Monday, March 23, 2009

Update on some of my positions... and the future.

So these are my positions as I noted in my last post:

Most of them have considerably jumped since that point. Most notable are:

CDE - closed at $.95 today

SST.TO - Closed at $1.80 Today

BIM.To - Closed at $.35 Today

The JPM Puts went up to $1.83 in value - closed out at $1.56/share for almost 400% gain. The stock price has since reversed but my estimation is that it will see the $12.50 or even $10.00 price again in the near future (2-3 months). This trade was a simple textbook trend trade - played off the resistance to the channel low for the exit point.

I will be constantly finding these over the next few months as the recent breakout is very temporary. Also, a note: More trades will be made in Asian stocks (from Asian exchanges) and Canadian stocks (my beautiful home country) as I am trying to decrease my USD holdings due to its soon-to-be fast depreciation.

The market skyrocketed today with Timothy Geithner's announcement. This pseudo-public mutant creature of "recovery" should have actually had the opposite effect, and WILL, over the long term. But as with most of these things they have a strong "positive" impact and then the market temporarily dies in horror as it watches the laws of unintended consequences take hold.

Oil will most certainly see $100 a barrel again. Most likely $200. I have increased my personal holdings of PetroChina (HKG:0857), Purchased 1,000 shares of Precision Drilling Trust (PD.UN on TSE), China Petroleum and Chemical Corporation (HKG:0386), as well as several other small positions in Canadian income trusts paying out over 15% in cash dividends.

Base commodities and foods will certainly see new highs in the next 36-48 months. The fundamentals are improving for these stores of wealth daily as business expansion and existing operations are being cut left right and center (see The Ulimate Buy Part I, and Part II for more in-depth analysis).

I am also buying a fairly considerable position in silver - most in sleeves of 20 x 1 oz silver rounds. Silver should see a new high of $25.00 per ounce by the end of the year. This might increase exponentially as gold becomes much more expensive forcing usual gold-buyers into the silver market causing a new wave of investor demand.

The major catalyst for these events were announced (and greeted with an immediate rally in treasuries - see my earlier comment about announcements bringing good immediate reactions followed by devastating medium term and long term results) was the announcement by Mr. Ben Bernanke. He has pulled the lever in the oh-so-slow motion hanging of the US Dollar. We will now watch as gravity becomes the USD Index's best friend in the coming weeks, months, and years. The Fed's actions are mostly in response to THIS Startling Statistic - something the news has not even mentioned.

Foreign countries are fast becoming net sellers of Treasuries as a 14% Debt-to-GDP ratio becomes more apparant for the irreversible Road to Serfdom that it really is (to borrow the title of one of the greatest financial books written in the 20th Century). The short term response to this decision by the Fed will be as follows:

Rampant buying up of Treasuries. This is not good buying up - all of the buying will be done by short-term speculators who are hoping to flip them to the Federal Reserve at a profit. This is already a giant bubble due to the Interest Rate Swap Derivatives (to the tune of over $190 Trillion) that private banks hold levered out against T-Bonds and other Government Bonds. Within the net several months these current buyers will be lining up to sell to the Fed. Add to the list foreign countries holding TRILLIONS of these bonds and you have a serious, serious problem!

Mr. Bernanke will be the only one sitting on the buy side, with everyone and their uncle's roomate sitting on the other side. The Fed will probably end up buying over ONE TRILLION of Treasury Bonds before they manage to escape the tsunami of selling. This will actually cause the inverse effect of what they are hoping for - lower long-term interest rates. The waves of selling will cause the price of the bonds to drop massively, which will cause the yield to rise 2, 3, 4, even 5 times from current levels. It will actually drive long-term interest rates HIGHER (something this particular investor thinks North America desperately needs!).

In lieu of this fantastic shorting opportunity I have taken out Call Options for Oct '09 on PST - the ultrashort ETF that tracks 7-10 year Treasuries. I have also taken out Call options for TBT, the 20+ year ultrashort Treasury tracking ETF. Both of these have a strike price of $60.00

I suspect these funds will both be much much higher than this by those respective points in time.

Invest smart, all. Think like a real economist and figure out what opportunities the law of unintended consequences will throw your way(something our governments and massive financial black holes seem to have forgotten exist!).

Happy trading and I hope I've given you all something to mull over. Again, feel free to email if you have any questions or suggestions on things you would like me to research. I'm always open to suggestions! You can reach me at: