Sunday

TheInflationist Weekend Summary: 130609

Post a Comment June 14, 2009 – 8:34 am |   | Permalink |  Print This Post |

Our portfolio value remains at $85619 including all unrealised positions. Our cash in bank is now $59249. Total return since inception (1 January 2009) stands at 114%. We look to increase our cash position by closing more long positions when the Dow hits 9500-10000. Reviewing all the stocks in our portfolio, most have moved significantly above their respective cash backing. We are not bullish on Citigroup’s long term outlook - this position was a short term play and will most likely be closed in the coming weeks. Webster remains trading below the value of its holding in Tassal Group (TGR) - last we checked the market capitalization of Webster (code: WBA.AX on Yahoo Finance) is supported by its holding in TGR even after selling down a small stake in TGR. If markets pull back this or next week, we will consider increasing our holdings in WBA barring any new announcements. Our holding in Agriculture is underweight (500 units of Agriculture ETF+Webster). We will wait for a company update before increasing our holding. Our favourite oil play Cooper Energy have gone up significant thanks to the increase in Price of oil and preliminary good news on the exploration front. We have reduced our holding in COE earlier, and will continue to hold out for now. Babcock Japan Property Trust (BJT) have since taken over the management rights from parent (now insolvent) company Babcock and Brown and successfully divested one of its commercial properties for a profit (but below book value) to reduce its gearing. We are VERY light on BJT, and so will continue to hold this. Our total investment in stocks represent 25.9% of our portfolio value, whilst we have 69% in cash.

Our Hong Kong vs India arbitrage play is profitable whilst our naked India shorts are down quite significantly. We now have a net $10/point short in the NIFTY at an average entry of 4342 (refer to table). We have also topped up our holding in Natural Gas - we now have 10000 at an average entry of 0.667. We may be overleveraged in this, considering it has not gone up with crude oil and the equity market in general - if markets pull back this coming week, it may exert some downward pressure on Gas and Crude. So we may take some profits and lighten up. We will put a stop loss on 4000 units at our entry price (0.667).

We remain bearish and feel that India is the best trade here for obvious reasons (for those who are new, check out our analysis and comparison between India and the rest here). We have an order to short the NIFTY at 4750 and another at 5000 ($5/point each).

We have always been bearish on US Treasury Bonds, convinced that this is the last bubble waiting for an impending cataclysmic crash. Since then, Bonds have gone down considerably (ie yields up). We have not been able to find a broker allowing us to trade Treasury bonds with NO expiry. We will wait for more bad news to drive bonds higher before taking a short position. If you know of a way to short Treasuries without an expiry, please let us know.

Everyone is expecting markets to pull back from here - whilst we feel the same based on our indicators, we will not be adding more shorts unless the NIFTY triggers our orders to open above. We feel that there is more upside from here. That said, we may take some day trades (ie short) if markets pull up from the 60 day MA significantly. As shown in our earlier analysis, the 60 day MA represents a checkpoint (ie a “recharge level” where markets need to pullback to before making higher highs). So, we will open shorts for trading purposes if markets fulfill both criteria below:

• Higher high
• Pulls significantly above the 60 day moving average on the daily chart - “How significant?” is subjective.

Big picture, the jury is out if May lows will be retested. Many are calling for  a Great Depression scenario unfolding, and that the Dow is destined to fall to 1000-2000(no typing error). We favour a sideway zig zag movement similar to Japan’s 1990 crash. Unprecedented money printing will most likely prevent a Great Depression type scenario at the price of unprecedented volatility in Forex and inflationary pressures on commodities.

The Nikkei is currently back to where it started 24 years ago! If you superimpose the Dow on this, the question is are we at mid-1992 recovery levels? Note the Nikkei recovered from 1992-lows from 15k to 21k, then fluctuated in a sinusoidal pattern between 15-22k for 8 years)?

www.theinflationist.com

www.theinflationist.com

www.theinflationist.com

www.theinflationist.com

For those who are new to our site, we started TheInflationist Trading Challenge in January 2009 with $40000. Unlike any other stock trading website, we trade publicly LIVE, track our performance transparently, and make actual trades in our personal portfolio (yes, we own every stock and trading position in our portfolio). We stick our necks out on the public chopping board and feel actual pain when our positions are in the red (No, this is not virtual trading for us!)

This phenomenal 114% result is reproducible for all readers as trades are published live at prices available to readers. Applying our own fundamental and technical analyses with our conservative risk management strategies, combined with the views of some of our favourite investment analysts (Jim Rogers, Mr Magik, Tony Caldaro, Brian Shannon, Guy Lerner, Marc Faber and Philip Manduca), we formulate trading plans both short and long term. We do not rely on any one source, and not uncommonly trade contrarion to these technical experts (with all due respect).

Feel free to join us - the first website on the web where you can take a position in anything, long or short! Trading is as easy as writing an email.

1. Register

2. Go to “My Portfolio” (top column of links)

3. Add stocks (search for stock codes using Yahoo here) - for Australian stocks, add (.AX ie dot AX) as an extension (eg: BHP.AX for BHP; WPL.AX for Woodside); enter the purchase price and quantity.

4. For trading indices or commodities, simply click on “Add New” under the “Posts” section in your Author Dashboard (www.theinflationist.com/wp-admin).