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TheInflationist Weekend Summary 10.10.09

Post a Comment October 11, 2009 – 12:25 am |   | Permalink |  Print This Post |

Our portfolio value including all unrealised trading positions have been updated as of 10.10.2009. Net value have decreased to $86109 , with cash at $34525 after our purchase of AAC and additional 20000 COE. We got rid of Telstra as we feel that Australian Agriculture Company (AAC) presents a greater opportunity and gives us more exposure to soft commodities. We will leave Telstra for conservative fund managers happy with the high dividend yield. AAC is trading at a discount to its land and water rights entitlements (provided those are valued conservatively). We are bullish on the agribusiness in the long term. We have also increased our holding in Agriculture ETFs and have held on to all our Natural Gas ETF positions, with our last top up at 0.49. Natural Gas ETF last traded at 0.63. A quick check on all our friends who have jumped onto the Natural Gas bandwagon have found that they have all sold out and are hoping for a double bottom. We are fighting this temptation.

To protect ourselves against any surprises, we have put a stop to most of our profitable positions:

• Natural Gas ETF : Stop at 0.59 (locked in $600 profit)
• NIFTY short entry 5050 $5/point : Stop at 4980 (locked in $350 profit)
• Nikkei long entry 9580 $5/point: Stop at 9880 (locked in $1500 profit)

Our trading portfolio is down $5349. We are net short (on Dax and NIFTY - dont worry they will come down. Europe is in bigger trouble than the US) and our losses are buffered by our short USD, long gas positions. As the USD loses its value, everything denominated in USD have gone up including equities. During the crash in October 2008, the USD shot up as the Dow dived (ironically) thanks to mass deleveraging and repatriation of USD back into the US.  We believe the next decline in equities will see the loss of that correlation with the USD (i.e. equities down, USD down). So we will be holding on to our short USD positions AND short equity positions.

Some of the stocks in our portfolio have increased in value significantly (along with the index), and we will look to unwind some of our positions as markets head higher. We are quite comfortable holding Cooper Energy as long as it trades close to its cash backing of $0.32.

We have not touched Treasury Bonds yet, but are watching it closely. We are hoping for the next crash in equity markets and corresponding spike in Treasury Bonds prices before taking a small position. Stepping back and looking at what has happened so far, we see that the US government have made some great investment decisions (when taken in isolation, and at taxpayers expense). All their positions in AIG, Citigroup (and whatever else they bailed out) are all up : they bought at the low at the height of panic and fear. Now these companies are recapitalizing by sucking in billions of dollars of public money. We believe the government will next try to offload their stakes (at a significant profit at the publics expense: ie you and I buying their shares), before the next collapse (which they will welcome) as the flight to “safety” will trigger the buying of government bonds (hence pumping money once again into the bankrupt US government). So they make money both ways.

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