Thursday

Agriculture Play

We have been accumulating a stock recently as part of our agriculture play. It is a solid business with a monopoly with good cash flow and leverages on the agriculture sector in Australia. Because it is so illiquid and we are still in the process of accumulation, we will not announce it publicly. We have checked out their services first hand, business looks good, efficiently run, and we believe it will be a long term play that will reflect the growth of agriculture in Australia. It has been overlooked, and is trading close to all time low whilst business continues to be profitable since inception. More on that in the future.

Meanwhile, the whole Greek crisis EU meeting yesterday triggered a massive rally. We expected a knee jerk rally, not quite to this extent, and shorted the NASDAQ last night. In our Germany Roadmap, when the Dax was threading water at 5000, we went all in long at $40/point and gradually locked in profits as it went up to 6000. We expected it to tag 6250. Here is what we wrote on 9 October:

Trade Plan for the next 2 months:

1. Long on pull back - if Dax pulls back to 5480-5500 we look to re-establish some long positions
2. Take profits as Dax approaches 6000 - be all out by 6000
3. Do nothing from 6000 to 6190
4. Short from 6210 to 6300
5. Ride it down and take profits from 5000 to 4600.
6. Long From 4550-4480. (we think it will break the 4500 mark)

We shorted US Tech instead of German Dax as the former is trading relatively way above the Dax. When the Dax was last 6400 in August, the US Tech was 2200-2250. It is not 2400, ie the level pre August decline (Dax equivalent = 7300). We did close a third of our Amazon shorts at 197 to lock in some profits for fear of a rally arising from the EU meeting. If history is any guide (problem is it never is!) to sharp declines, Amazon should resume its downward push. The NASDAQ chart does look abit “funny” to be able to fight its way back to August highs - concern here is a continuation of the upward trend to make higher highs. I am quietly glad Jim Rogers is also shorting US Tech stocks, but no one can be 100% right.

We remain bearish and will play it via US Tech shorts and Amazon shorts. Some of our long hedges in the form of Caterpillar and Google is paying dividends.