Thursday, December 19, 2013

12/19/13 Spoonful

Some of them dies about it. Spot gold prices fall to June lows. Miners headed for a test of the 2008 lows.

94 comments:

  1. Scaling back into EEM @ 40.74...

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    1. Closed EEM @ 40.55. I don't like what I see in the EM landscape this morning.

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  2. Emerging markets are unexpectedly giving back about 2/3 of yesterday’s gains. Premarket bids:

    (a) EEM 40.74 (-1.36%)
    (b) EWZ (Brazil) 44.09 (-1.35%)
    (c) EPI (India) 16.70 (-2.3%)
    (d) FXI (China) 37.82 (-1.7%)

    A few Asian indexes played ‘catch up’ overnight, but Shanghai dropped -1%, HK -1.1%, and South Korea closed flat. Not quite sure if this presents a buying opportunity (think Fibonacci 62% retracement), or acts as ‘non-confirmation’ of EM reaction to yesterday’s Fed announcement.

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  3. (a) EEM now poised to open the day by giving back all of yesterday’s gains. Proof of concepts: (i) Had I tried to game the Fed yesterday and opened RYWVX @ the 1030 am window, I’d be looking at a minor loss (I would have been disallowed to close @ the 345 pm window and forced to wait ‘til Thursday), and (ii) Had I chased EEM/RYWVX into yesterday’s close, I’d be looking at serious hits of up to -2%/-4%.
    (b) Miners poised to open at new YTD lows.
    (c) Bonds poised to open a tad lower.
    (d) TZA will open +0.5%.

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  4. CTA Trading Desk Morning Report

    [7:00am ET] Good morning, Geoff here.

    The overnight action in gold has serious implications. Four Pillars members, please check your inbox for an early morning report.

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  5. What's it all mean? I think yesterday's reaction to the taper was a fake-out.

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    1. Fake out as in sell the news now?

      CIE- Normally I would add here, so this time I wont.

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    2. I think it may have been a combination of short-covering + a delayed reaction to the implications of a taper (as in, the beginning of the end for QE).

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  6. Via Twitz...

    $F, your so right, people just don't get it, Wall Street, gov.,media influences are contolling the $F stock price, not performance

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  7. It's funny how all the fired up tweets flying around last night have disappeared, and the trash talkers have turned silent.

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  8. Interesting, gold (and silver) remain considerably higher than 2008 yet miners continue tumbling.

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  9. GNK - I might be forced to buy this one soon.

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  10. Making cookies here, 70% butter, 60% shortening!

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  11. Who's playing the dip in JCP?

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  12. AKS just absolutely killing it. Coal names are on fire too. All signs point to a recovery in the dry bulk sector as a result I would think...I have small positions in EGLE and GNK but am contemplating adding more...

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    1. I'm gonna wait to see how EGLE/GNK act next week, I think.

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  13. BONE - I just thought to type this symbol in, for no particular reason.

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  14. AA hit $10 a few minutes ago. Wouldn't be surprised to see some struggles to get through this round number, but still think a good long term hold.

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    1. Yeah I agree completely. I sold the remainder of my position yesterday just because I felt the drop in BALT was providing a better opportunity. AA should be some nice good $$ going forward.

      Still can't believe the move in AKS.

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    2. Regretting not loading up on that scary/false pre-FED selling spree!

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    3. 7 of the top 10 stocks in the TSX today are base metals stocks (Including TCK) across copper, zinc, nickel, etc.

      If the economy improves, base metals never got the huge excess investment gold miners did, so will be faster to turn.

      Also saw a report this morning about how the zinc market fundamentals look good going into 2014 and an Australin zinc mine is having pretty major problems, contributing to this.

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    4. Re AKS, it just shows how little faith people have in the steel sector - could be some big moves if business does improve.

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  15. I picked up a few more shares of ENPH today at $5.7X and more GNK at $2.05 and EGLE at $3.15. Not much but I like all of them for a potential double over the next year.

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    1. I talked to investor relations over at NM today. They signed a deal to take over 10 ships froma a bank yesterday and the press release was confusing, so I just called for clarification. NM's stong balance sheet is definitely proving to be a good asset curting these times. They seemed very confident about how things were going and see good things for next year and over the next few years as demand outstrips supply.

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  16. Warning, gold might not rally like we thought!

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    1. If you look at the long term charts comparing gold to pretty much every other commodity, it is still way above the rest. All things being equal, implies that there is more downside.

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  17. Replies
    1. I'm still hanging onto BSBR. Brazil is a bit more economically risky, but the value is good, middle class is growing and you've got all the attention going there from the Soccer and the Olympics over the next couple of years.

      My other 2 big foreign financials, ING and AEG, continue to do well and are both in uptrends and I think the Euro-market is less risky than Brazil, but probably not as cheap any more.

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  18. Taking a final shot @ Emerging Markets for this year:

    (a) EEM @ 40.65.
    (b) RYWVX @ the 345 pm window. (It closed @ 13.10 @ the 1030 am window, which is -3% from last night’s close).
    (c) EPI (India) @ 16.63.
    (d) SLW (Silver Wheaton) @ 19.67 for kicks.

    What I like about today’s selloff:

    (a) Today’s panic low in EEM was 40.22, marginally higher than yesterday’s panic low of 40.14. I’m guessing that the selloff succeeded in throwing most ‘newbie’ investors off the train. The morning ‘shakedown’ is typical of a sector that wants to take off without a crowd
    (b) Yesterday’s post-FOMC rally occurred on high volume. Today’s volume is about half of that.
    (c) There are still too many traders looking for a top here. If the US economy is recovering (which is essentially what a taper implies), then it makes sense that EM companies that supply the US should do well going forward. From that perspective you could say we’re looking at a buying opportunity.

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    1. I like your take. Sounds perfectly reasonable.

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  19. Ok screw it. I decided to just sell the EGLE and GNK. Figure I've got enough in BALT to give me a ton of exposure to this sector. Sold GNK at $2 and EGLE at $3.15. I think I lost commissions on both...

    BB - Yep its all about supply < demand for first time in a while. I think a lot of big money is pouring into this sector in a big way. Here is another video I found, talks about the supply / demand issue:

    http://video.cnbc.com/gallery/?video=3000229532&play=1

    I am sticking with BALT because it is the most levered to the spot rates that I can find. All of them should do well though. The one concern I have with BALT is short term in nature in that if GNK goes belly up I think people will sell BALT initially. It shouldn't have an impact on them longer term though. With Centerbridge taking a huge position in both I don't think this happens, especially with spot rates up 200% from the lows and standing firm in the 2000+ area. If they get to 3000 or higher then all of them will be significantly higher, even the near bankrupt ones like GNK and EGLE.

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    1. http://www.forbes.com/profile/james-dinan/

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    2. Makes sense and you'll probably do better than me with your higher leverage to rates, assuming of course the industry continues to rebound (which I think it does).

      I like a little safer bets, especially in riskier industries. A couple of the advantages of NM are it's seasoned, strong management who understand the shipping cycles, plus it's broader footprint across various sectors of the shipping industry including dry bulk, petroleum products and container, and the South American logistics and their ability to direct capital to where it can be best utilized.

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    3. Looked at CMRE a few years ago, but owned Seaspan (SSW) instead. I sold it not too long ago as it was my understanding the fundamentals for container shipping weren't as good as for others and SSW was well over book value.

      They guy at NM told me that the Capesize ships I think (the really big ones anyhow) had their rates go from $6,000 at the bottom to $30,000 recently and that typically the smaller ships rates follow this trend.

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    4. NM is a bit safer also in that they have a big logistics business which is what got me interested in it back in the fall of 2011. I believe their upside during an up cycle is limited when compared to a BALT, though. So in that regard, I'm definitely playing the riskier play. But I hedged my risk by going with the company that I felt had the best balance sheet, and more importantly, the one that wasn't burdened by old ships as they were formed after the crash in rates in 08. The one risk and I'm still not exactly sure how it will play out, is with GNK. I've read all covenants etc and have a good feel for the fact that they have no risk in the event of a GNK restructuring. The downside is GNK provides management of their fleets in exchange for a fee and BALT benefits from economies of scale via GNK. So should GNK go under then BALT might not get as many benefits from the economies but even if that happens my guess is all that will come of it is a restructuring of GNK's debt. Given that Centerbridge and a few others bought their debt at $0.90 recently, and that rates have gone up significantly since a year ago, my guess is a deal will be worked out where even the equity doesn't get wiped out for GNK. Either way, I think BALT is actually being held back a little because of this and should there be a restructuring deal put in place then BALT could do well.

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    5. Again, based on my math, BALT not only will get a kicker from higher rates but by mid 2014 they will have a fleet that is 70% larger than it was last quarter. So you could get a one-two combo of higher rates and almost a doubling in capacity. While the top line will grow from higher rates, the cost structure will not grow commensurately. And I think it's important to think about the mentality of the entire sector going forward. This recent crash will be burned into their memory for a while...which means far less willingness to go crazy with expanding fleet sizes by the companies and the banks willing to finance them. Another longer term kicker is India...if they ever get their urbanization plans going like the Chinese did then you will have massive demand for iron ore, coal, grains etc. So I think there's a chance this short term cycle people are talking about will turn out to be a longer term cycle.

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  20. Sprott lost his job this week:

    http://www.finalternatives.com/node/25583

    Funny how he was " the best Canadian hedge fund manager" a few years ago, but turns out he was just a lucky guy riding the gold bull market.

    But this is another sign we are moving along in the gold bear market.

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  21. Zero Day Technology - The phenomenon that's causing bears to lose their azzes.

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  22. I always get beat up on the pricing with Rydex. This time buying end of day (rather than 1030 am)-> entry price of 13.26 (rather than 13.10). Which means I left 40% of today's potential 'discount' on the table.

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    1. Traders appear to be hot or cold when it comes to Emerging Markets, leading to outsized moves. What if they spike +5% into year end? I can't rule it out.

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  23. Listening to some Nelly for some reason ...

    Greed, Hate, Envy but cake will do
    Fuck tha game don't let the game fuck you
    Follow the rules stay cool and rock too
    Greed, Hate, Envy but cake will do

    Pretty good trading advice ...

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    1. I'm still stuck on Talley Hall "Mucka-Blucka"

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    2. and I've moved to The Best of the Scorpions ... strange how the brain works isn't it ...

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    3. and then to Jeff Beck's Guitar Shop maybe it's the Tequila ...

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  24. Hi Guys- I added to NSPH today also. Still a small position but am looking to build it up/trade it going into earnings. Risky, yes, but I'm looking for a good report.

    Nice to end the day nicely green after the open. MOG wasn't surprised by the well failure, but was surprised at the stock price. He's going to make a call for me.

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    1. That was ENPH, not NSPH. I do that all the time entering the symbols on my computer too.

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    2. Just don't trade drunk.

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    3. Senior citizens shouldn't summarily dismiss advice from the younger crowd.

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    4. I'm trying to save up my drinking + trading for the next crash.

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  25. FCEL - Have a peek at this chart..... Kinds surprised me.

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    1. I just had a heart murmur looking at it.

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    2. You're too young for that! (Like being too young to drink!)

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  26. TOF,

    my reference to NM being safer than BALT is mainly based on the fact that BALT is a pure dry-bulk shipper working using spot rates and no long term contracts. Dry-bulk seems to be the most economically-dependant portion of the shipping market, and shipping rates are also volatile based on economic expectations,so a company like BALT will do very well if the economy does well, but will hurt if it does poorly.

    I see NM as more broadly spreading its risks across multiple sectors and also having longer contracts to lock in some of their rates.

    But, you've done more work on this sector and understand it better than I do, so I believe you will likely do better - but for me, I haven't looked into in that much detail, so I'd rather play the more broad approach as I don't feel confident taking the targeted approach without the level of info you have. Plus I do like the fact that they are into energy shipping which seems to be a good growth area.

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  27. EPI off at the open @ 17.06 (+2.6% gain). India’s Sensex rallied +371 points overnight to reclaim 21000.

    That one was easy. EEM displays far less exuberance and is treading water (likely due to the =2% drop in Shanghai). SLW up modestly.

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    1. Nice work, still watching IDX!

      I'd like to find a play in Uruguay....... Agricultural play, bulk shipping is one way, farm equipment is another. They just legalized MJ recently and their president sounds like a down to earth kind of guy. I ran into a guy from there and he was all about the massive farms and such, there.

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  28. Deutsche Bank maintained a Buy rating on Cobalt International Energy (NYSE: CIE) with a price target of $25.00 (from $32). The change follows disappointing news about a dry well on Thursday.

    "In a fitting finish to what has been a difficult past 6 months, CIE unexpectedly reported a dry hole at US GoM prospect, Aegean. At this point, valuation has taken a back seat, as lack of confidence in the story, fund flows, year-end derisking, tax loss selling, lack of catalysts and general frustration have the stock trading well below our $22/sh estimate of discovered resource ($15/sh of US GoM discovered resource). While valuation remains extremely attractive, we expect the stock to struggle in the near-term as the market wrestles with the value of discovered resource and potential paths to monetization, but see value for those able to withstand near-term volatility," said analyst Ryan Todd.

    "CIE reported a dry hole at the Aegean prospect in the US GoM (CIE 60%, Total 40%), a three-way trap targeting the inboard Lower Tertiary. CIE will now release the Ensco 8503 rig. Upcoming targets include Bicuar (late 1Q/2Q) and Orca (2Q14) in Angola, as well as three non-operated US GoM wells in 2014: CVX’s Anchor (1H14, CIE 24%), BHP's Rum Ramsey (2H14, CIE 24%) and ENI's Goodfellow (2H14, CIE 30%). We have reduced our PT from $32 to $25 to account for ~$2.50 of risked Aegean value and higher risk to future exploration," he said.

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    1. Saw that, GS I think is pumping it too but I really find it difficult to believe spin coming from financial institutions, What we need is near-insider confirmation, someone who knows the truth and isn't just following misleading institutional spin. These institutions consider us Muppets!

      CXO on the other hand, is running strong,

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  29. BSBR - Once again, my $5.78 stink bid is too low! Damn, how do these guys get the good entries? :(

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  30. AA - I dunno, kinda thinking we just saw $10 for the last time.

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  31. CNH - Where's the ticker, did they get bought out by Fiat or what?

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    1. They did a reorg and spinoff. I looked into once and it is a Euro-listed company now.

      FIATY is still interesting though, and has come down some. They own almost 60% of Chrysler who is doing well and have some other higher end brands, but their Fiat division is struggling. I keep watching it.

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    2. FIATY must have pension obligations, so if the economy improves and rates rise that should ease some of the burden?

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  32. BSBR - Alright then, picked up a 1/4 position, small in case it's not bottomed yet. $5.99

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  33. Do you believe in magic?

    http://www.youtube.com/watch?v=R8ifTS5NEsI

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    1. Perfect Sixties song. Back when we had no worries. Other than whether she liked you or not.

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    2. The thread title reminded me of Spoonful.

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    3. My primary worry at the time was trying to understand how everything worked, what made things tick. I also didn't know how much I didn't know and still haven't lived up to those ambitions.

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  34. SBS - Is it that hard to believe this one can make it back to the 52wk high within the next couple years?

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    1. CBD is another possibility, and they just updated their 3-year outlook.

      " Brazilian retailer giant Companhia Brasileira de Distribuicao (CBD) or Grupo Pão de Açúcar (:GPA) is gearing up to expand its stores and market share by cutting down on costs in the face of tough retail environment.

      CBD expects to open 400 new food stores by 2016, which includes 360 new convenience stores in its Mini Mercado format. The company also has expansion plans for its wholesaler, Assai, which has been posting solid results in the last few quarters. The company is expected to open 12 to 15 stores per year through 2016 under the Assai banner, particularly in the fast-growing Northeast region.

      In addition, CBD plans to open 210 stores during the next three years in the ViaVarejo unit, which includes household appliances and e-commerce operations through Nova Pontocom."

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  35. CH - Have a look at this one, overdone maybe?

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    1. One hell of a dividend, so not sure ehat's going on with this one, I guess the dividend is/was unsustainable.

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  36. SCCO - Sub $25 was the price so far, but I have no confidence in metals anymore.

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  37. Brazil - "The Q4 inflation report brought a similar message as that of the last Copom minutes. The BCB cut its growth forecast for this year to 2.3% from 2.5%, bringing it in line with our estimate. The inflation forecast for 2014 declined 10bp, to 5.7%. 2015's new inflation forecast is only 30-40bp below 2014."

    BACML

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  38. Any astute observations this afternoon, should I just kick up my heels and go back to sleep?

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  39. (a) Second roundtrip in SLW> opened @ 19.71, closed @ 19.81.
    (b) Partial close of EEM @ 40.73 during the morning spike.
    (c) EEM now retreating to 40.47, so will likely take minor losses on the remaining half position in EEM + RYWVX.
    (d) What’s surprising is the strength in bonds (TLT + 1.4% to 104.11). Traders may be positioning for a little volatility next week.

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  40. Replies
    1. Ahh, they bought Beech! Nice move, I rather doubt Chinese entrepreneurs trust their lives to anything less than the buick and cadillac's of aviation!

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  41. BSBR - $5.93 line in the sand box. Here kitty-kitty!

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  42. I always thought it was "Here kitty-kitty-kitty".

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    1. That works for me! :) We used to run the electric can opener to get the cat to come in the house.

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    2. Ha we used to do the same cp!

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