Finance / the Markets

• The Benefit of the Doubt Market

  It is already January 24, and the S&P 500 has seen a grand total of two down days so far in 2012. Are we on the eve of one of the great bull markets of all time? Is it off to the races once again? I follow dozens of fundamental and trading research services and the number that are flashing warning lights right now is close to an all-time high. For example, the AAII sentiment survey now shows that 46% of investors believe that the stock market will be high in six months, well above the 39% historic average. It…

• International Junior Oil Stocks: How Investors Can Position Themselves for High-Reward International Plays

  Without question, the oil stocks that have made me the biggest profits have been junior oil companies with international plays. Companies like Xcite Energy, (XEL-TSXv) which went from 62 cents to $6 with a heavy oil play in the North Sea, or TAG Oil developing their New Zealand asset, moving from $2 - $6 a share. (The one big international stock I missed was TransGlobe, (TGL-TSX) which went from $3.50 - $20 on drilling success in Yemen and Egypt.) These junior international plays are often orphaned stocks with big, high-impact exploration plays - and if they hit... WHOOSH! The stock…

• Oil & Gas Income Trusts

  The "New Class" in an old, popular investment vehicle Part 1:  A Comeback in the Making? The income trust game is back - just in a different form. Canadian Finance Minister Jim Flaherty killed these high-yield, tax sheltered public companies on October 31, 2006 - not so affectionately called the "Hallowe'en Massacre" by the millions of investors who were enjoying 10%+ payouts annually. Canadian companies had until January 1 2011 to convert back to a regular corporation or face new taxation that essentially reverted them back anyway. But the market has found a loophole that may allow for many new trusts - especially in the…

• How to Play Commodities in 2012

  This is my favorite asset class for the next decade, as investors increasingly catch on to the secular move out of paper assets into hard ones. Don’t buy anything that can be manufactured with a printing press. Focus instead on assets that are in short supply, are enjoying an exponential growth in demand, and take five years to bring new supply online. The Malthusian argument on population growth also applies to commodities; hyperbolic demand inevitably overwhelms linear supply growth. Of course, we’re already nine years into what is probably a 30 year secular bull market for commodities and these things…

• The Stock Market's Dream Scenario

  I’m sitting here with a mountain of technical analysis reports that are causing my desk to buckle this morning, all shouting “breakout”, “buy”, and “uptrend”. So I’m wondering, “is there a scenario out there where these might actually come to pass?” At this point I thought it might be useful to engage in what Albert Einstein called “thought experiments” and come up with a New Theory of Everything. In any case, you have probably all figured out that I am a frustrated novelist. As my old friend and former mentor, Sherlock Holmes, used to say, “Eliminate the obvious, and consider…

• Get Ready to Short the Euro Again

  The financial markets exploded to the upside overnight with news of Europe’s triple resolution of their sovereign debt crisis. As I predicted in my letter only yesterday, the move has caught traders by surprise, enabling markets to break out to the upside from the recent ranges, and give this fall rally longer legs than most expect. As I write this piece, the (SPX) futures have popped to 1275, a new high for this move. Ten year Treasury yields have ratcheted back up to 2.26%, and the dollar is in full flight against a basket of currencies. Here are the details…

• Why I Tripled My Volatility Index Short

  It has been quite a hectic and frenetic day, so I am just getting around to writing out the logic behind today’s short cover of my November (VIX) $35 puts. Basically, I was betting that once the S&P 500 hit the first technical downside target at 1,065, a long overdue and furious short covering rally would ensue. This was when the (VIX) was trading just shy of $46. This was not only an important Fibonacci level, it also showed up in the technical models of several different persuasions. Such a rally would cause the market volatility to plunge, (VIX) to…

• Get Ready for the Final Flush in October

  What a quarter that was! Q3, 2011, will go down in the history books as one of the worst in market history, and certainly one of the most volatile. 1929, 1987, and 2008 come to mind. Is the fat lady getting ready to sing in October? The economic data is saying definitely not, while commodities are saying definitely yes. The one economic indicator I would choose to receive if I were stranded on a desert island, the weekly jobless claims, showed a blockbuster decline of 37,000 over the previous week to 391,000, the first drop under the boom or bust…

• Soros: Europe is in a More Dangerous Situation than the U.S. in 2008

  Although stocks around the globe appear to be expecting the Eurozone to produce a game changing plan involving a leveraged, TARP-like approach, not all investors are convinced that Europe is out of the woods. In a number of recent interviews, noted financial expert, legendary hedge fund manager and philanthropist, George Soros, expressed his professional conviction and provided advice regarding Europe’s current financial crisis. Soros believes Europe is worse off than the U.S. back in 2008 given mass uncertainty. “It is a more dangerous situation…to the global financial system than the collapse of Lehman Brothers…” the 81-year old investor said. “Even…

• Selling Oil Again for a Hedge

  With oil having bounced $5.50 over the last couple of days, I am going to flip back to the short side for several reasons, not all of which have to do with Texas tea. The trigger was oil’s failure to rally in the wake of a surprisingly large draw down in inventories this week, some 6.7 million barrels. This comes off the back of a large build in gasoline inventories of 2 million barrels, which has been a great leading indicator for crude. For a start, I have run out of “RISK OFF” positions, having covered them all during the…