Purely based on statistics, September and October are the two months that are generally bearish for stocks. For example, in the past 15 years, S&P opened strong early September in 11 years but mostly closed weak at the end of the month. One reason could be due to end-of-quarter mutual fund portfolio restructuring, for which they may have to sell positions in their portfolios. There are 2 potential risks in this September you need to be aware of:
- Sep 7: the day which may determine the fate of the Euro. The Germany's top court
will give its verdict on whether the government broke
the law with last year's bailouts of debt-stricken euro zone
countries -- if positive, this ruling could limit Berlin's room to manage the
region's debt crisis, which will be a significant blow to Euro. Although the chance of a positive ruling is small, it is not impossible.
- Sep 21 & 22: Fed will meet, which has been extended from one day to two. Many investors consider this as a sign that Benanake will likely introduce QE3, a new round of money printing to save the market. If this does not come as expected, the market may tank with disappointment.
Keep this in mind when assessing the market trend.
Wednesday, August 31, 2011
Monday, August 29, 2011
We nail it again with the safe and effective apixaban
Spectacular is probably not a good enough word for the results of the study for apixaban. Compared with the 50-years-old warfarin, apixaban can reduce strokes by 21% for AF patients; can reduce the risk of major bleeding by 31%; and can reduce the risk of death from any cause by 11%. For all of these counts, the differences are statistically significantly. For more detailed discussions on the results and the market impact, simply check the headline news for BMY.
As a physician, I'm really happy for patients to have a very effective and safe new drug to treat their disease with reduced risk of mortality. As a trader, I'm more than happy to make money, especially 65% in just a few days. Not shabby by any account. Here is info on my BMS positions, which were closed today as I had set up the sell orders in advance.
| 100 | 08/25 | 0.45 | 4581.15 | S | 08/29 | 0.78 | 7713.70 | 3132 | |||
| -100 | 08/25 | 0.15 | 1418.82 | BC | 08/29 | 0.24 | 2486.15 | -1067 | |||
As I said on Aug 27, my total risk for this trade was about $3000. I closed the deal with a total combined proceed of $2065 (3132-1067) , a profit of 65%. If I wanted to make the max profit for $7000, I would have to wait for a few weeks to bet that the BMS shares can further climb to $30. Is it possible? Yes, but in this kind of market, I didn't want to risk my partial profit already obtained for the max profit which may or may not be materialized. That's why I simply took whatever I had got and walked away.
This is not kind of trade a general retail investor can easily make by stock shares. The amount (i.e. 100 contracts) of call options I bought or sold was equivalent to 10,000 shares of BMY stocks. If I were buying stock shares directly, it would have cost me $280,000 to set up the trade. Of course I didn't do that. Instead, I used call option spreads to effectively control the same amount of stock shares but with much less cash required. Effectively I had significantly reduced my risk but greatly enhanced my profit margin.
I guess you can guess now why I'm so enthralled by the stock options. It is really a fascinating world if you want to explore it!!
A quick note about the Pfizer stocks. It appears you could make more if you traded this news via the Pfizer stocks. This was different from what I had expected but I'm fine with this miss. That's the nature of speculation that no one can be sure about anything. Pfizer has got two doses of good news, one for an approval for a lung cancer drug last Fri and the other one for this promising bloodthinner. If you happened to make this trade with Pfizer, then pat on your back to congratulate yourself.
Sunday, August 28, 2011
May be a good idea to add mature biotech companies to your long-term portfolio
It appears we indeed got very good news from BMS and Pfizer today. Apixaban has done an amazing job as compared to warfarin in terms of its efficacy and safety. I'm optimistic regarding my bet for its shares. Will see how much appreciation, if any, tomorrow. Now today's topic.
It is rather uncertain with the current market and I still believe the real bottom has yet to be seen. More pain may still likely be with most investors for quite some time, if they are only long stocks. Having said that, it is a very good idea at the moment to create a shopping list for stocks you want to own, which will be really handy when the time comes to buy stocks. But be aware, biotech stocks are usually very risky and volatile. Regardless of how promising an investigational drug appears to be from the scientific perspective, it may fail miserably without prior notice. I have seen too many of such examples and therefore will only specualte with the money I can lose. Today I will talk two biotech stocks, which I think are worth considering.
One is Vertex (VRTX), a relatively young biotech company based in Boston. Vertex has recently got a new drug approved, Incivek, a first in class drug for hepatitis C. For those who know medicine, there was no effective treatment available before this approval for this devastating disease, which often leads to liver cirrhosis or even deadly liver cancer. Therefore there are a lot of patients out there waiting for such new hepatitis C drugs. Incivek is the first one to be successfully approved and marketed. With this new drug available now, it would be unethical to not to treat hepatitis C patients with it given there is very limited alternative. Therefore the demand is huge for this drug. In anticipating this approval, Vertex stocks had significantly appreciated with the euphoria and it peaked at $58.8 in May. It has plunged 30% since then at its nadir but has climbed back to around $45. I think it has a much better valuation at this price, given that Incivek is likely a very successful drug, with an estimated peak sales to reach $3 billion. This is huge for this relatively small biotech. Since the overall market is still very volatile, I’m not sure this is the exact best moment to establish positions for Vertex but definitely I’m interested in it at some point in the near future.
The other biotech company is the well known Amgen (AMGN). It has already got many products in the market with a few blockbusters and is one of the most successful biotech companies. Amgen has recently got approval for a new drug, Xgeva for preventing bone fractures in cancer patients. While I think this is also a first in the class new drug, there is a standard of care available for this indication. However, Amgen has done a head-to-head trial with the current standard of care and they beat it. Given the huge market for this indication, the peak annual sales for Xgeva are estimated to be in excess of $1 billion. Amgen shares are down more than 20% since touching a year-high in mid-May. I think Amgen is a bargain at its current price around 54 although you may see even a better price if the overall market further tanks.
If you are itchy in getting into them, better use the dollar-averaging method to establish your positions slowly across the next few months, instead of going in all at once.
Saturday, August 27, 2011
My betting for the BMS apixaban news
As I said, BMS will report the results on apixaban tomorrow, which will likely move the BMS share price significantly. Of course I don't know which way it will go but I bet it will be good enough to move it up. Here is the bet I have entered for BMS by using call spreads (yesterday's closing prices).
By using this option technique, I have predefined the max loss I may have, i.e. $3000 for this particular one. In return and if I'm right, my max profit could be $7000. I doubt I will lose or gain that much either way, since my intention is to only make a quick trade on this speculation and I will close it within days. We will know the direction by tomorrow if we still have access to Internet.
Wish you and your family safe tonight and tomorrow, if you are at the East coast. Good luck for all of us!
 | |||||||||||
Wish you and your family safe tonight and tomorrow, if you are at the East coast. Good luck for all of us!
Friday, August 26, 2011
Has the gold correctin been over?
Gold has plunged about 10% or so in the past 3 days, to as low as $1705s per oz. Of course, my short bet for this correction was doing very well. See below over 200% jump of my GLL call options at its peak. Since I had a sell order in place, I took the profit and walked away.
However, gold fought back strongly today with a great jump to $1824/oz. Silver jumped up also with it. This kind of swift price changes in a way support the rationality why I did not take my paper profits for my new silver long positions. I simply cannot keep the pace with it.
The natural question now is whether this gold correction is over and we are "safe" again with the trend in the short-term. If you ask me, my answer is: I'm not so sure yet. Technically speaking, gold is still within its bouncing band. Unless it convincingly bounces above $1830 or so (a strong resistant line) to start a new up leg, there is a good chance that it may drop again from this resistant line. I'm still thinking that a decline to the $1600s range is quite possible, although there is no guarantee since the political and economic risks out there are just too pronounced, which may justify its further appreciation from this level. As I said before, I have given up the urge to look for its bottom. I have used this significant plummeting, although very brief as of now, as my buying opportunity to add some long positions again for gold. I may be too early but no one knows for sure how this gold bull will behavior under too much public attention.
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The natural question now is whether this gold correction is over and we are "safe" again with the trend in the short-term. If you ask me, my answer is: I'm not so sure yet. Technically speaking, gold is still within its bouncing band. Unless it convincingly bounces above $1830 or so (a strong resistant line) to start a new up leg, there is a good chance that it may drop again from this resistant line. I'm still thinking that a decline to the $1600s range is quite possible, although there is no guarantee since the political and economic risks out there are just too pronounced, which may justify its further appreciation from this level. As I said before, I have given up the urge to look for its bottom. I have used this significant plummeting, although very brief as of now, as my buying opportunity to add some long positions again for gold. I may be too early but no one knows for sure how this gold bull will behavior under too much public attention.
Thursday, August 25, 2011
Should I have sold my new silver positions?
As I have said a few times, I have gradually added some long silver positions in the past few weeks via AGQ options, which is a 2 x leverage ETF to bet for increasing silver prices. Last Monday on Aug 22, the next day after I posted the blog saying that I thought the gold price was too high and was susceptible to a severe correction, the prices of both gold and silver jumped significantly higher. My new silver positions had a paper profit valued at $20,000, a big jump as well. I asked my wife, should I sell my silver positions to take the profit? I'm sure you can guess the answer that was of course yes. I didn't and logistically it was difficult for me to even to do that due to my daily work. You know what happened the next 2 days: gold dropped over $150 and silver dropped $3/oz or so. A good portion of my paper profit for those new silver positions evaporated in front of my eyes. When I said it was painful in my yesterday's blog, it was indeed skin-cutting pain for me. But no regret for me and I would not have sold them even if I had time to do so. Why?
I have learned over years that timing the market is oftentimes futile and counterproductive. If you are right about a trend, it is more effective to stay with the trend instead of getting in and out trying to grasp the up and down of a normal volatility. You may get right a few times of your timing, but more often than not you miss the big trend, i.e. the big profit potential. After you get out of a position, it is very difficult to get in again since it is quite difficult and often struggling to determine when is the better time to pull the trigger. For gold and silver, it is even more difficult to do so given their extreme volatility. I tried many times before to take some quick profits and only felt regretted and had to kick myself later. That's why nowadays I'm trying very hard to avoid such kind of temptation; rather I will use applicable options to hedge against the short-term volatility and/or to use a correction to add more positions. This is a much better and winning strategy in investment.
I have learned over years that timing the market is oftentimes futile and counterproductive. If you are right about a trend, it is more effective to stay with the trend instead of getting in and out trying to grasp the up and down of a normal volatility. You may get right a few times of your timing, but more often than not you miss the big trend, i.e. the big profit potential. After you get out of a position, it is very difficult to get in again since it is quite difficult and often struggling to determine when is the better time to pull the trigger. For gold and silver, it is even more difficult to do so given their extreme volatility. I tried many times before to take some quick profits and only felt regretted and had to kick myself later. That's why nowadays I'm trying very hard to avoid such kind of temptation; rather I will use applicable options to hedge against the short-term volatility and/or to use a correction to add more positions. This is a much better and winning strategy in investment.
Wednesday, August 24, 2011
Painful but healthy
I'm a great market timer, at least for the gold market. Am I right? In the last a couple of months, I have almost pinpointed the exact time when I thought the gold price might turn. You see, within 2 days after I said the gold price was too high in the short term and it should come down, it plunged over $150, about 8% drop from $1917 two days ago to $1760 today. Of course, don't believe me and it is purely a brag. Regardless of how accurate I am, it is a pure coincidence, period. I cannot and no one can consistently time the market. But I must say I do have quite a good sense now about the trend of precious metals. With this sense in hands, I can now hedge better against such kind of short term risks than what I could in the past. As I said, I have placed some short positions with GLL options to anticipate this kind of gold correction. Similarly I also have some short positions for silver. Therefore, while I'm also experiencing quite painful short-term squeezing of my position values for gold and silver, definitely my pain is much lessened with the profits associated with those short positions such as GLL etc. This is kind of beauty you will see if you know how to hedge. I hope you've at least learned some of them via my blogs.
So it is really painful with such a severe and fast drop of gold and silver prices. I believe I have said before that this kind of severe correction is actually healthy for the gold/silver bull market. You may ask whether the correction has come to its end. The short answer is that I don't know. But the good sign is that I start to hear the talking heads saying something like the gold bubble is bursting and its bull time is over. The more such negative people emerge, the better chance that gold is closer to the bottom of this correction. My gut feeling is that this time gold may need to further drop to $1600s before turning around. I feel happy that more buying opportunities are coming.
So it is really painful with such a severe and fast drop of gold and silver prices. I believe I have said before that this kind of severe correction is actually healthy for the gold/silver bull market. You may ask whether the correction has come to its end. The short answer is that I don't know. But the good sign is that I start to hear the talking heads saying something like the gold bubble is bursting and its bull time is over. The more such negative people emerge, the better chance that gold is closer to the bottom of this correction. My gut feeling is that this time gold may need to further drop to $1600s before turning around. I feel happy that more buying opportunities are coming.
Tuesday, August 23, 2011
Apixaban: a potential 5% mover for BMS this coming weekend
It is a pure speculation but there is a good chance that some good news may be reported on Aug 28 by Bristol-Myers Squibb (BMS; stock ticker: BMY), which may move the BMS stock price by 5% or so. BMS in partnership with Pfizer is developing a drug, called apixaban (Eliquis), which is a new bloodthinner for preventing strokes in patients with atrial fibrillation (AF), a very common and dangerous disease. It is reported that the AF stroke prevention market is estimated at $9 billion-a-year. A successful apixaban will mean another multibillion-dollar drug for BMS and Pfizer. Right now, the golden standard treatment for this disease is a decades-old drug, warfarin, which is notorious for its risk to cause severe bleeding.
BMS is conducting a huge study involving close to 20,000 patients. In June BMS reported that apixaban was better and safer than warfarin in preventing strokes in patients with AF. BMS will report more details on the study at the European Society of Cardiology annual meeting in Paris this coming Sunday. If the results are reported as expected, it could be the first oral anticoagulant that is associated with statistically significant improvement in mortality over warfarin in atrial fibrillation (AF) patients. This will lead to a jump in its sales forecasts. Given a much smaller company size for BMS, I think there will likely be a much better positive reaction for the BMS stock price. A 5% or so jump is probable.
But let's be clear: this is a pure speculation as no one knows for sure what kind of results BMS will report. Even it is positive, if it dose not totally meet the market expectation, it may still be considered negative and may even dampen its price. So trade wisely if you want to take the risk.
BMS is conducting a huge study involving close to 20,000 patients. In June BMS reported that apixaban was better and safer than warfarin in preventing strokes in patients with AF. BMS will report more details on the study at the European Society of Cardiology annual meeting in Paris this coming Sunday. If the results are reported as expected, it could be the first oral anticoagulant that is associated with statistically significant improvement in mortality over warfarin in atrial fibrillation (AF) patients. This will lead to a jump in its sales forecasts. Given a much smaller company size for BMS, I think there will likely be a much better positive reaction for the BMS stock price. A 5% or so jump is probable.
But let's be clear: this is a pure speculation as no one knows for sure what kind of results BMS will report. Even it is positive, if it dose not totally meet the market expectation, it may still be considered negative and may even dampen its price. So trade wisely if you want to take the risk.
Sunday, August 21, 2011
The gold bull does not like publicity
The bull market has its own mind and personality. One of the key characters of it is that it loves low key and does not want to be noticed in public. It prefers to silently proceed and slowly but surely to move upwards. It is easy at its early stage when most of people will usually doubt about its validity and oftentimes scoff at the baby bull due to its stumbling steps. It becomes more and more difficult for it to keep low key when it moves on since inevitably it will get more attention along with is maturing on the way. When its publicity become hot and frenzying, the bull's life is coming to its end as such kind of public madness will definitely push it into a super bubble, which will burst with no exception.
While it is far from the public frenzy for gold at the moment and therefore the gold bull market is still having a long way to go, I'm worried about its enhanced public attention lately, which is too much and too fast. Many people who didn't believe gold have now been converted to it believers. Even a new gold rush is back on in California, where people start to look for gold in rivers. This is not a good sign for gold at least for the very near future. I'm afraid some sort of severe correction is very likely on its way. I definitely don't want to add new positions to gold at this price. In the contrast, I have added some short positions via GLL, an ETF with 2 x leverage to bet a declining gold price. I use it as my insurance in case I'm right and gold starts a significant correction. I feel much better with such a kind of hedge since I don't want to sell any of my long gold positions, given I'm a firm believer for a long-term gold bull market.
While it is far from the public frenzy for gold at the moment and therefore the gold bull market is still having a long way to go, I'm worried about its enhanced public attention lately, which is too much and too fast. Many people who didn't believe gold have now been converted to it believers. Even a new gold rush is back on in California, where people start to look for gold in rivers. This is not a good sign for gold at least for the very near future. I'm afraid some sort of severe correction is very likely on its way. I definitely don't want to add new positions to gold at this price. In the contrast, I have added some short positions via GLL, an ETF with 2 x leverage to bet a declining gold price. I use it as my insurance in case I'm right and gold starts a significant correction. I feel much better with such a kind of hedge since I don't want to sell any of my long gold positions, given I'm a firm believer for a long-term gold bull market.
Saturday, August 20, 2011
Why can Euro continue to defy gravity?
Long time readers know that I'm very bearish for Euro. Regardless how you slice it, the Euro zone countries are just a mess, a huge mess which cannot be cleared without a collapse. I even made a bold statement that I would laugh all the way to short Euro at whatever level Euro will go upwards. Don't say I'm arrogant because I really feel the Euro prospect is extremely dire. For me, Euro should have already substantially depreciated or plummeted if the law of nature is still working with gravity. Indeed it has been doing so if you check it against gold, the only authentic money at the moment. But Euro is still very "strong" against US$ and is even appreciating when all kinds of the bad news are coming out almost on a daily basis. This is not very good for my bearish bet with EUO, which is an inverse ETF primarily based on the US$ vs Euro exchange rate. I'm very much amazed and constantly trying to reason why. One obvious reason I discussed a few weeks ago was that the US$ and Euro are competing to see which one is a better currency destructor. Well, I just read an interview with Soros, who gave another reason which I hadn't thought about. I assume everyone knows Soros. Regardless you hate him or like him, he is one of the most successful traders still alive. When Soros talks, I listen. Soros said Euro is still so strong because of China. China has so much surplus that they need to find some way to diversify. In addition to US$, Euro is the only other option with this kind of the scale suitable for China. So China really does not want to see a failing Euro. Therefore they always come in to buy whenever Euro starts to decline. Due to this reason, Soros said he would not buy Euro but also would not short Euro.
This is a very good reason to justify why Euro has been so strong in a totally messy situation. I need to take it seriously and will adjust my strategy. Does that mean I will not short Euro? Not really. There are two kinds of strategies to short.
- One is to directly short with which it is important that you need to be really accurate in the timing and the trend of the underlying stock, especially its price that you need to see it almost immediately declining. This is the strategy I should avoid now for Euro if I believe what Soros said is right. Actually I did lose some money recently with this strategy. Now I understand better why.
- The other strategy is to short something for a range. You don't need to be right totally for the trend; actually it will allow the underlying stock to even appreciate within certain range but still you can make money. Selling naked call options is a typical method for this strategy. If your big trend is correct but the prices fluctuate or stay largely where it is, this strategy is especially effective. As I said before, I have shorted Euro for at least 2 years by now and I did make quite a lot of money, actually with this tactic. I will continue with this strategy as I really don't think Euro has any future with the current status. Euro may survive only if it drastically changes in its composition, e.g. the weak links such as Greece or Portugal are removed from the Euro zone. I still stick to my gun that Euro will not survive with its current shape for 5 years. I will add more such short positions if it continues to appreciate.
This is a very good reason to justify why Euro has been so strong in a totally messy situation. I need to take it seriously and will adjust my strategy. Does that mean I will not short Euro? Not really. There are two kinds of strategies to short.
- One is to directly short with which it is important that you need to be really accurate in the timing and the trend of the underlying stock, especially its price that you need to see it almost immediately declining. This is the strategy I should avoid now for Euro if I believe what Soros said is right. Actually I did lose some money recently with this strategy. Now I understand better why.
- The other strategy is to short something for a range. You don't need to be right totally for the trend; actually it will allow the underlying stock to even appreciate within certain range but still you can make money. Selling naked call options is a typical method for this strategy. If your big trend is correct but the prices fluctuate or stay largely where it is, this strategy is especially effective. As I said before, I have shorted Euro for at least 2 years by now and I did make quite a lot of money, actually with this tactic. I will continue with this strategy as I really don't think Euro has any future with the current status. Euro may survive only if it drastically changes in its composition, e.g. the weak links such as Greece or Portugal are removed from the Euro zone. I still stick to my gun that Euro will not survive with its current shape for 5 years. I will add more such short positions if it continues to appreciate.
Friday, August 19, 2011
Congratulations, Son!!
My son is a junior undergraduate at UC Berkeley with Haas business school. Today is his last day for the summer intern at PIMCO, the largest fixed income investment company in the world. He was just told by his manager that he has got an offer for a permanent job with PIMCO when he is done with his current school next summer. What fantastic news for him, especially in the current job market when job cut is rampant everywhere.
Great job well done, son! You have reached another critical milestone in your life. We are so proud of you!! Life is not easy for anyone, including you. We know how many hurdles you have overcome to bring yourself to this point in your life. While each step on your way has involved a lot of pains, I'm sure you would agree with me that your joy and happiness are greatly enhanced because of such pains you have overcome. I still vividly remember a few milestones during your short 21 years of life:
- We brought you to Switzerland when you were 3 years old. The huge culture and language shock made you frightened. During the first 2 months, you were so happy every Friday coming back home but so depressed every Sunday night because you knew you had to go to the kindergarten next day where you didn't know and didn't understand anyone. Our heart was bleeding when we saw you silently weeping on the bed every Sunday night but we knew we had to push you through this. You did. Not only you successfully went through this painful transition, you have become so fascinated with different cultures and languages that you end up with mastering 6 languages. What a great transition!
- You were born with an introvert personality, shy to speak in public. We were often wrought-up and anxious when we saw you always hiding behind others because you were afraid of talking in front of people. Over time we had almost lost confidence as we knew how difficult it would be to expect you to change your personality. But you did prove that we were wrong! Without us knowing, you had challenged yourself to overcome your limit and comfort zone. You surprised us tremendously to see what a different person you had become! From a shy boy you became the captain for the Reach for the Top team of your high school. This is an esteemed Canadian game show in which teams of high school students participate in local, provincial and eventually national trivia tournaments. Your led the team to become the provincial champion and went to compete at the national tournament. I went with you to watch the final national competition. I may be biased but I still believed your team should be the national champion, not the 2nd place. Your team did answer the final question before your competitor but the judges thought they did first. Nevertheless, I was very impressed by your calm and respectful way to handle the controversy in public. A true gentleman!
- You were the provincial champion for French speech competition when you were too young to attend the national competition. You held a high expectation to realize your dream to compete nationally next year but only faced the unfair reality that the adjudicators deliberately scored you down to not allow you becoming the champion again on the ridiculous basis that champion should not always be the same person. What a heavy blow to you! While we knew it might not be bad to let you experience this as unfairness is indeed not uncommon in the real life, we were very worried that you might not be able to understand and accept this harsh reality at your young age. Again, you proved we were wrong. Instead of letting yourself be depressed for it, you wanted to demonstrate with your talent that you were the best. You joined the bilingual (English-French) parliamentary debating competition. You not only got the provincial champion, you also became the Canadian National Champion for the bilingual debate! We were extremely happy with your great achievement but we were more proud of you for being so mature in dealing with such kind of real life difficulty and challenge.
- The intern job hunting this summer was also not a smooth path for you. It was and still be a very tough job market in all aspects. Even though you did have many interviews including remote face to face interviews, you just could not get an offer for many months. But with your tenacity, persistence and your knowledge in the bond field which is not something the undergraduate finance students normally will have, you finally won the heart of the hiring manager from PIMCO. A heave workload with over 12 hours everyday in the past 2 months has finally paid off with this permanent job offer. Your experience has proved again that success is about 99% of efforts and hard work plus 1% of luck.
Congratulations, Son!
Life is always full of challenges. This is just a good start for your adult life, which will not guarantee your success by itself. More efforts are needed. I'm sure you will and you will surprise us again and again.
We love you and will always be with you regardless of what you may face in your life!!
Great job well done, son! You have reached another critical milestone in your life. We are so proud of you!! Life is not easy for anyone, including you. We know how many hurdles you have overcome to bring yourself to this point in your life. While each step on your way has involved a lot of pains, I'm sure you would agree with me that your joy and happiness are greatly enhanced because of such pains you have overcome. I still vividly remember a few milestones during your short 21 years of life:
- We brought you to Switzerland when you were 3 years old. The huge culture and language shock made you frightened. During the first 2 months, you were so happy every Friday coming back home but so depressed every Sunday night because you knew you had to go to the kindergarten next day where you didn't know and didn't understand anyone. Our heart was bleeding when we saw you silently weeping on the bed every Sunday night but we knew we had to push you through this. You did. Not only you successfully went through this painful transition, you have become so fascinated with different cultures and languages that you end up with mastering 6 languages. What a great transition!
- You were born with an introvert personality, shy to speak in public. We were often wrought-up and anxious when we saw you always hiding behind others because you were afraid of talking in front of people. Over time we had almost lost confidence as we knew how difficult it would be to expect you to change your personality. But you did prove that we were wrong! Without us knowing, you had challenged yourself to overcome your limit and comfort zone. You surprised us tremendously to see what a different person you had become! From a shy boy you became the captain for the Reach for the Top team of your high school. This is an esteemed Canadian game show in which teams of high school students participate in local, provincial and eventually national trivia tournaments. Your led the team to become the provincial champion and went to compete at the national tournament. I went with you to watch the final national competition. I may be biased but I still believed your team should be the national champion, not the 2nd place. Your team did answer the final question before your competitor but the judges thought they did first. Nevertheless, I was very impressed by your calm and respectful way to handle the controversy in public. A true gentleman!
- You were the provincial champion for French speech competition when you were too young to attend the national competition. You held a high expectation to realize your dream to compete nationally next year but only faced the unfair reality that the adjudicators deliberately scored you down to not allow you becoming the champion again on the ridiculous basis that champion should not always be the same person. What a heavy blow to you! While we knew it might not be bad to let you experience this as unfairness is indeed not uncommon in the real life, we were very worried that you might not be able to understand and accept this harsh reality at your young age. Again, you proved we were wrong. Instead of letting yourself be depressed for it, you wanted to demonstrate with your talent that you were the best. You joined the bilingual (English-French) parliamentary debating competition. You not only got the provincial champion, you also became the Canadian National Champion for the bilingual debate! We were extremely happy with your great achievement but we were more proud of you for being so mature in dealing with such kind of real life difficulty and challenge.
- The intern job hunting this summer was also not a smooth path for you. It was and still be a very tough job market in all aspects. Even though you did have many interviews including remote face to face interviews, you just could not get an offer for many months. But with your tenacity, persistence and your knowledge in the bond field which is not something the undergraduate finance students normally will have, you finally won the heart of the hiring manager from PIMCO. A heave workload with over 12 hours everyday in the past 2 months has finally paid off with this permanent job offer. Your experience has proved again that success is about 99% of efforts and hard work plus 1% of luck.
Congratulations, Son!
Life is always full of challenges. This is just a good start for your adult life, which will not guarantee your success by itself. More efforts are needed. I'm sure you will and you will surprise us again and again.
We love you and will always be with you regardless of what you may face in your life!!
Thursday, August 18, 2011
The drunk is helping me in the freefall market
It is brutal; no question about it! As long as you have long stocks, you have to endure the paper loss in this kind of market. No one can be totally immune from it unless you have all cash and/or gold/silver. However, when the time is right, you should always consider to add a few short positions for those companies which are doomed to fail. This may significantly help you to minimize your risk and help you better manage your portfolio. This is what I have been doing and is greatly helping me to hedge against the market gyration risk.
Three months ago on May 8, I wrote: "I'm short PHM. I think it is especially a good time to do so now. I'm not sure if PHM can survive long and less so in a house market that has officially entered the double-dip phase. In addition, the overall market is facing a D-day, the end of QE2 in less than 2 months. A big sell-off may happen anytime. A struggling stock will be hit more in a depressed market." (see here why I considered PHM a drunk). It was around $8 then. Today it is $4.16 at closing, about 50% plunge in 3 months. As you can see below, my way of shorting it has brought me with 77% profit on paper as of now. My total profit target for this one will be over $6000. I think I don't need to wait too long for the target.
Before I started writing blogs, I also entered another 2 short positions: one for GCI which is a newspaper company that publishes USA Today etc, a business of obsolescence. Since I shorted it about one and a half year ago, it has dropped about 50% in value. I have almost reached my shorting target. GRMN is the famous company for the GPS brand Garmin. While I like to use it, its products have lost its advantage in the fierce competition and its business has lost the momentum. Again, I have almost been there to get the full profit.
These are just a few examples in my portfolio on the short side. Together with other short positions and my long positions for gold and silver as well as world dominating companies, I'm safely swimming in the risky stock ocean.
Three months ago on May 8, I wrote: "I'm short PHM. I think it is especially a good time to do so now. I'm not sure if PHM can survive long and less so in a house market that has officially entered the double-dip phase. In addition, the overall market is facing a D-day, the end of QE2 in less than 2 months. A big sell-off may happen anytime. A struggling stock will be hit more in a depressed market." (see here why I considered PHM a drunk). It was around $8 then. Today it is $4.16 at closing, about 50% plunge in 3 months. As you can see below, my way of shorting it has brought me with 77% profit on paper as of now. My total profit target for this one will be over $6000. I think I don't need to wait too long for the target.
| 0.27 | $250.00 | -50 | $1.24 | $4,806.41 | 76.98% |
Before I started writing blogs, I also entered another 2 short positions: one for GCI which is a newspaper company that publishes USA Today etc, a business of obsolescence. Since I shorted it about one and a half year ago, it has dropped about 50% in value. I have almost reached my shorting target. GRMN is the famous company for the GPS brand Garmin. While I like to use it, its products have lost its advantage in the fierce competition and its business has lost the momentum. Again, I have almost been there to get the full profit.
| 0.05 | $-0.00 | -20 | $2.20 | $4,274.65 | 96.59% |
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Monday, August 15, 2011
If everyone is looking for a bottom, it is not a bottom yet
The market is bouncing back and back strongly. Before you blame me for warning you that I did not believe we were out of the woods yet and before you are too bemoaned for not being getting in to catch the "bottom", I will still warn you that you should be very careful and not act emotionally to rush in too early and only regret later for being trapped. Unless S&P can convincingly bounce beyond 1250, the important resistant line, I would not believe this is renewed rally.
I just read an interview done with David Rosenberg, who is well known for his widely read economic commentaries, which offer insights into market trends. Rosenberg was one of the first economists to warn of a U.S. housing market collapse and the ensuing consumer and financial market meltdowns. He responded to a question about the bottom of the market with something very interesting, which I wanted to pass it to you. Basically he said that if everyone was asking and looking for the entry point for the market bottom, it actually meant the bottom had not been reached yet. More painful volatility and a new low would likely ensue. The real bottom will only come when no one wants to get in anymore and everyone only wants to run away. Have you seen this kind of pessimism yet? I haven't felt that. Rather I was also asking whether it was likely the bottom when the market plunged 6% or so.
I will stay on the course as I laid out a few days ago in the script of my game plan.
I just read an interview done with David Rosenberg, who is well known for his widely read economic commentaries, which offer insights into market trends. Rosenberg was one of the first economists to warn of a U.S. housing market collapse and the ensuing consumer and financial market meltdowns. He responded to a question about the bottom of the market with something very interesting, which I wanted to pass it to you. Basically he said that if everyone was asking and looking for the entry point for the market bottom, it actually meant the bottom had not been reached yet. More painful volatility and a new low would likely ensue. The real bottom will only come when no one wants to get in anymore and everyone only wants to run away. Have you seen this kind of pessimism yet? I haven't felt that. Rather I was also asking whether it was likely the bottom when the market plunged 6% or so.
I will stay on the course as I laid out a few days ago in the script of my game plan.
Sunday, August 14, 2011
The best silver company in the world- Silver Wheaton
If you have never heard about Silver Wheaton (SLW), you should pay attention to it. I think this is the best silver company in the world. You may notice that I did not say it is a silver mining company. Why? First, here is the summary for the company per Yahoo Finance: "Silver Wheaton Corp., together with its subsidiaries, operates as a silver streaming company worldwide. The company has 14 long-term silver purchase agreements and 2 long-term precious metal purchase agreements whereby it acquires silver and gold production from the counterparties located in Mexico, the United States, Canada, Greece, Sweden, Peru, Chile, Argentina, and Portugal. Silver Wheaton Corp. is headquartered in Vancouver, Canada." What does it mean by "silver streaming company"? That's the key to differentiate it from other conventional mining companies. Silver Wheaton is a royalty company for silver. In a nut shell, it has cash in hand and lends its capital to those small early stage silver mining companies that desperately needs cash for their business. In return, SLW gets certain percentage of sales of silver mined by those companies when they go into production. That is the royalty checks SLW simply collects and cashes in the bank day in and day out. Given this unique business model, SLW does not need many employees (I heard it has about a dozen employees) with no real operations, and the best is that it does not take any mining risks other miners must take. Don't sneer at such royalty checks. According to the latest company estimate, it may bring in $700 million worth of royalty checks in 2011 at the silver price around $36 per oz. That's right, $700 million in a company with very few employees and no real operations!
If you really understand its business model, you should realize Silver Wheaton has an unbelievable potential. Here is what CEO Randy Smallwood recently talked about its amazing business: "The mining industry once again finds itself facing significant inflationary pressures, resulting in accelerating operating and capital costs. The benefits to Silver Wheaton in this environment are twofold. First, Silver Wheaton is immune from inflationary cost pressures as our unique business model guarantees essentially fixed operating costs of approximately US$4/oz. Fixed costs provide our investors with significant margin expansion as silver prices climb. Second, as mining companies' capital commitments continue to materially increase, and cash needs arise, Silver Wheaton can offer a very attractive source of funds compared to other forms such as debt and equity."
I could not believe my eyes when I saw at how low price SLW could acquire the silver rights: $4 per oz! Think about it, the current silver price is about $39/oz. In other words, its profit margin is $35/oz. Do you get the point? What kind of profits SLW will have if silver price goes up to $50 or even higher? I have no doubt this will happen. It is not a matter if but just when silver will significantly appreciate. At the current price of $37 for SLW, I think it is a good value to buy. But please remember, I'm not saying it is the absolute bottom for SLW. It is a futile game to try to time the bottom. For value investment, it is even stupid. Although I'm not predicting and I simply don't know, it is not unthinkable that SLW may drop to a much lower price. When it happens it simply means it becomes even more valuable. I'm already in and I will add more if its price comes down. By the way, SLW even pays a small dividend, which I expect will significantly increase over time.
If you really understand its business model, you should realize Silver Wheaton has an unbelievable potential. Here is what CEO Randy Smallwood recently talked about its amazing business: "The mining industry once again finds itself facing significant inflationary pressures, resulting in accelerating operating and capital costs. The benefits to Silver Wheaton in this environment are twofold. First, Silver Wheaton is immune from inflationary cost pressures as our unique business model guarantees essentially fixed operating costs of approximately US$4/oz. Fixed costs provide our investors with significant margin expansion as silver prices climb. Second, as mining companies' capital commitments continue to materially increase, and cash needs arise, Silver Wheaton can offer a very attractive source of funds compared to other forms such as debt and equity."
I could not believe my eyes when I saw at how low price SLW could acquire the silver rights: $4 per oz! Think about it, the current silver price is about $39/oz. In other words, its profit margin is $35/oz. Do you get the point? What kind of profits SLW will have if silver price goes up to $50 or even higher? I have no doubt this will happen. It is not a matter if but just when silver will significantly appreciate. At the current price of $37 for SLW, I think it is a good value to buy. But please remember, I'm not saying it is the absolute bottom for SLW. It is a futile game to try to time the bottom. For value investment, it is even stupid. Although I'm not predicting and I simply don't know, it is not unthinkable that SLW may drop to a much lower price. When it happens it simply means it becomes even more valuable. I'm already in and I will add more if its price comes down. By the way, SLW even pays a small dividend, which I expect will significantly increase over time.
Saturday, August 13, 2011
Annaly: a guaranteed winner at least till mid 2013
I have talked about Annaly (NLY) many times in my blogs (here, here and here). Personally I have got quite some money in it for many years as its business model fits the best to the current financial environment. In a nut shell, the worse the US economy goes, the more money NLY can make, which then translates into more dividends for share holders. A few weeks ago, NLY prices started to stumble. When S&P began to threaten to downgrade the US credit rating, people started to be worried about NLY's bottom line. NLY is 100% relied on the no-risk credit rating of the US government. No one knew what it would mean if the US credit rating was downgraded. People worried that NLY's cost base could increase if the US triple A rating was removed. Investors hate uncertainty. So they dumped NLY en mass end of July. As I said I still very much believed NLY and thought it was likely an overreaction that was typically seen among investors. Indeed, this is exactly what has happened. NLY's prices have bounced back very quickly in the past 2 weeks.
Now why am I so sure that NLY will guarantee to make good money at least till mid 2013? This is related to the latest Fed announcement a few days ago. Not sure if you paid any attention to what the Fed said. One of the key statements from the Fed was that they had made a very clear timeline for the near zero interest policy, i.e. the interest rate will be kept near zero till at least mid of 2013. NLY jumped immediately and it was traded at around $18 again. Why so? The critical premise for NLY to be able to make good profits is that it can borrow cheap money. In other words, the lower the Fed interest rate is, the better it is for NLY to get cheap money. That's why it can be such a good business during the bad economy period because the Fed dares not to raise the interest rate. Although we knew the Fed would likely keep the low interest rate for a long time (I expected at least till end of 2012), no one knew for sure how long it would be. Uncertainty is simply not good for any stocks. Now it is crystal clear that the Fed rate will be low in the next 2 years, which is absolutely good news for NLY. Given what is going on in the US and around the world, I even doubt whether the Fed will be able to raise the rate after mid 2013 but this is not my immediate concern at the moment. I will keep my NLY shares till before mid 2013 and then decide whether it will be the time to unload. In the mean time, I simply enjoy high dividends quarterly from Annaly with an annual yield of 14%. It may be much safer than your bank savings and definitely more profitable. Hope you have got in with some positions for NLY. An alternative is AGNC (see details here).
Now why am I so sure that NLY will guarantee to make good money at least till mid 2013? This is related to the latest Fed announcement a few days ago. Not sure if you paid any attention to what the Fed said. One of the key statements from the Fed was that they had made a very clear timeline for the near zero interest policy, i.e. the interest rate will be kept near zero till at least mid of 2013. NLY jumped immediately and it was traded at around $18 again. Why so? The critical premise for NLY to be able to make good profits is that it can borrow cheap money. In other words, the lower the Fed interest rate is, the better it is for NLY to get cheap money. That's why it can be such a good business during the bad economy period because the Fed dares not to raise the interest rate. Although we knew the Fed would likely keep the low interest rate for a long time (I expected at least till end of 2012), no one knew for sure how long it would be. Uncertainty is simply not good for any stocks. Now it is crystal clear that the Fed rate will be low in the next 2 years, which is absolutely good news for NLY. Given what is going on in the US and around the world, I even doubt whether the Fed will be able to raise the rate after mid 2013 but this is not my immediate concern at the moment. I will keep my NLY shares till before mid 2013 and then decide whether it will be the time to unload. In the mean time, I simply enjoy high dividends quarterly from Annaly with an annual yield of 14%. It may be much safer than your bank savings and definitely more profitable. Hope you have got in with some positions for NLY. An alternative is AGNC (see details here).
Thursday, August 11, 2011
A pounding the table moment
It seems the gold traders were listening to what I was saying. I said last night that gold was too high and was probably not sustainable in the short term. Gold went as high as $1818/oz over night but suddenly turned around and dropped by over $50 today to come down to around $1760 or so. As much painful as it appeared to be, it is actually healthy for a long-term bull trend. If you want someone to continue to run for a long time, you got to allow him or her to take a rest or slow down. Otherwise, he or she will collapse.
Gold is not the topic for today. Actually I want to talk about Cisco, which I discussed late Apr. Cisco (CSCO) is a value investment for me. I considered it a good value to own when it was below $20 at the time I introduced it. The market apparently did not agree with me. It came down further. When it dropped to around $15 about 10 days ago, I was thinking to write this blog as I was really consider it as "a pounding the table moment". It was so valuable to me. But I didn't. I figured it was never a good idea to talk about a long position when the overall market was crashing. However, for myself I could not help but taking the risk to go in. Below is the position I got last week. It was a poor timing since you know what happened Monday this week. The market crashed by over 6% and everything except precious metals came down with it. CSCO plunged to below $14 after I went in. The position I held went down with a paper loss of over $4000 at its nadir. I was really not worried. Cisco is doing all the right things now. It is streamlining its business to refocus on what it is doing the best as the Internet plumber. It is also cutting costs to improve its finance and profitability. Finally it surprised the whole world with a great earning report yesterday. CSCO is jumping by 16% today. All my paper loss recovered with a jump of over $4200 today in my position value.
I'm more confident now about CSCO as a long-term value investment. While it is still possible that CSCO may come down again with the overall market, it will just become more valuable with a decreasing share price. I may add more to it if such an opportunity presents itself.
Gold is not the topic for today. Actually I want to talk about Cisco, which I discussed late Apr. Cisco (CSCO) is a value investment for me. I considered it a good value to own when it was below $20 at the time I introduced it. The market apparently did not agree with me. It came down further. When it dropped to around $15 about 10 days ago, I was thinking to write this blog as I was really consider it as "a pounding the table moment". It was so valuable to me. But I didn't. I figured it was never a good idea to talk about a long position when the overall market was crashing. However, for myself I could not help but taking the risk to go in. Below is the position I got last week. It was a poor timing since you know what happened Monday this week. The market crashed by over 6% and everything except precious metals came down with it. CSCO plunged to below $14 after I went in. The position I held went down with a paper loss of over $4000 at its nadir. I was really not worried. Cisco is doing all the right things now. It is streamlining its business to refocus on what it is doing the best as the Internet plumber. It is also cutting costs to improve its finance and profitability. Finally it surprised the whole world with a great earning report yesterday. CSCO is jumping by 16% today. All my paper loss recovered with a jump of over $4200 today in my position value.
| 2.29 | -1.16 | -33.62% | $4,280.00* | -40 | $2.60 | $839.34* | 8.04% |
Wednesday, August 10, 2011
I'm worried about the gold pace
I have Bloomberg news on my TV all the time when I'm at home. It's rolling at its bottom screen to show the real time prices for various stocks, funds and commodities. In the past few days, every several minutes when I scan at it, the gold price is different and increasing. It took about a month to add $100/oz from $1600 to $1700 but it only took a week to increase by another $100. As I'm writing, the gold future has reached $1808, which seems continuing to appreciate. Given substantial various positions I have for gold, naturally I'm very happy to see this but I'm really worried about its pace now. Regardless how strong something is fundamentally, it is always worrisome if it jumps too fast, too soon. Some sort of correction is very possible for gold. I probably should buy some put options as my insurance to hedge against the potential fall.
Tuesday, August 9, 2011
The script of my game plan for the next few weeks
The market was extremely oversold. Even with not so good news from the Fed today with apparent disappointment, the market still overcame the initial huge sell off after 2:15 pm and bounced back to surprise everyone by ending the day with an over 429 points jump for Dow and 53 points jump for S&P. Certainly no surprise for me. I actually got a few contracts for the SSO options in place to anticipate the bouncing back. So are we out of the woods by now? Is it likely the bottom for this correction? I'm not so sure yet. When a market crashes, it always tries to bounce back and it has the habit to lure retail investors into believing that it has done with the crash and it is going to rally for long. As soon as the herd is convinced about the rally and starts to chase the seemingly upward trend, it crashes again and usually more severely to test the new low. This is what has often happened in the past during crashes. If the history is any guide, here is the script of what I'm going to do.
As I told you, S&P 1250 was the support line before the crash. Since it was broken through, it now serves as the new resistance line for it. If the rally is real, it must first break through this resistance line. Most often however, it will come back to test this line in its attempting rally but will then plunge again to a new low. If you have good paper profits for your existing stocks, it will actually be a good time to take your profits when S&P comes back to near 1250 before its renewed downtrend. That's exactly what I'm going to do. I will wait at the sideline for now and see the market try to rally in the next few weeks. When it jumps to the level close to 1250 for S&P, I will start to unload many of my positions with good paper profits. That will enhance my cash position to be prepared for the real bottom to come. This should come in the next 1-2 months. Stay tuned.
As I told you, S&P 1250 was the support line before the crash. Since it was broken through, it now serves as the new resistance line for it. If the rally is real, it must first break through this resistance line. Most often however, it will come back to test this line in its attempting rally but will then plunge again to a new low. If you have good paper profits for your existing stocks, it will actually be a good time to take your profits when S&P comes back to near 1250 before its renewed downtrend. That's exactly what I'm going to do. I will wait at the sideline for now and see the market try to rally in the next few weeks. When it jumps to the level close to 1250 for S&P, I will start to unload many of my positions with good paper profits. That will enhance my cash position to be prepared for the real bottom to come. This should come in the next 1-2 months. Stay tuned.
Monday, August 8, 2011
I don't know what can be considered low for gold anymore
I have to be honest with you. I really don't know anymore at which price I can consider gold is low. For those who follow me for some time, you know that I have been waiting for gold to correct for quite some time. For most of the past year or so, I thought gold was too high for me to establish new positions, given that I have already got all kinds of different positions for gold and silver. About two months ago, I started to doubt whether I could see any meaningful correction before gold went up too high from the current levels. In less than a month ago on Jul 18, I wrote that I was not sure if gold would every go down below $1500. The gold was $1607/oz that day. Without knowing it, gold has jumped to $1719/oz today, in almost like a blink of eyes. While I'm still a bit nervous to get in more for gold at this high level, I have started to put in more money into gold whenever there is a meaningful pull back. Not in big money each time; however slowly but surely I'm accumulating in my gold investment. I have given up the idea to only consider more money in gold when it plunges hundreds of dollars per oz. I don't mean it cannot happen. It very well may. However, I just don't know how far it will go before such a plunge, if any, ever happens. I will still be ready to go in more if a sever correction indeed comes.
As I said many times, there is a long long way to go before this gold bull market is over. How can I be so sure? Just look around the world regarding what all the governments are doing and honestly ask yourself: does your money worth more or much less with each passing day? If a 10 uninterrupted years of track record with year-over-year increases cannot convince you about this super bull market, I don't know what else can make you believe. In an odd way, actually just because there is so much doubtfulness for the ongoing gold bull market, it has made this super bull safely continue. I just saw today the bickering between Peter Schiff, the CEO of the Euro Pacific Capital Inc. and the talking heads at the CNBC Fast Money, which makes me to more firmly believe that this super bull of gold and silver will definitely continue. Schiff is a long time critic of the US government and the Fed. Naturally he is a super gold bug. For all fairness, CNBC Fast Money often invites him to express his opinions and criticism but each time they always laugh at what he says. They seem to believe that they know much better than Schiff. What kind of idiots they really are! Today they scoffed at Schiff again when they heard him saying that gold will continue to appreciate much more and the US dollar will fail miserably. You know whose side I am with and don't regret in 5 or more years if you don't take any action today! Mark my words: regardless how volatile gold and silver may be, the super uptrend for them will surely continue for long long time.
PS: as I'm typing, the gold future has touched $1751/oz.
As I said many times, there is a long long way to go before this gold bull market is over. How can I be so sure? Just look around the world regarding what all the governments are doing and honestly ask yourself: does your money worth more or much less with each passing day? If a 10 uninterrupted years of track record with year-over-year increases cannot convince you about this super bull market, I don't know what else can make you believe. In an odd way, actually just because there is so much doubtfulness for the ongoing gold bull market, it has made this super bull safely continue. I just saw today the bickering between Peter Schiff, the CEO of the Euro Pacific Capital Inc. and the talking heads at the CNBC Fast Money, which makes me to more firmly believe that this super bull of gold and silver will definitely continue. Schiff is a long time critic of the US government and the Fed. Naturally he is a super gold bug. For all fairness, CNBC Fast Money often invites him to express his opinions and criticism but each time they always laugh at what he says. They seem to believe that they know much better than Schiff. What kind of idiots they really are! Today they scoffed at Schiff again when they heard him saying that gold will continue to appreciate much more and the US dollar will fail miserably. You know whose side I am with and don't regret in 5 or more years if you don't take any action today! Mark my words: regardless how volatile gold and silver may be, the super uptrend for them will surely continue for long long time.
PS: as I'm typing, the gold future has touched $1751/oz.
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