Cresud-Argentine farmland play

Cresud (CRESY, Nasdaq) is an Argentine company, a leading company and also one of the largest farming companies in Latin America. From a commercial standpoint, Cresud’s key business includes acquisition, transformation and sale of farmland and the production in its own farmlands or in farmlands leased from third parties. Over years, Cresud has made many smart move to buy quality farmlands when no one is interested, not only in Argentina, but also significantly in Brazil and other South American countries. As a result, buying Cresud's stocks is just like investing in the great assets in Cresud's balance sheet.

As you can see from the long-term chart below, CRESY goes boom and burst every few years. It appears it has just gone through the burst cycle and has shown a sign of uptrend. Actually CRESY is trading at almost 20% discount against its book value, a rather great value. It is paying a big dividend, at a 5.5% yield at this price below $9. I think the downside risk for CRESY is quite limited now. For those who would like to take a risk and want to have exposure to the international stocks, CRESY is worth considering.

German government adviser: Euro may not survive more than 5 years

 

Dr Konrad, chairman of a scientific council that advises the finance ministry of Germany, said: “Europe is important to me. Not the euro. And I would only give the euro a limited chance of survival.” When asked whether Euro could survive 5 years, he replied:  “A concrete period is hard to identify as it depends on so many factors. But five years sounds realistic.”

 

Does this sound familiar? See what I said back in August 2012 : "it (Euro) won't survive in its current format within 5 years.". As I have repeatedly said, Euro is a rather faulty fiat currency and it is doomed to fail. Konrad is a senior figure in Germany with quite significant influences on financial issues. Apparently he is also very pessimistic about Euro.

 

If Euro tries to appreciate against US$ again to $1.35, it will be a great time to short it via EUO, but better via EUO put options since EUO is treated as Limited Partnership, a headache in terms of tax filing.

A great buy of a tech giant for your retirement

People are usually hype about new tech companies' stocks and have no passion at all about matured tech companies such as Microsoft and Intel. Actually exactly those less liked matured companies with a great track record of paying increasing dividends over time will make you rich, if you are patient enough by buying them at good price and holding them forever with dividends reinvested. Intel (INTC) is just such kind of a company. In the past year or so, people have run away from INTC, thinking that this giant is near its dead end. Its price has declined over 20% or so. At this price, INTC is very cheap in valuation and paying a salivating dividend of 4.2%. Right now, actually INTC is a great buy. Why so?

A few days ago, Intel reported disappointed earnings for the first quarter. Its core business, PC chips which are counted for almost half of the company's sales, was down 6%. This was consistent with the recent news that PC shipments worldwide declined 14% in the first quarter vs last year, worse than what analysts had predicted. As a result, Intel's sales dropped 2.5% and net income fell 25%.  Normally you would expect that a company's stock would be slaughtered when reporting earnings poorer than expected. But not this time for Intel. More amazingly, while the overall market was doing poorly in the past week, Intel was one of very few companies doing quite well and its share price showing a clear uptrend (see below: upper: INTC vs S&P500 past 5 days; lower: INTC 52 week chart).

When a company's stock is doing well with bad news, especially in a poor overall market, it is telling you that selling of the stock has been exhausted and it is the time to buy.

We are witnessing a historical opportunity

Gold, or more preciously, precious metals, are killed. It is an engineered slaughter of the sector. Those who have the money in precious metals, especially those who came in late, are all panic and eager to exit. Margin calls are triggered and mutual funds are forced to sell due to wide-spread investors' redemption requests, which further worsen the situation. Given that the major support line for gold/silver has been broken down, there is a good chance that the volatility will continue in the short-term and gold and silver could go down further. However, to put this into perspective, this is not an abnormal phenomenon at all for gold/silver. During the last historical bull run for gold in 1970-1980, gold jumped up from $35 to $850 before it topped out. But this was never a straight line up. Gold actually dropped 50% from $200 to $100 between 1974-76. One has to understand that gold has been up for 12 straight years, which has never occurred to any other assets. By the law of nature, I guess it should be expected at some point gold should take a breath and come down to rest before running up again. After all, nothing fundamentally has changed to support gold to go up. If anything, things have only become worse, which should push gold to a much higher level. There is one thing I found interesting these days. While the gold price dropped like a rock, people around world are lining up to buy physical gold and most of the gold stores have run out of their stocks. This does not sound like the end of gold bull run.

Personally I'm certainly convinced that gold and other precious metals will come back and shoot up much higher. The current turmoil in this sector will turn out to be a historical opportunity to buy gold, silver and platinum. We just need to be patient to let the havoc settle down. I will be especially interested in RGLD and SLW, the two best royal gold and silver companies that have been decimated as well this time. The profit potential will be huge when the time comes. No rush and be patient!

Russia is following Japan's footstep

Russia is an emerging economy, part of the socalled BRICS countries, and is very rich in natural resources, especially oil and natural gas. But due to its political and economic systems, investing in Russia is not really easy and can be volatile. One should never chase high when it is hot but if you catch it up at the beginning of an uptrend, you may make a lot of money as well. Right now, maybe it is the time to consider to put some money in Russia's stocks.

 

 



As you can see, Russia bounced back strongly from its 2009 bottom and peaked in early 2011. Since then, it has got a haircut by nearly 50%. Russia's stocks are substantially lagging behind the performance of S&P 500 as shown in the lower panel of the chart. At this level, Russia stocks are very cheap and have a great potential to catch up. Now there may be a strong catalyst. Russia is likely following what Japan is doing to overly stimulate their economy. Why so? Because it is well known that President Putin is not happy with the current economic status in his country and he wants to push it forward. But until now his hands are bounded because the head of the Central Bank of Russia has been quite independent and has not complied with Mr. Putin's call to lower interest rates due to concerns of inflation. Now Putin has changed the CBR head and ask his current economic advisor and his political ally, Elvira Nabiullina, to take over CBR's crown. In other words, it is very likely that Russia will lower the interest rate, maybe more than once and may even start to print money by buying government bonds. Similar to what happens to Japan, this kind of actions will likely trigger a bull run for the Russia's stock markets.

 

If you want to take this idea, RXS (for big companies stocks) and RXSJ (for more diversified and smaller companies) are the two ETFs for Russia. As I said it could be volatile and please watch for your stop loss if you are playing with this speculation.

 

Check if your seat is good or bad before flying

You may find this information handy and useful. The SeatGuru is rather easy to use and informative. Just typ in your airliner, flight number and the date, you can see the seat map of your flight. Simply hover your cursor over any seat you want to check and its information will show up. Hope you like it.

The lonely soul in the gold/silver market

I feel I like the only soul wandering in the gold/silver market now! Gold and silver got crashed yesterday and almost everyone sold in panic en masse. Gold dropped like a stone by over $80 in a single day, which has not happened since the crash in 2008. A moment of capitulation, definitely!

This vividly brought me back to the time in 2008 when gold crashed from $1000 to below $700 within a few months. The feeling was exactly the same: desperate, painful, hopeless. The whole world was telling you the bull run for gold had ended and no hope to continue the ride with gold or silver. I remembered clearly that I was sitting anxiously in my small room wondering what I should do with my rather big positions that were bleeding. After internal fighting for several days, I could not continue with the anxiety and finally gave up and sold my positions to cut loss. Looking back, that was exactly the time of the bottom for gold. In just a few months afterwards, gold took off again swiftly and the gold stocks I sold doubled very soon.

In the following years, I studied a lot and became much more knowledgeable about the fundamentals why gold and silver have to go up in the reckless world as we are in now. I have since made a firm resolution that I will not sell my gold/silver positions simply because there is panic selling or everyone else is dumping. Unless the fundamentals to support the gold/silver bull change, i.e. the madness of world-wide printing of fiat money is ended; the race of currency debasing has stopped; and the negative real interest rates have gone, I will continue to hold gold/silver positions and will even buy more when their prices come down. This is exactly what I'm doing now in the past few months.

After all, one has to buy low and sell high to make any money. If you like something, you have to buy it when it is on sale with lower price. But this is easy said than done in investment. People are usually just doing the opposite: buy high and sell low, a recipe of losing money.

I have no crystal ball to know if this is exactly the bottom or whether gold/silver will continue to slide down. One thing I'm sure about is that the lower their prices go, the less risk there is to buy them and the bigger profit one will eventually get. Gold and silver will come back and go up much higher. It is not if but when!

Next super-bubble to burst - student loan

First, a few words on 2 short-term trends I'm seeing at the moment. I think the stock market is at the dangerous cliff edge of a significant correction, which could happen any moment. I know I have been talking about this for quite a while and I'm wiping out eggs on my face for now, but I'm stubbornly thinking this is coming closer and closer. I'm not talking about one or a few days of market decline, even severe ones like we have seen in the past few days. I'm talking about a sustained decline over 5-10% for weeks or a few months. The other opposite trend is gold stocks. Again, I have been talking about this for quite some time but this sector has relentlessly kept going down. I'm seeing a lot of blood in the streets now and to me this is a great opportunity to make money when nobody wants to touch them, if people have courage and patience.

Now back to today's topic. It is well known that a substantial proportion of the US college students are getting loans for their college or graduate studies. This also includes a good chunk of student loans for studies in for-profit colleges. But not many people know how big student loans are and what are the problems associated with them. It is reported that the total amount of student loans outstanding is approaching $1 trillion. This is huge. The most worrisome problem with such huge loans is that 31% of the loans were already 90 days overdue. According to the U.S. Department of Education, "for-profit colleges" have a 3 year average default rate as high as 22.7%. The worst part is, the default rates continue to go up. People have to understand, not likely home mortgage loans, student loans are not backed up by anything and per the US law, one can not get rid of student loans even if they go bankruptcy. So the situation is much worse than the home mortgage loans, which have blown up the US and even the whole world's economy.

I hope more people can really understand the situation and wish something could be done to turn this around. Unfortunately it is likely a wishful thinking as the mess is too big now. Likely we as taxpayers will have to pick up the tag to pay, just like what occurred to the burst real estate bubble. However, savvy investors may proactively do something to fight against and profit from the super bubble in brewing.

SLM is the biggest student loan company, formerly known as Sallie Mae. Sounds familiar with the two mortgage companies? SLM's market cap is $9.21 billion but its student loan portfolio is worth $154 billion. In other words, this is a disaster waiting to materialize. The incredible thing is that, despite all of that, SLM has just sold $1.1 billion worth of student loan this year. It is pure stupidity! I don't know what else I can say about those who "invested" in such loans. They have just brought home a time-bomb waiting to explode. Well, other people's stupidity can be your profit opportunity. Shorting SLM will turn out to be a great success at some point. I'm not suggesting to do so immediately but I'm pretty sure I will do so some time in the future.

 

Short Japanese Yen!

Japanese yen started to lose ground back in Dec last year when Abe won the election. I talked about it back then and suggested to pay attention to the Japanese stocks because they should benefited from the weakening yen. Here is what I said: If indeed the Japanese stocks are immediately going up with the prospect, EZJ should break upwards through $56. If that happens, there is much better chance that it will go up further with more momentum. Well, this is exactly what has happened. EZJ jumped to $75 now, around 40% increase in just 3 months (see below).

But I don't think it will stop here. If you've not yet noticed, Japanese yen lost 3% against US$ yesterday and this trend will likely continue, which is very bullish for the Japanese stocks. What happened? Well, Japan has just got a new chief for their central bank, BOJ. At his first chairing meeting, he announced that BOJ will massively print money by buying Y7.5 Trillion ($77B) worth government bonds every month in order to increase their inflation rate. This is virtually the exact copy of QE in the US. This kind of money printing will inevitably create a huge assets bubble while significantly debasing their currency. See what happened between J-stocks (EZJ/blue) and yen (FXY/green) in the past few months. It is a perfect mirror image, isn't?!

I think it will be very profitable in the next year or two to short Yen, as long as they keep printing money. You may do so by buying the ETF, ProShares UltraShort Yen (YCS). This is a leveraged inverse ETF that will go up while Yen depreciates. Of course, if you want to double the dose, you may buy both EZJ and YCS, but please keep in mind this is not a short-term trade as Yen may likely fluctuate in the near term. However, 6 months to one year from now, I'm quite confident that this trade will be quite profitable.

How does a 85% haircut look like?

Just saw this one regarding a poor guy's saving account balance in a Cyprus bank, LaikieBank. With his $850K deposit, he has only $128K available to him and the remaining $720K is gong. Talking about the confidence and trust people will have for the Eurozone banks!!