A Contango Trade

I bet most of you have never heard about this word, Contango. Here is the definition: A state in which the price of a futures contract is higher than the eventual or expected spot price of the underlying commodity or security (oil for this case). So what does it mean? Well, simply put, you need to pay higher price for oil for a future contract than the current price of oil (spot price). This dose not often occur but right now there is a quite significant Contango for oil: e.g. at the moment the crude oil costs about $50 but for the oil in Mar 2016, its price is around $60. So if someone buys oil now and sells it in about year, he can make a profit of $10 minus all the costs. With this kind of easy money in the future market, you bet people are just busy buying oil now and simply keeping it for a higher price in the future. This is another important factor that the oil inventory will keep increasing, given more oil is bought and stored. Higher inventory usually is depressing for the oil price. Therefore as long as the Contango exists, it is hard for me to confidently say oil has bottomed.

So which business will flourish in the oil Contango? You bet, it is the storage business. It is reported that there are a lot of huge storage tanks floating in the ocean. Nowadays, there is a shortage of storage room for crude oil. There is simply too much demand for it. So the companies engaged in oil storage is doing very well. NuStar Energy LP (NS) is one of them. It is a MLP and paying a high dividend at 7%. As shown below in the past 3 months when the oil price has crashed most, NS is simply going up (red). As long as Contango continues, NS will benefit and be doing fine. Of course this is not a risk free trade. Although I don't expect Contango will disappear soon, no one knows for sure when it will stop and reverse. When that happens the impact for NS will be damaging. So you need to protect yourself while enjoying its high dividend and potential capital gain. I suggest you set a tight stop loss of $60 (currently NS is trading at over $62). If it drops below that at closing, the trend may be turning and you don't want to be trapped in. But I suspect this will be at least a few months trade while oil is fluctuating sideways or going lower.

Get paid to wait for the recovery of the oil/gas sector

Both oil and natural gas have been decimated in the past few months. After over 50% hair-cut for oil, the question keeps coming up is whether oil has reached its bottom. When you watch CNBC, it is almost a perpetual topic that every few hours there will be someone expert coming up and talking about why oil should go up from here. There is simply too much interest in oil at the moment. As a contrarain investor, I don't believe oil has reached its bottom yet when so many people are waiting for it to come and jump in. The market has the habit to hurt as many people as possible before it is done with the brutal correction. For those who are eager to get into this sector, I think you should think about natural gas instead. It is the young brother of oil and it has shown the sign of recovery from its bottom.

Natural gas (NAT) is very cyclic and in the past few years it has swung between $2.5 to $12 BTU, a huge range. Recently it got killed again with oil and touched again the low level of $2.6 BTU. This looks like its bottom and since then it has moved up and just broken out to the upside through its 3 month trendline. The moment indicator, MACD, is also showing a uptrend to support its bullish trend. There is another catalyst that may be very positive for NAT is the upcoming export of natural gas via the LNG (liquified natural gas). You see, US has too much NAT, enough for over 100 years of usage but everywhere else, NAT is still very much in shortage and highly demanded. In Asia and EU, NAT costs 4-5 times more than in the US. 2015 is the first year that US will complete the LNG export terminal that will be able to export NAT. I bet this will significantly increase demand and push up the NAT price. Of course the recovery of oil price will also boost the NAT demand as it is much cheaper.

So, with this consideration in mind, what is a better way to bet for the recovery of NAT, which will further benefit from the recovery of oil that will happen eventually? You can obviously just buy EFTs for NAT but if NAT turns around to go down again, you will simply lose money. A better way to bet for NAT is to find a stock that will pay you to wait for the trend to develop. I found a company that is great for this purpose. San Juan Basin Royalty Trust (SJT) is a so-called royalty company for natural gas mining. In a nutshell, it lends money to NAT mining companies and in return it will get cheap gas when the mines start to produce, usually during the whole life of the mines. This is such a great business model that SJT has no further risks at all except the initial investment funds. After mines becoming productive, all SJT needs to do is to collect money and pass the net income to shareholders. That’s why when you look for the number of employees for SJT, you find zero, yes, it is none (at least in ETrade). I assume they must have some people working for them but one thing for sure, they don’t need a lot of people to operate due to its simplicity. SJT has a lot of cash in hands with zero debt and it pays out over 90% of net income to investors. That’s why you can enjoy a 8%+ dividend yield at the current price. As you can see below, SJT is sitting on the support line at the low level seen in 2009. I cannot say for sure that SJT won’t go down further from here but I doubt it will. Also, it seems to me there is really no credit risk at all for SJT, as with its cash and no debt as well as its stable and productive business model, there is no way SJT will go out of business. Yes, the NAT and oil prices may still swing widely, which may impact on the SJT stock price, but you are at least paid safely and nicely by holding SJT. I personally really like it.

 

How to efficiently manage the trading cash flow

For those knowing me, it is not news that I'm a value investor for my core portfolio. Over years, I have identified a group of quality dividend stocks that are good for holding for retirement. I keep them without having to worry about the fluctuation of stock prices as I know the lower the stock prices go, the better for my long-term wealth building eventually. The trick is to let their dividends to do their magic work: compounding. I'd highly encourage everyone to really think about deeply how to use this stress-free strategy to build up your nest eggs. If you want to refresh your mind what this strategy is all about, please read this blog and this one.

Having said that, nothing prevents value investors to also trade for short-term income or profits, as long as you don't gamble and do what you know and what works for you. Therefore I'm also a very busy and active trader for short-term opportunities. My trading strategy has become more and more mature and effective as time passes by and I can literally get thousands of dollars each month by trading. This has also further enhanced and grown my retirement portfolio, a win-win strategy! Now the obvious question is how to free up cash for trading without jeopardizing the need of money for long-term investment. Indeed this seems contradictory to each other. Everyone may have different ideas how to resolve the conflict but I have effectively use 3 approaches that work well for me:

• Trade on your existing positions. If you have 200 or 300 of some stock (e.g. MSFT) for retirement, you may consider to do covered call for 1 or 2 contracts every few months.  This way, even if your shares are called away, you still have some shares in your hands and you can always buy back again. This is especially effective when there is a short-term overbought of the underlying stocks. I sometimes even do deep in-the-money covered call to hedge against the short-term overbought condition.
• Wisely use your margin. Margin is to borrow money from your broker to trade. I don't like to use margin as it could lead to disaster. However, occasionally you may run into a situation that you have to buy some stocks due to your options assigned. If the underlying stock is a solid good one and you set it up when it was oversold in the first place, I don't mind holding it for a while, especially if you can further make covered calls and earn dividends. Right now the borrowing cost (interest) is quite low. It makes a lot of sense to borrow for a while as long as the money is productive. I few months ago I ran into this situation that I sold MSFT puts, which were assigned. I kept it for about a month, during which I got dividends as well as gained from a few weeks covered calls. After interest, I still gained quite a lot.
• Let call options replace your long stock positions. I love options as they have endless possibilities that may benefit you. The key is to use them wisely and appropriately. One way I figured to help me is to use them as surrogate for the stocks I want to hold and free up my cash load for trading. This is especially a useful tool for stocks that only pay dividends once or twice a year, i.e. you don't need to keep holding the stocks all the time for dividend purpose. For example, last year I had 600 shares of Novartis (NVS) which I'd like to continue to hold. NVS only pays dividends once a year in Feb. So after the ex-dividend date, I sold NVS shares and at the same time bought 6 contracts of the deep in the money calls for NVS. What it did was to allow me to control the same amount of NVS shares (600) but with only about 10-20% of the cash. I then bought back these 600 shares early this year in order to get the next dividends. Since NVS has appreciated quite a lot last year, my call options went up a lot as gain and at the same time, I also used the freed up money to generate other short-term incomes. In other words, I virtually used the same amount of money more than 100% of its capacity. Right now, I have 10K NVS shares and its ex-Div date is Feb 27. I plan to do the same to sell NVS after Feb 27 and buy NVS long-term deep-in-money call options. At the moment, the longest options for NVS are in Aug and the $90 calls are priced at around $12-13. So instead of I hold NVS with over $100K for the whole next year, I can use options to control the same 1000 shares but only use about $12K. By the way, this is also a way to reduce your risk as the maximum I can lose is $12K, instead of $102K if Ihold the shares and if NVS drops to zero (in theory). I can use the $90K to generate other short-term incomes during the year. I will then buy back the 1000 shares in Jan/Feb next year to get the dividends. This is indeed a great money management strategy with a little bit more work to make it happen. It works very well for me. But a warning that you should not use this strategy to gamble. It is only great if the money is productive.

Time to bet on Greece?

This is not a fundamental trading but a pure technical speculation, and a contrarian trade. As you can see below, Greece was beaten down to death 2 years ago when it was on the verge of bankruptcy. But a miracle occurred. When everyone ran away and no one was considering to put money into the Greek stock market, it started to move up and doubled in less than 2 years time. Then the next cycle started again. Greek market has got crashed at the moment and reached almost the same level as 2 years ago. Right now, Greece is a taboo and probably no one is thinking to buy its stocks. But as you may see, it starts to move up again quietly and has shown a series of higher highs and high lows. This is a bullish technical pattern. I bet this is an early sign that the Greek stocks will be booming again and a potential double is not out of reach. If you dare, buy GREK, an ETF for the Greek stocks.

How to handle gold/silver ETFs now

I was asked to comment how to handle precious metal ETFs such as AGQ, SLV, GLD, GDX etc, which were bought long time ago and have been decimated by 60-80% by now. I can feel your pain and indeed it is difficult to face it. But I think I have a more positive view on this, which hopefully can alleviate your anxiety and pain a bit. Of course, please be aware, I'm a super gold bug, i.e. I have a firm belief that gold/silver are money and they will go up a lot more in the future. My view is obviously biased but I truly believe that gold will go up substantially from here, $5000 that someone is calling for is not something unthinkable as long as you give it patience and time. Personally I'm investing also with this strong belief! Just to let you know, I started to invest in gold almost 10 years ago with the very first gold stock I bought, GoldCorp, when it was about $15 I believe. Since then I have put money into almost all kinds of forms of precious metals that you can think about. So I personally have a huge stake in it.

The fundamental question everyone is asking is whether gold/silver has bottomed now? The short answer is I don't know but I feel it is very close if not yet in. Historically during the last super bull run for gold in 1970s/80s, gold got crashed by 50% at one point and then shot up by 7-8 times higher when everyone simply threw in the towel. So if the history wants to repeat itself, we may see gold to drop to $980 or so, another 10% decline from here. But I'm not saying this will happen and I think it is coming. I'm just saying if it happens, I'm not surprised, so that I'm psychologically prepared. Having said, with all the messes going on around the world and more and more countries going with negative interests for their currencies, I think gold/silver is likely at the bottom now. I've started to buy again. Of course it is easier to hold and keep the physical gold or silver regardless up and down of its prices. It is money and insurance that you can count on it. The most challenging question is how to treat those ETFs that have dropped so much. The short answer is: close your eyes, pinch your noses and hold them. Why so? Two reasons:

• As I said, I expect gold/silver has been likely very close to its bottom, if not yet in, and actually may have started to turn around. The sentiment for precious metals is extremely poor, even based on what I heard from you guys. The depression and extreme pessimism are usually seen at the bottom and when no one wants to talk about it. If you sell them now, you may be astonished and more depressed if indeed they start to jump high from here. Keep in mind, no one has a crystal ball when the bottom is in and when is the exact turning point. When it starts, it tends to start quickly.
• You may ask, what happens it it starts to go down further? Well, you have to be honest to yourself for this question: since your positions are already down by 60-80%, will a further drop by 10-15% do significantly more harm to you? If your answer is yes, then probably you indeed need to consider to get rid of them. But for me, I don't think it will hurt me too much more by now as long as I know they will not likely disappear. For GLD, GDX, SLV, and even DGP, I'm quite confident they will stay with the precious metals in the foreseeable future. Actually now is the time to even buy them for anyone who have the nerve and gut. I'm less sure about AGQ though. The leveraged ETFs are really not for long-term investment, more for short-term speculation. You have to decide for yourself: if the remaining amount is not something that will change your life, then keep holding it. If it is significant, then use a tight trailing stop loss, say 1-2%, to try to catch as much the upside as possible and get out if it turns down again. If I were you, I'd consider to get out AGQ and put the money into SGDM and RGLD. Both of which will be likely doing much better in the long run and much safer.  

Walmart fought back today

Walmart (WMT) disappointed the Street yesterday and the earning report did not meet their expectation. Needless to say, all the Street was dumping WMT immediately. It crashed by 3%, down to as low as $83.5 yesterday.  As I said, I was gambling on WMT and betting for a good earning report. I of course was disappointed. The put option I placed expired today. Since my strike price was $85, I will have to buy WMT at $85.

Today before the opening, the Barclay analyst issued her report downgrading WMT, putting salt on the wounds. As the majority of "investors" are nothing buy part of herd, they simply followed the lead from the herd head (the Barclay analyst) and were very busy further selling WMT pre-market. At the opening, WMT came down to as low as $82.75, another 1% decline. But enough is enough. Shortly after the opening, WMT started to fight back, defiant against the herd. It never looked back and went up all the way to $84.30 at closing. Since I collected $0.81 for the put option, my actual purchase price will be $84.19 per share ($85-0.81). As such I'm actually making money even though I was wrong and WMT was declining. Even more beautifully, I can start to sell covered calls to get more incomes. E.g. WMT Feb 27 $84.5 call options are priced at $0.6. I can collect 60 cents per share in one week, plus the 30 cents in the money, I potentially can make another $0.9 per share in one week time. That's the beauty to use quality cheap value stocks to make short term income trade. WMT is fundamentally cheap the this price and you can also make such covered calls for income.

Gamble with Walmart

Tomorrow morning before opening, Walmart will report its earnings. Trading before earnings is always like gambling. However I'm making a gamble here. The sentiment is quite depressed now towards WMT and it's stock price keeps declining these days. And the option prices are quite inflated. I bet the bad news has already been priced in. So I sold naked puts yesterday expired Friday. If WMT stays above $85 by Friday, I can walk away close to $1000 in 3 days. Otherwise, I will buy it at a price around $84, which I don't mind because it is very cheap anyway. Let's see.

Is Alibaba a good buy now?

I was asked for my opinion on Alibaba (BABA) and I said I was bullish for BABA. In general I tend not to touch individual Chinese stocks due to a simple reason: I don’t feel comfortable to simply go with the information publicly available as I don’t know whether it is reliable or not. Also, as with many things in China, a lot of things can be manipulated or suddenly changed by the government without any prior warning. But there are some exceptions obviously. BABA is one of them. In my mind, Alibaba is the only Chinese company at the moment that is of world scale and also has its unique business model not directly copied from other companies. Think about it, when people talk about the Chinese business right now, which one they come up first? Alibaba! BABA is the Chinese Amazon but with one huge difference: BABA is already very profitable since its IPO but Amazon is still a big money loser after so many years of being publicly traded. I think, simply because of this reason, Alibaba will be strongly supported by the Chinese government one way or the other, although they may not publicly admit that. It is currently almost like a business window for China that the Chinese government will not close it lightly, even not just ajar. On top of that, not to mention how many big guys from the top in China have been deeply involved with significant stakes associated with it. I guess it is a public secret that Alibaba is like a money machine for many “noble” families in China that they cannot afford to lose. All in all, there is no way Baba will go down in any significant way. Not so soon any way. Of course BABA is experiencing a lot of very significant challenges at the moment both at home and in the US, but this is just the pain every successful company must go through. No difference for BABA. I obviously don’t know how long this pain will last for it and whether or not BABA has reached its bottom at the moment. I simply don’t know. But I think the current snafu for BABA is likely a great investment opportunity that I don’t want to miss and I want to get in now with the understanding that BABA may go down further. So the best strategy for me is a staggering approach by using dollar averaging: I buy portion of the position for BABA so that I will at least have something in it. If it starts to run away from here, I won’t be totally regretted. If it goes down further, I will buy more to slowly establish my full position. If you are savvy with options, then you will have a better choice: buy long-term in the money LEAP calls for BABA, which will substantially reduce your risk. You may even use naked put options to further reduce your cost and if your timing is good, this combination may allow you to set up a free purchase of BABA or even you get paid first to buy BABA. This is a rather sophisticated technique not for amateur option players. So if you don’t understand what I’m talking about, simply go with buying BABA stock shares or call options. Just be prepared that this may be a volatile investment and you have to be willing to see your position value go up and down several times before it’s finally back to the bull run trajectory. Remember one thing: Bulls usually have to climb up the wall of worry. I think BABA is in this situation at the moment!

Good luck wiht HACK

Have you been hacked or do you know anyone of your friends or relatives who have been hacked? I'm pretty sure many of us have such direct or indirect experience suffering from hacker's attack. The most common one is probably the email account being hacked into. More serious one could be your bank accounts or other personal sensitive information been stolen by hackers. I guess we can all agree that the cyber security is the most worrisome part when we use online services. Given its critically and increasingly important aspect, the cyber security business is and will continue to be a business that will for sure only expand and grow to infinite, as long as Internet is part of our life. I think this is a very lucrative business still at its infancy. So which one or ones you should choose? Unless you really have the expertise in this area and know the industry inside and out, it won't be easy for most of us to choose one or a few particular companies. Fortunately you don't need to. A new ETF, called the PureFunds ISE Cyber Security ETF, was recently created, which is the first pure cyber security fund. Interesting, its ticker is HACK. The fund’s portfolio offers convenient diversification across market capitalizations, geography and business focus. The thing I like HACK most is in 2 areas particular: it is largely focused on small to middle cap cyber security companies, which will provide most upside potential. It is also very internationally diversified. The following are its top 10 holdings and key countries invested. I think this is a new industry with a great long-term potential for growth. Putting some money in HACK may also bring you some luck to fence out hackers' attack.

Apple may raise dividend soon

Apple has got free money! Well it is a bit exaggerated to say free money but it is almost free! Last week, Apple issued1.25 billion Swiss francs ($1.35 billion) in a two-part bond. The 875 million bond maturing in November 2024 will pay investors 0.281%. The 375 million 15-year bond will pay a 0.74% yield. Can you imagine to borrow money for 10 and 15 years with such low interest rates? It is almost free, right? So does Apple need money at the moment? Not at all. Apple is making around $8.3 million dollars profit per hour every single day and it has $60 Billion free cash flow. It has roughly $178 billion of cash with only $44 billion of debt. The big Apple just has too much cash in hands. So what on earth Apple needed to raise this amount of money, and in SFr? Well, if you are asked to borrow money for nearly free, would you like to take the money? That’s exactly why Apple issued this amount of bonds in Switzerland. It is always great to get free money! Given Apple has so much free cash and does not know how to use it, I bet Apple will soon significantly increase its dividend. How much is anyone’s guess. In addition, it will likely increase its stock buyback amount as well. Both of these are great for long-term investors as they increase the stock value substantially. Studies have demonstrated that companies that pay increasing dividends and buy back its own stocks are much better in the stock performance in comparison with S&P performance. This is another reason that Apple will continue to march higher, a lot higher from the current price. I bet Apple will reach $150 pretty soon and even $200 will not be out of reach. Buy Apple at any weakness.

Why dividend investment?

Very few people truly understand the value of seemingly little  amount of dividends. But for quality stocks with a long track record of paying increasing dividends such as MSFT, without your knowing it, you will end up with over 10%+ dividend yield year in and year out. Think about it, if you have a bunch of good stocks that pay you 10%+ dividends without you to work on anything when you retire, will you be really worried anymore about the fluctuations of the stock prices? Not me! This kind of money in such stocks is just like the money you save in the bank but it pays you increasing interest every year 10% or more. I don't think anyone will pay too much attention to the changing value of dollars in the bank (against gold, Euro or other currencies). You can simply think about it in this way when your money is tied up to such stocks. I just feel very sorry for them whenever someone scorns off the dividend investment strategy. You will be much richer if you spend some time to study and understand and implement this very powerful but easy investment strategy. The sooner the better. I'm just regret that I didn't realize this when I was 20s but still I feel great to see how such value investment has made me more and more rich every year without much stress. It has totally changed my mindset in watching the stock fluctuations: I feel great now when I see my value stocks prices going down as I know it will only speed up my wealth building process and pay me more with depressed prices.

Buy Qualcome now!

Qualcome (QCOM) is a very successful chip company, a leading force in the mobile chip business. It is very profitable with a profit margin at 30% and return on equity at 21%. It has zero debt but with a huge cash load in hands, $11 per share cash sitting in the account. It is paying a 2.5% dividend at the current price around $68. This kind of stock is usually traded at a high premium and should be very expensive, but not Qualcome. Actually it is extremely cheap at the moment. The major problem for Qualcome in the past year was the antitrust probe ongoing in China. Since China is such a huge market for Qualcome, people were scared with this legal dispute and dumped and ran. However, this depressing episode has ended tonight for Qualcome: it was just announced that Qualcome has reached a patent settlement in China by paying a $975 m fine to resolve the issue. This is a big relief for Qualcome as the huge headwind is now behind it. It is back to its takeoff trajectory and will fly again! I think it will be an easy run for QCOM to $90 or even higher very soon! Buy QCOM!

What value can you find in China?

I recently have challenged a Nobel Prize laureate, economist Paul R. Krugman. In his recent speech, he predicted the China’s economic situation would deteriorate and is not the place for investment in the near future. I agree that China is facing some significant challenges at the moment and will undergo a tough time period. But this does not mean Chinese market will be doing badly. On the contrary, I have said China’s stock market is very attractive actually at the moment and may return handsomely to brave investors. People, especially foreigners, often don’t understand the true nature of China and they often significantly underestimate the will power and tenacity of the Chinese people and the Chinese government. I’m already in and I don’t think I will be out of the Chinese stocks any time soon.

If you also believe me and would like to take the risk to put some money in China, one stock I think worth considering is Nam Tai Property (NTP). This is a company originated from Taiwan. It used to be a very successful electronic manufacturer 5-10 years ago, when electronic products were widely demanded in China. I made some money 3-4 years ago with this stock. But now electronics is a tough business to do in China. The NTP management is a great forward-looking team with excellent vision. They used their excessive cash to accumulate land-use rights in China, mainly in Shenzhen (Gushu and Guangming), over the past few years. Now they have successfully transformed into a real estate company controlling a large amount of land-use rights. While the real estate business is facing headwinds at the moment, I think they will come back, especially in the place like Shenzhen. They will only become more attractive when the economic activities recover.  The thing attracting me most is its fortress balance sheet. It has no debt but abundance of cash in hands. In other words, there is virtually no credit risk for NTP. Thanks to the misunderstanding of “investors” about this company, apparently not many people are interested in it and its share price has recently been significantly driven down. It is so cheap that you are basically paid to buy NTP: at the moment NTP is trading at $5 per share but it has cash $6.94 per share. This is almost like you buy a house worth $100K and find it has almost $30K cash on the table when you move in. Will you take it? I definitely will. This reminds me of the same situation for Yahoo 2 years ago. I pounded the table to recommend to buy when it was traded at $15 or so. Those who followed me are certainly very happy today. I expect the same will happen to NTP eventually. When people finally realize the value of it, they will jump in and go crazy. If you want to make money, be the first ones to lead, not to follow. Of course I cannot tell you when this day will come for NTP’s value being recognized but I’m fine to be paid to wait.

The mechanicals of today's day trade

I made a prediction last evening that S&P 500 would not hold high even if it’d initially go up due to the good jobs report. Well, it did broke down as expected after initially shooting up 10 points to reach as high as 2072. But it closed at 2055 today. When it went up to 2070, I decided to pull the trigger and held it all the way down to its lowest point. A nice same day profit at my last day on vacation in Panama.  Here is some mechanicals on the technical thoughts that made me confident on this trade. As shown below in the day chart of S&P 500, I saw two bearish technical setups that went against its uptrend:

• Even though it seemed to have a very strong up run during the first 1.5 hours (the upper yellow arrow), the momentum indicator (MACD) was always in a downward trend (the lower yellow arrow). This is technically called a negative divergence,  a good bearish indicator. It means MACD is going in a different direction from the underlying stock/index trend. When this occurs, it is often an early sign that the trend is going to change, either from up to down or vis verse.

• After S&P went all the way up to 2072, it started to decline and formed a text-book head and shoulders pattern, another very bearish sign. This often leads to a breakdown of the curve.

With these 2 technical indictors pointing toward a bearish trend for S&P, I was confident that I made a good day trade today. Thanks God, it was indeed a good call!

S&P 500 opened high and closed low, which was a quite bearish sign that it would likely be under pressure next Monday, barring any unexpected positive news to support it (remember we have 2 weekend days and anything could happen during that). If that’s indeed the case, I expect S&P may further go down towards low 2000s, e.g. 2010-2020. The good news is that it is less likely it will “crash” further. We are coming into a bull season in the next couple of months and likely S&P will start to move up, unless the EU mess really goes crazy.

Buy platinum and palladium now

Platinum and palladium belong to a extremely rare precious metal group, called PGMs (Platinum Group Metals), which includes palladium, platinum, rhodium, ruthenium, iridium and osmium. While as precious metals, they are mainly used for the auto industry, given their unique feature to clean the noxious car exhaust. Here is what is described in the Wikipedia "Over half of the supply of palladium and its congener platinum goes into catalytic converters, which convert up to 90% of harmful gases from auto exhaust (hydrocarbons, carbon monoxide, and nitrogen dioxide) into less-harmful substances (nitrogen, carbon dioxide and water vapor). Palladium is also used in electronics, dentistry, medicine, hydrogen purification, chemical applications, groundwater treatment and jewelry. Palladium plays a key role in the technology used for fuel cells, which combine hydrogen and oxygen to produce electricity, heat, and water."

So why now it is the time to buy them? You may not know, platinum and palladium are not widely available in nature and over 90% of the supply is coming from 2 countries only: Russia and South Africa. As you certainly know, Russia is currently facing a significant economic challenge thanks to the sanctions from the West. It has just been reported that the Russian supply of platinum and palladium to China has dropped by almost 50% recently. SA is no different. It has been afflicted with union issues for several years with constant strikes, resulting substantial reduction of all the mining business. Putting these two together, it is easy to expect that the supply of platinum and palladium will be drastically impacted and decline but the demand is still high. Almost inevitably the price of platinum and palladium will jump up quickly and soon. Adding to this supply shortage is another potential catalyst that there is strong evidence to suggest precious metals in general are likely recovering, which will also push up the prices of  platinum and palladium.

So how to play with this trend? I like StillWater (SWC), a mining company for PGMs. It has just broken out its 50 DMA. If I'm right, it will stay above this line and move further up. As with any mining stocks, this is a high risk stock but

Can you really believe Wall Street analysts?

This week, Barron's published a study showing the performance of seven firms' "focus list" stock recommendations. These are the investing firms supposedly with "best minds" in Wall Street supported by the most powerful computers and research teams. So you should expect that these highest recommendations from them should generate the largest gains to easily outperform the market. Did they?

In 2014, Bank of America, Merrill Lynch, Goldman Sachs, RBC Capital Markets, Wedbush Securities and Stifel Financial Management all underperformed the S&P 500. Wedbush and Stifel actually posted negative returns.

Lesson? Don't believe those WS analysts. Rather, you should go against them!

Don't call a bottom of oil too soon

The recent oil move must have caught a lot of eyes and the obvious question is if oil has reached the bottom and is ready to move up now. The short answer for me is NO. The market is a weird animal and it won't let you feel good easily. When everyone is looking for a bottom, the bottom is likely not in yet. That is how the market works. The past few days strong bouncing up in oil has got many people euphoric, claiming the bottom is in. My bet is: not so soon. This is still within the normal range of an oversold bounce. I'm pretty sure it will come down again. Just as a patient with sepsis, you should not expect him to recover quickly within days. It has to take some days up and down before truly recovering. Same for oil. The damage already done is too severe too deep. It needs time to recover. Right now it may be in the stage calling sandpapering. I don't expect it will simply explode high from here. If you try to jump in for a quick profit, look out below! For those who expected to see this oversold bounce and went in with some speculative trading, it is the time to get out to lock in the profit. Otherwise, you may see your gain evaporate quickly. I did have closed my trading positions with some quick profits.

When to buy Apple

Apple's earning report last week was just mind boggling and surprised everyone. It shot up 8% within days. It is simply too far too soon! Technically it was testing its all time high at $119. This is a strong resistance and usually it won't succeed at the first attempt. This reminds me of the last time when Apple broke out up through the $500 level (before splitting). The most likely path for Apple is to come back to test the last level it broke out, the support line for it now. This is the level around $113-114. I bet Apple will come down to that level in the next week or two but most likely it won't go down further. If it is true, that will be the price to buy if you are itching.