Some trading ideas for 2007, cribbed from nihoncassandra.blogspot.com
Monday, December 18, 2006
Cassandra's Xmas Presents to You
OK, Santa has come early. Of course some will say just "Buy Gold", but the smart investor is always trying to optimize, and do better. After all, bullion yields nothing, is risky, can be confiscated, and has few uses outside the speculative and decorative. Here is a Xmas investment (adn trading) shopping list that should, if nothing else allow the Goldbugs or just the worriers to BOTH invest and sleep better in the evenings.
1. Short High-Grade Copper vs. Long Gold
(Lots more HG1 about than GOLDS. Easier money for those with strong constitutions than phishing bank details from Nebraskans).
2. Long Cheap Japan Domestic Stocks vs Short Expensive US Consumer Discretionary stocks (currency unhedged).
The Easiest money may be gone, but this will continue to pay. Own the sub-book value soon-to-appreciate currency vs. the sector that once again will be ask investor owning it to bend-over (and get the yield pick-up while you wait to offset the high cost of shorting YEN)
3. Long CAD vs. Short GBP
Erosion of USD value vs. contractionary outcome will insure Canada doesn't roll over and so Bank of Canada will not be cutting rates anytime soon. In the race to see who cuts first, BoE will blink first cutting sterling rates before loonies.
4. Long YEN vs. Short Euro
Twenty-percent in 2007 on this one (Take 10% in Q1 if you get it, and put it back on again in July). If it don't happen, random Japanese tourists will be ritually sacrificed on the banks of the Seine.
5. Short USD Bonds
Rebalancing of CB reserves, means some of the distortions in the USD bond market will cease. And since no new taxes until 2008, and no new rate rises in 2007, US fiscal, trade and CA deficits will continue to provide ample reason to short bonds.
6. Short USD Quality Spreads
Short conumer-sensitive junk bonds where a continued retrenchment by consumer from higher energy prices bites and forces cutbacks.
7. Short Nucor vs. Long Newmont
There is an impending surplus of steel. Maybe not as fine as Nuecor's specialty, but nonetheless this trade will pay and pay and pay. Similar rationale to short the physical copper and long the physical bullion. Do it in options (short call vs. long call for the meek and timid).
8. Long Devon (DVN), Anadarko (APC), Apache (APA), Cimarex (CMX), Encana (ECA), Suncor (SU), Conoco-Philips (COP) Chevron (CVX) & Marathon MRO).
All are well south of heavily discounted NPV using low forward oil price estimates. The essential play is one of property rights in that US & Canadian resource property rights - in the absence of world-rogering depression - are most secure. Recent moves in Bolivia, Venezuela, Russia are harbingers of future actions that will see nation-states take greater control. These are wonderful "stores of value" with attractive current yields, trading is discounts, relatively secure. Should be part of any portfolio.
9. Stay Long: Global Sante-Fe (GSF), Diamond Offshore DO), Cleveland-Cliffs (CLF); Raynier (RYN)& PlumCreek (PCL), & Svenska Cell 'B' (SCAB SS), and Sherritt (S CN).
Assets. Assets. Assets. It takes three years to build deepwater rigs like these, and there aren't many out there. Attractive valuations, wonderfully abundant free cashflow, little encumbrances, should continue to make DO & GSF prized assets. Geography will continue to favor CLF over CVRD or BHP for NAm steel. Great balance sheet, and still cheap. RYN & PCL are Timberland LPs that are far south of book, nice current yield, and great assets - the kind the Chinese would love to buy. Bearts thought the Timberland boom passe, but recent transactions (admittedly by RYN) just paid $2200 acre in Texas, goosing implied values substantially.
10. Eastern European (& German) Real Estate.
OK so you feel bad that you didn't buy them when they were giving them away. Shame shame shame. But do not forget that Central Europe was the Center of the Civilized Chistian World for a very long time. Paris and London were hovels in comparison to Prague, Budapest, and Belgrade. Croatia, Serbia, Hungary, Berlin rural Greece, all afford excellent value for those with a long view. When the coming Europe vs. Asia trade wars come, Eastern Europe will continue to prosper as the lower-wage periphery of developed Europe. Europeans will (rightly) prefer to pay a bit more and buy from THEIR periphery where 80% is recycled back into Euro-area economies than from Asia. Farmland, coastal property, and urban locations still will afford attractive long-term appreciations on long-view with acceptable (but rising yields) in the interim.
And with anything left over, just go buy some Titanium, Uranium concentrate, or ultra-pure polysilicon and warehouse it safely.
Peace to all! |
