Speechless…. almost
FXA Plants Corner
5/20/2005
fxa.com
6:30 AM New York time. Very rarely in my career of looking at the markets have I come to points where I was afraid to open my mouth… when I thought my opinion was basically just a fart in the wind against an overwhelming tide of capital flow driven by excess and irrationality. Well… I'm at one of those low points right now. And if recent commentary and advice has worked less well and seemed more tentative… well… there’s the reason. I’m feeling pretty beat up these days. I notice my friend Dave Lewis has been rather quiet of late too. What I tell my rational mind is that periods such as this are completely natural stages of the market’s evolutionary process. When the spread between the views of bulls and bears seem so diametrically opposed you think the gap between then can’t possibly get any wider… and then it does. I know its just the market trying to suck the last vestiges of resistance out… a final attempt to get the doubters to believe that the laws of physics have indeed been repealed, and to stop fighting and join the crowd. I keep telling myself it CAN’T get any sillier… but it does. No doubt part of my problem is that it’s not just the markets, it’s in my back yard, and even in oyster-land. Oyster-land you ask? Yup. I don’t know the full story yet, but we got a call yesterday from the office of one of our local Congressmen. I guess there is some bill in the House (Federal level mind you) that has a rider attached to it that would make the Easter Oyster a member of the endangered species list. I suppose you can guess what that would do for sales. It's too soon to get excited, I heard about it only over the phone and don’t have the full story. And of course, having now been discovered (I’m sure it was tucked into some corner of a multi page legislative bill), I don’t think it has a snowball’s chance in hell of surviving. Still, it’s just one more measure of the insanity of our time and a reaffirmation that this country had better get it’s act together or we are destined to be a hobbled economy, managed by bureaucrats, producing nothing, and simply looking for the next easy way to make a quick buck with no risk.
Today’s venting accomplished, I’ll gingerly move on to some market observations. First, the bad ones. Pulte Homes had a strong couple of days, outperforming the broad market which was bouncing from a way oversold position anyway. But yesterday the stock gave up 3% gains and closed almost unchanged. In a week of trading, the position has swung from a $3 gain to a $2 loss. The range from best to worst was almost 10% the value of the stock. That’s a lot of volatility. I am VERY curious to see how the homebuilders perform against the overall market over the next couple of weeks. We have had SO much talk about a housing bubble in the financial press and from the Fed itself, if there was ever a time for those stocks to trade lower on anticipation regardless of the overall market direction… this is it. I want to keep a close eye and see if they become market under-performers. Such behavior would strengthen the case that the storyline of “real estate bubble” was indeed catching hold and the perception was swinging around that this group is vulnerable. The jury remains out. For the record, I’m thinking of a new high stop for the Pulte Home trade. That would be right around $80.
Sentiment on the dollar has swung fully around. Now it seems you can’t turn on the financial news without hearing about weakness in Europe or some other reason to be long dollars. You can still find dollar bears but most are hiding under rocks. Over the course of the dollar rally, my Aussie trade has moved 400 points from new high to recent low. That’s not bad considering the move we have had in the Euro AND all the its-over-bearish talk on commodities. How the Aussie performs on a bounce in the currencies will do a lot to confirm or weaken my enthusiasm with that trade.
Tyson Foods traded back above $19 yesterday for the first time since August of last year. Cool! This company has weathered a lot of bad news and come out OK. If it can just stay OUT of the news for a little while, we just might get a shot at new highs. Pilgrims Pride and Smithfield have remained below where I bought them, but they too have been slowly recovering. I know I paid up for them at the time. Of all the trades I have talked about since starting this column, the commodity food stocks and integrated oils (PCZ) have performed the best with virtually no pain. While I am leaning towards the energy trade as being mature, with subdued performance prospects from here, the commodity food group trade is still in its infancy.
Lastly… I haven’t said much about gold lately. Bottom line is I don’t care what the dollar does from here, I remain convinced that gold will stay well supported about the low $400’s. It too has hung in through a huge dollar rally and big corrections in the major commodity markets without suffering much damage. There is far too much support from Asia and the Middle East on dips.
The Model Portfolio… The model portfolio is short Pulte Homes (PHM) from $72.60 (May 11). It is long two August Gold from $431 (Apr 4). It is also long two Dec Corn, one from $2.34 (Mar 28), and one from $2.36 (Feb 23). It is now long two June Aussie Dollar, the first at .7875 (Mar 9), and the most recent at .7755 (Apr 29). The portfolio is long Smithfield Foods (SFD) at $33.75 (Feb 25, 05). It is long Pilgrims Pride (PPC) from $37.40 (Feb 14, 05). It is long Petro Canada (PCZ) at $43.60 (May 11, 04), long Bunge (BG) at $34.20 (May 11, 04). It is long Tyson Foods (TSN) from $17.70 (March 23, 04) and a second unit from $19.15 (July 28, 04). It has a $2.85 cent loss on December Cotton (May 20, 04). It is now carrying a 103 1/4 cent loss on four attempts to be long Corn (May 25, 04; June 22, 04, a series from the Aug-Sep 04 period, and Oct 19, 04), a net 4 1/4 cent gain on long December gasoline (June 9, 04), a net 8-30/32 point loss on ten separate bond shorts (Jan 7, 04; Feb 5, 04; Feb 20, 04; Apr 2, 04; April 26, 04; June 7, 04; July 14, 04; Oct 1, 04, Nov 29, 04 and Mar 14, 05). Some of those were contract rolls. The model portfolio also has a 2.3-cent loss on two long Live Cattle futures (Jan 5 and 15, 04), a 16.85 point loss on one E-Mini S&P (March 12, 04), a $3 loss on the Lennar (LEN) short (Jan 6, 04). It has a gain of $27.20 on nine long COMEX Gold trades (Jan 23, 04; Mar 31, 04; Apr 26, 04; May 11, 04; June 7, 04; Oct 1, 04; Dec 8, 04; Jan 21, 05, April 4, 05), most of them being contract rolls. The portfolio also has a $3 loss on an earlier long trade (March 23, 04) in Bunge (BG). It has a $3 gain of a short sale of Reuters (April 7 to Oct 27, 04). It also has a gain of 925 points on three long Aussie dollar trades (Dec 8, 04, Mar 2, 05 and Mar 9, 05).
Steve Plant
FXA |
