Welcome To The Depression...

[Duncan Smith]

Re: Welcome To The Depression...

You can't go wrong with a bank index they aren't done going up. I think Sherritt is very risky I like other companies with similar risk better ( take a look at Teck Comminco it's very popular with similar issues though ). Or avoid the risk and take something like Quadra which is profitable with a decent balance sheet. My opinion if the market ever turns down this year the companies with bad balance sheets will take the biggest immediate hit. Of course UUU has terrible numbers as well; I'm souring on them now the momentum has stopped in its tracks.

New speculative play of the week might be Intel. Earnings are out on Tuesday. Risks both ways but the upside is far larger then the downside. Prices stay reasonable because people still fear the economy ( look at the title of this thread ). Investors are definately starting to rediscover the technology sector. One bad earnings report could put the brakes on it but if not it's easy money the next few weeks in RIM, IBM, MSFT, INTC, CLS, SW, ... .

Bombardier has an order backlog of 57.2 billion. This figure is astonishing, they can survive any downturn easily. Buying the stock seems like easy money to me for those with less tolerance for risk. I think the depression idea is a little far fetched when Bombardier and RIM are posting huge earnings. The press tends to be way behind the curve while I'm making money there are articles almost every day about the bottom not being set yet. Anyone waiting for that new bottom missed out on good returns short term. Yes, a downturn is possible, just not likely in my opinion. And such a downturn would be followed by a huge market rally, so anyone with cash could again profit from such an event.

UPDATE - I looked up Intel options they are very expensive compared to statistical value. This
means many investors have a strong belief Intel's going up Monday. Comparatively
short term bank options right now are very cheap. This suggests investors expect
profit taking first thing Monday. I'm hoping to get in cheap first thing.

[Gary Ruben]

Re: Welcome To The Depression...

You can't go wrong with a bank index they aren't done going up. I think Sherritt is very risky I like other companies with similar risk better ( take a look at Teck Comminco it's very popular with similar issues though ). Or avoid the risk and take something like Quadra which is profitable with a decent balance sheet. My opinion if the market ever turns down this year the companies with bad balance sheets will take the biggest immediate hit. Of course UUU has terrible numbers as well; I'm souring on them now the momentum has stopped in its tracks.

New speculative play of the week might be Intel. Earnings are out on Tuesday. Risks both ways but the upside is far larger then the downside. Prices stay reasonable because people still fear the economy ( look at the title of this thread ). Investors are definately starting to rediscover the technology sector. One bad earnings report could put the brakes on it but if not it's easy money the next few weeks in RIM, IBM, MSFT, INTC, CLS, SW, ... .

Bombardier has an order backlog of 57.2 billion. This figure is astonishing, they can survive any downturn easily. Buying the stock seems like easy money to me for those with less tolerance for risk. I think the depression idea is a little far fetched when Bombardier and RIM are posting huge earnings. The press tends to be way behind the curve while I'm making money there are articles almost every day about the bottom not being set yet. Anyone waiting for that new bottom missed out on good returns short term. Yes, a downturn is possible, just not likely in my opinion. And such a downturn would be followed by a huge market rally, so anyone with cash could again profit from such an event.

UPDATE - I looked up Intel options they are very expensive compared to statistical value. This
means many investors have a strong belief Intel's going up Monday. Comparatively
short term bank options right now are very cheap. This suggests investors expect
profit taking first thing Monday. I'm hoping to get in cheap first thing.

Hi Duncan,

I think I'll stick with Sherritt even with the risk. If their balance sheet wasn't a bit stressed, presumably I wouldn't have been able to buy them for so little. I'm betting they will get through it and like their asset mix. They even project 14 million from Potash royalties for 2009.

I never looked at Tech close enought to form any real opinion of what they will look like coming out of their financial situation. Never before heard of a company which was selling gold mines to pay for coal.

I wouldn't touch RIM over the options thingie. Also, check the insider trading.

Is Bombardier's order backlog mainly the higher profit margin planes or the lower margin trains? Do you not think they carry a high amount of "Goodwill" on their balance sheet in relation to the Shareholders Equity?

Let's face it. A lot of companies are debt laden. That's one of the reasons we have this current situation.

Do you not think the Dow will test it's low? Maybe channel trade between maybe 7000 and 9000? Looks to me like some of the DOW stock like Citigroup, Bank of American, General Motors, General Electric and Alcoa will have to solve their problems for that index to soar like an American Eagle. Probably Exxon and Chevron need higher oil prices to get back up to previous highs.

By the way, are you doing call options or Puts?

[Duncan Smith]

Re: Welcome To The Depression...

I see you got some good news on Sherritt so you made some money. My take on US earnings is there is no depression and this market still has some legs. And Canada in particular many quality companies had extremely downtrodden stock prices that could only go up two months ago. For example, Canadian banks are fundamentally solid, unlike some of their US counterparts with serious risk issues ( although Citgroups results were encouraging in some ways for a previously failed business plan ).

I made a lot of money believing in the recent bull market ( it paid off nicely late in the week; current return in 1.5 months is 460% ). I'm actually somewhat disappointed I probably could have had 1000% return given the securities I have owned. My main regret was not maintaining my position on BMO longer. Last week I bought BMO APR C 36 at around 40 cents, they dropped to 20 cents one day then rallied to 66 cents. I sold them to reduce my overall portfolio risk. They finished this week at $4.95. So I missed out on an easy $25K. Options expired Friday so the risk is always there. I even picked out BMO APR C 38 as a bargain a week ago at 10 cents ask price, then failed to buy due to unnecessary caution on Monday. They ended around $3, which is a 3000% return in one week ! Anyone willing to gamble that one was a great choice. These examples help illustrate why I believe this market was one of the best short term opportunities to make money in our lifetime.

I made short term money on RIM, CLS, BBD.B, TD, and a smaller position in BMO. I had one stinker ABX which I bought as a hedge basically a few weeks ago and it crashed.
I missed chances to buy SW because the options are very thinly traded and the premium scared me. Again, easy money for anyone who bought them ( which was almost nobody for two weeks ).

Moving forward I have to restudy the stocks. IBM reports Monday which will be an important one. RIM I believe will keep going up short term with some choppiness. If IBM disappoints all bets are off in technology but merely short term. I think some of the metal stocks have been oversold so I have to check out because they usually spike up a lot in one day when they rebound. Uranium did well on Friday ( I still have some UUU ) but profit takers jumped in late in the day. If there is any small market correction ( eg banks, technology down 5% ) the miners will go way up for a day or two. I'm going to have positions for either scenario.

BBD.B has been solid but hardly an option traders dream. I'm still waiting for the next big spike up.

PS Investing in today's market is far riskier then two months ago. Invest at your own discretion only after educating yourself about the opportunities. Anyone considering options trading must be aware it's a very sophisticated market and without experience you can lose most or possibly all of your entire investment. That being said, today's online tools and lower commission rates are incredible and it's a lot easier to make money then it was in the 1990s when I last entered this arena in a big way.

[Gary Ruben]

Re: Welcome To The Depression...

Hi Duncan,

I generally don't day trade. I invest in companies where I either like the business model, investor relations, or the people running it. I also like companies which pay dividends or distributions. Remember, my Depression Portfolio is only from the time Harper said it was a good time to buy stocks. It's very specific.

I didn't sell Sherritt so technically made nothing. The dividend I get on that one is around 7% based on the average I paid. If the price picks up a few more dollars in this market I'll probably unload but longer term I want around $10. Of course, their quarterly report later this month could change this. Also, they have a decent interest in a well offshore Turkey that is supposed to "spud" next month. I think their Nickel mine is profitable but won't know until after their quarterly report. They have a Nickel/Cobalt deposit in Cuba which makes them profitable at a very low nickel price.

My outlook is always longer term except with ETF's and ones I buy specifically for a quick trade.

Even my Motor companies are up. Ford and Sparton. With Ford, if there is only one of the three which survies, I expect it to be that one. On the other hand, with GM I keep asking myself what part of "they are too important to fail" don't I understand. I read somewhere that with the current auto sales rate, people will have to keep their auto something like 26 years before they scrap them. I don't suppose they took into consideration 2 or 3 auto familes which will scale down to 1 auto. Anyhow, the figures seem to say there will be a boom in sales sometime in the next couple of years.

I like our financials more than I did last year. Regarding Citigroup, I was thinking the same thing you wrote.

It's entered my mind that every money manager who went to cash and missed the bottom is telling me about the huge correction which is coming. I'm waiting until things are no longer historically cheap. Right now the trend is my friend. How's that for a cliche.

Why is Uranium going up? I didn't know there was an increased demand and the Megatons to Megawatts program still has a good 5 years to go. Are miners getting contracts for future delivery for the plants on the drawing board? In any case, I like the company which enriches uranium for the light water reactors. I think they used to be connected to the U.S. government before they were spun off as a public company.

I hope you have another good week because then I'll have one as well.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Gary Ruben]

Re: Welcome To The Depression...

What should we talk about today?

In September when I was writing about how bad thing were getting, and would be, our government was assuring us we were fine. That we wouldn't be impacted much by what was going on in the U.S. They conducted the last election on that theme.

They are now revising their forecasts and telling us about tough sledding ahead. Gosh, folks. They aren't really telling us what will happen. They are telling what is happening after it has happened. I wonder if they are not a decent negative indicator.

When government projections are right half the time and wrong the other half of the time, there isn't much you can gain from what they say. When they are right or wrong most of the time you can get an idea of what is really happening.

I notice analysts have seen the light and have started calling Ford Motors a buy. One has even put a target price of 6 on the stock. Personally, I bought it because it barks. A bigger dog that Beware. Also, I thought maybe it could double.

Basically, I think they like it because of the "more for me" syndrome. You know what I mean. Tim's not coming to the buffet so there will be more for me. In this case they will be the U.S. Big three automaker which isn't likely to declare bankruptcy.

I know. There are some people who won't buy an auto from the Big 3. Others, like me, won't buy one from a manufacturer other than the Big 3.

You might have noticed the price of natural gas is dropping. No surprise, really. The auto industry uses a "whack" of it. Whenever I hear of extended shutdown time at any of the auto manufacturers I think of the natural gas which won't be used. The build in inventories.

I know! I know! You're thinking I'm pulling out my Ouija Board or Crystal ball and making forecasts. Actually I don't make forecasts based on guesses. I make them on statistics. Here's the link to a chart on natural gas usage. With proper charts and decent interpretation you could do your own forecasting and decide in which sector to invest. You can discuss this stuff with your financial advisor and ask the hard questions.

http://www.eia.doe.gov/oil_gas/natural_gas/ngs/ngs.html

When you look at the chart, you want the red line to be near the bottom of the trough which indicates the gas in storage is on the low side. If we want to accept the amount of natural gas being used for heating is about the same as last year (or greater), the indication is the build is higher because of reduced industrial and commercial activity.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Gary Ruben]

Re: Welcome To The Depression...

Ford Motors was a big part of my previous post. I sold it into the strong rise this morning. I had hoped the cash burn and loss would be less. Now it will probably soar like an Eagle! Anyhow, I sold it and went to lunch with a friend.

I remember when I was a teenager. A Ford was a great car for a drive in theatre, until the windows fogged up. :)

Now I have to find something else to buy.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Duncan Smith]

Re: Welcome To The Depression...

Ford Motors was a big part of my previous post. I sold it into the strong rise this morning. I had hoped the cash burn and loss would be less. Now it will probably soar like an Eagle! Anyhow, I sold it and went to lunch with a friend.

I remember when I was a teenager. A Ford was a great car for a drive in theatre, until the windows fogged up. :)

Now I have to find something else to buy.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

I did very well with mining companies this week. Missed out on TCK.B but I have ABX, YRI, QUA, and UUU. The latter three all had good announcements late in the week. I finally understand why UUU is popular despite it's previous financial stats.

I was lucky to have no banks on Monday ( the 5% correction seems to occur every few weeks ). However, the rebound was so quick I missed it. Banks will probably either make another nice move up early next week or drop back 5% again. In other words, the short term is very unclear.

Technology had a weird week lots of great earnings but the market was somewhat indifferent. This will be a great sector next week. I like RIM and SW in Canada. They both failed to move with CLS which went up more then I expected ( I sold a little early, expected a drop after their mediocre earnings report ). Quite a few US techs are decent buys right now.

[Hugh Brodie]

Re: Welcome To The Depression...

My transactions in the bull market:

X.TO: bought early January @ 25.50. Sold half my holdings last week @ 37. Thursday's close: 36.64. This company owns the TSE and takes a cut of every trade that is made through it. Competition looms however, and I will sell the rest very soon.
HFU.TO: bought about a month ago @ 4.50. Thursday's close: 5.58. Will hold for a while. Stock price based on the movement of Canadian financials.
TCK-B.TO: bought about a month ago @ 5.50. Thursday's close: 9.94. Will sell (some - if not all) at next sharp upward move. Large producer of copper, zinc, and coal. Copper prices up 35% in the last few weeks. Zinc prices up 15% in the last month.

X.TO: still holding on to the rest - looking for about $40. Friday close was 37.08.

HFU.TO: holding. Friday close was 6.43.

TCK-B.TO: caught the wave earlier in the week and sold half my holdings at 13.11 - more than doubling my money in 6 weeks. Friday close was 12.36.

[Duncan Smith]

Re: Welcome To The Depression...

X.TO: still holding on to the rest - looking for about $40. Friday close was 37.08.

HFU.TO: holding. Friday close was 6.43.

TCK-B.TO: caught the wave earlier in the week and sold half my holdings at 13.11 - more than doubling my money in 6 weeks. Friday close was 12.36.

UUU could be an interesting place to park your profits. It will either skyrocket or settle back to $2.80-3. Two major news stories. The first early in the week was a prediction that uranium prices would go way up in the next few years. The second was projections of UUU's mine producing tons of uranium at an extremely accelerated pace over the next 5 years. On the flip side they lost tons of money last year ( possibly start up costs I'm not sure ). I took this on a momentum flier more then a month ago but it's looking better fundamentally this week.

QUA looks like a more conservative no brainer investment. Low PE, producing mines, and a stock price around a quarter of its 52 week high.

BBD.B I can't understand why it hasn't gone up more yet but I am a chronic early adopter maybe the public will embrace this stock soon. I've made money on it but not nearly as much as I expected, and I could have made more money elsewhere. It might settle at around $3.50 for 6 months, or bust way over $4 very soon on the way to $6+. Of course I'm hoping for the latter, but it sure seems like a nice place to park money with limited downside risk.

TCK.B might go to $20 within a month. Their debt issues appear solved.

[Gary Ruben]

Re: Welcome To The Depression...

X.TO: still holding on to the rest - looking for about $40. Friday close was 37.08.

HFU.TO: holding. Friday close was 6.43.

TCK-B.TO: caught the wave earlier in the week and sold half my holdings at 13.11 - more than doubling my money in 6 weeks. Friday close was 12.36.

I'm also still holding HFU.TO. I think your X.TO is part of the index HFU tracks. They say those 2X etf's have some slippage over time but I don't worry to much about that. I think the following links to the index HFU tracks. I seem to recall reading, or maybe I dreamed it, that the big 5 banks plus Manulife and Sun Life are about 80% of the index. I look on this etf as an inexpensive way to participate in the performance of those equities without having to try to guess which one will outperform the others.

http://ca.finance.yahoo.com/q/cp?s=%5ESPTTFS

Ford I bought for a double and I pretty much got that. When I saw their quarterly report I thought they were fully valued at this time so sold. If it gets to the point where I think it's mispriced again, I'll probably buy it back.

I've noticed with this market it goes up a small step at a time. Then one day it's like the prices simply jump out a window.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Gary Ruben]

Re: Welcome To The Depression...

Hi Duncan,

I'm more a buy and hold guy. I usually buy share in companies where I like what they are doing. Some mining stocks I've had for some 20 or more years waiting. I'll even tell you what a couple of them are. VG and ME both on Toronto. I bought them for next to nothing. They are still worth next to nothing.

I like Uranium but am playing it through the company which processes it for use in the light water reactors. They make money and I got it cheap. They are building a new gaseous diffusion plant for enriching uranium and have applied for government guarantees for the debt. A decision one way or the other must be close and I'm speculating they will get it.

My other Motor company (the one I didn't sell), showcased their new ambulance and fire engine designs in the past week or so. More stability, better design and air flow and so forth. I really like them for the military vehicles for which they build chasis and the dividend. It's a small cap on the NASDAQ with not many shares outstanding. They make money but I don't suppose their RV's are selling all that well these days. Anyhow, there are 6.93 and I paid something just over 2.50. Earnings next week so they might get creamed in the short term. In any case, my target price is higher.

I can't understand BBD.B either. I've been considering it but the glamorous part (for me) is the aircraft division and I doubt they are doing much. They have a lot of shares outstanding (my screen shows 1.7 Billion), so they need a very large contract to get 1 dollar per share in revenue (not earnings but revenue). I'm not sure which shares carry the multiple votes but suspect it's BBD.A. I usually pay the extra few cents to get the multiple voting shares. Anyhow, they are paying a dividend. I think it's 10 cent a share.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Duncan Smith]

Re: Welcome To The Depression...

The latest TTC streetcar contract is 1.2 billion ( or 0.80 per share by your figures ). At the current stock price you're paying for the main business and the aircraft division you get for free ( see TD securities for the logic behind this ). Anything that division produces is gravy which ultimately adds to the share price. The number of shares really doesn't matter when they generate profits at a fairly modest PE. Market leaders always cost money.

I used to work with some gold bugs. They bought and sold them exclusively during the 1990s boom. I dabbled a little myself and didn't do very well ( got in too late in the cycle really ). Fact is long run roughly 90% of the junior miners are total flops and 10% are stars. Short run you don't have to get a star necessarily. Some will fade out once their main mines dry up or in the case of exploration the actual mines are a lot less profitable then they hoped or lack mineral content. Buy and hold is very good in some sectors, but I don't think so for miners, particularily junior miners. Of course some mining companies are money making scams with very little behind them.

[Gary Ruben]

Re: Welcome To The Depression...

I was reading about that streetcar deal in the newspaper today. The first one is to be delivered in 2012 and it says the entire fleet will be delivered in 10 years. Presumably, Toronto won't pay more than a down payment until they get delivery. How is the construction of the vehicles financed? Do they have to take on debt or can they do it out of cash flow?

I've already got a couple of infrastructure companies I haven't listed. One did the steel work for the new Yankee Stadium and the Mets new stadium. I play that one back and forth.

The other one was a mistake but a penny play. What can I expect for 25 cents.

Mining stocks I did OK with in around the 80's. My problem was the oil and gas stocks. Now I play oil and gas only by an ETF on the commodity.

With many companies stock I buy, I've gone to some of them, or similar ones, on business and seen the operation. I like the business and understand some of the input costs. I've got some idea of how energy and our lower dollar effects them.

In a lot of ways I'm a "show me" kind of person. I see the goverments throwing stacks of money at GM and Chrysler on the one hand. On the other hand, I see them threatening bankruptcy. Sitting here looking out my window at the world, it doesn't make sense to me for them to be piling money into companies they intend to push into bankruptcy.

What it looks like to me is they are trying to union bust and squeeze the bonderholders to settle for less. The U.S. and Canadian government seem to me to be in too deep already to push those companies over the line.

Of course, they could show me. That's the only way I will beleive it.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Gary Ruben]

Re: Welcome To The Depression...

It's been an interesting week!

Chrysler has declared bankruptcy in the U.S. I didn't really think it would happen. It seem some of the bondholders would not submit to the pain the U.S. government thought they should. They would not write off billions of dollars of investments. Money which they have coming. So now it's in front of the courts.

It appears our government is ready to dump billions of dollars of YOUR money into Chrysler. I never really understood what it meant when people referred to Prime Minister Stephen Harper as a Fiscal Conservative. Now I know the meaning of the term.

It tickles my left wing funny bone to watch Harper and his fiscal conservatives pump billions of dollars into Corporate Welfare Bums like Chrysler. I guess Flaherty must have flunked the lessons of the Common Sense Revolution. His years as a student of Mike Harris was a waste of time.

I've been buying and driving Chrysler/Dodge since around the mid 1980's. Not very long after I bought my last auto the dealership where I'd been buying all the cars changed from Chrysler to selling Mitsubishi vehicles. I think that lasted about a year. They tried to talk me into buying a Mitsubishi but the car didn't appeal to me.

The question I find interesting in the restructuring of Chrysler is if people who are used to the large autos will buy into the what we are hearing will be smaller autos based on the Fiat technology. I know I'm not interested and wonder how many other long time Chrysler buyers will be. Then there is the disappointment over what will happen to my warranty on my current auto which is not covered under the government guarantee. The resale value has been reduced so much it's not worth my while trading it in. Might as well drive the car until it won't run anymore.

I notice a lot of companies are beating the earnings estimates which had been predicted for them and the stock market has been reacting favourably.

I think I already mentioned I had sold my shares in Ford after they doubled. I sold half my shares in Spartan Motors and got a triple. If the shares drop a few dollars to around 5, I'll probably buy the shares back. If it goes up a few dollars to close to 12, I'll sell the remaining shares.

I decided to dabble in American Financials. I bought an ETF yesterday afternoon. One unit (I'm not saying how many shares are in what I call a unit) of ProShares Ultra Financials. UYG on New York. It tracks the Dow Jones U.S. Financials Index at 2X. Double the fun or pain. If the index drops down to a level I have in mind I'll double my position. That index has moved pretty low and started trending upward. While I don't think it will go straight up, the trend looks to me to be going up. I've commented before the trend is down until it's not down anymore. My guess, and it's only a guess, is that the trend on that index has started up. I still have confidence in the Canadian financials as well and retain my Canadian ETF.

Looking at the situation, it has struck me a lot of people were getting out of the market over the last number of months. They must have caught the bottom and be down quite a bit of money. My understanding of human nature seems to tell me many will want to make back what they lost and get back into the market to try to make back their loses. I have no opinion on this strategy but if it is what is going on, I think this uptrend has "legs". I guess we'll see.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Duncan Smith]

Re: Welcome To The Depression...

Several of my picks have done well but overall results have been limited due to the swine flu. Notably SW ( great earnings ), RIM ( stopped flat lining at $80-83 cdn ), BBD.B ( largest volume on the TSE Thursday ), and QUA ( busted through a key $7 resistance level ).

On the downside the Canadian banks clearly hit the skids for a week. Caution is the word on these stocks short term. Gold mining stocks were also surprisingly mediocre last week as a group usually on a crisis gold takes a spike up not down. Shows you how unpredictable markets can be.