Some Thoughts and a Trade

Some stocks just got a lot cheaper. I believe we saw the wipeout of some momentum traders with their stop-loss orders. I increased the GS call position yesterday during the carnage. As per usual in these situations the implied volatility spiked and it is arguable a better strategy to sell puts. I was somewhat disappointed by today's action as we didn't get a follow-through today from yesterday. Disappointed because I was eyeing some more opportunities. That said we might very well see more weakness ahead.

Notable is that commodities are holding so well through all this. Crude was up for most of yesterday and finished today close to $62.

Another encouraging sign is that the USDJPY remained relatively strong, particularly today. It is much talk about the so called Yen carry trade in the media. It is probably a good thing that everyone is aware of the risks of this trade.

Performance

This graph represents the performance data on a NAV basis. I am happy with a 90.4% annualized return compared with 9.7% for the S&P 500 since May 2004. I have also added the NAV numbers in a new section on the right side of this blog.

All trades since September 29, 2005 have been documented on this blog in near real-time.

Market and Portfolio Update

Commodities show remarkable strength here with WTI crude above $60, silver at new highs above $14 and and gold up some $20 the other day getting closer to $700. I don't believe in chasing crude here, the contract should be bought on weakness under the $60 level.

Boliden ended the day up more than 4%. The company released earnings for full year 2006 earlier this month. The earnings came in over SEK 21 per share. With a share buy-back program of up to 10% of the float and increased dividends the management seems more shareholder friendly. Something I have called for. At the same time we know that the company has locked-in higher copper prices in the years to come, this is good news as it seems the metal is more or less in balance. The exposure still remains in zinc, where we still see very small inventory numbers. The stock is fundamentally very cheap at current levels.

Pare is a very volatile stock. I firmly believe that once the company reports a full quarter with 20,000 bpd in production the stock will be much higher than today.

Google proves once again that the stock should be bought aggressively every time PEG dips below 1 on forward earnings. The company just announced a premier edition of Apps which will compete head to head with Windows Office. We know Gdrive is still in the pipeline and could be launched at any time. There have recently been a lot of news surrounding Viacom and YouTube. I would like to point out that Joost is not a competitor to YouTube, still Google needs to be present in the new TV platforms, either with a GoogleTV solution or directly with Joost as I have suggested here before.

The equity markets continues to trade with a historical very low volatility, which have dampened my trading activity somewhat. I have been successful with S&P shorts recently and right here I find myself once again closer to a short hedge than an increased market exposure.

The GS call option strategy is working extremely well as the stock remains undervalued. Calls should be accumulated on weakness which could be triggered by a market sell-off.

There are two interesting IPOs one should keep an eye out for; Interactive Brokers and Clearwire. Maybe the first one more than the latter but of course all given pricing. Clearwire is a pure play in Wimax in the US. I strongly believe that the Wimax adoption for phones will be considerably faster than 3G due to cheaper technology and packet based (IP) data. Wimax is what 3G shold have been.

Taking Profit

Covering the S&P short at 1438.75 for a 12.5 point profit.

The Right FIG Trade

The way to play the Fortress IPO craze is GS. This could be the trigger for GS multiple expansion. Hence, the GS calls should be bought aggressively on any dips, currently they have a $20 bid.

On another note, WTI Crude is once again above the $60 mark.

Two Trades

Exiting oil at $58.850 after a huge recovery. The contract gained $4.275 in one week, which is quite remarkable.

Shorting ES as a hedge here at 1451.25, as we might very well be in for a pull-back.

Digging for Gold

Buying the GS Mar 200 call for $13.70 as the stock is selling off from record levels at around $220. The stock is cheap, and I will average down if the stock comes down further.

Crude is up over 4% right here as what looks like short covering. My firm believe is that the contract should be accumulated under $55.

Buying on Dip

Staying true to the strategy and buying the March Crude future at $54.575.

Quite a Day

Sentiment has definitely shifted in the oil patch. It is getting much colder in the northeast US very soon as the winter already arrived in Europe. Fundamentally it is questionable how much it should affect the prices, but on a psychological level it does matter. The strategy of buying at dips is working. The time to buy today was right after the numbers were release when WTI was down some 1.5%. We ended the day up, well above $55.

GS is really breaking up here, posting a new ATH today. Fundamentally this stock has to be bought on dips. A strategy would be to get long Deep-In-the-Money calls.

Google crossing $500 after hours, getting the last push from eBay's report.

As for the major equity indices, I would not get long at current levels.

We are finally seeing some weakness in USD, something I have been looking for lately for a contrarian trade.

Market Strategy

The theme for crude has quickly shifted to sell on strength to buy on weakness. As the March contract is up at the $55 level, the time to buy was at the expiry of the Feb contract. Cold weather and doubling of US reserves created a short squeeze in today's trading. The tell that the shorts was building positions was that the open interest was increasing during the steep sell off (as noted in earlier posts). Once again the turn-around seems to happen right around the expiry. Of course the media is always backward looking and outlets such as CNBC was speculating about oil in the 30ish when crude was at the bottom. Thus it seems that Goldman and Deutsche were right on their 'doubling down' thesis. Looking at commodities at large one might be surprised to see such strength in silver, gold, natural gas, as well as many softs.

Lunding mining was up close to 5% in today's US session. I am anticipating similar follow thru across the board in Stockholm tomorrow.

Yahoo just reported, the stock is up in after-hours trading. The results should be analysed for tells about Google. On another note; as video is the next frontier of the Intenet and online ads, Google should buy Joost as soon as possible. The business logic behind eBay's buyout of Skype is very questionable. However a Joost takeover makes a lot of sense and would make Google more valuable (as well as Joost).

On the sideline, I am eying a FX trade.

Closing a Position

Crude is up here and I am closing out the position as I am not convinced we have seen the bottom.

The Good and the Bad

Google at $500 and above in after hours. The stock getting fueled not only by the tech rally but also by Goldman's bullish comments. Also the Swedish holdings having a good rebound, up between 5 to 10% across the line.

Apple is really taking off on the iPhone news. The time to buy was clearly before Macworld which also was considered at the time, but the question is as always what is price in and not and the probability of this or that happen. A priori not a given trade to make. The valuation seems rich, the strategy should be to let the stock come in. Especially since there is quite a bit of time before the release. Apple TV is somewhat overlooked by the media, the only disappointment there is the lack of Google integration.

Goldman Sachs has left the $200 level where it has been at for some time. This is a name to keep an eye on in a market sell-off.

The bad is the energy sell-off where I put in a sell order as the market was up about 10 seconds too late, just to see the future down some $2 in short time. I haven't been following the open interest, but have heard there has been an increase which suggest speculative shorts at play.

Taking Profit

Covered my short Mar S&P futures at 1417. It is not easy to make money on the short side in this market...

Market Update

A tech rally is underway. Google is one stock that became way too cheap in the 450:s, where it should have been bought heavily. Gdrive and iTV will likely be the big announcements of Q1.

Otherwise the big news is Crude which is tough to be long during a record warm winter in the northern hemisphere. The weather should be priced in already. I think it would be wrong to sell during this shake-out.

Pare has had a fantastic rally up to over SEK 70 before this pull-back. I am waiting for a release from the company before I trim my position.

GS seems to be pinned at $200. Could be a good case for put writing as I don't see much downside trading at P/E 10.

I have been eyeing EURJPY that was trading at record levels and should have been shorted in a contrarian move, I was however more focused on other markets.

Putting on a Hedge

Sold the Mar S&P future this morning as we saw a heavy sell of in Asia. Yesterday mostly Nasdaq was selling off in the US. I am normally very careful shorting the market as there are so many odds working against you.

Been comfortable long crude (which I rolled over to Feb contract), I would be careful before this weeks number though. As the market might not want to get surprise once more, plus we have the warm weather.

Yesterday I was on the sell side of Lupe as the stock was up big and this is the name that feels closest to the exit. However my offer wasn't hit. I got in the stock believing that this 'blue chip' oil would be a reasonable safe bet on energy, and also given the fantastic track-record. The risks the company shouldn't be ignored.

Would buy back GS here, they reported a record quarter and the company is cheap based on multiples. Think the option expiration last week hold the stock back. It also seems like the analysts don't believe they can produce this kind of earnings going forward.

Google got hit bad in the Nasdaq sell-off. I would get aggressively longer on any further weakness as it is trading at a PEG under 1, very bullish for the stock, historically.

Portfolio Update

December Silver expired with a nice profit, even though it continued a bit after expiration. As for Crude, it seems that I have been on the right side of the trade so far. I think we could see some upwards momentum going forward from here, I don't regard $65 as unlikely during the winter months. LMC, BOLI and PARE have all been phenomenal lately. Boliden has really played out nice as a fundamental case, up some more than 40% since the position was initiated not long ago. The stock is still not expensive based on next year's estimates with a P/E well below 10. The company also seems more shareholder friendly now with a big dividend coming next year. I don't like to sell BOLI under SEK 200. Pare, my largest holding, closed on a new ATH on Friday. I hope to be able to be a bit more active in my trading than I have been able to be lately although the holidays are closing in.

Market Update

My S&P puts expired with a profit at $5. Google is flying past $500 and is currently up some 2.71% in today's market. Many of the stocks on my watch list, such as WYNN, GS, MA, AAPL, NYX, HANS are all moving up fast here. I was bidding on Crude yesterday at $58.00. The January contract was trading at $57.75 only minutes before, however I missed that trade although I am still long the contract. Metal, oil and commodity stocks are all up big right here. We are seeing colder weather now in the US.

Two Trades

Rolled over the December contract in Crude to January. Bought the SPX Put with the 1405 strike and expiration tomorrow. Payed $4.7. A pure speculation play.

Two All Time Highs and More

My two biggest holdings both made all time highs today. PARE ended the session at it highest point SEK 58. The stock is playing out perfectly according to plan. There should be a lot more to come its way. Google was very close to break the $500 barrier intraday, but ended the day at slightly above $390. Fundamentally I strongly believe that the stock could go to $600.

Silver made a turn-around today, ending up after being down in the morning. Crude also showed some strength after the inventory data. US is still very warm, but that could change quick.

The two big disappointments in the portfolio both belongs to the Lundin sphere, namely LUMI and LUPE. Today I switched Lumi to LMC for purely technical reasons. The stock is getting hurt by the price of Copper which is not as bullish as Zinc. I might average down on this position going forward. LUPE I have view as a proxy for Crude which has been a mistake. I don't like to sell it down here and it very well could be that the company wants to give the market a bearish picture in order to surprise to the upside in the future.

A Very Good Day

Pare and Lumi up over 6% each today, Boli up almost 4% as commodities find new strength. Goog is up over 1%.

I sold my last Nordnet at 21.90.

Waiting for pull-back to go in heavier in equities.