Sunday, April 22, 2007

"Gambling" Episode 3

Let's face it....this series is starting out really slllloooowwww.....

Unfortunately, i haven't seen the setup i want/need to get the returns i'm looking for.

(semi)interestingly, on the second day of my challenge, a stock that i hold in my IRA got a buyout offer.... (Tenke) received an offer (that they've apparently accepted) to be bought by Lundin Mining. I did really well on Tenke, but took on massive risk to do under 6 months it is better than a double, but i risked political uncertainties in Africa AND a wildly vacilating copper price.

Sadly, a double in 6 months still wouldn't have been enough to bring me to my goal of 200% appreciation in my initial capital. That really drove home the point to me that this was going to be very difficult to accomplish without using options and/or margin for leverage.

There were some interesting things that "went right" (so far) with the Tenke trade that would be nice to repeat on this challenge. without getting into all the political and M&A activity that went right, the biggest thing was that the trade went right "from the start", I let it "run" (rather than clipping it at 15 or 20 percent 2 months into the trade), and i gave the bigger move time to "mature".

Of course, with the house trade, time may be a luxury that i don't have....

Here are the macro moves that I'm looking at....

uranium plays (as i discussed/predicted here) have been under pressure since the spot went over 100/lb. not a huge suprise. i really like a couple of these....txm.v and iec.v are two of these....emc.v (emu on nyse) is showing *relative strength* in this sector wide weakness. this can often be the harbinger of bigger moves. i don't feel like this is a great time of the year to be takin new long positions in miners, but i'm watching developments (esp in these three securities very closely) right now, i consider these good longer term plays on weakness in the market, but probably not enough upside to accomplish my goal...not to mention getting 150k out of some of the smaller issues might negatively effect the price if i was to see that kind of runup.

gold -- i think it needs to correct....a little.... i can't be sure if it is now or after a move to test the 720's.....i'm too scared to short it, so if it can get down to the mid 600's and base (slow cup shaped chart) i will be looking at some ways to take my first BIG swing. longer term i'm very positive on gold still so i'll be trolling for a buying opportunity.

dollar -- while i've been calling for its death for sometime, i think it will rally as gold corrects...not a lot, but slightly. of course, again, i don't have conviction in this....late last year in my post "get your affairs in order" i called for a countertrend rally and then a retest of the low 80's on the dollar index. something just doesn't seem right (even though it's done what i thought) there seems to be TOO much negativity about the dollar and maybe it needs to give people a minute to get used to its current level before the jailbreak downward. again i don't have enough confidence in that to long something (the dollar) -even for this short term trade - that i believe is doomed long term.

gen markets -- dow over 13k....another slight pop...perhaps to 13200 ish on some "good news" then a melt-down. if/when it pops over 13k i will be looking for some individual US stocks to be buying puts on (bets they will go lower). i'd like to implied volatilities to be very low so the price of my bets are very cheap...may also look to buy calls on the VIX in this case (a measure of volatility which is usually quite low during gradually rising markets (like now) and quite high when all hell is breaking loose on the downside.

oil, grains, etc -- i don't have an opinion on these yet, although i'm looking closely at the natgas market on increased usage for oil sands remediation, and on speculation that people are being lulled to sleep on the hurricane front this summer with all the other crap going on in the world and last year's relatively benign storm season

Tuesday, April 17, 2007

iec.v long

i'm looking to lever up in this one. i already hold it....we'll see if i can get my price.

more details this evening on the "why", etc.


Friday, April 13, 2007

Gambling Episode #2

It certainly looks like all Hell is breaking loose on the dollar index.

Forex trades offer *significant* leverage and if you can guess right on a directional move you can make a bucket of money really fast. you can also have your head handed to you if wrong.

Take a look at the last year on the dollar index. Almost makes me think that friday the 13th will be's now 2:30 a.m. NYC time

It really looks like it's getting ready to break down.

Unfortunately, I've been waiting for action similar to this month and last for two years, but i'm too busy working to take advantage with the house fund (yet). I will plan my attack and allocate funds this weekend...but for now it's in dollars!! (gasp! ) :)

In the past I was so anti dollar I would do anything other than hold dollars. But, even a ROUTE in the dollar can look pretty small compared to the 20% drawdowns in the metals or 40% haircuts you can take in minors or other nat resource plays that have been driven here i sit.

With any luck, if the mainstream media picks up on the acceleration to the downside of the dollar...big holders may decide to support it just a *little bit* longer before it breaks the all time low -- thus giving me a chance to setup for the wave.

Tuesday, April 10, 2007

"Gambling" Episode 1

gambling sounds so harsh...."speculating" seems more flattering....but maybe not as accurate.

A proper speculation would utilize a SMALL amount of our available risk capital, and attempt to achieve a healthy gain for the overall portfolio while only having a small amount at risk. However, given our criteria -- tripling our capital before my lease runs out -- i'm not sure that will get me the outsized gains i'm looking for. i'll likely have all of my money at risk large portions of the time until i hit my target or go bust.

So, below I'm going to attempt to outline some thoughts that are driving my gambling decisions:

1.) leverage

anyone who bought a house with credit knows what this is. to get the kind of gains i need, i'll probably need to use leverage. either margin (borrowing money) or derivatives, or both. if/when the time comes i'll explain how and why. both of these options have a cost over and above cash trading in an underlying security however. and, as any f'ed borrower underwater on his/her mortgage can tell you, leverage works both ways. :)

2.) focus

it could be argued this is just another way to say leverage, but i'll probably try to put all my eggs in one basket and watch it very closely, rather than "deworsify". actually, most of what i'll be doing is watching price and volume and attempting to discern something out of that. this will be hard to do because i've spent a long time patiently trading fundamentals. however, in this case, that will not work because the market can stay "irrational" way longer than the length of my current lease.

3.) trend following

going with the flow. forget my prejudices and just let the market tell me what is working and following it. for a really opinionated trader like myself this is pretty hard to do. especially when i think we are on the "cusp" of something that won't be so positive -- soon.

4.) patience

this will be the hardest to practice cuz i don't have much time. but, given that we could be on the cusp of a change in direction....if i can stay in cash long enough to spot a trend before jumping in, i could enhance my other words, i could just focus on "not losing" until it's time to move, and with a big enough, leveraged, focused bet, make all of it in a week or so.

join us next time, on, "Gambling",

fuBarrio Fall Programming Schedule a friend of mine was looking over my site today and i think her exact comments were, "dude....your site is 'hell-a' boring"

hahahahha....oops! :)

I tried to explain it away as "demographic targeting" and a conscious decision by the fuBarrio programmers to go after the high networth, low volume, high value transactions.

Truth of the matter though: I'm a pretty boring dude, and this is a pretty boring country! :)

The only time *any* excitement gets stirred up is when I inadvertently consume too much junk food, rage into a sugar-high, and I become my alter-ego, the grisled, blind, bald, spotted, fuGly dog, known as fuBarrio.

Given 37 years of serious overindulgence in all things "snack cake", I've built up a massive tolerance. That, coupled with the sad fact that twinkies are still not a staple in the Uruguayan diet, fuBarrio's appearances are on the "wane" lately.

Even so, let's face it, politics, housing, rare earth element pricing and raging against the Federal Reserve, aren't going to win me any nielson points with the genY set. Damn, there's that "lack of charisma" thing biting me in the ass again.

And yet, it's best to know what you are....Let's face it, CSPAN can't compete with "pimp my ride".....come to think of it, CSPAN can't compete with the test signal that comes on at 3 a.m....

So, on that note, I would like to announce.........

This fall's new fuBarrio programming schedule:

1.) Overthrow of the Government (any that piss me off -- in no particular order), and
2.) Gambling with money I can't afford to lose!

The first series of topics will point out why all government is evil, without any real solutions for making it better.....other than shrinking the size of government at all levels until they are completely off of my wave.

The premise for the second series of posts is quite simple. I can afford a $50k house in Uruguay. $50k houses don't appeal to me, and the construction noise in my rented apartment appeals to me even less. So I will take the $50k that I could have/should have purchased a humble home with and make trades (posted as near to real-time as possible in an attempt to triple my money before my lease is out. :)

Think of it as a "live demonstration of what can go right and what can go wrong when gambling with 'money that you can't afford to lose'". Of course, it will not be nearly as active as if I wasn't working, but I work during market hours now, so there won't be as many intraday transactions as you might otherwise see.

Please only follow along on the second series for laughs and maybe a healthy dose of shadenfruede....Don't follow my trades unless you are willing to lose all your money. What I'm doing is ill-advised and really just a 'goof' more than anything because those kind of trading gains necessitate taking really foolish risks to you will shortly see :)


Sunday, April 08, 2007

Uranium at $113/

ok....the little birdie got *some* verification.

i found a link citing the same price's the same original source however and "only" 100k pounds worth. crazy price advance given it was at 85/lb just a couple of weeks ago. looks to be parabolic by my reckoning.....i wouldn't short it be would suprised if we didn't see *some* retracement and backing and filling -- at least back down to the low 100's again...

here is the link and entire story from australia....the only place where the uranium story seems to be mainstream.

Uranium to $113/lb.

and, in unrelated news, today was of course easter and the end of semana santa in uruguay. things will hopefully return to normal tomorrow as i need to go get my visa stamped at the department of naturalization (or some such govt agency).


...a little birdie told me....

...that uranium changed hands at over 100/lb last week. actually, the rumor is that it was significantly north of 100/lb.

for those that aren't following along closely that's greater than 2x from when I started this blog, 3x from when i went into it last year (very late) and well over 10x from when the doug casey types started touting it.

i don't know what to make of it yet. it is not being reported by any news outlets or quoting services available to me (the lumpen masses).

if it's true, it's significant in that the mainstream media might even pick up on it.
if it's not true, the way the trend is playing out it's just a matter of time anyways.


Thursday, April 05, 2007

Montevideo: city w/ Best Quality of Life in SA

Montevideo was rated the city with the best Quality of Life in South America by Mercer Human Resource Consulting.

Worldwide rankings put Zurich Switzerland at number one and Baghdad at dead last.

Here's the link to the story that ran in Uruguay Daily News Montevideo News.

p.s. I let them use my pic for that story with the condition that fuBarrio got a photo credit. But, there isn't any credit! Editor must have figured that it hurt their credibility to suggest that a bald dog with cataracs and no opposible thumb could take such a nice pic. Of course I took it with my friend's camera which might explain why the pics on my blog don't always look so nice :)

p.p.s. i was looking at "cataracs"...that can't be spelled correctly. if you're wondering why i so frequently mispell words in my blog (sic)'s because

a.) i don't know how to spell,
b.) my blogging software insists that because i'm in south america i must be trying to run their application in spanish (including the built in spell checker), and
c.) i'm too lazy to write it up in another app and spellcheck before bringing it back into my bloggin screws up the WYSIWYG editor and i have to reformat everything.


UY's second most used currency has issues too....

If you are an expat and planning to live in a place that doesn't use dollars as their primary currency, make sure to protect yourself.....especially if you are living off of investments or fixed income.

One of the reasons that I predict the cup and handle formation "works", as I outline earlier in this blog is that it gives people a chance to accept the new reality that is in front of them.

It allows people to take profits that were in the trend earlier and newbies to feel like they are getting a "bargain".

The same works for inverted cups and handles.

While not perfectly formed, the US dollar chart looks pretty ominous.

What the inverted cup and handle predicts is that at the back end of the handle, it has fallen off the radar screen of the main stream media and the public's attention -- back to page 16 -- all the while nosing toward new nominal highs (or in the case of an inverted cup and handle).

We saw some months ago when the dollar was at these levels that it prompted a cover story in the Economist. I predicted some relief for the dollar. I made the post "Get your affairs in order". We got that relief.

Although I don't get a lot of main stream media down here, i suspect now the dollar is not on anyone's front page. Right now, however we are susceptible to a chunk of bad news pushing the dollar below technical support levels and getting some new news coverage AFTER the break....triggering more pessimism.


Wednesday, April 04, 2007

Injun Summer in Montevideo

Montevideo is enjoying some beautiful weather in early April. It's just as well, because lots of March was nothing to write home about.

Attached is a picture from Buceo, directly in front of my "office"

Tuesday, April 03, 2007

Inflation in UY

One of my alert readers sent this story in to me this weekend.

He had guessed that I'd already seen it, but frankly all i saw was the inside of my eyelids this weekend.

Curious that the stated inflation rate in UY is running at greater than 2x that of the states and yet the exchange rate hasn't budged in the last year. The story quotes over "this year" but they mean since January. Since I've been here it's essentially unmoved.

I guess there are some other forces at work, (taxes, duties, other government mingling, or inaccurate/inconsistent inflation counting, future expectations ?)

Of course, figuring out how long a situation like that could be technically sustainable....well, that's beyond my doggy brain's processing power right now.

So, I'll just post the story with the comment, "curious"...and point out that it should be factored in to any savings rate one would hope to get from a UY peso account.

from Bloomberg

“Uruguay March Consumer Prices Rise From Year Earlier (Update1)

By Jorge Rebella and Eliana Raszewski

March 30 (Bloomberg) -- Uruguay's annual inflation rate surged to a two-year high in March on rising prices for food, beverages and transportation.

Consumer prices rose 7.36 percent from a year earlier, the biggest jump since December 2004, according to Bloomberg data. Monthly inflation rose to 0.9 percent from 0.61 percent in February, the National Statistics Institute reported today on its Web site.

``The accumulated inflation rate makes me doubt the government can attain its annual inflation target,'' said Milton Ferla, a private economic consultant in Montevideo.

``In the first quarter, the consumer price index is already about half way to the ceiling set by the government for the whole year.''

Prices of food and beverages rose in the South American country 1.47 percent while transport costs rose due to a 3.15 percent surge in gasoline prices, the institute said. Consumer prices have risen 3.31 percent in the first quarter of the year.

The central bank targets an inflation rate ranging between 4.5 percent and 6.5 percent for 2007 following a 6.38 percent increase in 2006.

``We still have to wait for salary adjustments in all labor sectors to become effective in July as well as further rises in international oil prices,'' Ferla said.

Uruguay's peso was unchanged today at 24.12 pesos per U.S. dollar and has strengthened 1.2 percent so far this year. “


Sunday, April 01, 2007

Cups and Handles - Redux

It's been a while since I talked about this, but I wanted to do a quick review of cups and handles. As you'll remember, a "cup and handle" is a chart pattern that technicians use to occasionally attempt to predict future price movement in a security. Here is a link to my previous post on cups and handles.

Let's look at some simple charts of U.TO or Uranium Participation Group on the Toronto exchange. U.TO trades roughly in line with the price of U3O8 (with a speculative premium). U.TO is a company that stockpiles yellow cake supplies.

The first chart off to the rght is the period mid-2004 to september 2006 on U.TO. If you look closely you can actually see two separate cup and handle-esque pattern formed during this period.

I do a lame attempt at tryin to highlight these pattern in red ink in the second chart. the two green vertical lines are merely indicating the period where a bullish run-up in price took place off the back end of the first handle.

Remember, that cups and handles are most indicative of future trending behavior after a longer term trend is already in place (duh). In other words, it more indicative of a longer term trend taking a "rest" or getting ready to continue with a longer term trend.

In these cases, the reason we care, is that as the cup and handle breaks out it can be rather explosive in price. In chart three I highlight the second cup and handle. This cup and handle isn't as well formed as the first as the price action is quite choppy.

In the fourth chart I "zoom in" on this second cup and handle. While choppy, given the fact that it took place after a run-up in a longer term trend, i still viewed it as quite positive, and made several comments on this blog and to personal friends that Uranium was looking quite bullish.

As you can see in the fifth and final chart, which shows the second cup and handle and the price action from the subsequent breakout, the price action was pretty magnificent.

While most who trade on the fundamentals would attribute this to the cigar lake accident which put into question a large futre prospective uranium supply. it's also interesting to note that the price action in U.TO and the Junior miners set up *ahead* of this accident.

Once the news broke publically, the true breakout happened. But at the time, the prices were already nosing up against all time highs on the backside of a cup and handle formation in the midst of what looked like a signficant long-term bullish trend.

If you want more info on cups and handles, and why i think they might actually be some insight on market psychology -- especially when they are evaluated in conjunction with volume trends which i didn't bother doing here, see my earlier post.

ciao for now,