Wow! The Dow Jones Industrial Average sank 770.59 points (6.92%) yesterday as the US congress failed to approve the terms for the proposed US$700bn bailout that was supposed to save sinking financial markets.
The tech heavy Nasdaq went down 199.61 points (9.14%). Unless a miracle happens today, we're likely to get trashed.
Interestingly though - the Rand is slipping quite drastically and is now trading at around R8.33 to the US dollar.
I'll be he honest - I don't think we have even begun to see the real moves in the Rand / Dollar rate.
The question though is going to be twofold:
- What are our resources going to do with the weaker Rand? (Will the Rand buffer boost them or will they just keep being sold down)
- When the hell are these commodities supposed to bounce?!
Commodities such as base and precious metals were supposed to bounce on the back of increased demand from China following the Olympics. But this doesn't seem to be the case OR the
There is a palpable excitement building around Gold shares / the gold price at the moment and this failed bailout may just be the tonic that is needed to light some serious fires in the precious metals markets.
Gold is now above the psychological barrier of US$900 an ounce. A sliding Rand and a rising gold price is fuel for a run on these shares which creates some great opportunities for traders.
I maintain my exposure to the precious metals / Rand Hedge market through a small call position on Impala Platinum. For the rest of the market it still looks pretty grim.
Monday, September 29, 2008
Options and Wealth?
The recent trouncing of the stock market has led me to a great internal debate / struggle...
Up until the start of September I had a nice little strategy going. Buy little blocks of shares, each time adding another dividend stream and try and grow my wealth that way.
Then I got all excited by the market volatility and fancied a bit of day trading and I sold out of 3 dividend producing shares to buy some call options on Impala Platinum and WHAM! I got the direction wrong.
Apart from losing money on the trade (I kept a portion of the position open though because I still think its the right call given the anticipated emerging market currency issues), I have also lost 3 dividend streams.
The irony of all of this though is that the shares that I have sold out of, have actually weathered the storm quite well.
The whole situation got me thinking - why do I bother to try and time the market to make "quick bucks" off of futures or options trading when a strategy of accumulation seems to work better?!
I had previously enjoyed some good successes trading in the options market, but at the end of the day, chasing a quick buck has actually moved me backwards.
Maybe its a fools game?
Stock brokers consistently tell stories about clients who churn their accounts over each year. Sometimes they end up, sometimes they end down - but at the end of the day, they don't consistently make any money by trading options.
Their is nothing scientific about my statement and I don't for a moment think that you can't make real money trading in the options and futures market. I do however wonder whether traders sometimes delude themselves that they are building WEALTH when they're actually gambling on trading profits...?
Up until the start of September I had a nice little strategy going. Buy little blocks of shares, each time adding another dividend stream and try and grow my wealth that way.
Then I got all excited by the market volatility and fancied a bit of day trading and I sold out of 3 dividend producing shares to buy some call options on Impala Platinum and WHAM! I got the direction wrong.
Apart from losing money on the trade (I kept a portion of the position open though because I still think its the right call given the anticipated emerging market currency issues), I have also lost 3 dividend streams.
The irony of all of this though is that the shares that I have sold out of, have actually weathered the storm quite well.
The whole situation got me thinking - why do I bother to try and time the market to make "quick bucks" off of futures or options trading when a strategy of accumulation seems to work better?!
I had previously enjoyed some good successes trading in the options market, but at the end of the day, chasing a quick buck has actually moved me backwards.
Maybe its a fools game?
Stock brokers consistently tell stories about clients who churn their accounts over each year. Sometimes they end up, sometimes they end down - but at the end of the day, they don't consistently make any money by trading options.
Their is nothing scientific about my statement and I don't for a moment think that you can't make real money trading in the options and futures market. I do however wonder whether traders sometimes delude themselves that they are building WEALTH when they're actually gambling on trading profits...?
Wednesday, September 17, 2008
Gold vs. Platinum
Why is Gold a safe haven and platinum is not??
This was a question I posed on one of the local trading boards, because in my head, I just can't work it out.
Gold has gone bananas this afternoon as the US financial system can no longer plaster over its cracks. Gold shares are on the fly and the metal itself has jumped over 11% in the last few hours.
Interestingly the price of platinum has also started to tick up and so has silver...
Now when things start hitting the wall, the traditional response has been to pile into Gold which is supposed to be more 'secure' than traditional money.
But apart a brief trip up to US$1000 an ounce, gold has hardly set the world alight and in the last few months has given up most of those gains... Until this afternoon.
And now the trouble really has hit the fan and the traders are looking to Gold and (maybe) Platinum and silver and some people are getting slightly excited - opportunities amongst the carnage!
I'm buying into this idea of a perfect storm of precious metals (Gold, Platinum and Silver) and a big klap for the emerging market currencies...
Interesting times indeed
This was a question I posed on one of the local trading boards, because in my head, I just can't work it out.
Gold has gone bananas this afternoon as the US financial system can no longer plaster over its cracks. Gold shares are on the fly and the metal itself has jumped over 11% in the last few hours.
Interestingly the price of platinum has also started to tick up and so has silver...
Now when things start hitting the wall, the traditional response has been to pile into Gold which is supposed to be more 'secure' than traditional money.
But apart a brief trip up to US$1000 an ounce, gold has hardly set the world alight and in the last few months has given up most of those gains... Until this afternoon.
And now the trouble really has hit the fan and the traders are looking to Gold and (maybe) Platinum and silver and some people are getting slightly excited - opportunities amongst the carnage!
I'm buying into this idea of a perfect storm of precious metals (Gold, Platinum and Silver) and a big klap for the emerging market currencies...
Interesting times indeed
Rand to be hit?
Does anyone else get the schnarkies that the Rand is about to take an almighty klap??
I've been watching the action in the US and locally and suddenly in the last few minutes Gold has rocketed some 50 odd dollars and the gold shares are on a mission.
Harmony, Gold Fields and AngloGold Ashanti are up in excess of 10% and gold doesn't look like its planning to stop.
In between this the Rand has slipped to R8.22 to the US dollar...
This is great for my Impala shares and for my dollar earnings but will play absolute havoc with the local South African economy (Inflation and debt issues will continue to rise).
I just get the horrible feeling we're about to see a huge selloff of emerging market currencies as people pull their money back into their home balance sheets.
I think I will just keep patting my IMP on the head for the moment... Time for these things to fly....
I've been watching the action in the US and locally and suddenly in the last few minutes Gold has rocketed some 50 odd dollars and the gold shares are on a mission.
Harmony, Gold Fields and AngloGold Ashanti are up in excess of 10% and gold doesn't look like its planning to stop.
In between this the Rand has slipped to R8.22 to the US dollar...
This is great for my Impala shares and for my dollar earnings but will play absolute havoc with the local South African economy (Inflation and debt issues will continue to rise).
I just get the horrible feeling we're about to see a huge selloff of emerging market currencies as people pull their money back into their home balance sheets.
I think I will just keep patting my IMP on the head for the moment... Time for these things to fly....
Monday, September 15, 2008
Food and Pharma investments
For investors looking at the South African Food or Pharmaceutical industries as places to make investments they may be interested in the following:
SA listed pharmaceuticals assessed
SA listed Food & Chemical companies assessed
SA listed pharmaceuticals assessed
SA listed Food & Chemical companies assessed
Impala - cheap punt
Traders lick their lips when a bit of turmoil hits the markets. The collapse of Lehman Brothers and the 'rescue' of Merrill Lynch has been just the catalyst for a decent sell off and I reckon this is creating some very nice opportunities.
One trade that I have been eyeing for a while has been going long Platinum producer Impala Platinum.
The thinking around this is three fold.
1. The currency - The Rand / Dollar is slipping. SA resources run hard when the Rand slips. I believe that breaking the R8 mark was critical and I'm thinking we are about to see some sell off of the Rand. (Although I cant say where the money is going to).
We have seen emerging market currency sell offs before and when they happen, they happen FAST.
2. Plat stocks have taken a bit of a hit in the last few weeks and the junior miners are taking some pain. I think there is time for a bit of consolidation
3. Impala has some very nice assets that the market has completely discounted in Zim. IF this power sharing detail provides even a semblance of political stability and its game on for these assets.
Bit of a cheap and nasty punt but lets see how it goes. Entered a call warrant with IMP trading at R189....
Friday, September 12, 2008
Nice quote
I am not one of those guys or girls who take Robert Kiyosaki ('Rich Dad, Poor Dad') word as gospel, but every now and then he puts some things nice and simply.
I loved this quote though that came from his book "Cash Flow Quadrant":
'Most people struggle to live from paycheck to paycheck, and yet, US$1.4 trillion flies around the world every day looking for somebody who wants it..."
Hahhahahahaha doesn't that make you feel good?!
I loved this quote though that came from his book "Cash Flow Quadrant":
'Most people struggle to live from paycheck to paycheck, and yet, US$1.4 trillion flies around the world every day looking for somebody who wants it..."
Hahhahahahaha doesn't that make you feel good?!
Sunday, September 7, 2008
Where to?
Its a pretty sickly looking equity market at the moment. It doesn't seem to matter where you look, the bad news just keeps on coming.
The BRIC (Brazil, Russia, China and India) seem to chug along but this isn't really helping the ordinary South African investors who are just trying to work out how to PROTECT some of their money.
A couple of people have asked me what I was planning to do next from an investment perspective and I stuck to the theme about diversification for my portfolio building.
Next on my shopping list is my first exposure to the Deutsche Bank X-Tracker ETF's.
Basically the ETF's are there to try and give me a bit of protected brain dead 'basket' exposure to the major markets. Would have loved exposure to the BRIC economies via ETF's but no such luck so I guess I have to go with what I've got.
It is nice to also have some offshore exposure and enjoy the quarterly distributions that these ETF's provide (Even if the yield is relatively low).
My buying order for these instruments is likely to be
DBXJP (Japan)
DBXUS (US)
DBXWD (World)
DBXUK (UK)
I think the systematic adding of these to the portfolio will provide some nice spread to the portfolio and at least let me look at some offshore assets without dipping into my offshore allowance.
Something a little different
I don't have any plans to buy any (no funds available) but Sterling Waterford will be issuing the second of their Carbon Credit Notes. These worked quite well the last time providing investors with a return of 150%+. Second time around in a tougher economy I think will be slightly trickier, but still believe they are something different while still providing a nice investment.
I guess thats just something to stick in the back of your head...
The BRIC (Brazil, Russia, China and India) seem to chug along but this isn't really helping the ordinary South African investors who are just trying to work out how to PROTECT some of their money.
A couple of people have asked me what I was planning to do next from an investment perspective and I stuck to the theme about diversification for my portfolio building.
Next on my shopping list is my first exposure to the Deutsche Bank X-Tracker ETF's.
Basically the ETF's are there to try and give me a bit of protected brain dead 'basket' exposure to the major markets. Would have loved exposure to the BRIC economies via ETF's but no such luck so I guess I have to go with what I've got.
It is nice to also have some offshore exposure and enjoy the quarterly distributions that these ETF's provide (Even if the yield is relatively low).
My buying order for these instruments is likely to be
DBXJP (Japan)
DBXUS (US)
DBXWD (World)
DBXUK (UK)
I think the systematic adding of these to the portfolio will provide some nice spread to the portfolio and at least let me look at some offshore assets without dipping into my offshore allowance.
Something a little different
I don't have any plans to buy any (no funds available) but Sterling Waterford will be issuing the second of their Carbon Credit Notes. These worked quite well the last time providing investors with a return of 150%+. Second time around in a tougher economy I think will be slightly trickier, but still believe they are something different while still providing a nice investment.
I guess thats just something to stick in the back of your head...
What do you make?
Late on Sunday the US government confirmed that they would be providing a bail out service for Freddie Mac and Fannie Mae, the US based mortgage lenders.
In a nutshell, the credit crisis has become so deep, that two of the worlds biggest lenders are in such serious trouble that the US government has had to come to the party to help keep them afloat. The reality is that if they collapse, then a massive chunk of the US lending market goes with them.
I'm torn on the issue - not sure whether they should be allowed to die a 'natural' death as a result of their own lending practices or whether they should be bailed out for the greater good...
What do you guys think?
In a nutshell, the credit crisis has become so deep, that two of the worlds biggest lenders are in such serious trouble that the US government has had to come to the party to help keep them afloat. The reality is that if they collapse, then a massive chunk of the US lending market goes with them.
I'm torn on the issue - not sure whether they should be allowed to die a 'natural' death as a result of their own lending practices or whether they should be bailed out for the greater good...
What do you guys think?
Saturday, September 6, 2008
Empowerment Foursome
It has been an interesting week for my 'empowerment foursome"
Mvelaphanda Group
As per my last post, I got my paws on some Mvelaphanda Group (MVG) shares. My initial bid was a cheeky R5.95 but when it became apparent that it wasn't dropping below R6 I was happy to pay the R6.30.
The motivating factors for buying this company were:
A) The special dividend coming up in the middle of the month
B) The quality assets they seem to have under them that are being discounted by the market. You seem to be getting a lot of future earnings for next to nothing.
One of the things I like about the MVG story is that the general perception in the market, is that they don't think of themselves as an 'empowerment company'. They view themselves as an industrial company that happens to have a large black representation.
Personal opinion - over the next 10 years, this is going to become a serious player in the South African industrial segment off its own bat.
Sekunjalo
Intriguing things happening at Sekunjalo this week.
The company announced that they had gone into negotiations and the share price leapt up from 61c - 68c.
A nice bit of volume as well and no announcement that there were some director dealings so maybe it is not Surve buying shares.
According to website www.sharetips.co.za, there is a good chance that SKJ is going to be delisted in a management buyout by Surve.
I'm less convinced and think its an acquisition but nothing seems immediately obvious.
But I admit that I will be very irritated if this is a management buyout and delisting.
Brimstone
Investors seem to be recognising that there might be some disconnect between Brimstone's share price and the underlying operations.
The company is on a VERY undemanding price to earnings ratio.
The shareprice has jumped nearly a Rand (20% this week), admittedly on relatively thin volume. Even after this jump the share is still trading on a PE ratio of under 3 times earnings... must be money for jam.
Vunani
The company went under cautionary on Thursday afternoon. 24 hours later, Peregrine (of which Vunani holds 15%) also went under cautionary as it was announced that CEO Sean Melnick and management partners are planning to delist the business in a management buyout.
As a shareholder in Peregrine, I can't say I'm happy.
But Vunani has been doing some nice things since listing and the share price doesn't really reflect it.
The share is illiquid at the moment and there are some minor operational issues which need to be smoothed out.
But barring a huge disaster, I don't think this is a bad story. If they can retain their Peregrine exposure then they should do nicely over the next few years and re-rate appropriately.
Mvelaphanda Group
As per my last post, I got my paws on some Mvelaphanda Group (MVG) shares. My initial bid was a cheeky R5.95 but when it became apparent that it wasn't dropping below R6 I was happy to pay the R6.30.
The motivating factors for buying this company were:
A) The special dividend coming up in the middle of the month
B) The quality assets they seem to have under them that are being discounted by the market. You seem to be getting a lot of future earnings for next to nothing.
One of the things I like about the MVG story is that the general perception in the market, is that they don't think of themselves as an 'empowerment company'. They view themselves as an industrial company that happens to have a large black representation.
Personal opinion - over the next 10 years, this is going to become a serious player in the South African industrial segment off its own bat.
Sekunjalo
Intriguing things happening at Sekunjalo this week.
The company announced that they had gone into negotiations and the share price leapt up from 61c - 68c.
A nice bit of volume as well and no announcement that there were some director dealings so maybe it is not Surve buying shares.
According to website www.sharetips.co.za, there is a good chance that SKJ is going to be delisted in a management buyout by Surve.
I'm less convinced and think its an acquisition but nothing seems immediately obvious.
But I admit that I will be very irritated if this is a management buyout and delisting.
Brimstone
Investors seem to be recognising that there might be some disconnect between Brimstone's share price and the underlying operations.
The company is on a VERY undemanding price to earnings ratio.
The shareprice has jumped nearly a Rand (20% this week), admittedly on relatively thin volume. Even after this jump the share is still trading on a PE ratio of under 3 times earnings... must be money for jam.
Vunani
The company went under cautionary on Thursday afternoon. 24 hours later, Peregrine (of which Vunani holds 15%) also went under cautionary as it was announced that CEO Sean Melnick and management partners are planning to delist the business in a management buyout.
As a shareholder in Peregrine, I can't say I'm happy.
But Vunani has been doing some nice things since listing and the share price doesn't really reflect it.
The share is illiquid at the moment and there are some minor operational issues which need to be smoothed out.
But barring a huge disaster, I don't think this is a bad story. If they can retain their Peregrine exposure then they should do nicely over the next few years and re-rate appropriately.
About the Liquid Trader blog
I'm a South African day trader and investor.
I love the South African stock market and I love interacting with like minded South African professionals.
This blog was formally hosted on iBlog (www.liquidtrader.iblog.co.za), but we have had some connectivity problems as of late so I have begun to start shifting some of the content over to here.
I look forward to being able to bounce ideas off other South African and international investors and build a nice solid trading community to share ideas with.
I love the South African stock market and I love interacting with like minded South African professionals.
This blog was formally hosted on iBlog (www.liquidtrader.iblog.co.za), but we have had some connectivity problems as of late so I have begun to start shifting some of the content over to here.
I look forward to being able to bounce ideas off other South African and international investors and build a nice solid trading community to share ideas with.
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