Liquid Trader

Trading update

2011-06-18T00:53:00.000-07:00

It has been a while since I put something down on this blog. It has been a tough couple of months for traders and investors alike. Market doesn't want to go higher due to the Euro debt crisis despite there clearly being some compelling valuations.

Here are the trades I am still playing with plus one new trade:

Old Mutual at under R14 (ADDED)
I'm not a huge fan of insurers but Old Mutual has a lot going for it. Its being tarred with the Euro crisis but remember that a lot of its profits come from South African operations and a lot of its valuation is linked to its stake in Nedbank. It is battling to kick on at the moment but Goldman Sachs recently upgraded the share to a buy.

Nikkei
As mentioned in the previous post, there has been a pretty predictable 9400 - 9800 band starting to form. Everybody is talking Japan at the moment and how cheap it is. You don't even have to believe in a super rebound in the markets to score. Scale 250 - 350 points each time and you can build a decent return here.

Brait at R17.50
Sure there is a lot of speculation around Brait at the moment, but it has two very solid assets underneath it in the form of Pep and Premier Foods. As it stands you are basically getting these businesses plus some cash and paying next to nothing for the other assets. Sure in some cases you probably shouldn't be paying much for them and without the dividend Brait is a less compelling investment story but if they can stick to generate long-term ROE of 20% odd you are going to find few investments that can match this.

African Bank Investments Limited
I maintain what I said in the earlier post - you get a dividend of 5%, you have a solid and cash generative business on an undemanding price to earnings multiple which doesn't have to support capital intensive investment banking businesses. Simple, stupid kind of investment?

Vividend Income Fund
Another of those investments which slot into the simple, stupid investment category is Vividend. There is nothing complicated about this new property listing. It is ungeared, nice portfolio and with a well respected management. You are picking up about 6% yield after tax and the price is off its highs. Definately worth a nibble.

Nothing else really jumping out at me.

I quite like the new Africa ETN from Standard Bank and have added a debit order for it from next month. Will see how that product evolves.

And all I got was this lousy birth certificate....

2011-05-01T20:55:00.001-07:00

The world has woken to the news that public enemy number 1 (well at least the US enemy number 1) - Osama Bin Laden - has been killed in a mansion in Pakistan in a joint special forces attack. It has been almost 10 years since that fateful day since September 11th and you can understand the relief in the US that this fight has been "won".

The cynic in me suggests that this news probably puts paid to Donald Trumps presidential ambitions.... All he could produce was a birth certificate of sorts for Barack Obama....

... no wonder Obama thought he probably was justified in taking a dig at the property billionaire in the press conference yesterday.

So what does this mean for markets and trading?

- I gotta fess up. Friday's spike in Gold burnt me and I was stopped out there.
- Still in with my short oil from $125 and long US$ / short Japanese Yen trade

In my head I had suspected a bit more of a "patriot rally" in terms of the US dollar but lets wait it out. The yen is weakening and as the rest of global markets digest the news, there might be a bit more enthusiasm for the trade.

Oil at $125 is in my humble opinion overbought and being driven by this commodity bubble and being held up unnaturally high with social tensions in places like Libya, Syria, Egypt etc. But there is nothing new in these areas to suggest that this kind of price is justified, especially with economic data suggesting the economy is staggering.

I do agree with the early analysis from STRATFOR that this probably means that the US can hasten its departure from Afghanistan. While the US has made a lot of noise about its humanitarian support / obligations to the region, the fight has been going on for 9 and a half years and Americans are tired of this battle. Since the initial "shock and awe" they've been left fighting for a country which is politically and economically worthless.

With the US elections around the corner, it will do a lot for popularity ratings to show US soldiers packing their bags and heading home to their loved ones. US soldiers departing the Middle East will invariably be good publicity in the near-term.

So for now I'll stay short oil and long the dollar... counter-intuitive maybe but its probably about time the world started to settle down for a bit and put this chapter behind us.

April update

2011-04-18T12:03:00.000-07:00

So those dumb-asses at S&P decided to downgrade the US of A this afternoon and caused some proper kak in the markets today. Stocks are down, dollar is down, metals are up… I’m so excited to see a bit of volatility.

Certainly not the prettiest market around at the moment but at least if you’re looking for some long-term value one has to feel some things are opening up.

Here are a couple of things I’m looking at:

The Nikkei at 9400
News out of Japan consistency looks bad, but the amount of money which is going to be sloshed around in the next few years rebuilding is likely to provide a serious catalyst for growth. I reckon you can get a pretty nice band between say 9400 and 9800 in which to trade in the next few weeks.

Brait at R18.50
Said it in the previous post and I maintain it – Brait at under R19 is incredibly tempting if you are a patient investor and looking for some long-term dividend growth.

African Bank Investments Limited at under R36
The sell-off has created an opportunity in local banking group Abil. You still get a dividend of around 4% and decent earnings growth forward.

Altech at R55
If you are looking for an Africa play then Altech is hard to ignore at the moment. The group is an early mover on the technology front onto the continent and with the share having slipped from R68 to R55 its tempting. A historic price to earnings multiple of 11 times earnings and a dividend yield of a tad under 6%.

Dividends, dividends, dividends.....

Happy hunting….

Liking platinum

2011-01-27T13:31:00.000-08:00

I have been watching these gold and platinum prices with some interest and this recent sell-off has caught my eye this evening.

Personally I thought gold would hold around the $1320 mark but it went straight through that and maybe $1310 will act as some kind of support level. I think the thing which has surprised me on this front is the reason S&P rating cut in Japan, I thought there might be some money cycled out of there and into precious metal commodities... apparently not yet.

Whatever, I find gold over-rated and really only for the looneys.

The metal which does interest me though is platinum and I've taken a small long position on it at $1790 on the April future. There is nothing complicated about my thinking here... look around SA at the moment, everything is being held together on a shoe-string - roads, traffic lights, rail etc etc. Throw in that the rain has soaked the coal for the power stations and there is now a massive transport strike scheduled for early in February.

If the signs of economic improvement are to be believed and the emphasis on clean energy keeps being punted and that platinum is expected to come out of South Africa then surely you can't go too far wrong backing the metal from here?

On the equity front only two real plays are jumping out at me:

Brait
Rushed up to R26.50 before a cautionary announcement was put out and then the stock slumped to R22 but has subsequently bounced. Good play at these levels considering the dividend

RE:CM & Calibre prefs (RACP)
You can buy RACP at less than the NAV of a cash shell... To me that is simply brain-dead if you believe that Piet Viljoen and his team can generate even the most basic long-term investment return.

With the fun and games in Japan earlier today with the S&P re-rating I reckon Friday could be an interesting day for traders. Let's see who keeps their heads.

Warren Buffett and the Art of Stock Arbitrage: Proven Strategies for Arbitrage and Other Special Investment Situations

2011-01-04T21:43:00.001-08:00

I am always trying to look for new investment books for traders and investors to look at to try and find a trading strategy which works.

Came across this ebook from Warren Bufffett - Warren Buffett and the Art of Stock Arbitrage: Proven Strategies for Arbitrage and Other Special Investment Situations - and thought it might be a nice read.

The book is 176 pages so it is not too bad length wise and should appeal to both newbies and more experienced investors.

You can order it online for R163.46 by clicking HERE or on the book cover.

Sasol, the Nasdaq and the Dollar

2010-12-27T13:11:00.000-08:00

So we are slowly sliding out of an interesting 2010 and treading with some trepidation into 2011. Markets are interesting at the moment... I wouldn't say tough because I'm still happy being long for the simple reason that there is a sea of liquidity out there desperately seeking places to be parked. I think it is pretty obvious that people are not going to make (or even protect) money by leaving it in the bank.

I have three active trades on the go at the moment:

Sasol
I like this share. Good dividend payer, growth prospects, trades at a discount to its peers and hell its been largely unloved in 2010 despite oil now heading for $100 a barrel. The company started the year at R290 a share and up until September it didn't go anywhere but in the last couple of weeks its been slowly

gaining some momentum and looks like it wants to push aboe R340 a share.

Call me a cynic but the company is widely held by domestic asset managers and I wouldn't be surprised if this stock starts getting some serious media attention in the early half of 2011 as they try and ramp up their portfolios. Sasol also recently announced a $1bn investment in a Canadian project and a lot of its other Gas to Liquids (GTL) plants are coming on line and pushing up production volumes.

All signs are there that Sasol is kicking up a gear so I am comfortable being long Sasol at R335.

The Nasdaq
Technology stocks have been out of favour in the US for a while now but there is lot going for them. The last couple of quarters have been good for telecomms and tech stocks with many indicating share buybacks and dividends were on the cards. I stand under correction but I think Intel has lifted its dividend in each of the last five years.

US companies have sat with alot of cash on their balance sheets over the last two years and at some point they are going to look to deploy that capital. That means investing in new technology, PCs, semi-conductors etc. A Nasdaq at 2600 doesn't seem to be too risky in my books.

The Dollar
Considering how I got smacked around by US currency over the last six months I probably need my head read but here's my logic:

- The US is coming out of recession
- AIG, Bank of America and Citigroup are repaying their debts
- The emerging market story is interesting but it has meant that many of the US companies are offering some seriously good value. I wouldn't be surprised if demand for US assets starts to rise as institutional investors start realising that they get better value for their money in the US rather than directly ploughing money into emerging markets?

I thought about it a bit and decided to go long dollar, short yen. There is some uncertainty in Asia with the Korean spat so I wonder if the basket of Asian currencies might come under some selling pressure?

Let's see how those play out over the next few weeks.... Happy Xmas and New Year folks

The Wire: New offering from Global Trader

2010-12-22T07:41:00.001-08:00

I was just forwarded the following announcement from Global Trader and I thought it was quite an interesting idea for day traders / investors. Anybody tried it out? Thoughts?

You can check out the offering here.

The Wire. A Christmas gift worth waiting for

By Charles Savage, CEO of Global Trader

I don’t remember exactly when I first white boarded my vision for Global Traders’ online community offering but it was sometime in 2007. I clearly remember the enthusiasm and excitement with which the IT and marketing teams met my idea, excitement more about the fact that the CEO had finally lost his mind and had nothing to do with my idea at all.

Two Chief Technology Officers later and the work of people best described as wizards, magicians and conjurers and we launched version one of The Wire. The Wire is the name for the new online world we have created and is the centre of our financial community and the platform from which all our community driven services come to life.

It is a closed community in the sense that it is available to our live trading clients only but, beyond this, the restrictions fall away swiftly. The Wire is free to air and it is a radical new approach to delivering meaningful, actionable financial information that enables collaboration and communication and breaks down the barriers between those that trade and those that should trade.

At Global Trader we make it our business to smash down these barriers because we believe that for too long financial markets have unjustifiably been shrouded in mystery and intrigue. It is seen as the realm of engineers, actuaries and rocket scientists that, for the most part, have discouraged you from doing it yourself. To quote Peter Lynch, one of the most successful Wall Street investors of all time, “everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.” The truth is that Global Trader has now made trading simple.

On The Wire you can call yourself whatever you like, talk to traders, publish your research and views, read blogs about investing, technology trends affecting trading and read about how we view the world of investing. You can live vicariously through your trading alias and learn from fellow traders. When it comes to the what, when and how successfully you trade The Wire is an open book.

Do you remember your first casino experience? I do and I’m pretty sure it went something like this. You wondered around the casino halls in awe of the sounds, light and music, stopping occasionally to peer over the shoulder of the confident punters taking up the seats at the machines and tables. You paused and looked on in wonder at the piles of chips in front of some of the players and, after plucking up enough courage, reached forward and placed your chips behind one of them. You won some and you lost some but you learnt from every hand and grew in confidence until finally a seat became free and you pounced on it.

With The Wire’s Twades you can stand behind real live traders, follow their trades, track their success and if you like even put your money behind their portfolio punts until you feel comfortable enough to join them at the table. If you’ve played enough Blackjack, as I have, you will know that it is always good to cover a couple of boxes. Twades is our “first flight” service to launch on The Wire with more first flight services lined up for 2011.

Then there’s She–Ra, my personal favourite financial blogger, who publishes her work on The Wire’s Skirt Length Theory blog. If there is still some youth about you then you are going to love her approach to financial markets. She says of the myth surrounding trading, “Do you see images of a high risk, fast paced environment populated by coked up investment w*nkers or images of old fogies that have made their millions sitting in silk slippers barking orders at their brokers whilst smoking a pipe? If so then you would be only the tiniest bit right and you would also be SO wrong!”

I have no doubt that the launch of the Wire will be reflected on in Global Traders’ history as the defining moment that best demonstrated our commitment to the vision to boldly go where no South African financial service provider has even dared to dream about. Welcome to the New World!

Insider trading just got trumped by Twades! The question is, were you following?

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

2010-12-03T22:38:00.000-08:00

I enjoy Matt Taibbi and the "colour" he puts into the story he tells - I don't think anyone will ever forget the now famous paragraph:

"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
The new book from Taibbi was hellishly entertaining, there are some cracking one-liners in it and I still have a good laugh about some of them.

The blurb for the book reads as below:
The dramatic story behind the most audacious power grab in American history The financial crisis that exploded in 2008 isn’t past but prologue. The stunning rise, fall, and rescue of Wall Street in the bubble-and-bailout era was the coming-out party for the network of looters who sit at the nexus of American political and economic power. The grifter class—made up of the largest players in the financial industry and the politicians who do their bidding—has been growing in power for a generation, transferring wealth upward through increasingly complex financial mechanisms and political maneuvers. The crisis was only one terrifying manifestation of how they’ve hijacked America’s political and economic life. Rolling Stone’s Matt Taibbi here unravels the whole fiendish story, digging beyond the headlines to get into the deeper roots and wider implications of the rise of the grifters. He traces the movement’s origins to the cult of Ayn Rand and her most influential—and possibly weirdest—acolyte, Alan Greenspan, and offers fresh reporting on the backroom deals that decided the winners and losers in the government bailouts. He uncovers the hidden commodities bubble that transferred billions of dollars to Wall Street while creating food shortages around the world, and he shows how finance dominates politics, from the story of investment bankers auctioning off America’s infrastructure to an inside account of the high-stakes battle for health-care reform—a battle the true reformers lost. Finally, he tells the story of Goldman Sachs, the “vampire squid wrapped around the face of humanity.”

Definately worthwhile as a read for Christmas. You can buy it from Kalahari for R205 by clicking HERE or on the cover.

The Effective Investor - Franco Busetti

2010-10-24T01:35:00.000-07:00

I am reading the book "The Effective Investor" by Franco Busetti at the moment and really enjoying it.

One of the real reasons I am enjoying it, is that it is written for a South African investor, by local investment professionals. You recognise the companies, the challenges (e.g. the Rand) and the strategies in general.

On top of this there is none of this gratuitous "institutional" feel to the comments that I find often makes "investing" aloof.

You can find the book at Kalahari HERE for R350 or you can click on the image and it will take you to the item in their online store.

For the Standard Bank fans out there

2010-10-22T06:01:00.003-07:00

Hahahahahahahahah this e-mails is going around made me laugh:

Feedback on JSE trading course?

2010-10-18T21:51:00.001-07:00

Has anybody tried this course from Sharenet out?

One of my family members is keen to find an introductory trading course to learn to trade shares on the JSE but I am not sure what these are like. Feedback?

You should be able to click through to the Sharenet site for more info via the banner below.

Let me know - ta!

Too easy

2010-10-16T22:45:00.000-07:00

I have just logged into my e-mail and seen dividend notifications for my holdings in Sasol, FirstRand and Discovery as well as a re-investment notification for my Z-Govi holding and it reminded me how much of investing is simply method and repetition.

For sure there is little glamour in simply clocking up the dividends but you have to ask yourself - why work if you don't have to?!

I had a look at the performance of the Satrix Divi Exchange Traded Fund (ETF) product over the last year and I see that you have enjoyed a return of around 33%. Worst case scenario is an annual dividend yield of 4.5% which is not the worst return around and if you are looking for low-cost dividend investment strategies then this might be a product to consider adding to your portfolio.

Speaking of good dividend payers, has anybody been watching the rise in the Brait shareprice? It seems to have had a bit of a kick over October rising from R21 to above R24. This is one of those stocks I've kept in my portfolio primarily for its dividend yield which is sitting at about 6%.

The company did release a trading statement recently saying that earnings would be up sharply for the six months.

Basic eps and heps: 72.8 ZAR cents
Diluted eps and heps: 72.7 ZAR cents

This puts it on a PE multiple of around 14 times earnings and if you buy into the idea that Brait is the "smart money" then this looks attractive, particularly if the private equity portfolio is at the bottom of its cycle.

Another reason which might be contributing to the rise in the Brait share price is the similar rise in the Buildmax counter, in which Brait is a significant investor. Buildmax has risen from 27c to touch 40c this month and it looks like a turnaround plan is in place.

Happy trading investors.

Small cap update - 2 October 2010

2010-10-01T23:23:00.000-07:00

Hello fellow traders...

I see it has been a good few months since I last updated this blog which probably does not reflect that well on me.

What DOES however reflect quite well on me is the TrustCo share price over that period.

Let's take a look at some of the small-cap shares that have caught my eye over the last few months and where they are at now.

TrustCo
This share has really done nicely. Since I last blogged it, has risen from the 20's to touch a high of 65c with a lot of media attention. Directors have bought a whole whack of shares as well which has helped the story along.

In September, the company announced transactions with Econet and the International Finance Corporation (IFC) both of which should have an impact on the business.

Still think there is value in it if you are patient.

Interwaste
Share price wise this company has largely gone sideways over the last few months, but it is still up a bit since April.

On the plus side the financial results have shown something of a turnaround from the previous financial year and they have gained a number of new clients - the benefits of which should probably come through in the second half of the year. Guidance from management is that the second half of the year is traditionally stronger as well so let's see what comes through for the full-year.

One thing which needs to be watched a little closely is the cash position of the business.

The company overdraft facility has risen from R4.7m to nearly R30m for the six months ended June 2010. There is also negative cashflow as the business has made some serious capital investments.

For the 12-months, the net cash position had declined to -R21m.

Buildmax
This has been such a mixed bag sometimes I wonder.

The share is up from 27c to 31c and it looks like some serious corrective action is being taken to try and turn this business around.

New management are in place, rights issues have been sorted.

I'm gonna hang on to this one.

IPSA
Little to write home here. The share has gone nowehere.

However this announcement at the end of August will give shareholders some cheer:

"IPSA PLC (AIM: IPSA), the developer, owner and operator of power generation capacity in Southern Africa, announces that its wholly-owned subsidiary, Newcastle Cogeneration (Pty.) Limited has entered into a power purchase agreement ("PPA") with Eskom, the South African electricity parastatal, under the medium term power purchase programme ("MTPPP"). Under the new PPA all electricity output from the plant would be sold to Eskom for the period to 31 March 2015, and is based on 13 MW of capacity."

Again lets see what this translates into operationally.

RE:CM and Calibre
I got my hands on a few of these pref-shares last month and will try and get a few more as time goes by. I like Piet Viljoen in terms of his style of value investing and would like to think he can add value through this vehicle.

The share listed at R10 and has floated somewhere between R10 and R11 but there has been really limited liquidity so that is something that makes this tricky to watch.

Viljoen said that investors should expect "slow and steady" to start with so if you have a long-term investment horizon, then I'd probably be adding a few more of these to the portfolio as well.

Some others to consider
Three other stocks I have nibbled at in the last few months are Nigerian oil and gas group Oando, private equity fund Brait and Paladin Capital.

There seems to be some action happening at Paladin as the share price has risen more than 20% in the last few weeks. However this puts it well above its net asset value which is not always that easy to justify buying at the moment.

Buildmax

2010-08-05T13:02:00.000-07:00

This is a stock that I have been talking about for a while but have pretty much sat with egg on my face since making the call.'

Since June the share price has carried on sliding dropping from 50c to as low as 21c. Considering that in September 2007 and the private equity boys at Brait bought in at about 120c this has been a bit of a disappointment.

Anyways a new SENS announcement went out after the close of trade and this one catches my eye:

Buildmax is making a rights offer of 2.31 (two point three one) rights offer shares for every one Buildmax share held at a price of 12.5c per share. Brait and Coronation - two of the better value finders out there - have made an offer to underwrite the deal.

I guess for those who have a longer term investment horizon, this might not be the worst one to sit on....

Small cap update

2010-06-26T10:02:00.000-07:00

Two of the small caps that I have been tipping on this blog, and one I have been keeping half an eye on, have been making some waves in recent weeks and thought I would do something of an update on them quickly.

IPSA
A couple of people I have spoken to this week have been a little cynical on this stock but there was an announcement from them released on SENS which says:

"IPSA PLC (AIM: IPSA), the developer, owner and operator of power generation capacity in Southern Africa, announces that, on 23 June 2010, its NewCogen subsidiary re-started production of electricity under an emergency contract with Eskom. Under the contract the plant will provide electricity to support the South African economy during a period of power shortages which coincides with the FIFA World Cup. While the contract is due to end on 30th June, 2010 Eskom has indicated publicly that it may request an extension at least until the WorldCup Final on 11th July. Meantime NewCogen and Eskom are awaiting formal notification from NERSA, the electricity regulator, that a six year MTPPP power purchase agreement has finally been approved. A further announcement will be made on the MTPPP contract as soon as news is available."

Is it a case of IPSA just trying to get some good PR mileage? Maybe... but the fact of the matter is it literally takes a flick of a switch and the Newcastle plant can be delivering electricity when the country needs it.

It would appear that there has been a shift in thinking and Eskom has adopted the role that independant power producers do have a role to play in the new economy. The share price has not responded particularly positively but I maintain that this could be an interesting small cap to consider.

Interwaste
In April I mentioned that Interwaste was one you should be considering for your portfolio. At that time the share was floating around below 50c. It has gradually been ticking up and is now trading around 70c.

Looking back over the SENS announcements a couple of things caught my eye. Firstly at the end of April one of the directors bought a couple of tranches of the shares which gave me a bit of confidence.

The other thing was the announcement that Funani Mojono had joined the board as an independant non-executive. He seems to be quite well connected within ArcelorMittal and this might well have some spin-offs for the company.

TrustCo
This is a little financial services firm that I have been eyeing for a while. Based in Namibia they have yet to set their Johannesburg listing alight. However earlier this week they announced that they had won their court case with the SABC and were due around R24m from the victory including costs.

It is not a massive sum of money but it certainly provides the company with a way forward.

Might be worth a punt - the liquidity just worries me a bit.

Vunani - see through the BS

2010-06-19T01:29:00.000-07:00

I noticed this week that empowerment financial services firm Vunani has completed its second acquisition in the last two weeks buying an additional 31% in Peregrine iQ the fund management business held by Peregrine and a 51% stake in something called the Jala Group.

With that in mind I had given it some serious consideration as a potential investment as a bit of a rebound and thought I would take a closer look:

A couple of observations here:

Peregrine are a very smart bunch of people and in the back of my head I am wondering why they are allowing Vunani to end up with 51% of this business? These two firms have a funny relationship with one another and I wouldn't be surprised if Peregrine were quite happy to turn Vunani into their patsy for something they don't want.
Peregrine can't really place much value on a business which supposedly has R11bn in assets under management - the transaction didn't even warrant a cautionary or a disclosure of the level of investment. For a tiny little business like Vunani (in the listed sense) that's odd.

But it is this Jala Group thing that really stoked my curiousity and got me digging around a bit...

Ok so here is the deal - 28 May Vunani says it has bought a 51% stake in this thing called the Jala Group.

This Jala Group thing - a quick Google search doesn't come up with much except a bunch of media whores reproducing the press release that Vunani put out. More curious is that if you go to the website Jala.co.za the page has already been rebranded as Vunani Technology Ventures... but no real sign that there was ever any kind of cached web presence for these guys 20 or 30 days ago. Seems to ring a little hollow. Wonder if there was anything there in the first place?
For an IT company with a track-record of just 9 months, this is a bit peculiar. If there is one thing IT companies are good at it is in leaving a track record of their transactions and skills on the various search engines.
The site itself is designed in HTML. I can't think of any graphic designer who would design a new website - it has to be new because it has all been rebranded from Jala to Vunani in the last month - who would design anything in HTML.
A quick look at the LinkedIn profiles for the directors makes for interesting reading as well. The guys had updated their employment profiles in April 2010 (i.e. before the market was informed of the transaction). Surely there has to be a disclosure issue here?
Apart from Maree and McKellar who have something of a track record in IT, the associates seem to be a little lightweight. They have a psychologist for some bizarre reason and then they have Alon Hendel whose claim to fame (according to the website) was launching Tycoon.co.za that light-weight entrepreneurs thing for Moneyweb. No offence but we know how that ended up
I don't put too much faith into Cipro but a quick search reveals that the Jala Group was registered in June last year and provides "Supply of Stationary and Related Services"
There is no registered business called "Vunani Technology Ventures" or anything along those lines which has a link to Vunani. I appreciate its a new "re-named" venture but still the business needs to be registered.
For an empowerment company Vunani Technology Ventures seems to have an awful lot of white faces on its board

But the real kicker for me is the claim that Jala / Vunani Technology Ventures has been helping some of its clients since April 2008. That's odd because the business only came into being at the end of last year.

In other words the Jala Group is not really a business. It is a couple of people who get asked for some advice from time to time and may sit on a few boards but there is very little in the way of assets here. The IP for this business sits in the hands of Maree and McKellar and whoever they are mates with and if they decide to walk away there is very little that would be appear to be classified as an "asset" at the moment.

And THIS is the problem with Vunani - they are so busy cobbling together shit that they don't stick to what they could be good at.

As tempting as it is that Vunani is suddenly coming good the numbers still don't give any indication that they are on the recovery path - rather the acquisitions are a case of bullshit trying to baffle brains.

For the year ended 31 December

Turnover of R121m plus R15 in other income produced an operating profit of R8m
Cash negative from operations of R135m out the door
Net cash - R3m in the bank. If Vunani sneezes or has one bad month its screwed
It obviously didn't use its own cash resources to pay for either of these acquisitions so does that mean more debt has been taken on a group which has just had to restructure?
Vunani's debt effectively sunk it - there is a note in its March report saying that if its debt wasn't restructured it was effectively game over. The debt got restructured but then it runs around doing odd things rather than getting its house in order.

At first glance this might have the look of an interesting punt but if you peel back the curtain even a little bit the risk-reward trade-off is not even remotely attractive.

RE:CM and Calibre

2010-06-07T21:39:00.000-07:00

For those who buy into long-term value investing there is an interesting product listing today on the JSE that might pique your interest.

It is a closed end fund managed by leading value investor Piet Viljoen from RE:CM and is trading under the name RE:CM & Calibre (RAC) on the JSE.

Effectively the fund will be managed by these guys (who hold a high level of ownership in the underlying fund) and they'll be kicking off with R450m in cash.

The mandate for this fund is more flexible than a typical unit trust and can invest in debt, unlisted investments etc.

Don't expect fireworks from it initially but I will probably try and pick up a few during the course of trading today.

Market ramblings

2010-05-26T13:54:00.000-07:00

I haven't blogged in a while - been sitting back watching the fun and games on the market and trying to work out where this whole thing is going.

Some very interesting things happening at the moment and volatility seems to be the story of the day.

I battle to find value in this market at the moment. I don't like what is happening in Europe and I think there will be some fall-out to come.

Having said that, the Dow below 10000 almost feels "orderly" rather than out and out panic and that's ok.

There are 3 stocks which catch my eye at the moment and investors might want to consider:

African Bank
Long been a popular choice in my portfolio. Results were not great and the market has turned a little sour on them but they have a lot of positives that could be taken out of these results. Ellerines systems are sorted, they are growing again and the demand for their kind of credit is coming back slowly. But more important than all of that is their ability to generate cash - and quickly!

I would buy it at under R30.

Buildmax
Brait reported earlier this week and they managed to keep this one out of their reporting. This coal mining contractor has been a disaster for the private equity firm falling from R1.15 to 30c and now Brait is having to underwrite a R150m.

35c, a rights issue on the cards. This is a story to watch.

Reinet
I've liked Reinet. Done bugger all except mirror British American since it was listed and its off about 15% in the month but in this market, this might not be the worst defensive play around.

Would be adding this to the portfolio at the moment.

----------------------------

Another interesting thing I picked up this evening is that Zimbabwe is allowing the establishment of four new newspapers. I think this is a further sign that normality is returning to this country which will have a positive spin for many of our resource operators.

Finger trouble, burning Europe and Abil fried

2010-05-07T12:16:00.000-07:00

What an absolutely intriguing few days on world markets.

A bit of random finger trouble at Citi sends the markets into a tailspin and the Dow drops nearly 10% before you can blink. This is summed up by the literal carnage in Greece and then one of our favourite banking stocks (African Bank Investments Limited - Abil) gets smashed today.

Absolutely intriguing!

Finger Trouble
Make no mistake - Thursdays nonsense is going to piss some US politicians off in a big way. Here they are pushing for regulatory change and trying to convince the public that they are hauling some bankers over the coals and one prick can't decide whether he is selling millions or billions of stock and he sinks stockmarkets across the world.

Story for the rest of the year invariably has to be the politicans against the bankers.

I thought Henry Blodget summed it up really well in this post. Things are overcooked at the moment

Europe is in trouble
Ok that's a given, but I don't think it is the debt issue which is the problem but rather the structural issues facing a number of these economies - they cannot create jobs.

If you think about it, a country going broke is a shrug of the shoulder event. Technically the US is broke and will be for eternity.

Iceland very definately is broke as is Greece... but who actually cares? Ireland, Spain, Portugal and Italy... debt is a way of life get over it. The real question is how are they going to tackle their unemployment issues.

Here are some interesting stats which I've dug up around unemployment in a couple of Europes major regions:

Spain - 20% unemployment
Italy - 8.6%
Portugal - 10.10%
UK - 8%
Ireland - 12.7%
France - 10%
Poland - 12.9%
And then Germany for some context - 7.5%

While everybody is jumping up and down about the debt issues in the PIGS and Ireland, I actually think that Spain and France are the two flash points to watch.

Greece has a population of 11 million.

In contrast France has around 63 million people while Spain has around 41 million. Look at a map of Europe for a moment. Spain cannot create the number of jobs it needs - the job seekers can only push one way - France.

Without oversimplying it - if you think a couple thousand Greeks know how to riot can you imagine what it will look like with a couple hundred thousand French and Spaniards venting their fury...

I would be watching these two economies very closely for changes in the social landscape.

African Bank Investments Limited (Abil)
This is one of my favoured banking shares in the South African market - great company in a great sector.

Anyway the share got slaughtered today - off about 5.5% to close at R32.15.

Those pricks at Deutsche Bank apparently put out a pretty negative analyst report earlier this week which didn't help sentiment which was a bit of a pre-cursor to the following trading update out of them today:

Shareholders are advised that headline earnings and headline earnings per share for the period are expected to decline by 2% relative to the R937 million and 116.6 cents per share respectively reported for the first six months of the 2009 financial year. The African Bank business unit is expected to report a decrease in headline earnings of 5%, whilst Ellerines is expected to report a 6% increase relative to the results reported for the six months to 31 March 2009.

A whole 2%... how frightening...

Well of course it is down, the country is still losing jobs (190000 in the last quarter). Guess what - you don't get a loan (even from Abil) if you don't have a job.

All these analysts are so focused on Ellerines - guess what trading has actually improved in the last six months... wankers.

Personally I still like the stock. While the rest of the big banks with their investment bankers (who can't even push the right buttons) have to worry about nasty politicians and regulators wanting to check out all their cavities, Abil can get on with the business of lending and THAT is what they are good at.

Long dollar, short euro

2010-05-01T12:07:00.000-07:00

"In the next months there will be many demonstrations, nobody knows what really is going to happen, But people know there is no other way than to come down into the streets and protest"...

... that was the message from one of the protesters involved in riots in Greece earlier today.

This is serious kak methinks, and I can't see how it won't spread to at least Portugal and Spain over the next week. I read a report that Spain's unemployment rate is now well over 20%... this is not something that gets addressed quickly and even a hint of panic and people will start pulling money out of the banks.

The Euro I reckon is toast unless the regulators take some serious action to try and co-ordinate their efforts quicker. With that in mind I've gone long dollar, short euro on Friday. I should have entered the trade earlier but I reckon it is now terminal...

The euro recovered a bit late on Friday night on speculation that the Greek bailout will be sorted out over the weekend but if Spain and Portugal fall over early next week then there is going to be carnage.

Not too much else looking that attractive is there?

SA small caps

2010-04-19T22:34:00.001-07:00

I see that there has been quite a lot of talk about South African small caps in recent weeks. Probably because the market has been so kak that people have nothing better to talk about.

With that in mind, I thought it would be fun to look at some of the small-caps which appear on my screen and see whether other traders agree?

Beige Holdings
I have been tipping this one for ages and so far it has gone nowhere fast. This should in theory be an easy stock to double your money on, but geez I have been saying that for how long and I'm still waiting.

ISA
This is a good stock in a growth industry. Cash generative, no debt and it actually pays a dividend - a rarity in the IT sector. Internet and IT security is going to continue to be a key industry going forward. ASk anybody who has had their home or work PC or mobile device crippled by a computer virus and you will appreciate why a business like this has so much to offer and will consistently be able to achieve ongoing annuity income.

Interwaste
I walked to the shops this morning and was aware of all the uncollected rubbish on the pavement from last weeks municipal strike. Its unpleasant to live in a decent neighbourhood and be surrounded by flies and rotting waste and there is not a hell of a lot that you as the ordinary consumer can do about it.Now imagine how much waste is being generated by businesses and more importantly how much it costs to deal with that waste. This share hasn't exactly covered itself in glory since being listed, but its a good industry to be in with very high barriers to entry.

Buildmax
I was actually checking up on my Brait shares and I was reminded that the Brait guys paid R1.50 a share for Buildmax. Now its trading around 50c a share. I still think it is a good story for those with a longer-term appetite.

Anybody got any better suggestions?

Goldman Sachs kicked in the nuts

2010-04-17T05:19:00.000-07:00

I remember watching a movie once where a new kid starts a school after being bullied at the old school. Sure enough this geeky looking kid gets bullied on the first day and nobody wants to hang around with the local whipping boy. He goes home and asks his dad (or maybe it was his uncle?) what he should do because he can't go through another year of torment.

The advice he gets is very simple: "It doesn't matter whether it is a sneak attack, you walk up to the biggest bully on the playground and you kick him as hard as you can in the nuts in the most public place. If he drops, your year has been made and you will be the hero of the school".

Judging from the fun and games in the US on Friday, I reckon somebody over at the SEC has adopted a similar kind of strategy to "right-size" banking giant Goldman Sachs.

Much like it doesn't matter whether or not the bully has psychological issues or problems at home, I don't think that the SEC is all that concerned about the merits of their case. They've snuck up on an industry giant which believes it is untouchable and possibly fired the first salvo in a carpet bombing exercise aimed at the investment banking industry.

Will this even dent Goldman Sachs? Probably not - the guys that work there are too clever to even blink.

But for the rest of the industry, a very clear message has been sent.

The start of a genuine correction?
I'm undecided on whether or not markets are expensive and I think it is folly to try and play that game. Personally I probably wouldn't be buying too many shares right now if I was looking to make money in the next 6 to 12 months.

In fact if I had to hazard a guess this little assault on GS could be maybe the right kind of message to market participants that it is now time to step back and reassess the landscape.

How many compliance managers at the various investment banks and brokerages are scurrying around this weekend trying to double check that their systems are in place? How many are going to be advising their traders that the regulators are being a little nosier than expected and maybe they need to pull in any potential troublesome trades / activities?

Another interesting thing which was missed is that the VIX actually rose to its highest level in 12 months on Friday.

While I'm sure it certainly doesn't help (the traders) that regulators are being nosy and digging into the activities of some of the big guns on Wall Street, maybe it is just a sign that there is some downside risk in the near-term?

Time to go defensive?

2010-03-30T22:43:00.000-07:00

It is interesting to look at some of the flash points coming up around the world over the last few weeks:

Bombs in Russia (I think there is more to this story to come)
Riots in India
Problems in Thailand
Violence in Mexico
Some protectionist stuff happening in the US / China row
Greece and Portugal debt problems won't go away

Gut sense suggests that going slightly defensive in portfolio construction and probably upping exposure to both US equities and the US dollar in the short-term might pay some dividends.

Slash your CFD trading costs by up to 80%

2010-03-30T14:11:00.000-07:00

I saw this on the Rival Financial Services blog. It might be of interest to anybody trading CFD's.

We picked up this message from local derivatives trading firm Global Trader and thought it might be of interest to our readers:

10 years on we want to say thank you to our clients for their loyal support, and allow you to invite your friends to share in the benefits.

At the same time we think it’s important to stay true to our brand by leading through innovation and by delivering on something we have remained true to since the day we launched.

“That is to provide the man in the street with the tools, products and services to trade without limitations”, however this time at a lower cost.

“Cost has been the single differentiator over the last 10 years between Harry Hedge Fund and Trader Tom”

Cost erodes performance and cost creates barriers to entry. Well the costs are coming down.

In celebrating our 10 years we are giving you and your friends the perfect opportunity to become members of the most exclusive clubs in CFD trading, with member benefits that secure you the lowest cost of trading coupled with the highest level of service and exclusivity.

Clubs that don’t undercut the competition but quite frankly blow them away!!!

Entry to Global Trader’s Perfect 10 Year Gold & Platinum Clubs are only available for a limited 10 week period.

Entry is easy and qualifying members receive an immediate reduction in trading costs of 5bps (0.05%) with the opportunity to further reduce your trading costs all the way down to an astounding 10bps (0. 1%)

Is it worth my while to switch to Global Trader NOW?

If you switch your CFD Trading account to Global Trader over the next 10 weeks, we will not only guarantee* to reduce your current** trading costs by 5bps, but on switching you’ll also qualify for our Perfect 10 offer, giving you the ideal opportunity to reduce your trading costs all the way down to 10 bps (0.1%)

* Potential clients already trading at 10bps do not qualify for a 5bps reduction in trading costs

** All you’ll need to do is show us proof of your current trading rate and we’ll match it less 5bps

Day Trading is for suckers

2010-03-28T21:32:00.000-07:00

There is a really interesting piece on the Business Insider website written by Henry Blodget which talks about why day traders can never win.

You can read the full article here but here for me was a key quote which needs to be borne in mind:

Most Wall Street traders have skills, information, and tools that day-traders can only dream of. Trading is a zero-sum game: Market moves aside, every dollar won by one trader comes out of the pocket of another trader. Day traders competing against Wall Streeters is the equivalent of a college football team (or Pee Wee team, depending on the day-trader's skill) competing against a pro team. Is it possible to win? Yes. But it's highly unlikely (1 in 100). Wall Street's winnings do have to come from somewhere, though, so Wall Street thanks the day traders for playing.

Blodget's conclusion is right - if you are planning to day trade your way to enormous wealth then think again - you're probably chasing a pie in the sky dream....

That's probably not what you want to hear if you are visiting a day-traders blog but let's cut the bullshit - making trading wealth is incredibly hard.

Part of the problem I think is that too many private day traders want to cast themselves as institutional traders.

They sit with multiple screens and charting systems open. They want to talk about resistance, break-outs and the double nipple formation.
They feel they have to be "in" or "on" the market the whole time
If they are not moving money they are not really "trading"

If you are planning to get rich quick then go-ahead and trade forex through one of the online platforms with 200 times gearing. 90 out of 100 of you are going to get fried, maybe 5 of you will eke out a living you're probably going to give most of it back and statistically one of you might make one or two big scores and walk away before you give it all back.

If you do believe you have what it takes then consider these steps:

There is nothing wrong with buying a reliable share portfolio which includes dividend paying, cash generative shares with high returns on equity - profiting from gains made here is just as much "day-trading" as trading in and out of the global currency market every 10 minutes.
If you are going to trade regularly identify one or two core themes and run with them. Don't try and chase every market and every instrument because that is what the news is doing.
The trend is your friend. It is the oldest trading mantra and for good reason. We all want to call "the top" or "the bottom" of a market but you will go broke going against the trend.
Use a bit of common sense - trading is made out to be more complicated than it really has to be. Buy low - sell high does not mean buying a stock or currency now because it was 1% lower than it was yesterday
If you are waking up in a cold sweat at two in the morning and rushing to check your portfolio or positions then you are over-commited.

I hope that gives you something to ponder?

I'm not totally sure about this whole Twitter thing but I am reliably informed that I must tell people where they can find me on Twitter...

2010-03-09T12:49:00.000-08:00

... so here goes.

DRUM ROLL PLEASE

...

If you want to find me on micro-blogging service then you can find me at:

http://twitter.com/liquidtraderza

.... there I said it!

This is probably very speculative

2010-03-09T12:25:00.000-08:00

... and definately not for the widows and orphans fund but did anybody notice that SENS announcement from IPSA late in the day?

Here it is in a nutshell:

IPSA PLC (AIM: IPSA), the developer, owner and operator of power generation capacity in Southern Africa, announces that on 5 March 2010 the Company entered into an agreement with RAB Energy Fund Limited and certain other investors (together the "Loan Note Holders") to issue GBP650,000 of unsecured loan notes (the "Loan Notes") to the Loan Note Holders.

On the same day, the Company also entered into an agreement with Standard Bank PLC ("Standard Bank") and TurboCare S.p.A. ("TurboCare") regarding the marketing of the Company`s gas turbines, which also provides a standstill arrangement
regarding funds due to both these parties.

Now IPSA's problems with Eskom have been well documented - they've been royally screwed over and now suddenly Eskom has realised that perhaps independant power producers (IPPs) may actually serve a purpose.

The tone of the IPSA SENS announcement is pretty downbeat - but GBP650000 of unsecured financing is a sizeable chunk of change for a business which should be technically failing.

For me what is interesting is that since the start of the year the share has lost 17% and is now trading around 140c. If you go back to when the shit really hit the fan at Eskom, this was priced around R2 a share... Logically the case for IPPs has been reinforced by this whole Nersa tariffs issue.

As I said - not for the widows and orphans but definately something which could be worth a cheap and nasty punt?

Slight change in strategy

2010-03-02T01:20:00.000-08:00

After the Euro sunk against the dollar yesterday I slipped out of that trade and changed to long dollar short Swiss franc.

Seems to be playing nicely so far - will keep an eye on it and let's see where this takes us.

I probably don't understand society but...

2010-02-28T20:21:00.000-08:00

... we wake up on Monday after a massive earthquake has hit a major commodity producer like Chile and markets are going up?!

Me - I am largely indifferent but it says a lot about society doesn't it. My only open position at the moment is long the US dollar versus the Euro and some small long-term equity positions and that's about it.

This is a massive earthquake and there have been 90+ aftershocks to rock Chile all between 5.0 and 7 on the Richter scale. The swells off the coast of Hawaii are rising again and action in the Pacific on Friday was felt in Australia, New Zealand, Japan, Californaia (which you can short the shit out of till it sinks into the sea), Chile and Hawaii.

If you're interested in currencies, there is a good story on Bloomberg this morning predicting that pound sterling could drop by as much as 30% against the US dollar.

“Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly,” Haig Bathgate, head of strategy at Turcan Connell, said at the company’s offices in the Scottish capital. “The U.K. is in a similar predicament. It could be hit very hard.”

You can trade Forex products here if you want to get in on the action.

With any luck the Poms also sinking into the sea along with California and we're saved from their painful whinging and Wayne Bridge acting all sanctimonious about his woman being groped by a team-mate.

Anyway time to sit back and watch Hawaii get washed away...

Contracts for Difference

2010-02-21T04:54:00.000-08:00

CFD(Contracts for difference) trading is about ‘margin trading’, or buying not ownership of stock but ‘trading rights’ on the stock by putting down a fraction of the price (i.e.,10%) holding it for short term, hours, days or weeks, and selling it at a profit when the market rises.

Easy? Yes and no. The cautionary is that like all speculation with stocks and shares, only money that you ‘can afford to lose’ should be used. Having said that, with the right systems, good nerves and attention, it is very feasible to make a lot of money. A CFD being a ‘derivative’ of a stock holding is a separate entity from Forex which can also be traded in the same manner but has some regulatory differences.

“For example, A client wants to purchase £10,000 worth of HSBC shares, the margin requirement would be only £1,000. If HSBC share value increases to £10,500 a £500 profit on the deal would equate to just 5% return if you traded the shares outright; compared to a return of 50% on a CFD.” Interested? You should be.

Get started now with a free ‘demo’ account from agmtrader.com .

Tactical asset allocation

2010-02-14T13:01:00.000-08:00

Over the last few weeks I have been thinking quite a lot about this concept of "tactical asset allocation" and specifically how it impacts me as a South African trader / investor...

So here's my issue - over the last decade it has been pretty much money for jam if you have been long SA equities. The dividends have been good, there has been capital appreciation and believe it or not, the rand has been overall a quality currency to hold these assets in.

Shock, gasp, horror - and here everybody was thinking that South Africa was heading down the drain at a rate of knots...

So it has been easy - you buy SATRIX or RAFI or you pretty much throw darts at the newspaper and provided you don't hit the Alt-X you've made a pretty decent return.

But as cliched as it may sound, the world is a very different place now...

Are you going to get away with just tracking an index over the next few years? Can you just buy SATRIX, RAFI, MSCI World etc?

I amo not that sure that you will.

Two reasons:

Global economy is recovering - we're not in a global economic bull market - certain segments will heat up faster than others
South Africa has (at least from an equity perspective) appeared to catch up with the rest of the world

Locally our exchange is dominated by big international heavy-weights whose markets are made in London primarily. If international investors want them to move - then they will move.

Pfizer seems to be a stock that a lot of asset managers are talking up and it will suit my example well. I want to buy Pfizer - I have two options - buy it off my own bat through an asset manager geared for the international markets or buy into a fund which is supposedly "tactical" and will look for more opportunities like this.

I don't like the fund idea so I need to fin a stockbroker who can get me into international markets and then work in my tight forex regulations. But that takes a mindshift from me - I can't just limit myself to the SA market anymore.

I need to be aware of a brewery in Zambia or a Russian oil firm or a Mexican tequila plant and that takes some doing....

Will need to think about this a bit but would welcome any thoughts on

A) Will tactical stock picks outperform index tracking?
B) How important is the international market to local investors?

Let me know.

The US dollar

2010-01-26T20:44:00.000-08:00

Out of curiosity are you still hanging on to your US dollars?

I see that there are media reports of North and South Korea trading pleasantries over a couple of artillery cannons this morning. Now THAT will do wonders for the global economy if we have both the Middle East and the Korean peninsula trying to obliterate eachother now won't it.

Anyway just a humble observation early in the morning and seeing as PIMCO were in the SA media earlier this week talking about how the US dollar was set to bounce back specifically against the pound and the euro, I thought it might be time to start looking at a few for the portfolio.

Geopolitics

2010-01-21T10:08:00.000-08:00

I always find it difficult to take geopolitics all that serious - especially when it is looking ahead over the next decade, but I see that STRATFOR have made their forecasts to 2010 with some very interesting views.

I don't agree with all of them, but I think its good to throw out the ideas into the investor domain for debate.

Their predictions:

Egypt and Turkey will become regional superpowers
US-jihadist war will have subsided with Iran pacified by either military action, isolation or political agreement
Worldwide labour shortages and huge demand for immigrant labour
China will have suffered an economic meltdown leaving the US as the lone world superpower

I have mixed thoughts on these Egypt yes, Turkey no. Egypt I've always thought was an under-rated part of the mix on the continent and its proximity to Europe and the Middle East have to be considered. Turkey I still get the sense is too fractious internally to fill the gap.

I'm indifferent to Iran as a flashpoint. I was surprised to learn their economy is as big as it is - GDP of around $850m. That's big if one considers the problems it has. America doesnt have the enthusiasm it once had to pick fights and I wouldn't be surprised if Iran actually thrives on sheer pigheadedness.

Labour shortages I don't agree on. I actually think that while the world is going through a phase of upgrading its labour force and emphasising quality of work /loving its labour force. There might be a little less mechanisation than people think and while there might actually be wage deflation, but maybe more flexibility in the working day.

China - disagree completely and I also think that Japan will bounce back. Don't worry I'm not one of those people who believes that China is a bulletproof story - but let's be honest in 10 years China will just be starting to develop a property market, retail banking system and empowering its consumers - its not all going to fall on its head in the next 10 years.

Anyway food for thought always aims to stimulate some debate - your thoughts?

6.5% per annum?!

2010-01-19T11:48:00.000-08:00

So I've been surfing around the financial news sites and it would appear that Old Mutual had a press conference today, because they seem to have cracked a couple of mentions

Anyway the gist of the tune being rolled out by these guys is that investors need to rein in their expectations and accept that investment returns are likely to be lower than what they've had over the last decade or so.

Numbers of between 6 and 7% have been rolled around which I'm assuming are real returns after inflation.

Let's say you're getting 3% dividend from that, that means you're not really making a helluva lot in capital gains... which I guess begs the question whether you really want to be invested in the equity market for this decade.

Anyway the thought that jumped out at me is that while there are a lot of points about being made about traditional asset classes and how they are likely to perform very little is being said about things like private equity, venture capital or even unlisted investments.

For those looking for something a bit more risque in terms of their investments and not prepared to sit back on an index tracking performance, their might be some value in looking at some of the following for their portfolios:

Brait:
JSE listed private equity play Brait has been busy in recent months and they've signed up a couple of smaller deals for their funds. While I probably wouldn't want to put money in one of their funds, I might be interested in putting some money into the holding company which targets a long-term return on equity of above 25%. Worst case you get some decent dividends if you are prepared to buy into the business through the cycle.

Reinet
The JSE listed "private equity" player is effectively a proxy for the British American Tobacco shareprice at the moment. But there is no question that they have a bit of money on the sidelines which they are looking to invest.

Paladin Capital
I've touched on Paladin in previous posts so not going to do much else to add here.

Venfin
Is now de-listed but if I remember correctly you can still buy their shares OTC. Also gives you a bit of access to high profile tech.
---------

Nobody can really see well into the future but I would suggest on historical evidence and data on the real economy, we're entering a period of consolidation. Those who are likely to score could be part of the "smart money" who are making investments in higher growth businesses now in the hope that they can exit them when the price is right.

Interesting punt
This is really high risk and not worth risking your mothers pension on, but those with the flair for something different should look at that rights issue out of Nigerian oil and gas firm Oando (JSE:OAO). I can understand the whole issue about doing business with Nigerians but I think they came to the JSE for the right reasons and this rights issue could free up some of the float - I reckon it could be worth a punt.

I am going to write a bit more on Oando in my next post but as I say - something different...

Obscure postings

2010-01-15T22:42:00.000-08:00

Posting late at night sometimes I don't communicate that well. I started mumbling something about small cap shares and then found bed calling so let me try again.

I think there may be some merit in certain of the JSE listed small cap shares in 2010 and here are a list of stocks which I believe should be considered. Some are great businesses with a good track record and some are a little higher risk.

AdvTech
South Africa's leading private education provider, AdvTech is one of those stocks which could be classified as defensive. Parents will always want to equip their kids with the best opportunities. There is a massive shortage in quality education providers in the country and AdvTech gives you one way of participating in it.

Historical PE multiple of 12 means its not cheap but sometimes you pay a little extra for a bit of quality

CIC Holdings
This is a nice little company which has re-rated significantly since I tipped it at 80c last year. Presently trading at around 130c a share it still only sits on an historical PE of 5 times earnings. Its a company that not a lot of people know much about but it owns quite a lot of agencies in growth markets in Africa. It's partly owned by Paladin Capital (PSGs investment arm). A positive for it is first mover advantage but a negative in that it is an agency type business and does not have a lot of its own Intellectual Property. Still might have some legs though.

Zeder
Jim Rogers is still mumbling on about farming being all the rage in the coming years and I can buy that story. Zeder, the PSG agri-ops business has been very aggressive in the last 12 months sorting out and growing its portfolio.

Paladin Capital
This is your alternative in the education space (but with far less concentration). Paladin - the PSG investment arm - is in the process of rolling out and expanding its network of Curro schools. These guys have been tipped as being super aggressive so and probably not the nicest management around but they'll get the job done.

Pallinghurst
This is the only resource play which jumps out at me but I am useless at judging the sector so don't go on my word. I was speaking to one of the resource guys yesterday and his thinking is that it will either be a 10-bagger or it will go nowhere fast.

Beige Holdings
I am probably going to take much flak for this one but this is a company I really like. Its got much too much paper in issue but its not the worst business around by the stretch of anyones imagination. It has quite a lot of negative legacy issues which its battling to shake off. However it has a major competitive advantage in terms of that new factory which it has put together in Chloorkop plus that factory in Durban (Quality Products I think its called). They can interchange product lines extremely quickly meaning they can shift up or down depending on demand. Paper is a huge issue though. Directors have also not been shy to buy their own stock.

Glenrand MIB
Buying a share in an insurance broking operation in the current economic climate seems to be madness. But that hasn't stopped the big-wigs at GlenMib putting their money down on a regular basis. Something is potting here and a historical PE of 9 considering the problems they had last year may be a sign that better earnings are coming through.

If anything else jumps out at me, I'll post it below this thread but it might be something to look at.

No recovery soon?

2010-01-14T19:42:00.000-08:00

Again a few random musings which shows a very cloudy outlook for the real economy over the next few months.

Geopolitics
Politics is always tough to read and more often than not geopolitical "intelligence" is a big "what-if" game.

However there appear to be a few storm clouds brewing:

The US over the last few weeks has found itself in a constant state of alert for terrorist threats both at home, in far-flung places like Yemen and of course in the Middle East. Whether there is a serious threat or not to the US the emotional drain on the American psyche has to be there
Just tonight a Texas nuclear assembly plant was shutdown for securit reasons.
A top Iranian nuclear academic was recently assasinated. Neither Israel nor the US are claiming responsibility but Iran is making some unhappy noises and this looks like it is rapidly coming to head considering the US deadlines which don't appear to have been enforced.
More fuel is being thrown on this fire (excuse the bad pun) after Swiss commodity firm Glencore reportedly stopped selling gasoline to Iran. Something has to crack here and it looks like the US is on a colission course with Iran.
Debt issues continue to plague Iceland, Ireland, Argentina and Greece as well as a number of other emerging markets which look shaky.
US Centre for Disease Control reckons as many as 81 million people have been infected with H1N1 swine flu, 16000 deaths and 360000 hospitalisations.
Lots of posturing between China and Google which I'm surprised hasn't really been picked up by South African media.

Economics

Initial stimulus packages appear to have had only a short-term impact on the economy
Job cuts both locally and abroad continue to mount. The pace may be slowing but each month there are a few more people joining the unemployed lines

I am reading some research from the NFIB Small Business Economic Trends for January 2010 and it would appear that there appears to be no real improvement in the confidence of US small business - a worrying sign was that 33% of SME's reported price reductions for products and services.

Locally I have had reports from one of the big media houses and two of the big financial services firms that there is another round of job cuts coming.

Small business confidence ticking up?
Having said that there are a lot of negatives in the economy, there seems to be some anecdotal evidence that some of the smaller businesses who were operating on a low cost base are bouncing back quite nicely.

Those who survived the carnage of last year appear to be consolidating.

So where does that leave us?
Disposable income is tight and markets don't look like they are going anywhere fast. Maybe there are some opportunities for some under-rated small-caps to shine through?

Things that look like they bear some consideration:

CIC Holdings - quality branded goods licenses
Advtech - Education
Paladin - Education and financial services

Tough market

2010-01-05T13:13:00.000-08:00

Bloody hell it is a tough market at the moment. I'm personally getting slaughtered with whatever strategy I employ, except good old fashioned "buy and hold".... maybe there is a lesson in that?

Anyways there is not a lot that looks particularly exciting to me at the moment - markets have continued to rally into the new year but there is still pain being felt in the US consumer with insolvencies / bankruptcies still high.

One stock which appears to have gotten a lot of coverage today in the press - (pump and dump?!?) is local coal producer Exxaro. In the South African context it is obviously a sensible play as they are going to be the major supplier of coal to Eskom when it starts to ramp up its production levels and expansion program.

Seems like a far cheaper play (on historical earnings) than something like Anglo American and far more targeted in terms of specific resource.

One thing which did jump out at me today - and I saw it was covered on the Miningmx website - is a report out of Stratfor. The research firm has its detractors and I have called them war-mongerers before - but they certainly do raise a couple of interesting points.

1. Russia continuing to spread its influence into neighbouring states
2. China going to continue reckless lending practices to sustain its growth
3. A "cold war" of sorts between Angola and South Africa
4. A crisis in Iran is now inevitable and all the big players are jockeying for positions

I don't want to be the "Chicken little" out there but 1 and 4 worry me quite a lot. I am just not sure what the fallout is and how to tackle it.

On my personal account I've been moving quite quickly into cash. I have kept my preference share portfolio but that's about it.

You gotta love the markets!

2009-12-17T21:07:00.000-08:00

I dunno, maybe it's just a traders thing but you have to love the markets. It's the biggest game around and nobody has a clue how it is going to play out.

Was just surfing around on The Bullion Desk website and there are two stories, one after the other:

Gold to hit fresh record highs in coming months before easing back - BarCap

and

Gold to fall to $870/oz on stronger dollar - Saxo Bank

I just had to laugh at that.... it puts investing / trading / "playing the market" into perspective.

Update

2009-12-10T22:56:00.000-08:00

Just a quick update on my long USD short ZAR trade. Things have moved in the right direction and I am marginally in the money.

Quite pleased that the Rand is starting to get comfortable below the R7.50 to the US dollar level and it is good to see decent volumes continuing to go through on that USDSCA warrant.

Something that should give a bit of momentum to the weakening of the ZAR will be the hints being offered by the bond market. Foreigners were net sellers of R596m worth of SA bonds on Thursday following up on the R645m sold on Wednesday.

These are the kind of flows likely to indicate that people are starting to pull in their horns and take money back to the developed markets for a while.

According to the guys over at RMB: "RMB analysts said in their daily report that risks of an immediate break
of 7.62 have faded as mixed US data has taken the strength out of the US recovery and global risk-taking is resuming, if slowly."

.... they're bankers and probably wrong.... Personally I wouldn't be surprised to have a decent sell-off going into December - particularly with concerns around structural problems in places like Greece, Spain, Ireland etc.

A great number of out of China with November Industrial Output up 19.2% - well above economist expectations. The recovery seems to be taking hold at all levels of the economy which is very encouraging for longer term investment stability

Anyways - I have a good feeling about today. Let's see what the day holds.

The most important part of trading is to make money

2009-12-05T10:59:00.000-08:00

I was over at Ickos' Alsi-Trader blog and came across a pretty recent post from him about "Becoming a better trader".

One of the comments that he made was: "To become a profitable trader one must invest time. First on to do list is to read as many books as one can."

My personal opinion is that this idea of becoming a good, better, best trader is questionable at the best of times and the one thing that is more important than reading books is to make a profit and retain it!

Simple example - a trader starts with R1000 - he makes a 15% profit - what does he do with that profit?

A) Bank it and trade up with R1150 next time?
B) Put the profit in the bank?
C) Invest the profits in an index tracker or a blue chip share?
D) Put their profits into their bond and settle debt / grow other asset classes?

To me, knowing how you are going to protect your profits is something only you can learn and decide and too often it is left till last in order of importance while traders pursue larny systems.

I'm a big believer that many traders spend way too much devising, back-testing and developing systems and spend far too little time working out how they are going to protect

How many traders are cussing and cursing that they were stopped out of long gold trades on Friday? (Or will be on Monday). I am pretty sure that few people or systems could fault you being long gold until WHAM! that jobs number comes out and you are blown out the water.

(Yes you should remember the rule that it is dangerous to trade around data but if that were the case then most of you would be out the market 75% of the time.)

No trading system in the world is going to protect you from random events (9/11 for example or a "whopping" jobs number) - but you can certainly protect yourself by making sure you know what you are going to do with your profits as you make them.

THE POINT OF TRADING IS TO MAKE MONEY - IF YOU DON'T KNOW WHAT THE SCORE IS THEN YOU'RE A GAMBLER.

And we're off!

2009-12-05T10:29:00.000-08:00

I'm still trying to get my head around that US jobs number but I guess I'll take what comes - it looks like the jobs are finally starting to come through in the US economy.

The dollar started to bounce back and that burnt the gold and platinum prices on Friday - it will be interesting to see what impact that has on SA shares during the next week. If foreigners decide to lighten some of their SA holdings we might see the Rand come under a bit of pressure.

Rand slipped to R7.46 vs the US $ on Friday and a move through the R7.50 mark could be quite telling. I see it has subsequently strengthened a bit at the end of the trading day to R7.41.

Like I said in my previous - I still the dollar offers some of the best opportunities for traders over the December / January period.

Ouch

2009-11-28T23:15:00.001-08:00

Well that Dollar / Yen trade was an almighty screw up and I am suitably poorer for my efforts.

I still think in the long-term (3 to 4 months) the trade is the right one but having been stopped out twice in the last few weeks I've had my fill of this particular currency play.

That doesn't mean I've moved my attention away from the currency market and I've used some of these new Standard Bank Currency Reference Warrants to go long the US Dollar against the South African Rand.

One of the fallouts I would expect to see courtesy of Dubai is some money being pulled out of emerging markets and parked off in in things like the US Dollar - particularly as Christmas rolls around.

If one looks at the US dollar call (USDSCA) there seem to be quite a lot of people taking bets that the rand is going to weaken from these levels. Of the last 7 trading days 4 have had trade in excess of 2.3m which is not bad for an instrument which is only 2 weeks old.

I also bailed on my Sasol call after my stop-loss was breached - the warrant was decaying too fast and my sense is that investors are not going to rush to bid up emerging market shares over the next 30 days.

Yeah!

2009-11-28T22:34:00.000-08:00

These are the kind of analysts I'm talking about:

Danielle Chiesi - the analyst who sunk Galleon!

Comments on ABL

2009-11-23T11:56:00.000-08:00

African Bank Investments Limited (Abil) for me has long been a popular choice in my investment portfolio. They're a good dividend payer (both the ords and the prefs) and they are one of the few financial services stocks who have really good growth prospects over the next two to four years.

I have read quite a lot of commentary today about how Ellerines is an albatross around the neck of Abil and how it is likely to continue to hurt them.

Don't get me wrong - in hindsight they have overpaid for the asset but just look at this for a moment and let's try and work this out.

As things stand revenue breaks down like this

African Bank - R7.4bn
Ellerines - R6.9bn

That revenue line in these results is the key. A business that can generate R15bn in revenue - primarily cash can do whatever the hell it likes.

Have a look at the capital raisings that the bank has undertaken this year. I think it raised about R800m over the last 12-months.

In credit markets which have been squeezed that is not a bad going. In a business of this nature, if you can generate cash the funding (and cost of funding) will ultimately play ball.

Another key aspect for me is that the Ellerines they bought and the Ellerines they are trying to build are two very different animals. The group has admitted they have made mistakes and they've done things about it.

Instead of standing around and letting it fail they've attacked the problem and they are trying to address some of the challenges they are facing. If you have seen some of the plans around simplying the whole retail offering you will know that there is a strategy they are trying to execute.

The other point I would like to try and get across is that I don't believe Abil are trying to be furniture salesmen competing with the mainstream retailers. My sense is they would like a functional and workmanlike retail offering but stick to the business of lending - and managing the risk of lending

Conclusion
Maybe the ordinary shares are a little expensive at current levels (if you have a short-term investment outlook) but I don't think you can go too far wrong adding a few of the Abil preference shares to your portfolio.

Long dollar, short yen

2009-11-20T00:15:00.001-08:00

Anybody who has been following my Twitter feed over the last week will know that I have been yapping on and on about the US dollar being the only place to be for December.

More specifically - long dollar short yen.

Now given what has and still is happening to the US dollar over the last 12 months, most of you are probably looking at me a little cross-eyed and wondering if I have taken my medication this morning... but hear me out.

I like the dollar going into December for a couple of reasons:

1. Say what you like about it, it will ultimately a defensive hard asset over the long run

2. Asia is stressing about their exports, at some point they are going to start putting pressure on their govts. to weaken many of their currencies to try and resucitate their export market

3. Singapore and Korea are now talking about trying to limit capital flows into their markets. Taiwan last week banned foreign investors from placing funds in time deposits on concern about currency speculation. Plenty of asset managers have been talking up the Asian currencies for a while now. Do they have the capacity to keep taking these inflows in the short-term? I don't think so.

4. Its a volume game - the two currencies who can genuinely absorb major inflows - the dollar and the yen (I'll touch on the yen now now).

5. Equity markets have run hard and there is a general sense that maybe its time to take something off the table and re-evaluate into the new year. Where are you going to park that cash?

Just for shits and giggles I am reading an article at this very moment about them evacuating people in "flood-hit Britain" - Mud Island is sinking into the sea ----> FACT

Which brings me to the Yen. The yen at 88.80 to the dollar is BAD news for Japan. A look at the Nikkei vs. Dow and S&P shows you that it the currency is doing Japanese companies no favours. In my opinion it won't move much lower and people will be looking for an excuse to buy the dollar over the yen in the short-term.

So long dollar, short yen and long Sasol are my only open positions at the moment.

A whole lot of nothing

2009-11-13T21:14:00.000-08:00

A week which opened up a little nervous but ultimately ended green.

The JSE Top40 (J200) opened at 23730 and finished at 24075 helped by a bit of a bounce in banks and industrials (SAB and RCH). For the rest it was a case of going nowhere fast.

Portfolio changes:

Sold out of my long IMP call on Wednesday (IMPSBC) for a marginal profit - time decay was starting to bite into the warrant despite being in the money
Switched into a long on SOL (again SOLSBG)

While I still maintain that IMP in the long run is a good call (especially with platinum gaining traction at the top end of the the $1300 range), the time decay on the asset is hurting.

Sasol seems to have built a nice base around the R290 mark (Friday close as well as warrant strike). IMP on the other hand has broken below R170 (the warrant strike) and coupled with the safety issues and the drop off in production - it maybe needs to do a few things right to tempt me back.

Having said that trade in both warrants was brisk over the week and for investors with a bit of risk appetite, they both seem to be an option.

Classics!

2009-11-12T04:43:00.000-08:00

I just got mailed these two and thought they were brilliant for a laugh:

THE LLOYD`s Prayer

Our Chairman,
Who Art At Goldman,
Blankfein Be Thy Name.
The Rally`s Come. God`s Work Be Done
On Earth As There`s No Fear Of Correction.

Give Us This Day Our Daily Gains,
And Bankrupt Our Competitors
As You Taught Lehman and Bear Their Lessons.
And Bring Us Not Under Indictment.
For Thine Is The Treasury,
The House And The Senate
Forever and Ever.

Goldman.

and then a truly beautiful poem:

Loves the sensation
caused by temptation
A guy sticks his location
in a girls destination
to increase the population
of the next generation
Do you understand my explanation
or do u need a demonstration

Snigger...

2009-11-02T10:49:00.000-08:00

I don't know where this comes from but I see it posted on the Page88 site and I had to laugh at it:

The Economy, How Bad Is It....
The economy is so bad... that I got a pre-declined credit card in the mail.
The economy is so bad.... I ordered a burger at McDonalds and the kid behind the counter asked, "Can you afford fries with that?"
The economy is so bad... that CEO`s are now playing miniature golf.
The economy is so bad... if the bank returns your check marked "Insufficient Funds," you call them and ask if they meant you or them.
The economy is so bad.... Hot Wheels and Matchbox stocks are trading higher than GM.
The economy is so bad... parents in Beverly Hills fired their nannies and learned their children`s names.
The economy is so bad... a truckload of Americans was caught sneaking into Mexico .
The economy is so bad... Dick Cheney took his stockbroker hunting.
The economy is so bad... Motel Six won`t leave the light on anymore.
The economy is so bad... the Mafia is laying off judges.
The economy is so bad... Blue Cross laid off 20 Congressmen and Morgan Stanley laid off 10 more.

Platinum

2009-10-28T21:35:00.000-07:00

The precious metals took a bit of a thumping yesterday and you had gold flirting with $1030 and platinum as low as $1303.

Impala Platinum got sold off a bit as the metals prices fell but at R168 a share its not far off the R170 strike of that warrant so it doesn't worry me too much - especially as there is still time to run on it.

I've taken two other positions in late trade yesterday.

1. Long platinum at $1308
2. Long Dow - 9775

I wouldn't be surprised to see platinum bounce back to that $1340 price in the near term and the Dow, while looking expensive to some analysts also doesn't seem to have the inclination to fall hard and fast. If the Dow had another run at the 10000 mark I'd probably cash out and see if we consolidate at these levels.

Call update

2009-10-20T18:36:00.000-07:00

Just a quick note - on Tuesday Impala Platinum rose by 1.85% to R166 after earlier in the day after hitting a high of R168.49 earlier in the day.

A quick look at trade in the US ADR has IMP trading at around R168.50 if the present Rand / Dollar exchange rate is used (R7.40).

There was a bit of a pickup in trade in my prefered call warrant IMPSBC with 469235 warrants trading hands and the warrant rising 3c to 27c - admittedly it didn't trade particularly much in the latter part of the day when IMP gave up some of its gains.

Last week I said I thought the dollar would bounce back against the Rand and it seems to have done so - albeit slowly and this is proving a positive boost for the rand hedge stocks listed on the JSE.

Long AUD
Speaking of currency related developments I picked up a currency trade via my Global Trader account which seemed to make sense to me.

This week we take a look at the Australian Dollar (AUD) a currency that has come up three times in our past reports and has continued to strengthen on the back of firmer Gold prices and the carry trade. The Reserve Bank of Australia (RBA) became the first central bank to increase interest rates this year, by increasing their cash target rate from 3.00% to 3.25% on 6 October. This increase took the market by surprise, as most analysts had expected the RBA to keep interest rates unchanged.

The question in most investor’s minds at the moment is will the AUD continue to strengthen against the greenback, or is the greenback oversold at these levels. We, however, continue to be bullish on the AUD as the currency continues to be backed by relatively stronger fundamentals than its peers. Year on year unemployment levels in Australia declined from 5.8% to 5.7% in September 2009, as the Australian economy continues to strengthen on the back of anticipated increase in demand from the Asian markets. Australia’s trade balance however continues to show a different picture as the trade deficit continues to remain relatively high, as it was recorded at $AUD1.5 billion in August. Australia continues to provide investors with higher yields for their investments.

The AUD is currently trading at its 52 week high at 0.9265 to the Dollar. We anticipate the AUD to continue its strong run against the Dollar with our eyes firmly fixed on the 0.95 resistance level. The AUD should continue trading firmer with 0.935 as the first resistance level and followed by 0.95 as the next level. On the down side we expect the currency to find support at 0.90 and then 0.88.

Their recommendation was long AUD vs USD at 0.92 with a stop at 0.90 and a take profit level at 0.935 which I will follow and see what result it produces.

Saturday morning review

2009-10-16T22:49:00.000-07:00

Two quick themes I want to look at again on this bright and cheerful Saturday morning

First up is the power of dividends and the old fashioned "buy and hold"
It has many detractors as a way to wealth but I was sitting here this morning watching the dividend notifications flow into the various portfolios we old and the passive portfolios holding the likes of Sasol, Discovery and FirstRand were nicely topped up this morning.

It is a theme I have repeated a couple of times - if you are getting into investing or simply trying to accumulate a nest-egg, then good old fashioned accumulation of good quality stocks with good dividend track records is hard to beat over the long run.

I was having a look at our old family trust account and it always amazes me in terms of return for us. It comprises 8 core stocks (ATN, PWK, SOL, NPN, MTN, BTI, REM, BVT and SBK) and every quarter I check back to it and I find that it has generated another R10000 in passive dividends.

I use R10k as a measure rather than percentage returns because for that portfolio, after it reaches R10k it will then begin to look at re-investing these funds.

Powerful stuff not to be understimated despite all the trading mumbo-jumpo that goes on.

Sasol and Impala
I exited my long position on Sasol yesterday on the back of a nice run up in the share and saw a handy profit. Could it go up more? Probably - but that's why we old the underlying shares in the portfolio to benefit from that upside. The leveraged position was there to give our portfolios a little something extra.

Anyone following my Twitter feed will know that after cashing out of Sasol I went long Impala Platinum after it was down about 2% on the day... didn't work out ideally after it got smacked down more than 4% in total but I remain long.

Upfront let me emphasise that I have always prefered Implats (IMP) over Amplats (AMS)
I maintain that IMP is run for the benefit of shareholders while AMS is run for the benefit of Anglo American and it is a subtle difference but an important one
The premium I attach to IMP is that when it has its good years, it rewards shareholders with great dividends and special dividends
From what I have read almost all of the IMP assets in Zimbabwe have been written down to zero

In the last couple of weeks AMS has out-performed IMP by a mile but watching some of the communication out of the various asset management houses there is definately a trend starting to develop where they are advising institutional clients to look at IMP again.

IMP had a very scratchy September with (correct me if I am wrong) but I think they had 3 fatalities - something which is being focused on by a lot by the industry and of course the media. But if you are pragmatic about these things then you also have to recognise that it re-focuses management on operational problems which in turn (one hopes) flows through to a better run platinum business.

I was reading some research out RMB Morgan Stanley released on Friday and this comment by one of their analysts jumped out at me:

"Marking to market, Implats looks more robust: Applying spot values for the rand, PGM and base metals, we estimate that AngloPlat’s NPV would fall 27% to R494, while Implats would fall by 24% to R174. Alternatively, we assess that AngloPlat is pricing in platinum of USD1520/oz or a rand of 8.15/USD. Implats appears more robust, with its NPV pricing in the current spot (R7.40/USD, platinum USD1345.)"

In other words, there is next to no upside being priced into IMP at the moment... which one would assume means its ripe for those cheesy brokers and analysts to start pumping up their "overweight" and "buy" recommendations.

Which brings me to what I think could be drivers for a focusing in on the platinum sector in the next 3 months which will boost the IMP share price:

Important factor - South Africa dominates global platinum resources. Any sense that the politics or the operating environment (Electricity) - founded or unfounded - and you will see the platinum price move up
Lonmin have a dispute with their workers who are looking for a 25% wage increase while the company is offering 5%
Xstrata dumped its bid for Anglo-American which I would take to mean that something else better is on the table. Something in platinum (Lonmin rearing its head again?). If the platinum sector goes through another round of assets shuffles then this catches the imagination of traders and investors who start looking at the sector for opportunities.
From the newsflow I get the sense that IMP seems to be coming into favour - and off a relatively undemanding base, it could be one to watch.

Dow 10000 is here

2009-10-14T20:44:00.000-07:00

Well the Dow Jones index has finally breached the 10000 point level once again and the psychological kicker that has come through is evident in Asian trading this morning. The Nikkei is up over 2% and people in general are feeling good about themselves.

Its just a damn pity that the US Dollar keeps seeing its ass and falling through the floor! It is acting as a serious handbrake to my long Sasol trade. Interestingly the SOLSBG warrant has continued to track up even if the Sasol share price has been moving sideways.

I had been gradually building up a long in platinum and have added to that position yesterday as the price has firmed above $1355. I suspect positive sentiment will be with the markets and industrial metals this week - trend is your friend and all of that.

On the small cap front
Did anybody see that new power board put in place at African Dawn?!

Christo Weise and Robert Emslie as non-execs. This surely has to be worth a punt if these guys are throwing their weight behind it.

Director dealings
It is interesting to see that directors are starting to sell into this market - is it the guys cashing for an early Christmas?!

Just yesterday:

Topping over at Steinhoff sold R11m worth of shares
Mokoena at Eqstra sold R240k
Lazarus at Blue Label sold R309k
Curle at Altech cashed in some of his options and sold R1.38m worth of shares
Matlakala at Metropolitan sold out R2.5m
Van Deventer at Shoprite settled options and cashed out R7.9m

I dunno - maybe if you start adding up the dealings in the last couple of weeks you will find a big number of people are cashing out. Wonder if it is just the Christmas / Festive Season phenomenon or whether they don't see value in their shares at these levels?

Monday - quick note

2009-10-12T13:47:00.000-07:00

Hello boys and girls

A busy day on Monday but one which ultimately went nowhere fast.

The primary reason for my angst was that Sasol went ex-dividend today which lopped R6 off its price - money which was quickly recovered as markets continued to rally.

Sasol eventually finished the day off 80c at R288 with the SOLSBG warrant ticking up 2c to finish at 31c.

Goldman Sachs today set a revised (downward) price target on the oil firm with a 12-month target of R403... still a handy premium to where it is now!

Gold carried on trucking up nicely and I have some small long positions open on platinum as well. If there are legs to this economic recovery then an industrial precious metal like platinum could benefit at present levels.

Anyway tomorrow is another day - happy trading!

Bits and bobs

2009-10-11T13:46:00.000-07:00

Tough week - just when you think you have things figured out you get worked over....

Before I get into my post this week I have to post something from Paul Theron over at South African asset management firm Vestact which I thought rang so true:

Deadly financial plan

FINANCIAL planning is deadly boring. What is worse, most of the assumptions are wild guesses, like the rate of inflation, your date of death and returns on equities.

Blogger Carl Richards suggests that it might be better to forget all the thumb sucking and just focus on some of the things we can control, and then hope for the best.

So how’s this for a financial plan. (1) Save as much as you reasonably can; (2) Don’t lose money through risky or stupid investments; (3) Draw down no more than 4%-6% of your assets each year once you retire.

There you go, all sorted.

...... And here we monkeys are trying to time or beat the market with our "systems" and analysis!

Sometimes I think keeping it all nice and simple beats this whole trading lark ... and then I get it right and I feel like a genius for a couple of hours!

Things that occur to me:
I do remain bearish on some aspects of the global economy but there is some genuinely positive data coming through:

Sometimes we traders get nailed by short-term "noise" that we don't look at what is right in front of us. I took a look at these charts which plotted the Baltic Dry Index (BDI) against Gold, Oil etc etc and it makes for interesting reading - underlying shipping rates are on the up (solidly)
These string of natural disasters intrigue me and I am surprised they have been given so little coverage by the financial media. There is likely to be a lot of government sponsored re-building which will need to take place here in the coming months. Would be interesting to know how this will impact supply and demand of commodities
I still think there is tension with Iran and I don't see the oil price going South any time soon except perhaps against a rebound in the dollar (see below)
While I have been shouted down on it by certain people - I still believe that Pakistan is a far bigger economic and security threat to the world than people are giving it credit for. For crying in a bucket they stormed a millitary base and held soldiers captive in one of the countries which has active nuclear armaments!
I see Jim Rogers is calling Gold to $2300 over the next decade and oild somewhere between $150 - $200 as well but sounds like a lot of noise and very unspecific.

Trades I like:

I am still long Sasol (probably short-term target of R310). The Rand to Dollar exchange rate has played havoc with this trade but it seems to have ground itself higher, despite the currency. Still think there is a bit more legs to this trade
I get the sense that we might be about to see the dollar do a short-term bounce (which might tie give a boost to SOL). Yes it has been sold down hard but at some stage but when something is completely out of favour, it suddenly surprises. It is also still a "hard" currency and with many export dependant economies needing a strong dollar exchange rate, it might not be a bad idea to look at the USD recovering in the short-term
I have put on some SMALL and TENTATIVE shorts on Gold as well on the back of a dollar revival
The 10000 point Dow must be on the cards for this week

Heartening stuff

2009-10-01T21:26:00.001-07:00

I hear somebody threw a shoe at the head of the IMF at some presentation yesterday. Heartening stuff to see that people are venting their fury on bankers.

Friday mumbles

2009-10-01T21:23:00.000-07:00

After making a small profit on my short on the Top40 I closed out my position and the only open trade I now have open is a long on Sasol. At least the Rand is providing a bit of a handbrake at the moment and the oil price at $68.60 is "robust"

There is no question that the rising unemployment issues in places like the US remains a threat - you cannot have a jobless recovery - finished and klaar. Personally I think a lot of stocks will still come off over the next few months - particularly those with exposure to the consumer end of the market.

A couple of people commented that being long Sasol while shorting the TOp40 was surely counter-productive and in general that makes sense. But Sasol is cheap in comparison to its international peers.

At the moment Sasol is trading on a price to earnings (PE) multiple of say 10.5 (allowing for some currency).

In comparison the historical PE's of:

Exxon Mobil - 17 times
Chevron - 15 times
Royal Dutch Shell - 13 times
BP - 13.9
ConocoPhillips - 13
Total - 9

For sure Sasol is not Exxon or Chevron but when one considers the multiplier effect that a weaker rand could have on earnings and the great technology the company possesses, it would make sense to see Sasol pushing on from here.

But that's just my view so who knows.

It is not a very scientific method of analysing investor sentiment but I thought what was quite interesting was to take a look at the top headlines on CNN....

# Chicago, Rio lead race to host Olympics
# Key piece of human evolution revealed
# 1,100 dead in Indonesia quakes, U.N. says
# Ex-prosecutor says he lied about Polanski case
# Martin: Hollywood is clueless on Polanski
# CNNMoney: Dow plunges on economic reports
# Fortune: BofA CEO scores $53M retirement
# KSL: Elizabeth Smart says she was raped daily
# Vote now for 2009 CNN Hero of the Year
# Time: What Berlusconi's Obama jokes say
# Ticker: Republican sounds off on Polanski
# Boy, 11, wages fight against the N-word Video
# Stranger carries boy from burning building Video
# H1N1 vaccine on schedule, official says
# What if you ditched your car for a day?
# Kanye West's 'Fame Kills' tour meets swift end
# Sister upset about Mackenzie Phillips' book Video
# Poo power saves farmer $200,000 Video T-shirt
# CNN Wire: Jon Gosselin’s epiphany...

...... Yip sounds like people are REALLY worried about panic in the global economy this Friday.

Still looking grim

2009-09-26T23:11:00.000-07:00

I am not one of those perma-bears in the Marc Faber mould, but I have been short for the last few weeks (often at some cost to myself).... I'm sure I keep forgetting the mantra - THE TREND IS YOUR FRIEND!!!!!!!

In fact I am actually a believer that the worst is behind us, but the structural problems and the volatility still need to be dealt with and markets have simply run too far too fast.

Anyway, finally into a decent short position on the JSE Top 40 (J200) which looks like it still has some legs.

Reasons that I reckon you can stay short:
- Two bombs in Pakistan this weekend are likely to keep the whole area alert for more tension
- More US troop losses in Afghanistan - the US is caught between a rock and a hard place between Iraq, Iran and having to commit resources to Afghanistan which is becoming a real problem
- On the ALSI on Friday there was a decent downward move and with resources still under the whip, there could be more downside to come - ask yourself why stocks should move up now?

Faber
Speaking of Faber he was interviewed by Bloomberg recently and this is what he had to say:

“You cannot postpone the hour of truth forever,” adding “The next stage is for total breakdown of the financial system and for an economic and financial crisis that will bankrupt governments.”

Strategy wise he continued to beat the drum of buying Asian stocks and gold while selling down the US Dollar and the Pound - I can agree on the pound, I'm less sure on the dollar although I think in time it will be replaced as the global fiat currency.

Playing into this strategy I am still a buyer of the DBXJP and DBXWD exchange traded funds (ETF) and considering using the spreads account to short the pound... the question is what do you short it against? The Euro...? Not so sure.

The Privateer
There is an excellent piece in the latest copy of The Privateer talking about protectionism, trade tariffs, Obama and the Chinese.

Summing it up are these two paragraphs - sound familiar?:

Any student of the depression of the 1930s will be familiar with the “beggar thy neighbour” policies which did as much if not more than any other piece of economic insanity in turning a stock market crash into a decade-long global depression. The infamous “Smoot-Hawley” tariff act was signed into law by President Hoover on June 17, 1930. It did notbring US tariffs into being, what it did was to lift tariffs on 20,000 imported items to record levels to “protect” American business.

Eight months before the act was signed in October 1929, US and world stock markets had crashed. Six weeks before the act was signed, US stock markets had reached what proved to be the top of their post-crash rally. Within weeks of the passage of the Smoot-Hawley act, trade barriers in the form of tariffs and quotas went up across the world.

Short and damn proud of it

2009-09-21T11:29:00.000-07:00

I won't lie, I have been seeing my ass trying to short this market.

Having said that it looks like I am in a short on the JSE Top40 (J200) which might have some legs.

I bailed on my AngloGold long position this morning as my stop of R320 was broken and so far it looks like the right decision with ANG looking to re-test the R300 mark.

I'm reading an excellent piece in The Privateer, which I'll post a piece from once I've absorbed it all but maybe if I can throw out some motivation for being short on the Top40 in the short-term.

A) Since the third of March 2009, J200 has rallied from 16400 to 23350 - the rate of appreciation was unsustainable

B) The South African Rand has strengthened heavily in the last few weeks as the US Dollar has weakened. If the appreciation is sustained or continues further then invariably you are going to have some earnings downgrades on the resource counters as the brokers adjust their forecasts.

C) The biggest short-term driver - there is a mountain of paper about to be issued by the likes of RBS in the coming weeks. There has to be questions asked about whether or not the market can adjust for this influx

D) The signs of economic powerhouses adopting protectionist policies are on the up and the decision by Obama to up the tariffs on the tyres imported from China is setting the wrong tone. Unemployment is rising, money in pocket decreasing ... and now you want the consumers to fork out higher prices for the imported goods? Protectionist policies will hurt export based economies hard.

E) Hows this for an interesting stat - for the month of August 2009 there are US$31 of insider stock sales for every US$1 of buys - can you say NO CONFIDENCE?

I am certainly not one of those Uber-Bears predicting the end of the world as we know it, but from every vantage point it would appear things have run too far, too fast. There might be a bit of window-dressing at the end of the September quarter but the enthusiasm to make a real assault on the Dow 10000 mark doesn't seem to be there.

We live in interesting times!

Shorts, warrants and something in between

2009-09-17T13:03:00.000-07:00

Do you ever get the sense that you're at the end of a grand ponzi scheme and suddenly you are the last guy holding out waiting for your money to come in?

I'm starting to get that creepy feeling and I started looking around for a bit of downside protection today. Started shifting away from a lot of my small-cap stocks into either cash or puts today.

Without question my "feelings" are very non-technical and would be thrown out the door by most traders - but having watched the market in the last few days (specifically the US), one can't help but get the sense that the market is running out of steam.

Thought this made for interesting reading - this is the volume traded on Put warrant TOPSBV which is a warrant issued by Standard Bank on the Top40.

Monday - 14 September - 13.5m warrants traded
Tuesday - 15 September - 1.3m warrants traded
Wednesday - 16 September - 6.4m warrants traded
Thursday - 17 September - 7.7m warrants traded

There is a lot of action around this warrant and I get the sense that people are starting to buy some protection against downside risk.

Looking at the US markets this evening I see that they seem to be bumping their heads around 9800 level on the Dow and people have stopped to ask themselves - what next?

I still have a long position on Anglo Gold which seems to be doing ok although I am watching it quite closely. If it doesn't kick on again tomorrow I might be tempted to exit it although I wouldn't be surprised to see gold move up going into the weekend. Looking at the ADR (AU:US) its off just under 2% but the JSE listed counter has not been helped by the dollar being so weak - a little slip in the rand and the gold shares could fly.

Warrants / spreads / products etc
An observation that I thought could be the opening for an interesting debate around linear and de-linear trading products in a market such as these.

I haven't traded warrants in ages, preferring to instead use things like the spread trading platforms offered by our favourite bucketshop. However I was finding myself getting stopped out at losses on that particular platform with some regularity even if the overall trend I was looking at was right.

While there has been this big move toward straight line products like spreads, knock-outs and binary options there is still an important place for a product such as warrants which can absorb some sideways volatilty (without hopefully being strangled by time decay).

The importance of picking the right product to work alongside your trade is often as important as picking the right trade - it means sweet bugger all if you can't execute on the right strategy.

Any ideas?

2009-09-05T23:23:00.000-07:00

Does anybody know of any offshore Exchange Traded Funds (ETFs) that you can buy through an online broker and pay for on your credit card?

As a South African our locally-listed ETF options are relatively limited. It would be nice to access other markets like Brazil and China.

At the moment locally I have the following ETF's in my portfolio:

The Deutsche Bank X-Trackers - DBX Japan (DBXJP), DBX World MSCI Index (DBXWD) and DBX MSCI US (DBXUS) as well as the New Gold ETF (GLD) and the local government bond offering from investec ZSHARES GOVI (ZGOVI).

Obviously it would be nice to expand the universe a bit and be able to find ETF's that give exposure to other regions as well.

Zecco.com
Has anyone locally had a look at this Zecco.com offering?

It looks quite interesting in terms of a low-cost investment and trading platform. Would be nice to be able to use a credit card to transfer funds into an account though.

Thoughts on which online brokers allow you to transfer funds via your credit card?

Risk vs return

2009-08-29T06:19:00.001-07:00

Out of sheer curiousity - if I asked you to put R500 down for a R50 return would you do it?

What if I could do it 8 out of 10 times?

I can't make those promises so I am not going to try but I think it is quite interesting exercise to conduct in terms of trader mentality.

Personally I get the sense that a lot of traders would far rather hit one or two spectacular trades but don't keep score of their smaller losses which add up very quickly.

A lot of people have all of these questions about trading vs gambling - my personal opinion - trading is about building wealth. You build wealth by having a score card which reads more wins than losses and you preserve the capital that you generate.

Gambling involves going out and partying it up when you win well and complaining when you lose.

I like this!

2009-08-22T01:32:00.001-07:00

Courtesy of PSG Online - I like this as it gives some interesting insight into what it takes to be a good trader...

Winning traders execute and monitor their trades in a peak performance state. They are not worried about past mistakes or future profits. All their attention is focused resolutely on the ongoing trade. But it is hard to focus on your ongoing experience when you are worrying about losses, or some other trading problem. It may sound easy to take losses in stride, and avoid letting them interfere with your ongoing experience, but when you are in a severe drawdown, and worried about how you will get out of it, it is hard to avoid letting it get to you. You may become consumed with guilt and anxiety. It is natural. Your future may actually be at stake. But you cannot trade at your best when you are worried. Somehow you must train your mind to put the losses out of your awareness. One way to train your mind to temporarily forget about losses is to schedule worry time.

The natural human tendency to worry about problems protects us. If we did not worry, we might take dangerous risks, and pay a steep price. But worrying can be a problem for successful trading. If you are the kind of person who worries uncontrollably, it may interfere with your ability to pay attention to executing your trading plan. Not only can it distract you when you try to execute a trade, excessive worrying can prevent you from getting a restful sleep at night, or keep you so uptight that you cannot relax. Without proper rest and relaxation, you will find it difficult to mobilise your psychological resources for optimal trading performance.

Worrying becomes a problem when you do it too often and for no good reason. For example, if you have mounted losses and worry about it, you tend to think the same thoughts over and over again. It does not help much. You are likely to just let it interfere with your ability to make back the money you have lost. You need to put such thoughts out of your mind while you trade. When you worry too much, you feel out of control. One way to regain control is to schedule worry time. The basic idea is to set aside a certain part of the day, say seven o'clock, for example, and only worry for 30 minutes during that time. The goal is to worry only at a specific time for a fixed length of time. When you catch yourself worrying during the day, you can tell yourself to stop with the knowledge that you can worry about whatever is bothering you later. Knowing that you can worry during the "worry session" will help you control your worrying.

It may sound a little simplified, but it works for many people who have trouble controlling their worrying. Try it. See if it works. If you are like most people, you will find that you worry less, and can control it. So do not let worrying interfere with your ability to trade successfully. Worrying seems like a natural response to a setback, but it usually gets you nowhere. Rather than hopelessly worry, it is vital that you take an active problem solving approach. If you can control your worrying by scheduling regular worry sessions, you will be able to recover from a setback fast and return to profitability.

"In a crisis, don't hide behind anything or anybody. They're going to find you anyway." - Bear Bryant

Interesting market to be in

2009-08-09T23:29:00.000-07:00

It is a tough market to be in at the moment. Every sense is screaming that equity prices are looking increasingly expensive but the market seems to be disagreeing and there is more green in Asia today after increasingly "bullish" economic data out of the US on the jobs front.... I have no comment on this data beyond saying that you cannot have an economic recovery while the number of unemployed continue to rise.

In terms of open trading positions I have a long on Gold from US$955 and Platinum from US$1250. Also taken a bit of a dirty little punt on sugar having read that there is a global shortage which is likely to fuel prices in the coming months.

The sugar one I can't comment on - it really was just a flutter and having looked around the reality of of sugar supply-side shortfall seems to be credible.

Platinum I think will see some increased demand going into the second half of 2009 with some re-stocking in the auto sector (the so called "cash-for-clunkers" programme) and maybe some jewellery demand as the economy stabilises. My guess is we could see platinum testing $1285 again this week.

Gold - The yellow metal has worked hard to get back above the $950 an ounce mark. There have been a couple of stomach curdling $10 - $15 drops on action in the dollar market - which have hurt me on stop losses a couple of times - but the metal seems to be behaving a little better after the sell-off last week. I think we could realistically see gold test $980 this week and I would be tempted to take some part profits at $975 if it gets a bit of wind under its sails.

On the equity front I've continued the habit of accumulating a mixture of ALSI constituents and the exchange traded funds (ETFs) that have been mentioned on this blog before.

Saturday mumblings

2009-07-25T03:14:00.000-07:00

I haven't posted in a while but I've got a couple of observations around trading, wealth management and strategy that have occurred to me which I thought I would stick up here on the blog and see if others had some thoughts.

Trade vs. buy-and-hold
I know many traders turn up their noses at old fashioned buy and hold strategies (not "hold and hope" stuff - quality buy and hold). I was looking at the performance of my two respective portfolios since September 2008 and interestingly my buy and hold (wealth) portfolio has outperformed my day-trading portfolio.

I found that quite interesting considering the volatility in the market at the moment.

Does it mean I am a kak trader? The record says I've made consistent money day-trading so I'd like to think I have some skills but I think it does show that a consistent system aimed at wealth and money management will trump short term trading gains.

Trading personality
Have you ever done a personality test? Do you think there is room for one in your trading strategy?

A mate of mine took this What's Stopping You test run by Global Trader and it came out with some interesting results.

The evaluation basically tests some of your knowledge about financial products and your risk profile which is all good and well. Most interestingly for me - the test looked at his personality and it discovered something of an impulsive streak in him. It's something I agree with and something I've also seen in my own trading. Sometimes you find yourself constantly looking for positions to trade or you find yourself picking out a quick and easy "punt".

In his case, I have regularly seen him drop money when it wasn't necessary to take a position and the test actually highlighted for him a problem with his trading personality. If he wants to punt, he can do it on the horses.

Point being that he was made to think about what he was doing and hopefully it improves his trading strategy.

Nothing wrong with asking an expert
I think there are quite a few traders who want to "do it their way".

By following advice from other traders they feel like they are cheating a bit. I haven't traded much recently and when I have it has been very haphazardly and not been good for the wallet.

I stepped back and took one of the recommended "house" views from one of my service providers and BOOM I was back on the scoreboard within 6 hours.

Sometimes you don't have to go against the grain to pick good positions.

Just some thoughts - use 'em don't use 'em....

Trading thought

2009-06-26T12:30:00.000-07:00

Day-trading can be a lonely past-time - which is why I suspect traders love to flit between various internet message boards.

But the problem with that is that bad habits can creep into your trading if you don't have somebody watching over you or making sure you stick to your system.

I can see it in my own trading - I've been losing discipline and been chasing around silly little punts that have cost me a few bucks in the last few days.

I found myself scalping for silly little profits and then tossing them away on speculative positions a few minutes later. Yesterday I did no fewer than 30 trades and went backwards!!!

30 trades is ridiculous and the stupid part of it was that if I had let my first trade run it would have been more profitable than all my other winning trades on the day put together.

Time to step back and get out of the scalping game and get back to fewer but more profitable trades...

... live and learn.

But but but....

2009-06-22T19:45:00.000-07:00

A sea of red greets traders today with Asia kicking us off. Had a couple of overnight shorts in place on both the Hang Seng and Nikkei which I've cashed out... Still reckon there is more downside to this leg but nobody ever went broke taking a profit.

The only thing I've got open now is a short on the Dow with a downward trend back in place as the rally fizzles out after the World Bank came out yesterday with some negative comments about future growth potential... which was in contrast to comments attributed to George Soros who said "The worst was behind us"

I am by no means a perma-bear and I think there are some nice value opportunities in the market at the moment - particularly in the South African market - but we need to appreciate how skittish investors are.

The bid by Xstrata for Anglo American gave the local market a bit of a boost but having chatted to a few people I get the sense that the bid is not going to get the support needed and if the "transaction premium" gets yanked out from Anglo then the JSE Top40 could take a smack.

Commodity futures are down as well. I thought there might be a bit more support for gold at 920 and oil at US$68 (particularly after its recent strength) but I guess next areas of interest for me are gold at around US$910 and oil at US$65.

(On that - I noticed an interesting story on Bloomberg about Japanese banks threatening to pull some funding from Venezuelan oil assets in response to non-payment and nationalisation threats... could this be a short term catalyst?)

Down still seems to be the only direction.

Some fundamental calls

2009-06-20T10:45:00.000-07:00

There are no shortage of opportunities to scalp around the commodities but finding deep value investments are a little tougher given the economic outlook.

Markets may have rallied and there may have been some stimulus in the system prompting some improved data but I get the sense we're starting a second downward leg.

Previously on this blog I've mentioned that I like the agriculture and food sectors as good bets over the next year or so. I've had my holdings in Zeder (plus followed the rights issue) and added to my shares in Country Bird Holdings (CBH) on the back of the directors dealings.

Another sector I hadn't given much consideration to was education in South Africa. Specifically private sector education.

Your main listed entry point for education at the moment is via Advtech which owns the Crawford schools. The share has run hard but they have an important area that AdvTech has is scale... You need scale and infrastructure to make a success of education for obvious reasons.

The second unknown entry point which I had only heard about quite recently was through Paladin Capital (a soon to be listed subsidiary of the PSG group). They've apparently got a fairly sizeable investment in a new education player which might be of interest....

** Author holds shares in ZED, CBH, PSG

Buy and hold vs day trading

2009-06-16T20:35:00.000-07:00

I see there is quite a lot of "industry experts" coming out and saying how 'buy-and-hold' strategies will never work again and day-trading is suddenly where all the wealth is.

There are a lot of people who got toasted in 2008 while watching day-traders make hay while markets were tumbling. The logical answer is that 'buy and hold' no longer works and day-trading must be the way to go....

1. Most people are not cut out to be day-traders. The risk involved and the control involved to manage your own money makes it a highly stressful environment particularly if you are moving in and out of positions regularly.

2. Not all buy-and-hold investments have been poor. Despite this massive financial crisis, the JSE for instance has largely regained everything it lost over October and November 2008 and the dividends, while reduced, are still largely being paid.

3. Making money and keeping money are two completely different concepts that day-traders don't always focus on. Most day-traders will always tell you how they are making money and coining it in the market but if you had to actually drill down into their results you might find that the statistics tell another story. As I have said before on this blog - the question has to be what do you do once you've actually made a profit ....? Do you just gamble it away on the next trade always upping the risk or money down?

For me the strategy has always been to split the profits up and drop some of them into my bigger equity portfolio which largely does have a "buy-and-hold" theme based mentality. Once it is there I'm not likely to dip into it and I pick up the dividends which are subsequently reinvested.

Some of the other profit goes into expanding some of other business interest so that hopefully by the time retirement rolls around I have multiple sources of income with the outperformance being initially driven by the day-trading.

Conclusion
I read a statistic the other day that South Africa has a negative real savings rate. I knew it was bad but didn't realise it was THAT bad...

I don't think the issue should be about whether it is buy-and-hold vs. day trading but rather building up a strategy that lets you build long term wealth with the profits you can generate from day-trading....

Anyway just a thought - use it don't use it

Risk summed up

2009-06-16T20:17:00.001-07:00

Not sure where this is from, but I saw it posted on the Page 88 website and thought it summed up risk 100%

US markets

2009-06-11T22:25:00.001-07:00

The US markets are actually pure and simply kak at the moment.

Lot of confoculating (Howdy Page 88) around the 8700 and 940 levels on the Dow and S&P. It doesn't matter what data comes out the thing just hangs around at these levels.

Out of the mainstream equity markets but taken a small position long on the US 10 year Treasury. Other than that I am out of the market till this thing works itself out

Crazy Friday

2009-06-07T04:18:00.000-07:00

Geez how crazy was that Friday?? Enough to drive me to drink - not that I need an excuse of course.

The short platinum and copper trades took a while to get going but eventually they joined the tumble in metals prices and there was a bit of profit for Friday. The job numbers came in bad and NFP reflected the real problems the US is facing - you can massage what you like things aren't great...

The commodities and underlying equity markets took off like a bat outta hell and then suddenly started losing ground with Gold falling to US$955.

I entered a long pozzie on Gold just under US$960 anticipating something of a bounce as some "normality" returned to the market. Gold gyrated around a bit like a stripper at the Lollipop Lounge and just like the pros - promised a lot and delivered bugger all.

Personal feeling - commodities still look toppish and with the job numbers still showing no sign of a turnaround they seem to be looking like we could be about to start a second down-leg (particularly in the base metals and platinum). Gold and Oil still seem to be trading as something of a "risk" proxy.

There is some talk of the dollar starting to strengthen on the back of some prospects of rising interest rates in the US. The problem with interest rates going up is that its going to deaden any of these so called "green-shoots"...

No real conviction for direction tomorrow beyond expecting a bit of a rebound in gold.

Hahahah

2009-06-05T09:22:00.000-07:00

Bizarre trading day - I'm still trying to catch my breath and survey what worked and what didn't.

I did however come across an article on Moneyweb and found a comment I thought really funny. The article was discussing how you shouldn't let fund managers look after your money (or sort of because it was an interview with a fund manager).

One of the comments underneath the article was:
"Advice from a six year old on the playground - Never let a dog look after your sandwiches - The same applies to managing your money"

Got a good chuckle out of that one. If you want to read the article, you can find it here.

Friday trades

2009-06-04T23:31:00.000-07:00

Only open trades at the moment are short copper and short platinum which I went into last night...
It all just looks a bit too toppish for me and expecting a bit of a commodities sell-off today.

Drifting in and out of oil at above 69.50 - think this has run a little too hard in the last few days - time for a breather.

Hard to call the markets with the BHP news giving a skew opening to the All Share... Will see..

ALSI Trader

2009-06-04T23:25:00.000-07:00

For the technical analysis and SA traders - add this blog to your links:

http://alsi-trader.blogspot.com/

Nice clear and concise blog for a South African context and always nice to bounce ideas off the other traders on this blog as well as the usual suspects from Page 88

Trading tip

2009-06-03T21:42:00.001-07:00

Trade with a clear conscience - if you have to get up to 2am to check what your trade is doing then you shouldn`t be in the position in the first place...

Unwound some of the dollar stuff

2009-06-03T21:40:00.000-07:00

I have unwound some of the long dollar short yen positions I was in. Felt I was a little over-geared in the short term and there was some profit on the table so it was easier to walk away and try again another day.

Bet on the dollar

2009-06-01T21:19:00.001-07:00

If you've been following me on Twitter you'll see I've been plugging my long Dollar | Yen position which has so far yielded some rewards.

The thinking behind this is four-fold.

1. There is the political instability around North Korea which is likely to lead to some volatility in the Asian markets (including presumably the currency markets)

2. As the economy (or more specifically the stock-market) has rebounded, there has been some flight from low yielding but perceived "safe" currencies such as the Yen into the Euro for its higher yield. I argue that the dollar sale has been overdone and in fact offers better value than the Euro.

3. While I still expect another market down-leg, the more the rally takes hold (particularly in the US) the more appetite there will be for the dollar - I don't see the currency alternative at the moment nor do I see something else that carries enough "size".

4. China, Japan and the rest of Asia all want the dollar to be strong relative to their currencies and logically they are not going to try and put some pressure on their own currencies to keep them weak relative to the dollar.

It is not a long term trading position - simply because I think there is too much volatility and earnings uncertainty everywhere but I think while everyone is keeping their eye on the Euro, I think the US dollar offers something a little different.

Liquid Trader on Twitter

2009-05-31T10:27:00.000-07:00

I am assured by one of my journo mates that Twitter is the place to be if you want to "get noticed" so I've set up a presence on Twitter and accumulated a few followers.

Not sure about the whole Twitter lark but you can follow me at this address:

http://twitter.com/liquidtraderza

Interesting times

2009-05-25T19:10:00.000-07:00

Monday was a bit of a non event as far as trading went - neither the US nor the UK were open for trading so global markets were battling for direction of any kind.

However I thought that maybe the Memorial Day holidays in the US may provide us with a short-term trading opportunity. The Americans are quite big on these big patriotic holidays and on more than one occasion I've seen these "Patriot Rallys" where US markets go up seemingly because of national sentiment.

Did a bit of a Google search on the subject - specifically relating to Memorial Day - and I came up with this link which made for good reading (particularly if you're a stats or quants guy).

Used Monday to position myself with a couple of short term long trading positions on the Dow, S&P, Oil, JSE All Share Index, Naspers, AngloGold and Sasol. Yeah yeah its a bog-roll long list of pozzies but I'm comfortable with the spread.

I wanted MTN as well yesterday morning but the merger talk with Bharti moved the price too early and I couldn't get the entry I wanted.

The Oil trade hasn't yet gone totally to plan and is bouncing around just above my stop-loss but there seems to be some support at above US$59.50 which is keeping me in the game.

I don't believe this will be a particularly sustainable rally but I guess we try and take the opportunities when they look like they are there and if there are short-term profits available then we take it off the table.

Go Gold go!

2009-05-21T11:10:00.000-07:00

Absolutely loving this gold price action and pretty sure we've got clear air up to $970 before the end of the week. At this moment in time we're floating around the $953 mark and the only thing that hasn't played the game in terms of my AngloGold call has been the strong Rand. (or is that more specifically a weak dollar)

Still pretty confident that long ANG is a good place to be going into tomorrow.

Sasol was looking fine but dipped off today as the exchange rate strengthened and US markets sold down but still pretty happy with where we're at.

Looking forward to tomorrow, I reckon there is going to be plenty of short covering around gold as people pile in and technically I don't see the Rand / Dollar getting through the R8.20 mark to the dollar.... in fact I think there might be some hot money being pulled from emerging market currencies tomorrow...

Let's see ...

Hhhhmmm....

2009-05-18T21:39:00.000-07:00

Honestly can't believe the strength of this rally - am I missing something

I took a couple of positions on Monday - long Sasol (SOL) @R294 and long AngloGold (ANG) R314 and then stuck in some wider reaching short positions.

Of course ANG promptly announced its bond issue and the share price took a bit of a smack beneath R300.

Interesting to see there is a bit of a buzz in the gold price despite the equity rally - we're sitting around between 920 and 930...

Bizarre!

2009-05-16T23:11:00.000-07:00

Last week was a bizarre trading week! I had taken quite a lot of short positions on local equities that just didn't pay-off.

The Rand didn't help - particularly with the crap from ICASA on the Vodacom deal - but still I'd have thought it was time to see a bit of profit-taking and a bit of a blow-off considering the economic data still doesn't look great.

The US job numbers look kak and are going to take a serious dent when the GM dealerships (1100 of them) start being closed down.

I see Gold has bounced above the 930 level which gives me the indication that we're about to start another down-leg for equities - something that gets me a little excited because I think many of the SA equities I've picked are trading on pretty undemanding values.

Bias has to be to the short-side methinks.

Binary options - news

2009-05-03T13:44:00.001-07:00

Dunno if there are any South African day traders out there who have been looking for a way to participate in the action in the US automakers and banks but a mate of mine just SMS'd me an interesting piece of news...

... The Justrade binaries option trading platform has added contracts on Citi Group and Ford which could be a bit of fun to trade.

ETF's and portfolio construction

2009-04-30T22:28:00.000-07:00

Portfolio construction for retail investors is oftened made out to be far more difficult and technical than it really needs to be.

I don't claim to be an expert on the subject by the stretch of anyones imagination - but I have got some thoughts around using ETF's that might be interesting for active South African retail investors trying to level out some of the volatility in their portfolio.

ETF's in my portfolio are (in my opinion) great for one reason - variety....
- Access to asset classes that are not normally open to retail investors (e.g. bonds)
- Access to markets that are not normally available to retail investors (Japan, US, World indices)

These are the ETF's that I've tried to blend into my portfolio:

DBXJP - Deutsche Bank Japan X-tracker
DBXWD - Deutsche Bank MSCI World Index
DBXUS - Deutsche Bank MSCI US Index
ZGOVI - Investec's government bond ETF

On top of that I'll add in the RMB / Bips Inflation-X product when it lists later this month.

My strategy at the moment is to mix in about 20% of these into my portfolio just to try and balance out the stock-picking and asset diversification.

It is a pretty cheap and easy way to balance out this risk - Anyone else using these tools for the same reason?

BIPS INFLATION-X

2009-04-30T21:50:00.000-07:00

This is a product I've been waiting for since I first got wind of it at the end of 2008 and I reckon it could be a really nice addition to any retail investors portfolio.

The product gets officially announced on Monday but basically Rand Merchant Bank and their "Bips" team have created an ETF product comprising four government-issued Inflation-Linked Bonds. Basically your real return on the proudct is inflation + 2.5%.

The reason this product is really interesting is that if you buy into the theory that the bailouts have created "un-natural" liquidity in the system, we're about to have a huge second bout of inflation hit the global economy.

When that comes in, many of your other investments will fail to grow or keep pace with inflation and this is one of the few "guaranteed" (I hate that word) ways in which you can continue to generate a positive return.

To me it is a "must-have" in your portfolio going forward and I'm definately going to be adding a few. The IPO for the product is next week and it will be listed on the 15th of May.

Just a thought - use it don't use it.

And so it goes...

2009-04-30T21:27:00.000-07:00

How is this bloody rally! That's the only way I could start this post I'm afraid.

I'm not complaining - I went long last Thursday and so far I'm smiling all the way to the bank but geez it goes against everything I would believe fundamentally.

Somebody raised a good point yesterday which I think we should stick in the back of our heads - the US earnings in particular haven't been as bad as people were expecting largely because these businesses have been hacking costs at every turn primarily around staff..

Now you go into the next reporting season with a far higher unemployment figure. Having said THAT you then need to step back and ask yourself whether or not the current rally in the stock-markets has a lot to do with excess liquidity coming in from the bailout packages - has the idea of printing money to get us out of a recession actually worked... If it has then inflation is right around the corner....

... need to think about this a bit.

Catchup

2009-04-23T21:51:00.001-07:00

Hhhhhmmm these South African public holidays have really played havoc with any day-trading activities so I've had to spend my time on the "investment" side of my portfolio.

Added a few more PSG and ZGOVI's to my portfolio and I've also added Country Bird Holdings to my watchlist.

PSG
Was pretty happy with the results out of PSG and I'm quite liking the way that their companies are actively seeking acquisitions while others are heading for the hills. Check how nicely Capitec has done in recent weeks since their results came out.

Below R16, I've been adding a few more PSG to the portfolio.

I'm also watching PSG for some action around their Paladin subsidiary which has been steadily adding to its holding in Top Fix Holdings. (Not totally sure what the strategy is here, because I'd have thought there were better quality assets - but I guess we trust Jannie Mouton's judgement on all of this)

ZGOVI
I'll blog separately on my Exchange Traded Fund (ETF) strategy for my portfolio but I've continued to add these ZGOVI's to my portfolio for a bit of diversity into another asset class.

These things have held up quite nicely and coupled with their distribution, they've been worthwhile to hold through all this turmoil.

Pick 'n Pay / Pikwik
How good were those results out of Pick 'n Pay! I have a couple of Pikwik in my portfolio and those results mean I'll probably add a few more to my portfolio. Some success in Australia with the Franklins operation at last and good cash flows. Nice defensive option in the portfolio and with decent cash flows come decent dividends.

Altech / Altron
Altech released their financial results yesterday and they also looked good. As far as IT companies go, my pick would be Altech. However while I like the Altech story, I've actually been adding the Altron shares (wider power and infrastructure story as well as access to ALT) as well as the Altron prefs to my portfolio for some dividend yield.

Strategy
In terms of strategy, I'm still short equity and long gold (underlying and AngloGold).

I see China has just announced that they've bought a stack of Gold which has driven the price back above the 900 dollar mark.

Equities are still looking a little shaky in general and it would appear that Chrysler is going into bankruptcy protection in next few days. Stress tests out of the banks also due out today... gonna be interesting.

Interesting directors dealings

2009-04-14T21:48:00.000-07:00

Two interesting directors dealings jumped out at me yesterday.

1. Grindrod - Ivan Clark sold R31m of ordinary shares in the shipping firm / diversified industrial company yesterday at R12.50... I know he had some big SSF positions open and some of those options had been exercised but I'm guessing that means he doesn't see much upside from these levels.

2. Country Bird Holdings - The chicken farmer / agri firm has seen two of its directors very active in the market in the market in the last few months since releasing its interim results in February.

The company is on a pretty undemanding price to earnings ratio of 5.2 and a pretty handy dividend and it also kind of fits in with the farming and food theme. Haven't taken a position either which way on it yet, but it would appear to be something to consider.

Goldmans

2009-04-14T21:32:00.000-07:00

It was helluva interesting to watch the market response on Monday and Tuesday after Goldmans Sachs came out and announced it would be reporting a first quarter profit of US$1.8bn.

The market took initial heart from the announcement and then the overwhelming bad news and "reality" set in. Retail figures in the US were poor and that weighed on markets from the moment they came out.

Locally we had a pretty widespread rally with resource heavyweight Anglo American up over 5% and Old Mutual up 8%.... and the retail figures were my chance to take a couple of short-dated (10 day) puts on the local and international markets.

Dunno - think there is simply too much bad news for much more upside in the short term. Headlines from Bloomberg this morning:

Cathay Pacific Said to Ask Workers to Take Unpaid Leave to Help Cut Costs
Fiji Devalues Currency by 20% After Military Takes Power, Judiciary Sacked
Australia's Banks Face `Headwinds' as Economy Slows, CLSA's Johnson Says
North Korea Expels Nuclear Inspectors Following UN Condemnation of Launch
Bangkok Enters Fourth Day of Emergency Rule as Police Seek Protest Leaders
Intel Profit Declines 55% on Falling Chip Demand

Not exactly much in the way of good news in there.

Fascinating

2009-04-08T01:43:00.000-07:00

It's been a fascinating couple of weeks in the market. Biggish rally which seems to have sucked in a lot of people seeking some relief from the constant selling pressure and suddenly the downside has "re-emerged".

Somebody made a good point though - last week was the end of the first quarter reporting period for unit trusts so while I'm sure they will deny it there must have been some "padding" going on.

Didn't really do much with the rally but rather elected to sit on the sidelines. The only thing I bought was a few more shares in Zeder to satisfy my farming fetish. Their results came out recently and weren't too shabby and I see I'm basically getting a 5% dividend yield from them (at R1.35) so I can't complain too much.

The unlisted investments are valued at R1.92 which looks like you get them at a pretty deep discount if you follow the rights issue at R1.35.

Anyway - watching the US market yesterday and rest of global markets today, the sell-off trend seems to be back. It looks like we've got two things to watch now which are likely to weigh on the markets going forward:

Credit card debt: In the US credit-card debt rose to 8.82 percent in February, the most in the 20 years that Moody’s Investors Service Inc. has kept records. Moody’s cited higher unemployment and forecast so-called charge-offs will exceed 10 percent by the end of the year.

As credit cards tighten remember the pressure this is going to have on retailers who depend on credit based sales... This is a very real problem and its coming to your doorstep...

CDS defaults rate on the up: Credit Default Swap default rates are on the up again which adds fuel to my thought that the rally may have suckered in a few more people.

Remember that this rate went up sharply when the "smart money" decided to start taking some collateral just before the October crash.... If this is on the up again then tread warily...

Autos
The auto companies are an interesting one... I think that while people accept that Chrysler and GM are effectively about to go into "prepared" bankruptcy I think the actual "shock" to the system will send shudders through the US markets.

Looking at the data, experts are predicting that GM will go down in the next 2 - 3 weeks...

Wouldn't be particularly long in this market I'm afraid.

Hahaha

2009-04-03T23:58:00.001-07:00

Good for a bit of a laugh:

Doctors' Opinion of Financial Bail Out Package

The Allergists voted to scratch it, and the Dermatologists advised not to make any rash moves.

The Gastroenterologists had sort of a gut feeling about it, but the Neurologists thought the

Administration had a lot of nerve, and the Obstetricians felt they were all laboring under a misconception.

The Ophthalmologists considered the idea shortsighted.

The Pathologists yelled, 'Over my dead body!' while the Pediatricians said, 'Oh, Grow up!'

The Psychiatrists thought the whole idea was madness, the Radiologists could see right through it,

and the Surgeons decided to wash their hands of the whole thing.

The Internists thought it was a bitter pill to swallow, and the Plastic Surgeons said,

'This puts a whole new face on the matter.'

The Podiatrists thought it was a step forward, but the Urologists felt the scheme wouldn't hold water.

The Anesthesiologists thought the whole idea was a gas, and the Cardiologists didn't have the heart to say no.

In the end, the Proctologists left the decision up to some assholes in Washington .

Over....

2009-03-30T12:08:00.000-07:00

I guess this means that the rally is over...??

Looking over at the Dow in the US it's "blood on the trading screens" with the heavyweight industrial index down over 320 points....

It's funny - it didn't matter how many people you spoke to in the last week or so, almost everybody was cautioning against being sucked into this rally... and yet people couldn't help but chase the "hope".

I'm guessing we're going to see a sub-7000 Dow this week as reality starts to sink in again about how tough things are out there. My feeling is that today was the death knell for General Motors (and probably Chrysler as well)... although I have no idea how Ford is managing to stay alive in these markets.

Having said that, I don't think South African equities are particularly expensive and I guess doing a bit of stock-picking should pay-off in the next few years from these levels.

Two stocks I've blogged on before, remain popular in my tiny investment universe - namely Interwaste and Zeder.

Interwaste
Interwaste is a waste-management firm and the only way for SA investors to gain exposure to this lucrative sector in the listed space. The company reported its full year results to December 2008, and a much better performance. I looked specifically at the cash flow from operations and I reckon this free cash-flow indicates some dividends could be on the cards in the next few months.

Remember also that management remain sizeable shareholders in the business and that will probably mean that they'd like to push for dividends as well out of their investment.

Zeder
This agricultural operation has announced that they will be going ahead with a rights issue at 135c a share, in the next few months. The company says it sees a number of opportunities and it is raising cash to take advantage of them.

Zeder is trading on an historic PE of 6 in a relatively defensive sector, especially with its large stakes in KWV and Pioneer.

Think there is merit in adding to these two positions.

Dying dollar?

2009-03-25T21:47:00.000-07:00

I know it is something we blogged about a while back and I see it has just become very topical again.

Here is a piece from Reuters which I found quite intriguing:

China eyes SDR as global currency to replace dollar

* China proposes sweeping overhaul of world monetary system

* IMF's special drawing right could replace dollar over time

* Advantage would be greater stability, fewer crises

BEIJING, March 23 (Reuters) - China's central bank chief on Monday proposed a sweeping overhaul of the global monetary system, outlining how the dollar could eventually be replaced as the world's main reserve currency by the Special Drawing Right.

The SDR is an international reserve asset created by the International Monetary Fund in 1969 that has the potential to act as a super-sovereign reserve currency, Zhou Xiaochuan, governor of the People's Bank of China, said in remarks published on Monday on the bank's website, www.pbc.gov.cn.

"The role of the SDR has not been put into full play due to limitations on its allocation and the scope of its uses. However, it serves as the light in the tunnel for the reform of the international monetary system," Zhou said.

Zhou did not refer directly to the dollar.

But his speech, issued in English as well as Chinese, spells out in detail Beijing's dissatisfaction with the primacy of the U.S. currency, which Zhou says has led to increasingly frequent international financial crises since the collapse of the Bretton Woods system of fixed but adjustable exchange rates in 1971.

"The price is becoming increasingly high, not only for the users, but also for the issuers of the reserve currencies. Although crisis may not necessarily be an intended result of the issuing authorities, it is an inevitable outcome of the institutional flaws," Zhou said.

"The desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies," he added.

FEWER RISKS

A super-sovereign reserve currency not only eliminates the risks inherent in a credit-based currency such as the dollar -- in contrast to one backed by gold -- but also makes it possible to manage global liquidity, Zhou argued.

"And when a country's currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability." he said.

Reform of the international monetary system is likely to take a back seat to the more pressing task of economic and financial stabilization when leaders of the Group of 20 developed and emerging economies meet in London on April 2.

But Zhou's speech shows that the issue is a pressing one for China, whose top officials regularly bemoan the volatility of the dollar and what they see as mismanagement of the world's leading economy.

Zhou acknowledged that establishing a new reserve currency that commands wide acceptance may take a long time. It would be a "bold initiative that requires extraordinary political vision and courage".

Hahahhahaha another take on sub-prime

2009-03-12T11:49:00.000-07:00

"Heidi is the proprietor of a bar in Berlin. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around and as a result increasing numbers of customers flood into Heidi’s bar.

Taking advantage of her customers’ freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi’s borrowing limit.

He sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At the bank’s corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed.

Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently of course fired due his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi’s bar.

However they cannot pay back the debts.

Heidi cannot fulfil her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80%.

The suppliers of Heidi’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation.

Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non-drinkers."

Going farming

2009-03-09T23:37:00.001-07:00

It is damn tricky to make any money trading in this environment so I guess sticking to simple strategies is probably the best way to try and accumulate wealth while the world is tumbling around you.

Somebody asked me the other day why I am buying equities in a market that continues falling.

That's easy

1. Nobody can pick the bottom to the cycle. We've seen huge sell-offs and maybe we will see more losses but I think that we're getting to a point where some of the good SA businesses are starting to offer some value.

2. I am young enough that I need some kind of long term nest-egg and forced savings method to ensure I'm not blowing what I have grown. If I depend on monthly salary cheques or income from my businesses and I blow all of that, then in reality I am going backwards. By sticking some money into quality, income generating stocks trading well below their NAV I am creating a type of forced savings to carry me through that I won't be tempted to dip into.

Good old Jim Rogers was on Bloomberg yesterday and he said that he reckons it will be the farmers driving the Lamborghini's in the coming years and that kind of ties in with some of my thinking that farming and agriculture are going to be great places to invest over the next few years. I've got a few shares in Zeder - who announced a pretty interesting deal yesterday with KWV - and I'm planning to add to the Pioneer Food Group shares in my portfolio as well as look at adding Crookes Brothers as well.

Otherwise, selling pressure remains constant in the US and the Nikkei bounced off intra-day lows.

Going long

2009-03-02T22:39:00.000-08:00

Geez another rout on stock markets yesterday and the Dow Jones went below our 6800 target briefly closing at 6763 points down 299 points.

Big news of the day on the international front was that AIG reported a US$62bn loss for the quarter and on the local front the speculation is running riot (For the nth time!) that Old Mutual will offload their Nedbank stake.

What was interesting though was that despite the rout on US equity markets, the Alsi only moved down 0.43% and at this very moment in time the Nikkei has given up only 49 points and at one stage was threatening to go green. While the US takes the pain the rest of the world seems to be taking a back-seat ... a chance to look for a short term bounce?

I started going long in late trade on Monday, pretty much across the board.

Long Gold
Long Sasol
Long Old Mutual (yeah yeah I know.... but there results are coming out so its worth a punt)
Long Absa
Long Remgro

You're probably thinking I'm a little loco going out on a limb here and going long but I think one has to stick to their convictions in some instances - I said 6800 was close enough to my short-term "low".

Also watching the Rand / Dollar exchange rate, I think this is where the kicker is going to come from over the next few days. The Rand slipped to R10.50 to the dollar and there doesn't seem to be too many reasons for it to go stronger either. I wouldn't be surprised if it fell to R11 to the dollar by the end of the week and that will provide a bit of upward momentum for our index - particularly if international markets take a bit of a breather...

Will see how it plays out

Fools rush in

2009-03-01T13:37:00.001-08:00

I've been thinking quite a lot about this idea of a "bottom" to the stockmarket.

Logic says you can't pick a bottom and I can accept that, but I also get the sense that market in the short term is tired of all the red.

Many professional traders have been slaughtered in the last few months, institutional investors are forced to keep a certain percentage of their holdings in shares (even if the prices keep declining) and particularly if you look at the South African equity scene I reckon a big chunk of the hot money - the offshore investment funds - have been pulled out of our market.

For my own thinking I've pegged the Dow as falling to between 6500 and 6800. At the moment we're at 7000. Index weighting issues aside, the 7000 level looks pretty tough to break and I wouldn't be surprised to see a bit of a bounce this week.

The banks locally were flushed out on Friday and I suspect we'll get a bit of a relief rally this week. While I don't think the South African banks have seen the worst of it in terms of bad debts, they still remain super-profitable and paying dividends.

Taking a short term view (Close of trade on Friday) - I've taken the following positions:

- Small long positions on Absa, First Rand and Standard Bank
- Small long position Remgro
- Gold to finish above US$950 this week

While I still remain pretty negative about the outlook for equity markets over the next six months, I believe shares are starting to get pretty close to levels where we can absorb some earnings declines from previous high levels.

Let me emphasise one thing though - while we may be getting to the point where local equity markets are looking at historically attractive levels, that doesn't mean they're going up now... that I suspect is still going to take some time (at least the rest of 2009) before people start putting their toes back in the water.

Remember though that we still have an election to get through and plenty of job cuts to come into the system.

Only fools rush in.

Obviously things can change in the blink of an eye so tight stops might be recommended on the above (except perhaps the gold call), but lets see how Monday and Tuesday play out first...

Binary Options Continued

2009-02-28T00:43:00.000-08:00

I know I blogged about it recently but one of my mates had some success with Binary Options yesterday so I thought I'd add his feedback here so that you can make your own decisions.

He basically elected to use the Justrade.com platform and he committed 300 bucks. In two hours of trading he managed to turn it into R670 so he's pretty pleased with it. In terms of the stocks he traded he had REM, FSR and ASA

Apparently he got very lucky in the auction though with a lot of the profits coming from FSR in a last minute trade which made his main profits.

His main concern though was there were insufficient market participants and basically he scalped the market maker at the end. Hopefully this will change as the offering goes along...

... heck maybe I'll even sign up for them one of these days.

He did grumble that the contracts were dated a little too far in advance for such an illiquid market - i.e. the strikes were too far out to generate trade in them - think he said they were priced a week in advance - but a nice profit meant he wasn't moaning too much... plus I think he said the trades were something ridiculous like R1.50 a match which seems really cheap - but if it floats your boat then I guess you can take it...

Anyway that's my public service announcement for the day....

SW

2009-02-26T23:12:00.000-08:00

It's Friday and I thought I would stir the pot a pit... On one of the trading boards one of the posters posted a graph of the Smith & Wesson share price since November 2008...

The share has moved from US$1.50 to US$3.66 (yesterday).

Is this a hint that people are stocking up on guns since the financial crisis started to bite?

Shopping list

2009-02-25T02:28:00.000-08:00

A bit of income is coming into my account again at the end of this month and I'm going to be using some of that cash to add some more shares to my portfolio.

As things stand at the moment, I'll be adding the following shares

PSG: Jannie Mouton continues to buy up these shares left, right and centre. I've previously blogged on why I think PSG remains a good buy and Mouton has been good at returning value to shareholders so I'm going to rely on his judgement here.

Capitec: As far as banking offerings going, Capitec remains one of the most exciting in the sector from a growth perspective. At a time when consumers are looking for the most cost-effective offerings around, Capitec would fit the bill and I wouldn't be surprised if they pick up customers in these tough times.

Altron Preference shares: I indicated in previous posts that I think preference shares are going to be a handy asset class in the coming months and combined with the demand for power related projects, I think it makes sense to add some of the Altron Prefs to the ordinary underlying shares in the portfolio as well.

Growthpoint: Income remains key to growing my portfolio and an investment in a blue chip property offering like Growthpoint will hopefully boost this aspect of my portfolio.

Milkworx: My cheap and nasty turnaround punt. I promised myself I would add a few more of these at 3c so I would be able to participate further in the rights issue.

Beige: Again I've blogged on this company before but my argument was that it trades at a nice discount to NAV and keep tucking a few of them away....