China gooses Dr. Copper (or CAT?), position update

I’m wary of global economic growth but stimulus is stimulus and I’m not going to Fight the Chinese Fed.   According to Bloomberg a stimulus of the kind that actually builds roads and infrastructure is on its way.

I’m awfully tempted to play this right now…week’s positions have been ho hum; exited soybeans at 1772, got back in at 1738 but losses on S&P Futures (just 7 points, missed getting whacked by the huge rally) evened that out.  My tight stop on Gold hit, which I’m looking to get back into, but slightly ahead on long Corn and short Treasury trades.  Sold APPL for slight profit but it was underperforming S&P on big move today so thought the money would be better put to work elsewhere.

Copper is just over the highs hit twice in July, but employment report looms tomorrow morning.  Close correlation between corn & soybeans means I may lighten either (or both) positions to establish one in Copper.  May also halve position on Treasuries given the risks of a rebound there.

Shorting Copper was one of the great trades I had in August 2011: am I emotionally obscured by it, even if going long?  I’ve bought one contract of Copper at 3.567 which is a way to implement strategies to see how I feel being in the position and brings the contract to various screens of my Interactive Brokers account.

Going long CAT might also be a decent play here but haven’t given it much thought beyond initial feelings about CAT at low valuation and weak arguments to the contrary.

Chart forCaterpillar Inc. (CAT)

FWIW, CAT Jan 2014 120s & 125 calls in the low $2 range…82.5 strike at 13.10 if one feels more cautious.  I’m not sure I have the patience to let that play out.

Small other position update…Selling ZNGA Jan 13 & 14 calls at 2.5 & 3 strike prices is slightly ahead and I’m feeling good about that position.

UPDATE: did swap out of ZN at 132 ‘100 for copper at 3.575 – ZN is still in a range with a big unknown coming up in a few hours; HG is breaking out; Soybeans and Corn feel the risk/reward is better than ZN short term to swap out of them.  Set HG stop at 3.5245; HG & ZN are probably decently correlated in short term so the one breaking out of range right now is more appealing.

Notable Barron’s Predictions September 1

The market strategist survey was as usual effectively worthless with most of the analysts predicting a market very close to where we are today, Treasury bills at 1.75 give or take, and without decisive opinions about whether the “fiscal cliff” will be avoided.  Only Goldman Sachs stood out with an end of year S&P prediction of 1250.

Steven Auth of Federated recommended CAT at 84.47, QCOM at 61.20 and Daimler DDAIF at 48.85 (“luxury goods”).  Robert Doll of Blackrock recommended Chevron CVX @ 110.93, ConocoPhillips COP at 56.11, and UnitedHealth UNH at 54.69, Adam Parker of Morgan Stanley concurred on Chevron, Bristol Myers BMY at 32.8, AmerisourceBergen ABC at 38.1

I like the CAT call — 8 p/e also favorably ranked at Valueline — and this is on my watchlist after any market drop but low priced enough perhaps just to jump in.  Continue reading

“Hunger Games” in Forbes September 10 2012

In the Forbes print article “Hunger Games” by Steve Schaefer five stocks were recommended playing on the theme of drought:

Agrium (AGU) @ 100.37

CF Industries (CF) @ 216.09

Market Vectors Agribusiness ETF (MOO) $50.79

Tractor Supply (TSCO) @ 92.28

Tyson Foods (TSN) @ 15.26

Aside from a dire quote from perennial bear Jeremy Grantham about a “chronic global food crisis unlikely to fade for many decades” there isn’t much support for the described trend.  If it holds, the picks themselves may be good.  Tyson is probably questionable since feed costs will rise — one source of their current laggardry.  The fertilizer stocks go in and out of vogue and have had quite a run this year and this summer.  Chart for Agrium Inc. (AGU)

Chyanne Fickes of the Stone Agribusiness Fund is quoted these stock remain “extremely cheap” which strikes me as suspect: Agrium is up 10x since 2003 and had not moved much from 1995-2003.   This fund the article notes has $10 million under management — which one might have prefaced by saying puny.   Their results at least as expressed in (Canadian) dollars per share is not remarkable (were there large dividend distributions?):


Guess one could have just bought Agrium.

AltaCorp Capital analyst John Chu says farmers are planting more corn than say soybeans which requires seven times more fertilizer which is a compelling point that can be matched against actual acreage planted.  In this earlier estimate on Seeking Alpha, Corn was indeed at “a 75 year high” but only a 4% acreage gain over last year in the US versus a 1% drop in Soybeans to 73.9m acres.  Does that move the needle?  The grain complex moves together; all else being equal one might suggest more Soybeans next year if there are lower fertilizer crops.

Deere (DE – 73.81) and Caterpillar (CAT – 86.01) were notable absences from the list of recommendations which if anything earns points for freshness.  In crops that’s paramount but will put their quotes here for comparative measure.

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