» Simit's Stock Portfolio & Trading Plan
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1. I'm willing to risk at least 50%, while looking for at least 5X return on overall portfolio.
2. Buy at support, or a massive sell-off. Focus accumulation of uranium miners employing ISR techniques, gold miners with unique properties, royalty gold stocks, and firms with top management.
3. If any position doubles in value, sell half.
4. Hold the rest till top of market. For uranium miners, this is at least a price per pound of $140 in the uranium market; for gold, it depends: need to see a new international monetary agreement and some type of resolution to the global sovereign debt crisis.
5. Exit uranium if China and India back off nuclear.
6. Possibly exit on change of management.
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» Trinidad & Tobago raises rate 25 bps, ready for challenge
Jan 31, 2015 - by InformedTrades
Trinidad and Tobago's central bank raised its benchmark repurchase rate by another 25 basis points to 3.50 percent, its third increase in a row, and said it was "prepared to further position its monetary policy stance to address any challenges that may arise from unanticipated changes in global energy markets."
The Central Bank of Trinidad and Tobago, which has raised its rate by 75 basis points since September, added that it had embarked on intensified open market operations to "aggressively" remove excess liquidity from the banking system in coming months and larger and more frequent foreign exchange interventions would also indirectly help absorb some excess liquidity.
The main factors behind the central bank's rate rise was the U.S. Federal Reserve's guidance about its future policy path - which signaled a likely rise in the U.S. fed funds rate to around 1 percent by end-2015 - along with signs that Trinidad and Tobago's economy seems to be approaching full capacity and the positive growth outlook for the country's non-energy sector, the bank said.
The anticipated U.S. rate rise is expected to make U.S. dollar assets even more attractive than TT dollar assets, prompting further capital outflows in search of higher yields, the bank said.
Trinidad and Tobago's economy appears to be approaching full capacity judging from a number of indicators, including the fact that headline inflation is creeping up, hitting 8.5 percent in December from 5.50 percent at the start of the year.
Earlier this week the central bank said it had sold US$400 million to the banking system during January, the largest foreign exchange intervention in a single month to date, surpassing November 2010 when the bank sold $315 million when there was also unsatisfied demand for foreign exchange.
The central bank's strategic foreign exchange management program kicked off on Jan. 15 with a $200 million intervention, then it sold another $100 million Jan. 23 and then $100 million Jan. 28.
Despite sales of $1.7 billion in 2014, the central bank said there was significant unsatisfied demand that carried over into early this year.
The demand for foreign exchange derives from substantial imports of consumer durables that is fueled by elevated domestic liquidity and strong growth of consumer credit.
Trinidad and Tobago's net official reserves amounted to $11.1 billion as of Jan. 28, or 12.5 months of import cover.
The Central Bank of Trinidad and Tobago issued the following statement:
"At its January 2015 meeting, Central Bankís Monetary Policy Committee (MPC) agreed to a third consecutive increase in the ĎRepoí rate by 25 basis points to 3 1/2 per cent. The MPC based its decision on three factors. The first and most influential factor was recent interest rate guidance from the US Federal Reserve about the future path of its monetary policy. The second factor related to signs the Trinidad and Tobago economy seems to be approaching full capacity, and finally, the MPC considered the still positive growth outlook for the non-energy sector despite the steep decline in oil prices.
Following its December 2014 meeting, the Fedís guidance on the medium-term course of its monetary policy, signalled the Fed funds policy interest rate would likely increase to around 1 per cent by the end of 2015. As a result, global financial markets are now expecting the first increase in the Fed funds policy rate in eight years to occur in the second half of 2015. This anticipated increase in US interest rates is expected to make US dollar assets even more attractive to investors than TT dollar assets, prompting additional portfolio capital flows out of Trinidad and Tobago in search of higher yields. Although the interest rate differential between TT- and US-dollar assets has widened somewhat over the past month, domestic interest rates must move from historic lows to maintain a comfortable enough position relative to US interest rates. By January 20th, 2015, the TT-US differential on benchmark 10-year Treasuries stood at 87 basis points, compared with 53 basis points at the end of December 2014.
There are signs the Trinidad and Tobago economy seems to be approaching full capacity. This is reflected in the movement of a number of economic indicators. Headline inflation is creeping up, reaching 81/2 per cent in December 2014 from the 51/2 per cent at the start of the year. The pickup in headline inflation is mainly due to food price inflation, which remained in double-digit territory (almost 17 per cent) for the sixth successive month in December 2014. The acceleration in food prices largely reflects rising prices for locally produced vegetables and fruits. Unemployment is exceptionally low at a little over 3 per cent of the labour force, with the business community reporting shortages of skilled workers which could push up wages in the private sector. Consumer credit continues to expand at a strong pace, helping to finance substantial imports of consumer durables and contributing towards significant excess demand pressures in the foreign exchange market. In the face of declining crude oil prices, the Government substantially revised downwards its energy price assumptions for the 2014/2015 Budget, but it intends to return to the original fiscal deficit target of roughly 21/2 per cent of GDP. This suggests the Government is likely to maintain its expansionary fiscal stance that would further add to elevated liquidity levels (currently around $6 billion) and push up core inflation.
The positive momentum in the non-energy sector has delivered fairly respectable growth for 15 consecutive quarters to December 2014 and the near-term outlook is for continued steady performance in non-energy output. Boosted in part by strengthening growth in the United States and softer oil prices, the tourism-based economies of CARICOM should see some uptick in activity in 2015, providing further support to Trinidad and Tobagoís non-energy exports.
Central Bank has put in place a programme of intensified open market operations to aggressively remove excess liquidity from the banking system in coming months in order to support its Repo rate adjustments. Larger and more frequent foreign exchange interventions aimed at preventing systemic foreign exchange shortfalls will indirectly contribute to absorbing some of the excess liquidity. Central Bank is prepared to further position its monetary policy stance to address any challenges that may arise from unanticipated changes in global energy markets."
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» 199 Days of Hell (Marin Katusa, Chief Energy Investment Strategist)
Jan 30, 2015 - by InformedTrades
Originally Published by Casey Research
Just after I signed the publishing agreement for my first book, The Colder War, I realized how much research I was going to end up doing, specifically in areas that I never thought would be so integral to my subject area: energy and mining. Along the way, I came across some fascinating events that were completely out of my area of expertise but gave me a better sense for the unintended consequences in an historical perspective of the events that led to where we are today.View the Casey Research Guide to Crisis Investing on InformedTrades
One epic event that really stood out for me, which I will discuss today, is the bloodiest battle of all time, to my knowledge. Over 2 million soldiers and civilians died in this one battle that lasted 199 days from start to finish. (If you know of one particular battleónot a waróthat had more deaths, please email me at firstname.lastname@example.org.)
What was the catalyst for the bloodiest and most horrible battle of all time? Oil. Before I get into why it was, I want to present the events that led up to this epic battle.
In 1939, Hitler and Stalin signed the German-Soviet Nonaggression Pact. Hitler focused on Western Europe and on defeating France by the mid-1940s, he became rattled by Soviet expansion in the East, which by this time included the occupation of the Baltic states (now Estonia, Latvia, and Lithuania) by the Soviets.
The Day That Changed the World
A critical, often forgotten event (especially by the French) occurred on June 22, 1940. That was the day the French surrendered to the Nazis and signed the armistice. Four days later, the Soviet Union made a decision that ended up becoming one of the critical turning points of WW II.
Initially, the Soviets planned on annexing parts of Romania via full-scale invasion. Sound familiar? Iíll touch on Crimea later in my missive, but for now, stick with meóthis gets very interesting.
However, the military masters of the Soviet Union recognized that with the fall of France, out went the French guarantee of security at Romaniaís borders.
So rather than actually invading Romania, the Soviets sent an ultimatum to Romania: withdraw from our territories of interestówhich were Northern Bukovina and Northern and Southern Bessarabiaóand avoid military conflict with the Soviet Union. If not, the Red Army will invade.
Germany via the 1939 German-Soviet Nonaggression Pact recognized the Soviet Unionís interest in Bessarabia; thus Hitler became paranoid about the Soviet Unionís expansion from the east to Central Europe. But more specifically, Hitler feared the proximity of the Russians to the Romanian oil fields, which the Nazis depended on.
By early August 1940, these territories that Romania withdrew from made up the Moldavian Soviet Socialist Republic, and they were quickly folded into the Soviet Union.
By late 1940, Hitler made the decision that I believe was a critical turning point of WW II. Initially, Hitler planned on invading the Soviet Union in May 1941, but Yugoslavia and Greece got in his way, and his plans were delayed by five weeks until the Nazis defeated those armies in the Balkans.
The Russian winter came early in 1941, but Hitler believed that the Nazi Germany army was much superior to the Red Army (and they were more superior at the time) and that the Soviets would be defeated before November 1941.
The Nazis sent 3 million soldiers. Stalin met the Nazi offensive with over 5 million Soviet soldiers. I donít know of a larger invasion in the history of mankind.
To put this battle in perspective, itís the equivalent of battle lines spanning from Florida to New York (over 1,100 miles). Also, over 90% of all Nazi casualties in WW II were due to their invasion of the Soviet Union.
By late July 1941, the Nazis fought their way within 200 miles of Moscow; by this time, they had progressed over 400 miles into the Soviet Union in less than a month.
Initially, the Germans made incredible progress. However, heavy rains in early July hampered their speed as the terrain became a mud bath, and by this point, Stalin ordered a scorched-earth policy, where the Soviet troops destroyed all infrastructure, burned all crops, and dismantled and evacuated all factories and equipment via rail to the east upon the Nazi advance.
As winter set in, the progress of the Nazis came to a standstill. On December 7, 1941, Japan bombed Pearl Harbor and subsequently, the United States joined the Allies and entered WW II.
Hitler was well aware that the biggest priority of the Americans upon entering WW II was to defeat the Nazis. He knew he had to bring a quick defeat to the Soviet Union and drastic measures had to be taken.
Hitler believed that rather than attacking Moscow (the heavily fortified capital of the Soviet Union), Germany should go after the Soviet oil fields in the Caucasus. For Hitler, the victory would result in a triple positive for Germany:
- Cut off the flow of oil to the Soviet resistance;
- Divert the oil produced from the oil fields in Caucasus for the Nazi cause and for future battles against the Americans; and
To execute Hitlerís plan, the Nazis would have to control a key industrial city, which happened to be named after Soviet leader Joseph Stalin: Stalingrad (today known as Volgograd).
- Cut off Soviet access to the breadbasket areas of Ukraine.
The Nazis invaded, and Stalin threw everything the Red Army had at this battle, even refusing to allow the civilian population to be evacuated. He believed the soldiers would fight to their death if civilians were in the city.
He was right. Stalinís ruthless orders worked. The Red Army, including civilians who worked in factories made up of men and women of all ages, put up a ferocious resistance doing whatever possible. The Germans had superior weapons, training, and land and air support. To put things in perspective, the average Soviet soldier, upon arriving to Stalingrad, had less than one dayís life expectancy.
The battle eventually evolved into concrete guerilla warfare within the city ruins. The Nazis captured 90% of the city by September 1942 and by this time, they took over 3 million Soviet prisoners of war, most of which never returned alive.
The Sovietsí luck changed on November 19, 1942, when they decided to launch Operation Uranus, which many at the time within the Red Army believed would be their last chance to defeat the Nazis. With 90% of Stalingrad under Nazi command, the Soviet plan was to swing multiple army troops around the Nazis and surround them. It worked.
Up to this point, Hitler publicly made announcements that the Germans would never leave Stalingrad. For most of the German soldiers, this proved to be true.
Rather than having the German troops attempt a breakout (and going against Hitlerís promise of Germany never leaving Stalingrad), they were ordered to fight, even though they were running low on ammunition and starvation had set in within the German camp.
On January 31, 1943, German Field Marshal Friedrich Paulus surrendered to the Soviets.
After the Nazi defeat in Stalingrad by the Soviets, it was only a matter of time before Germany lost the war. Hitler never got access to the oil fields, and over 2 million soldiers died.
Dťjŗ Vu and the Butterfly Effect
Letís reflect back to the events that followed. Hitler became paranoid about the Soviet expansion after the signed 1939 German-Soviet Nonaggression Pact.
Remind you of anything?
We see NATO today supplying military troops and land and air force in the Baltics for similar fears about Russian expansion. NATO sees Crimea today as a reminder of the Balticsí situation in 1940.
Ukraine is not in a civil waróletís make that very clear. A civil war is defined as two or more groups fighting for control of the government. Whatís going on in eastern Ukraine is not a civil war, but rather a war of secession; the two breakaway provinces donít want to go to Kiev. Furthermore, NATO will not stand for a secession.
Putin is facing sanctions from the West and military force by NATOÖ not to mention that oil has dropped in half from over $100/bbl to under $50 a barrel in the last 12 months.
Hitlerís decision, based on actions that essentially involved a small territory (now known as Moldova) sandwiched between Romania and Ukraine, resulted in the bloodiest battle of all time.
But behind the scenes there is always tension and momentum building and waiting for a catalyst to release the pressure that has built up. We have seen this many times in the past where an insignificant event on the global stage puts in motion events with shocking results. But there is always more behind the story than a ďsimpleĒ catalyst or unconnected events.
The Arab Spring eventually brought to the global front a built-up dissatisfaction of many youths and lower-income people of human rights violations, dictatorships, absolute monarchy, extreme poverty, and many other factors. The catalyst for the protests in Tunisia was the self-immolation of Mohamed Bouazizi in 2010.
I recall a specific event I experienced in Kuwait in December 2010, where a Pakistani taxi driver shared with me his story of anger and contempt with the government of Kuwait. I asked him to be my driver for the week, mainly because he spoke English and had been in Kuwait for 10 years and knew his way around, but I also enjoyed his company.
But I got much more than I expected. He took me around Kuwait, where I saw the good, the bad, and the ugly. Every city in the world has those areas you will never see advertised in the travel guidebooks.
Kuwaitóa ďdry country,Ē meaning you cannot buy alcoholówasnít that difficult to find alcohol in if you really wanted it. Yet at what seemed to me to be every hour on the hour, I heard prayers blasting through the air. My taxi driver wasnít an extremist; he was Muslimóand no different than any Catholic, Jew, or atheistóworking his cab 12-15 hours a day, wanting a better life for his family. He was a good guy, caught up in the momentum that was building, which led to the Arab Spring.
The spread of the Arab Spring was muted by high oil prices. That is fact, though not a popular one.
How did Saudi Arabia prevent protests in its kingdom? The House of Saud promised tens of billions of dollars in social programs.
How will the oil-producing nations, such as members of OPEC, Russia, Canada, and Mexico, fare at $45 oil in 2015? How will the African petro-states function?
How will the investors, who are exposed to billions of dollars of debt in the US energy sector (below is the payment schedule of all public companiesí debt payments due over the next 11 years), going to fare if oil stays below $50 in 2015?
History doesnít repeat, but human nature has a repeatable pattern. The growth for energy will only increase in the future, even with energy efficiency improvements.
The fact is, the world will consume more oil in five years than it does todayÖ even though I get many emails a day from uninformed individuals telling me why fossil fuels are awful (and yes, to the 100+ people who have emailed stating that Tesla cars will kill the need for oilókeep on dreaming. And by the way, your Tesla is on average powered over 50% by coal and natural gasóso you all are absolute hypocrites).
The world still needs uranium to power its nuclear base-load power, such as the US, which is currently the worldís largest consumer of uranium, using about 25% of the worldís uranium. China wonít be far behind, and itís catching up quickly.
You Need to Be Brave When Everyone Is Fearful
Investing isnít easy. If you want to do well in cyclical sectors, such as energy or mining, you must be able to buy when the sector is unloved and beaten down. Unfortunately, from a psychology standpoint, itís easier to buy when it feels good.
Here is a list of rules of speculation I like to follow:
- Never put more than 10% of your speculative portfolio into any one stock. True success in speculation is only achieved with risk mitigation and letting your winners ride. While putting all your eggs in one basket theoretically can pay off in a big way, it rarely does so in reality. If your speculative portfolio is worth $50,000, donít put more than $5,000 into any one junior.
- If, for whatever reason, an investment causes you stress to the point that you cannot sleep or are overly distracted from your daily life, sell enough stock to alleviate the situation. Life is too short. Have fun. If your stress level becomes intolerable, youíre either overinvested or speculating just isnít for you. Thatís okay; youíve found out more about yourself. Speculation is a journey where the reward is money and the experience, but itís not for everyone. If your wife, husband, family, or partner is hating you because you lost the familyís vacation money, look back to Rule 1.
- Know what you own and why you own it. The Casey Energy Report posts all relevant news about the companies in our portfolio every Monday and Thursday after market close.
- Use trailing stops and stop losses. For liquid stocks, theyíre important, in my opinion. We work to create for you a balanced portfolio of high-risk speculations along with mid-risk and lower-risk yield plays, and we lock in gains along the way.
The current market is exciting but carries a significant level of volatility. We want to be able to capture the upside and hold on to it, which is best accomplished by locking in gains with trailing stops (we did this very well earlier in 2014). Then we can sit patiently on the sidelines and await a general correction that allows us to get back into our favorite stocks, which we are currently doing.
Thereís a big difference between a trailing stop and stop loss. A stop loss limits losses. Itís the price you set to sell your stock in case the trade goes south on you. A standard stop loss is a sell order thatís automatically triggered if the security falls 20% (or whatever you put in for your stop-loss percentage) below your purchase price. For example, if you bought a stock for $10 and you put in a 20% stop loss, it would be $8, at which point you would lose $2. Unfortunately, stop losses (and trailing stops) donít work for illiquid juniors, so be careful. Thatís why Rule 3 above is so important.
A trailing stop locks in your gains. Letís say you paid $10 for a stock, and it goes to $14. If youíd be happy to sell at $13 and pocket $3 per share in profit, then thatís where you set your trailing stop, in case the price retreats to that level. Of course, if the stock continues to push higher, you can always move your stop along with it, to capture even more profit.
Many of our trailing stops were hit in early to mid-2014, a good indicator that weíve been right to be careful amid this marketís volatility.
- Give your speculation some time to play out, as with trends like the European Energy Renaissance. Such speculations demand that the investor wait for the market to catch on to the potential. This one specific ruleóbe patientóis probably the most difficult of all to stick to. A speculator is his or her own worst enemy.
- Risk mitigation. Reduce your risk while preserving profit by using the Casey Free Ride formula when the opportunity arises. Itís prudent speculation.
Getting Your Casey Free Ride
Number of shares to sell =
Purchase price of stock
x Number of shares bought
Stock price when you want to sell
This is just a short list of many of the rules to speculation.
- Know that youíll make mistakes, and that will result in losing money on that trade. Not every trade will be a winner. But if one or two of the junior high-risk speculations work out, they will make the whole journey more than worthwhile. Iím speaking from personal experience.
With oil at $45 per barrel, could there be massive changes that many arenít expecting?
If youíve been a subscriber of mine, you know how cautious Iíve been since early to mid-2014 on the price of oil.
Whatís Next in the Energy Sector?
In the past four months, Iíve personally invested more cash than I have in the last four years. Could I be wrong? You bet I could, but this is not my first downturn.
I also believe in not owning too many positions, as I donít have many positions either personally nor in the Casey Energy Report. I follow a very disciplined approach, and my style isnít for everyone. Iíll be the first to acknowledge that fact.
If youíre looking for a newsletter that recommends a stock every month on the month and has 50 stocks in its portfolio, Iím not your guy.
But if youíre looking for in-depth research, experience, and exposure to my vast network in the resource sector, then you may want to pay attention to what Iím doing.
Thereís blood in the streets in the energy sectoróand I love that!
Now if you believe that to be successful in the resource sector one must be a contrarian to be rich, as I do, now is the time to become engaged.
Come see what I am doing with my own money. Youíll get access to every Casey Energy Report newsletter Iíve written in the last decade, and my current recommendations with specific price and timing guidance. Itís all available right here.
I canít make the trade for you, but I can help you help yourself. Iím making big betsóare you ready to step up and join me?
The article 199 Days of Hell was originally published at caseyresearch.com.
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