Monday, March 07, 2011

7 March 2011 The Tightrope Higher and Higher


7 March 2011 The Tightrope Higher and Higher

Philippe Petit. Ring a bell? Ok another hint, 1974 World Trade Towers. Yeah that was him. The guy tight roped across between the two towers and was quickly arrested. He actually danced and crossed the chasm about 12 times. (All charges were eventually dropped, because American’s are not allowed to arrest French people. Not really, I just made that up.)

Today was kind of like that in the markets. We went up then down then down but on relative small volume. Oil was the wind between the towers today. Ya see a guy like Philippe practices at ground level until they get the hang of dancing on the wire. Just like Philippe, we began our tight rope walk 2 years ago this week. For you Dow Hounds, 2 years ago today we had a low of 6,515. We have been moving the tightrope up higher and higher and until the last couple of weeks we have not had too much wind or too many arresting officers up here to take us down. Yeah the police helicopter buzzed us a couple of time in June 2008, bring the Dow down from a high 11,200 to 9,656. And yes we had that huge gust of wind on May 6th with the flash crash but that just got the crowds heart flowing. Since then, it has been higher and higher. Now we have the New York Port Authority (Libya) threatening to cut the wire between the building with 120 barrel oil. You see they produce and ship 1.6 million barrels of oil a day. Their current social unrest has cause that amount to drop to about 600,000 barrels a day. What we are finding out over the weekend is that Saudi has offered to fill the gap as they have an excess flow of about 3.2 million barrels a day so they can make up the one million shortfall without too much problem. However their oil is stinker than Libyan oil. Saudi Oil has a much higher sulfate content than Lybian Oil and refiner will need makeover to refine the stuff. That is why we are seeing the kick in oil prices. At 120 or 125, we could see the tightrope pop and watch Philippe scramble to stay somewhere near the top of the Tower.

PIN Action In the Portfolio

SMTC Semtec. Keep an eye on this Feb 28 POTD as it getting dirty because of some sector downgrades today. (Wells Fargo bad mouthed the whole sector today saying it has gotten to high too fast. Interesting reason to downgrade. More smart phones and tablets being produced than ever before. More chips used in more applications than ever before.) Fundamentally we are not worried, but we will get out at $21.75 if that number comes in. Until then watch the market TREND and consider buying on this 3% dip. Again this is not to be confused as buying on the way down. We will respect the 21.75 stop as we accumulate the stock.

We added significantly to our JJG positions and DBA positions. Whether you are a inflation worrier or not, 110-115 oil will cause prices to raise. This is a good insurance play for that scenario, although both ETFs were down today which makes us think there was some profit being taken.

With no end in sight of the Lybian mess, it is time AGAIN to check out the stinky business of fertilizers. Add these to your watch list and begin your homework as there will be big winners in here:

POT Potash Corporation of Saskatchewan Inc. produces and sells fertilizers and related industrial and feed products primarily in the United States and Canada.

AGU Agrium Inc., together with its subsidiaries, produces and markets agricultural nutrients, industrial products, and specialty products worldwide, as well as involves in the retail supply of agricultural products and services in North and South Americas.

TNH Terra Nitrogen Company, L.P. produces and distributes nitrogen fertilizer products to agricultural and industrial customers.

CF CF Industries Holdings, Inc. manufactures and distributes nitrogen and phosphate fertilizer products in North America and export markets.

LXU LSB Industries, Inc., through its subsidiaries, engages in the manufacture and sale of geothermal and water source heat pumps, air handling products, and chemical products.

MOS The Mosaic Company engages in the production and marketing of concentrated phosphate and potash crop nutrients for the agriculture industry worldwide.

SYT Syngenta AG, an agribusiness company, engages in the discovery, development, manufacture, and marketing of a range of products designed to enhance crop yields and food quality worldwide.

IPI Intrepid Potash, Inc., together with its subsidiaries, engages in the production and marketing of muriate of potash or potassium chloride, and langbeinite under the Trio brand name primarily in the United States.

CGA China Green Agriculture, Inc., through its subsidiaries, engages in the research, development, manufacture, and distribution of humic acid based compound fertilizers in China.

YONG Yongye International, Inc., together with its subsidiaries, engages in the research and development, manufacturing, and distribution of fulvic acid based liquid and powder nutrient compounds for plant and animal feed used in the agriculture industry in the People's Republic of China.

SQM Chemical & Mining Co. of Chile Inc. engages in the production and sale of fertilizers and specialty chemicals in Chile and internationally.

We never caught our RAIL play from yesterday so we are not in the stock. We will do more homework and see if its worth the 28.50 entry point.

The rest of the week ahead.

Tuesday we really have no data points. A retail report comes out but should not be a market mover. Our guess is the market will be watching oil oil and more oil. Tomorrow, EBIX reports. The consensus figure is 33 cents a share. WE OWN THIS. We will be disappointed with anything less than 40 cents. There are no other movers tomorrow, but for fun watch DKS Dick’s Sporting Goods for a slight miss of the 72 cents a share. That miss should be margin related.

Wednesday you have the MBA (Mortgage Banking Association) report for new mortgage applications. Look for some good news there, but not enough to get Lybia off our minds. WE OWN THIS. SMTC Semtech reports on Wednesday and should beat the 41 cents a share guess. Also watch MCP Molycorp. It is a rare earth mining company and has been in the news over the last year or so because of China’s stranglehold on rare earth minerals. It may be a bit early, but we think it should be estimates of a 7 cent loss. Look for a break even and a jump in the stock.

Thursday we will hear the BOE (Bank of England) say nothing about raising rates. The International trade gap for the US will gap to the upside due to oil pricing. The guess is 41. billion which was close to the previous month. We think we will see 42.3 billion and a little stinger to the market. Jobless claims should remain below the 400,000 figure. We don’t see any movers on the earnings front for Thursday, but for fun watch MTN Vail Resorts. They are good at making money, it is a world destination, they have lots of snow this year, look for a big beat of the 1.38 a share. We are thinking 1.45.

Friday we have a retail sales report, well it’s the retail sales report as put together by Census division of the department of Commerce. The guess is a 1% jump, less when you back out vehicles. We think we’ll see a little stronger number, but nothing to move the S & P or DOW number. There are no mover’s on the earnings report on Friday.

He is our guess for the S & P 500 at the end of the week. We are already down .83% today as we closed at 1,310. 1,287 is where the week will end. A 2.6% drop due mostly to 115 dollar a barrel oil, 4.50 gas, and Lybian unrest. We are counting on at least a point down when China shares some of its consumer pricing and buying data on Friday.

We have not forgotten about the follow up of You Can Too, we just have been busy. We are now living in a hotel for a couple of weeks as there is some heavy duty painting going on at the house so bare with us. We are attempting to publish from an iPad and it's a bit clunky, for me anyway.

Salve Lucrum


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