Generally speaking the stock of the week is produced through technical analysis. "The Skeptic" reads the tea leaves after every market session to predict the future. Most of the picks generated are short to intermediate term trades. This week though I bring you a fundamental analysis big picture call.
DBA- Powershares DB Agriculture Fund (current price $26.70). A straight up Ag play, this fund is 25% corn, 25% soybeans, 25% wheat and 25% sugar. A direct bet on higher agricultural commodity prices. Looking ahead a few years out, this is where you want to be. Oil, water and fertilizers- required inputs to produce these crops on an industrial scale have become more expensive. This is a secular trend that will continue for many years to come.
Disclaimer- The author owns shares in this fund. This post is not intended as a recommendation and if you buy these shares you may trigger a plague, thereby reducing demand for these commodities, making this fund a big loser.
Friday, June 29, 2007
Thursday, June 28, 2007
Dead End
In the small corner of the world "The Skeptic" calls home the local government plans to spend $25 million, before inevitable cost overruns, to expand a nearby road. The road in question was virtually a white elephant when it was built just over twenty years ago. Now it receives significant traffic as an outlet for new communities that have sprung up everywhere on every available piece of real estate. It all just sort of sprawls out in every direction. Our closest interstate highway is planned to widen from 4 lanes to 10 in the upcoming years. More millions to be invested in our drive everywhere for everything lifestyle.
These are just plain bad investments. Every person having their own vehicle or two, that they then have to drive to accomplish nearly any errand, is just not sustainable. No way. We are going to have to find ways to drive less and stop investing in our motoring past/present. Instead we need to invest in public transportation and rezone our communities to a walkable scale through multi-use zoning. It's painful to think we might have to change our lifestyles and sacrifice some comforts but we had better start having this conversation now when we can still plan ahead. More likely though that false comfort and blissful ignorance will persist amongst the populous until we have a full blown crisis. The crisis of course is end of the cheap oil era followed by price and supply destabilization. Technology is not going to save us.
We are at an inflection point in the history of the world. We can either look forward or throw good money after bad. Most will not want to admit that we have invested our national wealth in houses close to nothing, accessible only by car, in the twilight of the cheap oil era. Our entire infrastructure is built around our motor vehicles. We are going to need a miracle to sustain this. "The Skeptic" doesn't believe in miracles or fairy tales.
These are just plain bad investments. Every person having their own vehicle or two, that they then have to drive to accomplish nearly any errand, is just not sustainable. No way. We are going to have to find ways to drive less and stop investing in our motoring past/present. Instead we need to invest in public transportation and rezone our communities to a walkable scale through multi-use zoning. It's painful to think we might have to change our lifestyles and sacrifice some comforts but we had better start having this conversation now when we can still plan ahead. More likely though that false comfort and blissful ignorance will persist amongst the populous until we have a full blown crisis. The crisis of course is end of the cheap oil era followed by price and supply destabilization. Technology is not going to save us.
We are at an inflection point in the history of the world. We can either look forward or throw good money after bad. Most will not want to admit that we have invested our national wealth in houses close to nothing, accessible only by car, in the twilight of the cheap oil era. Our entire infrastructure is built around our motor vehicles. We are going to need a miracle to sustain this. "The Skeptic" doesn't believe in miracles or fairy tales.
Wednesday, June 27, 2007
More Gross
Gross on derivatives:
You were wooed Mr. Moody’s and Mr. Poor’s by the makeup, those six-inch hooker heels, and a “tramp stamp.”
Link
You were wooed Mr. Moody’s and Mr. Poor’s by the makeup, those six-inch hooker heels, and a “tramp stamp.”
Link
Monday, June 25, 2007
Anything but Revalue
Check it out. Read this article.
This is a slow motion train wreck worth keeping an eye on. Financial dark matter, hidden from sight and illiquid, is deteriorating. The players in these complex transactions are levered to the hilt. The Bear Stearns fund mentioned in this article started with $600 million in equity and borrowed up to $6 Billion!
This hidden from view market is a ticking time bomb. The players are not marking to market their exposure so until a trade happens or a rating agency downgrades your exotic security of choice you can pretend everything is OK and continue to value your exposure to this mess at par. Hence the reason Bear would throw another $3 billion of good money after bad. Normally when a fund blows up they admit their suckery and liquidate. In this case liquidation would cause all other players to come to grips. So the market is frozen and waiting for the inevitable downgrades which are very slow in coming since the rating agencies get paid by the players.
This is a slow motion train wreck worth keeping an eye on. Financial dark matter, hidden from sight and illiquid, is deteriorating. The players in these complex transactions are levered to the hilt. The Bear Stearns fund mentioned in this article started with $600 million in equity and borrowed up to $6 Billion!
This hidden from view market is a ticking time bomb. The players are not marking to market their exposure so until a trade happens or a rating agency downgrades your exotic security of choice you can pretend everything is OK and continue to value your exposure to this mess at par. Hence the reason Bear would throw another $3 billion of good money after bad. Normally when a fund blows up they admit their suckery and liquidate. In this case liquidation would cause all other players to come to grips. So the market is frozen and waiting for the inevitable downgrades which are very slow in coming since the rating agencies get paid by the players.
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