TFN eNews 09/29/2009: A commodity of a disreputable sort — and China’s buying with both hands!
Published via e-mail broadcast on September 30, 2009
In today’s TFN eNews:
* A profit taken is a loss avoided
* Sponge-tech a buy at current levels?
* A new twist to the Commodity Carry Trade
Dear TFN eNews reader,
“I’ve been reading of a possible correction coming in the bull market,” writes TFN eNews reader J. this morning. “Whether it happens or not, I wonder if you could let your subscribers know if they should wait for instructions on what to buy or keep buying the current recommendations on the big dip. Thank you for all your good advice.”
True, there are quite a bunch of double-digit gainers in our Hot Stock Confidential list of open positions, and of course, among our free TFN picks.
As we head into October, I admit to feeling restless. October and November have bad connotations for me — not simply because of last year’s debacle. And while some of our open picks haven’t quite reached their full potential yet, a profit taken is a loss avoided.
But the 2009 market so far has defied my prevailing glass-half-empty outlook. Considering that I was about ready to close down shop last November because of mow low expectations for this country’s economy and market, I’m sometimes stunned that we’ve generated 63 double-digit gainers using our relatively basic approach to investing.
Back to my outlook: I believe that reports of a recovery in the U.S. economy being imminent or already underway to be politically motivated. They’re either false, intentionally misleading, or parsed in a lawyerly fashion.
Their value as valid indicators to me is nil.
This is not to say that there isn’t potential for bullish momentum. Investors starved by bad news and lousy returns on T-bills are likely to latch on to numbers and short-time trends like drowning men clutching amateur rescuers. Some key companies may report better-than-expected earnings. There’s considerable potential that politics will fuel a revival of alternative energy stocks. And the magic level of a Dow at 10,000 is just a few hundred points away…
So as we proceed with caution, rest assured your TFN team will be watching our open positions like hawks… ready to alert you when things start going downhill… or the way we initially projected. Our open positions are always updated with recommendations whether to hold or buy more.
We won’t change that practice!
I’ve also asked our resident options guru Andrew Snyder to come up with a simple put-option play you can buy as an “insurance policy” against drastic drops in the market.
Like all insurance, this kind of option play may eventually expire worthless. (Much like you hope your family won’t cash in on your life insurance policy any time soon!)
I think we should have this ready for you on Friday!
*** Blame it on my kids, but whenever I see the name of this stock, I hear the jingle of a popular cartoon spool off in my head.
You’ve probably watched the meteoric rise and Miltonian fall of Spongetech Delivery Systems, Inc. (OTC:SPNGE) with mixed feelings. Sure, we took over 50% gains on one half our position. But what good is that when the remaining chunk drops by another 50%?
SPNG is sure getting a lot of attention as the Street awaits the company’s latest financial statements and 2008’s re-audited figures. With a company as small and volatile as SpongeTech, the action has stoked the rumor mill.
It’s important to remember this stock is well-shorted, with a volume-weighted average short price of $0.09. At current levels, those investors are sitting on profits and are likely to back out of their positions in light of recent revenue growth initiatives. According to Andrew Snyder, SpongeTech is a stronger buy than ever, especially at current levels.
*** China spent billions in the commodities markets over the past year. Now it’s unloading $2 billion into a commodity of different sorts.
“China’s digging its hands even deeper into the pockets of the American economy,” said Andrew Snyder today. “While investors still debate a tire tariff, Beijing is de-nationalizing another $2 billion worth of American assets. This time the cash-heavy country is buying a commodity of different sorts:
Distressed assets.
While not a traditional commodity like gold, aluminum or crude, debt-ridden assets became bundled into the class during the latest investment cycle. Now the opaque investments appear, at least to China, as one of the most undervalued assets on the market.
“China Investment Corp., the same $200 billion sovereign investment fund that recently shelled out $850 million for a stake in commodity-giant Noble Group, plans to invest up to $700 million in three separate distressed-asset funds.
“It’s a deal backed by an ever-desperate U.S. Treasury designed to prop up an industry that refuses to budge on its own. By unloading the assets to the relatively risk-adverse fund, the funds find well-needed liquidity, while China gets a shot at strong long-term growth potential.
“Even better, it will own an even larger part of the American economy.
“This is yet another extension of what I have dubbed the ‘Commodity Carry Trade’: China is desperately pouring the cash generated by its massive trade surplus into American assets as protection from a weakening dollar.
“Frankly, I’m not sure what aspect of this deal to be more frightened of, China’s increasingly large holding of American assets or the Treasury’s need to quietly back the deal.”
You’ve got to finish reading this article: http://www.todaysfinancialnews.com/gold-and-resources/big-money-china-buys-a-commodity-of-different-sorts-10095.html
*** 3 tiny stocks you need to own now!
This upstart financial information network has generated 63 double-digit gainers so far in 2009! Find out what “ridiculous” method they found to reliably pick winning stocks. You need to read this! http://www.todaysfinancialnews.com/HSC/ridic/EHSCK901.html
Quote of the Day:
“President Obama’s efforts to be the anti-Bush have taken us to a strange moment in history in which the United States is being scolded by France for a lack of resolve on foreign affairs.”
– Chris Stirewalt, Washington Examiner
Recommended Reading:
No bailout needed: Good news from the rags
Q4 Update: TFN Complete Guide to Stem Cell Stocks under $10
The 3 Best Chinese Stocks Under $5!
Today’s Top 3 Financial News Stories:
Moneynews.com – Schiff: Dollar is the New Peso “A weak dollar and low U.S. interest rates push the greenback toward becoming a carry trade currency, which, like the yen for many years, attracts investors to borrow it cheaply to invest elsewhere.”
CNNMoney.com — Consumer confidence dip is bad holiday omen “A key measure of consumer confidence fell in September, after a gain in the previous month, raising concerns about retail sales in the upcoming holiday season.”
Bloomberg.com — China Stocks Fall for Third Day; Brokerages, Airlines Decline “China’s benchmark stock index fell to a four-week low, led by brokerages and airlines, as trading waned before a weeklong national holiday and oil prices jumped.”
Cordially yours,
J. Christoph Amberger
Executive Publisher, TodaysFinancialNews.com
Next Article: TFN eNews 09/30/2009: Better than stocks? Safer than gold?
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