KAR, ACL, FB:US, Coffee

AUD/USD (SHORT) – at 77.40 , stop 79.50

Dow Jones September contract (SHORT) – average 17,740, stop 18,900

KAR – I purchased this at 1.44. Refer below via the NGE heading for more comments.

ACL- I wrote about this earlier in the year following Sandon Capital in this and bought mostly at 9.3 cents, to receive exactly the same in a capital return shortly after. So the remaining shell was the upside. Sandon since sold under a cent and are out of the shell. There was a surprising move to 1.5 cents so I stuck around for a bit. Looking at their quarterly though cash is leaking and may only be 0.008 cents. I sold last week at 1.1 cents so the return of 13 % in under 6 months in a low risk play was pleasing. My worry last week was I don’t know the share register well so they may just be lining their own pockets, just not sure.

Coffee Robusta July contract – trading in robusta coffee futures might freak out a few readers however here it goes! The markets that have come to life for investors since mid-January are those that were very hated. Think gold, oil, iron ore, the AUD, stock markets of Brazil, Russia. Absolutely friendless at that stage. We hit a point around then that most concluded the fed’s dream of normalizing rates to any meaningful extent was just that, a dream. Hence investors are willing to look for downbeat markets to mean revert and capitalize on the world’s printing presses being in overtime, because the U.S. Indices have lost momentum for a few years now. Soft commodities are an ugly duckling that may have their time in the sun. They are renowned for sharp sudden trends but try looking at many they have been trending slightly down, even after being already at depressed levels, and doing their best to destroy any trend follower by chopping around in undefined ranges. It could be a time for a change and the graph on robusta coffee has bounced and held for a little while poking out of a clear downtrend. I am long at 1594 with a stop at 1274. For those wanting more specifics on robusta coffee itself, it won’t be hard to track down stories that the production prospects also look sick at the moment. By most time periods the performance has been poor historically now because of the sharp falls. I may even store some bags soon myself this year where I don’t get screwed on IG markets roll costs! When Jim Rogers is getting laughed at on the internet for being long soft commodities the last few years it may be the signal to get in. His interviews are very repetitive and I think he has called things quite poorly for over five years but over the longer journey one should respect his views.

Facebook – I could just be very brief here on the short trade and summarize as the following. Wrong. Perhaps it is not that simple and it wouldn’t surprise me if the stock still did fall from here after their stellar results as that has been a pit of a pattern with their quarterly beating of estimates afterwards. However, I have covered this short with a percentage loss of 7%. If someone had of handed me the actual quarterly numbers last week I would have considered it possible for the stock to even go as high as the $125-$130 range. So stopping out at $119 didn’t seem so silly. Basically my concerns are unfounded at this stage with the company, and the stock has broken through all-time highs so the initial thesis on the trade has passed by. At least I was a few percent in the money before the results so this helped minimize damage on the trade. Maybe I was spending too much time browsing Facebook and didn’t bother to research this trade well enough! They delivered on absolutely every single measure.

Shorter term trades / derivatives – It has been an active week in this area so thought I would expand a little. Over the long term I am only barely making a profit on these types of activities through IG markets controlled risk betting. So why bother? Often taking these as portfolio protection, it usually stops me from selling good stocks because I fear the overall markets are a bit frothy, which even in turn can assist the tax situation and hold onto winners greater than one year. Maybe a long time ago I would have feared a correction and taken very juicy profits at the time in something like SSM at 40 cents, and now it is 80 cents. To break down this year, despite some losses on these instruments and the recent Facebook loss, as I write my record is about break even. I am comfortable with this as I have enjoyed extra free downside protection on the portfolio despite it not really being needed. If I start to rack up losses on this type of trading I would certainly reconsider, I at least am in control in terms of guaranteed stop losses. In short it helps me deal with the market timing problem that reminds me of a famous Peter Lynch quote “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves”. Hopefully I become more profitable in this area but the shorter term trading should be in the context of my overall positioning, and I am an investor rather than a trader.

 

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