Hu's on first but what's on second?
Jittery investors sold in earnest this week on speculation that China is going on some kind of austerity kick, destined no doubt to wreak havoc on the civilized world. That's probably the lamest selling excuse I've ever heard for locking in some profits but if you need to have one, there it is.
Guys, if you want to take some money off the table, just do it.What's with all the 'good reasons'? Nobody goes to prison for taking profits, assuming they're legally obtained, and even that is questionable. Honestly, there's something downright Presbyterian about our attitude towards money. Profits should be a healthy, wholesome, joyous thing, like sex. Why do we feel so guilty and sinful about it?
Some commentators, Steve Sarnoff among them, were quoting 'negative divergences' this week to justify the possibility that a nasty correction is looming. Now there's a Calvinist idea — punishment for our excesses. Well, ok … maybe he's shorting the Dow, who knows. But I'd characterize this week's market action as a post-Xmas rally breather instead of a harbinger of doom.
I mean, how bad can it be when you have GE outperforming the S&P500 for the first time since 2004 and raising dividends? Plus some $172 billion in backorders? Do those look like Depression era numbers to you? Arlington Asset Investment Corp, which I've been following of late, did very well this year making leveraged investments in government backed mortgages — yeah, I know — and even declared a $0.60 per share quarterly dividend which worked out to something like 10% of its stock price on an annualized basis. I wouldn't be surprised to see a split in the months to come: AI only has 7 million shares issued and trades at north of $23.
Having said all that, however, I'm not particularly bullish on precious metals plays going forward, at least not yet. My idea of a 'bargain' is one in which you pay far less than you expect to, and I like to be as pleasantly surprised on the buyside as the sell. Hence, I'm waiting for if and when prices get way, way, way below support … and if it doesn't happen, well that's my burden to bear. I'll never cross the street for a deal.
I've only made one buy since last September, when I picked First Majestic, Fortuna Silver, Silver Wheaton , and Ontario gold play Lakeshore Gold. (They're all in the money btw, and even BP which I pitched last summer). Over the holidays I got a piece of Ivanhoe Energy right after they released the first of three sets of drilling results (the third is still pending) from a natural gas play in China. Ivanhoe is a Robert Friedland deal with some impressive oil sands/gas properties in Canada and China, and while the environmental permit on its (estimated) 400 million barrel Tamarack property outside Fort McMurray is still 18 months away, the company's Zitong block discovery in China's lucrative Sichuan Province is very much in play: Last week it announced gas from the Yixin-2 well had intially flowed at 13 million cubic feet per day, and averaged 9 to 10 million cfpd during the subsequent test period. This will be the first of many such wells to come in that region I hope. Natural gas pricing is due for a spike as well.
Apart from energy in 2011 I'm also bullish on tech and financials. The corporate world is incredibly cashed up after two years of profits and practically zero spending and I believe this is the year they'll loosen the purse strings. But they still won't be hiring. Instead they'll be spending on tech — Steve Job's latest gadgets, enterprise wide software, Cisco's bits and pieces. And I wouldn't be surprised to see a variety of heavy industries retool on a massive scale.