Equities Analysis of Australian Companies

Is Gold a Safe Investment for Australians?

2012-01-08T22:08:00.000+11:00

If Australians think it is safe to buy gold, think again!

Some background: Why would people even consider buying gold.
Given the bleak outlook on the economy from Europe, and the US, the stock market is falling. But the biggest reason for actually buying gold is the deliberate devaluation of currency, US, Euro, China and others. What they call Quantitative Easing is actually printing money. In the end, this means the value of the currency is decreased. If this keeps up, think about, hyperinflation as in Germany 1920's, Argentina 1980's, Zimbabwe recently.

So avoid the devaluation of your money, people suggest to buy gold. The reason is gold is the real money - it is hard asset and recognizable as the default money for thousands of years. While currency or paper money is hyperinflated, then if people have already changed them to gold, then they can still hold the real value of their assets.

There is only ONE problem. In the 1930s the US government confiscated the gold possessions of its citizens. This is blatant seizure of private property. (This is well known and can be googled to confirm). Yet this was done. Perhaps one reason is to increase the legitimacy of the new US paper money.

But Australians should be safe right? The government would never do something like that? Even so, how many Aussie gold investors know that it is written in Australian Law, that the government has the right to, if it chooses, to require its citizens to surrender their gold. This is part of the BANKING ACT 1959 Part IV. An excerpt is shown below:

-------------------------------------

BANKING ACT 1959 - SECT 42

Delivery of gold
(1) Subject to this Part, a person who has any gold in the person's possession or under the person's control, not being:

(a) gold coins the total value of the gold content of which does not exceed the prescribed amount; or

(b) gold lawfully in the possession of that person for the purpose of being worked or used by that person in connexion with the person's profession or trade;

shall deliver the gold to the Reserve Bank, or as prescribed, within one month after the gold comes into the person's possession or under the person's control or, if the gold is in the person's possession or under the person's control on any date on which this Part comes into operation, within one month after that date.

(1A) A person is guilty of an offence if:

(a) the person fails to comply with subsection (1); and

(c) there is no instrument in force under section 48 exempting the person from the application of this subsection.

Technical Analysis - Bird Flu, Biota and Uptrend

2012-01-04T23:01:00.001+11:00

A Bus Driver in Southern China Dies of Bird Flu. Could the Deadly Virus Strike Again?

Hong Kong Urges Bird-Flu

With all the news of Bird Flu perhaps it is time to look at Biota again.

A quick technical look on the graph below shows that it is possibly developing an uptrend. Without any complex technical indicators, price action alone does seem to indicate that things can get interesting and worth a more detailed look. Recall the Weinstein method and the CAN-SLIM method talks about getting in early at such price signals.

The pink smooth curve is the stop signal, the green curve is the moving average, black curve is the main price action.
The smaller graph below is a proprietary indicator showing that it is in an uptrend (RT value > 0.0)

Special Report on Financial Stocks - yourmoneymag

2011-12-22T22:29:00.001+11:00

A Special Report on Financial Stocks is available here:
http://resources.keymedia.com.au/ymo/2011/Issue8/FinancialStocks.pdf

It is published by yourmoneymag.com.au and the analyst contributing to this report are:
Stan Shamu - Australian Stock Report
Benny Sada - Australian Stock Report
Dennis Ng - Lincoln Indicators
Julia Lee - Bell Direct

To summarise, the list of stocks picked by this report are:

Commonwealth Bank of Australia (CBA)
Westpac (WBC)
Australia and New Zealand Banking Group (ANZ)
National Australia Bank (NAB)
Credit Corp Group (CCP)
IOOF Holdings (IFL)
MyState Limited (MYS)
QBE Insurance Group (QBE)
Bendigo and Adelaide Bank (BEN)
Macquarie Group (MQG)
Suncorp-Metway (SUN)
Bank of Queensland (BOQ)

Actually this covers most of the big financials in Australia. But in any case, the report has a pretty graph for each as well as a table of key financial ratios.

Technical Analysis - 21 Nov 2011 - Dow and All Ords with Gann Angles

2011-11-27T16:27:00.000+11:00

Since the last update to the Gann charts of the Australian All Ordinaries (XAO) and the Dow Jones Index (DJI), Greek has changed Prime Minister, Italy took over the bad news, Italy changed Prime Minister, Germany failed to sell all its bonds and France is in risk of a ratings downgrade. On either side of Europe, the US SuperCommittee failed to agree on debt reduction plans while the growth in China is in serious doubt.

All these news within two months and it looks like the world finance system is beyond hope. So what do the charts tell us?

The charts below are weekly charts so within the last 2 months there is about 9 new points on the graph. Both the All Ords and Dow Jones show a similar characteristic. Both when sharply up and then both went sharply down. Both have not even reach the resistance level talked about in the previous blog post.

The summary is that, sure the trend is sharply down. But it has broken no major Gann resistance angles yet and have a slight way to go. So although the news sound hopelessly indicating a financial meltdown, the charts say Not Yet.

An Article on Pharmaxis, Iinet, Channel Ten, CSR

2011-10-19T22:22:00.000+11:00

For those with an interest in Aussie shares, here is a news article that talks about for mid-caps. These four companies are almost household names here in Australia.

http://www.smh.com.au/business/buyup-revelation-lights-iinets-share-fuse-20111018-1lyo9.html

I know a lot of you are not in Australia but perhaps they may be a reflection of their industry worldwide.
I'll provide a bit of background here.

Pharmaxis - $3.00 stock crashed to 1/3 to less than $1.00. One of its promising drugs for the lungs and respiratory system was in Stage III and got knocked back in the trial for some technical reasons. It was not that the drug has failed. Details are a bit murky - but it may still hold promise. As in all biotechs, this is speculative.

Iinet - Internet Provider. At one point was in deep financial situation. Parts of it shares was bought up by smaller rivals a few years ago. Now there seems to be more shareholding rebalancing as small rivals consolidate their holdings. More action to come maybe.

CSR - is an established Aussie company that recently divested its sugar division with a handsome capital return. Although the building industry is not crash hot, more buildings are needed. And there may be more corporate action to come.

Ten - Aussie TV channel. Not impressive. Nothing that special as a business. Entertainment at risk from new medium. As a television viewer, this channel is not that great anyway, its lack of respect for viewers is shown by simply cancelling certain TV shows in the middle of the season. Don't think it is that popular among viewers.

Technical Analysis - Dow and All Ords with Gann Angles

2011-09-28T00:23:00.000+10:00

It's more than half a year since the last Gann Analysis. Things have certainly taken a turn for the worse. The doomsayers say that the bottom is still far away. The optimist are trying to find any shred of evidence to the contrary. So what does the Gann Angles tell us? Below are the weekly Dow and All Ords with their updated angles.

The Dow is very interesting in that it had stuck to the line of Gann +10 for about a year and showed signs of coming off this March. Now it has definitely broken off the Gann +10 angle. Question is how far will it drop. According to Gann, it would tend to drop to the next support angle. However the Gann +5 angle is still quite far from reach. If this is simply projected, the Dow may fall to 8000 by March 2012.

The All Ords has clearly broken the Gann 1x1 drawn from the low of 2003. The Gann 1x1 is the strongest or most stable angle. The other closest angle is the Gann +2.5 (Pink) from the low of 1991. This angle is significant in that it was the support for the 2009 low from which the market made a strong recovery. Will the same angle provide a resistance for the current trend? If yes, then the bottom of the current market will be about 3750-3800 in mid October 2011. Looks like we are almost there! If it does not support, then it will fall a long way more.

Interestingly, if Oct 2011 is to be the bottom, this would break the trend that the market crashes in October. In addition the Dow Graph would be resting on the Gann +7.5 angle (not drawn, but imagine between the +5 and +10 angles) in Oct 2011 at about 10,100-10,200.

Silver Companies in Australia

2011-07-19T00:48:00.000+10:00

.... ongoing article .....

This article looks at Silver exploration or mining companies that has the potential to take off as the price of silver resumes its upward path. The gold to silver ratio is at a historically high number. When the silver price catches up to the historical average ratio, silver companies would follow.

The following are some silver companies to consider:
White Rock Minerals WRM
Silver Swan Group SWN

From just a purely technical analysis view, WRM seems to be stabilising while SWN had a long downtrend which shows sign of slowing. Given the silver price is on the rise over the last week, it may be time to watch these two closely.

WRM chart

SWN chart

Shale Gas - the Next Energy Revolution

2011-07-09T01:25:00.007+10:00

Shale Gas - at this point in time, has not exploded into the main investment media. Yet those who are familiar are already jumping in the bandwagon. In Australia, Coal Seam Gas investments have taken off substantially in the first decade of the 21st century. Rare earths has exploded in terms of investment at least between 2009 and 2010. It is both too late now for investors to make 1000% gain. However, Shale Gas is approaching the stage where it is almost starting to grab investors attention.

This article is an ongoing development. Details of the Shale Gas can be found elsewhere. This article is a collection of loose notes about potential investments in Shale Gas in Australia.

Adelaide Energy board urges no action on Beach Energy bid
BY: TIM BOREHAM From: The Australian November 07, 2011 1:05PM

IN pitching a $73 million offer for its junior Cooper Basin partner this morning, Beach Energy is trumpeting its faith in the potential of the shale gas tenements in which Adelaide Energy has a 10-20 per cent interest.

Adelaide has been free-carried so far, but Beach chief Reg Nelson warned his more substantive outfit would turn off the funding tap, leaving Adelaide, which has $11m of cash, to pay its share of the expected $200m exploration bill with more capital raisings.

Hail shale gas, a force in the energy balance
by ROBIN BROMBY From: The Australian July 25, 2011 12:00AM

"SHALE gas, while now contributing to a gas glut in the US, may be looming as one of the most important developments in the world's energy geopolitical balance.
Gas supplies are a raw nerve issue in Europe, which remains concerned about its dependence on Russia, a nervousness exacerbated by the disruption of gas supplies from Libya earlier this year."

July 13, 2011

NEW STANDARD AND CONOCOPHILLIPS EXECUTE HEADS OF AGREEMENT
TO FARM INTO GOLDWYER PROJECT
(ASX: NSE)
New Standard Energy Ltd (New Standard) announces that it has entered into a non-binding Heads of
Agreement (Heads of Agreement) and exclusive negotiating period with ConocoPhillips Australia SH4
Pty Ltd (ConocoPhillips), an affiliate of global energy company ConocoPhillips [NYSE:COP].
The Heads of Agreement sets the framework for ConocoPhillips to farm-in and jointly explore, New
Standard’s flagship Goldwyer Project in the Canning Basin, Western Australia.

BHP buys Petrohawk Energy for $US12bn to boost shale gas exposure
ROBB M. STEWART Dow Jones Newswires July 15, 2011 10:11AM

Some Aussie firms position themselves as early movers in shale gas
The Australian March 15, 2010

The article above lists the following companies with Shale Gas interests:
Beach Energy BPT
Sundance Energy SEA
AWE
New Standard Energy NSE
Molopo Energy

Future is hale and hearty for shale gas
Herald Sun February 23, 2011

More companies mentioned here with interest in Shale Gas:

BHP paid $7.45 billion for US shale gas field

Santos STO

Beach Energy BPT

Lake Oil

Somerton Energy

AWE

Buru Energy

Central Petroleum

Some more companies which are speculative and may have interest in Shale Gas:
Cooper Energy COE
Senex Energy SXY

Gas giant BG gets into Cooper Basin shale
Global gas giant the BG Group has joined up with local junior Drillsearch Energy to develop shale gas resources in Australia's Cooper Basin.

Analysis

The main areas with Shale Gas and potential companies with tenements appear to be:

Perth Basin - Iluka (ILU), Santos (STO), Origin (ORG), AWE, Norwest Energy (NWE)

Canning Basin - Oil Basin (OBL), Buru Energy (BRU),

Maryborough Basin - Magellan Petroleum (MGN), Blue Energy (BUL)

Cooper Basin - DrillSearch(DSL), Inanmincka (INP), Linc Energy (LNC), Beach Energy(BPT), Adelaide Energy(ADE)

News: Rice, Mining Services and Asian Soft Landing

2011-06-02T00:22:00.000+10:00

A collection of articles today, from quite a diverse range.

1. Local Australian rice growing collective decides to spurn a takeover by Spanish agricultural giant. Food is one of the sectors which will be in greater demand in the future, due to a global shortage of food. It is interesting to see stories like these and perhaps more in the future. In terms of investment, it is worthwhile to spot a good agricultural listed business because this sector will feature more in the future.
Adios amigos as SunRice snubs Spanish food giant Ebro's bid

2. Over recent months, there are more doom and gloom predictions. This article attempts to show using various economic data that some Asian economies are slowing down, but not necessarily the big fall many shorters are hoping for.
Asian slowdown to be a 'soft landing'

3. Australia is a resource country and the demand in commodities globally had produced a mining boom. However, investing in big miners may show mediocre growth. Investing in junior explorer may have explosive growth but extremely high risk. This article presents a group of companies with high growth potential due to their exposure to the mining industry, yet without the risk of explorers. These companies are the mining services companies such as: Zicom, Matrix Composite and Engineering, Monadelphous Group, Fleetwood Group, Campbell Brothers, Clean TeQ Holdings, Imdex, VDM group.
Mining services a ticket to commodities boom

Australian Property Bubble

2011-05-18T01:05:00.000+10:00

This is blog about the sharemarket and in particular stocks and trading methods. No I have not gone off the rockers in writing this blog article about the Australian property market. So why am I writing about the property market? Few reasons are:
- the Australian economy is partly sustained by the booming property market, not just the resources sector.
- the Australian banks with huge exposures to property market are highly vulnerable if there is a bursting of the property bubble. If the banks suffer, the rest of the economy will follow.
- Usually the property market lags the sharemarket, so why bother with predicting a property market crash? The fact is that is already happening. The sharemarket seems to be highly volatile and can fall significantly any day now. Throughout this time, the property market data has shown signs of easing and more commentators have begun to write about this. Although the sharemarket may fall first, the downturn momentum pulling the property market with it (like being tied with a rock thrown into the sea) will mean the effect on the Australian economy will be so much worse before it can get better.

There are many more people who are more qualified in commenting on the property market and the economic drivers than me. The main goal of this blog article is to collect news articles regarding the slowing property market and general economy. The number of articles have increased recently.

Housing starts up in smoke
Peter Martin May 17, 2011
HOUSING approvals have collapsed to a 10-year low, falling 12 per cent between December and March and sliding 9 per cent in Victoria.
While the Queensland floods contributed to the fall, Bureau of Statistics figures released yesterday show that, excluding Queensland, nationwide approvals fell 11 per cent.

Real estate slump will leave banks in pain, too

May 17, 2011

More an orderly retreat than a rout. Australian real estate, long the subject of global concern, bears all the symptoms of a market that simply has run out of puff.

Ever since America's housing bubble burst in 2007, setting off a chain reaction in Britain and across Europe - which then infected the global financial system - international pundits have been warning of a similar catastrophe here.

Endless boom a shaky theory and China's economy is likely to stall
The Australian May 16, 2011 12:00AM
A MEMBER of the Coalition's leadership team says China's economy will stall in the next year and the resulting commodity price plunge will push the budget deficit back to $30 billion or more.

Housing finance falls to 10-year low
AAP May 16, 2011 12:26PM
THE number of home loans approved in March fell to a 10-year low, dragged down by the Queensland floods and by the November rate hike. The number of home loans approved in March fell 1.5 per cent, to a seasonally adjusted 44,968, its lowest level since February 2001. Economists' forecasts had centred on a 2.0 per cent rise in housing finance commitments for the month.

How to Profit from Black Swans or At Least Don't Lose Your Nest Egg

2011-05-16T23:11:00.004+10:00

This blog article is inspired following my reading of the book called Black Swan (not the Ballet movie with Natalie Portman) written by Nassim Nicholas Taleb, mathematician, professor, philospher, writer, Wall Street options trader. The Black Swan book is more than interesting, it is intellectually fascinating and courageous as it takes on the established world of mathematical finance dominated by PhDs and turns it upside down. Technically, the author criticises and shows with detail why the Gaussian approximation, which is at the hearts of many derivatives pricing, can be so wrong because it fails badly when some rare event happens.

This blog article will leave the details of the book to the book itself. Instead from here on, I have developed some thoughts on how to make the most out of the markets based on having read the book. The suggestions here will be divided into 2 broad categories. The definition of Black Swan here are unexpected events which are almost inconceivable and have huge impact.

How to survive Black Swans
----------------------------
Some of the points here are along the strategy of diversification but there are subtle details relevant to black swan events.

- It has been said that to be save, invest in blue chips rather than speculative stocks. However, throughout history, most recently the GFC, blue chip companies with huge reputation and operating for more than half a century, have collapsed in a matter of days. Investors in such supposedly save companies are caught out much more severely than investors who invest a little amount in a certain speculative stock.

- There is no safe stock or even safe sector. By definition, a Black Swan happens when we least expect it and with the biggest impact. So diversify across stocks, sectors, or even classes of investment, say property or cash.

- Expect the worse to happen, then make decisions on the investments with such possibilities in mind. When we expect the worse or the unexpected, we take away the element of surprise and the event loses its sting. Furthermore, having expected the unexpected, the amount invested would incorporate risk measures, thus the amount of loss may be minimized. Examples:
- expect the Australian currency to hit US$2.00 and asses what that would do to export companies.
- expect some powerful nations to default and make appropriate plans.
- expect commodity prices to go extreme in either way and see how it affects companies.
- expect commodity prices to plummet and assess your investments in the mining companies.

How to profit from Black Swans
-------------------------------
Black swan events are not always there to cause damage. It is quite possible to make tons of money when exposed to a positive Black Swan. Here are some ideas:

- Expose yourself to investment opportunities that may present a positive Black Swan. This is not too different to what venture capitalist do. They invest in companies with totally new ideas and concepts, knowing that most will fail, but the one that succeeds will have an enormous return on investment.

- Speculative stocks are not necessarily Black Swans. One may first think that mining companies that can hit a jackpot is some big discovery or biotech company with potential ground breaking drug may be classified as Black Swan events. However, by definition the Black Swan being very rare and unexpected, mining and biotech companies cannot be true Black Swans because many investors expect them to have breakthroughs.

- An extraordinary event may still make a mining or biotech company a Black Swan type investments. Examples may include a mining company that has been in production for years and has almost no exploration program. Then suddenly that company happens to find a large mineral rich deposit on a very large scale. A biotech company may already have some drugs in the market and suddenly found that the same drug can be used to cure something totally different or unexpected.

- It is very hard to catch a positive Black Swan event due to its rarity in its class. However, in the overall sense, such as look at the entire sharemarket, there are enough Black Swans that occur that can be profitable. One of the key is that as the Black Swan event unfolds, not many will recognise it in the early stages, so those who paid attention enough may make a profit. One example in the resources sector is the advent of Coal Seam Gas CSG. Not that any CSG company are Black Swan itself but the entire CSG phenomenon is a Black Swan because before that, it simply did not exist. Then a few companies came into existence that tried to harvest this new resource and initially no one paid attention - this was the time to get in. When the majority of investors understand CSG, the early investors would have made a significant profit.

More ideas are most welcomed. Note that the investment ideas above are not from the author of the Black Swan book. Rather they are my ideas inspired after reading the book.

News: Small Caps, Biotechs, Rare Earths, ETFs

2011-04-13T19:28:00.001+10:00

Quite a few articles on today's news about Small Caps, speculative and alternative investments.

Highlights a couple of takeover, acquisitions or collaboration of Australian biotechs by giant foreign pharmaceuticals. Notable ones include Acrux, Chemgenex, Mesoblast, Biota and Cellestis.
Life-science battlers have a spring in their step

This article talks about a few small caps funds and the fact that it is getting harder to choose a winning small cap. Also provides a historical view of small caps that have become huge successes, like Cochlear, Super Cheap Auto and The Reject Shop.
Small-caps scarce but worth wait: a lack of floats has tightened the market

Highlights a few highly speculative mining stocks. Miners include those with Australian as well as foreign operations, like in Africa.
Mining stocks flying under the radar

Introduces a new rare earths company called Data Motion, which used to be an IT company.
Rare earths worth a shot for IT minnow

Finally an article on ETF which has gained worldwide popularity among investors. This article however, cautions about ETFs. In particular synthetic ETFs carry much more risk since they are based on derivative and leveraged products, rather than just mirroring the index.
Exchange traded funds under global scrutiny

Technical Analysis - MCP - McPherson's Limited

2011-02-26T17:31:00.000+11:00

McPherson (MCP) is a company involved in marketing of household consumer products, and book and commercial printing. This will be all that is going to be said in terms of fundamentals of this company. The following will be strictly a technical analysis using methods from McNeil's book How to make money in Stocks and Weinstein's book Secret for Profiting in Bull and Bear Markets.

The two graphs presented here are the 2 year daily graph and the 5 year weekly graph. The black line is the closing price. The red lines are the 20 point moving averages. The Green line is the Stopping criteria from VectorVest.

Looking at the 2 year daily graph, the current price is almost back up the top level from around 1 year ago. This is potentially a set of the cup and handle pattern mentioned by McNeil
(http://ozstock.blogspot.com/2010/12/canslim-method-william-oneil.html). Once this signal breaks strongly, it will be a good signal to buy. Also the buy should only happen when the price still keep above the moving average.

From Weinstein's method
(http://ozstock.blogspot.com/2011/01/stan-weinsteins-secrets-for-profiting.html), the top from almost 1 year ago seem that it may be the end of Stage 2 and going on Stage 3 as the increase in price levels out. However a Stage 4 which is going downwards phase, did not develop, but instead it went sideways for almost 1 year and now it may be ready for a cup and handle.

Looking now at the 5 year weekly graph, we see that the current high price and the top of 1 year ago is only slightly lower that the pre-GFC top. One interesting feature from this 5 year graph is that the crash of MCP due to the GFC can be anticipated. The red moving average line is a good indicator since the pre-GFC peak, MCP then drifter slowly below the red line and even form lower top a few times below the red line. This is the point to sell. Only after this, then MCP dropped dramatically. So those who watched the red moving average should have got out before the steep crash.

Technical Analysis - Dow Up but All Ords Crawling

2011-02-17T23:39:00.000+11:00

There has been a lot of talk of a two speed economy in Australia but perhaps there is a bigger two speed economy when we look at the world as a whole. The developed world which has slumped during the GFC is showing signs of recovery, slowly but surely. The high-flying GFC defying developing economies led by China and dragging a resource economy like Australia (it's more relevant here to classify Australia as a resource economy than a developed economy for our current argument), are showing signs of braking due to overheating. Let's look at our usual comparison of Gann angle charts for Dow and All Ords to compare.

Looking at the Dow first, today's news announced the Dow has doubled its GFC low, meaning it's now over 12000 while the GFC low was 6000. This has much less importance though than the half way point between the Peak and Trough of the GFC. Roughly, the Peak-Trough is 14000-6600 = 7400. Half of this is 3700, but clearly, the DOW is way above 6600 + 3700 = 10,300. So the half way point is clearly broken and not relevant now.

What is interesting from the Gann angles is that the current rise in the Dow sits very nicely at the Gann +10 line and has been doing so since mid 2010. The mid 2010 point, from our previous analysis, was where it looked like it was a double top. Since then the Dow has powered ahead. There are no visible signs of breaking any angles.

Going on to the All Ords, our previous review stated that a triple top has been confirmed. This was the right call but since then it has reversed quickly. The result for the All Ords is however a bit lack lustre. Since the reversion from the triple top, the All Ords has climbed but only very slowly. At the moment it is at the level similar to the peak of the triple tops between Oct 2009 and mid 2010. In fact the current All Ords is hugging the top of the Bollinger Band and there is no evidence of violating any Gann angles soon.

So what do we make of all this? Though the All Ords is moving very slowly, both All Ords and Dow are still on a very firm positive trend. Unless there is any reason to doubt, we can play the market with the continuing trend but keep your fingers on the button since it can turn absolutely at any moment.

Agflation and Australian Agricultural Companies

2011-01-30T16:57:00.000+11:00

The phenomenon of Agflation is gaining headlines and will increase in the near future. It is the inflation of products of the land, such as wheat, corn, soybeans, basically food supply commodities. There are various reasons for this and the problems will get worse. Some of the reasons include population growth leading to more people to feed and at the same time less land for agriculture. Natural disasters worldwide has recently had dramatic effects on agriculture. The recent environmental push for biofuels also mean that products are grown for fuel rather than to feed humands. None of these causes will go away soon but may increase in severity.

From an investment perspective, agriculture companies have fundamental reason for appreciating in price. Some of the Australian agriculture companies are below. Please feel free to comment if you find other significant companies.

AAC AUSTRALIAN AGRICULTURE COMPANY
CAQ CELL AQUACULTURE
CSS CLEAN SEAS TUNA
ELD ELDERS
GFF GOODMAN FIELDER
GNC GRAINCORP
IPL INCITEC PIVOT
MSF MARYBOROUGH SUGAR
NUF NUFARM
PAG PRIME AG
RIC RIDLEY
RHL RURAL CO
SHV SELECT HARVEST
TAN TANDOU
TGR TASSAL
WCB WARRNAMBOOL CHEESE

Dethroning the US Dollar - Part II

2011-01-24T22:50:00.001+11:00

Following the brief article Dethroning the US Dollar,
the present article continues to track what's happening in the world of US dollars and money printing.

A lot of the details of what is to be said here can be obtained from online media, just Google it. Basically, the market has risen dramatically in the last two years. Compare this with the rise in 1932 after the 1929 crash and the subsequent crash of 1937 which took longer to recover.

The situation now is on a much larger scale. Many major banks around the world was bailed out. A big Depression was averted for now. The solution was that the government saved the banks.
- Where does the money come from? They print them. The QE2 is nothing more than printing money to pay debts.
- How can the US do that? Because the US is the reserve currency and the real physical commodities are sold in US dollars.
These news are well known in the media to anyone who wants to read.

However, what many people are in denial about is that the risk of hyperinflation, in which the currency can become so worthless that it can cost billions of dollars for a loaf of bread. Is this ridiculous? Look at the history of Germany in 1920's, Yugoslavia in 1990's and Zimbabwe recently. Here is a potential way events can unfold.
US prints more money - Cannot pay off debt - inflation becomes hyper - people's life savings are worthless.

Why would a goverment do that? Why print money and make your currency worthless? Simply, there is no other way out. The solution is to declare bankcruptcy of your country or make your currency so worthless that everyone knows you cannot pay anyway. Rest assured, the people pulling the strings and controlling the monetary policy would have bought other assets before they devalue the nation's currency. THEY would not hold their savings in their own currency.

So is this devaluing real? Here are some evidences:
Geithner says "US will not Devalue Dollar" (they always say the opposite) -
China's holding of US Treasuries tumbles -
China cuts US Treasury holdings by the most ever -

The wold community knows the US dollar is losing its value fast. There are plans already to introduce a One World currency. Here is a document by the International Monetary Fund (IMF) entitled: Reserve Accumulation and International Monetary Stability.
http://www.imf.org/external/np/pp/eng/2010/041310.pdf
The world currency already has a name: Bancor

Some other articles:
Yes, China can choose to just say no to one export from America - inflation

World finances go topsy-turvey -

Stan Weinstein's Secrets For Profiting in Bull and Bear Markets

2011-01-15T22:12:00.004+11:00

Continuing the series of summaries of investment strategy book's, here is the acclaimed book by Stan Weinstein on Secrets for Profiting in Bull and Bear Markets. It is presented in point forms so that it is quick and easy to read.

The points includes when not to buy stock, how not to sell stocks, how to sell stocks profitably, when not to short sell stocks and when to short. In addition, Weinstein has identified the pattern on how stocks rise up and decline in FOUR stages.

Don't buy

- overall market is bearish

- stock in negative group

- stock below its 30 week MA

- its 30 week MA is decreasing

- stock has already advanced a lot

- if stock has poor volume characteristic on breakout

- stock has poor relative strength

- stock has nearby overhead resistance

- by guessing a bottom

Don't sell (stock you already have):

- sell based on tax considerations

- sell based on dividend yield

- sell based on PE or because PE is too high

- average losses by buying more stock that is going down.

- wait of the next rally to sell

- refuse to sell because market is trending up

- keep holding stock because it is high quality

Selling stocks

- use stop losses - based on MA and previous support level

- don't use stop loss based on percentages

- First stop loss should be based only on the previous support

- Other stop losses adjusted based on MA

- Increase the stop losses to higher bottoms

- use stop loss at number slightly less than a round number.

don't short

- because of high PE

- because price has rise too much

- because everyone thinks it's going to crash

- stock trades thinly

- a stage 2 stock

- stock that is in a strong group

- without protecting with a buy stop loss

- a stock that is above its Rising 30 week M.A.

- a stock with positive relative strength

Do short

- negative market

- negative group - group chart broken below 30 week MA, and declining relative strength.

- its stage 2 increase was very strong, clearly above 30week MA

- Volume confirmation not necessary for shorts, since prices on the way down don't need strong volume

- Short when the price break down below a certain level. Place buy stops at the previous peak.

STAGES

1. Base phase - trending in range

2. Advancing phase- moving strongly upwards. 30 week MA also starts increasing after breakout. BUY

3. The Top Area - 30week MA starts to level off. Place sell stop below this range.

4. Declining phase - don't need strong volume to confirm this phase. SELL

RELATIVE Strength = Price of Stock / Price of Market Average

Buy and Hold Strategy - Pros and Cons

2010-12-05T15:38:00.001+11:00

The so called buy and hold strategy has been popular for amatuer investors or those looking to park some money into the stock market believing that in the long run, they will have greater return on their investments than other asset classes such as property, government bonds or term deposits. There are various indications that show that this is in fact a failed strategy as investors who adopt this will be worse off.

Here is a list of arguments both for and against the Buy and Hold Strategy summarized from the book by Leslie N. Masonson

Buy--DON'T Hold: Investing with ETFs Using Relative Strength to Increase Returns with Less Risk

For:
1. Stocks perform better over the long run compared to bonds, treasury bills, cash and is the only way to beat inflation.
2. A diversified portfolio of stock, bonds, mutual funds will provide positive return over the long term.
3. It is better to stay in the market all the time since no one can predict up or down.
4.Stock market always recover and go to new highs, so it is better to be patient and stay with it.
5. If investors miss the best rallies, they will miss out on the best returns so it is better to stay invested in the market.
6.Picking high and low points to sell and buy does not work, so might as well stay invested and also to avoid frequent buy or sell commissions.
7.Only commission is the initial purchase so better to be invested for the long term.
8.Buying no load active and / or passive funds does not incur commission.
9. Rebalancing a portfolio annually to achieve a certain stocks to bonds ratio yearly is good. There are no tax consequences if this is for retirement account (for US holders?).
10. Tax only need to be paid when stocks are sold. For the case of mutual funds, they do pass on capital gains yearly and investors need to pay some tax on this. This is more relaxed for retirement accounts. (for US holders?).

Against:
1. Sometimes may take up to 20 years to break even since there is usually bear market in this time frame. Historically some 20 year period may return negative after inflation is accounted for.
2. Exposed to bear markets and crashes. If you just buy and hold, you will lose what you have gained and need to wait for the recovery.
3. From 1998 to 2009, buy and hold strategy did not return positive return after inflation is accounted for.
4. Diversification may not help as some bear market or crashes affect all industries.
5. There is no defense in a bear market. Buy and hold is only effective during a bull market.
6. Missing out on strong market rallies is not as bad as avoiding the worst daily, weekly drops in the market. Movement of prices in a crash is much more severe than in a charging bull market.
7. Commissions on buying and selling stocks have dropped. ETFs in particular allow exposure to diversified set of stocks.

CANSLIM method - William O'Neil

2010-12-04T15:49:00.004+11:00

This is a quick review of the CANSLIM method of stock selection or stock picking as described in the book by William O'Neil:
How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition

The interesting thing I found about this method is that it is neither pure fundamental nor technical analysis but a combination with elements of both. Here is a quick brief on who William is.

William J. O'Neil (born March 25, 1933) is an American entrepreneur, stockbroker and writer, who founded the business newspaper Investor's Business Daily and the stock brokerage firm William O'Neil + Co. Inc. He is the author of the books How to Make Money in Stocks and 24 Essential Lessons for Investment Success and is the creator of the CAN SLIM investment strategy. He holds one of the highest performing track records in the stock market --- Wikipedia

Now on to the CAN-SLIM method. This article is not a book review, rather a summary of the CAN-SLIM method for quick reference for users of this blog.

C - Current quarter growth 30%- compare to last quarter, for four qtrs, sales growth. This indicates strong short term growth. Finding such a criteria for stock whose price has not shot up may be good as this may indicate a company which is overlooked and ready for appreciation.

A - Annual earnings growth 25% - last three years. Roe > 17%. Check earnings stability, i.e. this ensures that good earnings is not just a fluke, but is due to good business and can be sustained.

N - New things in company, products, management - fundamental. New highs off properly formed bases, such as stock price shooting up recently from a long inactive period.

S - Supply an demand. Low debt to equity. These are typical fundamental criteria. The first represent the core of any business for without a favourable supply and demand, the business would not survive. The second is fundamental on how the business is run in terms of debt level. Many large corporate failures can be traced to too high debt.

L - Laggards and leaders. Do not buy when price drop big, with big volume , even though look cheap. This will trap most amateur and even professionals like fund managers and so called fundamental investors. Get out of laggards if drop 8% or more.

I - Institution investors - buy stocks with a few institutional sponsor that have good performance, or more coming in. Avoid those with too big proportion held by institutions as this will lessen liquidity.

M - Market direction. Major top when small price up, large volume, big range. Market bottom begin with rally attempt which closes higher after day's decline. From fourth day, look for follow through with higher price and strong volume. After confirmed , buy quality stocks with strong sales and earnings . Also look for divergence in major indices and ratio of call to put options volumes.

A few more notes which I would try to remember for myself are:
- look for Cup handle pattern. This is when the stock price has not moved up or down for a long time and just recently starting to spike up.
- Buy when stock is going up, on increasing volume, not when going down.
- Buy companies with low debt to equity.

Roger Montgomery Intrinsic Value

2010-11-02T01:40:00.001+11:00

http://blog.rogermontgomery.com/how-do-your-value-able-valuations-compare/

Technical Analysis - Summary of PSAR, Bollinger Bands, Triangles

2010-10-27T01:34:00.002+11:00

Ref: http://ozstock.blogspot.com

This is a quick summary of 3 other methods of Technical Analysis. As usual, each method by itself is not as good as using a combination of methods.

PSAR - Parabolic Stop and Reverse
- only use in trending markets
- use as exit tool or trailing stop
- BUY - Price hits PSAR from below
- SELL - Price hits PSAR from above

Bollinger Bands
- Middle Band - 20 period moving average
- Upper Band - Middle Band + 2 standard deviations
- Lower Band - Middle Band - 2 standard deviations
- Use with Double Top of Double Bottom - need the first peak to be outside the Band and the second peak to be inside the band

Triangles
- ascending, descending, symmetrical
- breakout may be in either direction in all 3 types of triangles.
- enter when breakout
- stop loss set inside triangles

These indicators and a few others are shown in the example of the ASX 200 below. The conclusion is that there is no obvious trend of the ASX at the moment as the market is trading indecisive with not much direction.

Brief - PAG - PrimeAG Australia

2010-10-15T00:24:00.002+11:00

This is going to be a very brief note about PrimeAG (PAG). Rcently PAG caught my attention because of the recent strong uptrend. I have been studying a few technical gurus (Gann, Weinstein), methods on Technical Analysis and clearly the strong uptrend would be one reason to buy. See graph below.

However, although I may wish to go for a short term, technical play, I also glanced at the fundamentals. One of my recent indicators I followed, which I will use more of, is the ROE. I would be looking for ROE of at least 15% for long term play. For short term play, a smaller ROE will suffice.

However, PAG's fundamentals is this: ROE is almost Zero. It had made a loss recently, ie. negative earnings and profit. One of the only positive ratio is the book value of $1.89 (from CMC Markets). Based on this, I will make no further analysis for now.

One point more on the Technicals, the uptrend has not been strongly supported by heavy volume. If there was heavy volume, then the case based on technicals would be stronger.

Note to Self: avoid this stock unless I feel very very lucky.

Note to Self

2010-10-06T00:00:00.004+11:00

5 Oct 2010

ESG - wait till go up 85-90c
STO - buy when rebound from 12.30 to 12.50
AMP - ROE 40.50 54.80 27.00 29.50, wait for technicals
TGA - sell when below 1.40
TIS - buy when breakout 25
CUV - sell when close under 19

TZL - wait for break above 50c
VLA - wait for break above 35c
POH - wait for break above 11c

CMC Market allows a simple filtering system.
- ROE > 15%
- Debt / Equity < 0.5
- Market Cap < 100,000, 000
- 5 yr avg annual return > 10%
- Net Profit > 10,000,000

the results from the filtering were:
TBR - Tribune Resources NL
TWD - Tamawood Limited

All Ord Triple Top Re-Confirmed, and Dow Jones does not resist

2010-06-30T21:44:00.001+10:00

Source: http://ozstock.blogspot.com

Usually the charts are done at the end of the week to get the full weekly picture but since the dramatic drop over the last few days, the last point on these weekly charts end in the middle of the week.

In the last post, the All Ords were on the verge of confirming a triple top but the Dow did not show any similar patterns. For over the last month, the All Ords had been fighting the Triple Top and showed signs of successfully resisting a Triple Top plunge as it climbed up from the 4300 level. However, things changed in the last week and as of today, it seemed the market is plunging back down. In fact the closing of today has broken the previous month's low of 4325. The chart also shows that it has broken through an important Gann angle. At this point the signs are now quite strong for further downtrend.

In terms of the Dow Jones where previously, it was not near any support or resistance, the lastest chart shown here indicates that it is touching the Gann (brown) angle. The minor recovery over the last month followed by the subsequent downtrend provides strength to break this Gann angle. When a Gann angle is broken, the trend will continue in that direction until the next angle is found. The fundamentals of the world economy and sentiment also provide strength to the downside.

Whereas before the Dow and All Ords seem not to coincide with each other, the current downtrend is supported by both indices and may be a confirmation of strength in the current direction.

Coal Seam Gas companies

2010-06-17T01:07:00.003+10:00

(taken from AOE's Acquisition Scheme Booklet)

Coal Seam Gas (CSG) has been of considerable interest over the last few years. It represents a new technology of producing gas. Over the recent years there has been various corporate takeovers of CSG explorer and developers (eg Sydney Gas, Sunshine Gas, Roma Petroleum) by bigger companies (eg BG Group, Shell, AGL).

The table below may serve as a quick guide as to what CSG companies are still available and hence possible investment opportunities. Note that currently, Arrow Energy has an acquisition offer. In terms of size by enterprise value, none of the remaining CSG are close to Arrow Energy.

Most of the remaining companies are explorer / developer. Only Molopo is producing gas from its field in the Bowen Basin in Queensland. Note that the largest field for Molopo is in Canada, hence the 2P and 3P numbers from overseas are not included here. It also has tenements in South Africa.

From the 2P and 3P resources we see that many of the explorers have quite small reserves. The only other company with significant reserves besides Arrow Energy and Molopo would be Eastern Star Gas.

Just a note that:
1P = proven
2P = proven and probable
3P = proven and probable and possible.

Hence those companies with a very high 3P and relatively small 2P means that the majority of the reserves are only "possible". These are the companies with higher risk compared to one with smaller percentage of Possible reserves. In table, in the Proven and Possible %, the lower percentage the better.