Click chart to enlargeAbove is an updated chart of MOS showing its reaction to support at the bottom of its channel and its 100dma. So far, this is all business as usual. If the Ag names go much lower, their p/e's will slip below 10, at which point we'll have to advertise ourselves as being value investors, a title which we would rather avoid. "Growth investor" just has a nicer ring to it. Whether or not the support holds is up to the broader market, which is up to OIL, which is up to the Bush/Cheney administration. We have yet to receive our check from Dick Cheney's Halliburton stock option profits that would allow us to offset our exorbitant fuel bills. Our readers will be the first to know when it arrives.
12 comments:
Snot, I'm no fan of Bush or Cheney for a variety of reasons. However, why do you lay the blame on Bush/Cheney and the all-star hunter's stock options? HAL doesn't necessarily go in lockstep with OIL and once oil gets too high, it appears to hurt HAL. Handing out no-bid contracts in Iraq is one thing. Controlling the price of the earth's oil supply is quite another.
OIL and HAL for last 3 months
I agree with Snot’s position (in his previous postings) how Bush/Cheney administration drove up the oil demand in US. On the supply side, they subsidized big oil for drilling and exploration instead of developing alternative energies. With that amount of cash burned in Iraq and needed to care veterans, we would find and would have found more energy supplies (in oil and alternative energy). Did not HAL hit new high two days ago? Sure, when the world markets are crashing, nobody can be spared, including HAL, Bush and Cheney, because either cash can not be king in case of inflation. But those people are too greedy and/or too stupid to know, not only ahead of time but also afterwards.
Snot,
could you please post a magic chart of Agrium - it seems to be the new leader of the pack. AGU should be at the bottom of its channel. Thanx.
Concerning the oil debate here: The wars in Iraq an Afghanistan were right for political reasons. Islam is the new totalitarian threat of this century. Shame on Europe for our pacifism. And if Iraq should open the taps, the oil price should sink.
However, the US-oil lobby is clearly working in the background. For us Europeans, it is not understandable, why the US is still hanging on to her oil-addiction. Ok, America is bigger and public transport cannot reach every single corner of the country.
But you need a negative incentive to get away from oil. We pay 1,60 Euro PER LITRE gasoline here in Germany - that is 2,50 USD per litre or 9,50 USD per gallon. That's mostly tax - and with this money, we are funding solar and wind energy. So our (and the Japanese) car industry with their small cars pushed Ford and GM from the streets. Plus the German solars are the world leaders.
Still waiting for the huge crash: All important indices are resting on supports, which should better hold: S&P, Hang Seng, DAX. The Dow has already broken through the March lows. What could reverse this trend? Some big event like the opening of the US strategic oil reserve to the market.
newfrankyboy
Although it looks like Ag has put in a bottom and is beginning a new leg up, we don't trust it. We're 51% invested in Ag and aren't selling, but our gut says the bleeding may not be over.
As for oil, first let us reiterate that we think analysts are still underestimating the magnitude of the damage current oil prices will have on corporate profits. The example that American Airlines saved $40,000 one year by removing one olive from each salad served in first class shows how fractions of a penny have a substantial impact on big business. With oil, we're not talking about fractions of a penny. We're talking about doubling the cost of a product that almost 100% of the world's businesses depend on. We have only scratched the surface of understanding the magnitude of the problem here in the U.S. The iceberg that lies beneath is going to give us more than two quarters of negative GDP growth, and keep America from expanding for the next several years.
Why do we blame the Bush administration? If a person makes a small snowball at the top of a hill and gives it a push, are they responsible for the deaths of the 50 people at the bottom of the hill that get hit by the snowball when it's grown to 10' in diameter and is traveling at 80mph? If you answer yes, then the Bush administration is responsible for America's current oil crisis. Al Gore had the right idea. Taking an active step in reducing America's dependance on oil for the good of the environment, our economy, and our health was a top priority 8 years ago when Bush was first elected (if he really was). His administration failed miserably in incentivizing businesses and individuals to use less oil. In fact, they incentivized people to use more. This is not hindsight. Not at all. There were outcries from day one. Anyone who voted for Gore knew that Bush would be a disaster.
They may not have wanted Gore, but they knew that voting against a Texas oil man was necessary for the survival of the economy and the environment. Believe us when we say that absoultely none of this is hindsight.
Instead of offering incentives for people to buy trucks and SUV's, the incentives should have been offered to people buying small cars and hybrids. Large vehicles should have been taxed. The tax should have gone towards research required to further the development of solar power. If this sounds like too much to ask, you have to look at how much progress has been made in ridding the U.S. of its other addiction... tobacco. Taxes and new laws about advertising and where people can/can't smoke have made smoking far less common than it was just 10 years ago.
When government chooses to act, they can do good. Unfortunately, the Bush administration missed the boat on one of the most important issues of our time.
Well said snot. Why not post this on the main page as a separate entry instead of burying it here? Maybe add a bit explaining how the Bush adminstration encouraged SUVs etc. I thought people made their own choice to buy the large SUVs for perceived safety, fashion etc.
Do you really think that people “chose” SUVs? The truth is that, in the past decade, big four only worked to improve the quality of SUVs and trucks because they are more profitable. All small American cars are close to junk status. When Bush/Cheney had the zero interest rate program for Americans to buy cars, consumers had no other choice but to buy SUVs and big trucks. Now when oil price is shooting to the moon, big fours had no quality small cars on the market. It is why GM stock is trading at three decades low now. Bush/Cheney had the power to intrude citizens’ privacy. They can find their way to regulate auto industry if they want to. Instead, their policies encouraged energy consumption and damaged environment.
I didn't have to buy a big SUV. Four years ago I traded in my small pick up truck and bought a Toyota Camry. I get 31 to 32 mpg on the highway.
I owned Chevy Sprint (three cyliner 1 Liter, a wonderful little car) and Ford Windstar. My experience is that quality is about the same for both. With the introduction of fuel injection and on-board computer chip, newer cars are quite reliable, big or small. People are also free to choose Japanese small cars that tend to last longer, hence higher resale values.
I agree that Bush could/should have provided some leadership in mandating fuel efficiency. I think the bottom of the problem is that US auto makers spent too much time lobbying/advertising instead of trying to figure out how to build better cars to better compete with the foreign makers.
Hi, long time reader here. Great stuff (you too Clarke).
I've been considering VWDRY - Vestas Wind ADR (OTC), lying near its 100 SMA again. It's responded well in the past, and I think pulled through the recent market downturns rather unscathed (nice recovery after Jan for example, and then a surge with the eventual market 'recovery'). Solar handed me my a** over the past 6 months, and I've decided to give the AG channel trading a try (small positions in AGU & MOS established today). Thought VWDRY could be a nice addition. Given VWDRY is in ADRs (and the .PK status I see), I'm curious what your group's take would be. I'd love to see one of your charts if you like it. Cheers.
You might consider an alternative energy ETF such as PBW, PUW, PZD, GRN, GEX, QCLN, or TAN (if you still want exposure to solar).
Link 1
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JSW
VWDRY's chart looks very good, but there's no volume to go with it. Too much volume and a stock is "overowned", but too little and it can be extremely volatile. One bad earnings report and instead of dropping 10%, it could drop 90%. When we pick a stock, we have a list of criteria that give us confidence that the company has enough eyes on it that its moves (in either direction) will be met with opposition. Of course it is possible that you've just found the next Google, but it's a real gamble. For each one of these stocks that's the next Google, there are thousands that go bankrupt.
As far as the Ag channel trade is concerned, we feel that we may break the bottom of the channel this time. It's just a gut feeling. MOS in particular is getting too comfortable at the bottom of the channel. It should just bounce off of it quickly, not stay there for any period of time. It's entirely possible, though, that MOS breaks down and the others remain in the channel. A new leg up could still be in the cards. It all depends on how bad the overall market gets, and we haven't had a washout move yet. The first bounce off of the bottom of the channel for MOS was buying from those who expected history to repeat itself. This time it may be more challenging to begin a position in the Ag names than it's been in the recent past. We're only 51% invested and hedged with SMN despite being at the bottom of the channel because this is the fourth test of the channel. At some point, they will do a headfake before running up again. Our gut says MOS will see 110/115 this time around. We don't expect it to go much lower because of its relatively low p/e. If we lose the Ag names alltogether, then we expect it will happen only coincident with Dow sub 10,000. That's a worst case scenario, and would take an extreme catalyst, like a new war.
Thanks for the alt energy ETF ideas JSW, I've actually been in PBD and PBW in the past (liked the foreign exposure via PBD). I've hung on to many of my solar positions, which I'm deeply underwater with, but lightened up a bit in hopes of another mini-rally. Just bought some DXD, since I'm getting nervous with the OIL/DJ action.
Snot- thanks for the reply. VWDRY's volume is something to be concerned about, I agree, and I wondered if it would pass your criteria. Given that Vesta's #1 in wind and based in northern Europe to boot, I'm pretty confident in the company staying strong for a while. The worry of course is just what you said... poor earnings and a drastic response. Given how it's done impressively well in the past though, and that the case for wind out there grows daily, I may still take a bite when I see a good chance. GLTA.
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