Chinese Reading

Europe is still a mess, even mighty German saw Q4 growth go negative (Reuters), but European spreads continue to get better (Josh Brown).  Meanwhile stateside, 2013 Outlook:  Why The SPX Will Be Up For A 5th Year In A Row (Schaeffers).

The stimulus push continues in Japan (Reuters).

Chess:  Gold Miners Leading the Charge

China’s economic improvement is becoming visible in global markets at Sober Look.

“(F)our factors combined to generate a sharp increase in world demand for  commodities: rapid growth in global GDP, increasing urbanization in developing  countries, a rise in population at a rate of 800 million people per decade, and  a significant decrease in poverty. With the exception of global population  growth, China has been the most dynamic country in all of these respects.”  Shall this continue?  Project Syndicate

China’s ravenous for iron ore, copper and oil at Mining.  Highflying Molycorp has tanked also at Mining.

China, ECB, Currencies, and Commodities by Ryan Puplava.

However:  ” Short seller Jim Chanos sees big trouble brewing among leveraged natural-gas producers. Why he still views China as a bubble and is wary of Brazil’s Petrobras and Vale, too.”  Barron’s

Missed the China Rally? Wait for February, Ned Davis says at Barron’s.

Commodity currency Australian Dollar ready for a major kangaroo jump? by Peter Brandt.

“Copper and tin are likely to be the biggest near-term beneficiaries of improved apparent demand through the first half of 2013, with supply availability still limited, Macquarie said in a research note Friday.”  Platts  China’s 2013 refined copper consumption to rise 5.5% to 8.1 mil mt: Antaike at Platts.

Natural Resource Stocks To Reflate On China?  Michael Gayed  Look’s like a possible fantastic low risk entry point:

Vale Breaks Out of a Two-Year Downtrend

China’s 2012 trade surplus surges 48% (CNA), thus “China’s overseas investments neared $80 billion in 2012, according to the latest
tally by the Heritage Foundation, a conservative Washington D.C. think, and may well hit $100 billion a year in the coming years.”  WSJ

We shall keep a close eye on China (Business Spectator).

Inflation adjusted stocks via J.C. Parets:

1-10-13 SP500 inf adj by CPI

An MLP blog to bookmark for those interested in the space:  MLP Guy.

9 thoughts on “Chinese Reading

  1. J.J.
    Enjoyed the charts on buying stocks and warrants. Can you give us some insight on buying calls and puts as well? Many of us who subscribe to ISA make our own investment decisions and are constantly looking for more knowledge.

    • The investor interested in obtaining stock warrents (options) on junior exploration plays ought to contact Rick Rule’s firm and do business with them.

      The investor interested in stock options in the traditional sense could start with Tom’s suggestion. My thoughts will require a full post later next week.

      First a tease:
      1) Options are a zero sum game.
      2) Spreads between the bid and ask are generally quite wide…the house take will get you.
      3) Option premiums and the VIX are really low…in part as a function of the low interest rate environment.
      4) To benefit from black swans, one must be prepared to consistantly lose a little money to occationally make a lot. The whole Nassim Taleb thing…
      5) Meanwhile, naked option writers consistantly make a little money until blowing up.
      6) Some sware by covered call writing for income…whole (internet) newsletters and even some bad books are devoted to it. I am friends with one active covered call writer…
      7) While others believe covered call writing is a sure way to lose your good stocks and be left with only losers
      8) Interestingly, covered call writing has the same risk/reward profile as a covered naked put.

      McMillan’s “Options as a Strategic Investment” is the industry gold standard on the subject. Buy me lunch and you can borrow mine. My 2002 edition was $75.00.

      • You wrote: “Interestingly, covered call writing has the same risk/reward profile as a covered naked put.”

        First, I call it “cash covered puts”. Second, I think that cash covered puts are a great way to buy stock THAT YOU WANT TO BUY ANYWAY. Say you want to accumulate SLW. Right now SLW is ~$36.50. You could spend $3650 for a lot of 100. Or you could sell a Feb. 36 cash covered put for ~1.10. That means that if SLW gets put to you on Feb. 16, your effective cost basis is ~35 instead of 36.50. If it does not get put to you, you still pocket the $100 (about 3% for one month, which is not bad). You don’t get hurt because you were willing to pay 36.50. YOU WILL NOT MAKE ALL OF THE PROFITS YOU COULD HAVE IF SLW EXPLODES IN THE NEXT 5 WEEKS! You have to be able to live with that! But 3% a month adds up in my book.

        A few things: Learn what you are doing before you try this “live”. I suggest doing some paper trades for a while. Second, I would only do this when trying to accumulate a stock. Don’t do it just to collect a quick premium. I always have some SLW, GDX, GG, etc. and if I want to add, I sometimes do this. Third, IMO one should NEVER sell naked puts, only cash covered puts. Fourth, this is simply one more strategy that one can put in their bag of tricks. Fifth, follow the moving averages for a stock and sell cash covered puts when it is well below its 10 DMA. That usually gives you more margin of safety.

      • Very true on thinly traded options. But on actively traded SLW options, the spread is usually between 0.02 and 0.1.

        • I was referring to your comment: “Spreads between the bid and ask are generally quite wide…the house take will get you.”

  2. John, if you want to learn about puts and calls, I would recommend the book “Getting Started in Options”. (Link below) I have been doing options for years, but you have to know what you are doing. They can be great tools if used correctly. However, IMO it is too long of a discussion for JJ to explain on a blog; reading books is much better and really IMO necessary.

    http://www.amazon.com/Getting-Started-Options-Michael-Thomsett/dp/0470480033/ref=sr_1_1?s=books&ie=UTF8&qid=1358006062&sr=1-1&keywords=getting+started+in+options

  3. FWIW you showed a chart of IGE (above). I know that you did not say to buy IGE; it was only put in to show a possible buying point for natural resources. As you wrote:

    “Natural Resource Stocks To Reflate On China? Michael Gayed Look’s like a possible fantastic low risk entry point.”

    However, if anyone is interested in buying IGE, it is note worthy IMO that XLE is a very similar fund, but has lower expenses and has consistently outperformed IGE. For an energy ETF, XLE is my “go to” fund.

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