TIME released an article yesterday, widely reported in other media, that globally, humans are now overweight by a staggering 16.5 million tons, with the U.S. accounting for 34% of the world’s obesity (with only 6% of the population). If you were to extrapolate this rate to the whole world, it would like adding an extra BILLION people to the world. The upshot of the article is this: rising rates of obesity are threatening the world’s food security and environmental resources.
If this were a health blog, I would offer up my own reasons for this epidemic, which would NOT include the lack of exercise or prevalence of fast food eating. The big culprit? Carbs–especially high fructose corn syrup, which is an man-made sweetener found in a huge range of foods, but which the body has great difficulty in metabolizing, which leads to large releases of insulin, which creates insulin resistance over time, which forces the body to produce more insulin to metabolize food–a vicious cycle that promotes obesity.
But this is not a health blog and I will focus on the banking of coin. Specifically, the fat I am thinking of cutting are dead weight stocks, which function like a financial tire around the middle of my account, inhibiting the bankation du coin. The question for me is simple: when to cut the losers?
Case in point: MGO.TO Migao is a potash supply company which operates in China but is based in Toronto. Fundamentally, the company is strong, PE of 4.7, with a book value of $5.70, more than double the current share price of $2.30. Technically, the chart is fugly:
I bought this around 4 dollars and am currently staring at a 40% loss. Yes, I know I should have sold this long ago. The point is that I didn’t because I believed the fundamentals would outweigh the technicals, and I buried my head in the sand to the actual reality. I mean, how could a profitable company trading below book value continue to keep dropping another 40%? It’s easy in hindsight to see this as flawed logic, but at the time, with the prevailing wisdom that potash prices had stabilized and demand was increasing, it seemed like a safe bet.
I wish I had some kind of great revelation here from this trade, but the fact is we are faced with these decisions as traders all the time, and it is the combination of fear and/or greed and/or stubbornness that can make or break you. Some times it pans out and you are the hero. In this case, I’m closer to a zero. If I were really sure about this one, I would do a Fly and double down here, but, alas, I am but a piker trying to survive until retirement, patiently waiting for a recovery, confident that the long-term term thesis is correct, but not willing to throw any more money down the hole.
I guess that makes me an investor.
