Higher We Go

It’s time to stop skipping around. I have a year to make, and being up only ~20% so far isn’t in the final plan. My last few years have been volatile, with me longing for the heat of 2009 and 2010, where I was able to return absurd percentages.

My last year’s numbers would have been stellar, if not for what preceded them.

So far, I’m holding a good gain, but looking at what the market has done largely by itself, it’s not enough. Volatility in my small number of positions keeps holding me back. But I can feel the chips falling into place.

The multifamilies are ramping hard now. People are figuring out that there’s gold in the coal.

I’ve had a very successful year trading around positions. This is only marginally reflected because the summer brought sell offs in my holdings. If I can get some big rallies in a few of my core themes, this year could run +40% very easily.

It’s a Friday, and my heart isn’t in this right now. Rather, my imagination keeps running away outside to whatever’s left of Summer slipping away. This is most inopportune, since work is a runaway train.

So, here’s a brief list of things going through my mind right now.

1) War is overrated and oil is begging to get taken down a notch. Tell me when these geopolitical type scares have actually panned out? The last time was under what, Carter? The oil market is well supplied; a few oil traders are just gaming the system to make their year’s. Meanwhile, a US energy revolution is sweeping accross America.

2) Multifamily REITs selling off alongside broader REITs is as careless an act as I can think of. These companies are all 95% plus occupied with rising rates and numerous projects in the pipeline. Tell me who was forecasting that two years ago, other than myself and a handful of others? Yields are only a problem on a case by case basis. Sellers slamming the whole space here are irresponsible.

3) Coal prices and associated companies are unnecessarily low. Natural gas prices have come back nicely from the death throes they were convulsing in last year. The EPA can only do so much to legitimate, legal owners of coal producing assets. There’s this power grid we have that demands base load, after all. And even the most eco-friendly of Californian millionaires will not tolerate their precious Tesla batteries running dry. Even with natural gas transitioning taking place, there’s a price point where coal comes back online Everyone hates coal, making it pretty attractive right now.

4) I still fear for the wellbeing of Tesla longs, but I can only care so much. On a different note, there was a Seeking Alpha article about battery supply problems that made no sense. It was trying to argue that batteries will constrain Tesla production, but it pointed out that Tesla’s primary competitors are transitioning away from using the kinds of batteries that make up Tesla’s product. At most, I could see competition for batteries pushing up Tesla’s costs, keeping their vision of an affordable mainstream electric vehicle at bay (for longer than longs could survive, I might add). But at some point, Tesla forcing helping to force battery prices higher causes the electronics manufacturers to convert to the newer battery options, freeing up capacity. Besides 100,000 vehicles a year for Tesla isn’t exactly a plague of rats.

5) The natural gas and fracking boom will run further than any of you can possibly fathom. There is no reason not to buy into this. The go to corporations are the specialists who make the backbone of the extraction process (like BAS) and coporations or partnerships supplying the materials that make it all possible (I like HCLP). Risks that the frackers will saturate the market with so much gas and oil that it will collapse profits have blown over. Chesapeake energy was last year. Aubrey McClendon’s ass has been fired.

6) I’m not sure I can like this DRI position if prices for commodities keep pushing higher. But there was plenty of opportunity for the resturant business to line up cheap access to the raw foodstuffs they need for any number of months into the future. So I’m going to hope for the unexpected. Meanwhile, the job market is humming along. Now go eat at Red Lobster tonight.

7) The uranium market disgusts me. I knew it would blow out again. So far CCJ is taking the damage in stride. There’s a major fuel supply issue looming, but reactors just use up fuel so slowly, it takes forever for it all to wind its way through the system. It would be nice if the Japanese could get off their culturally slow-as-shit asses and maybe do something expediently for once in their lives. No, no, please, by all means continue to import oil and coal to your resource depleted island for sky high prices. Who needs an economy, especially with the egregious demographics problems of a nation like Japan?

8) I would rather lick an ant hill than let the sequal to the Catholic Church circa 12th century France come back to power – whether it’s crosses painted on the walls or crescents. To hell with both sides of the Syria civil war. If we’re going to let loose the arsenal, we should at least do it indiscriminately.

9) We are going higher.

Wednesday, a NYU professor put out a post on his personal blog talking about everyone’s favorite, Tesla (TSLA).

My readers know my own frustrations with the stock and personal contempt for its valuation (which is not to be confused with contempt for its product) – even if they don’t understand it.

The professor created a model you can download and play with, putting in various assumptions to spit out different ends. The verdict?

He has no idea why Tesla is going for this much either.

While he did say there were a few outcomes which were as profitable for current buyers as they were farfetched, the probability of realizing those outcomes is dismissible.

This guys seems to have done more in depth work than I did. I just grabbed the growth estimates and studied the exponential curve generated from those assumptions…then recognized any variance is no friend of TSLA shareholders.

It’s worth pointing out that all of the assumptions this professor used to reach his conclusions are actually very optimistic, in the favor of Tesla. Even after that, he still can’t reach the current valuation. If you use my colder, less favorable assumptions, you get to my numbers…

At this time, I still hold my TSLA puts, with targets in the $30’s and $40’s. They have basically been cut in half (spaced out 6-18 months out from purchase), but constituted an investment of about 2-3% of my account at the time of purchase.

I dropped out of my euro hedge, EUO, for $18.61, for a 2% gain. I could have been +10% if I hadn’t held onto it for so long, but that’s not necessarily the purpose of having a hedge.

The next leg of the euro crisis doesn’t appear imminent, and even though I’m not exactly cheery about the position the Europeans have put themselves in, our two economies appear to be leveling against one another.

I can’t say how long until the ECB will need to devalue the euro again. It’s coming; maybe a few years at most. But we could just as easily get hit here at home first.

This shouldn’t even be a problem. I’m very long into a solidly green day, as short sellers and any longs who bailed on the ship last Friday get taken out back. But, AEC for whatever reason is having a horrendous day.

The only news is that the CEO, the great Mr. Jeffrey Friedman, sold 40,000 shares of stock.

This isn’t news at all. AEC’s CEO is probably getting ready to leave. He’s helmed this company since the ’90’s, almost uninterrupted. But, as usual, analysts hate the company so they throw insults and pressure the stock whenever possible.

I am in a sour mood, and will probably buy more if it dips into the $12 range.

I can’t explain why I’ve suddenly changed up and gotten a little more optimistic. All the concerns I stated earlier are mostly there. The big checklist of 2014 problems coming together in a perfect storm is still mostly in effect.

But, for some reason, I’m getting bolder. Maybe it’s a trick my mind is playing on me. Perhaps I am simply a dog, responding to training from the last few years.

The market has done very well in the winter months. I don’t believe the Fed is about to let us sell off. Even though there is much concern, and many problems, our society has gone on an obsessive kick, triple checking every corner of the economy for trouble.

It’s just going to be very hard to get tricked when everyone is on guard like this. Major sell offs require a certain element of apathy that just hasn’t been there.

So for the moment, I find myself comfortable. The market is having a minor correction, but I do not fear it.

So this is probably when the big hit comes…