The cause for my 1% loss this morning can be summed up by three things; oil, uranium, and MGM.
Oil is obvious, as people jump into buying crude thanks to positive outlook on Japan’s economy.
Uranium is most likely from people running scared, as a result of Germany’s declaration of nuclear de-activity…someday.
And MGM is just MGM. Roll with it.
Ergo I will not be adjusting. Japan may instigate a massive surge in crude, but once it’s taken off the table, there seem to be far more exogenous events that can negatively impact crude, at this point, than positive ones. Libya declaring a cease fire, for instance, and beginning to massively export crude so as to aid reconstruction efforts. Ditto for other countries in that region who have been hit by revolution. See my other rants to try and comprise a full list of scenarios that may crush crude oil prices.
I will add to my ERX short if it crosses $90; and will do so again at $110.
As for nuclear, I sincerely doubt countries saying they intend to wean off will carry through with it. There are just no suitable substitutes, at this point. Alternative energy is not up to the task, oil is very, very expensive, and I don’t see countries having the will power to step into coal. Still, if you believe that nuclear is getting the axe, coal and perhaps natural gas are the places to be.
Myself, I think these countries are just making show until things calm down enough to renege. But even if a decade from now, some countries do go through with plans to scuttle existing nuclear operations, uranium miners like CCJ are a buy today. Plants marked for shut down will still require fuel until their doors are closed. And for the task of keeping all current plants operational, uranium prices are cheap here.
Altogether I will hold my positions, which I have favorable prospects for, hedging by holding short energy companies (ERX). The losses today are very much an off event, caused by unique weakness in other areas of my portfolio. However, further downside in these positions seems limited, and the rest of my holdings, especially the multi-family REITs, are displaying strength.
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There is a big REIT investor conference in NYC next week – REITweek, so the REIT may get some mojo around that. I agree with you about oil – these calls for $135/barrel, $5/gas are ridiculous in this economy. With all the publicity about oil speculation being the driving force behind prices, when you have Exxon, Saudi prince, Cramer, etc. all saying margins need to be higher or trading limits need to be enacted to keep non-delivery specs from pushing prices up, it’s astonishing and depressing the Fed seems clueless or apathetic enough to let something this absurd threaten to blow up all they’ve done in the last 2 years.
Are you going to the conferences?
It’s sort of ironic in that, even if oil does push to those boundaries, the very act would be akin to the economy putting a loaded .44 revolver in its mouth and pulling the trigger.
If oil goes down, shorts win. If oil goes too high, shorts win eventually. The only way I see this going bad is if oil pushes a little higher and then stays range bound for a prolonged period of several years.
Always a pleasure, Jack.
Man, the math on that spam protection just gets harder and harder, the older I get. May have to resort to a calculator soon.
No, won’t be attending since I live in Texas. I don’t think there is much they can say we don’t already know. Housing is in the crapper and will be for quite some time…multi-family REITS are cleaning up. If I didn’t already own a house, I sure as hell wouldn’t buy one now.
Some monkey with JP Morgan just said QE3 ain’t gonna be a happenin’ thing, which is pretty much my opinion. If the Fed starts another handout to the banks to run up commodities, things could get real ugly at election time.
I’m stepping out for the afternoon, to pick up a friend from the airport.
I am getting so bullish on CCJ that I cashed in 2/3 of my hedges today. It weathered the Germany news pretty well and is actually showing some relative strength so far this morning.
I agree it’s a winner. If I like what I see in their next series of reports, I may increase my position to a full 10% allocation.
Right now though, I’m just so focused on the basic necessities; food, water, and shelter; that a uranium company is like background noise.
If you don’t mind me asking, where do you live?
Oh, about. SE Michigan mostly, with roots in the middle of the state.