Solar, Buy Low Sell High - 6 months later

In post on June 27th, 2012 titled "Solar, Buy low Sell High" I discussed the value play to buy FSLR (solar company) , TAN (Solar ETF) , and OIH (Oil ETF) purely based on they were beat up at that time.
Also called out FSLR as it started to move at 20.50

TAN was just under 18 a share, now at 18.96.
FSLR was at about 15, now 32
OIH was at about 33, now at 40.70

I did two posts today, both throwback looks on the non-gold miner stocks to buy.
See other called 'Social Media Stocks - Five Months later'

Charts below with red circles on the items.
For these stocks, a long term hold for years is not a bad idea.  A stop at just above your purchase price for the long haul hold.  Otherwise set stops at comfortable levels to lock in gains if they pull back.  Be sure to leave plenty of wiggle room.

Commodity Market - Is the bull back?

Back on March 24th 2009, I declared the Commodity Market bull is back.  We may be close if not already at the next bottom poised for the next leg up.  The upward exponential drawing below of course may be materially wrong, but it should correct quickly whenever bottom hits.

Timing of course is IMPOSSIBLE!  Catching falling knives is very painful.

Investing in this sector will only marginally help offset the cost of living crunch everyone will continue to face once the bull resumes.  This is inline with my 2008 post of global consumption squeezing the American consumption.

Back in 2009, the graph I showed was the standard CRB index.  What I didn't realize at the time, like most indexes, it is changed over time to re-prioritize weighting of the underlying components.   The previous revision to this index was more evenly distributed across all resources.

Although weighting differently may be more meaningful, it does skew the graph unfairly.  When an ETF composition is changed to be "fair" the entire index should be recomputed back to the start of the index to reflect a graph that has the same underlying funds consistently.

That however is not done.  I found an index where the composition was NOT changed with the last revision,  called Reuters Continuous Commodity Index (CCI).   The chart looks materially different than the current CRB index.

I believe that keeping the same mix of items is more realistic to show the impact of commodity prices.
Look at the chart below to see how even in 2008 crash, the bottom BARELY touched the high in 1980!
This graph shows what I believe is a more parabolic price change that we are experiencing.  Some deem it inflation but wages are not rising.   I deem it simply what it is, commodity prices are rising.  This is NOT about strictly US dollar debasement.  It is about poorer countries buying more commodities driving prices up for Americans.  Countries like China and India simply did not compete with Americans for resources 30 years ago as percent of purchasing.  Also consider watching Chris Martenson on exponential growth and commodity issues.

The only question is, how far does it go down before the trend of up up up resumes.  Strap on, for whenever the next leg up starts, it won't be fun.  High unemployment AND rising costs.

Usual suspects to invest in.  OIH  , DBA, GLD, GDX, etc.  The ETF GCC tries to mirror the blend that the CCI presents.
(UPDATE: 6-28, end prices.  GDX-43.30, GDXJ 18.20, OIH 34.30, DBA 27.77, GCC - 27.55, TAN - 17.74)

Solar, buy low sell high

We are likely about to enter a recognized recession, that may last months or years.
If years, buying anything right now in the market is not a great idea, markets can go much lower.

However, many industries are already slammed hard, like solar.
The ETF TAN reflects 25 solar companies, and FSLR has been brutalized.
For longer haul, if you think solar has a future, TAN is pretty cheap at 17.90 compared to 300.

And of course, I still love OIH (oil ETF) at this range.
Time to start nibbling OR we may have a deflationary collapse bringing all stocks much lower. (well worth the WATCH!)
But if we don't here is pretty cheap.

Don't forget my disclaimer!  I am throwing darts on a dartboard, any trading is up to you.

It is all about Oil

I may blog on a wide variety of financial topics, including gold, currencies, government debt, investing.
But the only one that REALLY matters is Oil.  For without cheap energy, the world financial dance stops.

I believe peak oil is here, and may have already hit the top, we are on the down slope.
One way to realize the reality of this is the current price of gas.  Europe markets are in a full recession collapse, so is Australia, and to some degree, China.   The USA isn't exactly leading economically either.

But here we sit, with gas prices much higher than second half of 2008 prices.  Some of it is explainable by the 3rd world markets growing, their demand is driving prices higher.  But the USA gas consumption is down to 2002 levels....and retreating!   So as the US retreats the rest of the worlds consumption rages on.

Overall this doesn't explain the price of gas today.  It is peak oil, in action.  Peak oil does NOT mean the world runs out of oil.  It basically means all the cheap oil is gone (% to consumption, new cheap well here and there immaterial).  The only oil left is costly and hard to get to, and will continue to get harder and costlier.

Think off-shore oil rigs costing billions to construct.  They are built because there isn't cheaper ways to get oil, we are tapped.

If you want to read a really in depth rant on oil, check out the Burning Platform by clicking here.  While I agree it is a dire situation, that blog does tend to get a little dramatic.   My take is next few years, everyone should spend money to focus on reducing monthly costs.  Buy solar panels, electric car, improve house inefficiencies.  Basically focus on reducing monthly costs to zero.

For once the masses want to do the same, it will cost you...big time.

Alternate Power as Investments

European economy is under fire, so is China, and to a lesser extent, the USA.

Yet gas prices are stubbornly high.  Every new well is MORE expensive to drill, as it gets harder to find new resources.  That drives fuel prices up, as well as energy demand from BRICK countries rise.

I still like two stocks for decade+ play, HTM and MGMXF, both in renewable energy.  Both their stocks trade at 40 cents, not something I advise dumping huge amounts into.  But a nibble here for the long haul to me seems like a winner.   As fuel prices go up, renewable energy from thermal simply increases profit margin.  These plants last 50-100 years at constant cost structure.  Check them out.

Gas Prices and US Dollar

The video below does a great job spoon feeding the rationale that gas prices are rising due to a weak dollar.  I do agree with this principal partly.  What the video misses is there is enough world demand to keep the prices high as the US consumption falls.  That is my entire theme on why natural resources will continue to rise for the decade ahead.

With exception of missing the point above, the rest of it is spot on.

It's all about Oil

As I have posted before, I am a believer of peak oil.  Whether the peak has past or will past soon is immaterial.  In the scheme of 100+ years of oil use, we are about to hit the peak, and afterwards we will experience continued rising costs for energy.

Governments can and have been promoting green energy.  But the adoption rate is slow, but hopefully will accelerate with technology efficiency advancements.

The growth for energy in India and China is staggering.  The consumption monster drives all energy sources higher.  China has done much with nuclear and coal to relieve pressure off oil.  

So when resource costs are going higher, what can governments do?  Why a stronger currency helps offset these pressures.  Think of it this way, if the USD was worth 10x more than other currencies, oil to US Citizens would cost less than people pay in their countries.  The irony is governments are publicly advocating cheapening of the currency to make them more competitive (and help pay down debt cheaper, but that part they don't announce).  The act of lowering money's value is a tax on every single citizen, in higher expenses.

We may be seeing another round of deflation to start, to help kick resources down a few notches in cost.  And of course, sometime between September and February of next year, another round of loose money will hit the world.  But only after resource costs go lower.

To get an idea how expensive oil is, and remember, the US and Europe are experiencing weak economies, look at the graphs below.  The second one is important, it helps make the costs of oil reletive in current dollars. By any historical standard, oil is expensive.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Peak Oil is real, the true crisis

I may focus on various economic issues, focus on currencies, gold, food, and energy.

But the single worst disaster the world faces is peak oil.

The global society is predicated on cheap energy. Without it, the laptop I am using right now would be insanely expensive to produce.

The world is facing catastrophic problems with energy costs, as the world is too dependent on oil for energy. Oil unfortunately has a problem with increasing production capacity to meet increasing demand from China and India (2.5 billion people) and western consumption. The US is already back at peak consumption levels set back in 2007, with a weak economy.

The concept of Peak Oil eludes most people, and many debate it as real. Let me be crystal clear what peak oil means to me. Oil will NOT run out in the next 50 years. Oil will continue to be more expensive to procure and rise in price by lack of increasing total global output. So in a sense, peak oil is lack of continued increase in net oil production, at a low price.

The net result is too little oil for too much demand, with higher production costs. This will be a continual problem for the rest of human existence until we can find a new primary energy source.

The net result will be increasing costs in food, energy, and consumer products relative to income. This is in-line with my view of continued downward spiral of US living standard, along with western countries, until these economies can experience a rebirth away from debt and new energy sources.

To articulate finer points on this issue, I have links to resources.

Shell Oil predicts Great Depression 2.0 Sooner rather than much later - Full PDF here

Financial Sense News hour podcast, Energy Crisis likely in 2012

Baron's Magazine, calling for Oil at 150 a barrel and beyond.

As a side note, Saudi Arabia is building a large solar farm. For the largest oil producing country in the world to entertain Solar tells me they think it will be cheaper than consuming their own oil.

Mentioned in the Shell article is movie Collpase, never heard of it. Snippet below.
UPDATE 6-21-2016 - the PDF and video are gone, I found alternate PDF copy here

Oil Prices and Energy Supply Problems

In August of 2008, Oil hit 145 a barrel. Immediately afterwards with the market crash, Oil hit 30 dollars a barrel.

Said it then, and I still believe that we will never in our lifetime see 30 dollars a barrel again.

Flash forward and in Q1 of 2011, oil was rising rapidly towards 115 a barrel (and beyond?).

But unlike 2008 when the global economy was full steam ahead, now its a tepid growth. The rising oil prices are resulting in energy supply problems around the world.

I expect in the years to come, 200 dollars a barrel will be come the low end of the scale, not high end for oil. In effect, prices of oil will find a new range, higher than historic prices. To read up why, see Wikipedia on Peak Oil.

So what does this mean for investing? Last time oil shocked the global economy towards a collapse. This time, it maybe a tepid retreat of the economy. But one thing I can count on, as oil rises above 140 a barrel and beyond, I doubt corporations in America and most western countries will go on a hiring spree.

Cheap energy has financed global growth since adopted. Technology and cheap oil is the defining difference between the 1500's and the 1900's. Without cheap energy, good luck on complex technology being affordable.

If/when the market retreats, at the "bottom", a great buy alternative to gold is oil producers, for as oil gets more expensive, their profit margins rise.

Video from Jim Rogers

Silver got SMOKED, as well as resources

If your in natural resources you may have seen some horrible losses on your screen.

I hit the bids hard Monday AM, as my post HERE stated.

It was a gamble, the markets could have recovered and I'd be the idiot selling at the low.

As luck would have it, what was a risky run-for-the-hills move, it turned out good.

The market was near upper trend line, and at the bottom of this post, you can see what happened once the market hit that line Monday.

Further, I sold my AGQ position last week at 364....well.....the charts tell all on how lucky I got.

So if you have been reading this blog, I am not saying now is the time to buy into resources, but things just got a nice haircut, making entry less risky.

And today the US Dollar EXPLODED higher. if this doesn't change soon, we may have seen the USD hit a year low, and we are going to see USD make a nice long run for years up....until I expect it to return downward in 2013 into new lows by 2014-2016.

For now, I am waiting to see what happens as I stated Monday. Mostly cash, just some money left in AVL, it almost hit my stop losses today. I may get hit out of that next.

I may dive right in and try to catch the falling silver knife...but I'll play that by my gut.

To the horror charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Zero Hedge Roundup

The blog Zero Hedge can sometimes be a bit....extreme in some of its posts.

But I found a few good articles recently worth sharing.

Citi Recommends Buying Irish CDS In Advance Of "Nightmare On Kildare Street" - Basically Irish debt is going parabolic which equals, another government collapse. We'll see what Europe does.

Chris Martenson Straight Talk With John Rubino: The Damage Is Already Done - I don't highlight Mr. Martenson much on the blog, but I do feature in my "new reader" link his videos and link to his web site. Interesting read, highly recommend it.

JPMorgan: "The Likelihood That The Portuguese Government Will Fall This Week Looks High" - Hopefully if we have enough governments collapse, eventually the USD will reverse and gain value! Come on Libya, Ireland. Portugal, Greece, and a dozen more. Get busy failing!. The question is, once all the small players fail.....what then for the USD?

US Inflation On Track To Hit 8.3% In 2011 - To all retire's, fat chance you'll see an increase in your social security check to adjust standard of living. Get used to it.

OPEC Says Perfectly Happy With $120 Oil, Does Not Think It Will Impair Growth - Funny how 120 dollar oil was panic time in 2008...but now, eh, its fine! What has changed? Are global citizens more wealthy can can spend more for fuel (and all things that need fuel)? Or maybe...just maybe...Peak oil is real. Nah, common folk are clearly richer than spring 2008, so 5 bucks a gallon gas here we come. Alternately, maybe this is the first crack of OPEC with using USD as a benchmark, and expects US to continue to pay higher prices.

Financial Sense Podcasts

Financial Sense news hour is by far the best economic pod cast I have listened to.

I flatly disagree with any concept that gold is money, but other than this one difference in opinion I have with the podcast, it is a great podcast to listen to.

I have put together a link to their recent great podcasts.

Stratfor's George Friedman on the Next Decade: Upheaval Dead Ahead

Jim interviews Stratfor’s George Freidman, discussing his dynamic new book, “The Next Decade: where we’ve been…and where we’re going”

FSN In Depth: Thomas E Woods Jr, Rollback

In Rollback: Repealing Big Government Before the Coming Fiscal Collapse, Thomas E. Woods, Jr. explains that we may still have a chance to avert total economic disaster—but only by completely changing our understanding of government. With bracing candor, he dissects just how the political class has nearly destroyed America’s economy.

Bill Powers discusses impact of Japan on energy

Bill Powers, editor of Powers Energy Investor, previously published the Canadian Energy Viewpoint and US Energy Investor. Bill has studied all aspects of the energy sector with an eye towards uncovering outstanding investment opportunities. He completes both primary and secondary research to identify small to mid-sized exploration and production (E&P) firms with strong value propositions, experienced management, strong balance sheets and growing production. With alternative energy becoming an increasingly important part of the world’s energy supply, Bill also considers established and early stage alternative energy companies worldwide.

Gold, Silver, and Oil podcasts

I am recommending two podcasts to listen to from Financial Sense News Hour.

The better of the two is on peak oil, oil prices, and middle east problems. (click)

Second is gold and silver. (click)

imminent US Dollar crisis?

The US dollar has been building strength/support from a chart perspective since 2008, with the lower trend line illustrated in the first chart. From a chart perspective, if the USD breaks this trend line ,there is very little resistance from US dollar falling further. The crisis point will be 70.70.

Evidence of this is the PREVIOUS trend break, back in 2007, where the USD for the first time since 1971 (ever?), broke below 78.19, a low set back in 1992. In 2007, the US broke this level and entered a free-fall until a new low was made in March 2008.

During 2007, the US stock market made new highs, as valued in US dollars. Once the market made new highs, Oil continued to climb even after the USD dollar bottom was put in March 2008, until markets crashed in September 2008.

The USD valuation in my opinion as a key component in driving assets to extreme levels, both US stock market and resources. Notice that the USD rose rapidly mid 2008, and Oil still spiked to extreme levels, soon after the markets crashed.

The USD is currently at a level that is a critical indicator for the next crisis. Assuming the USD breaks the recent trend line, it will likely spark yet another run-away asset valuation somewhere. And USD will enter into a true crisis if it breaks the low of 70.70 set in 2008.

This is a very likely scenario in 2011. If this comes to pass, any economic recovery that is occurring in the US should be badly hurt.

It is quite likely Oil will rise with US dollar falling, but also quite likely that Gold and silver will rise much more rapidly. For in 2007-2008, speculators on overheating economies and tight supply of oil drove oil to new highs. In 2011, mid east crisis and currency crisis will drive likely both oil and gold/silver.

There is a second indicator, in the second chart, US 30 year bonds. The trend line dating back to 1985 is in jeopardy. I had previously posted that we broke this trend line, I was wrong. The tools I have don't go back to 1985 on a daily basis. The Chart Store has charts updated periodically, going back decades. From this latest long term chart, it looks like we are pressing on the downward trend line since 1985.

A combination of breaking cheaper bond rates combined with USD driving to new lows will provide a super-charged cocktail mix that should drive some asset classes to new highs. My bet is gold and silver will benefit based on previous posts. See "Time to play parabolic chicken" for investments I am interested in.

Losers will be those invested in longer term bonds, mostly over 5 year maturity. Also pure cash storage will be damaged ASSUMING the USD never returns to current levels. I think that this is quite unlikely, and instead what will occur is after a crisis occurs the USD will regain value.

This is the moment of truth, what I have been concerned over since the start of this blog, and more so since the fall of 2008, when I switched to gold and natural resources. Those invested in pure cash will need to count on USA doing the right thing to generate a sharp turn around in asset classes. I will be making the same decision, but only after gold, silver, oil, food, etc explodes upwards. The decision will be to get off the bullet train before a crash in resources......or not and keep resources to retain wealth in a spiral of USD failure.

I truly have no idea how this plays out, but this is why it is prudent to diversify into 25% resource based investments (or more).

I may be blogging in a month, crisis averted, from a chart perspective, and we have returned to the historical range. But March is likely to bring interesting events.

From a cycle perspective, Gary of the Smart Money Tracker also believes there is a high chance gold/silver and possibly other resources explode upward. Gary's view PRIMARILY uses broader market trend view of gold is in a bull run, where we are in a cycle for a commodity, and other factors.

The fact that my view of USD valuation and interest rates will drive a new USD crisis like we had in 2007-2008 is inline with Gary's method of timing markets makes for a very compelling story.

Good luck, and here are the charts, from The Chart Store.com

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Oil spiking

Oil facility in Libya owned by Chinese attacked. (click)

Brent Oil has spiked to 120 a barrel. If oil continues to spike (200 barrel anyone?) it is sure to crash the US market like it did in 2008.

India stock market declining over-night.

When violence is required to change politics

As everyone should already know, Egypt is undergoing a peaceful civil revolt against President (dictator) Hosni Mubarak. I say dictator as he has been in office 30 years, and by no means has been truly freely elected over the entire duration.

I have talked before this revolt to USA Egyptian citizens about their countries politics. The spin I get is the Egyptian government exists primarily through USA political and financial backing. I haven't run into an Egyptian yet that has said they are happy with their homelands government. So it was no surprise to me that civil unrest erupted threating Mubarak's government.

I was rather startled how quickly this unrest turned into the government's very existence is called into question. However by enlarge the protests by the people to basically over-throw their government is relatively peaceful. There has been looting, violence, and clashes with the police. But compared to other government over-throws you could say it's peaceful.

I was expecting the announcement that came about 1pm Thursday that Mubarak was stepping down. Later the same day Mubarak stated that he would not step down. The military has been trying to act neutral, not clashing with protesters unless they broke civil law. I am no expert of the situation in Egypt, but from my standpoint the momentum is too great to ignore, Mubarak must go.

This is a clear case where if change cannot be attained through peaceful means, the public will be forced to violently overthrow their government. And frankly, I think that it is getting close, if not already a justifiable next step. Unfortunately, if Egypt is over-thrown through violence, rather than a negotiated transition, I expect Egypt to become a Muslim state.

Mubarak should have negotiated a transition, ensuring a truly democratic state evolved from his reign. Since he refuses to step aside, the transition will yield an unknown next government. The people will get change, but it remains to be seen if the change is truly better.

A secondary question should be asked, why now? If he has ruled for 30 years, why is this happening now? Again, I am no Egyptian expert. But from my standpoint there are many catalysts, but to me it comes down to....money.

Food prices are rising, and governments that where barely maintaining order lose control of that order as people become angrier of their living conditions. Further, Egypt has historically augmented it's fiscal positioning through Oil sales, among other things. And due to peak oil (in my opinion), Egypt is about to become an oil importer rather than exporter.

I see quite possibly similar civil unrest occurring for countries experiencing similar energy import shifts. Becoming an oil importer rather than exporter is a major financial stress that weaker governments may not transition well.

It boils down to natural resources will grow in cost due to India and China's consumption rate, and the transition will continue to be a colorful one. (Nice picture here of global oil consumption) I hope the Egyptian people ensure a truly democratic government follows President Hosni Mubarak's rule. For if it becomes a Muslim state, the power shift may continue to the rest of the area including Saudi Arabia. And that will bring some extreme change the US lifestyle.

This Week without Charts - Egypt

This week I bring you no charts.

Primary reason is laziness. The charts are not going to show any major changes from the last two weeks.

What is a major change is the political unrest in Egypt. I expect by Friday the market to have been influenced by the Egyptian politics as it unfolds. I also can't see how the current ruler can remain in office. After 30 years of rule, his last minute ditch efforts to gain support will not work.

The real story isn't just Egypt, its the fact the middle east has quite a few governments that are operating without representing it's citizens. Many of whom have been helped kept into power by the USA.

Notice that technology has helped the citizens organize and in effect "uncover the inefficiencies" and take on the status quote. This theme I believe will be repeated for the future of US currency policy as I posted.

If the destabilization in the area spreads, expect oil to soar. I expect oil to soar anyway, just because of the situation. But a little skittish oil pricing is forgivable for a week or two. I am more concerned over a few months or year.

So for now, its see how the markets react. Watch natural resources, oil, gold, and USD as always.

BTW, I fully expect this situation to help push the US treasury rates lower, buying more time.

USO VS USL VS DBO

The most popular article on my blog is USO vs USL. Even through I don't trade these etf's much anymore, I felt obligated to update the post.

Since then, USO has continued to lose vs USL in price, continuing the trend proving USL and DBO are better oil ETF's than USO.

Below is a comparison since Dec 21st, 2007. You can click here and choose different time periods, showing how in general, USO always does worse than USL and DBO.

The second image shows how Oil company ETF OIH has been better than all the oil ETF's, and that gold ETF GDX has also done great. Click here to change time periods and add other ETFs to compare against.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Food Prices hit record high

Article quote (click to read)

Food prices hit a record high last month, surpassing the levels seen during the 2007-08 crisis, the UN’s Food and Agriculture Organisation said on Wednesday.

The Rome-based organisation said the increase did not constitute a crisis. But Abdolreza Abbassian, senior economist at the FAO, acknowledged that the situation was “alarming”. He added: “It will be foolish to assume this is the peak.”

What a way to start the year. Already sounding the alarm that food prices are rising, and will continue to rise. Looks like this 2011 prediction is already on track.

And what people are mis-understanding this isn't due to money printing, inflation, deflation, or speculators as the CTFC want you to believe.

The cause is what I predicted back in December of 2008, and we will see for the rest of our lives. Continued rise in food and energy costs as China and India economies grow. Click to read my December 2008 full article.

Once again, why I recommend food, energy, and resources as investments.

This Week in Charts

Basically, we are either about to make some significant moves higher, or a "failed breakout".

Buying resource based stocks in earnest here isn't a horrible play, but must set stops to sell positions if wrong.

The problem I have with resource based stocks continue to scream higher is the chaos it will cause in the US economy. That of course won't stop it, but those watching resources have to be aware of how detrimental this will be to any chance of a recovery.

Out of gold, food, energy, Oil is looking strongest to me.

In any event, I have about 80% in resources, and ALWAYS will, my buying, and selling is just the fringe.

Good luck, to the charts!

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2