So dummies, present company excluded of course, what do we do with the second half of 2012? Well, in the irrational market that we currently deal with today, it seems like guesswork. However, the guesswork is left to the day traders and as for intelligent investors as ourselves, you should look at the big issues in the world economy. The three biggest issues are the debt situation in Europe, coal and natural gas.
The debt issue in Europe will not correct itself for at least a decade. The European Union may have to bite the bullet and disband. You have a group of countries, that are broke, lending money to each other. Something will have to give, since you cannot get blood from a stone. Eventually, one of the countries will default, which will create a cascading effect that will trickle down to every other developed country, since we are all owning and are owed money from every other developed country.
So, what do we do with the available information we have? The hippies are campaigning for the end of coal and trying to stop hydro-fracking, despite the fact is has been proven that hydro-fracking has been developed with safe guards to protect our drinking water. So, coal and natural gas prices are in the gutter. Luckily, there are slew of developing countries that are craving cheap energy. The main importer of coal is China and FYI, coal is still the largest export of the United States. Natural gas has been undervalued for about a decade. Natural gas will pop in about five to ten years as coal's lifespan is about twenty years, before it is replaced by solar power and natural gas.
Coal has had some developments in the past week. Patriot declared bankruptcy and Peabody just recently finalized a purchase that makes them the largest utility in the United States, servicing over seven million people in six states. Peabody is the long play as the stock has been killed over the past year. I have the company valued in the $80-$90 range and it is currenlty trading at around $22 a share. Again, the irrational market will most likely not price the stock correctly, but as with every stock today, they are not priced correctly. This creates tremendous opportunities for saavy investor as every stock is priced incorrectly. In the long term the stock will eventually be in the range of proper pricing. The trick is being able to double up when the stock is beaten down and when to realize the stock is overvalued and to reduce or eliminate your position.
Tickers for the future:
BTU
BAC
DUK
CHKE
WM
JNJ
Good luck!
Sunday, July 15, 2012
The Great Recession: Part II
Sorry for the prolonged hiatus. I had some business dealings that needed to be addressed. So, how has everyone enjoyed the market lately? Well, Europe changes its story, pretty much on a daily basis. You have to love the media, by reporting that Europe "Feels confident that it might have an answer to the debt issue." And, the market goes up. It is true about any good or bad news that is announced by the oh so smart media.
The problem with today's market is that it is too easily influenced by the media. The reason for that is today's market has everyone in it; educated, uneducated and ignorant. Fifty years ago, you had much fewer investors in the market and mutual funds did not exist or were extremely new. The only people invested in the market are the ones who had money and had a pretty good idea of the value of companies, because they were priced in the market much closer to the real value as opposed to the pseudo value they are assigned today. It is more confusing today, however, there is greater opportunity to be taken advantage of, if you can anticipate the market.
Ah, anticipating the market is basically impossible, because it is so random and is affected by investors who have no idea what they are doing. This causes all stock prices to be incorrectly priced at all times. The saavy investor will see this and take advantage. I must quantify this as the investor must be long on this investment. If you try to trade in this market, just like a casino, the longer you are in and the more trades you make, you'll eventually lose.
The problem with today's market is that it is too easily influenced by the media. The reason for that is today's market has everyone in it; educated, uneducated and ignorant. Fifty years ago, you had much fewer investors in the market and mutual funds did not exist or were extremely new. The only people invested in the market are the ones who had money and had a pretty good idea of the value of companies, because they were priced in the market much closer to the real value as opposed to the pseudo value they are assigned today. It is more confusing today, however, there is greater opportunity to be taken advantage of, if you can anticipate the market.
Ah, anticipating the market is basically impossible, because it is so random and is affected by investors who have no idea what they are doing. This causes all stock prices to be incorrectly priced at all times. The saavy investor will see this and take advantage. I must quantify this as the investor must be long on this investment. If you try to trade in this market, just like a casino, the longer you are in and the more trades you make, you'll eventually lose.
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