Friday, July 29, 2016

Romania: Cut taxes, regulations and economy improves

Seeking Alpha:

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Another country that "gets it" is Romania, the mountainous, Central European nation and home to roughly 20 million people. After years of tepid growth, Romania's government moved to revise its tax code. At the end of last year, it reduced the value added tax (VAT) rate from 24 percent to 20 percent, lowered the income withholding tax rate, nixed a controversial "special construction" tax, simplified deductibles and exempted certain dividends from corporate income tax.

The changes have worked much faster than expected.


In the first quarter, Romania grew 4.3 percent year-over-year, beating the 3.9 percent analysts had expected, and up 1.6 percent from the fourth quarter of 2015. This places the country among the fastest growing EU economies, with the European Commission now expecting it to be the second fastest growing country in the 28-member bloc, behind only Ireland.

I am playing this via my investment in closed end fund Fondul Proprietatea. Speaking of Fondul the fund just announced the terms of the tender offer. They are offering about a 9% premium to the current share price and are attempting to tender around 575 million shares which is about 5% of the outstanding shares. I am not going to tender because I like the assets in the fund that are not yet fully valued in my view so I expect the shares to trade higher down the road. 

Thursday, July 28, 2016

This gold stock bull market is one of the biggest record advances in all of history

Gann Global:

The 175% Advance in Gold Stocks in 5 Months, 22 Days Now Places Us As the 11th Greatest 1st Leg Up in Any Bull Market in Any of the Tangible Assets During the Past 150 Years.  In Other Words, it is the Elite of the Elite.

A short video but very compelling.

Sunday, July 24, 2016

Why stop losses are a key to stock market success

I have written quite a bit about becoming wealthy via investing and speculating in the capital markets. Doing research and picking the right security is definitely a big part of the equation. Timing is also a big factor. One must buy the correct security at the correct time. I would go as far to argue that the price you pay for a stock determines how much you will profit, if at all.

These skills are all subjective in that although we can use data and history to help guide our decisions we cannot know the outcome of any of trades beforehand. We can increase our odds of success but we will still not have certainty.

Two of the things that we can control about our investments that are certain are position sizing and stop losses. These are two items related to an investment that most people give very little thought or attention to.

A stop loss is very important because large drawdowns in your account are very difficult to recover from. I define a drawdown as:

 "the peak-to-trough decline during a specific recorded period of an investment, fund or commodity. A drawdown is usually quoted as the percentage between the peak and the subsequent trough."

Lets say we have a $1000 stock investment account and we buy 100 shares of XYZ corp. stock for $10 per share. Assume the stock drops to $7.50 per share which is a loss of 25%. What percentage gain do we now need to get back to even amount of $1000?  The math says we need a 33% increase in XYZ corp. just to get back to even.

How about a 50% loss? You would need a gain of 100% just to get back to even. A 90% loss, which I am embarrassed to say I have taken in the recent past would require a whopping 1000% gain just to get back to even.

Ask yourself how many 1000% winners you have had in your investing career. How many 100% winners? These type of gains just do not happen that often in an investing career. In order to have success one must cut losses early and let winners run.

I have failed many time in this endeavor mostly because of ego. You put alot of work and time into researching an idea and then you pull the trigger and the stock goes down. It may go down even though the prospects of the company do not change. Or you just might be wrong in your analysis. However, instead of taking a loss a loss and living to fight another day we hold and then begin to rationalize that the stock will go back up. This is the kiss of death to investment returns and is one of the main reasons individual investors (you and me) suck at beating the averages. 

A recent study by the Boston-based financial-research firm Dalbar found that the average investor in all U.S. stock funds earned 3.7% annually over the past 30 years, while the S&P 500 stock index had an annual return of 11.1%. In other words, the market outperformed stock-fund investors by about 7.4% annually over three decades.

We have to control this urge to hold on. You are a long term investor until you are down 90% and then you sell at the bottom. It happens over and over to individual investors. What I have done is to try and automate the stop loss process. I use Tradestops. This software program allows you to enter your stocks, the date bought, price paid, number of shares. You also enter the percentage loss you are willing to take. For a larger more blue chip investment I like to use 25%. For my more speculative picks like junior mining stocks I like to use a 50% stoploss as these smaller stocks are more volatile.

Tradestops looks at your portfolio everyday and then if the stock drops by the determined percent you specified you get an email notifying you. You then should take action and sell the stock. No questions asked and regardless of the blow to your ego. Think of like being a professional baseball player and hitting. Even the very best hitters never get a hit much moire than 3 in 10 times at bat. Yet if you were to hit for that type of average in the majors you would be a star.

This software that Tradestops offers takes some of the emotion out of the investing equation. You get the email and then you act. It becomes a sterile, mechanical operation. You can always reassess and buy back in at a later date if you look at the stock later and then decide the situation warrants. You just cannot afford to take 50-90% losses and be successful long term.

The other good feature of the software is that as the price rises the software automatically raises the stoploss price up along with the share price. This saves you time and effort as you don't have to do all kinds of calculations on a daily or weekly basis. The software also will account for any dividends paid on the stock and lower you cost basis on a stock by the amount of the dividend paid.

I saw many guys I worked with let million dollar portfolios go down 90% in the dot com bust and they never recovered. Some are still waiting to get back to even or sold out at the bottom for a total loss. I have taken big losses in my own career and I need to cull the current portfolio of some wounded ducks. It happens because of ego and emotion. Don't let it happen to you consider using Tradestops software for your portfolio.

There is a cost to Tradestops (I get no compensation from recommending this product) and I believe it is around $100 or so dollars per year. However I consider it money well spent. We are not going to be right all the time in our stock selections. But if we cut our losses early and take as much emotion out of the process as possible you become wealthy by being correct in your stock selections even less than 50% of the time.

Cut your losses early and let your winners run

Saturday, July 23, 2016

Mr. Lithium Joe Lowry comments on Orocobre

LinkedIn:

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Many who are considering investing in other lithium projects look at Orocobre’s execution as an indicator of what to expect from other emerging brine producers. Unfortunately, the extended start-up and continued delays on the Olaroz project have done a great disservice to other juniors seeking funding by amplifying the difficulty of executing a lithium project. Yes, bringing a brine asset online is a challenge but Orocobre has made it look like brain surgery which it is not. All brine projects are different and have unique challenges but ORE should not be looked at as a barometer of what others who assemble experienced, competent teams will do. I expect much better from Galaxy and LAC/SQM.

My original recommendation in the lithium space was Orocobre. I took half off the table when the stock was up 100%. The stock has continued higher as the bull market in lithium is driving up all players. Orocobre is fortunate that they were ramping production into a rising lithium price. 

I cautiously hold the remaining Orocobre shares that I own but my prime lithium play is Galaxy Resources. I will remind readers that I liquidated my shares in Albemarle because of the fact that the company is not a pure play on lithium. 

I continue to like the lithium space as the ramping up of electric cars and battery storage of renewable energy is now just taking off. I do caution readers that this will become a bubble. Anyone with any moose pasture is going to become a lithium company. Most of these will fail. Make sure if you are in this space that you pay attention to the management of the company. Do they have a team that is schooled up on lithium mining and actually know what they are doing. 

Every time there is a mania in some mineral all the stock promoters in Vancouver begin creating shares in these companies to take advantage of the punters with visions of sugarplums in their eyes. Do not be like the punters. Know what you are buying and why you are buying it. 



Wednesday, July 20, 2016

Why the gold bear market is over and a new gold bull market has started



I am using a new screen recorder so the quality of the videos should be better along with the sound.

Here is a link to the Frank Holmes article on the effect of real rates on the gold price that I site in the video.

Mongolian Growth Group article and video



Here is a link to my article about Mongolia Growth Group and why I think the turnaround in the Mongolian economy will benefit them.

More bad news for Social Security

Social Security Administration:

Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing. Lawmakers have a broad continuum of policy options that would close or reduce the long-term financing shortfall of both programs. The Trustees recommend that lawmakers take action sooner rather than later to address these shortfalls, so that a broader range of solutions can be considered and more time will be available to phase in changes while giving the public adequate time to prepare. Earlier action will also help elected officials minimize adverse impacts on vulnerable populations, including lower-income workers and people already dependent on program benefits.

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Social Security and Medicare together accounted for 41 percent of Federal program expenditures in fiscal year 2015.

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Social Security's total income is projected to exceed its total cost through 2019, as it has since 1982. 

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After 2019, interest income and redemption of trust fund asset reserves from the General Fund of the Treasury will provide the resources needed to offset Social Security's annual deficits until 2034, when the reserves will be depleted. Thereafter, scheduled tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2090. The ratio of reserves to one year's projected cost (the combined trust fund ratio) peaked in 2008, declined through 2015, and is expected to decline steadily until the trust funds are depleted in 2034.

Instead of talking about this issue which will eventually destroy the US as a political entity the press is talking about Melania Trump's speech and whether she plagiarized Michele Obama. Good grief the country is facing ruin and everyone is fiddling why the country burns.  

If you do not take responsibility for your own life and finances you will get what you deserve. 

Tuesday, July 19, 2016

Mongolian economy moving out of recession

World Economics:

The Mongolian economy has continued to grow and is now poised to end its 3 year long recession. The key monthly Sales Growth Index, which is an accurate gauge for GDP growth, has posted the first unadjusted reading above the 50.0 no change level since the summer of 2013. Stronger sales are also driving improved Business Confidence and an easing in the amount of price deflation. It’s too early to know if these improvements will continue for the remainder of the year but for now this good news will offer some reprieve for the struggling Mongolian economy.

The trend in the SMI is clear and it is heading higher. No economy stays in recession forever. The Mongolian economy is an economy based on commodity exports. I expect commodity prices to gain strength after a five year bear market. In fact this has been one of the worst resource market bear markets of all time. The recovery from these lows should be consummate with the decline.

I noticed Mongolia growth Group stock is moving higher in anticipation of a recovering economy.

Even a child can recognize the uptrend



Cyprus Tourism sets record

RTE News:

With the Mediterranean holiday island's economy on an upward curve, state-run Cyprus Tourism Organisation said that 413,114 tourists arrived last month. 

"It is the best June in terms of arrivals in the history of Cyprus tourism. Moreover, these are the second best monthly figures ever after July 2015 (with 414,527 arrivals)," CTO said in a statement. 

It said Cyprus had also set other records this year, with the best first six-month performance ever recorded.

For the first time in tourism history, arrivals during the quarter from April to June also surpassed the one million mark. 


In June, there was a 22.6% hike in tourist arrivals compared to the same month in 2015.

Turkey is also a big destination for many European tourists. I think the recent coup attempt and ongoing nonsense there including the airport terrorist attack are going to dissuade visitors to Turkey. I would expect Cyprus will be picking up some of that trade.

Cyprus is under followed but is bouncing back nicely from its recent troubles. I continue to like Bank of Cyprus which continues to show progress in healing its balance sheet. 

I think long term sentiment to Cyprus will change along with sentiment towards the Bank of Cyprus. 

Listing the shares in London will also be helpful.

Monday, July 18, 2016

Fondul Propritatea: Short term gain possible on upcoming tender offer



This is my first video on one of my portfolio holdings Fondul Propritatea which has an upcoming tender offer. I will be doing more videos on more of my holdings and will even bring back my weekly commentary that I used to do prior to the housing bust. I was calling out the housing bust well before the mainstream media (late 2006). Here is a link to one of those old episodes. I was dead nuts on and a year early with regard to the housing bust.





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