Market Curiosity: Exploring Markets And Systems

June 27, 2012

A steady way to prosperity: Timber (update 2, July 15)

Filed under: Editorials, Just Watching — Tags: , , — Jeff Fitzmyers @ 11:33 pm

I wanted to highlight some info Dr. Steve Sjuggerud recently posted via The Most Accurate Investment Forecast Ever because I love the idea of selling options on Timber: An Excellent Retirement Vehicle.

On December 31, 2001, Jeremy Grantham issued a 10-year forecast [on] 11 different asset classes… He got the order almost exactly right… It may be the most accurate 10-year call in stock market history…

How does Grantham come up with these predictions? … His firm “predicts asset class returns in a simple and apparently robust way: we assume profit margins and price earnings ratios will move back to long-term average… from whatever level they are today.” … “These estimates are not about nuances or PhDs. They are about ignoring the crowd, working out simple ratios, and being patient.”

So what’s Grantham predicting today?

Grantham predicts that over the next seven years, bonds will lose money (after inflation). He predicts that managed timber will be the best-performing asset class, followed by emerging-market stocks.

This PCH move today spurred me to highlight timber again. The dividend is currently around 4%.

The monthly shows price to be closer to the bottom of it range than the top.

Update June 29 2012: Pretty good for a boring timber stock!

Update July 15 2012: The July 30 put sold for $64 is far out of the money 😉

May 31, 2011

PCH looking interesting due to significant late day volume and a low weekly CCI turning up (update 2, June 1)

Filed under: Just Watching — Tags: , , — Jeff Fitzmyers @ 10:45 pm

Not sure, will look at things in the morning, but I might buy some July or Sep 35 calls.

+ Nice volume spike. Often associated with soon-to-rise prices.
+ Weekly CCI low and turing up.
+ Daily CCI turing up and crossed over weekly CCI
– Price has not broken the 2 month down trend line.
+ The daily RSI got rather low. But that by itself does not necessarily mean it’s a good time to be aggressive with calls.

+ Price could have closed much lower but was heavily bought the last 15 minutes of trade.

Related
+ Timber: An Excellent Retirement Vehicle

June 1: Something going on that I don’t understand so standing aside. All that late volume is now underwater. Will those shares be sold?? Covered the short puts too.

June 1 pm: Initial support met rather quickly 🙂 Some more support at about 33.50-ish based on past gaps and price action in Sept and Nov of 2010. Not time to sell calls just yet. Waiting until the daily CCI gets really low. But now the monthly CCI is turning down below the +100 line. Supply could predominate for a while. But undercutting the expansion bar above 35 frn’s/share is the biggest deal.

May 26, 2011

Sold June 35 PCH puts for 0.85 — expecting a bounce. (update 1, June 1) +17%

Filed under: +06 to +25%, Short Puts — Tags: , , — Jeff Fitzmyers @ 1:45 pm

Will cover on any decent bounce.

+ 3 stabs toward 35 with no follow through.
+ Long legged candles.
+ At long term EMA support and daily Bollinger Band support.
– EMA’s are heading down.
+ Weekly and daily CCI’s oversold.
+ Daily CCI crossed upward over weekly CCI.
– Monthly CCI heading down.
– Fair amount of selling volume, but trending down.

June 1: Wish I covered on the large gap up but was not at the computer near the open yesterday. Price “should’t” have gone this much lower so time to get out. +17% — even though the trade happened about 30 cents lower. Will wait for the daily CCI to dip below -100.

March 27, 2011

Possible CNQ, MPAA, and PCH trades

Filed under: Just Watching — Tags: , , , , — Jeff Fitzmyers @ 10:14 pm

Might be looking to sell puts on CNQ, MPAA, SOLR and in the money puts on PCH. Opps, scratch SOLR — insiders have sold 99.4% of their shares. The price might still go up for a while, but that big red flag adds a lot of risk on face value. Insiders are buying PCH.

This chart seems to be a good rule of thumb right now.

And the $NYSI index seems to be turing up with a little room to run.

March 24, 2011

PCH – selling far out of the money puts, again (paper trade) (updated May 15) +80%

Filed under: +76 to +100%, Short Puts — Tags: — Jeff Fitzmyers @ 9:49 pm

Sold May 35 puts for 0.50.

(Notice all these PCH put shorts have made money, easily.)

+ Looks like price might be coming out of a 4th wave. Doubtful it would close below 35.
+ EMA’s all moving up.
+ CCI’s all moving up.
– Volume is a bit tepid, but that’s the only slight negative I see.
+ In fact, the weekly CCI starting to rise from a dip with a rising monthly CCI is quite bullish.

The reason these are far out of the money puts is because there are not that many strike prices to choose from.

References
+ PCH – selling far out of the money puts +100%
+ Timber: An Excellent Retirement Vehicle

May 15: No more paper trades. I was deluding myself that I was not solely focused on silver in April. Paying attention to illusions does not produce gains in anything but experience-the-hard-way. Covering at 0.10.

March 17, 2011

Just a quick note – look how well PCH is holding up…

Filed under: Just Watching — Tags: , , — Jeff Fitzmyers @ 11:07 pm

Oh, and since this happened to be close by… Paper Marks / One gold Mark. Note the log scale.

References
+ Timber: An Excellent Retirement Vehicle
+ “You Need to Consider This Crisis-Proof Investment”
+ PCH – selling far out of the money puts

February 24, 2011

PCH – selling far out of the money puts +100%

Filed under: +76 to +100%, Short Puts — Tags: — Jeff Fitzmyers @ 8:27 pm

Sold March 35 puts for 0.30.

+ Price had a nice reversal of the 34 ema on good volume.
+ Longer term ema’s trending up.
+ Weekly CCI > monthly CCI.
+ Daily CCI is low.
+ 5.4% dividend.

March 24: Puts expired worthless, +100%.

February 22, 2011

Surveying the playing field: fortunes can be made or lost in the next month or so, and sent to PCH :-)

Filed under: Editorials — Tags: , , , , , , , , , — Jeff Fitzmyers @ 11:54 am

I have closed out most other trades. The primary focus is on silver. Why?

1) A comment on Mr Ferguson’s update that Friday March open interest only dropped a small 4.5%.

Difficulty in choosing right currency has become unmanageable – gold will continue to become currency of strength without liability; storehouse of value; medium of exchange

Possibly, at some point, people will begin focusing more on purchasing power stability and less on trying to eek out a few percent deciding which currency is the least worst every month, which bond’s won’t default, and which stocks will not drop too much.

Feb 22 update: And Wow: Fed’s Hoenig Says United States Has “Deeply Undermined Free-Market Capitalism” How can entities manage their affairs efficiently if the rules keep being modified in secret? Sooner or later they find more efficient paths. Ticker Guy’s take.

2) Silver is still, by far, the most undervalued store of wealth.

3) Timing. I don’t have a high success rate at timing things. In a way, that’s why I prefer to sell puts — timing can be off a lot and the trade can still be profitable.

John Embry: Eric Sprott and I have always contended that in silver if you get some serious physical buying in the absence of above ground inventories that are available for sale, that the paper manipulators would basically get overrun. Right now we are in the process seeing that unfolding… I definitely think a short squeeze is underway in silver. The evidence will be if the price of silver moves sharply higher from here. I think you will know if you have a real short squeeze if this thing starts piling on gains in the next week.

4) What vehicle? The COMEX can and will likely change the rules in their favor to try to survive. So other than a few token June 60 calls, that venue seems risky. ETF’s — except Eric Sprott’s probably have less silver than advertised. That leaves silver stocks and SLW appears to be the best. And of course options are to be considered in potential situations where large percentage sustained moves can happen in short timeframes.

That all boils down to a few SLW June 60 calls (incase price goes ballistic), and SLW June at the money calls that are rolled forward as they get a few strike prices in the money. The stop loss is a close under the 10 EMA. If silver really is about to rise substantially, except for a few fast drops, price should steadily rise higher.

The over all exit strategy? If price really does take off, start shifting some value to things that the gov is not (yet) interested in. For me, that is PCH, PCL and maybe WY.

Bonds/debt are weak:
Feb 22 EDIT: Opps, I did not update the data correctly, this chart is incorrect. Debt did go up today a fair amount on good volume. Correct chart:

Old chart:

Stocks continue to be overbought (I speculate that a tug-of-war going on between value and fed printing):

December 27, 2010

Non-ideal sell Feb 35 PCH put (paper trade) +69%

Filed under: +51 to +75%, Short Puts — Tags: — Jeff Fitzmyers @ 6:47 pm

Action: Sell a FEB 35 PUT for about $240. EDIT: paper purchase at $245. (Bid 245, ask 300. Picking the worst price since it’s a paper trade. Likely would have been able to get $270.)
Exit: On a good spike up; a close below 31.50, get the stock put, or simply roll position.

– Daily CCI is high, but not too uncommon to be oversold for a while. Not ideal.
+ Increasing volume over December.
+ Weekly CCI crossed above monthly CCI.
+ Double normal volume a week ago.
+ Price is likely to tag the white horizontal resistance line.
+ Pretty good volume the past 2 days considering the holidays.
– No option at 32 or 33 so have to pick 30 or 35. The 30 would sell for about $35. That is the safe play. But picking the 35 strike since the weekly and monthly CCI’s are starting rather positive. Will close trade on a spike up or simply roll over.

Action: Sell a FEB 35 PUT for about $240. EDIT: paper purchase at $245. (Bid 245, ask 300. Picking the worst price since it’s a paper trade. Likely would have been able to get $270.)

Exit: On a good spike up; a close below 31.50, get the stock put, or simply roll position.

UPDATE: Jan 14th: Bought back for $1.45. PCH will likely go up some more, but I wanted to exit on a decent run up and before price has a chance to correct since the option is in the money.

December 5, 2010

Timber: An Excellent Retirement Vehicle (update 3, Oct 23)

Filed under: Editorials, Favorite Posts, Short Puts — Tags: , , — Jeff Fitzmyers @ 12:26 am

Assuming markets exist and patience, the apogee retirement vehicle is:

The #1 Investment of the Iron Chancellor The 50 years in Germany following [Bismarck’s] death featured hyperinflation, depression, war and defeat. Timberland held its value better than any other investment… Most people don’t know that timber beat all major asset classes over the last 30 years.

You Need to Consider This Crisis-Proof Investment Timberland is a crisis-proof investment because the growth of the trees does not move in step with economic cycles. You don’t have to harvest when demand is soft. Let them grow, bigger trees equal more dollars.
+ Growing scarcity of quality of timberlands.
+ Global demand should increase.
+ Growing institutional interest in timberland.

The Ideal Investment to Own, Based on History Timber, for example, has a history of high, stock-like returns with low, bond-like volatility. Using the same time period in the table, timber had a compound annual return of 11.8%, with risk (annual volatility) of only 7.9% – for a Sharpe Ratio of 0.96. That is hard to beat…

People keep wondering where to put value if there is a big appreciation in silver and gold prices: timber (PCH, PCL, maybe WY, maybe RYN).

What does the “helpful” MSM thinks of timber as of August 2009? Timber prices could be vulnerable to a decline of as much as 50% in coming years… “The reality is the underlying cash flow is highly dependent on cyclical industries like housing, paper and newspapers…” What happened in the 2 years since publishing? The break even point could have declined to $19/share. In 3 more years the beak even point could decline to $13/share — SmartMoney’s 50%. So even if PCH did drop 50% in 5 years, the overall value was flat, and it’s still chugging out dividends and income from selling options. So far the risk was very little and the reward might have been 40%.

A very safe and profitable way to buy timber shares: Sell puts on down drafts to enter and sell calls on spikes higher. Number from early 2010.

PCH ($30/share) $2/share dividends = 6% gain / year.

Add selling options conservatively 5 times per year for about $40 contract = another 5% per year.

Starting with 100 shares and reinvesting dividends and option sales at 11% per year:
5 years on : possibly 150 shares worth maybe $4,500 generating $500 in dividends and option sales per year.
10 years on: possibly 250 shares worth maybe $7,600 generating $840 per year.
20 years on: possibly 720 shares worth maybe $21,000 generating $2,300 per year.

Say you add $3,000 per year:
5 years: possibly 620 shares worth maybe $18,000 generating $2,000 per year.
10 years: possibly 1,670 shares worth maybe $50,000 generating $5,500 per year.
20 years: possibly 6,400 shares worth maybe $190,000 generating $21,000 per year.

Starting out with $100,000:
5 years: possibly 5,000 shares worth maybe $150,000 generating $12,000 per year.
10 years: possibly 8,500 shares worth maybe $150,000 generating $28,000 per year.
20 years: possibly 24,200 shares worth maybe $725,000 generating $79,000 per year.

Update June 2012: The Most Accurate Investment Forecast Ever “Grantham … predicts that managed timber will be the best-performing asset class, followed by emerging-market stocks.”

Update 3, October 2012:
+ A Safe Land Investment That Can Protect You from the Dollar Crisis

Update 4, January 2015
One of the Best ‘Hard Assets’ to Own in 2015

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