Thank You Mr. Brieger!!!

THE STORY OF MY FIRST DOUBLE
One day in August of 2009 I was watching BNN.  The analyst du jour was Peter Brieger of GlobeInvest Capital Management.  A guy called in and asked Brieger if he still liked Scorpio Mining (SPM).  It must be his brother who calls every time he's on to ask the question to give him the lead into talking about his favorite stock.

Brieger gave a number of reasons for his belief that the .55 stock would rise to $1.50 to $2.00 over the next eighteen to twenty-four months.  I'd seen Brieger a number of times and believe that he's a fairly conservative guy so it was a bit of a surprise to hear him talking up a small cap miner.  He stated that Scorpio is his largest single holding and he's still adding it to client's accounts.  I figured if it's good enough for him, it's good enough for me.  The price that day was .55.

I had some cash in my trading account having recently been taken out of Royal Bank (RY), so I put in a buy order at .50 good through the end of August and went on vacation.  A couple of weeks later, while snorkeling in Maui, my order was filled and I became the proud owner of Scorpio shares.  Within weeks the price bounced to .75.  Normally I would bail and brag about a 50% gain in less than a month, but I held off.  Brieger's forecast of a share price in the $1.50 to $2.00 range intrigued me.  I've never had a three or four bagger.  Forget three or four, I'd never had a double.

Months passed, the shares traded in a range between .55 & .70, seldom touching .75 again.  With my usual impeccable sense of timing I put in a sell order at .75 in March.  Yup, here I was, seven months later, trying to get the same .75 that I could have had months ago.  I renewed my sell order each week for a number of weeks.

On Monday, April 5 I changed the strategy and revised my ask to .90 figuring it was just plain dumb to settle now for what I could have had last September.  Brieger's predictions haunted me. I realized that I had already held for nearly half of his earliest prediction of $1.50 to $2.00 in eighteen months. The following day, the price popped to a high of .85 and closed at .83. At last, I had avoided being taken out on the way up. 

One day later, on Wednesday, greed set in.  Before the markets opened I revised my order to an ask of $1.04 for half my position, calculating that I'd get all my original investment back (including fees) and still hold half the shares for the ride to Brieger's $1.50 to $2.00.  The Wednesday high was .94 and it closed at .88.  Once again, I'd dodged the take out bullet.  Was I finally getting the hang of this?

Well, you gotta know, on Thursday it dropped to .80...but everything else dropped so I wasn't worrying.  I decided to stand fast with the $1.04 ask figuring if it hit .94 on one good day, it would get there again in the near future.  If .94 is possible how far away is $1.04?

On Monday, April 19 the share price jumped over .90.  By 11:00 AM 'Peg time the volume was twice the average daily.  The price was in the .93 to .97 range with a brief pop to .99.  I resisted the temptation to reduce my ask to 1.00 and grab the double.  I stood my ground only to watch it fall off and wander in the .60 to .75 range for the entire summer.

Things heated up in September and Scorpio's share price bounced to the .80 to .90 range. Brieger was on BNN on September 21.  As usual, the very first caller asked if he still loves Scorpio.  As usual his answer was yes.  In fact, he now has a price target of $2.50 to $3.50.  This he calculates as a simple multiple of anticipated earnings.  Once again I placed a sell order at $1.04.

In mid October I revised my sell order and offered all of my Scorpio shares.  Figuring that I'd held for fourteen months I may as well take the double and move on rather than sell half and wait it out any longer.  Last week my sell order expired on Friday and I was busy with other things and did not renew it.  I was heading out early this afternoon and thought I'd check my trading account.  Scorpio had briefly touched .99 this morning.  I placed my usual sell order at $1.04 just before leaving the house.

While I was out my Scorpio shares sold for $1.04 giving me my first ever double.  Yup, fourteen months and three weeks and I doubled my money with Scorpio Mining.  Thank you Mr. Brieger!

ROCKTOBER!

Wow!  Here we are, one month past the historic weakest month of the year, September. October isn't usually a whole lot better as it's the final month of the summer doldrums as described by the Halloween indicator, a term used by some for the theory that the markets generally do better in the months from November to April than in the May to October period. The Sell In May And Go Away crowd supports this theory.

So what happened this past summer?  At the end of April my stuff was up 5.42% for the year. By the end of August it was all gone.  My year to date gain had disappeared.  I sure was feeling like I should have joined the Sell In May And Go Away gang.  Needless to say, I wasn't looking forward to September, the weakest month of the year.

September!  The TSX gained 3.82% while in the US the DOW shot up 7.77%.  And then, along came October.  Pumpkin month saw the TSX gain another 2.49% while the DOW bounced another 3.06%.  While the markets did very well in September and October, I did better.  My stuff shot up 9.19%.  A fantastic two month gain!

On October 8, I triggered my exit strategy by unloading my long held Canadian Resource Fund. That day I simply parked the proceeds in an Interest Fund with the same fund company.  A few days later I transferred it to a Canadian Bond Fund, again, with the same company.  I don't have a crystal ball and I'm not suggesting that resources and commodities are going to fall off the cliff.  What I do know, is that if they do, my Canadian Bond Fund units will be worth the same amount, or more, the day after the meltdown.

Exit Strategy?  Who said anything about an exit strategy?  Well, I think I did...at least I've been gradually introducing  the idea throughout the year.  On May 5 I wrote Who Should(n't) Be In Funds?  This one triggered some interesting response from readers who told stories about finance guys who no longer return calls.  After hearing some of these stories I was compelled to write my July 9 post Why we fell in love with funds.  Do we still love finance guy today?  Finally, my July 16 post A Little More About The Last (Next) Ten Years revealed that in the past ten years the markets were pretty crappy and I suggested that we all need a plan.

Another September to Remember!

A year ago tomorrow when the markets defied the long term norm and bounced in September I wrote A September to Remember.  We are told September is historically the worst month of the year.  Well, it happened again.  It's looking like the norm isn't the norm any longer.

This year, the TSX began September at 11,913 and closed at 12,368 for a gain of 3.82%.  South of the border things were even better.  The DOW gained 7.77% while the broader S & P 500 shot up 8.77%.  Wow!

Unfortunately, the gains of September 2009 didn't last long.  The TSX tanked 323 points on October 1 and by month end pretty much all of the September gains had disappeared.

We're off to a much better start this month.  As I write this, the markets have been open for less than 45 minutes and the TSX is up 74.  Additionally, gold, oil and the US markets are all UP!  It's all good....for the moment at least.

As reported on these pages, I made a couple of changes in my trading account in September. On September 2 I bought Research in Motion (RIM) at $46.49.  Since then it's been a rocky road.  It's been as low as $45.40.  Right now it's at $50.90.  After some disappointment with the announcement that the new Blackberry Play Book won't be released until the new year, the investment community seems to be responding to the positive press about this new device. Yesterday I gassed my gas company, Encana (ECA). Even as we approach the heating season I couldn't see hanging onto this company.  Nat gas is just TOO cheap and there's TOO much of it.

Good Luck & Happy Investing!  

A Change In Direction

In my most recent post I briefly outlined a plan to get more aggressive with my trading account. The process begun a few weeks ago with the sale of TransCanada Corporation (TRP) at what was then the 52 week high of $38.16.  This stock had been range bound between $32. & $38. for a whole year.  I was happy to sell my shares at the top of this range.

Now for part two of the plan.  Identify an undervalued stock to add to my portfolio.  Hopefully one with real potential for an upside surge.

Let the research begin.  Not a day goes by, on BNN, without a caller asking the guest analyst for an opinion on Research In Motion (RIM).  This, I learned, is because RIM is presently trading near the bottom of it's 52 week range.  The 52 week low is $44.94 and the high is $94.00.

It seems RIM's troubles stem from the threat of the government of India and few others to shut them down unless they allow government access to their state of the art encryption so as to allow governments to 'listen in' for threats of terrorism.  The Blackberry is supposedly the communicator of choice for terrorists and other criminals.  We know politicians all use them. Coincidence?  Most analysts believe that RIM will negotiate a reasonable settlement on the encryption issue long before being shut down.  Additionally, there is a belief that the Blackberry is not as sexy as Apple's iPhone.  I then learned that this issue is a North American phenomena.  Apparently Blackberry is smart phone of choice for the 18 - 30 crowd in pretty much the rest of the world.  North Americans love all things Apple.

Next stop Stockchase.com   As I've mentioned before, this site capsulizes all the comments made on BNN by the various guest analysts.  In addition to their comments, the share price on that date is listed.

Next I turned to the interactive charts of Yahoo! Finance.  These charts allow customization by adding any number of technical indicators to the chart.  By adding moving average indicators I learned that RIM shares were trading 15% below the 50, 24% below the 100 and 29% below the 200 moving average.

Last stop, the RIM website.  A few highlights from RIM's first quarter financial report;

• Revenue grew 24% over the same quarter last year to $4.24 Billion
• Earning per share increased 41% year over year to $1.38
• Blackberry shipments grew more than 43% over the same quarter last year to 11.2 Million.
• RIM shipped its 100th million Blackberry during the quarter.
• Subscriber base grew 60% over the period year to 46 Million with 4.9 Million accounts added in the quarter.

Satisfied, I bought RIM on September 2 for $46.49.  This is a real change of direction me.  I've kept my stuff all Canadian, all the time but have stayed away from the tech sector.  Since September 2 it's been as high as $46.71 and as low as $45.40.

The short term direction for the RIM share price will be established later today with release of second quart results after the close.  Will I be listening in on the web cast?  You bet.

IMPORTANT REMINDER
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.

Nat Gas. The Only Loser Today!

Europe, Asia, US Futures, oil, gold all UP! The only thing that's down this morning is that perennial loser natural gas. Methinks it's time to review the Encana (ECA) holding.

After dipping below $72 yesterday, on US weakness, oil bounced back overnight supported by positive numbers for China's manufacturing sector. I wonder when (if) weekly US oil inventory figures will stop driving the price of oil.

I Need To Make A Change!

Sometimes I wake up with an idea, go to the computer and write a complete post and publish it to TPCI.  Sometimes I begin drafting a post weeks in advance with a plan to post it at month or quarter end.  I began drafting this many weeks ago in anticipation of the end of June.  My initial opening line was "I'd like to get things going UP instead of sideways".  Doesn't that just bite.  After the bloodbath of June, sideways would have been great!

The TSX began the year at 11,746.  At the beginning of June is was 11.762.  The end of June 11,294...down 4.85% for the year. 

    

Obviously I need to change something.  I still have faith in my two main funds, the Endeavor and Resource Funds.  I'm thinking I need to change my strategy for my trading account.  The winners are still winners, the losers are still losers and the do nothings are still doing nothing.  My strategy has been to hold the winners, with the expectation of further gains, and hold the do nothings with hope that they'd turn into winners.  Because I don't sell anything at a loss, I'm still holding a couple of losers with the faint hope that eventually I'll get my money back.  Well, guess what?  It's not working!  For seven months now the winners have fluctuated between break even and plus 5 to 10%...and because we can't put two decent months together the gains of April disappeared in May...and the whole process began anew.  My do nothings have taken a similar path except that they've been fluctuating between break even and minus 5 to 10%.

What to do?  I'm thinking that I should identify a couple of undervalued stocks to add to my account with the hope of a nice short term run up.  You guessed it, I'll be watching BNN until my eyes bleed.  I think I've mentioned how painful watching BNN can be.  One rainy day when I've nothing to do I'm going to watch it for a whole day and document how many times they mention and analyze the first headline story of the day.  They really should be embarrassed.  Michael Kane leads with an overnight news item at 6:00 AM 'Peg time and after rehashing it over and over all frickin' day long it's Pamela Ritchie's lead story thirteen hours later on Market Call Tonight.  But enough about BNN.

Thankfully there are some short cuts to BNN research.  I've previously mentioned Stockchase.com.  Stockchase capsulizes all the BNN guest analysts' comments about the stocks they talk about.  They include the date of the comment and the stock price of that date.  Once I identify a few potentials, I'll be looking them up on Stockchase.  The Bullboards on Stockhouse.com are also an interesting read although you have to recognize that these comments are posted by retail investors with an agenda of their own.  Still, worth a read. 

After identifying a couple of undervalued stocks, I'll bail on a couple of my present holdings to raise the money.  This step will take a while as I'll try sell at the top of the aforementioned 5-10% curve.  The decision to sell a good stock is not easy.  On the other hand, it can get pretty boring watching as real good stock go up and down in the 5-10% range.  The fact is, the real good, real big companies  seldom spike up in value.  As someone once said, "elephants don't gallop, they just plod along".

  

I've initiated the first step by putting in a few sell orders.  I picked four good ones and put in sell orders equal to their 52 week highs.  They're all so far below that right now that I don't even have to watch.  Maybe, just maybe one or two of them will get there in the next few weeks (or months) and I'll have some cash for bottom feeding.  

Head Above Water

Buoyed by the price of oil, holding above $82.00 and gold, back to $1,200.00, yesterday's up-tick in
the TSX brought it and my stuff above water for the year. It's been awhile. Agrium (AGU) reported it's second best quarter ever. Maybe, just maybe my aggie ETF (COW) will get moving.

Asia, Europe and US futures are up. Excellent earnings reports are rolling in. Might we have three in a row?

Pension Reform

For the past while the feds have been giving a bit of lip service to the idea of pension reform. It seems they finally woke up to the fact that many boomers are either recently retired or soon to retire and failed to, or were unable to plan for their sunset years. The result is that these old buggers either stay in the work force or return to work when they wake up to the fact that the little nest egg just isn't cuttin' it. When old guys aren't falling off one end of the employment ladder there's no room for young guys to climb on to the other.  Both groups suffer.  The dream of old guys to retire to a sandy beach sinks like the sunsets they were hoping to see.  Young guys who hit the books and got an education line up for night shift jobs at Tim's and Mikey D's.  Their Grandmas have all the day shifts.

No surprise that any pension reform suggested by government will involve either, or both, increased taxes and increased plan contributions.  It's likely that any increase in CPP benefits would not affect present CPP recipients.  Rather, the increase would kick in  for future retirees.  This means that retired boomers would be subject to higher taxes without participating in increased benefits.  Thus, the group whose very dilemma triggered the need for reform would be left out in the cold.

Nobody wants higher taxes, especially retirees living on fixed incomes or under-employed young people.  The business community, according to the C of C, is totally opposed to increased contributions.  As you know, for each dollar individuals contribute to CPP, their employer is compelled to match it.  I suspect that the greatest fear among business is that the feds will change the rules and make employers contribute $1.40 for each employee $1.00 as is the case with EI premiums.  This would be a 40% increase in employers' contributions.

Now, here are my ideas;

1. Remove the $5,000.00 annual cap for deposits to Tax Free Savings Accounts for retirees.  If a larger portion of the investment income, earned on unregistered funds, were free of tax this would effectively provide additional income for this group without increasing either taxes or contributions.  I'd expect there would have to be some sort of means test for this.  Gazillionaires shouldn't be included.
2. Increase the Pension Income Tax Credit.  Again, this would reduce taxes for those who need the break without affecting others.  Once again, Richie Rich shouldn't be included in this program. 
3. Tax-Free Muni Bonds.  South of the border, interest paid on Municipal Bonds is generally exempt from federal and state taxes.  Again, this would be great for retirees.  It would be huge for the municipalities who would have access to a whole new source of funding for infrastructure renewal and capital expenditures, without going to the feds or the provinces as is now the norm.  The resultant reduction of income tax would easily be replaced by normal taxation of the income produced by the increased economic activity.  A win, win!

If you like these ideas, send the link on to your MP.  Maybe we can start a grassroots movement.

A Little More About The Last (Next) Ten Years

Since last Friday's post I've been doing a lot of thinking about the last ten years and wondering if there's any logic which might help us look forward to the next ten years.  Most of my gang are either retired or hope to retire in the next ten years.  Timing may be a critical factor.

I can't get it out of my head that the next ten years are unlikely to be any better than the last ten.  Why would they be?  News spreads instantaneously.  No more waiting for the morning paper.  The markets react negatively to everything from earthquakes and floods to oil spills and acts of terrorism and positively to increases in commodity prices and excellent earnings reports.  At the end of the day, I have come to believe that there are more negative influences than positive ones.

The TSX was driven to an all time high of 14,984 on May 16, 2008 as it rode on the back of the price oil.  I doubt that we'll ever see $147 oil again.  It wasn't worth it then and it won't be worth it in the future.  I believe the difference now is that regulators will never allow the price to be manipulated to this level again.

Imagine where you'd be today if you had cashed in on July 8, 2007.  That five year rally compounds to 201.56%.  Yup, better than a double in five years!  Back to the beginning of the ten year period, $100.00 invested July 8, 2000 would have been $110.23 at the end of the ten years, July 8, 2010.  Yup, ten years... 10%.  Ugly!

Just over one year ago I wrote A Brief History of Volatility.  If I had to guess, I'd guess that we're in for more of the same.  I believe that those who stay in for the next ten years will have a ride like they've never imagined.  There will be periods of tremendous gains.  You know, the times when greed rules and we hang in there believing that it'll keep on rolling.  There will be huge down cycles when fear takes hold.  In these times some will cash out to stop the bleeding, some will hang in hoping upon hope for the next extended rally, which may never come.

What are your plans?  Are you intent on hanging in there and riding it out no matter what?  Do you have any reason to believe that the next ten years will look more like the eighties or nineties?  Do you have an exit strategy to move toward guarantees when (if) the markets reach a predetermined level?  Are you talking to finance guy or does he no longer return your calls?  Do you have a plan at all?

Why we fell in love with funds. Do we still love finance guy today?

Most of the investing by my gang consists of contributions to our RSPs and for a large part that began in the eighties when we finally had some money and woke up to the fact that we weren't going to be able to work forever.

In the ten years, ending July 8, 1990, the TSX rose from 2,116 to 3,596 or 69.94%. We fell in love with finance guy and his wonderful mutual fund products.

In the next ten years, ending July 8, 2000, the TSX shot to 10,380 for a ten year increase of 288.65%. We declared finance guy to be an absolute genius and bragged to each other that our guy was the best!

In the ten years ending yesterday the TSX rose to 11,433 or 10.14%. Yup, 10% for ten whole years!

A GIC invested at 5% for the same period would have returned 62.88%

What do we think of finance guy now?