New markets I’m studying in 2012. Soft Commodities (II)

Today I'll talk about the soft or agricultural commodities. I can't be short in anyone…

 

Liverstock. It's a wide classification and I can't invest in one category. The only thing I've found is (COW). It's related with the futures contracts of lean hogs and live cattle.

 

Grains. The 3 main are: corn, soybean and wheat. There is a generic one with the three like in livestock and its (JJG). Since some months ago we have an specific one for corn (CORN)

 

Sugar. Here there is an ETF (SGG)

Cocoa. Here there is the ETF (NIB)

Coffee. the same (JO)

Cotton. the same (BAL)

 

Note 1: Except for the COW;  the others are written for the iPath company.

Note 2: the (JJA) include all the traded soft commodities: soybeans, wheat, soybean oil, sugar, coffee, cotton and corn. Only for information purposes, for me it's not an useful tool.

New markets I’m studying in 2012. Energy (I)

One of my goals in that 2012 is to wide the assets I look to invest in order to generate more ideas, and earn more money of course. I'll detail the most liquid and the only ones I can trade from my account.

The last days I've done some work on it. Today I'm going to make a recompilation of energy assets and how I can invest on them.

 

Oil and Gas – Here there are some market. With the light crude I can go long with (USO) and short with a double (SCO). With the natural gas I can only play the long side with (UNG). It's a famous ETF because of the contango of the underlying commodity that makes lose price every day.

Moreover have two more markets. One is about the Gasoline prices that can be played with (UGA) and the heating oil prices with the (UHN)

 

Coal and Nuclear. They can't be played in a direct form. You can buy some ETF that are linked to an index of companies that operates in that sector. (KOL) is the best and tries to replay a 60 global coal exploration and mining companies index. (NLR) could be the same in the nuclear sector but it's widen in its definition. Another possibility could be to invest in the companies directly.

 

Green energies. Here we have the same problem that with Coal an Nuclear. However I'll mention two ETF. (FAN) related to wind energy companies and (TAN) related to solar energy companies.

 

CLOUD Companies Relationships

I just try to make an overview of the relationship cloud companies have between them, and try to have things more clear when looking at companies in this sector.

Lets start with the midpoint, and indispensable part of the cloud world, data center group, These companies ( EQIX, COR, INXN, DLR, DFT ), are service buyers of network controllers, which are widely used in data centers to speed up application servers ( FFIV ), but they also need storage systems to develop its businesses (EMC and NTAP).

These storage companies need to buy hard-drive, which are produced in Disk drive manufacturing plants (WDC, STX).

We've seen to whom Data centers buys some things. Looking for its clients we can find other cloud companies, these clients are the most known companies in the cloud, companies that offers its sevices to final users. Examples are companies like RAX, AMZN, Facebook, ZNGA, Twitter, CRM, GOOG, SWI, CVLT and TIBX among many others.

Some final relations include:

FFIV competes with CTXS ans CSCO in some markets.

EMC owns 80% on VMW (1^st in virtualization software).

VMW competes in virtualization software with CTXS and RHT.

“Stopped out in my SDS”

On Monday I was stopped in my position in SDS. It has been a bad trade, but the Euro/Usd hasn't helped me. Now it's time to think about how it has gone.

First of all and anticipatory trade has to be with a tight stop, so you can prove the idea two or three times if necessary. Or change your mind with little pain.

Second, I usually must go on with the flow instead of fight with it because of my macro views. It's ok to have a global economy idea, but from the start of the 2012 it's poor not to have proved any long position.

However I'm proud of my implementation and the fact the think work I've done about the stop level has helped me to stay in the trade for a week. The stop in the machine has helped me mentally and emotionally.

Data centers II (companies involved)

EQIX - Equinix Inc.
Provider of network-neutral data center and colocation services. It connects businesses with partners and customers around the world through a global platform of high performance data centers. Some of its customers ara RAX and AMZN
Group biggest company, has big expansion plans.
Market Cap:  5.500 M
Av. Volume: 600.000
Constant growth during last  4 years in revenue but no in Profits where is more irregular. Always in profits since 2007. ok in debt. ROE from 6 i 15. Gross 45 i profit a 3. CF +. P/E 67.

COR - CoreSite Realty Corp.
Owns, develops and operates strategically located data centers in some data center markets in the United States,  The company's premium data centers feature ample and redundant power, advanced cooling and security systems and many are points of dense network interconnection.  Founded on February 2010.
IPO de 2010
Market Cap: 1240 M
Av.Volume: 180.000
Revenue x3 last year, still losing money, although improver every year. Debt under control, ROE -2, and negative margins but decreasing.  Gross 60 i profit a -7.CF +. P/E N/A.

INXN - InterXion Holding N.V.
Provider of carrier-neutral collocation data centre services in Europe. Interxion's uniformly designed, energy-efficient data centers offers customers extensive security and uptime for their mission-critical applications. Within its data centers, the company enables its customers to connect to a broad range of telecommunications carriers, Internet service providers and other customers. Its data centers acts as content and connectivity hubs that facilitates the processing, storage, sharing and distribution of data, content, applications and media among carriers and customers, creating an environment that the company refers to as a community of interest.  founded on 1998.
IPO de 2011
Market Cap:  950 M
Av.Volume: 75.000
2 years of results, improve  15% last year. Always in profits. Debt under control, ROE a 9 desde 20.
Gross 56 i profit a 7. CF +. P/E 28.

DLR  (REIT) - Digital Realty Trust Inc
Owns, acquires, develops, redevelops and manages technology-related real estate.  Founded on March 2004
Market Cap:  7.000 M
Av.Volume: 1,2 M
Constant growth during last 4 years in both revenue and Profits  ROE constant at 5.Constant  Margin. Gross 65 i profit a 12. CF negative. P/E 57.

DFT - Dupont Fabros Technology Inc.
Fully integrated, self-administered and self-managed company that owns, acquires, develops and operates wholesale data centers.  Founded  on  2007.
Market Cap:  2240 M
Av.Volume: 700.000
Creixement constant al llarg dels últims 4 anys, en vendes si pero no en  Bº on es + irregular. Deute 0. ROE constant a 3. Gross 70  i profit a 13. CF +. PER 36.

FFIV
Some of the companies explained before are FFIV customers, sinde its network controllers are widely used in data centers to speed up application servers.
Provides products and services to manage Internet traffic worldwide. Allows enterprises to direct traffic to a particular data center or to redirect traffic to an available data center.
- Provide  access for remote users of IP networks, and any applications connected to those networks from any standard Web browser on any device.
- Offers a Web application firewall
- Its devices to combine wide area network optimization and traffic shaping in a single device to accelerate file transfers, email, data replication and other applications over IP networks and WebAccelerator that speeds up Web transactions, enhances Web application performance from any location, speeds up interactive performance and improves download times.  Founded 1996.
Market Cap: 9.000 M
Av.Volume: 1,7 M
Constant growth during last 4 years. No debt, CF +.
ROE a 22, Gross 82  i profit a 21. P/E 40.

Thinks to improve in my trading in 2012

-         Not to make trading bets without some previous work

-         Look to more graphics. And look that more carefully to generate more trading ideas and make them more rentable.

-         Look to more markets and assets like commodities and forex, although some can’t be trade for me (because I haven’t access to some futures or some ETF are very illiquid)

-         Improve my risk management not betting more than 1% of my capital account in one idea. Moreover I won’t double a loser layer.

-         Put stops in the PC, better than mental stops.

-         Put stops where market says you have to change your mind. So I must adapt my bet to that not the inverse as sometimes I do.

-         Fix the target or some points to sell part of the operation, in every trade without exception.

-         Go on analyzing companies for the new bull market accordingly to Can Slim principles.

-         Don’t look for bargains. They are bargains for a reason.

-         Not to be frighten to buy companies that have done a great price increase. Look for the reason and wait the moment to catch the train.

-         Maintain a good recap of all my trades with more information like: risk-reward, days of duration, kind of trade,…

What I did improve in 2011?

-            I maintained a blog with 180 entries and explained there all of my trades.

-         I readed a lot of books and do some synopsis.

-         I learned a lot of things about CanSlim and looked for companies that fix that style of investing.

-         I talked about my sentiments when I do a trade.

-         I tried  new vehicles like VIX ETF or inverse ETF in USA. So I had to look USD carefully.

-         I waited less when I had a losing position and waited more when I had a winner position.

-         I haven’t done an error that cost more than 2% of my capital.

-         I did less operations but I did bigger ones. That forced to maintain a better risk management.

I’ve started my trading year

I'm short SP500 at 1297 with SDS. Eur/Usd at 1,27.

Points in favor of my trade: AAII very bullish, McClellan oscillator giving divergence, the 1300 points resistance, my opinion that positive news are going to be finished. Because all of that I made an anticipation trade, looking for the SP500 to go to the boundary line at 1260 in a first objective. There would be the point to think in double my position. As you can see my short bias toward economy and toward stock markets go on. I'm going to risk 10 point in the SP500 for a first gain of 40 and maybe 100 if we can go to 1200. Today I've thought a lot which ETF would fit better my trade idea. From an American investor I think SH would have been a better option. This is significance especially If you done and anticipatory trade like mine, where you can stay with the trade some days. But I've preferred to invest few euros in the trade because if the stock market goes on in an up trend the euro can appreciate hardly.

Data Centers I

Some thoughts about 'data centers', and indispensable component in newly cloud services.

Data center operators provide space, power, cooling and high-speed Internet lines. Their customers typically pack the facilities with their own computer servers.

The data center market is divided between "wholesale" providers (DLR, DFT) and smaller "retail" operators, ( EQUIX and U.K.-based TeleCity Group) that sell less space over shorter contracts.

Demand for data center space has jumped for a couple reasons.

1- more companies are moving to cloud services — on-demand computing resources they get

from distant data centers via the Internet.

2-the rise of services that whisk media-rich content to wireless and wired devices.

Data center operators are expanding fast, betting that booming demand for space to house computer servers will persist — and that oversupply isn't on the horizon, although supply-demand imbalance is the sector's main risk.

Recently, demand for data center services has been very solid because of Internet growth, mobile-to-cloud computing, software-as-a-service and infrastructure-as-a-service," The simple rule is that all that equipment has to be somewhere, and that somewhere is data centers.

Analysts expect favorable supply-demand outlook because older facilities can't handle today's power and cooling requirements, so new data centers are needed to replace older ones that will be phased out. They think demand is running ahead of supply, so it can be the early innings of a multiyear expansion.

At he moment, 75% of data center space is being utilized. (in 2001 was 10-15%).

An important point to consider before any insvestment, there's the possibility of some companies to convert into REIT to avoid some tax expenses. (DLR has already done it).

After this secor overview, In the next post, i'll talk about the companies involved.

Measures that the new Spanish government should implement

-         Make all the new labor contracts equal. Finish the difference between temporal and fix employees.

-         Reduce the unemployment rent and urge the people that receive it to make courses and learn new jobs.

-         Make the housing market run: The banks must reduce the price in order to sell its stock. The people that rent flats need the laws to protect them front the tenant.

-         Make the houses, the industries and the transport more energy efficient in order to reduce imports of crude.

-         Make the public administration efficient, and reduce the paperwork.

-         Reduce the number of politics in the administration. Maybe the end of Autonomous Regions

-         Reduce the money spent in the public health system. Fewer medicines. Better to invest in prevention.

-         Implement a new tax model. More VAT, less workers contributions, level taxes of workers with capital ones. Give-up all the housing subsidies.

-         Make a fiscal holiday (I propose to obligate to subscribe of a 5-year 0%coupon sovereign bond) for black money.

-         Pay all the money that public administrations pays companies, workers and other public administrations like town or the Treasury.

-         Reduce the money spent in the public TV.

-         Nationalize the troubled private banks or savings banks and don’t sell it to other ones until the housing market is stable.

-         Ban the young retirement.

-         If somebody can’t pay the mortgage, giving the flat will repay all his debt.

Some trade ideas

Future of SP-500  It’s near his maximum level since October ’11. Moreover we can draw a boundary line between October, November and December 2011 lows.

Here graphically we have two possibly trades:

-         Go long if SP Future climbs over 1290 with a tight stop at the low of the day of the breakup. I can trade with SPY.

-         Go short if SP Future goes down through the boundary line at around 1260. The stop will be the high of the day of the breakdown. I can trade that with two inverses ETF like SH or SDS (double one).

Here I’m biased to the short because of the macro situation but the market is the boss…

Volatility (VIX). I’m looking it with two exponential moving averages: 5 and 50 days. The differential is wide. Maybe in the low 20’s we will be able to wait a cross. Of course it will be related with the short scenario in the SP500. I’m able to play that with some ETF like VXX o TVIX (double one). Be carefully with this kind of instruments: very reliable when you are right, but you need to cut the losses quickly here.

EUR/USD. After and H&S that break down in November at 1,34 is going down step by step. Now at 1,27. In the weekly it’s in a bigger down wedge, but now in the middle of nowhere. In my opinion a hard retest of the neckline at 1,33 it’s not in the cards but everybody is talking about a weak euro. Everybody in the same edge of the boat….

I won’t trade that but I’ll considerer when if I buy some ETF in USA.

Thinks to improve in my trading in 2012

-         Not to make trading bets without some previous work

-         Look to more graphics. And look that more carefully to generate more trading ideas and make them more rentable.

-         Look to more markets and assets like commodities and forex, although some can’t be trade for me (because I haven’t access to some futures or some ETF are very illiquid)

-         Improve my risk management not betting more than 1% of my capital account in one idea. Moreover I won’t double a loser layer.

-         Put stops in the PC, better than mental stops.

-         Put stops where market says you have to change your mind. So I must adapt my bet to that not the inverse as sometimes I do.

-         Fix the target or some points to sell part of the operation, in every trade without exception.

-         Go on analyzing companies for the new bull market accordingly to Can Slim principles.

-         Don’t look for bargains.

-         Not to be frighten to buy companies that have done a great price increase. Look for the reason and wait the moment to catch the train.

-         Maintain a good recap of all my trades with more information like: risk-reward, days of duration, kind of trade,…

Highlights in the first days of 2012.

Happy new year to everybody!

Situation in a few highlights:

-         European markets have doubts concerning Spain, Italy and the banking sector.

-         EUR/USD is very weak, now under 1,30. UDS index near his latest maximum at 81,30.

-         Commodities are holding instead of a strong dollar, but less correlationated between soft, crude, gas, copper…

-         Asian markets are weak, but for two weeks we won’t have that reference because of china New Year holidays.

-         SPX and NASDAQ are a bit strong holding first day of year gap with the banking sector and the tech as leaders.

-         Soft volume across the board but going up.

-         Bullish sentiment in particular in contrast of a high level of short interest in USA stocks.

-         VIX going down slowly but without stopping.

The main drivers for the markets in this 2012 will be:

-         Level of the contraction of the economy. A lot of people call a new recession but some of the last indicators reported, mainly in USA, show an economy holding.

-         Level of the European/Banking/Sovereign Debt crisis. Whatever you call it. Some day everything is solved, the next day some capital increases in banking sector shows the real problems. And going on….