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The Money Map Advantage
Friday, September 23, 2005
By Horacio Marquez
#10
** Awaiting Rita
In the last 48 hours, Rita went from being a dangerous storm to a category 5 hurricane, bent on destroying 20% of U.S. refining capabilities. Then it weakened to a category 3 and spared Houston by turning east. The latest development is that waters are breaching the levies in New Orleans.
If I learned anything from Hurricane Katrina, it is how humble we need to be in forecasting. Even after just winning the Block Island race by 40 minutes, and after more than 40 years of competitive sailboat racing – and access to sophisticated weather-forecasting models, the overwhelming odds pointed Katrina at Ft. Lauderdale. The hurricane was supposed to quickly lose strength and become a non-event. The models and I were dead wrong.
If our benign Katrina scenario had turned out to be true, then the October dynamics on the energy market would have taken over. The end of the driving and air-conditioning season in the energy-guzzling northeastern U.S. and in Europe would have lead to lower demand and prices for oil and distillates, all things being equal. There is no major news regarding the pace of growth in Europe, China, and the rest of the emerging markets.
Thus, I prefer to stay out of energy until we get the seasonal October pullback, as a very decent opportunity to get back into it. With Greenspan’s rate move in doubt earlier this week, and with Rita’s outcome a very wild bet, I prefer to stay on the sidelines in other matters as well, until we have a more solid footing for analysis. The smart money seems to be taking some profits in energy and in other stocks going into October’s traditional profit-taking season.
In the meantime, Tenaris (NYSE: TS) disregarded its two downgrades (UBS and Citi) and keeps breaking to all-time highs. How much is it worth to have very low production costs and major access to the Americas in the seamless steel pipe business when the world needs to increase oil exploration and extraction?
A lot more than $126 per share, even if the price of oil drops $10 per barrel in October. So we have more than a 6% gain in this stock, and more than a 40% gain in its call option. Similarly, our iShares Japan Index Fund (AMEX: EWJ) keeps setting new highs on the basis of Koizumi’s resounding electoral victory and his plans to privatize the postal system.
Our iShares Austria Index Fund (AMEX: EWO) and Cerner Corp. (Nasdaq: CERN), seem oversold in the short term and ready for another jump up. Austria and Eastern Europe were weighed down by the disappointing election in Germany, which put the aggressive market-friendly agenda of Andrea Merkel in doubt. The general weakness in the market kept Cerner from rising, despite getting another hospital chain as a client yesterday. Maybe the ongoing drop in oil prices will prove to be the catalyst for the jump.
I will be evaluating the conditions for our next pick after Rita, and will get it to you next week.
Enjoy and profit,
Horacio Marquez
If you have any questions, feel free to call one of our VIP Trading Services representatives at 888.570.9830 (toll-free) or e-mail: viptrader@oxfordclub.com , or Mt. Vernon Publishing at 888.384.8339 or 410.230.1200.
Stock
Current Price
Comments
iShares Japan Fund (AMEX: EWJ)
$11.76
Buy. Sell stop is $10.
Cerner Corp. (Nasdaq: CERN)
$81.90
Buy. Sell stop is $62.25.
Tenaris (NYSE: TS)
$126.42
Buy. Sell stop is $95.
MSCI Austria Fund (AMEX: EWO)
$26.87
Buy. Sell stop is $20.90.
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Market Watch
NASDAQ
1528.95
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SP 500
813.88
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DJIA
7749.81
+89.84
As Of 6:11AM 3/26/2009
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