The Money Map Advantage
Wednesday, February 8, 2006
By Horacio Marquez
Email – #28
** The Market Seems Oversold In Commodities And In Brazil
Housing in the U.S. keeps getting weaker… but as we expected, it will not implode, and inflation has barely appeared in the horizon. The market took a dive yesterday, as the three-year U.S. Treasury note auction did not do well. The bid-to-cover ratio was only 2.01 vs. some 2.13 expected, and the percentage of indirect bidders, the category that includes foreign central banks, was only 22% – a record low.
The excuse for the “bad” performance at the front end of the curve was a generalized upgrade of their U.S. economic growth estimates for 2006, on the back of the employment data of Friday. Such an upgrade is very convenient, coming at the same time they have to bid on these three issues that conform the quarterly refunding.
So, having been forced to “make room” in their books for the refunding bonds by taking profits in their most appreciated holdings – mainly the commodity plays (especially energy), and emerging markets and some Japan, all of which we hold dear – they created the buying opportunity we expected.
Not only did Wall Street unload, but many traders and fast money went short for the ride… So, we are in a well oversold situation, in my opinion.
Even though nobody should try to call bottoms, since it is a sure way for getting burnt, I am choosing this spot, with a nice price concession from the recent highs, to add to our positions. I would rather be early and take some more volatility, than late.
I would like to add more Brazil (which is grossly oversold), and energy. But we already have three stocks in Brazil, and one of them in energy. Brazil recently showed acceleration in industrial production for December. Also, the Brazilian central bank is considering passing a measure that will allow Brazilian exporters to keep more U.S. dollars abroad, instead of being forced to buy Reais, the local currency.
This measure, which has long been demanded by CVRD, will benefit all the major exporters, especially in natural resources, since most of their costs are in local currency and their revenues are in U.S. dollars. It will also keep the Brazilian real from appreciating strongly (as it has been the case), which will allow economic growth to keep accelerating nicely this year. This should benefit all of our Brazilian positions greatly.
I had been waiting patiently for an occasion to add energy, and this is the opportunity. Peabody Energy (NYSE: BTU), the premier U.S. coal producer has sold off violently, and could go down another 3% to its strong resistance point, and has some 15% upward potential in the relatively short term.
So we can expect a lot of volatility in the short term with this pick, but we should gain dramatically longer-term. The U.S. economy is not going to drop dead, and demand for energy – especially for oil and gas substitutes – is a central part of the U.S.’s energy policy.
In this selection, I am taking the very conservative position of not counting in any possible upside from hostilities with Iran, or UN sanctions against Iran. Despite the fact that Iran seems to be negotiating with Russia so that any uranium enrichment takes place in Russian territory, I am not sure that such an arrangement is acceptable for the U.S. and for Israel. This means that further escalation in the Iran situation cannot be ruled out.
ACTION TO TAKE:
Add Peabody Energy (NYSE: BTU) at market price. It is currently trading for $92.25. Place a sell stop at $70.
Enjoy and profit,
Horacio Márquez
A personal note: Last week, Argentina celebrated the Combat of San Lorenzo, which occurred on February 3 of 1813. In this combat, General San Martín, the liberator of Argentina, Chile and Perú, defeated with his elite grenadier force of 140 saber-wielding grenadiers a force of 250 Spaniards, in what was the first battle for the independence in Latin America. Our family honors our predecessor, Corporal José Márquez, who gave his life fighting with San Martín and is buried right there in the battlefield. Like José Márquez, I strongly support with my work in this and other publications, and with my participation in the U.S. political process, the expansion of democratic and economic liberty throughout the world, congruently with the ideals of the United States of America.
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 contact Pillar One Advisor Greg Galloway at 800.438.3040 or 407.667.4729.
Stock & Symbol
Current Price
Comments
Peabody Energy (NYSE: BTU)
NEW
Buy at market. Place a sell stop at $70.
IShares Brazil Fund (Amex: EWZ)
$38.95
Buy. Sell stop is $33.79.
BHP Billiton (NYSE: BHP)
$36.40
Buy. Sell stop is $32.70.
Banco Bradesco (NYSE: BBD)
$36.29
Buy. Sell stop is $29.45.
Petrobras (NYSE: PBR)
$85.99
Buy. Sell stop is $75.47.
Mitsubishi UFJ Finan. (NYSE: MTU)
$13.73
Buy. Sell stop is $12.93.
iShares Japan Fund (AMEX: EWJ)
$13.62
Buy. Sell stop is $12.83.
Tenaris (NYSE: TS)
$154.99
Buy. Sell stop is $117.27.
MSCI Austria Fund (AMEX: EWO)
$29.86
Buy. Sell stop is $26.51.
Market Watch
NASDAQ
1528.95
0.00
SP 500
813.88
0.00
DJIA
7749.81
+89.84
As Of 6:12AM 3/26/2009
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