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Tuesday, April 23, 2013

Today’s trading ideas and investment themes:

Resource Roundtable Update:  Markets on the Edge

Energy:          Crude Setting Up to Test $90

Softs:             Sugar Trades Sideways

Indices:        Could a Flood of Easy Money Send Stocks Higher?

“Honesty is the best policy – when there is money in it.”
– Mark Twain

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Tuesday, April 23, 2013

Resource Roundtable Update:

Markets on the Edge

The big news on Tuesday was that the broad stock market plummeted lower on a fake news alert sent over Twitter, the 140-character messaging service that is quickly becoming Wall Street’s choice for flash investment news. The Associated Press’ Twitter account was hacked and the culprit sent out a tweet saying: ““Breaking: Two Explosions in the White House and Barack Obama is injured.”

That’s absurd, right? Still, trading bots reacted to the news and sold, sold, SOLD! It was enough to send the Dow plunging more than 140 points, bond yields tumbling, and the yen soaring.

Then the news came out that the report was false. Within six minutes, the Dow recovered its losses and was trading with triple-digit gains.

We can look at this a few ways:

• First, despite the protestations on CNBC to the contrary, it’s obvious that High-Frequency Trading (HFT) algorithms have too much power to move the market.

• Second, many traders (or at least the firms  using HFT algos) are long the stock market and short the yen.

• Third, this market is more nervous than a nine-tailed cat in a room full of rocking chairs.

There’s not much to take away from this event except that those traders who had bids under the market are happy and those who had disciplined stops in place are likely feeling steamed. Wall Street continues to lose credibility, and probably will until serious reforms are put in place.

Maybe this one-day “WTF” dip will put some steel into traders’ spines and some real conviction into a market that is wobbling without real direction lately.

The broad economic news is mixed. Europe was up big on news that governments there may be moving away from austerity programs and toward stimulus.  China sold off on news that its economy is not growing as fast as hoped or expected, but it’s still growing. Here in the U.S., home sales jumped while growth in U.S. factory activity is at a 6-month low and gasoline sales continue to slide lower.  Go try and make sense of that mess.

But as for market news – it’s pretty darned good.  Earnings are at record highs and important names are beating the street. And there are short-term trends developing that we think have real potential. We have some of those trading ideas for you tonight. Good luck, and good trades.

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**********Trade Entry and Track Record Process***********

Here are our general trading guidelines …

• We recommend buying two contracts unless otherwise specified.
• If/when you hit PT1, immediately sell half the position.  Move the stop up to your entry point and place PT2 for the second half of the trade.
• If no stop-loss and/or profit target is included in the original recommendation, we’ll issue one in the next update.
• All new trades are entered at the prevailing price at 7:30 am ET the morning after the recommendation.
• We follow stops in electronic markets ONLY in the currencies, bonds and interest rates (generally speaking that’s CME, CBOT and Globex products).
• When trade entry prices deviate from the recommended entry point in the issue, move stops accordingly. The stop should be increased by the same spreads as shown in the issue.
• For agricultural markets, use both electronic and pit-traded prices side by side. Be warned, they can and have differed – that’s just a sign of the times were living in.
• We recommend you close out trades only in the regular session (the previously mentioned electronic markets are the exceptions).  When you close out a trade, remember to cancel all open stops and/or profit targets.

Now, on to this week’s trades …

Important:

Resource Roundtable (RR) and Limit Up Publishing (LUP), LTD does not advocate auto-trading.  You should take the time to review and discuss these recommendations with your broker.

RR & LUP are strictly research publishing firms and do not provide individual investment advice to subscribers. These are merely trading ideas; you and your broker should make the final decision on entry and exit into a position, as well as placing profit targets and stop losses.  The information we publish is based on our opinions plus financial data and independent research – it is NOT intended to be used as customized recommendation to buy, hold, or sell securities, or engage in any trading strategy. Such recommendations may only be made by a personal advisor or the broker you select.

Investing involves risk of loss. You can lose money.  It’s that simple.  Make sure you consult your broker and are fully aware of the risks involved.

We believe our data sources are accurate, but we do not verify their accuracy independently. Therefore, we cannot assure you that the information is accurate or complete. Nor do we guarantee the success of any investment decision you may make using our data, information, or recommendations.

We do not track the performance of recommendations.  Adjusting profit and stop-loss prices and exit points are up to you and your broker.  References to market price action are based on our observations of the general market and not intended to reflect your individual positions.

RR & LUP will not be liable for consequential, incidental, punitive, special, exemplary, or indirect damages resulting directly or indirectly from the use of or reliance upon any material provided by RR or LUP. Without limitation, RR & LUP shall not be responsible or liable for any loss or damages related to, either directly or indirectly, 1) any decline in market value or loss of any investment; 2) a subscriber’s inability to use or any delay in accessing the RR or LUP website or any other source of material provided by RR or LUP; 3) any absence of material on the RR or LUP website; 4) any kind of error in transmission of material; or 5) the use by a subscriber of any research to invest in any way which may be deemed unsuitable in accordance with certain industry standards.

In short, we make no warranty of any kind.  Use of any material provided by RR or LUP represents acknowledgement of these terms and agreement

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A solution for many of nuclear powers problems is right in front of us

The disaster in Japan has reignited the ongoing debate over nuclear energy, its safety, and costs. As different groups argue over the issues, everyone seems to be missing one very important solution, and it happens to be right in front of our faces.

Having your Yellowcake and Eating it too

As the tragedy in Japan unfolded rapidly, the worst fears of nuclear watchdogs were realized. Reactors melting down, radiation leaks, damage to the environment and water table, as well as crops and animals.

Not to mention the almost certain impact on human beings. The initial reaction by the markets was that nuclear power was doomed and share prices of leading uranium producers fell sharply, to say the least.

So is Nuclear Power Dead?

On life support maybe, but dead…not likely. However, there is bound to be a great deal of changes that take place in the industry and much tougher standards implemented going forward, and rightfully so.

Countries that already have strong opposition to nuclear power, such as Germany, have made an historic decision for the gradual closing down of the country’s 19 nuclear power stations.

It means that Germany has become the first leading economic power officially to announce its intention to phase out the use of nuclear energy.

Nuclear energy is a very hot potato in Germany and with important elections on tap for Angela Merkel, one has to wonder how politically motivated this decision was. Elsewhere in Europe debate is raging too but while everyone is quick to condemn nuclear, answers on what to replace it with are sparse.

While the decision may be popular with the European electorate, it may not be very practical. As the nuclear plants go offline and the voters suddenly realize they cannot fire up their laptops or get euros out of the ATM anymore, they may change their minds. Rolling blackouts, brownouts and rationed power are all possible.

Germany alone gets about 30% of its electricity from nuclear power, and much of Eastern Europe, like Estonia, where I live, are 100% dependent on much of our energy from Russia, not always a friendly, reliable, or cheap relationship.

The fact is that there are really no alternative energy solutions that are also economically viable that could replace nuclear altogether, at least not yet. Solar, wind, and others simply are too cost prohibitive based on the electricity they can create as compared to nuclear. Also solar and wind are dependent on two things, wind and sun, solar doesn’t work at night and windmills don’t work on days that aren’t windy…Clearly problematic.

Out with the Old and in with the New

Uranium based reactors, especially ones, as old as the plants in Japan, create safety concerns on many levels.

First of all, placing the reactors in an earthquake prone country in the first place is problematic in itself, let alone right next to a Tsunami sea wall. Probably not the wisest decision, no matter how well the facilities are built.

Regardless, even when a nuclear plant is placed in a more desolate area, without such risks, concerns still abound.

Leaking of radioactive material, disposal of waste, and of course meltdown, are always worries. On top of all of that, the risk of weapons grade uranium getting into the hands of a rogue nation or terrorists is one of the biggest risks of all. And let’s not forget the cost, uranium is not exactly abundant, and therefore like any scarce commodity, it’s not cheap.

But there is an answer…

A 1000 Year Solution

What if there was a substitute for uranium, an abundant relatively cheap, nuclear fuel. This element could create more energy with less waste and on top of it all it could not be used for weapons.

Sound too good to be true? Well it’s not, it’s called thorium.

In America alone it’s believed that we have up to a 1000 year supply of thorium just waiting to be pulled out of the ground.

Nobel laureate Carlo Rubbia at the European Organization for Nuclear Research, has worked on developing the use of thorium as a cheaper, cleaner and safer alternative to uranium. Rubbia claims that “a tonne of thorium can produce as much energy as 200 tonnes of uranium, or 3,500,000 tonnes of coal.” Other leading experts have stated that reactor cores are less expensive by up to as much as 20 %. On top of that savings, additional savings occur because the design reduces the storage of nuclear waste by up to 50%.

Thorium actually produces 10 to 10,000 times less long-lived radioactive waste.

The race for thorium is already on, and leading the way as usual, is China which has just announced it is moving full ahead with thorium as nuclear fuel. Ambrose Evans-Pritchard, of the British Daily Telegraph, suggests that “Obama could kill fossil fuels overnight with a nuclear dash for thorium,” and could put “an end to our dependence on fossil fuels within three to five years.” I agree.

The bottom line is that thorium is a safer, less polluting, and an abundant source for nuclear fuel. Thorium could answer many of America’s problems and even the world’s. Thorium could eliminate or at least reduce many environmental concerns and lift the country out of our fossil fuels addiction that has helped cause the country so much harm. So if it’s so great, why isn’t thorium being used already instead of uranium?

Bombs Away!

The simple answer is that thorium didn’t serve the purpose of creating weapons like uranium did and so it has never gained as much momentum. DBI/Century Fuels, a company that has been developing a nuclear thorium fuel cycle since 1965, agrees that wars and weapons have contributed to the slow uptake in thorium power reactors.

The company is quoted as saying that “Perhaps the main reason why thorium use for energy production has not made more progress over the past decades, is that thorium is not nearly as easy to weaponise. An international scientific symposium in 1997 on nuclear fuel cycles concluded that the principal reason why thorium had not been used more widely to date is that the ore contains no fissile isotope,”

This approach may be changing rapidly though and suddenly thorium is being thrust onto the main stage as a possible answer to many of our current problems with nuclear energy.

For investors in the alternative energy space, adding some solar, geo-thermal, coal, and others is a good idea, but consider adding into that mix any of the Rare Earth Metals producers who cultivate thorium, as well as companies who are involved in the technology and design of thorium reactors.

In my recent documentary interview with the CEO of Silmet Rare Earth Metals, here in Estonia, we discuss thorium during the interview and the benefits and challenges. You can watch the full interview and tour of the facility here, free. http://vimeo.com/19113246

Safety must always come first but at the end of the day we all like to be able to turn on the switch and have lights too, so something has to give. Safety and nuclear power can certainly work together.

So while the nuclear debate rages and the emotional selling continues, it may be a good time to consider the long term outlook.

Alternatives are the ultimate answer to the world’s fossil fuel addiction, and nuclear is a vital part of that, for better or worse.

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C&S Special #13 Sept Vs Dec Corn Spread In JuL-Aug 3-19-13…

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