TIB: Today I Bought (and Sold) - An Investors Journal #277 - Oil Shipping, Fertilizer, US Telecom, Gaming, Korean Steel, US Interest Rates.

Sanctions ramped up on Russia. China comes back dollar for dollar. Markets look calm on the surface. 3D Printing is a rocket ship. Trade action is averaging down in steel and interest rates and oil shipping and a new entry in US telecom. Profit taking in fertilizer and regional banking. Bitcoin gets smashed some more as US investors digest the SEC postponement.

Portfolio News

Market Jitters - Tariff Tantrum Markets went sideways mostly but there was turmoil underneath

Donald Trump instituted another level of sanctions related to the nerve gas attack in the UK and the Senate drafted tough new legislation on Russia for election meddling. In my portfolios Gazprom dropped 5.4%, Russian small caps 4%, Russia overall 4%, Surgutneftgas 1.6%, Rostelcom 2%.

https://www.thestreet.com/markets/russia-stocks-bond-and-rouble-slide-after-u-s-sanctions-threat-14677195

China matched the 25% tariff game on $16 billion of US trade - playing the dollar for dollar game.

In the detail of the China list were oil products. The US remains a key exporter to China. This had a dramatic impact on oil prices (down 4% at one stage) which flowed through to my portfolios with Petrobras down 2.1%, Exxon Mobil 0.7%, SPDR Oil ETF 1.6% and NYSE Pickens Energy ETF 0.9%.

The talking heads are beginning to talk about the line in the sand or the straw that breaks the camel's back. At the moment the earnings numbers have been so strong which has displaced some of the fear potential from the tariffs. When earnings season ends, this could get ugly (my view) when there is no data to focus on.

3D Systems Corporation (DDD). My US portfolios were somewhat salvaged by 3D printing.

3D Systems announced stellar sales growth numbers which took the market by surprise ending up 32% on the day. Sales have grown for 5 out of the last 6 quarters. Nice work team. A quick update on the chart which shows the big spike in price to get close to 200% profit on the options trade.

Trade management will be key as previously price has dropped back after good earnings results. My thinking is to sell a portion of the stock to take profits and to hold onto the 12/22 bull call spread. Nice to see that even Motley Fool were surprised and that I got onto the idea before they did. Thanks Real Vision. Profits paid for the annual subscription.

https://www.fool.com/investing/2018/08/08/3d-systems-earnings-3d-printer-sales-surge-41-stoc.aspx

Bought

Navios Maritime Holdings Inc (NM): Oil Shipping. I have had a number of tries at investing on breaks up for oil shipping stocks. Prices are just not responding to rising oil prices. This time, my thesis is different as the market dynamics may have been changed by the Iran Sanctions (and the China tit-for-tat). If the sanctions are effective, there has to be more oil shipped around the world to accommodate Iranian supply. The China tariffs on oil products will also change oil shipping patterns. I added another parcel to average down my entry price (see TIB166 for the last purchase).

The chart shows my last 3 entry points - not a successful trade thus far. The good news in the chart is that price has respected a bottom (the pink line - it's new) and is showing signs of life.

Posco (PKX): Korean Steel. I bought into Posco because it bought salt brine lithium tenements from Galaxy Resources (GXY.AX). The market has not priced that purchase in as it has been focused on steel tariffs. I added another parcel to average down my entry price - this remains a lithium play but it will benefit from global growth driving steel demand. (See TIB237 for the discussion on Posco)

Sprint Corporation (S): US Telecom. Sprint appeared on my regular stock screens on a Price to Sales valuation and a new one month price high. Price had spiked on news flow about the regulatory review process pertaining to US wireless carriers (T-Mobile is aiming to buy Sprint).

I bought what I thought was a small parcel of shares (finger trouble got me a large parcel of shares). I also bought January 2020 strike 7 call options.

The whole trade points to the perils of doing analysis and trades in front of the TV after dinner. Trade size was wrong and I had not read the background to the T-Mobile deal to fully understand the price spike. I did get a clue about trade size, as my broker would not allow the trade in one account as it was out of margin. I did the trade in another account instead of checking trade size = lesson learned.

The price spike came from a possibility that the regulator would/could agree that 3 wireless carriers was sufficiently competitive in the US market, which would then allow the T-Mobile deal to go through. I will be watching price closely to exit to a smaller trade size (or just take the loss and exit).

News: "At least" 3 carriers are needed in US - unnamed source
Status: No decision has been made = rumour.

U.S. antitrust enforcers are in the early stages of reviewing T-Mobile U.S.'s plan to buy Sprint for $26 billion, and have reached no conclusions on how many wireless carriers the country needs

https://www.cnbc.com/2018/08/06/sprint-t-mobile-in-early-stages-of-regulatory-review-source-says.html

Tabcorp Holdings Limited (TAH.AX): Australian Gaming. Signal from research house following a solid results announcement and a spike in price. What I liked in the results announcement was a strong projection of merger synergies in 2019 following the merger with Tattersalls during 2018 and the sale of a few losing businesses. Gambling is a strong feature of Australian consumer markets and with a growing economy gambling revenues grow. The merger gives Tabcorp a strong platform across the country (they were previously focused in one state, Victoria, which has a gambling unfriendly State government - they they do like to tax gambling).

The chart shows price breaking through a level which has proved to be a strong resistance level.

My sense is that this could be the platform for the next leg up - the research house agrees (I read their report after placing the trade and drawing the chart)

Sold

Nutrien Ltd (NTR): Canadian Fertilizer/Potash. Nutrien was created following the merger of two largest Canadian fertilizer businesses in January 2018. I had previously bought options in Potash of Saskatchewan (POT) which were converted into options on NTR with each share in POT accounting for 0.4 shares in NTR. I was holding a January 2019 20/35 bull call spread which equates to a 50/87.5 spread in NTR. Price has been oscillating around $50 since listing and has been holding above for the last 6 weeks. As my options are not directly listed on NTR prices, the market is somewhat illiquid. I closed out the spread for a 20% profit since January 2017. I remain exposed to fertilizer through the Global X Fertilizers/Potash ETF (SOIL)

SunTrust Banks, Inc (STI): US Regional Bank. Profit taking sale to close out January 2019 strike 55 call option for 188% profit since December 2016. Closing price was $72.63. This closes a stellar return on this leading regional bank - see TIB274 for the most recent review of US banks.

Shorts

iShares 7-10 Years Treasury ETF (IEF): US Treasuries. I have been short this ETF in two of my portfolios for some time. The carry cost has been a challenge. In one of my portfolios, I did average down my position and that trade is now profitable. This new trade was to average down in the other portfolio. The chart has salutary lessons. Note: it is a price chart - I want it to go down as rates rise.

Trade 1 (blue ray) was based on a belief that yields would continue to rise from the 0.75% they were in late 2013. As it happened the trade entry was from a put option that was assigned. It does not look like a smart entry point - the option was set up some time before when price was falling. Then, good trade management would have protected the trade at around the 103 level and exited, especially as the carry cost for the trade has stock borrowing and dividends to cover. Trade 2 (green ray) was made to recover from the trade management situation and it has now recovered the capital losses and covered a lot of the carry cost. The new trade, trade 3 (pink ray) has been entered on a reversal which looks like a better trade entry - too bad I did not do that when price reversed at 108.

The main thesis that rates will rise remains intact. This may not have been the best vehicle to trade that idea (futures would have been better). The flattening of the yield curve will help as short term rates are rising faster than long term rates - this is closer to the short end of the curve than the long end.

Cryptocurency

Bitcoin (BTCUSD): Price range for the day was $596 (8.8% of the high). US markets heard the SEC postponment of the Bitcoin ETF applications and headed for the exits at some volume. Price dropped through the support level around $6400 and tested the level below (that pink line is where it stopped this time).

It seems pretty clear that the rally from the $6000 level tested last month was driven by hope that the Bitcoin ETF would get approval. Is this the bottom?

I watched an interview with Dan Morehead, CEO of Pantera Capital, talking about the Bitcoin Bust as CNBC now calls it. His view is that markets overreact to price because there is a real time price feed. My view is they overreact because it is SCARED money. He thinks that SEC approval is some way off - the asset class is just too new and the market is complicated by the fact there are a myriad of unregulated exchanges operating all over the world. What he said investors should focus on is the news like this and especially this

Bakkt, the Intercontinental Exchange's cryptocurrency project with partners Microsoft and Starbucks that was announced in early August.

This is a project that will allow consumers and institutions to buy, sell, store and spend cryptocurrencies on the global network by November and spend them at Starbucks, for starters.

https://www.cnbc.com/2018/08/08/panteras-dan-morehead-investors-are-overreacting-to-bitcoin-news.html

The big deal is the partnership is with Intercontinental Exchange which is a regulated markets operator operating in a number of jurisdictions around the world (Europe, US, Singapore, Canada) and across a range of instruments (agriculture, forex, equities, derivatives, energy, interest rates, precious metals).

https://www.theice.com/about

More about that deal here

https://www.cnbc.com/2018/08/03/starbucks-partners-with-microsoft-ice-on-new-cryptocurrency.html

Why should one listen to Dan Morehead? He has a track record in investing and trading. His business is the first US Bitcoin investment firm. He offers a number of cryptocurrency and blockchain funds. He has been doing this for a while, which is a lot more than can be said of most of the talking heads.

https://www.panteracapital.com/about/

Ethereum (ETHUSD): Price range for the day was $36 (9.4% of the high). ETH price followed BTC down and worryingly broke through the support level it had respected in April to test a lower level (the green dotted line - new on the chart) from October 2017. Volume also spiked (lower green and red bars)

This was not the day for me to discover that Bitmex had launched a perpetual swap contract on ETH. I opened a new trade long based on a 1 hour reversal. Liquidation price is a long way below the support level.

CryptoBots

Outsourced Bot No closed trades. (213 closed trades). Problem children stayed at 18 coins. (>10% down) - ETH (-45%), ZEC (-51%), DASH (-62%), LTC, BTS, ICX (-74%), ADA (-53%), PPT (-73%), DGD (-67%), GAS (-79%), SNT (-47%), STRAT (-70%), NEO (-73%), ETC, QTUM (-67%), XMR (-42%), OMG (-56%).

Again on a day when BTC dropped 9% altcoins dropped mostly 1 or 2 points only. STRAT (-70%) and BTG (-70%) did join the group of coins at 70% down. ETC was the exception giving up most of the Coinbase/Robinhood based gains. GAS (-79%) remains the worst

Profit Trailer Bot I did start the process of acquiring PT Defender to deal with the coins on the DCA list and on the Pending list. Sad part is the Bitcoin transaction took 1 hour and 40 minutes to confirm and I lost the time window to do the set up. That was expensive.

Seven closed trades (3.47% loss) bringing the position on the account to 0.82% profit (was 1.03%) (not accounting for open trades) with 3 trades stopping out (ETC - twice, XLM).

Dollar Cost Average (DCA) list was reduced from four to one with ZRX closing at a profit and XLM/ETC stopping out. Interestingly XRP survived and has still not made a level of DCA.

Pending list remains at 10 coins with 2 coins trading flat and 8 worse. IOTA was the biggest faller dropping 8 points. This list demonstrates the need for a tool like PT Defender to find a micro way of trading out.

New Trading Bot Positions dropped 2 points to -61.5% (was -59.1%)

All coins traded worse with BTC worst faller at 3 points more down. LTC has dropped to 70% down.

Currency Trades

Forex Robot did not close any trades and is trading at a negative equity level of 5.7% (higher than prior day's 5.2%).

Outsourced MAM account Actions to Wealth closed out 2 trades for 0.16% profits for the day.

Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas

Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work

Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers

Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices

Crypto Trading: get 6 months free trades with Bitmex for leveraged crypto trading. They now offer perpetual ETH contracts. http://mymark.mx/Bitmex

August 8, 2018