Small Time Blog

Smalltime's 2014 Economic Outlook Part 2

by Bradley Voight on 02/02/14

Here I will turn from the equity markets and look at the real global economy. The best indicator for that are the base metal prices which continue to be under pressure as you can see here by looking at the 1 year aluminum chart here. The base metals are the building blocks of everything so if demand is low for these items, prices will be low. Consequently, if demand is low and prices are low then the real economy is crawling along at best right now. I do look at numbers and I do my best at making sense macro economic data, but I like to measure sentiment in what I can actually observe from my own vantage point and here is what I see that tells me this is the make or break year for the world "recovery"

1. My friend got a job at Rexnord which is a bearing manufacturer. Every thing that rotates needs bearings. My friend is working mandatory 10 hour shifts as are all three shifts at the plant. Saturdays are opt out only meaning that you are working unless you opt out.

2. Ford is now making the F-150 pickup truck with an all aluminum frame. The F-150 is the #1 selling truck in America and preferred by contractors of all types. If home building does pick up in the spring and summer more F-150's will be sold.

3. Alcoa may have something to tell about the future of the global economy in its stock price. The stock has been in a defined trading range of $8-$10 for over 2 years now. Starting in October of last year it began to move and is now at $11.51. Why is this important? If the stock is going up then investors must be anticipating an increase in profits. Alcoa can ramp up profits without doing anything other than benefiting from an increase in the aluminum price. What makes the aluminum price go up? Stronger demand.

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First Major Mistake in Smalltime Model Portfolio

by Bradley Voight on 01/27/14

I promised myself I would try to use the knowledge I have gained in my personal account to avoid the mistakes I've made in the past. Well I made one by purchasing a call option on a stock I own in my personal account. I should not mix the two accounts but options commissions are much lower on Tradeking than on Scottrade. Not only did I make the wrong call (so far) but I bought 2 contracts instead of one. You can see the dismal performance on the portfolio page. Mistakes are part of the learning curve. My learning curve has turned out to be like a mountain road thus far but I feel it will be worth it in the end. It is not all lost yet though, PLUG could still make a run toward $5 and bail me out. I have until February 22 for that to happen.

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Smalltime's 2014 Economic Outlook

by Bradley Voight on 01/14/14

2013 was a banner year for stocks with the major averages posting better than 25% gains. Bond yields crept toward 3% on the 10 year US note and gold and silver were hammered by better than 20%. So what can we expect in 2014? I think it is going to be more of the same.

My quick cast says at years end we will have: S&P 500 @ 2110, DJIA @ 19,560, NASDAQ @ 5400, Gold @$725, Silver @12.50. This only happens if geopolitcal tensions remain in check. It happens because corporate profits will benefit from Obamacare, the domestic energy boom, and fiscal clarity in Washington. Monetary policy will continue to be loose with stimulus tapering based on the unemployment numbers. The fed is currently buying a mix of shorter term US treasury bonds and mortgage backed securities on the secondary market to the tune of $75 billion a month.

A series of high profile mergers and acquisitions will occur. The flood of stimulus $$ from the fed will reach the market in earnest in 2014 as large banks work around the new trading rules set forth by Dodd-Frank. The Japanese stimulus and the return of the carry trade in force by summer, as the yen creeps lower towards 110-115 per dollar, will also propel world markets. The devaluation of major currencies could also create a very hard fall in subsequent years, but in 2014 it will continue to propel equities worldwide. Technological advances will continue in multiple industries as the internet becomes the backbone of world commerce.

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Winter Time Intermission

by Bradley Voight on 01/06/14

I have at least $250 worth of scrap but collection of new scrap has slowed to a trickle due to the harsh winter we are having in Indy. I will be adding that $250 to the account in the next few days to make it an even $500 invested. I will be adding three new stocks over the next few weeks as I see that market sentiment has changed for the worse to start the new year. I am hoping to find some bargains on some young companies. The theme of the Smalltime Model Portfolio is stocks under $5 per share. Keep in mind that knowing the number of shares of each company is CRITICAL to undertanding whether the price is cheap or not relative to the companies earnings. I like stocks under $5 based on the prospect of future earnings growth. Most of the companies I am choosing are either turnaround companies or new companies in new technology fields such as pharma, biofuels, hydrogen fuel cells, wind power, and wireless tech, LED lighting and additive manufacturing (3D printing) to name just a few. Some companies on my radar now include MY, AMRS, FCEL, ATRS, MEA

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Portfolio Page Up and Ready for Viewing

by Bradley Voight on 12/04/13

Please click on the portfolio button to see the Smalltime Model Portfolio. I have started small with our first $250 worth of scrap/recycling cash. I went with two turnaround companies, FTR which is a rural cable and broadband provider. Heavy debt has burdened Frontier for years and now it looks like future revenues can service the debt and keep the 10 cent per share dividend going. ANAD was a major supplier to Blackberry for years but is now focusing on wifi installation, a high margin business that should return ANAD to profitability.

The Smalltime Portfolio is going to focus on high growth potential companies and beaten down companies on the comeback trail. With our limited capital, we must look for medium risk/high reward opportunities to supercharge our money. We will be doing a lot of research on the companies we choose to own ensuring that we fully understand the businesses we are buying. This involves the potential loss of a large part of our investment, but remember all we have in this deal is time, our money literally (no pun intended) came out of the trash!

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