As I wrote in my 11:45 post today, I think the short-term commodities cycle has turned. China’s buying spree, which fueled a furious commodity rally in the last six months, is, if not over, slowing. China’s buying in the second half of the year is likely to be much slower than in the first six months of 2009.
Which leads to my decision to take some money off the table in the most volatile commodity stocks. Fortescue Metals Group (FSUMF.PK) certainly fits that description. Although the stock is down 32% from my purchase date on December 19, 2007, it’s up 129% from the March 9, 2009 market bottom.
Fortescue is so volatile because it has a double link to China. First, China is the major customer for the iron ore coming out of the company’s new mines in Western Australia. Second, China is the major source of capital for the expansion that this company needs to get its cost per ton down and its profitability up.
I’m leaving these shares in my long-term Jubak Picks 50 portfolio because over the long-term I think commodity prices will continue to rise along with the economies of countries such as China and India. But in the short-term I think iron ore stocks are likely to take a rest. As of September 24, 2009 I’m selling these shares out of my 12-18 month Jubak’s Picks portfolio. (Full disclosure: I will sell my shares of Fortescue Metals out of my personal portfolio three days after this is posted.)
Sue,
Embarrassed to say that I couldn’t figure it out myself, but Sue, you are spot on.
It’s more of a functional problem that I have with the site, certainly not a content issue.
And just for the fun of it, I can’t stop myself from adding (JJ, Please forgive me)For the folks who read my original post, and found it
necessary to “flame” me on the fact that I said I was disappointed, rather then
on the faulty logic I used to say I was going to hold FSUMF (Logic fueled by Rum
and Coke I might add, that in retrospect reads more like a bad conspiracy plot) I have only
one thing to say… You really need to learn to discern between a poor argument, and
an inexpensive opportunity to strike out at an unknown somebody/nobody.
A thoughtful rebuke to a poorly formed argument can be a good teaching moment (and the logic that I used to explain why I was going to remain a “holder” of FSUMF gave ample opportunity for a thoughtful teaching moment)
None the less, a focus on the argument would have garnered significantly more respect, which would be in keeping with what I would expect from people who have been a fan of Mr. Jubak.
A request for clarity, is a sign of a good listener (And a thoughtful planner/manager/
Investor/analyst/ buyer/seller/etc…) A jump to judgment points to opposite characteristics.
And while I still remain a “Fan”, after doing my own research, and my own due diligence, and recognizing this instrument for what it is (An enormous risk), and for better or for worse,
sickness and health, and all of that stuff…. I am prepared to take the risk, and the associated losses (I mentioned that I expected a drop of up to 25%, which we came very close to but haven’t quite hit yet…..)
but none the less, I find this little bastard (The stock, not Mr. Forester) very intriguing
and full of possible possibilities (Not looking away from the fact that the possibilities include
an inability to pay due debt in the next 9 months, ownership by Chinese banks, becoming a shell company that for all intents and purposes is used to manipulate ore prices, loss of its CEO, further dilution of shares, ever expanding debt (Did I miss anything) etc, etc, etc….) But the upside remains what it always has been, A Hellofa fun company to put play money into .
Full disclosure (I bought the first time around 3.5 and sold at 8, I bought the second
time well below 2) Fuller disclosure: If this “stock” breaks below 1.6, I’ll be the guy on the wrong side of the door yelling “BUT I BELIEVED!”
P.S. on a more serious note folks, don’t ever take what I post to seriously, after all, I’m not getting paid for it either.
P.S.S Go Mets!
P.S.S.S (See what I mean?)
Jim,
I think what DJ and the others are trying to say is they had a routine while reading your articles on msn. Your inaccessability was a (big) part of the charm for them. Its almost like when a celebrity becomes your neighbor.
I am very glad though that I can get to read your advice everyday.
Website does need improvement though. If you can get someone to design it better it will definitely be a big plus. Thankyou for all the advice you give. You are the sanest person I read
Dear Jim, I have read your articles for many years. Think you are doing a great job. You give me a lot of ideas to research and have made me a couple of bucks.. Keep up the good work….
Dear Jim,
A “heads-up” regarding your excellent book:
The Jubak Picks. On page 240, in your chapter “Hidden Technology”, you list a couple of Technology ETF’s. You list the Dow Jones U.S. Technology ETF as: ITW when it should be IYW, I think.
Sent a copy of your book to my kids.
Calm down everyone. No reason to attack me for a statement that the new blog is not as conveniant to some of us as the old way. If I did not like Jim’s research and picks, then I would not care. But I have been successful fo many years following most of Jim’s advice. I just wish I knew when an update was coming. But please everyone, just as in the market, try and keep a level head and not go off on every percieved negative comment. The fact that I liked the old regimented schedule better is no reason for this vitriol
Jim,
I to am extremely grateful for your work and advice. I have been following you for 7 years and it has paid off very nicely. I certainly didn’t mean to start a Jim bashing party. I just remind everyone that this is America….the land of the free. If you don’t like the advice or the blog…don’t read it. Me on the other hand, I’ll continue to check it as often as I can and keep getting paid!!
Jim,
Love the blog. Are there any plans to add the dividend investor portfolios from MSN to this site?
I have to chime in and say “THANKS JIM!!” I’m a big fan….small money, but your advice has been great. At least my stock account is almost back to the early 2008 level (uhhh until this week that is) as compared to my mutual funds account which has a looong way to go yet.
Jim,
Any thoughts on Yara International. Think it is still headed toward $38, or will it have the same issues as Fortescue? Thanks. Great FREE advice…..
Scott
Ummm… Am I forgetting something here? Isn’t this site FREE. That means Jim does not get paid anything and he takes his valuable time to help us out. To those that are complaining- have you ever stepped into the world of managed money? Or how about stepped into the world period… Nothing is free. In fact, money managers are paid extremely well. Have you ever seen a poor money manager??? It is a great skill and most of them do deserve to be paid well.
Jim, I speak for almost everyone on this board when I say thank you for any time that you give to us to provide your insights on the stock market. We appreciate it and I’m sure you have made a lot of people a lot of money. I know we are not here to bash anyone else, and it is not my stance to single anyone else out. This comment is directed at no one in particular, I just want everyone to sit back and think about what you get from Jim. Unbiased information, clear thinking and easy to understand posts, timely advice, and I know he tries to answer everyone’s questions. Then, to add it all up he does it for FREE.. FREE.. Are you kidding me? How would you like to do your job for FREE.
Thanks for all you do Jim. Your kindness is greatly appreciated.
AJ
I too am baffled how anyone could possibly be critical of this outstanding, free information source. I love the frequency and timeliness of new blog. Why in the world anyone would want to wait until Friday’s column for Wednesday’s news is beyond me, Jim. It would be like complaining to CNN for providing Live-Late Breaking 24-hr news because it doesn’t fit into their schedule. Please, please, please, keep up the great work!!
Draco, I know lots of people don’t have time to read th blog several times a day. (Although you’de be amazed how many people do–for which I’m very grateful.) One reason I added an overnight email feature to this blog was so that folks who can’t check frequently during the day can get one email summary delivered to them first thing in the a.m. (actually it goes out around 4 a.m.) that includes all the buys and sells and updates for the previous day and whatever else I think was most interesting of that day’s posts. It’s free and you’ll see the sign up box in the left navigation of the blog. I try not to pick stocks that trade such little volume that my recommendation will move them. Frequently when a stock I pick goes up, it’s coincidence. Since I track all my picks from the closing price on the day I picked them, I’m in th same boat you are and I’d certainly prefer not to have a big jump on the day of the pick.
I had no intention of putting DJ on the spot. I just wanted to let DJ and any other reader know that I take all comments especially the negative one’s seriously. That’s how the site gets beter.
I have followed Jim’s articles for the last 8 years and in my opinion his thinking/logic is just great. Obviously, that does not mean I always buy and sell in a ‘blindfolded” way whenever he comes with a recommendation, but rather use his work for my own research – at the end of the day it is my own money I play with and the responsibility is just mine. But his market insights have helped me a lot.
So Jim, just want to say Thank You from the other side of the Globe and please keep up the good work.
Jim,
YOU ARE DOING GREAT! I’m mystified by why anyone would complain that this is no better than the MSN experience. Your blog is far superior to the constraints of the old format. For those that don’t want more information, they can always hone in on the buy/sell links conveniently placed in the upper right corner.
Jim – I also want to say that I really continue to get a lot out of your stock and market views. It took a short time to get used to your new format and updates that normally come several times a day, and I was anxiously awaiting buy and sell recommendations that did not come immediately. But these more frequent updates are a plus, not a minus! We are all in favor of any specific improvements that can be made. But some people are just never satisfied.
I have to say that with Jim’s past record I am very happy that he continues to do his research and publish his blogs for free. I’ve paid for professional money managers whose record doesn’t match Jim’s. Nothing but Thanks from this corner.
Draco97, I have read Jim for a few years now, I do not always buy what he is recommending, however I think he does very well as a free source of information. If you wanted to pay someone for a recommendation, there are alot of people out there. If you have to log in early before you start work and the market opens each day, or late at night before you go to bed you would probably see his recommendations before the market opens. Stocks do not always go up and that applies to his recommendations also, there are also times when they experience pullbacks.
Jim,
I too, am disapoointed. I used to be able to know what days to check your column to plan on my buy and sell for that day. Now, a buy or sell recommendation could come in at any moment. I am a physician, and cannot be on the Web all the time wondering if you have just posted. As there is often a bounce when you suggest a stock, by the time I see the buy recommendation, the stock has often already gone up a significant amount.
DJ, sorry if you’re disappointed with the new blog. I’d be the last to say that it’s perfect. And I’m always willing to try to make the experience better. I was wondering if you could be more explicit about why you’re disappointed. If I understand the problem, then I’ve got some shot at fixing it.
javajack, I thought I was pretty clear on TC when I updated the picks in July. At that point I said that I thought the stock could drop by 1/3 in a commodities pull back–it was then at $17–but that I would hold it through that pull back because I continued to like the falling costs of production and the potential for an eventual turn in molybdenum prices. All that still goes. We just went below $12 today. I’m still holding and I don’t have any plans to sell.
August 23rd MineWeb Iron & Steel Section
“China’s appetite for iron ore to continue for years – Goldman Sachs”
http://www.mineweb.com/mineweb/view/mineweb/en/page39?oid=89662&sn=Detail
I would have to say that I very very rearly disagree with Jims research, While I think he is right regarding the next six – eight months on the commodities front
I struggled to come to a decision to keep Fsumf, balancing the possibility of seeing it decline by an additional 20%, with possible upside potential from an (Impending?) announcement of financing, and then the fact that the deal could be quite ugly in terms of piling on debt, sending the stock downwards, and then the very very real possibility of a W recovery, rather then the V recovery that everybody , Until just a few days ago was touting, and the possibility that government spending may dry up and starve off any kind of recovery, As Jim talked about a few days ago, all combined with the fact that China is importing less Iron Ore (And everything else) probably for the next 6 months. What intrigues me is this: For the last few months China has been importing record amounts of Iron ore, why? Nobody to sell product to really, certainly not selling steel in record amounts… So why the massive stock piling?
I wonder if it was for no other reason than to precipitously drop off demand to punish (And force) the majors into the 44% reduction in price that they have been demanding. I had a feeling back when FSUMF made a deal with China on pricing for the next 6 months, that perhaps they knew something that everybody else didn’t know. It was such a strange thing to do, unless they knew, ultimately that it would actually end up being a pretty good price (Over the next 6 months).
Something just doesn’t strike me as right about the whole deal. And yet I am holding for the long term.
Gotta see how this turns out over the next 6-8 years…. Might have dead money for a while, but I think GS is correct, why else would everybody be rushing to build out Iron Ore capacity now? Not just fsumf, but BHP, BP, all the minor players.. (Which in and of itself could turn into an all together differnent problem) Very strange times to hold this stock. . .
On another subject. The Jubak Picks web page has a long way to go, I used to mark on my calendar when to expect a few words from Jim on MSN, Not that I am a particular MSN fan, been reading him religiously for close to 10 years now, but communicating with him, getting regular updates on particular stocks, figuring out how to navigate around here, I would have to say for the first time in 10 years, I don’t pay attention to when he posts anymore, and only look at this page a couple of times a week…
Used to leave regular notes as “comments” only to feel like I was talking to myself…
I was very excited when he went off on his own, disappointed now… Just not the same..
Just as a technical advise, since August 25th when TC announced their 217million$ deal.. since then, 13,10 is a resistance.. Personally I sold at 13 & would come back at another support or above the 50DMA.. (Catengineer, A least I would sell 1/2 position.. Imagine your gain!!). Thks Jim for any fundamental advise from your side…
I have asked Jim about an update on TC for months and never get a response. By the time he will the stock will be back to 2.75
I bought TC at $2.75 that is.
Jim,
I had that same question. I bought in at $2.75, should I sell all those as well?
Jim what about TC?