Vancouver Investment Advisor Ritch Wigham

That could be a good idea!

This last week has been a “mental” mess. We started with the world on its way back to hell in the proverbial hand basket and ended it with definitive statements that the recession was over and all was back on track. Confused yet?

The first thing I would like to say is that either we all learn to dismiss the talking heads on T.V. or we are never going to be able to keep any kind of clear thought . I am now convinced that the reporting is generally and consistently more harmful than it is beneficial. I am not saying this from the view “If you don’t agree with me, you must be bad” I say this because I believe that the average person watching is enacted to make decisions that are not beneficial to their finances. If you had watched and then acted the first part of last week you would have sold all of your holdings, run for the hills, and contemplated stopping at Joes Gun’s & Gas to make sure you were well equipped to survive the next several years.

Within the next 48 hours you would have bought back all your stocks, paid more for the privilege and been told to go buy a new boat for the cottage, all was well! The reality of what happened last week was that a group of core companies released earnings results that were on track or better than our talking heads expected. Brilliant analyses, from brilliant people, who think they must “shock” to keep you watching. How about we try to report the news a little bit more and reduce the commentary a little bit more until at least after all the facts are out. I know our job is to try and “predict” the future so to speak, but my colleagues try and do this in a thoughtful manner and are taken to task very quickly if we don’t. It is becoming more clear to me that, that standard is not being met by the financial reportage that we are fed daily.

Moving forward, it has become clear to me that there is a growing stability developing in the markets. Individual stocks are still swinging more than they should, but the overall market seems to be less likely to over react to either individual good or bad news. This is what should happen at the end of a recession. “The worst is over but more bad news is inevitable.” What to do then?

WRITE CALLS!!!

In sideways to moderately increasing markets writing calls is the way to go. The premium bleeds out over time and still maintains a level of downside protection for those inevitable little short term surprises that our talking heads like to exaggerate. This also currently should give an extra level of comfort for those who are still trying to time their re-entry into the market. Buy the combination. When you buy the banks write the calls. When you buy the pharmaceuticals, write the calls. And especially when you buy your energy stocks, write the calls. Done properly this should add 8% or more to your returns over the next several months while we are finding out just how robust these markets really are and still offer a level of protection for your peace of mind. There are lots of opportunities out there right now for this.

Those goofy sun spots! At the moment and for the start of this year we have a much cooler and moister start to the growing season. “Perfect” growing conditions are being experienced in mush of the U.S. Corn Belt. Yields have been predicted to exceed generational numbers and final harvest results are maybe going to bring the second largest crop in American history. Don’t bet the farm just yet. If it stays cool early frost is the call, if it finally gets hot(currently being predicted by some models for August) it may stay that way and impact the crop because the root systems stayed shallow with all the early cool moist weather. Suffice it to say “the crop is not made yet”. It looks very good, but it is still very early. If you follow these things it looks like buying wheat and selling corn is probably a very good trade. This is no longer considered a spread trade for margin purposes by the CBOT(Chicago Board of Trade) but I still view it as one. Those who have known me for a very long time will know we have made out very well with trade in the past.

Final note; good crop or bad crop farmers in North America do not have the luxury of going another year without fertilizer. All this noise with Potash prices is just that “Noise”.

The reality of our world is that there are billions of people that continue to drain our growing soils. Only one thing fixes this, and that is fertilizer. Like it or not, it is cheaper for the Indian government and the Chinese farmer to fertilize than it is to import more grain because your population is going hungry. Remember that up to 50% of your yield can be attributed to fertilization.

Talk to you soon

Ritch

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