NovaGold Position Increased. Update to portfolio.

March 21st, 2012 | Posted by octafinance in Alternative Investments | Commodities | Currencies | Gold | Portfolio | Precious Metals | Stocks - (Comments Off)

Today I increased the portfolio’s Novagold position by 50% to 0.3% of the portfolio.  As Novagold declined about 20% since my initial purchase I have decided to add to the position as I find the stock even more undervalued now. The portfolio’s total exposure to precious metal stocks is now 1.8%.

I still believe that there is significant downside risk to gold, silver and precious metal stocks so I look forward to increasing the portfolio exposure if declines happen. I believe that the total exposure might go up to 5% until a final bottom is formed in this sector.

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Japan’s Debt Crisis a Follow-up Review

March 14th, 2012 | Posted by octafinance in Bonds | Currencies | Europe | Japan | Options - (2 Comments)

This is a continuation of the article “Japan’s debt crisis comes after Europe buy some long term OTM yen puts”

Surprisingly honest, Japanese Ministry of Finance official admits that “Japan is fiscally worse than Greece“. Bloomberg is reporting that, at a conference in Tokyo, Yasushi Kinoshita said “Japan’s 2011 fiscal deficit was up to 10% of GDP and its debt-to-GDP has soared to over 230%”. It seems that Kinoshita is worried that there is a big risk of shocks even with large amount of JGBs that are held domestically. I completely agree with him as stated in my analysis.

And now a former top Japanese currency official:  “The Bank of Japan is locked into purchasing more government bonds and may contribute to a loosening of fiscal discipline in the world’s largest public debt market”. “Since they have come this far, if the BOJ stops purchasing bonds, there will be a fall in bond prices and huge valuation losses for banks.”  said Makoto Utsumi, former vice finance minister for international affairs and now president of Japan Credit Rating Agency Ltd.

BOJ last month increased bond purchases through its asset fund by 10 trillion yen ($123 billion) to $374 billion QE as part of measures to counter deflation and spur growth. That means that BOJ will monetize most of the deficit that Japan has. Don’t underestimate the significance of such program, the Japan’s economy is much smaller than the USA one.

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When to worry about Hyperinflation. Where it could happen?

March 7th, 2012 | Posted by octafinance in Bonds | Currencies | Europe | Japan | Uncategorized - (3 Comments)

While some people are worried whether QE3 will be initiated so they can reap some profits there are others who are worried that hyperinflation might suddenly happen and destroy their wealth.  Because I received a few emails from such nervous investors and businessman from Europe and USA, I have decided to dedicate this post to them and assure them that even though money printing is risky and causes hyperinflation, we have nothing to worry about in Europe and USA.

Hyperinflation is one of the worst systemic risks. People and investors usually avoid holding much cash because they believe that hyperinflation might destroy it and they are partly right in their assessment. The only problem with that assumption is that there are specific causes that result in hyperinflation and cash might be a good option for now, even for those that hold Euros.

There have been 28 episodes of hyperinflation in national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz, (more…)

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Investment in Gold Miners, Gabriel Resources, Allied Nevada Gold and NovaGold

February 19th, 2012 | Posted by octafinance in Alternative Investments | Commodities | Currencies | Gold | Portfolio | Precious Metals | Stocks - (Comments Off)

On February 17, 2012, I bought shares of three gold miners: Gabriel Resources Ltd.  (GBU), Allied Nevada Gold Corp. (ANV) and NovaGold Resources Inc. (NG)

I want to emphasize that these purchases are a part of my portfolio as they are long-term investments and not trades. The allocation of capital is as follows: Gabriel Resources Ltd ~ 1.1% of my portfolio, Allied Nevada Gold ~ 0.4%, and Novagold Resources ~ 0.2%. My total exposure to precious metal stocks in the core portfolio is now 1.7%.

Currently the precious metal stocks are very cheap compared to the metal price. The gold bull market has a long way to go until it forms a bubble phase. The precious metal stocks that I bought have probably an upside of up to 400% long-term (3+ years). I still believe that gold will correct more, probably going to $1400/oz, or even $1200/oz, before resuming it’s uptrend. Still that didn’t stop me from doing these purchases because they are all unique and special situations that might go up significantly, no matter what the price of gold does.

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Japan’s debt crisis comes after Europe. Buy some long-term OTM Yen Puts

November 28th, 2011 | Posted by octafinance in Bonds | Currencies | Japan | Options | Trades - (2 Comments)

The chess and investing are similar processes. In order to be successful investors, we must foresee the coming, many moves before it happens and we must position ourselves for it.  I’m sharing this analysis with you so you can position yourself for the coming. I know that most of you are interested more of what is happening in Europe and it’s obvious as you are Europeans. But still I think that the best trade and most profitable trade from a risk/reward perspective is related to Japan. When we talk about Japan, I’m talking you about what will happen within the next 5 years as I believe that I’m many moves before the markets which are focused on Europe’s debt crisis.

In this analysis I will answer the following important questions:

1. Why Japan’s crisis will shake the world in few years?

2. Why for many years hedge fund managers betting against Japan lost money and why they were wrong?

3. How can I profit from what is coming? Why position now?

4. Why Japan’s debt and economy are not safe? Most people think Japan is save because: 

-  Japan is net creditor and have huge reserves.

- Japan has trade surplus so it gets more money than spends from outside.

- Japanese government bonds are locally hold so it’s not a target for sudden yield spikes or attacks from foreign bond holders.

I will prove you are wrong! And of course my final prove will come when you see Japan all over the news within the next 5 years at maximum. (more…)

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HKD Call option bought in portfolio

September 17th, 2011 | Posted by octafinance in Currencies | Options | Portfolio - (1 Comments)

Two countries share the same monetary policies but have absolutely different problems and solutions to them. I refer to USA and Hong Kong and their currencies, the USD and HKD.

Hong Kong shares U.S. monetary policy because of it’s currency. The HKD is pegged to the USD. Hong Kong import the U.S.’s ultra accommodative monetary policy. All factors for which HK decided to peg to the USD are no longer active. Now we are left only with the negative impact of the peg on Hong Kong. Consumer price inflation in Hong Kong is accelerating. The weak currency is intensifying the inflation problem.

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USDCHF call option sold for a 187% profit

August 11th, 2011 | Posted by octafinance in Currencies | Options | Trades - (Comments Off)

Today I sold my USDCHF call option that I bought for 0,0146 on August 9 2011. I sold it for 0,042, or a profit of 187% on my invested capital. In fact, it has been only 3 days since I bought this option, but the SNB did an intervention and I believe that this move is enough for me to take profit. Interventions are usually ineffective and the safe-heaven status of the swiss franc will probably be tested again.

The USDCHF put option was a position in my trading account. A speculative play that I make with less than 10% of my total trading account size. I use put options when I detect a parabolic rise of an asset. The options limit the possible loss if I’m wrong, but they also offer me opportunity to leverage my trade. I always buy out-of-the money options, so I pay cheap premium for the option. As after parabolic rise, I do expect huge correction, I prefer to buy cheap out-of-the options and risk less capital for a high return, if I’m right. I also buy the options for a short period of time. Usually I buy options for few months, so they are cheap. In this case my option was bought until August 31 2011.

Summary: USDCHF put option bought on August 9 2011, for 0,0146 USD/oz, with strike 0,737, and expiration date August 31 2011. The USDCHF option was sold on August 11 2011, for 0,042 or a 187% ROIC.

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Swiss franc parabola

August 9th, 2011 | Posted by octafinance in Currencies | Options | Trades - (Comments Off)

Currencies rarely go parabolic. Guess how big the problems are. I’m sure that the swiss franc is appreciating because everyone in Europe is transferring money from unstable banks to Switzerland and many people expect the EUR to weaken. All these factors have contributed to a strong currency going parabolic. Today, August 9 2011, I bought USDCHF call option at 0,0146 with a strike 0,737 USDCHF and expiration date August 31 2011. The option is for 1.65% of my trading account. I’m not only bearish on the swiss franc due to extreme overvaluation, but I’m also optimistic on the USD appreciating this year, and even next year depending on whether the USA give tax incentives to companies to repatriate USD back to USA or not. The main rationale behind this trade is the parabolic move that I detected.

The swiss franc has risen in a super parabolic move due. The Swiss franc has appreciated 60% from the low in 2010. That’s unbelievable. Just in the last month CHF has risen 20% to the USD. I think that the swiss franc will soon crash due to actions by the SNB. Parabolic moves always end badly. They form because super high optimism about an asset, many factors supporting it, and it goes much higher than 200 DMA. The siwss franc is 20%+ higher than the 200 DMA.

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