PhotoChannel Finally Lives Up To Expectations

Why couldn’t we have this quarter in the bull market? PNWIF came out with Q1 numbers today, and it was the first quarter where the company truly demonstrated it has lived up to its full potential.

Their first quarter is the 4th calender quarter, and happens to be the holiday season, which will be their best quarter seasonally. The current Jan to Mar time frame is their worst, and then it gets better as we get into the year.

The company netted about $1 million on $7.2 million in revs. Revs were up 67%. Profits went from $1 million loss to $1 million gain.

Now we’re finally seeing what this company is capable of. Too late unfortunately. This was a $5 stock, up from my first entry level of $1.80.

I don’t have time to give this a full treatment today, but if you like growth, this is definately one to own. I don’t really have a handle on how they will grow from here, but if they can continue on this pace, this stock has to be considerably higher some day.

Update on New Idea in Gold: DGP

Those of you who caught the weekend edition should be aware of my new idea for investing in Gold. With the market moving up a bit today, the fear fueled gold rally is taking a bit of a breather.

My idea for investing in gold is DGP- the 2 for 1 ETF, is new closing in on an excellent entry point. I’m looking for this security to pull back and fill the gap that was created last week when the market tanked and gold gapped up.

As you can see from the chart, that entry level is in the $21.30 to $21.50 range- As I make today’s notes, DGP is trading at $21.86- within striking distance of my ideal entry level.

If you see the $21.50 level, don’t hesitate to begin accumulating this one. Gold is going to do well this year. Fear is driving the price right now. Inflation expectations will drive it later in the year.

Own the Brazil ETF

The other international ETF I like is the one that represents the large cap stocks of Brazil (EWZ). The chart here is similar to the China ETF. It has made a series of higher lows since making its November low, and technically looks capable of delivering a big break out.

Brazil has a relatively healthy economy, and is very commodity oriented. They are a low cost producer of oil and a huge producer of ethanol. If you want to own oil or the like, the Brazil ETF is a great way to do it, but mixes in other upside as well.

Brazil is not plagued with the same problems we face in the US, hence EWZ is trading far better than US equities over the last several months. I
first recommended EWZ at $35 on December 13th. Friday’s close at $34 doesn’t represent much of a move in the wrong direction, and there have been a number of blips much higher than $35- we’ve now seen $40 three times since making the call.

At today’s level, this one is a buy right now. Comments and Questions are welcome.

DGP The Way To Own Gold

invest in a new Gold idea- DGP.

I love the leveraged ETFs. There are a number of ETFs that are leveraged to trade double and triple the moves of their underlying securities. These leveraged ETFs are far preferable to option contracts, which have a lot of negative associated costs and risks.

Options have a premium for time value, and the price erodes as the expiration time comes closer. Thanks to the volatility in the markets, the option premiums these days are huge. Simply going long the options is a very expensive proposition, and risky because they can expire worthless.

These new leveraged ETFs offer you more bang if you’re right, and greater losses if you’re wrong. However, they don’t have a time premium that erodes, so you can hold them much longer term without losing value simply because you’re getting closer to expiration. There is no expiration.

So, this past week I decided to see if there was a leveraged ETF for Gold, and sure enough, I found a 2 for 1. If you really believe Gold is headed to much higher levels and want to maximize your returns, DGP is the way to go. Double the move, with no time value or premium. Double the move up, and double the move down.

Here’s a chart with DGP over GLD. As you can see, when GLD goes down, DGP goes down more. When GLD goes up, DGP goes up more.

Gold made an awesome move this week, and actually traded briefly to $1,000 per ounce in Friday’s extreme fear driven market. Fear and momentum is driving investors out of equities and into the shiny stuff.

On Monday, I recommend selling EZA, and using the money to invest in DGP. Go from South Africa to Gold, and do it two for one. Since Gold has made such an impressive move of late, it might be a good idea to only invest half the money in DGP, and hold the remainder for a temporary pullback.

DGP is the one to own if you want to own Gold, and I believe everyone should right now for part of their portfolio. Today, Gold is being driven higher by the intense climate of fear. This is just the beginning. Later this year inflation will become the talk of Wall Street, and then watch gold get really rocking.

Buy DGP. $21.50 would be the ideal level to jump in, and Friday’s close was $23. Go small now, and pile in at that level. Price target longer term: $50.

Comments and questions are welcome.

Own China For the Long Term

I love the China ETF- FXI. I believe China has the ability to come out of the global recession far faster than we do, and this ETF is so oversold is pretty absurd. After all, China’s stimulus package of $600 billion is 20% of their GDP. There are many bridges, roads, schools, and lots of other infrastucture to build there. There’s no toxic mortgages, and the banks are in no trouble. China has lowered interest rates 5 times in the last 4 months, and the January lending rate for the banks was double 2008.

FXI puts you in the best position with the least risk to benefit. As a bonus you get a 3% cash dividend at the current price.

I had a buy on that one at $28, and a strong buy at $25. Today we closed at $25.15, so dip time is the time to pile in. The chart looks far better
than anything in US equities. Since making it’s all time low in late October, the lows are getting higher, and the highs are getting higher. From my
recommended entry level there have been several opportunities to trade out for $5 point gains in the last 3 months.

Comments and questions are welcome.

Nighthawk Plans To Open Up

At long last I had a nice candid conversation with Doug Saathoff, CEO of NightHawk.

While I can’t report much, I can tell you we did discuss the importance of opening up shareholder communications.

Over the coming weeks I am confident shareholders will be better informed about the current status. I’ll continue to cover the substantive events for the time being. Once everyone is up to date on where the company is and its plan for growth, I’ll decide where I am with the coverage.

Stand by for updates from the company.

China Energy Recovery: The China Macro and Micro Picture

It’s time to explore what’s happening on both a micro and macro level at China Energy Recovery (OTC BB: CGYV).

First, the China Macro Picture. There is a global recession, and it has had a very negative effect on the Chinese economy. Everyone understands this, and accepts it. Here’s the debate- is China going to come out of their recession sooner than the US, and has the recession been fully discounted by the stock market?

There are some early indications China will emerge from the recession sooner than the US. I believe when money starts to look for growth again, it will find it in China far sooner than it will in the US.

Back in November, China announced its own version of stimulus package, and it’s scope should be far greater than that of its US counterpart. In Beijing, they just decide to do it. There is no political wrangling or compromise.

Chinese banks are writing loans as they are not plagued with bad debt, and the government has implemented some major incentives for home purchases. New borrowing last month was double the previous year.

Furthermore, the Chinese are making investments in commodities to insure cheap supplies when the recession has run its course. They are investing in iron ore in Australia, and other areas around the world.

With regard to China’s initiatives in climate change, there’s some new and interesting information available. The Asia Society on US/China relations, based in Beijing, recently released a report aimed at giving the Obama Administration a new road map to enhanced relations on the climate change front. The report was coauthored by John L Thornton, a Professor at Tsinghua University, and Dr. Stephen Chu, President Obama’s choice for the new US Secretary of Energy.

This document provides a blue print for collaboration between the two biggest energy consumers and producers of green house gas emissions.

Armed with a $700 billion stimulus package they can write the check for, the Chinese government has plans to commit significant resources to the reduction of green house gas emissions and the deployment of green technologies on all fronts to reduce future energy dependence.

That’s the macro picture. Now, let’s look specifically at China Energy Recovery (CGYV). The stock is currently what I would consider a “tweaner”. It’s somewhere between trading really well and trading extremely poorly.

The CGYV idea is now smack in the middle of a good idea and a money loser. As you can see from the chart, the timing for introducing this idea was absolutely the worst it could have been. Late September was the death knell for every equity, and CGYV was no exception.

We started at about $3, and in pretty short order a $.90 bottom was made as the company’s financiers simply blasted the stock with no regard for price. They had their own problems.

However, since making the $.90 bottom, the stock has delivered a 150% gain to its highest rebound level of about $2.25.

Now, the stock is kind of range bound in the $1.50 to $2 range. There seems to be sellers near $2, and buyers surface near $1.50. Volume is a bit lighter. So, while the market is trying to make new lows, this stock has gained back a healthy percentage of its loss. That’s not bad.
On the fundamental side, the company is achieving something no company is supposed to be able to do in today’s economy- it’s growing like crazy and making money.

Sequentially, ’06 was $5 million, ’07 was $12 million, and ’08 looks like it will be about $23 million. That’s phenomenal growth with the ugly backdrop we have today.

You would think the company might slow down in 2009. So far, indications are the growth will continue. There’s no slow down at China Energy Recovery (CGYV).

They have booked about $30 million in business for 2009 already, and we’re not even 25% of the way through the year. I expect the company to deliver north of $40 million in 2009, and net $3 million to $4 million.

This is not supposed to be possible in today’s world.

As the China stimulus package finds its way into “Green Theme” strategies, China Energy Recovery is positioned to benefit in the extreme. Energy recycling and pollution is a huge problem in China, and CGYV is perfectly positioned for additional massive busines flow as funds begin to pour into energy efficiency and the reduction of green house gases.

The stock is going through a consolidation period. I hope it is being transferred out of “weak” hands who need cash today, into “stronger” hands who have a longer term perspective.

When money comes looking for growth in China “Green Themes” it will find CGYV. When the big money comes for this stock, I hope you are positioned to make a killing.

Comments and questions are welcome.

Invesrse Long Bond (NYSE: TBT): Time To Buy

TBT has been a good call so far. I called it a buy at $39 back on January 3rd, and today it’s trading at $45.48. Not bad if you bought shares of TBT- net gain of around 16.5% cash, 32% on margin, and more than a double on the option I suggested (March $30 calls).

TBT is the inverse of the long bond- and to understand what you’re buying here, you have to understand bond dynamics. Owning this security is a bet interest rates in the US Treasury long term maturities are going to go up.

Buying US Treasuries at their current yield is, in my mind, an irrational fear driven flight to quality. Despite all our problems and talk of a 30′s like “Depression”, the US Treasury is still considered the safest security in the world.

So, in this time of great uncertainty, money is pouring into US Treasuries, and it’s irrational.

Let’s start with Bonds 101. When a bond is issued, it comes with a coupon, or an interest rate. That bond can go up or down in price. The interest payment always remains the same from time of issue. If the bond goes up in price, the interest rate goes down and vice versa.

So, if there’s more demand than supply for bonds, the price goes up, and at the same time the interest rate goes down.

Money has been pouring into US Treasury Bonds- it has been coming out of corporate bonds and stocks. It has forced up the price of bonds to irrational levels in my view. As I write this BLOG, the US Treasury 10 Year is sporting a yield of 2.67%- with inflation coming back you’re probably losing money.
Consider the following facts:

The US Government is going to auction $1/2 Trillion in US Treasuries this quarter alone. That’s massive supply. When there’s excess supply, the price simply has to go down. In bonds, when the price goes down, the yield goes up.

A yield of 2.67% in the 10 year, and today’s 3.5% in the 30 year (long bond) is simply not going to hold up. Those interest rates, coupled with the inflation that is inevitable, is coming.

As interest rates go up in the Long Bond, the price comes down, and the price of TBT goes up. Here’s the chart:

TBT has come down off it’s near $50 high as the fear is running rampant in the markets. Money is coming out of stocks and corporate bonds and pouring into the perceived safe haven of US Treasuries. Prices up, yield down, TBT down.

However, is that money chasing the Bond Bubble safe? Certainly US Treasuries, if held to maturity, are the safest security in the world. But, suppose you buy the Long Bond with a 3.5% yield, and 2 years from now you decide 2.5% is not enough and you want out?

When you consider how much we’re borrowing and the likelihood of the reincarnation of inflation, you have to include interest rates are likely to be higher. At this point, the value of bonds will be lower, and you will have to sell at a loss to redirect those funds.

TBT is going to end up being a very strong long term inverstment. It has pulled back from the $50 high, and today’s $45.50 level represents a confluence of several technical indicators.

This pullback is clearly a buying opportunity.

Comments and questions are welcome.

GOLD ETF (NYSE: GLD) Officially Breaks Out

It’s official. As the market is trying for new lows, the FEAR quotient climate is so thick you can cut it with a chain saw.

The GOLD ETF (GLD NYSE) I picked on February 3rd at $88.47 is now in breakout mode. $95.50 and climbing. Right now, I believe the flight to Gold is simply fear based. However, I also believe this move to Gold could have legs far beyond investors simply looking for a “safe haven” to get a decent return in an ocean of fear.

Here’s today’s chart:

This is a weekly chart, so each individual bar equals one week in time. As you can see, the price has blipped above the top line- otherwise known as the “downtrend line”. Breaking above this line is technically very important.

The bottom trend line is known as the “support line”. This chart is called an Ascending Triangle, and it has now resolved itself to the upside.

Technically, GLD is a slam dunk for $100, and probably higher levels from there. This would be a new all time high from the March ’08 high of $1,000 per ounce (or $100 on GLD).

While this fear fueled break out is nice for GLD holders, the real move is going to come as this security evolves from a fear driven move to the upside, to an inflation driven move to the upside.

The $800 billion stimulus package is going to be signed into law by our new President today, and the US Government does not have $800 billion in the bank.

Guess where it’s going to come from? We are going to print the money by borrowing and deficit spending our way to it. Guess what that means- the dirty word will come back, and it will keep Bernanke on his toes.

It’s the “I” word- INFLATION.

When the market gets around to recognizing we are going to inflate our way out of this $1.6 trillion for banks and the economy, GLD will be the place to be.

In my next major edition on the issue, we will explore when to buy and a “Logical Profit Objective”.

Comments and Questions are welcome.