(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.)
Trades continue to trigger in the on-going sell-off in commodities. In my last listing of commodity stocks that have erased all their post-QE2 gains, I did not include stocks in agriculture, oil, or natural gas. I have now completed that scan and have posted the results below. I divide the list into stocks that were included in the explanation of the rules and picks for the strategy on making profits from physical assets…
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It was a good coincidence to see heavy calling buying in some of these names as they lost their post-QE2 gains. Although I did not include ECA and TLM on the strategy list, I made small purchases in each.
In past posts on potential plays on a crash in commodities, I did not fully explain the rationale for using the “vocalized” launch of QE2 as a trigger point…{snip}…the strategy requires acknowledging the high level of uncertainty on how a crash in commodities will play out. For example, the current crash is not ostensibly about the potential of an economic slowdown in China. Yet, today’s worries and panic were still enough to drive a large handful of commodity names back to pre-QE2 levels. If this crash turns out to represent the extent of the damage, I will have a good number of commodity-related stocks already in play. If China does finally slow down, I will be much more aggressive in accumulating these stocks. (To review the thesis inspired by Jeremy Grantham see “Preparing for Profits in a Resource-Constrained World.”)
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.)
Full disclosure: long ECA, TLM