SINL

by Bill Baker, J.D.
Editor and Publisher, SINL

It's March 2010 already. So what looks good?

Let's start the month with a two of the stocks I presently hold in my portfolio:

1). I have been watching AGM (Federal Agricultural Mortgage Corporation aka Farmer Mac) and buying shares since it bottomed out in March 2009.

AGM closed at 9.10 on 03/02/2010 and is trading at the high end of its 52 week 2.40 to 11.49 price range. The shares are optionable so you can use option strategies to hedge your risk. AGM also pays a small dividend which is frosting on the proverbial cake.

Farmer Mac is a stockholder-owned instrumentality of the United States chartered by Congress to establish a secondary market for agricultural real estate and rural housing mortgage loans, rural utilities loans, and USDA-guaranteed farm program and rural development loans.

According to their website, the Federal Agricultural Mortgage Corporation:

"...........is America's secondary market for first mortgage agricultural real estate loans. Farmer Mac was created by Congress to improve the ability of agricultural lenders to provide credit to America's farmers, ranchers and rural homeowners, businesses and communities...... Farmer Mac facilitates the flow of lendable money from Wall Street to rural America, thus providing a stable supply of mortgage credit to lenders and borrowers."

As I see it, agriculture is the most important, misunderstood, complex sector of the U.S. economy. The United States steel, auto and electronics industries may no longer be the world leaders they once were. However, the U.S. is still the world's breadbasket. The Federal Government needs Farmer Mac to keep this vital sector of the U.S. economy functioning.

2). Every portfolio needs a solar play. YGE, which closed on 03/02/2010 at 12.27, is trading near the middle of its 3.32 to 19.11 52 week range and it is optionable.

Yingli Green Energy Holding Company Limited (YGE) is one of the world’s largest vertically integrated photovoltaic manufacturers. Headquartered in Baoding, China, Yingli develops, manufactures and sells photovoltaic modules to a wide range of markets, including Germany, Spain, Italy, Greece, France, South Korea, China, and the United States.

YGE is a major player in the volatile solar sector. The price of oil, strength of the international economy and competing alternative energy technologies will determine the future price of solar sector stocks like YGE.  A weaker economy and lower oil prices could drive down the price of YGE while oil price spikes, increased international solar initiatives and a stronger international economy could puch up YGE's price.

I am not looking for a lot of overall upside in the equity markets this year. So, I think a covered call strategy with a downside bias might be the best way to play YGE. This strategy will seriously limit any upside if the equity markets take off but will protect you from moderate YGE price movements. If you play your cards right, you may even be able to use a covered call strategy to obtain a decent return and still have the stock when it starts moving up. Or, you may end up losing money when the price of the stock declines more than the premium you received on the options.

Based on how the equity markets have been performing, I'm not a big fan of option strangles or straddles for YGE right now because I am not seeing enough upside and downside volatility to make these strategies work. The way things have been going, time decay will probably eat up your option premium before enough upside or downside prive movement occurs to make a profit on your strangle or straddle positio

On 02172010, UBS closed at 13.55/share. During the past year, UBS have seen a low of 7.04/share and a high of 19.32/share. UBS shares are optionable, so you can use an option strategy for leverage or to hedge your downside risk.

So far, UBS has survived the financial meltdown. They have also survived attacks from government regulators, attorneys, and every other adversary probing, prodding and attacking them. 

If you want to diversify into the financial services sector, UBS is a good bet. As an international wealth management, investment banking, asset management and business banking company, UBS has the ability to ride out economic downturns and thrive in good times.

by Bill Baker, J.D.
Editor and Publisher, SINL

It looks like more sizzle that will eventually fizzle.

Between February 8th and February 17th the equity markets have been trading higher.

The S&P 500 closed at 1,057 on 02-08-2010 and 1099 on 02-17-2010. The Dow closed at  9,908 on  02-08-2010 and 10,309 on 02-17-2010. The Nasdaq closed at 2,126 on 02-08-2010 and the 2,226 on 02-17-2010.

The financial talking heads have saturated the media with the mantra that the stimulus worked, the "recession" is behind us, and there are "blue skies" ahead.

The reality is that the attempts to stimulate the U.S. economy, by the Obama Administration and the Democrat Congress, are doomed to failure because the U.S. is now buried under a mountain of debt that will, sooner or later, drive interest rates to the moon and destroy any spark of growth that may have taken place from all the government spending. In addition, the unemployment figures that the U.S. Government pumps out are grossly deceptive in that they only track people receiving unemployment benefits and don't count the millions upon millions of Americans who have fallen off the unemployment rolls and are no longer counted. In reality, the unemployment rate in the United States is probably somewhere between 20% to 30% or higher. Finally, the Obama Budget is a recipe for financial disaster that will eventually lead to the collapse of the U.S. Dollar.

Now the good news. From an equity market perspective, we can continue to play the "let's pretend things aren't as bad as they really are game" as long as people with money are willing to buy into it. Equity market rallies are built on perception and hope. As long as the media can keep pumping out "happy news" there will always be lots of money available to buy the hype. The devil is in the details as to how you play the news cycle and profit from the advance and decline of equities as they respond to the news cycle.

by Bill Baker, J.D.
Editor and Publisher, SINL

CGA (China Green Agriculture Inc.)

On 02-09-2010, CGA closed at $12.94.

CGA is optionable and trading in a range that may be sustainable in the near term. If not, the next support level is at about $10 per share. If CGA breaks below $10 we may see $7.50 again. Upside resistance appears to be at about $18. In addition to going long CGA; you can also hedge your bet with covered calls or an option spread strategy.

Description of China Green's products at their website:

"China Green Agriculture currently produces over 100 different types of 'green' Humic Acid Organic Liquid Compound Fertilizer that are split into 3 broad categories. Our fertilizers not only increase yields for farmers, but are also good for the environment and can be applied in several conventional ways. We market these products with our own branding and promote them across 27 provinces in China."

As I have pointed out in previous articles, China is hyper growth, energy hungry country. That being said, China's people also need food.

CHINA GREEN AGRICULTURE AND DESERTIFICATION

China must maximize the yields generated from the agricultural lands it has available due to its huge population, limited land area and growing land desertification.

As far back as 2002, the Chinese government recognized the desertification problem it was having. In a November 10, 2002 article titled, China Plans to Curb Desertification by 2010, Deputy Director of China's Desertification Prevention Center of the State Forestry Administration (SFA) said:

"....a total of 1.743 million square kilometers of land, or 18.2 percent of China's total land area, has become seriously degraded and sandy, and it is expanding by 3,436 square kilometers per year."

A June 18, 2007 article on the Chinese Government's Official webpage observed:

"There is 320,000 square km of land threatened by desertification in China, a State Forestry Administration (SFA) official said in Shanghai Sunday.

"From 2001 to 2004, the area of sandy land shrank by 1,283 square km each year, but desertification is still menacing some parts of China," Wang Xinjian, deputy director of the SFA's Desertification Prevention Center, said at a seminar held in Shanghai on curbing desertification.

According to a national survey conducted by the SFA in 2004, 18 percent, or 1.74 million sq km of China's territory, is sandland. Direct economic losses from desertification is about 50 billion yuan (6.8 billion U.S. dollars) a year, affecting 400 million people.

Recent research has found ecological degradation at the headwaters of the Yellow River and Yangtze River, China's two biggest rivers, and signs of desertification have emerged in some parts of the river source area, the official said.

"The SFA will reinforce protection in these areas by taking such measures as restricting herding or logging," Wang said. "We hope the public, especially the rural population, can be involved in efforts on preventing desertification."

Sunday marks the World Day to Combat Desertification."

You can find more information about China's desertification problems by going to www.gov.cn and entering the word "desertification" in the search box.

Most investors aren't tuned into China's agricultural problems so CGA doesn't have the same excitement rating as stocks in China's internet or oil and gas sectors. Right now, this is one of the strengths of CGA  who are interested in buying value before other people recognize it.

Some JRJC positives include (but are not limited to): A). The company has about $4.94 / share in cash. We all know that cash is king, so when a company trading at $7.16 has about $4.94 in cash per share that's a real plus.

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