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Weekly rollup | Sept 05-11 2022

Stocks Mentioned: Skeena Resources (SKE), Bunge (BG), Teucrium Wheat (WEAT), Grindrod Shipping (GRIN), Mercer International (MERC), First Solar (FSLR), Hannon Armstrong Sustainable Infrastructure (HASI)

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September 06 2022

Sell Skeena Resources (SKE)

The company is going to release the Eskay Creek FS sometime tomorrow or Thursday and hold a conference call on Thursday at 11:00 AM ET. This detail was hidden in a press release put out today announcing drill results. No fanfare. Earlier this month, Barrick Gold ($GOLD) sold a portfolio of 22 royalties to Maverix Metals ($MMX) for $50 million. That included Barrick's royalty on Eskay Creek, sold right before the FS was due out. MMX will pay an additional $6 million if Eskay Creek is fully permitted for construction in six years.

Skeena stock price didn't react to either news, nor did it run up on anticipation of the release of the much awaited and much delayed FS. I suspect the FS is going to be a disappointment, given this lackluster price action. Marathon Gold ($MOZ.TO) recently announced 57% capex escalation compared to its 2021 FS and the stock gapped lower from C$1.69 to C$1.5 on the news. MOZ now trades at C$1.28.

There's still a possibility of a positive surprise, but I think it's prudent to just take the loss and move on. Sell.

September 07 2022

Inflation has peaked. Not a theory but a fact. Deflationary shock incoming. Got US dollars?

The U.S. Department of Agriculture ("USDA"), last week, increased its farm earning forecast for 2022.

"Total crop receipts are expected to increase by $36.4 billion (15.3 percent) from their 2021 level following higher receipts for soybeans, corn, and wheat," according to the USDA. "These increases would put total cash receipts in 2022 at their highest level on record, even after adjusting prior years for inflation."

We own Bunge (BG) as the sole point of exposure to agriculture.

Buy Wheat. Either futures or the Teucrium Wheat Fund (WEAT). Reason? Breakout from a base. Why? Traders expect lower production in the Midwest due to late planting and dry weather. I don't know if that's actually going to be the case and I have no great wheat bull thesis. I'm just buying a breakout from a two month base.

Gold miners are up across the board today. To me, this is more confirmation that oil is going to roll over. Gold and oil tend to lead at different times in the commodity cycle. It's starting to look like gold's turn is coming up. One day does not make a trend. Patience.

September 08 2022

Grindrod Shipping (GRIN) goes ex-dividend today. Expect an 84 cent dividend on the 19th. Note that this is an ordinary dividend, separate from the proposed takeover bid.

Buy Mercer International (MERC) using a market on close order as a mean reversion trade

Mercer is in the wood and forest products business. The stock is down 13.25% today on no news, either from the company or in the media. The price action is puzzling vis-a-vis other stocks in the sector such as WY, RYN, PCH, RFP, WFG, CFP.TO, IFP.TO, etc. With 90% of the stock held by insiders and institutions, my suspicion is that someone tried to get out in a hurry today and whacked the shares. If so, the price should mean revert. A market on close order stacks the probability in favor of catching that move, while lowering the risk of catching a falling knife.

September 09 2022

Memo from Howard Marks (who interestingly bought into shipping close to the bottom of the cycle and is now cashing out) on why he doesn't produce or rely on macro forecasts. Illusion of knowledge.

First Solar (FSLR) closed at $137.53 yesterday, a new high. I added it to my watchlist when it was $72. Like HASI, this gapped higher on 7/28 while I was on vacation. I usually have alerts in place so I don't miss breakouts like this. This makes two missed trades due to poor planning. There's errors of commission and errors of omission. Not taking these two trades is in the latter camp, and I consider them on par with actual mistakes on executed trades. I'm going to spend time improving my screens and watchlists so I can cut down on these errors in future. Lesson learnt.

Mercer (MERC) isn't moving either way. Let's wait out the first hour of trading before exiting.

Sell MERC at $14.3 for a 23 cent one-day gain.

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