Interesting comments, Blondie (re the last blog). I agree with you that dividends are very good and it’s great to get that cash in the bank. Next week I will talk about your comments.

Today I want to look at buying and selling strategies for Ford (F) and Advantage Oil and Gas (AAV), both of which I own in a tax deferred account. I bought F for $2.09 (October 2008) and sold the amount that equaled the cost of buying the stock and an annual return of 10% for 3 years (I am playing with ‘free’ money). F did a good job of reducing their debt and labor cost, but in the US they are competing against US Motors (GM) with no debt and lower labor cost and foreign automobile companies that have much lower labor cost. Which of the following would be the best strategy for the large number of the remaining F shares?

- Sell 50% with a stop loss order of 3% (price is around $10 today); wait until the price gets around $15 and then put in a second 3% stop loss order

-Sell 100% with a stop loss order of 3%

-Wait for the stock to go higher before putting in a stop loss order

Please comment on what you think is the best strategy.

The second stock I would like to talk about is AAV. AAV was a Canada trust (Advantage Energy Income Fund) that paid a high dividend (around 15%). With Canada changing its corporate trust law in 2011 AAV decided to become a corporation that dropped its dividend and reinvented itself as a growth-oriented natural gas and oil producer. Once it became a corporation, AAV became a trading stock for me. I have made several trades selling a subset of shares owned at around $7.50 and buying it around $5.50. I take 50% of the profit from the trade and increase my holding of AAV. The stock is closely correlated to natural gas and oil prices. When oil is around $70 the stock price for AAV will be around $5.50 and when oil is at $80 it will be around $7.50. I had a buy order for $5.50 at the beginning of December and just missed the buy (got to 5.52). Two events increased the stock price that day, record low inventory of natural gas and the Iranian army took over an Iraqi oil field (and left a couple days later). What do you think the high price for natural gas and oil will be next year? Should I continue to use AAV as a trading stock? Please add your comments on both questions.

2010 Oil and Natural Gas high price prediction:

Oil - 88.50
NG - 7.75

Paul

With the government running a huge deficit, what investments will have good returns over the next four years?

Currently we are increasing the US deficit by $3.82 billion per day since September 28, 2007 (this does not include the state and local deficits or the federal government unfunded future liabilities of $47 trillion). This will lead to declining value of the $, inflation, and possibly the $ losing its place in the forefront of world currencies.

I would like to find a hedge against inflation and the declining value of the $ like I had with oil when oil prices went from $30 to $140 by using Canadian gas and oil trust companies (ie AAV, PWE, PWI). You got a greater than a 10% dividend along with share price growth (thanks FullStacks and Mr. C for telling me about the Canada Trust). These have become very good trading stocks over the last couple of years provided you know how to use the stop loss order. FullStacks made a lot of money selling AAV when oil hit $80 and buying when it got near $70.

I have started to look at commodity ETF index stocks as an inflation hedge, for example PowerShares DB Base Metals (DBB), DB Agriculture Fund (DBA) and other commodity funds. Is the better investment non US currencies like the BRIC countries? Please comment on what you think is the best approach.