Thanksgiving – It’s such an Easy Message
Thanksgiving is my favorite Holiday of the year - partially because it’s my birthday, but mostly because all of us have so much to be thankful for – and to set aside one day to say “Thanks” seems like the least we can do. I had the pleasure yesterday of helping my 15 year old thru a physical therapy work-out, talking to my son at NorthWestern’s football game in Wrigley Field, and helping my wife re-do our dining room – and then it hit me – in over 90% of the world – none of that would be possible. So allow me to wish all of you the best – and hope you get to share some good food, drink and bonding with those who you really love – because that’s the #1 investment in all of our lives.
This week, as Gold was being systematically taken down, so we sold our position in GLD and GDXJ for over a 20% gains. As much as I think Gold and silver are going to go higher in the long run, when you're facing those kinds of profits, on a short term trade, sometimes it's best to just take those dollars home and redeploy them later. In some others the runs have been spectacular – SLW for over 100% and NG up over 139% for us – and for those we also have stops (points where we will sell) and we’ll share those at the end of this letter. Why don’t we just hold these stocks? Well currently there are 4 major lawsuits and a class action suit that have been launched concerning silver manipulation. The Gold manipulation is almost as ugly – yet to this day banks are still piling on illegal naked shorts. This week we found out:
- Mortgage applications fell 14% - along with building permits and new home starts
- 30 year fixed rate mortgages jumped to a 4-month high of 4.34% - higher yields on 10-year treasury bonds are creating ripples in the mortgage markets – the exact opposite of what the Fed expected from QE2
- The rise in cotton prices has been 'terrifying' and could force U.S. retailers like Gap (GPS), J.C. Penney (JCP) and Wal-Mart (WMT) to pay their Chinese suppliers as much as 30% more for clothes. The price hikes will be passed along to consumers.
- The Empire State manufacturing report came in at Minus 11 (saying that manufacturing is shrinking)
Today I was reading a Drudge report on two young kids who had their ‘cupcake’ stand closed down due to an elder (in the town) calling the police because of their failure to have a permit. Does anyone out there really believe that in America we ENCOURAGE entrepreneurship? Every time I hear Obama speak on job growth coming from small business I have to laugh – because who’s going to tell all of those Washington Agencies to ‘call off the dogs?’ Want to get people back to work – eliminate about 90% of the EPA's rules, eliminate the 7 years of "environmental impact" studies they require, eliminate the political correctness and replace it with common sense. Gee – I’m really looking forward to flying to visit relatives this Thanksgiving – but not nearly as much as I’m looking forward to having TSA agents ‘feel my junk’ and oogle people with x-ray specs.
The Market:
I would guess that the single biggest question on people's minds right now is - Are we going to rally into the year-end or not? I think the answer is yes. I think we'll consolidate here a bit (as they have defended the 11K level) and then see one last charge higher into year-end. However and I think we need to remember the “January Effect” – that is to say – if the market does well in January, it does well for the year. Well – I do not think we're going to get a ‘favorable’ January effect. Here’s my thinking: If you sell your stocks now, you'll be paying taxes on them in April, 2011. If you can wait until January, 2011 to sell – you’ll be paying those taxes in April, 2012. I have a feeling a lot of people are going to need cash in January, and so it’s possible we run up higher into year-end, and then sell off fairly substantially in January.
Since Ben Bernanke put himself on record as saying: "higher stock prices will contribute to the wealth effect", there can be no question that the Fed manipulation we talk of so often is not only true, but happening daily. With that in mind there are two consequences: One is that by having the member banks push the market higher, we are seeing valuations start to attain nosebleed levels. The second consequence of QE2 is that materials and "commodities" are going higher and higher - resulting in price inflation. While Bernanke floods the system with more printed money - it has to go somewhere. One place it's going is banking reserves - because frankly a lot of them are still insolvent if they had to actually account for their holdings via any semblance of GAAP. The other place the money is going is into the stock and commodity market. With Government POMO operations continuing right on through December, with people's hesitancy to sell and pay taxes now, with the Fed leaning into the market, and with the momentum leaning higher - I have to think we can lean long into year end. But after that it's got a great chance to be a nasty place, and we'll certainly be looking to go short.
Tips:
Let’s review our holdings – with an eye toward our doubles (over 100% gainers) in the past four months of NG and SLW!
We sold GDXJ and GLD last week
We still have: GG (stop at 43.8) – NG (stop at 12.65) – AAU – FCX
We still have: SLW (stop at 31) – SSRI (stop at 22.9) – SLV - silver miners and indexes
And still have: AUY – DNN – and VXX
We still like the metals and are buying on the dips – and looking at buying some SIVR, SIL, and SGOL.
Here are some we’re watching:
In solids: JOYG over 76.55, ANR over 50, MEE over 50, CLF over 71, BTU over 60
In tech: ATHR over 34, IBM over 145.6, AAPL over 310, CRUS over 14, STC over 15 (may see 16.50 quickly)
In retail: AMZN over 165.7, TJX over 46.5
The rest: GS over 170, and PAAS over 38 would all be interesting to me.
If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.
If you’d like to see me in action – teaching people about investing – please feel free to view the TED talk that I gave a 4 months or so ago now:
Remember the Blog:
Until next week – be safe.
R.F. Culbertson
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