Should WE be a Buyer of this Market?
Do you remember the market topping on February 18th, and then entering a period of incredible chop with mood swings of over 150 points? This type of action is NOT normal and signals a change in the wind. At virtually any other time the easiest call in ‘investing’ would have been to say: “okay, go short and hold on". Unfortunately we have The Ben Bernanke who likes the "wealth effect" that rising stock prices have on people's attitudes – so at any moment, he may very well do another "injection" of stimulus, and "drive" the markets higher. It’s with this fear that most of my trades in the past 3 weeks have been strictly day-trades. I personally don’t enjoy ‘day trading’ all that much – and therefore I don’t publish my day trades on twitter, but I potentially will start if this market chop continues.
Many people suggest that this down turn was a result of the earthquake, and tsunami in Japan. I think that we were overbought, over extended, had gone months without so much as a hiccup, and had already dropped from 12,380 to 12,000 before the Japan issues started. So, it’s my belief that our market is moving in concert with ‘monetary policy’ more than anything else. In the last two days, we've bounced from 11,589 to 11,860 and let’s examine the news to potentially find a reason for the bounce.
- Even though The Ben Bernanke says inflation does NOT exist - a special index created by the Labor Department to measure the actual cost of living for Americans hit a record high in February! Ouch – now how can the cost of living increase to a record high if there is no inflation? So we know that the market didn’t go up due to a drop in the cost of living – how about the U.S. debt situation?
- A new assessment of President Obama's budget released Friday says the White House underestimates future budget deficits by more than $2 Trillion over the upcoming decade. I remember when our entire debt situation wasn’t $2 Trillion! So we know that the market didn’t go up on our debt situation – maybe good news coming from Japan?
- At 2:52 PM on Friday, breaking down in tears, the managing director of TEPCO concedes the radiation being emitted from the damaged reactors is enough to kill people. The NISA, which earlier raised its severity rating on the disaster, acknowledges the water-spraying operation is "fighting a fire we cannot see.” So we know the Japanese news didn’t send the market higher – so maybe the Middle East has calmed down?
- At 12:24 PM on Friday Syrian security forces kill at least one and wound dozens as they fire on demonstrators. And, "There is no longer any possibility of mutual understanding with this regime and he has no choice but to surrender authority to the people," says the head of Yemen's opposition after a massacre in which 42 were shot dead and hundreds wounded by security forces. So it doesn't look like there is an outbreak of peace across the Middle East – so maybe there was good news on the jobs front?
- Friday the Labor Department said that the unemployment rate rose in 351 metro areas, fell in only 16, and was unchanged in 5. That's worse than December, when the rate fell in 207 areas and increased in 122. So with unemployment rising – Japan melting – the Middle East at war – inflation increasing and the debt increasing – why did the market go on a two day romp higher?
The market bounced because Wall Street and more importantly The Ben Bernanke said it was time to bounce. So are we going to continue up? My guess is we have some more upside to come, but we won't be breaking out to new highs. I think they're going to try to claw back to the 50-day moving average that resides just above the DOW 12K line. In this new era, with Central bankers all around the world flooding the markets with dollars, yen, Euro's, etc. – all fundamentals have vanished. Now it's all about capital flows, which direction they're heading, and we need to understand that there's a very good possibility that the big banks are playing big games behind the scenes via their dark pool platforms. I personally believe that QE-3 thru QE-8 are right around the corner – they just may not be official! The end will either come by Central Banks tightening – which I view as unlikely – or hyper-inflation followed by a massive deflationary roll over. So our guess is that we bump up for a while longer, and then the air comes out again. As we come into the late spring, we should be looking at a much lower market as they anticipate the official end of QE-2.
Once again I am hearing people calling a top in gold and silver. Please, the entire world is inflating "fake" dollars to try to plug all the holes. The real issue is that our Governments are bankrupt. We are facing sovereign debt issues that cannot be solved. The interest expense on the debt already borrowed is consuming the ability for productive spending. We have to borrow even more today, in order to re-pay the debts we created yesterday. Thus, global defaults will indeed be coming to a nation near you, and in the not so distant future.
It's not easy suggesting that the Lehman debacle and the economic meltdown were just ‘warm-ups’ for the big show that's coming. But, our economic and financial pains are not over, there is much more to come. Now, you can trust The Ben Bernake and continue to want his dollars; however, I (on the other hand) don’t want his dollars but will gladly exchange them for other currency of gold and silver – especially silver.
I continue to use the stock market to amass dollars, and then use those dollars to buy gold and silver. Maybe my lucky streak is going to run out and I'll look the fool, but every single fiat currency in the history of all time has always ‘gone away’ while gold and silver, simply march on.
Be careful out there. The day-to-day ups and downs will indeed be influenced by major headlines, but, the real danger lurks in the back ground, as each day brings us more and more bogus bucks. One day the banks will make more billions yanking the rug, so do NOT get caught in the rug.
Our long holds looking like: SLV, NG, AAU, DNN, AVL, and USSIF. Even with the one day gold and silver raid last week – we held through it.
In our short-term holds we have:
N, SLW, FRG, QSURD, NGD, PAL, AUGT, EXK, SVM, and AGRO.
As an example of our day trades over the past week (which we will attempt to put out on twitter starting next week) - we currently own:
- CAT at 102.30 – closing Friday at 105.06,
- HK at 22.13 – closing at 22.49,
- ANR at 54.04 – closing at 55.28,
- GLNG at 20.52 – now at 22.96,
- BTU at 67.34 – now at 70.21, and
- FCX at 50.45 – now at 51.78.
We mentioned some shale drillers last week - Approach Resources (AREX), GeoResources (GEOI), and Gulfport Energy (GPOR) – however, did not purchase as of yet – but continue to have our eye on these!
If you’d like to view my actual stock trades – and see more of my thoughts – please 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 4 months or so ago now:
Remember the Blog:
Until next week – be safe.