Your Single Best Investment
People forever ask – What’s your single Best Investment? Was it in stocks, bonds, gold, silver, or real estate? My answer has been the same for over 20 years – None of the above! It’s been in Education! The single best investment you can make is in educating yourself and/or the people around you. You are witnessing a global economic implosion that will eclipse the 2008 debacle, and things are just beginning to fray at the seams. People are becoming outspoken. Consider the “Occupy Wall Street” crowd. Right now they are a fairly peaceful group, but just this weekend 139 of them were arrested in Chicago. Consider what’s going on in Greece. On Friday we watched fires being set, petro bombs being tossed, and cars being overturned. Things are becoming desperate, and there's still no real way out. Heck, crime in certain areas of New York City is up 250%. Therefore, instead of arguing whether things are going to disintegrate into some re-enactment of “Mad Max”, let's think about what I consider to be the most important thing you can be doing right this minute. Educate yourself on your ‘options’, because that is going to be a very valuable skill as this economic train wreck continues. Most importantly – Don’t be an ‘easy mark.’
- U.S. Underemployment has reached 17+ percent = 26 Million people
- Misery Index (inflation + underemployment) = 5+ and 17+ = OVER 22%
- Bank of America Corp. was hit by a credit downgrade and is moving all of its derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, so that if those derivatives fail (which they will) – the FDIC and we (the U.S. people) will be responsible for keeping them solvent!
- Pete M reminded us of a line from the Carter – Reagan debate: “We have inflation because the American people are living too well," says Jimmy Carter. “We have high inflation and high unemployment because the government is living too well," responded Ronald Reagan.
Wealth creation is a long and arduous process. Understand that it’s a discipline as much as it is a vision. In many cases it’s like ‘watching paint dry’ – but if you understand and listen to what is going on around you – you can then avoid the areas that are the most volatile. The world is upside down, and the economic unrest is making things worse.
I said last Sunday that this past week would be one of the most important weeks of the entire year, and thus far that's proven to be true. The market was battling within a trading range of between 1125 and 1225 on the S&P. As we would approach the highs of the range, we would regularly bounce off of them and plunged down to the 1125 support level. For 3 days in a row, the market attacked that 1225 high and got repelled. Then on Friday it pushed up and broke over and out of that range, closing at 1238. There was much joy on the set of CNBC, and everyone was giddy with excitement. Is the market now set to run to the next S&P level of resistance at 1260? Is it finally time to pile in and ride the big wave?
I'd love to tell you YES, but I can’t. Why - because you need to consider the reason the market moved up in the first place. The market isn't moving on earnings or fundamentals. The market is moving on the hope that Europe has a plan to ‘carpet bomb’ it's members with Trillions of Euro's in order to bail out the banks and sovereign funds that are bankrupt. Unfortunately there us no such plan. We are going to hear about that plan on Wednesday of this coming week. Now, do I think that upcoming plan will encompasses several Trillion dollars, and solve all the immediate problems? Sorry, I don’t believe that we will. They've been “kicking the can” down the road now for months – making plans to make plans; therefore I am just not convinced that they are going to pull this off.
Do you know why Timothy Geithner has been travelling around Europe, begging and pleading for them to "get er done?" Because Timothy knows that some "very bad" things have been happening. In the past couple of months, U.S. money market funds have pulled approximately $400 Billion out of Europe. And with that much money leaving the European Banks and Investment Houses, it creates more debt problems for the Euro Zone. But because JPM, Citibank, Goldman Sachs, and many others have CDS’s (credit default swaps) written against these banks and sovereigns; when they go – we go because our financial houses do not have that kind of guaranteed money either! Timothy also knows that he can not get more bail out money out of Congress; therefore he’s seeing his friendly banks going ‘kaput’ – and hence his heavy travel schedule!
Will the International Monetary Fund (the IMF) come to Europe’s rescue? Will the German people allow their economy to be wrecked, so they can bail out the Greeks that still want to retire at age 50 with 100% pay? Is France strong enough to truly prop-up Spain? Are there really enough printing presses in the world to paper over the nightmare that Europe has become?
We rallied up and over a very important breakout level, and momentum could push this higher Monday and Tuesday. But will Wednesday’s Plan truly be enough? Currently I have my doubts.
We are "leaning long" into this rally, but I'm not ashamed to say that it's got me a bit scared. There is absolutely NO volume on these up days. On Friday when the S&P market got "up and over" that 1230 level we only traded 3 Billion, 765 Million shares. When the market was crashing on October 3rd – we traded over 5 Billion shares. When it was crashing back on August 8th – we traded 7 Billion, 491 million shares. I’m not inspired when there is huge volume on the big ‘roll-over’ days – and mediocre volume when we push over resistance level that was attacked 4 times.
I don't think we get a grand plan out of Europe, and I don't think they can pull it off if we get it. But, how our market deals with that has yet to be seen. With the lack of break out volume, I won't even be surprised if we sink back on Monday. However, pure momentum should keep us up, but I also tend to think that ammunition is running scarce about now. Mutual Funds are still losing money via redemptions. The bottom line is that if Europe doesn't come up with something substantial, I can easily make the case that we're going to plunge and plunge hard by the end of the week. It's something we have to all be aware of and be prepared for.
In the short-term holdings account I’m carrying:
- SPY at 108.54 – now at 124.20,
- NTES at 42.43 – now at 45.60,
- GLD at 157.49 – now at 159.90,
- SLV at 28.00 – now at 30.46.
I did take some profits last week – but there’s still some more there to be taken. I’ll hold them for a bit longer just to see. If on the other hand things roll over, I'll cash out and play some short side using HDGE.
Please be safe out there!
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