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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
Please click HERE to read a synopsis of my view of the financial situation.

Sunday, May 31, 2009

Gold Miners Update

Gold Miners have been on a tear in the last few weeks. A seemingly unstoppable bull market. I felt compelled to show the difference 9 days since my last post.

From my previous post, I expect the gold miners from my initial recommendation price have gain of 1,000% to 10,000% return in the next few years.
Click on my past entry to full explaination.

Forecast: Gold is about to make a huge run up to a new level or about to have a major pullback. That is helpful isn't it? Well, at times of "breakout" patterns that's the way it goes, high risk, high reward. If you are considering buying, get 100 shares of some if not all the miners below, and average more shares over time. Then you are always "right" when you buy more. (Buy more if cheaper, good job!, Buy more as you double down on your gains)

If you read my blog entry on 5/20, you probably said, I'll wait for a pullback. Heck, I didn't double down on 5/20, I just kept my same positions, so I understand the fear. The main point here is ALL PRICE purchases are winners in the 1-2 year time frame. That is not to say a couple of these miners may go bust, but that is why I spread out my investments. The one or two blow ups will be well compensated by the winners.

Look lower in this post for GDX & Gold chart commentary:

ALL of these stock plays assume you are LONG the stock. Click on stock symbol for link of recommendation.

Stock 10/22/08 5/29/09 Percent Gain 5/20/09 Gain
GDX 19.50 44.16 126.5% 107.5%
NAK 2.00 8.11

305% 285%
Stock 10/27/08 5/29/09 Percent Gain 5/20/09 Gain
AAUK 9.13 14.35

57.2% 36.6%
ABX 18.14 38.08 109.9% 99.7%
AUY 3.74 11.77 214.7% 167.4%
FCX 23.75 54.43

129.2% 110%
GG 15.06 39.73

163.8% 144%
GSS 0.73 2.28 212,3% 176.7%
HMY 6.16 12.10 96.4% 74.7%
IAG 2.47 11.27 356.3% 311.3%
NEM 21.54 48.87 126.9% 111.5%
PAAS 9.6 23.42 144.0% 118.6%
RGLD 23.15 46.57 101.2% 84.8%
Stock 12/16/08 5/29/09 Percent Gain 5/20/09 Gain
FNARX 19.16 24.87 29.8% 22.3%
IVN 2.43 5.48 125.5% 139.9%
NXG 0.93 2.41

159.1% 111.8%

Now, here is where the "risk" comes in. GDX, the gold miners, has just broken above historical resistance. This indicates, but does not guarantee, GDX to move up to 52 price target. The rub is, this past week just broke above this level. Also, as from my rantings that the market is about to tank, well, the miners won't be cut in half, but they will likely pullback with the market.
So at this level it is much riskier than buying GDX than it was 8 weeks ago from a chart perspective, or 4 months ago. On the plus side, all of this really is pennies on the dollar, since I expect GDX to easily hit 170 in the next few years. (10X from the low) But each person has to be comfortable with their entry point and to have the strength to hold on as the market fluctuates.

Gold is on a tear, driving miner stocks up as well as the market rally driving miner stocks up. Gold doesn't seem that over-extended from the bull trend line, but is about to hit a historic new high. Once that new high is broken, I would expect a very very hard pop up as a parabolic blow off happens before returning lower. Unfortunately, I doubt I'll ever see gold at 750 an ounce again for years, if not ever. That just makes trading so much tougher, since now we are entering "chase" mode rather than "buy while cheap".

So if you are watching on the sidelines, do yourself a favor, promise yourself to buy GDX if it ever comes back towards 38. Look at the graphs, see the trend, that will be a low risk entry point. Use your fear of purchasing today as strength to jump in when the world seems to be collapsing all around us. All purchases at all prices involve risk, but a pullback for GDX to that level would seem like an opportunity. Conversely, for that reason, we may never see it. Trading is tough, you got to be tougher.

From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

As always, I HIGHLY recommend spending the money and paying for Gary's "Smart Money Tracker" blog for true insight and expertise on precious metal miners and other resources. Don't listen to me about how great gold miners are as an investment, listen to Gary. After all opinion you pay for is worth than my free one.

Saturday, May 30, 2009

Video on US Dollar, Gold, Global Economy

Peter Schiff posted on his video blog a drive-by-summary of his view of the world economic shift occurring. Since this video post is timed well with my blog posts, and Karl's video, I felt it important to throw it on my blog ASAP for my readers over the weekend to watch.

Its short, to the point summary. Well worth the watch.

Video on US Treasuries

I decided to change the title of my Video posts from "Saturday Video post ##" to "Video on XXXX", basically a small summary of what the videos are about.

Today's video is quite disturbing, Karl of the Market Ticker walks through the various bleak options Ben "King" Bernanke has before him. I say "King" since the power he wields literally can devastate the USA for years if not a decade. This video was created this past Wednesday, May 27th, 2009.

Once the US is past all of this, whenever that is, I hope the power of the Fed is significantly reduced, if not eliminated entirely.

This video is a must watch, or if you prefer click to read Karl's comments.

When done, go to this web site to act, http://federationist.org

Also for the "fun" of it, I have posted parodies of the movie "downfall" a few times on this blog. This is a parody of all the parodies being made using this clip. Not financial related, but I found it humorous.

Friday, May 29, 2009

The BIG Picture of US Economy

This is going to be a rant, I feel the "need" to articulate my view of what is happening in one post. Break out a beer and some peanuts, this will be an entertaining read. It's my blog, and heck, I can decide to do such things. :)

First, lets established how the world got here in basic terms. The US created "cheap" money in the form of low interest rates after 9/11, and sustained these low rates. This was combined with "deregulation" of banks to eliminate safeguards put in from the last Great Depression. And finally "computer model debt" rather than mark to market debt, called CDO's, where created. This created a cocktail of drunken spending, mis-labeled debt (AAA when its junk), and financial companies to take on unprecedented risk. This eventually blew up once the computer models ran into a wall called "reality", and the bogus CDO ratings was uncovered. This problem would be over already IF the government immediately forced all companies to revalue debt back to "mark to market" and restored company balance sheets to international accounting standards to eliminate doubt of everyone's credit worthiness. Sure tons of companies would fail, but the bad debt would be purged, good companies buy the parts of bad companies that are good, and we could then proceed to rebuild.

Since it seems the US will avoid reality at all costs, and continue to hide truth of corporate solvency and debt valuation lets go over the course decided:

The US Economy has many severe issues that impede it's success in the near term. First and foremost is it's own historical strength: Consumer based economy. The US greatest selling point to the world is we buy lots of crap. And I mean LOTS! We drive the world by spending.

This accomplishment has lead the world to being blackmailed into sustaining the US spending problem by lending the USA , more and more money. The US is now debt spending in the TRILLIONS per year. Lets break that down, if USA spends 2 Trillion (direct tax spending and bailout spending), the US must issue $63,419 a SECOND in debt notes (US Treasuries). The idea being if we just spend lots 0 money, we can pretend it's 2007 again and resume where the US left off, like 2008 never happened.

What this does is unfortunately create a situation where the government MUST find someone to buy the debt, or interest rates rise to "find" buyers of debt.

This unfortunately creates a situation where the US Treasuries must "take" investment money from the world pool of cash out of private investment pools. Example: If the world has 10 Trillion dollars to invest in 2009, if the US sells 2 trillion of US debt, that 2 trillion can't be spent buying stocks or starting a new company.

Since the US government believes it is the savior of the world, through direct debt spending (social programs), and guaranteeing private companies (welfare for companies), it will press the world to support its spending. Unfortunately, when trying to sell 2 trillion dollars of debt, the world wants more than 1% interest over 30 years for that debt. After a while, the act of selling debt saturates the market demand for low interest debt notes.

To get people to buy, interest rates rise, as Mr. Ben Bernanke is witnessing. The government doesn't like paying higher interest, just like you don't, but the government gets to make it's own rules and tries manipulation of interest rates by having one arm of the government print debt (US Treasury), and a semi-private arm buy the debt (Federal Reserve) in an attempt to suppress rising interest rates for long term US debt.

The world population, which may have 1/2 of a percent who sees this as outright manipulation doesn't fall for it and accelerates interest rates rising demanding for the US to pay more for its $63,419 per second debt habit.

This then drives interest rates higher for US debt, causing the US government to need MORE money, since it needs additional money to cover the interest it pays for its spending, making the debt requirement not 2 trillion, but 2.2 trillion. Also, higher interest rates causes companies to fail in greater numbers since the extra cost puts the corporations under water. Further housing rates soar causing more people to walk away as ARMS reset. This causes more banks to fail, more unemployment, and the US Government to want to spend MORE money to "stimulate" the economy. This pulls MORE money out of private investment, more into government debt, and the cycle spirals out of control.

Where does this land? Here are the options as I see it.

1) Fire Ben Bernanke, give direction to the Fed to protect solvency of the US government and US Dollar. Stop the manipulation, as it won't work. Immediately cut US government spending, which lowers taxes and allows the government to not "compete" for investment dollars. This allows interest rates to fall. Force proper corporate valuations to regain trust and lending will resume normally.

2) Continue on current path, wait for interest rates to soar and collapse the US economy. Once an inflection point hits, the US government defaults on all debt, we have a global economic "Reset". Physical wealth rules over paper wealth.

3) Tank the stock market, interest rates fall, continue on same path until rates rise too far, repeat tank the market to keep rates down. Once DOW 2K is achieved, see option 2 or option 1. If option 1, the US lost a lot more money than it should have to prove Mr. Benanke's college thesis was wrong.

4) The world pays for unlimited US debt, for low interest rates. The US economy takes off, since debt/money is free. US spending spree which did not work in 2002-2007, works in 2009-2050 Once the US economy recovers in 2010, the US then voluntarily cuts back on spending because its the right thing to do in a recovery, pays down it's debt, and thanks everyone for the crisis support. Another 10+ year bull market begins and US living standards further increase as compared to China/India. China/India complies nicely by mandating it's citizens to not increase their living standards, to ensure the US citizens can maintain theirs, by not raising costs of natural resources by adding 2.3 billion more people who want "stuff". America has 300 million who need stuff cheap.

As you can tell from my sarcastic writing, I don't think #4 is in the cards, but it seems like Mr. Ben Bernanke and Obama thinks it is. Lets hope #2 does not happen, and there is option 5, which is almost equally great for the US as #4, but achievable.

In my opinion, we repeat option 3 until Dow 2k-4k, then jump to option 1. Option 2 I don't want to consider as possible. And I hope for option 4!

The State of the US Economy

I'm surprised that there is some public discussion that the US economy is not doing well. I tend to see this type of commentary only on the blogs. Some news:

Bill Gross, co-chief investment officer of bond mutual-fund giant Pimco, on Thursday offered investors a sobering market outlook in which he sees lower returns, decreased U.S. growth and the loss of the dollar's status as the world's reserve currency.

The United Nations predicted Wednesday that the global economy is in considerably worse shape than originally thought
My Spin - UN and Bill, if you where reading the blogs on my blog list, this would have occurred to you a year ago.

Mortgage delinquencies -- loans that were at least one payment past due -- also leaped in the quarter, to a seasonally adjusted 9.12%, also a record, the MBA said Thursday.
My Spin: One in ELEVEN homes are late one or more mortgage payments? Frankly, it didn't occur to me that it would get this bad, this quick. This should indicate the banks are not a "buy", don't listen to Dick Bove who says Big US Banks Are ‘Definitely Out of the Woods’.

Up To 75% Of Modified Mortgages To Re-Default -Fitch Ratings
My Spin: So, someone who can't afford to pay 2,500 monthly mortgage, can't afford a 2,100 dollar mortgage? Go figure!

David Einhorn, head of hedge-fund firm Greenlight Capital, called AAA credit ratings a curse and said he is betting against rating agency Moody's, during a speech at a closely watched investment conference on Wednesday.
My Spin - If you can't trust debt ratings, how can trust resume to ensure a growing investing economy?

The U.S. economy appears destined for several years of weak growth and high unemployment that leave it vulnerable to a recession relapse after the massive dose of government stimulus wears off. The U.S. government has stepped in as lender and spender of last resort, but its deep pockets are not bottomless.
My Spin: Deficit spending is a delay tactic, not a solution.

Thursday, May 28, 2009

Bonds is where the action is....again

I posted a quick comment yesterday that the US Treasury interest rates are rising, and Ben Bernanke will have to choose the US poison, high interest rates with crippling housing collapse from here, or yank the rug out from the market to create demand for US Treasuries.

Today, interest rates rose significantly, and the mainstream media is picking up on what I commented yesterday, Mortgage-Bond Yields Jump, Jeopardizing Fed’s Housing Effort.

Let's hope the market falls significantly bringing down interest rates, and the US Government cuts back tremendously on it's debt spending. Bonds don't get much main stream media attention, but it is where the action is. If you own TBT, it may be a good time to get protective on profits.

Sudden Debt has some good analysis on rates, 2 year vs 10 year (click).
See Mish for his own spin on Bond interest rates.

Gold miners may get a major smackdown in a deflationary collapse, so I would not add to any gold miner positions. Nor will I take any off. :)

From WebSurfinMurf's Financial Blog

Ben, praying won't save the USA, and your college thesis is wrong, you can't avoid the US taking losses for fraud and uncontrolled spending.

From WebSurfinMurf's Financial Blog

Wednesday, May 27, 2009

Bull fights back again

The range the US stock market is trading in is very volatile. Tuesday brought an incredibly strong rally to the markets. As I said in my previous post, I expected games, and I got it, worse than I expected.

If the market trades above 930 on the S&P 500, I'll start to panic, and above 950, I'll probably start covering my shorts at a loss at that time. I still believe this market is about to head down hard, but the market can trade irrationally longer than your bank account can afford.

The "good news" today is people are more optimistic about jobs, even though reality paints a much different picture. That was enough to give an excuse to rally up hard. The 200 DMA is still a magnet, and by Friday the recent S&P 500 of 925-930 will touch the 200 DMA.

I still would not add to any shorts or lottery tickets until we break below S & P 500 875. Above S & P 500 950, its time to consider throwing in the towel trying to time this market break downwards.

However all is not well in the market, the US Treasury yields continue to rise, and if unchecked, the rising interest rates will choke corporate earnings and cripple the housing market further. Interest rates are already fast approaching pre-market crash levels. As interest rates rise bankruptcies will increase, as well as government spending cuts.

So once again, Ben Bernanke's thesis that the great depression could have been avoided back in the 1930's by aggressive Fed action is being challenged by reality. Ben, there is no such thing as a free bailout, and you will have to choose: Tank the market to create fear to lower interest rates or have higher interest rates that cripples the housing market and kills any remaining corporate profits.

This bullet cannot be avoided, one way or the other, America must pay for its 9 year spending spree.

From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

Tuesday, May 26, 2009

Market declining since 2000

Once of my rants has been that since 2000, under Mr. Bush, the market was inflated by low interest rates and in essence "printing money". The market according to conventional wisdom rose between 2001 through 2007.

I ran across a very interesting graph which shows the S & P 500 adjusted to the valuation of gold. Gold is considered the "alternate" currency as compared to fiat currencies. If you subscribe to gold as a more "absolute" value of wealth, then the S & P 500 has been on a DECLINE since 2000.

This clearly illustrates that charting in terms of US Dollars is not an absolute valuation of wealth in the world sense. There is different perspectives of what something is worth.

See graph below, I lifted this from xTrends blog.
From WebSurfinMurf's Financial Blog


I would like to take the time to list out the blogs I read, and my spin on what they offer for information. You could spend 24 hours a day trying to keep up on all the streaming information on world politics, 10,000's of graphs, company news releases, etc. I frankly barely have the time to spend an hour a day (I shoot for 2-3).

Bloggers are an amazing resource that everyone should use to help digest what needs your attention. The goal is to find bloggers that do the daily footwork of digesting information provide a non-partial coverage of the highlights that need your attention. This provides you the tools tools to assess what trading actions are appropriate.

The bloggers listed here are also listed on the right hand side of this blog. I no longer provide the blogger roundup, do your own homework. Please post other blogger suggestions in the comments on this post.

Mish's Global Economic Trend Analysis Blog
A Must Read Daily
Mish is the best general financial realated news source on the web period. If you have one blog to read, this is it, not mine. However, Mish does little to no trading advice. He sticks to taking the spin out of the news, and constructing the reality behind it.

The Market Ticker
Recommended Read
Karl Denninger is a great American who cares passionately about the USA, and it's current crisis. Karl not only provides his insight to current events, he does it with great passion and colorful language at times. Karl supports efforts to mobilize the readers to influence politics and is associated with FedUpUSA.Org. Karl is the "next best" to Mish's blog to read, and definitely more entertaining than Mish. Karl speaks on blogtalk radio, as well as posts videos on youtube.

The Market Ticker forums
Karl hosts a news/posting forum for the public. You can read some of the forums without registration, some areas require you to have donated to support his efforts. For up to date news worth reading, click this link and browse the titles daily. Its one of the best news sources for what new information is being released. Try to take any spin the other readers post with a grain of salt, but many provide key insight to the news releases.

The Market Ticker Gold Member Area
If you donate to the Market Ticker, Karl provides a daily breakdown of the market action in the form of a 20-40 minute video. I watch this video daily religiously. Karl unfortunately is a true day-trader, so his immediate market spin does not help me. But his decade+ experience of trading helps me put in perspective market likely direction. Karl on occasion in the video makes a stock recommendation.

The Smart Money Tracker
A must for precious metal investing
Gary of the Smart Money Tracker provides expert insight into the direction of precious metals and sometimes other resources. Gary's blog provides minimal information compared to his pay service. If interested in purchasing Gold Miners or other resources, I highly recommend donating to Gary's blog (click for examples) and start gaining access to his pay only blog and email service. As a warning, Garys "day to day" advice to me is not accurate, but his month over month advice seems to me to be extremely accurate. And his long term vision matches mine exactly, so he must be good. :)

The Slope of Hope
Recommended for day to month trading
Tim Knight of the Slope of Hope provides day-trading advice. He on occasion does provide week-month plays, but usually in shorter timeframes. Tim provides volumes of chart analysis, with trading recommendations, that is great to review. Tim also has a twitter post to allow you to easily follow his activity. Tim plays both long and short, and is pretty much not attached to any sector to trade. Best part, Tim's free! :)

The Chart Store
Recommended for overall picture of market sector trends
Ron Reiss of the Chart Store has over 5,000 charts dating back as far as the 1800's. Ron offers the same data from different perspectives, including adjusted for inflation, which is key to value resource stocks. I find Ron's blog worth the purchase currently, to get an overall impression of the market direction, and sectors that are in play, as well as trading ideas. Because Ron's site has so many charts, I don't believe I would find it useful to pay for the site access without paying the Premium fee for his blog analysis.

McHugh's Technical Index
Worth a 1 month trial
I have mixed emotions on McHugh's magic stock chart analysis. This pay service provides pontification of market direction using it's own formula for market trend prediction. This is worth paying for if only to see what many people use as a trend indicator. McHugh is very popular in the blogger world, and I believe extends into the professional trading world.

The McClellan Oscillator is the difference between the 5% and 10% Indexes, which are a 19-EMA and 39-EMA of daily advances minus declines. It reflects the short-term strength and direction of market liquidity. A longer-term view is provided by the Summation Index, which is the cumulative total of the daily McClellan Oscillator values. These indicators move within a trading range and also help determine the overbought/oversold condition of the market.

Other blogs
Shadow Stats - Alternate economic statistics from the USA government, adjusted to be more "Truthful". Also has a pay service.
Mises Institute
- Great for general independent economic analysis.
Hussman Funds - I have only started reading this blog, great general financial market analysis
Financial Truth Blog - Good for videos from Jim Rogers, John Stossel, Marc Faber, Peter Schiff and Ron Paul
Sudden Debt - posts on market thoughts, and chart analysis.

*NOTE* I may update this entry without warning, to add additional resources I follow

Monday, May 25, 2009

Bull vs Bear

I have a feeling there will be some fireworks as this market turns down. On the S&P500 chart I have been watching, Friday passed the intersection of S&P 500's 200 DMA line, 2009 high, and recent bull trend line up. Now I am looking for SPX to close below 875 with conviction to mark the start of the bear market down. There are very huge financial forces at work to hold the line, but as previously blogged, I think the next leg will be down.

I have a hard time believing we can come out of this week without a hard decision of direction. The market marked by the blue line has been keeping in a range, at about SPX 875 to 925.

This is not fun to watch, but not watching doesn't make it the unlikely event.
From WebSurfinMurf's Financial Blog

As for GDX, (Gold Miners ETF) it is poised for an all out run up to new highs, lets take a look:

From WebSurfinMurf's Financial Blog
As previously blogged, I hold majority in smaller gold miners, only a small position in GDX. I wouldn't recommend chasing GDX here, but wait for a pullback to the bull trend line.
So this week will be interesting indeed. The short positions are holding up well, as are the lottery tickets.

Sunday, May 24, 2009

California faces fiscal day of reckoning, rest of USA next

California voters denied the state legislature on raising taxes to close budget gap for next year. (Full article click) Snippets from article below.

California is looking at a budget deficit projected at more than $24 billion when the new fiscal year starts in July. That is more than one-quarter of the state's general fund.

The governor's cutbacks could include ending the state's main welfare program for the poor, eliminating health coverage for about 1.5 million poor children, halting cash grants for about 77,000 college students, shortening the school year by seven days, laying off thousands of state workers and teachers, slashing money for state parks and releasing thousands of prisoners before their sentences are finished.

In the near term, the huge cuts that are about to hit will probably affect nearly every one of the state's 38 million residents. Schwarzenegger's latest budget proposal, for example, would eliminate health care coverage for more than 2 million people, about 1.5 million of them children, said Anthony Wright, executive director of Health Access California.

Of course, as you can read above, the politicians are assaulting the very bottom of the economic ladder, rather than taking away benefits from the over compensated. This better be just a political game to grandstand against the budget cuts. For meaningful and progressive change, the state must cut union benefits and cut salaries.

This is, after all a deflationary collapse, and business needs to get more money for the service performed.

If the government cuts the very bottom, you better have a gun and an alarm system, for the society will get mean very quick.

"I understand that these cuts are very painful and they affect real lives," Schwarzenegger said. "This is the harsh reality and the reality that we face. Sacramento is not Washington — we cannot print our own money. We can only spend what we have."

In a way California DOES print its own money, in the form of state bonds. However those interest rates don't enjoy the same downward pressure as federal notes, since people expect California may fail. (Reality: USA on a federal level does have issues)

I would like to see is a pie chart of the total California budget of how much is spent as a direct benefit to citizens vs state employee benefits. Unions in the public sector have been destroyed, culminating with the bankruptcy of GM and GM pensions under pressure. Next up California needs to eliminate 100K pensions and other excessive publicly funded benefits. And CA budget issues doesn't taking into account the eventual reality of the California pension fund shortfall. Don't look at the government pension insurance fund, its completely underwater, and this party is just getting started.

This is the situation I predicted, Federal government would spend it's money on banks and not have enough capacity to help out the states or pensions.

See Mish's comments and Karl of Market Ticker.

Saturday, May 23, 2009

Saturday Video Post 12

This video lays out the problems with the real estate CDO market.
It doesn't cover any of the problems with banks actually valuing their assets, government debt, etc. Just the basics on the CDO and touches lightly on CDS. A good watch, light and easy.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Good video from Ron Paul, political commentary and discussion on economic theories. I am in the camp of Austrian Economics over Keynesian. Quotes Ron Paul from 2003 describing the pending bubble.

Friday, May 22, 2009

Lottery Tickets 2 - Fourteen Days later

As previously mentioned, the second Lottery Tickets are MUCH higher risk. So these lottery tickets aren't for the feint of heart.
Lets take a look how we did 14 days later.

Stock 5/7/9 5/21/09 Percent Gain
FAZ 4.75 5.41 13.9%
SRS 20.1521.60
TZA 24.9528.41 13.9%

The lottery tickets have lost ground since last post (click). However, all things considered, not doing too bad. If you haven't bought lottery tickets, and where thinking of doing so, or if you haven't yet bought the full target volume, consider this.

The banking index broke down the 21st below the bull trend line. See below.
Trade at your own risk.

As for SRS, read what is happening to commercial real estate.

Also , on earlier lottery tickets I said Ford maybe a long term hold. I change my mind. Sell all ford!
Why? The us Government will in effect operate the zombie GM company, allowing it to offer financing and pricing that Ford can't match. So the US Government saving GM jobs will eventually cause Ford to shed jobs.
When will people learn! There is no such thing as a free bail out!

*NOTE* Today has two posts, please see earlier post on Bear Market traders.

Bear market traders

I have been voicing my concern recently of a market top, which should have significant downside after such a violent market move up. (40% in 8 weeks).

When this market turns, which may have been today, its going to get ugly, fast.

I wanted to take a moment to ensure I am clear about most bear market traders like myself. We do NOT want the stock market to crash. People's 401K's that have become 201K's become 101K's is a crime, that deserves mass prosecution of the perpetrators of this offense. When I describe reasons to short a stock, or buy gold miners, it isn't out of some sort of perverse need or desire to see the US economy to fall apart.

Most bear market traders are people who read, think, and form opinions on what the actions being taken today will produce in the future. I cannot in good faith for my family or my friends and family buy general stock funds on the hope that huge deficit spending by the US government will produce years of prosperity.

I cannot buy stocks in the banking system, when the US Government will not enforce the law, and will not fix accounting rules that allow banks to obscure the companies value.

I will not advise buying US Treasuries as a long term investment, when the same government has outright stated their goal is to create an inflationary environment. But only a little one, that is controlled, and will be defused when needed. The US government has not yet once announced a plan that has gone according to plan. Communism does not work, free markets do. And the US Government trying to control a free market 1/2 way does not work. If we want to go full communist, lets get it over with and set the prices for everything.

I cannot buy a company like DIN, which it's stock price went parabolic up, over 700% in 7 weeks. This from a company that depends on disposable income where over 6.6 Million people are on continuing unemployment, with another 500K+ new unemployed being added monthly.

To me, the greatest exercise of free speech is the ability for the individual to be able to spend their money on buying food, clothing, shelter, give(donate), and investment as they see fit. As an investor there is always two sides of an argument, the value of the investment will rise or will fall.

A FREE society allows an individual to "bet" on either side. A non-free society, like China, disallows shorting. The US was the same way at one point, but discovered market dislocations occur when everyone must bet on the same side. Most bear market traders are also bull market traders, but "switch sides" once the reality shows the direction of the market trend.

The blogs I read, such at TheMarketTicker, Mish's Global Economic Trend Analysis, TheSmartMoneyTracker, TheBullzAndTheBearz, often take a critical eye to current news, stock trends, and market direction. The information digested on these blogs provide me with a perspective I do not get from the "free media". We live in a fantastic world where the likes of these bloggers can share and digest information with everyone in the world, for next to free! 20 years ago, this current situation would not allow me to get more accurate information than what was crafted for me by the government or corporations.

Further, people like KArl of the MarketTicker are actively creating political movements to reverse the market downslide. See FedUpUsa.org

So as a Bear Market trader, and blogger, I spend my time to articulate to you the reader so I can hopefully help you to safeguard your family's financial security. To inspire you to be more alert to the realities of what is occurring, to help influence political change. And for some other readers, to possibly give ideas of investments in either short term or long term.

I anticipate a blog post "in days" that depicts a very large bear announcing decisively the bear market has arrived, and be prepared for a ride down into the abyss.

I do not take joy in the announcement, but I am prepared for it. Are you?

Thursday, May 21, 2009

Gold Miners

In reflecting on this blog, I realized that I talk quite a lot on current plays, but not on my primary play for the next 2-4 years.
I mention it time and time again, buy resource stocks, but I prefer Gold Miners, often linking to previous articles such as these (click).

What I haven't done is clearly articulate how committed I am to these gold miners, and the ROI I expect.

The gold miners from my initial recommendation price have a potential of 1,000%, some small ones maybe 10,000% return in the next few years. Yes, you read that right. How can I have such crazy thoughts?

The world is printing money, basically "photocopying" currency. They really aren't photocopying, there is a complex debt system keeping tabs on all the new money. But in the end this "resource" is being increased substantially world wide, in an effort to counter the massive DECREASE in credit. Credit in it's own way is another form of creating currency. This is especially true of the most common banking system, the fractional reserve banking system.

There are several things that will make resources in general explode. One, the "Ratio" of currency per unit of natural resource will go up, due to all the new cash. After all, cash is being created out of thin air, at an arbitrary human rate. Where natural resources have constraints on production.
Another is when the world gets out of this financial funk, there is 1.3 BILLION people in China, over 1 BILLION in India, and only 300 million on the USA. The USA has historically consumed significantly more of the world resources per citizen. Click for Oil. India loves gold.

This piggish ratio cannot last, now that China, India, Brazil, and lesser degree Russia (BRIC) have woken up. So how can the USA use less of the worlds resources, while other countries start consuming more as a %? Will the USA just decide to go on a resource diet to allow other countries to take a greater share of resources?

Hardly. The USA is not a good sharing nation when it comes to consumption. Therefore, there is one way this will occur, cost of resources. If the cost of resources RELATIVE to a USA citizen goes up, the US buys less resources, leaving more resources for other nations. Further, even if the USA tries to keep up consumption rates it has enjoyed, BRIC will bid up resource costs.

Why I like gold/silver/precious metals over other resources is a bonus value it has. The above two reasons articulate two primary reasons form a general standpoint why I like natural resources. Why specific precious metals has to do with one thing: Panic.

The world is in flux, and I believe what we are witnessing is the world killing off it's love affair with the US dollar, and moving to a new currency and new economic leader. The new currency is unknown still, China may be it. China has some severe problems, specifically the world being able to trust a communist nation with the worlds wealth. China I believe will be the new economic leader, driving the world economy as WE service their 1.3 billion people. I'm talking decades folks, not next week.

Aside from the currency standard changing, we also have potential for panic of world financial doom that sets people into a frantic migration to something that they can trust to store wealth. For most of human history precious metals such as gold has been looked at as "absolute" transportable wealth. (Land is absolute wealth, but not transportable, and land is taxed, gold isn't until sold)

Looking at my previous article on resources, I made a case on how resources are still cheap historically. Each day that passes resources are becoming more expensive. See Forbes article.

So, without further chatter, here are the gold miners, from their recommendation purchase date(s) to current valuations. I still hold these and plan to hold them all until gold hits 2000 to 4000 an ounce, or if/when gold prices go parabolic as it did in 1980, or as oil did in summer of 2008. At that time, I would like to sell gold and buy land or another resource.

ALL of these stock plays assume you are LONG the stock. Click on stock symbol for link of recommendation.

Stock 10/22/08 5/20/09 Percent Gain
GDX 19.50 40.47 107.5%
NAK 2.00 7.7 285%
Stock 10/27/08 5/20/09 Percent Gain
AAUK 9.13 12.47 36.6%
ABX 18.14 36.22 99.7%
AUY 3.74 10.00 167.4%

23.75 10.00 110%
GG 15.06 36.73 144%
GSS 0.73 2.02 176.7%
HMY 6.16 10.76 74.7%
IAG 2.47 10.16 311.3%
NEM 21.54 45.55 111.5%
PAAS 9.6 20.99 118.6%
RGLD 23.15 42.77 84.8%
Stock 12/16/08 5/20/09 Percent Gain
FNARX 19.16 23.43 22.3%
IVN 2.43 5.83 139.9%
NXG 0.93 1.97 111.8%

I HIGHLY recommend spending the money and paying for Gary's "Smart Money Tracker" blog for true insight and expertise on precious metal miners and other resources. Don't listen to me about how great gold miners are as an investment, listen to Gary. After all opinion you pay for is worth than my free one.

Also as always, I can't take the credit for most of these stock picks, John Chinnock is the true brains of this blogs operation.

NOTE: I have since dropped AAUK, mainly since I didn't want to be tied to a company with ties to England, since the pound probably will fall worse than the US dollar. Any future follow ups, I will keep AAUK on, but I am not an owner of the stock, nor do I recommend it.

Also FNARX I have no love for, it happens to be a natural resource ETF offered by Fidelity Investments, my broker. I bought it as a low risk diversification. Notice Low risk equals low returns.

The Bull keeps trying

I am starting to convince myself we will see the SPX hit the 200 DMA. But who knows, people could start buying seeing another rally that just doesn't materialize.

In any event, I am NOT adding to my shorts here. There will be plenty of time to do that when the market rolls over. What is driving this market up? One possibility is natural resource stocks, they are soaring, GDX hit over $40 a share today! Gold miners are on FIRE! See The Smart Money tracker for his comments on gold miners. Oil is doing great too, as well as food. (RJA ETF) At some point however, the rest of the stocks can't do well with rising costs (resources).

Even though the market is down, don't count this bull out yet! Not until time passes by the intersection of 2009 high, 200 DMA trend line, and bull trend line.

From WebSurfinMurf's Financial Blog

Wednesday, May 20, 2009

Bull vs Bear

I have fixated on watching the "exact top" of the US Stock market in the near future. With a potential 200+ SP500 move down, with possible SP500 move up of about 50, the risk to reward is to get short, not long.

With that said, we are still in the same situation. On Wednesday of last week, the market finally broke the bull run trend. However on Monday the bull market came back with a vengeance routing late to the market bears.

At the end of today, the bull trend line up is now "resistance", the market bounced off the bull trend line today. I am still concerned now through next Tuesday of the market rallying up to the 200 Daily Moving Average (DMA) line.

From WebSurfinMurf's Financial Blog

So if your in on shorts, or lottery tickets, I would advise caution on adding to these positions. Better to be late to the party than get yet another run against the position before the market breaks.

As a quick check, lets see how bad the short plays are now.

ALL of these stock plays assume you short the stock.

Stock 4/16/9 5/19/09 Percent Gain
AAPL 121.45
BAP 50.01 53.82 -7.6%
BBY 38.5337.25
EAT 18.7817.55 6.5%
DEE 82.72

DECK 62.33 49.79

WYNN 33.4740.05
new entries 4-24-095/19/09 ----

new entries 4-29-095/19/09 ----

CAKE 17.6516.09 8.8%
BWLD 40.60

All things considered, really not hurt that bad being short a market, after such a huge move up yesterday. DECK has really started to collapse, which is encouraging. In such a strong market, it has fallen. Very interesting. Wonder what will happen to DECK if the market falls.....

Also WYNN my big loser, is getting a little better. I won't even bother covering the lottery tickets, safe to say, they are a disaster currently. I'll post an update on them when we hit 200 DMA OR collapse. Until then they are very high risk positions as previously stated.

Tuesday, May 19, 2009

Quick Thoughts

I didn't have time to do a more in-depth post. Just a few thoughts.

Corporate profits have hit the greatest decline EVER.
Stock price to earnings ratio is highest ever or just a little high, depending on assumptions. (See last post)
Bank valuations are still unknown, and other financial companies, due to not using mark to market valuation.
Credit faults are on rise.
Unemployment numbers increase by 500,000 per month.
China/Brazil making noise to decouple from US Dollar.
Market moved up due to India market ROCKETED higher, due to politics, not economics.

Coupled with pontification Sunday night expect a rebound (whoa, that was some rebound!), this move isn't out of total expectations. SPX target high is "here", 930, or 950. In any event we will see SPX 700 before 1000 in my opinion. Therefore the risk is going long here.

Good luck in any event, and please see Monday's post about stop losses. If you put them on FAZ, you where hit out on Monday. Up to you when/if to get back in.
My plan is to hold, and the day I'm ready to puke that I can't believe the level my lottery tickets fell to, to buy 2x.

Monday, May 18, 2009

TheChartStore - Week two

UPDATE: 7:12pm - fixed second chart
Ron at the Chart store by now has to have a dart board with my name on it. I have pestered this guy for two weeks on reprinting some of his charts from his pay-for-view blog. Again, so far, Ron's charts aren't helping me pick stocks, but definitely is giving me perspective of the over-all market and sectors.

Rons blog this week has over 42 charts highlighted out of his 5,000 charts. Many of the 42 charts look tailor made for the weekly blog entry.

One of his charts shows the S&P500 Price/earnings ratio of stocks. Depending on assumptions, WORST case is depicted on the graph below. Best case puts Price/Earnings at 24.75x, which historically is not a "cheap" level for stocks. The take away , at the current US Stock market valuation, stocks are NOT cheap, and at worst case deserve to be easily 1/2 their current value.
From WebSurfinMurf's Financial Blog

Related to above chart is historical level of earnings report for S&P500. Extrapolating 2009 yields later in the year first time negative earnings for S&P500. Again, this isn't to say the extrapolation is right, but it does show that US Stocks are NOT cheap at this level.
Translation: Stocks SHOULD go lower.
From WebSurfinMurf's Financial Blog

So once again, I am touting The Chart Store service with the blog option. I get no commission, just sharing some of Ron's work.

Has the bear won?

From WebSurfinMurf's Financial Blog

I really wanted to create a post stating the Bear market is here, watch out! I am betting this is the case, and we are going lower from 5-8-09 highs.

Last week broke the bull week over week gain for the last 9 weeks. My only hesitation with all this bearish talk is the graph below. The 200 DMA, 2009 high, and the bull trend line up all converge this Friday or following Monday. I could see the market rallying to this point again THEN the market falls apart.
So although the Bear has broken the Bull run this past week, one week doesn't make a trend change. Unfortunately when trying to establish a bear position in a bear market rally, there never seems to be a good time. I already picked my timing, from about 5-8-09.

My friend John Chinnock makes a great point for the bear market, do you think the market will be "kind" enough to rally to allow the bulls caught buying at 5-8-9 highs to sell? The market does tend to "take" money from those who stayed too long in the game, and any bull in the market after a 40% upswing in 9 weeks deserves to get pinched.

But if the market makes one more shot up before collapsing, the lottery tickets should get hurt very badly. I'm hoping the established shorts will not make any significant gains, due to their charts already looking over-extended up.

Gold has been doing fantastic. This translates into pretty good move upward for gold miners, including GDX. My gold miner positions where established long ago, and I'm not selling a single one for years.

NONE of this bull/bear talk changes the next 4 week outlook for the markets, which is down from these levels. So if the bulls get one more push up, try to minimize any panic moves before the bear trend resumes. Establish stops now, when your head is clear to avoid an emotional reaction to a rally.

Sunday, May 17, 2009

Lottery Tickets 2 Eight Days Later

As previously mentioned, the second Lottery Tickets are MUCH higher risk.  So these lottery tickets aren't for the feint of heart.
Lets take a look how we did 8 days later.

Stock 5/7/9 5/15/09 Percent Gain
FAZ 4.75 5.90 24%
SRS 20.1524.46
TZA 24.9530.03 20.4%

As impressive as these returns are, all these stocks could easily go negative on return in two days. I'll be impressed if we can make it to next weekend with higher returns than 20-25% per stock next week.  It isn't a bad idea with these gains made, to put stop-losses in at the entry points I listed above, to ensure you don't lose your shirt if I am wrong. 

If your a high roller, sell 50% at 100% return, and let the rest ride. Tempted to gamble sell 50-75% of the stock at 50% up. Or plain crazy, keep it all until it seems like your shocked how low the market ran. I'm in the last group, mainly since we saw a 40% rally in 9 weeks should mean a decent pullback.

It isn't too far fetched to see  SRS hit at 75,  FAZ 12 to 20 (Depends on velocity of market movement), and TZA I'll get nervous over 50 bucks.   All could hit MUCH higher numbers if the market is headed to new lows, which is a very real possibility.  I reserve the right to get cold feet at any moment and dump all. :)

Still, the best bet was the short pays already mentioned here.
A special thanks to Happy John, who gave me the confidence to bet larger on these plays than I normally would for Lottery Ticket plays.  Happy John is a fiscally conservative person, and he placed some of the largest bets (considering the risk) than I have known him to do in the last 3 years.

Saturday, May 16, 2009

Saturday Video Post 11

This is a fun video about the exponential nature of the world we live in.
A must watch to get a sense of how the world is changing.

While watching think of the impact this will have on the valuation of natural resources in the next 20+ years. Natural resource DEMAND can go exponential, but the supply cannot. CLICK HERE to watch without annoying pop up ads.

If there is a WW 3, it will be over natural resources , the one thing everyone can't seem to share equally, least the USA. :(

Friday, May 15, 2009

We can’t keep on just borrowing from China

The title of this blog entry is the quote of the day.

I am starting to wonder if Obama is basically a very smart person, a quick learner, but his problem is he has huge deficits of knowledge of some basic world mechanics, such as economics.

Assuming Obama is a quick learner, I am getting a little bit more optimistic here. What makes me think Obama is a quick learner. A quote from Obama today. (full article click here)

President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”

The president pledged to work with Congress to shore up entitlement programs such as Social Security and Medicare and said he was confident that the House and Senate would pass health-care overhaul bills by August.

I am speechless. To me this was an obvious, easy spin on the reality of economics, that debt has consequences. And in general its not good to "require" additional debt daily to be successful. And if you never pay your debt, but increase it, the cost of borrowing more goes up.

I have blogged this many times before. It is widely discussed that with huge debt, if interest rates rise, the nation's debt will consume any infrastructure and services spending. And we have arrived today at the President of the USA, just talking now that debt is not a highway to prosperity.

In the last 8 months HUGE debt by the US government was taken on, and even more HUGE debt in the form of back-stopping obligations by private companies. This has shown a pattern that will lead to the Doom and Gloom post.

But here we have Obama seems to "get it" when it comes to debt. What is now needed is ACTION!!! Enforce laws. Enforce budget caps. Improve business environment, by allowing capitalism to take its course. In general, clean up our act.

Hopefully Obama "Gets all of it" and ACTS ON IT, does what needs to be done sooner rather than in four years. I don't want my doom scenarios to become reality, it's up to us to ensure it doesn't, and that starts with our leader.

Thursday, May 14, 2009

Doom and Gloom

The news media and government have been spinning tails of what the future holds. All of them are rosy to "very mild problems". There is no indication at all of the possible problems we will face based upon possible mis-steps being taken today.

A good article on Seeking Alpha lists WORST CASE Scenario, well worth the read. (click) Of course true worst case is Mad-Max, but that to me is off the table, but fun to reference. :) I am not in the camp that the rosy scenario will occur, nor the worst case (yet), but somewhere in the middle, leaning slightly to worse case.

The one thing I do agree is lawlessness and corruption will seep its way into Americana, one of the great assets of America will be gone, trust. We have an example of actions being taken NOW will destroy that trust.

The government is setting precedence that the LAW does not matter when it comes to finance. The damage this will do in world confidence in the US is beyond calculation in terms of investment dollars lost. With the bankruptcy of GM, the government is changing the rules of who gets paid. Read more from Karl by clicking here:

A private watch group, Judicial Watch filed a Freedom of Information Act (FOIA) requested information about a federal bankers meeting on October 16, 2008. After months of stonewalling, a FOIA lawsuit was filed against the Obama Treasury Department on January 27, 2009. Incredibly, on February 4, Treasury responded it had no documents about the historic meeting. It was released today that the Treasury Department coerced major banks to allow the government to take $250 billion equity stakes.

And the government is taking a draconian approach by looking into regulating/dictating corporate compensation. The TRUE answer is to change the structure of the pay-out, it should be linked to not only past performance, but future company health. I have blogged about this before. But the government dictating what is appropriate pay? This is insanity.

As for the economic Rosy outlook? S&P states U.S. banking crisis may last until 2013
FINALLY! Some honesty, this is refreshing that the timeline is father out than "next quarter" for a turn around.

There is plenty to be doom and gloom about. There will be a bottom, the US will rebuild, and in a generation come back swinging. For now, what matters is where to invest, and its not in stock hoping to see DOW 14K in a couple of years.

REMEMBER, Options expiration is Saturday, expect some real game playing to go on. This bull won't die without a fierce fight. I expect government games to make a rocket ride up for the market. Probably something like announcing putting CDS on a regulated exchange, etc.

Wednesday, May 13, 2009

The Bull Market vs Bear Market

From WebSurfinMurf's Financial Blog

The bull is fighting the bear market, trying to keep its gains. I am in the camp that the bear will win fight in the next 7 business days. Lets take a look at what was happening with S&P 500.
Notice we are close to hitting the 200 DMA, as first mentioned as a target on this blog back on 3/4/09, and several times after that.

Remember, there is NO GUARANTEE we will hit the 200 DMA. It is quite possible the "Bear market" wins against the Bull Market rally before then and the market takes a nose dive. That is why I have been yelling from the rooftops if you where caught long from August 2008, to consider taking some investments off the table to lock in the gains of the last 9 weeks.

Lets look at the chart, and the trend line, notice we will have our answer in the next 7 business days.
From WebSurfinMurf's Financial Blog

My problem is I gotta be in it to win it, and I got in ahead of this decision point getting short in a big way. But so far, the shorts are doing great in this bull market. Also gold miners are rallying quite well up. This may be a poker tell of what is to come. The over-extended stocks are starting to trend down, while fear is putting money into gold miners for safe keeping.

Lets look at the short plays from April 30th, 9 business days later. (Put mouse cursor over symbols for current prices/charts)

ALL of these stock plays assume you short the stock.

Stock 4/16/9 5/12/09 Percent Gain
AAPL 121.45
BAP 50.01 54.98 -9.9%
BBY 38.5337.06
EAT 18.7816.36 12.9%
DEE 82.72
DECK 62.33 54.94
WYNN 33.4745.18
new entries 4-24-095/12/09 ----
34.89 12.0%
new entries 4-29-095/12/09 ----
26.37 12.4%
CAKE 17.6515.05 14.7%
BWLD 40.60

With the exception of WYNN, the plays overall are doing pretty well, considering it has been a bull market for the last few weeks. As previously mentioned almost all trading ideas came from Happy John. At the TheBullzAndBearz.com, for 5 bucks a month, Kirk lays out the charts for most of these plays, and other plays. He also had a stop for Wynn, which if I had listened, would have cut my losses at about 10%. I can't recommend highly enough for 5 bucks a month to pay for Kirks service, even if just for the chart analysis.

I'll cover depending on each chart and/or when I think the market has over-all been extended too far down.

AAPL is looking like a GREAT short. I may buy more puts on it tomorrow. If WYNN pops up to 50, a great shorting opportunity.

NOTE! I fully expect one or two disaster days, where all of these shorts make a run up. After that however, I would expect a quick pull back down, perhaps even over-night. So I would prefer to be in it since the dates listed over trying to catch an exact top.

A quick look at GDX chart below. I was HUGE long GDX starting at 17, but lost my way at some point. I have only some GDX, but I still have tons of baby gold miners. In any event, I think I would need an announcement that gold can be made from lead to shake me from my current positions. As you can see, GDX @ 42 will be a critical line to cross.

It is possible that the gold miners form their own independent "bull market", and act differently from the rest of the market. Therefore even though my positions are doing absolutely fantastic. there is no way I take one share off the table. GDX target could pass 200 in the next few years, and I wouldn't rule out 1,000 if things go really really bad in the world.
From WebSurfinMurf's Financial Blog

So there you have it a complete round up. I'll post an update on the Lottery Tickets Season two in the next few days. Good Luck. If you are thinking of joining some of these positions, and want "minimal risk", if the SPX does hit the 200 DMA, its a great entry point.