Seeking Alpha

Marc Courtenay's  Instablog

Marc Courtenay
Send Message
Marc is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor at the internationally acclaimed web site www.ChecktheMarkets.com. He holds an MS in Clinical Psychology from California Polytechnic State University, and is a former senior vice-president... More
My company:
Advanced Investor Technologies LLC
My blog:
ChecktheMarkets.com
  • At This Point Be Very, Very Careful 0 comments
    May 12, 2009 12:12 AM | about stocks: VZ, T, NVS, VAR, APL

    Or as Elmer Fudd would say, "Be vewy, vewy, caeful" while Bugs Bunny watches with amazement. Although the stock market can sometimes be cartoonish, it is no laughing matter when we miss a great rally or get sucked into the end of one just before it takes a dive.


    I personally don't like the risk/reward ratio at this point. I don't like the fact that the S&P 500 is trading at an average price of 16 during a time when earnings are falling like a jet with no wings. Whether the market has further to rally from here or not, we can all look back to March 9th and say with conviction "It has already come a long, long way."

    Author Lawrence Williams, writing Monday from New York, posted the following comments on Mineweb.com that should give us all pause for thought. There's no wishful thinking in what he wrote and there's plenty of uncommon sense.

    "In a week that has seen global stock markets continuing to perform positively, gold has done remarkably well given that many experts are predicting the start of a new bull market. There has been little, if any, disinvestment from gold over the period, which suggests there are many out there continuing to hedge their bets.

    "And indeed they may well be wise to do so. Major bear markets of the past have seen big upswings during their progress, sucking investors back in, only for the upturns to end dramatically as some further major financial collapse spooks the markets again and prices tumble.

    "The global economy remains unstable enough for there still to be some nasty events out there which could do this. The duration of these upswings in past major bear markets has tended to be for periods of between five and seven weeks, which suggests we could be near another major downturn if history repeats itself - as it frequently does.

    "The global debt position is still an enormous cause for concern and many of the noises coming from politicians talking of "green shoots" and "safety nets" seem to be little more than hot air designed purely to try and build general confidence. In itself this is perhaps a justifiable position, but the whole deck of cards can equally come crashing down when a single significant event occurs belying the political rhetoric.

    "So gold, which thrives on economic uncertainty, should continue to play a major part in wealth preservation. It thus makes sense for at least a significant portion of one's wealth to be invested in gold and gold stocks - and maybe also in silver which tends to follow gold, but in a more volatile pattern.

    "Remember silver came back a huge amount more than gold as both fell back from their peaks, and it could thus increase in value faster than gold. (But also bear in mind that silver investment tends to be riskier than gold because there is a much greater industrial element in silver demand and usage than for gold and industrial growth is currently flat to negative in most parts of the world.)

    "At the moment the US dollar is holding up reasonably well in relation to other currencies, and inflation is proving to be minimal, but the whole system of pumping money into the economy at unprecedented rates developed to shore up world economies has to be inflationary sooner or later - and may even become hyperinflationary in some countries.

    "Should the dollar start to fall back and inflation pick up, this would be a double whammy in terms of boosting the gold price and this could soar while the purchasing value of other investments, of salaries - and of pensions in particular - could dive dramatically. This may be almost a doomsday scenario, but one does need to protect oneself against such an eventuality.

    "There has also been some talk of revaluing gold as a neat way of boosting global monetary reserves and stabilising the global economy, but this may be politically a nightmare and probably won't come about. But again, if more and more people turn to gold amidst continuing economic shock and uncertainty the markets alone could make this revaluation fact and save the politicians from having to try and push through what could be a perhaps unacceptable move.

    "Overall, therefore, gold looks to have more of an upside potential than a downside. Maybe one should sell one's stock market investments in May and go away as the old adage advises, but it may be foolish to sell your gold!"

    Monday, May 11th, the stock market took a tumble. The 10-year treasury bond moved up much higher and the yield fell. Maybe those who need to refinance their mortgage will be able to get that 4.5%, 30 year fixed rate after all.

    All I know is that I hear trouble, I see trouble and I smell a "wascally wabbit". So when it comes to the stocks you and I are keeping in our portfolio (I'm still holding VZ, T, NVS, VAR and APL for instance) the best advice anyone can give us right now is "be very, very careful".

    Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please remember investments can fall as well as rise. And they will! - Advanced Investor Technologies LLC accepts no responsibility for any loss or damage resulting directly or indirectly from the use of this content.

    Disclosure: I'm long VZ, T, NVS,VAR,APL

Back To Marc Courtenay's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.