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Brian Bain
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Brian is the founder and lead writer for INVESTOR IN THE FAMILY LLC and All-Star contributor at Scutify. At INVESTOR IN THE FAMILY LLC (http://investorinthefamily.com/), Brian maintains an active portfolio for subscribers in addition to publishing research for readers on Seeking Alpha. His focus... More
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Investor in the Family
  • Market And Meaning – The Week Ahead (8/11/14) 0 comments
    Aug 9, 2014 10:56 AM | about stocks: Q, GLUU, MU, TMUS, S, TWX, FOXA, GLD, SPY, SLV, DIA, QQQ, IWM

    Market and Meaning is our weekly update on market movements and their meaning for you as an investor. Market and Meaning is normally reserved for premium subscribers but is currently being offered for free to all our readers. As always, everything here represents our personal views and not official recommendations, please do your own due diligence and come to your own conclusions. To follow us more closely at Investor in the Family, be sure to subscribe by entering your info in the field to the right of our website and follow us on Twitter, Facebook, Scutify, and even Pinterest.

    As for major market news, there wasn't much this week. The markets ended up on the week, but not enough to erase the previous week's plunge. Companies continued to release second quarter earnings reports and for the most part, things look good on that front. There were several large mergers that fell apart this week between companies like 21st Century Fox (FOXA) and Time Warner (TWX) as well as Sprint (S) and T-Mobile (TMUS). These broken merger deals are getting quite a bit of press this morning as people look to recap the week, but I don't see these as the major stories.

    As for updates on the markets, the good news is that the major plunge of the previous week did not erode into larger capitulation this week. This means that the initial pullback did not lead to increased panic selling this week, that's a good thing. I posted an article earlier in the week (How to Avoid the Bear Trap) on the importance of watching the market's response to pullbacks. I summed it up with this:

    "The major takeaway from the article, in my view, is that the bear trap we want to avoid is when rallies fail to overcome the preceding correction. In a healthy bull market, corrections will be followed by rallies leading to higher highs."

    So far, we have not reached new highs yet, but it's only been a week. I still maintain that the market has much higher to go before the next big bubble-busting crash. I had an interesting exchange on Scutify on the idea of a bigger bubble to come with Danny Van den Berghe, you can see it all here. Danny's (aka Lunatic Trader) view is that once the Fed starts raising interest rates, bonds will no longer be a good investment and eventually everyone from institutions to main street investors will essentially be forced into stocks. This will lead to a year or two of insane growth in stock values ultimately ending in heartache for everyone still around at the end. Don't get greedy! Stick with us here at Investor in the Family as we look to navigate all this as best we can, right in front of you.

    The BIG news right now is still global conflict and politics. The most horrifying is that of ISIS in Syria and Iraq. For those of you unfamiliar, ISIS is on a campaign to kill all non-Muslims through everything from be-headings to even crucifixion. This is not the first time the world has seen mass deaths and even genocide. An argument could be made that there is actually even greater death happening in other places, but few could rival the outright evil that has embodied the acts of ISIS.

    My prayers go out for all those suffering in Iraq and Syria as well as those struggling with Ebola in west Africa, those on the brink of starvation in South Sudan, and the ongoing conflict in Gaza and Ukraine. The are lots of rough things going on in the world. The way I see it, things will likely get worse before they get better. A struggling global economy such as ours, when it lasts long enough, eventually breads extremism. Whether it be ISIS in Iraq or hateful anti-Semitism and neo-Nazi groups in Europe, we are beginning to see this play out right in front of us.

    The West continues to hand-slap Russia with sanctions. The big problem is that Russia is not impotent economically. The sanctions are having an impact on the Russian economy, but what is going to happen in a few months when it gets cold and Europe desperately needs natural gas from Russia?

    As for my personal portfolio, not much action this week as I wait for the dust to settle in this pullback. I continue to maintain that Glu Mobile (GLUU) has great potential, especially at current levels with a price target of $10. I feel the same regarding companies like GT Advanced Technologies (GTAT) and Micron (MU). All of these have pulled back of late and now sit at nice entry points.

    What does all of this mean for the investor? The world is looking like a pretty scary place right now. As far as investing goes, there has been nothing that has seemed big enough for investors to truly panic over. That could be seen as a good or bad thing. Could be good in that with the Fed still helping the markets through low interest rates, no shock is big enough. On the flip side, could be bad in that investors are over-confident in the strength of the market. In the short-term, it's hard to say. For this reason, I am maintaining the yellow alert and viewing this as a time to remain conservative.

    Current Market Outlook: YELLOW ALERT

    The Current Market Outlook is like my traffic light for investing. Green means all systems go, yellow means to be cautious, and red means we believe there are major reasons to be concerned.

    The Dow (DIA) gained 0.4% or 61 points for the week, closing at 16,553.93.

    The S&P 500 (SPY) gained 0.3% or 6 points for the week, closing at 1931.59.

    The Nasdaq (QQQ) gained 0.4% or 18 points for the week, closing at 4370.90.

    The Russell 2000 (IWM) gained 16 points for the week, closing at 4370.90.

    Gold (GLD) closed at $1309.10/oz and Silver (SLV) at $19.92/oz. for the week.

    My opinion on gold and silver holds firm. As I have said for some time now, I are still looking for one more big drop. Gold below $1200 is a good range for me, but I am hopeful for even lower toward the $1000 range. I thought these lows could come before the end of June, but that appears to not be the case. I am now looking at this larger drop, potentially below $900 or more, sometime in the next six months. At the same time, I am preparing for the possibility this drop may never fully materialize. Note: I did buy a small amount of silver this week due to a great sale at Apmex.

    That said, if I did not own any physical gold or silver, I would consider the current prices to be a very good entry point for long-term investment. One of my favorite gold sources recently said that he expects the metals to at least double from current levels in coming years calling this a "generational buying opportunity." It is important to reiterate that I am talking about owning physical gold and silver coins and bars, not stocks or ETFs. My favorite coins are U.S minted Silver and Gold Eagles, they are universally recognized and offer tax protection. For information on how to buy gold and silver, please see "How To Buy Gold And Silver."

    Bitcoin is sitting at around $586.32, virtually unchanged for the week. There seems to be some notable stabilization taking place. I don't see any near-term catalysts for Bitcoin one way or the other. I am currently holding my small Bitcoin position and have plans to buy or sell any more at the moment.

    I continue to urge caution as we still think Bitcoin is a lottery ticket that could grow 10-100x or more and could even more easily go to $0. Caution and small amounts of money are strongly advised. For information on how to buy Bitcoin as well as my views on investing in it, please see my article, "How To Buy Bitcoin."

    Disclosure: I am long GLUU and own gold and silver bars and coins as well as some Bitcoin.

    Disclaimer: This article is for information purposes only. There are risks involved with investing including loss of principal. All readers must be responsible for and make their own investing decisions. Each reader bears the full responsibility for any decision to buy, sell, or hold any securities, precious metals, real estate, or other asset class as well as any decision regarding the starting or running of a business. Nothing in this newsletter is to be considered a formal recommendation. Investor in the Family LLC makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made. There is no guarantee that the goals of the strategies discussed by Investor in the Family LLC will be met. Please see full Disclaimer.

    Disclosure: The author is long GLUU, GTAT, MU.

    Additional disclosure: I own gold and silver coins and bars as well as some Bitcoin.

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