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Since childhood I have followed the markets as my father had done, turning a school teachers salary into over one million dollars when he retired by investing in the top mutual funds. I think mutual funds day has come and gone, with ETF's now the best way for an investor to trade. I am a... More
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  • Time to go to cash and protect what you have
    I realize this is being posted here a day too late, but it was sent out to my friends and family just prior to todays market disaster and I promise to do better in this space from now on.  

    Friends,

    I know I haven't written in a while but I've been really busy.  I'm still busy but needed to take the time out to warn you that the market may take a dump very shortly that will bring us back to 2009 levels or worse.  Why? Because of the following fundamental facts:

    • Our debt
    • Our governments inability to deal with our debt
    • Unacceptable unemployment levels 
    • Stalling GDP (below 2% now and we need 3%)
    • Housing market still dropping and abysmal forecasts
    • Foreclosures and 25% of all homes under water
    • 41% of Americans on some sort of government assistance
    • Brazil and China slowing
    • Emerging markets slowing
    • Germany, the powerhouse of Europe stalling
    • European banks ready to crash and burn
    • European governments close to default on debt they can't pay back
    • Fractured European approach to solving serious fundamental Eurozone problems
    • More items than I can possibly enumerate in this email

    These are the 'fundamentals' in stock parlance that will keep this market from recovering. 

    Now for the technicals.  We are ready to enter a bear market.  A bear market is defined as a 20% drop from the market top.  Do the math yourself.  Look at the Dow, S&P500, NASDAQ, Russell 2000 index, the German DAX, Brazil Bovespa, Hang Sang China index, I could go on and on.  Worse news yet, I heard a piece on Bloomberg Radio today with Louise Yamada (look her up and you'll understand why I'm so concerned) that the German DAX, The Chinese Hang Sang and the S&P500 all experienced what is known in the technicals of the market as a 'death cross' in the last 2 weeks, which is where the 50 day moving average, moves below the 200 day moving average.  This is a very bad thing to happen.  Yes, there have been a few times where the market has recovered after this occurring, but the fundamentals were much better than we have now, many times over.  If you don't believe me, look it up on Google.  You won't like what you see.  Basically it is a warning sign that the market will dump in the next few days to weeks, and it won't be pretty.  For us, it may mean returning to the 2009 lows or worse.  For Japan, it may mean catastrophic results as they are already at the bottom of their support level. 

    What to do?  The following things can be done NOW even in your IRA or 401K:
    • Move to cash or money market funds
    • Move to Gold (GLD)
    • Short the indexes (SH, SDS)
    • Short the financials (SEF, SKF)

    Protect what you have.  Be careful.  Stay alert.  Read the financial section of the newspapers.  Listen to Bloomberg in the morning on 1130AM or on the internet if you're not in the NY area.  Read bloomberg.com or finance.yahoo.com each day.  Don't let what you've worked so hard to accumulate get lost.  If I'm wrong, you haven't lost anything really.  If I'm right, you will thank me.

    My best,
    Bob
    Tags: SDS, SQQQ, SKF, SEF, GLD
    Aug 18 7:31 PM | Link | Comment!
  • Is Healthcare the issue or is it more fundamental?
    A very dear friend of mine sent me a piece from the NY Times the other day and asked me for my comment.  It made my blood boil.  Once I calmed down and thought about it, I realized how few people really understand what is going on and how columnists such as Paul Krugman can get away with outrageous statements.  I publish for you my friends email with the original text and referenced column, but with his name redacted.  Draw your own conclusions...


      > Date: Fri, 18 Feb 2011 11:01:14 -0500
    > From: xxxx@ptd.net
    > To: zzzz@hotmail.com
    > Subject: Willie Sutton Wept - NYTimes.com
    >
    > www.nytimes.com/2011/02/18/opinion/18kru...
    >
    > An interesting point of view. What say you?
    >

    My take?  Forget the individual statements for a moment.  Krugman chooses silly arguments while he ignores facts.  I really don't have much respect for him as a columnist so let's just talk about the subject itself rather than a self-serving, one sided, I'll prove my point with ridiculous stories because people don't know better Op-Ed piece.  Calling last years health care bill financial reform is like calling a Wall St banker a caring individual who only wants to help people get the financing they deserve.  By the CBO's own numbers, the cost of this bill is astronomical at it's most conservative end, and a monetary disaster at worst. 

    Rather than quibble on who's facts are more relevant, lets talk about some general things I think we can all agree on.  First of all, we are BROKE.  The credit card is maxed out and we find ourselves unable to pay for the bill because we just plain owe too much money.  In terms of real money, we are in worse shape than Greece.  The only difference is they can't print their own money or devalue their currency.  Fortunately or maybe unfortunately, we can.  The fact that we are the worlds reserve currency gives us an advantage that no other country on earth can claim.  I ask you to watch this presentation below because it's the best education I've seen on the subject yet.  What he is selling at the end is neither here nor there but he is a serious investor who has his own take on things, and unfortunately, I think he may very well be right.  BTW, I can confirm all the things he says in his presentation as fact.  I have read them on Bloomberg, CNBC, and other mainstream websites as well as my own subscriptions.  Unfortunately, what he says is correct.  The presentation is:

    www.stansberryresearch.com/pro/1011PSIEN...;

    Please take 20 minutes and watch it!!!! 

    The sad fact is that neither party has a way out.  The reality is we can't afford our way of living any more and it's about to get worse.  Much worse.  Wisconsin is just the beginning.  There is no question we have to cut the budget.  The question is:  Who's ox gets gored?  Even if you cut Medicare, Medicaid, Social Security and the military all  by 25%, it's still not enough!  No politician wants to make the hard choices on either side.  No one wants to offend the voters with only a couple exceptions.  The Governor of Wisconsin Scott Walker and Gov Christy from NJ are the first 2 who don't care about re-election and are trying to save their state from defaulting.  BTW, once one of our states defaults, we will lose our credit rating just like Europe and our rate to borrow will go through the roof, putting us further in the hole.  These guys (and a few others) started with the teachers, not because they hate teachers, but because of the crazy benefits they get that no one else has, not even close.  Wouldn't it be great if we all got 100% free health care with NO co-pay and couldn't ever be fired?  Wow, what a job!  There is no other job class in the world with these benefits, so they are unfortunately just the first to be targeted.  State and Municipal workers are next.  Medicaid probably comes after that.  Higher taxes, less services, and on and on after that.  This is just the first volley.  The reality is we can't afford this any more.  It will be a hard reality that people are going to have to face in the next 2 years. 

    If you want to discuss the cost of the Obamacare, the sad part is that the number 1 thing we could do to reduce the cost of medial care across the board is to do tort reform.  Since the entire Congress is beholden to the lobbyists, and one of the most powerful lobby's is the lawyers, it was not surprising that even though almost every group weighed in on the health care bill, the one that was conspicuously silent was the legal lobby.  It should be of no surprise that in over 2000 pages of legislation for the health care bill, not one page, not one mention is there regarding this issue.  In addition, why in God's name is this bill over 2000 pages?!?!?!   Why did they make Congress vote on it before they had a chance to read and understand it?  We are still finding things out about this bill months later because it is so complicated.  The entire US Constitution, which is the guiding principle of law and governance in this country is only 4 pages long. 

    Rather than continue this debate on health care, as it is only 1 of many problems we face, it is clear that our legislators are incapable of leading us out of this mess.  That means both parties.  If we are serious about reform, then we must impose term limits or we face certain doom.  I find it interesting that the Tea Party candidates and the 2 Governors we discussed above are all about the one overriding issue of our day, and were elected to do something about this problem.  Unfortunately, these people face a perilous problem as well.  If we cut everything, more people will lose their jobs.  With our economy so fragile as it is, could that be societal suicide as well?  We are in my opinion in a no-win, can't win, lose-lose situation.  -IF- we had spent TARP 2, and QE2 on creating jobs, then we might be in better shape as more jobs = more tax revenue and we'd stand a chance whittling down the budget shortfall and national debt.  Unfortunately, we did not.  We chose instead to give it to the banks in the hope they would stimulate the economy.  Care to guess how that turned out?  This recovery has 2 visual versions to it; a V shaped recovery in the stock market, but a L shaped recovery in terms of employment.  The V shaped recovery does not help the common man, corporations have NOT rehired and unfortunately will not rehire, no matter what happens.  I could spend 2 pages explaining why but my fingers are getting tired.  Most likely, this recovery is only temporary and once you watch the presentation I listed above, you will understand why better. 

    Xxxxx, we are in trouble.  BIG trouble.  I don't know how we will get out of this mess.  Even I can't see a way out with things as they are today.   All I and you can do is protect the assets we have today.  I know you've read my blogs and I've spoken about this for a few months now.  If you haven't read my articles, for yours and Yyyyy's sake, please do so now.  In my estimation, we may only have a year or so more before the dominoes fall.  Once they fall, it will be too late to do anything.  This is not something new.  It has happened many times in history, and is about to again.  It has happened as recently as the mid '90's in Europe and Argentina and is happening right now in Zimbabwe. 

    I could talk for hours on all this so I encourage you to; read this, watch the presentation and call me some night.  This has nothing to do with being liberal or conservative, democrat or republican, libertarian or crazy right or left winger.  It affects every American and mostly no one knows how much trouble we are really in and what WILL happen soon.  Oh.  By the way, in contrast to what Krugman said in the article, (That’s why I say that Mr. Obama gets too little credit. He has done more to rein in long-run deficits than any previous president.)  This administration has spent more money than EVERY single administration since George Washington COMBINED!!!!  That is a fact.  Please ignore Drugman from now on.  He is the worst kind of political hack there is.  Disgraceful 

    I hope this answers your question. 

    Bob


    I'd love to hear your comments on this.  Just reply to my blog or send me an email.  Thanks.
    Feb 19 8:04 PM | Link | Comment!
  • Gold and Silver
    I was almost ready to write another market situation blog, but the market is so volatile that I decided to send out specific pieces on individual items because things are just so crazy out there right now.  2011 will be a VERY volatile year.  

    I have attached an article which makes the case for both lower and higher Gold and Silver prices.  Typical financial piece.  

    finance.yahoo.com/news/Gold-Prices-Flat-...;_ylt=An_B6CyX.ccN6so3NPAuabW7YWsA;_ylu=X3oDMTE1aGYxYmJoBHBvcwM5BHNlYwN0b3BTdG9yaWVzBHNsawNzaWx2ZXJiZWNvbWU-?x=0&sec=topStories&pos=5&asset=&ccode=


    Here's my take:
    Gold and Silver have been in a pullback, but not as much as it should or needs to go to make it's technical correction (nothing moves in a straight line).  Forget what Wall St says about Gold, they are always wrong because it behaves outside the norm.  You will see some of that in the Goldman Saks quote in the article above.  This last mini-crisis in Egypt saw prices go up then down in a matter of days and even minutes based on the news.  

    Here's the deal.  Gold and / or Silver could change in either direction depending on the following...
    • Mid-East stability or lack thereof
    • Europe debt crisis or not for the moment
    • An Oil crisis
    • A US equity market upward swing because people are moving out of bonds and precious metals (the herd going where the money is with talk of QE3 which will push up the stock market further)
    • US States or Municipalities defaulting on bonds or going bankrupt (don't laugh, we're close but that is for another article)
    • Inflation and interest rates

    The facts:
    I can't predict world events.  I can only predict price ranges depending on the circumstances.
     
    Silver - has moved down from the low $30's to 27 and now back close to $30 again.  If it makes it's needed pullback, it could go between $22-25.  However, once it goes over $31, the pullback will be over.  My prediction is Silver will outperform Gold percentage wise, but is more volatile.  It is heavily used as an industrial metal and will reflect upward or downward global recovery metrics.
     
    Gold - has pulled back from over $1400 to $1362 +/- $15.  It is trading in a range which makes total sense (for those who understand technicals, that's based on Fibonacchi retracement charts).  If it drops lower it will go to $1320 or even $1260.  It it goes above $1375 or so, the pullback is over and all bets are off.  
     
    The question is: At what point do we jump back in?  There is no question that they are both going up and won't stop once it gets going towards the end of the year.  My feeling is you need to determine your own price point.  I watch both every single day all day long.  There have been days in the past few weeks where I was ready to buy and ready to sell.  We're at an indeterminate point and that is always a difficult place to be.  We all want to buy low and sell high.  
     
    Some food for thought: Silver may pull back, let's say $5 more.  That would be a good guess for now.  Considering that it may go to $50 and higher, does it matter if you buy at $23 or $29 or $31?  You need to be the judge on that one.  Same thing with Gold.  It probably will hit $1500 and my guess is it will end up somewhere between there and $2000 by November.  Keep in mind that all this and their final top will depend on what's going on around the world.  
     
    Recommendations:
    Gold: GLD
    Gold Miners: GG, EGO, ABX, RIO
    Gold Miner Index: GDX
    Jr. Miner Index: GDXJ
    Silver: SLV
    Silver Miners: SLW
    Junior Miners: GPL
    Silver Miner Index: SIL
     
    Risk level from Low -> High:  Pure Bullion -> Miner Index -> Miner -> Jr. Miner
    More risk means more volatile and higher rewards as well as pullbacks.  Be careful if you invest.  You must watch your stuff.  I can't always get out an email to everyone warning of a major change.

    Bob
     
    Tags: GLD, GDX, GDXJ, GG, EGO, SLV, SIL, SLW, Gold, Silver
    Feb 14 9:18 PM | Link | Comment!
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