Wednesday, September 8, 2010

Trade of the Week: How to Profit if the Wheels Come Off...

I have been warning you for the past few weeks that mid-September looks to get ugly unless you plan on being short the market -- which is my plan.

Below is my time-cycle forecast for the S&P 500 for the next few weeks:

This coming week looks to be a shorting opportunity. I will be selling into an expected rally that will last only until either the end of this week or early next week. Then, as you can see, if the time-cycle forecast proves to be correct, the market could begin a stair-step move from about 1120 to near 1020 -- a decent opportunity to make money if the trend holds.

I prefer to buy inverse exchange-traded funds (ETFs) in falling markets, rather than shorting individual stocks. The reason is entirely due to risk. A positive exogenous event can occur at any time with any individual company that could push it from a declining trend to a spike higher. It is the risk of these potential upward spikes that put more risk on an individual short trade than I normally like. (more)

Thunder Road Report On The Imminent Surge In Silver, And Much More

From the just released Thunder Road Report:

I can’t remember a time in my 23 years in the market when there was so much confusion and uncertainty about the outlook. As the monetary catastrophe unfolds gradually, some days things look a little brighter, then the sheer enormity of the problem becomes only too apparent once again. Sentiment keeps flipping between optimism and pessimism, but the debt bubble just gets bigger! Noel Gallagher wrote “These are crazy days, but they make me shine”, and that sounds like a good enough motto for trying to invest right now (fingers crossed). The silver price has started to trade differently and it appears that BIG MONEY is moving in to the metal (at long last) and fighting the Cartel. There is evidence that the supply of physical silver is getting tight and it could be the beginning of a major upward move in the price.

This and much more in the full report:


World Indexes Since 2000

Jay Taylor: Turning Hard Times Into Good Times

click here for audio


Comparing Historical Bond Yields to the S&P Composite Dividend and Earnings Yields; and Is Silver Breaking Out?

The following chart compares Moody’s Aaa bond yields with the dividend yield of the S&P Composite. Notice that stock yields remained above bond yields from 1929 until the mid 1950’s.

moody's Aaa corporate bond yields and SUP Composite

Click picture for sharper image

The following chart compares Moody’s Baa bond yields with the dividend yield of the S&P Composite. Notice that here, too, stock yields remained above bond yields from 1928 until the mid 1950’s. Stocks were considered to be more risky than bonds in those days.

moody's baa corp bond yiels and s&p dividend yield

Click picture for sharper image

The next two charts compare Long-term U.S. Treasury and 10 year U.S. Treasury bond yields with the dividend yield of the S&P Composite. In both cases, stock yields remained above bond yields from 1928 until the late 1950’s. (more)

Matterhorn Asset Management Sets Three Gold Price Targets: $6,000 – $7,000 – $10,000

From Egon von Greyerz of Matterhorn Asset Management


Fundamental and technical factors for gold are now in total harmony and gold is entering a virtuous circle that will drive the price up at its fastest pace since this bull market started in 1999.

  • It is a fact that gold in US dollars (and many other currencies) has gone up 400% in eleven years or 16% per annum annualised.
  • It is a fact that the US dollar has declined 80% in value against gold since 1999.
  • It is a fact that the dollar and most other currencies have gone down 98-99% against gold since 1913 when the Federal Reserve Bank of New York was created.
  • It is also a fact that the Dow Jones (and many world stock markets) has declined over 80% against gold since 1999.
  • It is a fact that gold has made a new all time monthly closing high in dollars in August 2010.

Gold Rises to Close at Record as Stocks Fall Amid Debt Concerns

Gold futures rose, closing at a record $1,259.30 an ounce, as a slump in equities spurred demand for the precious metal as an alternative investment.

The price reached an intraday high of $1,261.60 as stocks in Asia, Europe and the U.S. fell on heightened concern that the global economy will struggle. The record was $1,266.50 on June 21. The euro dropped as much as 1.4 percent against the dollar as an industry group said Germany’s 10 largest banks may need fresh capital to meet new regulations.

“Gold is back in vogue with the stock-market weakness,” said Adam Klopfenstein, a senior market strategist at Lind- Waldock in Chicago. “People want protection from a downdraft in stocks. You’re seeing a lot of the flight-to-quality bid come into gold.”

Gold futures for December delivery closed up $8.20, or 0.7 percent, at 1:39 p.m. on the Comex in New York. The previous record settlement was $1,258.30 on June 18.

The price has gained 15 percent in 2010. The metal had climbed for nine straight years. (more)

Dodging the Rising Cost of Food


09/07/10 Tampa, Florida – I was surprised when Mike Burk of Alpha Investment Management wrote that “Some of the NYSE breadth indicators look pretty good, but that is from strength in fixed income which makes up about half of the issues traded on the NYSE. Fixed income looks like a bubble.”

Well, being an admittedly stupid guy who just wants effortless and instantaneous satisfaction of every desire, I am, as such, not really into the “nuts and bolts” of things.

Not surprisingly, then, I never heard that fixed-income makes up half of issues traded on the stock exchange, but it seems somehow important, in a menacing, sinister kind of way, like when I first noticed that my wife was no longer the same woman I had married, but was instead now some old crazy woman who thinks I can “change” after all these years of not changing.

So I wrote to Mr. Burk, and I was going to ask him, you know, as a kind of ice-breaking opener, if his wife thought, for some bizarre reason, that he could be “changed,” but instead I stuck to business and asked him if he was sure about this “half of the issues traded are fixed income” thing.

I was thinking that, you know, it seems so somehow strangely significant that I was hoping he could define “shares of fixed income.” (more)

BNN: Top Picks

Norman Levine, managing director, Portfolio Management Corp., shares his top picks.

click here for video

Analysts: Time to Let the Housing Market Crash

By: Julie Crawshaw /,

A growing numbers of economists and housing analysts are saying the government should stop trying to stimulate the housing market back to life and just let it crash, arguing that lower prices will bring buyers to an exhausted market that government intervention has failed to revive.

“Housing needs to go back to reasonable levels,” Anthony B. Sanders, a professor of real estate finance at George Mason University, told The New York Times. “If we keep trying to stimulate the market, that’s the definition of insanity.”

Further market descents will inarguably impair the spending ability of tens of millions of homeowners who have already seen the value of their houses drop an average of 30 percent, making them even less likely to engage in the consumer spending the economy needs to recover.

Moreover, homeowners who see comparable homes selling for half of what they themselves owe may well decide to simply default on their mortgage loans, increasing pressure on the Obama administration to take additional action. (more)

Financial stocks drag broader market south

(MarketWatch) -- U.S. financial stocks on Tuesday were the worst-performing sector in the S&P 500 Index, closing down 2.4% as worries over European banks and sovereign debt moved back into the foreground.

The Financial Select Sector SPDR Fund (CONSOLIDATED:XLF) shed 2.3% with Hartford Financial Services Group Inc. (NYSE:HIG) and Lincoln National Corp. (NYSE:LNC) leading the decline.

The Treasury Department on Tuesday said it plans to sell its warrants in Hartford and Lincoln that it received under the bank bailout.

Stocks were in the red after the holiday weekend, and Europe's sovereign debt risks were back in the headlines. The Wall Street Journal reported the so-called stress tests for banks understated holdings of government debt. (more)