Friday, March 1, 2013

Crisis Investing 101: Get Ultimate Diversification With Art, Wine and Collectibles

As I've been saying in the past articles of this series, diversification can take different forms. Depending on the size of your portfolio and personal interest, diversification can lead into unusual and exciting profit opportunities.
You can diversify with anything that will potentially appreciate in value. There is no need to stick to the traditional exchange-traded products. In fact, use out-of-the-box thinking with truly uncorrelated investments, and you will build the ultimate crisis portfolio.

And a popular, uncorrelated way to add that extra layer of diversified safety onto your crisis portfolio is collecting art. Purchasing art, wine and collectables can also be a great hobby that may open up new worlds for you, the investor.

Here's a closer look at art as one of the most popular alternative investments...

According to the index Art Market Research's Art 100, the median price for art has soared 1,066% since 1975 and is up nearly 30% in the past year. Huge numbers have been paid, such as more than $106 million for a Pablo Picasso painting, $90 million for a Chinese Qianlong vase and nearly $11 million for a rare edition of John James Audubon's "Birds of America." Not only are art collectors paying attention; financial people are as well.

As a result, art funds have popped up. With an art fund, an investment manager pools money from investors to purchase paintings. In return, the investors receive ownership units in the artwork, with value tied to the underlying art. The leading art fund is The Fine Art Fund, with more than $150 million in assets. The fund is divided into subfunds: old masters, impressionists, modern and contemporary art. It requires a minimum initial investment of $250,000, but it claims an average annual return of 20%.
And although art funds provide investors with professional guidance for choosing and pricing artwork, it's possible to invest in art independently.

Here are four tips for investing in art... (more)

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Gold, Silver and Miners Remain Junk Grade Investments

Since silver and gold topped in 2011 investors have been struggling with these positions hoping this cyclical bull market for metals continues. The simple truth is no one knows for sure if prices will continue and make new highs and those who say its a for sure thing we all know deep down is full of bull crap.
All investments move in cycles, waves or trends which ever you want to call it. The market has 4 simple yet distinct stages each require a completely different skill set and trading tactics to navigate.
Stage 1 – After a period of decline a stock consolidates at a contracted price range as buyers step into the market and fight for control over the exhausted sellers. Price action is neutral as sellers exit their positions and buyers begin to accumulate the stock.
Stage 2 – Upon gaining control of price movement, buyers overwhelm sellers and a stock enters a period of higher highs and higher lows. A bull market begins and the path of least resistance is higher. Traders should aggressively trade the long side, taking advantage of any pullback or dips in the stock’s price.
Stage 3 – After a prolonged increase in share price the buyers now become exhausted and the sellers again move in. This period of consolidation and distribution produces neutral price action and precedes a decline in the stock’s price.
Stage 4 – When the lows of Stage 3 are breached a stock enters a decline as sellers overwhelm buyers. A pattern of lower highs and lower lows emerges as a stock enters a bear market. A well-positioned trader would be aggressively trading the short side and taking advantage of the often quick declines in the stock’s price. More times than not all of stage 2 gains are given back in a short period of time. I do show some of my trade setups using these exact stages free here:
Now that you know the stages and what it looks like its time to review the gold, silver and miners charts.

Gold Chart – Weekly

Gold has been in a bull market for several years but is starting to show its age in terms of the size of the price patterns, volume levels and extreme bullish sentiment. Back in 2011 a week before price topped we exited precious metals because the short term charts and volume levels were warning of a sharp drop. Since then I have not done many trades in either gold or silver because I do not like shorting in bull markets. Waiting for a bullish setup/price pattern before getting involved is my focus.
Gold has pulled back with a bullish 5 wave correction the last 5 months and at key support. While the long term charts are pointing to higher gold prices you must be aware that if gold and silver start to breakdown things will likely get ugly quickly. To be honest I do not care which way it goes, I just want it to either rally from support here and make new highs or breakdown and crash. Both will be very profitable if traded properly.

Silver Chart – Weekly

Silver has a very similar chart to that of its big sister (yellow gold).  This shiny metal has the energy of a 3 year old making it a very volatile investment. I have touched on the topic of gold and silver being so called safe havens and if you have been reading my work for a while you know that any investment that can move 18-45% in value within 1 month is NOT a safe haven.
While it has done well in the past decade and boosted a lot of retirement accounts the day will come with these things collapse and most people holding them will give back most if not all the gains they had simply because people get attached to large positions and most do not know when to just exit a position.

Gold Miners Chart – Monthly

This chart gives me cold sweats because I know how many people own gold mining stocks and I know how fast these things can move. If the price closed below the green support line the bottom could fall out and be very painful for those who get paralyzed by denial and do nothing but watch their accounts lose value week after week.

Precious Metals Investing Conclusion:

In short, this report is to show you the very basics of how investments move in stages. It is also to show a warning that precious metals are technically very close to a major breakdown which the big money players are watching closely. This thinly traded sector can move extremely fast when everyone rushes for the door.
Do not get me wrong, I am not saying a crash is about to happen, actually it’s the opposite. All I am doing is planning the idea in your subconscious so that if prices continue to move lower you will remember that these price levels and take action with your investments. Remember, you can always buy the investment back at any time again if the outlook changes in a week, month or year.
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How to Trade POMO Manipulation

This week I talked about how the uptrend is to be the focus of trading positions until a down trend is actually confirmed via price and volume action. The SP500 was very close to reversing down this week but with the POMO’s (permanent open market operations) scheduled largest injection of money for February of over $5 billion dollars sent stocks soaring jamming stocks back up into its uptrend.
Take a look at the normal daily injections and then look at Feb 27th’s….

SP500 Futures 10 Minute Chart Zoomed Back 48 Hours…


SP500 Trend – Green, Orange, Red candles indicate trend direction


Short Term Trading Conclusion:

Following the bigger underlying trend of the market along with the big money will keep you on the right side of the market more times than not.  My trading strategy which is now programmed into my trading system clearly tells me the current market trend, entry signals, profit taking, stop adjustments and exit prices.
Creating a proven trading strategy which works in all market conditions and having it programmed to do 95% of the analysis for you keep my trading emotions in check, saves me time and money and keeps things simple which is the key for long term success. So keep your eye on the POMO’s injection schedule each month for days to focus on long day trades or entry points for swing trades.
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Western World’s Perpetual Motion Ponzi Scheme To Collapse

from KingWorldNews:
Today Egon von Greyerz warned King World News that the Western world is now fully engaged in a perpetual motion Ponzi scheme and a collapse is coming. Greyerz, who is founder of Matterhorn Asset Management, also said that propaganda will not save the West from what is coming. Here is what Greyerz had to say in this remarkable and exclusive interview: “Eric, the world is broke, and more and more individuals are broke or going broke. The reality now is that most individuals are one paycheck away from going under. These same people are also loaded with debt in many case. Students are also broke and they have massive loans but no jobs.”
Egon von Greyerz continues @

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Should You Hold or Sell This Recession-Proof Stock?: KMB

Every four years, the world stops to watch the winter and summer Olympic Games, as individuals and teams compete to take home the gold medal for their respective countries. Though the goal is to bring home the gold, silver and bronze medals, the simple chance to participate in the games is still quite impressive.
In the investing world, I like to compare the remarkable Olympic athletes to the stocks that comprise the consumer-staple sector, one of the safest sectors to invest in during the past five years. Stocks like General Mills (NYSE: GIS), Kraft Foods (NYSE: KFT), Colgate-Palmolive (NYSE: CL) and Procter & Gamble (NYSE: PG) are true winners, having offered better returns with less volatility and risk than the benchmark S&P 500 Index. In addition, this group of stocks has also a strong track-record of providing higher yields and dividend increases.

And within the sector, there is one particular stock taking home gold and silver medals as it holds the No.1 or No. 2 position in the key categories in which it competes. Four of the firm's brands generate more than $1 billion in sales annually. Though its product line may appear quite boring with diapers, tissues and toilet paper making up the majority of the company's sales, it has been consistent and delivered impressive profits during the past few decades.

But even being successful, many companies stumble and lose their shine. Just like an aging worn-out athlete, sometimes it make sense to replace these companies when they are past their prime.(more)

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