The Market
Technical
The
indices (DJIA 13537, S&P 1461) traded up fractionally on the day, closing
well within their primary trends: (1) the short term uptrends [13265-14093,
1402-1481] and the (2) intermediate term uptrends [12381-17381,
1302-1904]. In addition to the upper
boundaries of the two uptrends, resistance also exists at 14190/1576.
Volume
fell; breadth continued to improve. The
VIX fell, remaining well below the upper boundaries of its short term and very short
term downtrends. It also broke the lower
boundary of its intermediate term trading range. A confirmation of this challenge would be
positive for stocks.
GLD
rose fractionally, finishing above the lower boundaries of its short term
uptrend, its very short term up trend and its intermediate term trading range.
Bottom
line: the trend is up, it clearly is your friend and our Portfolios are 18% in
cash. Obviously, our Sell Discipline
pushed us to raise our cash position too early; but historically, that has
always been the case. So while my
cognitive dissonance is in the red zone; but I can live with it.
Update
on investor sentiment (short):
Fundamental
Headlines
We
received a full load of housing data yesterday morning: weekly mortgage and
purchase applications were disappointing as were new home sales; however, the
much larger existing home sale market improved substantially. That got stocks off to a plus start.
Overseas,
the Bank of Japan joined the money printing party, announcing an easing in monetary
policy---which will clearly contribute to all the negative consequences that I
have discussed ad nauseum in these pages.
Here are a couple more negative essays:
The
three costs of QEIII (short/medium):
And
(medium):
The
problem with printing money (medium):
In
addition, the Saudi’s cast their vote for President by raising their oil
production and helping to drive down oil prices and provide some extra fuel for
stock prices.
On
the other hand, the news out of the EU is increasingly confusing as no one
seems to be able to figure out the game that Spain
Spanish
bad loans mount (medium):
***overnight
both Chinese and EU PMI ’s were reported in
negative territory.
Bottom
line: stocks, as measured by the S&P, are overvalued, as measured by our
Model---and with the action by the Bank of Japan, it looks like the bulls
aren’t done. So it seems equities will
get even more overvalued. As I noted
yesterday, I wish that I was smart enough to trade this phase in the Market but
I am not. So I continue to focus on our
Sell Half Discipline and our GLD position.
Thursday
morning humor:
Investing for Survival
I
am adding a new section to our daily notes which as you can tell by the title
addresses concerns about the future in which (1) central banks have become a
power unto themselves, printing money willy nilly and ignoring the fact that it
does no good, (2) the western political class have by and large become whores
and con men, selling votes to the highest bidder [read: the banksters], (3) the
US federal government invents on a daily basis a new ‘right’ for every
conceivable minority group and awards them not just government largess but the
‘right’ to multiple infringements on the working class.
It
is too early to ring the alarm bell that these conditions will persist. But given (1) Romney’s completely inept
campaign thus far---avoiding any discussion [debate] regarding the difference
between a redistributionist state and a capitalist system and (2) the expected
results in the polls in particular intrade, i.e. the electorate is vying for
the nanny state, it appears an Obama re-election is likely. Hence, the likelihood that things aren’t
going to change is rising and with it the need to start preparing. There is clearly the possibility that all
this could change in the next 50 days; but even if Romney wins, given his
Casper Milquetoast defense of the policies that will be required to put us back
on track, I am not sure that we can count on real reform.
Of
course, as you know, it is not like I haven’t already been concerned about the
above issues. Clearly, with 17% invested
in GLD, 10% in foreign ETF’s and 18-20% in cash, our Portfolios reflect these
worries. However, my intent in adding
this section is to be even more focused on the long term consequences of the
current irresponsible monetary, fiscal and regulatory policies.
The
experimental economy (medium/long and today’s must read):
With
that inauspicious prelude, today’s thought is on silver---a much more volatile
‘precious’ metal than gold and therefore one that has to be approached with
some caution. Nevertheless, like gold,
it is rapidly regaining its status as ‘currency’ as the world central banks
race each other for the limited supply of paper and ink. The strategy that I am considering is to own
the metal outright in the form of recently minted coins. They would represent (1) about 20% of the
value that our Portfolios have invested in gold, i.e. 20% of 17% [3.4%], (2)
the most aggressive and highly volatile investment in our Portfolios, hence are
small in size, and (3) comprise part of our ‘rainy day’ fund in case things
really go to hell in a hand basket. To
be clear, this is a very aggressive investment, not suitable for everyone,
should comprise a small part of a total portfolio and should be expected to be
passed on to the grandchildren barring a worse case scenario.
http://www.minyanville.com/sectors/precious-metals/articles/silver-price-of-silver-silver-price/9/19/2012/id/44129?page=2
Steve Cook
received his education in investments from Harvard, where he earned an
MBA, New York University, where he did post graduate work in economics
and financial analysis and the CFA Institute, where he earned the
Chartered Financial Analysts designation in 1973. His 40 years of
investment experience includes institutional portfolio management at
Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic
Stock Investments is to help other investors build wealth and
benefit from the investing lessons he learned the hard way.
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