GOLD, SILVER AND 2004
Some charts to think about as we head into trading. Bottom line: Gold and Silver in trouble. 2004 correlation? Possibly, but not as treacherous. (click charts to enlarge)
I’M NOT GOING TO BE ABLE TO SLEEP TONIGHT
I just sent our members some new research on our oil/gas spinoff. It was a comparison of the market caps of companies that are drilling in the same region relative to the market cap of our oil/gas holding. It made my head spin with excitement. I admit, I drank some coffee tonight before I started doing the research. But once I started digging even deeper into this name, I realized exactly why it is our largest holding...and I really would like to find a way to buy more. It's rare that you come across such a gem. Why a gem? Mainly because it's so undiscovered...so underrepresented...so undercover. Nobody talks about it, nobody cares about it. The message board is empty...I google it and very little comes up. It's the picture perfect stock, with the picture perfect management, at a picture perfect time. I'm telling you, I am tempted to just shout it out. I want to share all the research we have on this..so everyone can see what we see, but I can't. Again, it wouldn't be fair to my current members, it wouldn't be fair to my investors, and it wouldn't be fair to my analyst who helps me uncover opportunities such as these. There is a very clear reason we offer the guarantee that we do. We find names like this once in a great while that have embarrassing upside. The others we find, while not having the upside potential of this one, still have a good amount of upside and have a great margin of safety. We research them constantly and thoroughly. All misunderstood, under-recognized and under-appreciated companies that are high percentage bets. Join...
RESPECT AND BIG-UPS
The market continues to fall in line as it should. That's bad news for bulls, at this very moment, as giving respect to the leaders means further weakness. I outlined yesterday how well the market was listening to its leaders towards mid-day...and here we are at mid-day with the market showing similar respect. With all the respect and shout-outs that the market (S&P 500 mainly) seems inclined to give to its leaders such as SOX, Nasdaq 100, inflate or die leaders such as Gold...I'm not holding my breath for a reversal today. Next week may be a different story, as the option expiration pressure from this week re-calibrates itself. This level of respect over the long run is a big positive. The bulls are hating it for now, but good ol' fashioned respect goes a long way, even in the financial...
FLASHBACKS OF A BATTLE FOUGHT IN 2004
Having a lot of visions of January of 2004. It's a period of time that I think about probably more often than any other time in my trading career. And January of 2011 is reminding me a lot of that period of time. Why are memories of that period a chronic condition within my mind? It marked the performance peak for my hedge fund. Right around this time in January of 2004, my fund was up some 45% for the month of January...not for the year...just for the first few weeks of the month. This was after being up over 100% the previous 18 months. From the middle of January 2004 until the beginning of 2006...trading the markets became a hellish nightmare. The boogie man was chasing me everyday and I couldn't get away from him. Needless to say, I gave back the 45% and then some in 2004. I'm reminded of January of 2004 due to the fact that the market action and my results are very much alike. I had a triple digit percentage gain in 2010, just as I did in 2003. I haven't had any gains so far in 2011...portfolio is more or less flat...so that's a bit different. However, the market action is very similar. We are coming off of a strong year in 2010, similar to 2003 being a strong year. The markets have continued their strength into the first half of January, just as they in 2004 and are now weakening during the second half of January...again, just as they did in 2004. I don't think that 2004 is a bad roadmap to use for what can transpire in 2011. I don't think that we'll see the many months of weakness following January that we did in 2004. However, the general path and intentions of the market may be similar. I also don't think...actually I know that my trading results won't be similar. My trading style and focus is so much different now than it was then. The ability to produce large gains still exists. However, the risk has been lessened through different methods of allocation and an increased focus on a very specialized niche within the market...that being reorganizations, shareholder activism, spinoffs within the micro-cap market. In 2004, I was trading anything and everything within my macro fund. I will be posting a chart of 2004 for further study tonight, as it may give us important clues as to where we go and what to...
“I JUST WANT TO GO OUT BACK, HAVE A SMOKE AND EAT SOME HO-HOS BITCHES”
If you listen to the market closely, as I tend to do, that is exactly what the market was screaming out during the selloff today. It's apparent that the bull market is tired of being steady eddie, and wants to rebel for a bit. The more the bulls attempt to force it into a disciplinary way of life, the greater the rebellion will become. So let him have his cigarette and some ho-hos...it'll be good for the bull over the long-run. Some charts to illustrate the point (click to...
DON’T FORGET WHO YOUR LEADERS ARE
This is an important point to remember. The leaders of the market have thus far been technology, led by the semiconductor names. SMH today is down over 1% as of mid-day. S&P is down only 10 points, but is beginning to realize that it can't do the work without the leadership of technology. It surely can't depend on financials or any of the secondary type leaders that used to step up when things got a little unstable. As I've outlined time and time again over the last few days, we needed a pullback. If you are a bull hope that this is the beginning of a period of rest and meditation for the general market, as it needs to lure in some pessimism and doubt before it can continue its ascent. The market seems to realize who its leaders are and is...
GOLDMAN’S EARNINGS ARE CONFIRMING THAT TIMES ARE A CHANGIN’
Remember several years ago, when everyone was in some way affiliated with the financial business? It wasn't stocks, mutual funds or annuities, mind you...it was real estate. A good percentage of the US population was either a real estate broker, mortgage broker, appraiser, assistant to appraiser...the list goes on and on. As with any good financial bubble, people found a way to slice the pie 10 different ways just from one illegal immigrant with no financial history and a moderate income buying a 3,000 square foot home in the burbs. Everyone was getting paid like P-Diddy. At one point, financial services in one form or another made up a good percentage of the economic output of the western world. With the destruction of the financial bubble, this phenomenon is well into its reversion to the mean phase, forcing those who had illusionary jobs based off of illusionary wealth to actually become a contributing member towards economic output. Last night, I went over a monthly chart of the financial sector, which shows that given the severity of the destruction that we faced following the financial bubble bursting, we have not nearly retraced the amount that any sector with intentions of returning to its former glory should. Over-regulation of the financial sector is in its infant stages. Companies like Goldman Sachs will continue to be vilified, as Congress, in an effort to slay the demon in order to get votes, increasingly makes the collar around companies like Goldman's neck tighter and tighter. Times are indeed changing. Financials, you can be sure, will not be the leaders of any market movement on the bull side for years to come. The economy is shifting...excesses are being absorbed into the system, for the benefit of all. We surely have some more shocks coming over the very long-term, but it's all part of this long process. In the meantime, find another home for your capital away from the suit/tie/swindle segment of the...
ABOUT TO GET MONTHLY ON YOUR ASSES
When you want peace and quiet amidst all the hustle and bustle that is the life of a capitalist grinder, you get away to the mountains...climb to the top and look at the world from afar. It puts things into perspective when you zoom out. Same thing with monthly charts of various indicators and indexes. When you zoom out, it filters away the noise and leaves you with the essence of the market. Here are a few important monthly charts to munch...
RANDOM MUSINGS OF A BRILLIANT NATURE
AAPL, IBM both crushed it afterhours today. The reaction afterhours, given the scope of the crushing, has thus far been of the "factored in" variety. In case you missed it, I wrote earlier today how the structural integrity of the current bull market becomes compromised with every point we gain from this point forward. The AAPL and IBM news has a very good chance of being sold tomorrow, which will clue those who want to listen into the fact that we need to rest in order to preserve the health of this bull. I'm long-term bullish..very bullish actually...but I've been around enough markets to know what to look for and where to look in order to gain the information needed to realize when a market is due for a pullback/consolidation phase. That doesn't mean the markets can't keep moving up. I'm not the Wizard of Oz, where I can press a button and all will go my way. I play the odds...just like any other speculative venture. Odds at present are heavily weighted towards tricks, shenanigans, diva-like, drunken and obnoxious behavior. I like my girls a little more wholesome and predictable. Therefore, it pays to stay away from the high-beta, knock your socks off stocks over the next few weeks, while we allow this starlet the opportunity to iron out her...
STRUCTURAL DAMAGE AS A RESULT OF BULLISH EXUBERANCE EXPLAINED
I made a post on Twitter earlier saying the following: "we're at a point in this rally where any further gains will only serve to make the coming correction/consolidation more violent & unpredictable". I want to explain the logic behind this analysis. Over the weekend, I made a blog posting demonstrating why the bulls need to slow their roll, pointing to a few different charts and indicators that are showing bullish exuberance and just plain overextending to the upside for some important leaders in the market. As the bullish case grows in popularity, we can expect more participants to jump aboard the train. This is a positive phenomenon generally speaking. However, it becomes highly detrimental during the late stages of a rally, as it serves to weaken the overall foundation or integrity of the rally. How does it weaken the foundation? By pulling ardent bears and stubborn side-line cash off of their asses and injecting them square on into the marketplace. The bears cover their shorts, the side-line cash buys AAPL, INTC and PG...and the market continues moving forward at a torrid pace. The foundation becomes weak as a result of these reliable bidders during market corrections no longer being available. They have now turned into potential sellers if things do not go their way. Remember, these guys were the last ones to the party, meaning they were the most stubborn of the non-believers and will be easily swayed back into the non-believer role with any market weakness. And what happens when weakness does finally come around? We get a vacuum of bids...they simply disappear, as the last of the non-believers becomes a buyer and is no longer capable of bidding, but instead is offering shares. That is exactly how corrections that should be tame and orderly, turn into street riots where molotov cocktails fly and ordinarily level-headed men turn into maniacal, fear-ridden...