First of all, welcome to the inaugural issue of Inside Mt. Vernon Research – our weekly look at the latest news and developments from our services, and our editors’ latest take on the state of the market and the sectors that they cover.
And when you talk about the “state of the market,” the past month or so has felt like a remake of an Abbott and Costello movie. Craziness prevails and whenever someone in power comes on to make a statement, the market plummets.
Some friendly advice for George W: Stay off the TV for now. The President has appeared on the tube 19 times in the past 30 days – and we were above 11,000 when he first came on!
Want some better advice?
Buffett’s Still Buying And Here Are Five Reasons Why You Should Be, Too
If all else fails, you could do worse than follow Warren Buffett. The legendary investor shares his thoughts on the market in this article, stating that it’s cheap could get cheaper still and that he’s buying American stocks.
That’s a pretty ringing endorsement – one that we share. As much as the thought of buying stocks right now might seem like a death wish, there are bargains available out there. Sometimes, you just have to hold your nose and jump – and this is one of those times.
Don’t get me wrong we certainly share your pain at the moment. After all, we’re investors, too. But sometimes, we need to put our emotions aside and focus on facts
- Corporate insiders are buying more shares than they’re selling.
- U.S. corporations are flush with cash.
- The U.S. government is in full liquidity creation mode, as are other governments around the world.
- Interest rates are low.
- Stocks are trading much closer to book value now than at any time since 1974.
So, what should you do? What are we doing?
Commodities Creamed
While compiling this first weekly “digest,” I got on the phone with our resident commodities expert and former NYMEX floor trader, Lee Lowell.
As commodities continue to get whacked, along with equities, Lee tells me that the malaise has spread to all sectors, including the energy commodities (oil, natural gas, etc.), grains, and “soft” commodities. Even metals, which typically go up in times of crisis, haven’t been immune from the selloff.
The only glimmer of hope here is that oil is getting cheaper, with the price per barrel dipping to 14-month lows below $70. The market seems to be anticipating wider consumption cutbacks from businesses and consumers amid the global downturn.
With regard to our XPR positions, Lee says: “We continue to hold a long-term bullish play in the natural gas futures options, which should do well once the market turns around. We’re holding a short put option position on Intel(Nasdaq: INTC), which expires in January 2009. This may allow us to buy Intel shares at a price that we’ve only seen twice over the past 10 years.”
Your Opportunity To Take Advantage Of Volatility
Lee and I are also working together to launch a new service, which allows investors to actually capitalize on the volatility in shares right now. And who doesn’t want to do that?! We just need to figure out the remaining nuts and bolts of it before passing it along to you in a reassuring way.
I say this because of the current slew of promotional material on the market now for covered call services. I don’t know if you’ve come across any of it, but it seems that every Johnny-Come-Lately is now recommending this type of investing.
In fact, I just saw some FDA health newsletter recommending covered calls. Okay, when I’m looking to an FDA scientist for covered call advice, I know times are really tough! I wonder if they’ll come to me for compounding advice?
Warning! Stay away from these covered call guys. They’re still doing it wrong. God bless ‘em for trying to go after the big strike, but they still haven’t figured out the safety side of the trade yet – a critical element.
If you are looking for covered call information, we have an absolute ton of it in our Smart Profits Report archives. It’s totally free, so go here to check it out.
And if you really want to kick things up a notch and invest using covered calls, check out our Strategic Income service. For 11 years now, we’ve notched up a consistent success rate of more than 70%. Call our VIP Trading Services Team at: 888.570.9830 (inside the U.S.) or: 410.454.0498 (overseas).
So what else is working?
Hop On Board The Biotech Bus
As most of the market crumbles, the biotech sector has performed better than most others – and our guy Marc Lichtenfeld has been all over it for more than a year now. His picks have greatly helped strengthen our overall portfolio immensely during this downturn.
But it’s not biotech news that I want from Marc right now – I want news on hedge funds. That’s because Marc used to work on the “dark side” before joining us – and he confirms what I’ve been writing about for a while now
The Big Boys Are Nesting With Their Cash
That even the pros are in full panic mode. These are guys who run hedge funds, trade millions of dollars a day and usually have ice running through their veins? And right now, they’re absolutely frozen by fear.
Marc tells me that he spoke with various hedge fund managers this week – top-notch guys, who consistently beat the market. And he found out that they’re all sitting on the sidelines with cash right now.
Many of them are up on the year and they’re solidly protecting those profits by not doing a thing until 2009. You see, hedge funds usually get paid 20% of the profits they make for their partners. One guy is only up 4%, but at least he’ll get a paycheck at the end of the year by sitting in cash for the next few weeks.
Marc says that at some point, these institutions are going to put massive amounts of cash to work. Perhaps not this year, but don’t be surprised to see a strong rally in the first quarter of next year.
Finally, I want to thank you for sticking with us during this tough time. Rest assured that we’ll continue to do our best to bring you important, timely, and profitable ideas. The market will turn and we’ll see much better days ahead – and we’ll be with you when it does.
Karim