The Fed capped off a series of stimulative measures by announcing on Wednesday that it’s hiring Anne Murray to perform a series of concerts across the country.
The goal is to cheer up consumers. And heck, even if you can’t attend one of the many concerts scheduled, you can request a CD, free of charge – including postage.
Clearly, things are tough all over again.
The market responded by moving higher for yet another day, although reality set in on Thursday. Still, everybody agrees that this week looks a lot better than last week, and that appears to be the bottom line for now.
Nobody cares about what the bottom line is costing us. After all, it’s only money, right? We can just print lots more of it whenever we need a little boost again. No problem.
But step back and bit and let’s look at the bigger picture critically…
Our Personal Goldmine
Can you imagine what would happen to the Thai Baht or the Argentine Peso if the countries announced that they’d be tripling the currency in circulation? We may be the most powerful country right now, but we’re hardly invincible. And right now, we’re also not doing ourselves any favors.
That’s why I’m still touting the value of precious metals. It’s sweet to own the greenback when all financial hell breaks loose, but it may be better to own gold.
Our own personal goldmine, Goldcorp (NYSE: GG), jumped more than 20% this week. We’re in like Flynn on this one, with an adjusted cost in the low $20s and a $35 strike price for our calls.
But since nothing goes up in a straight line (except the budget deficit and national debt), expect lots of volatility in the gold market for a while longer.
And if you’re wondering why gold spiked this week – especially as the market was moving higher, too – my explanation is that investors are finally realizing that this stimulus is going to result in a resumption of spending sooner or later. And that means inflation could be a threat.
We’re not worried, though, as we’ll be making money regardless of the outcome. Our preference, of course, is for gold to pull back so we can rewrite our calls. But if that doesn’t happen, we’ll still happily take our profits.
Other than gold, if you’re really reaching for the stars, you may want to add silver to your portfolio.
Boost Your Wealth In The Sunshine State
Next week, I’ll be at the annual Investment U conference in St. Petersburg, Florida. I’m expecting a great exchange of profitable ideas and information. The main idea I’ll be sharing is one of my favorite subjects: How to use options to navigate through uncertain times.
And then in June, we at Mt. Vernon Research will be co-hosting our own conference at the Turnberry Resort in South Florida. All our editors will be there, plus Associate Investment Director of The Oxford Club, Louis Basenese and Keith Fitzgerald, Investment Director of the Money Map Press.
Find out more by going to our special conference page.
Now on to Marc Lichtenfeld…
It Takes Guts To Be Contrarian
Lets’ face it… there are a lot of people who like to call themselves contrarian. But the truth is, few actually have the guts to practice what they preach by investing in truly out of favor companies or sectors.
Don’t get me wrong… the last thing we want is to feel uncomfortable with our stocks. We want positive feelings tied to our portfolio, not unease. But portfolios should be less about feelings and more about profits.
I’m fortunate to have been trained by two of the greatest contrarian investors of recent decades. They taught me many valuable lessons – including what to specifically look for when going against the grain. They also instilled the mental toughness needed to face the constant criticism that dogs any contrarian’s steps.
The training paid off when, at the height of the housing craze, I recommended shorting St. Joe Company (NYSE: JOE). That was back when people “knew” that real estate was the end all and be all to investing. “They’re not making any more of it,” speculators confidently declared.
Not only did I face criticism for this… I even received death threats (unfortunately not the first time that’s happened to me over a controversial call). Yet the stock plummeted very shortly afterwards and my research proved to be right on the money.
Why do I bring this up?
The Approach You Need To Succeed
On Monday, I’ll be releasing my next small-cap recommendation in the Xcelerated Profits Report. And when you read it, I wouldn’t be surprised if your first reaction will be: “I’m not investing in this sector. Not now anyway. Maybe after the economy improves.”
But I encourage you to toss that attitude away because by the time the economy truly improves, it will likely be too late. In order to really capture the largest gains, you need to buy when sentiment is awful and there’s blood in the streets. Because by the time sentiment changes, the big gains have already been made. Remember, buying contrarian stocks should feel a little bit uncomfortable, because you’re early.
And research has shown that buying out-of-favor stocks outperforms the market over nearly every time period (starting with one year).
Few Wall St. analysts cover this stock. And most of the ones who do, hate it. It’s in a beaten-up sector that’s sensitive to economic cycles. So it’s no surprise that the stock is dirt-cheap. What is surprising, though, is that this company just increased its dividend, has loads of cash, and actually managed to grow its margins in the last quarter. Not bad in this climate.
Over to Lee Lowell with some bullish commodities news…
Are We Seeing The Next Commodity Bull Run?
The commodity sector got a big boost this week after the Fed’s new plan to put more liquidity into the market, which it hopes will spur more lending and consumer borrowing.
The oil market was a big beneficiary, as it finally popped back above the $50 per barrel mark – an area it hasn’t seen consistently since early January. OPEC’s decision last weekend to rein in its overproduction also helped the move.
The market initially reacted badly to the decision, but has since switched and rallied. As it stands now, oil is at a crossroads, as it grapples with the reduced worldwide demand versus the reduced supplies being taken out of the market.
But oil wasn’t the only commodity to make a comeback. All the grains – corn, wheat and soybeans – have rallied this week, along with “softs” (coffee, sugar, cocoa, orange juice and cotton). We may be seeing the beginning of the new bull run in the entire sector.
One way or the other, gold is still king these days as it continues to trade well through the first three months of the year. Though it was down $30 an ounce before the Fed announced its plan, it went on to stage a major reversal and popped back up over $80 an ounce to its current level of $955 an ounce. And many are still calling for $1000 an ounce gold within the near-term future.
Finally, here’s Jim Stanton…
Ticker Of The Week: Nasdaq 100 (^NDX)
Since the current rally began two weeks ago, the Nasdaq indexes have performed stronger than the rest. Many of the larger cap indexes tested their 50-day moving averages on Wednesday, with the S&P500 also testing the all-important 800 level.
Some of my longer-term technical analysis tells me that the recent rally is part of a large consolidation pattern, which could eventually come back down and test the recent lows.
The reason I mention this is that although the Dow and S&P 500 have gone low enough to satisfy their weekly charts, the Nasdaq Composite, the NYSE Composite, Wilshire 500, and the smaller-cap indexes did not appear to go low enough.
Also, the bear market that ended in 2002 took over seven months of consolidation before the bull market began. It’s only been about four months since the November lows. If history repeats itself, a lot of choppiness lies ahead.
If my “consolidation theory” is correct, watch for it in the Nasdaq 100 (^NDX). Take a look at the chart below…
Note the two resistance lines – one at the January high and the other at the October high. If either of these two levels are tested and the indexes begin struggling around one of them, I would trade lightly until the move plays out.
That’s all for this week. Enjoy your weekend.
Karim Rahemtulla
Top 5 Recent Closed Positions – Mt. Vernon Research Trading Services
|
COMPANY |
SYMBOL/TRADE |
BUY DATE |
SELL DATE |
GAIN |
SERVICE |
|
Citigroup (C) |
Bought shares |
3/5/2009 |
3/11/2009 |
67% |
400 Report |
|
SIGA Technologies (SIGA) |
Bought shares |
10/16/2008 |
1/30/2009 (first half) |
66% |
Access |
|
Tenet Healthcare (THC) |
YTX-AA (January 2010 $5 calls) |
10/8/2007 12/3/2007 |
1/20/2009 |
100% |
400 Report |
|
Whirlpool (WHR) |
WHR-BI |
12/31/2008 |
1/6/2009 (second half) |
161% |
1-2-3 Trader |
|
Whirlpool (WHR) |
WHR-BI |
12/31/2008 |
1/5/2009 (first half) |
73% |
1-2-3 Trader |
Top 5 Recent Closed Positions – Xcelerated Profits Report
|
COMPANY |
SYMBOL/TRADE |
BUY DATE |
SELL DATE |
GAIN |
|
Tesoro (TSO) |
TSO shares |
11/24/2008 |
2/17/2009 |
108% |
|
The Gap Inc (GPS) |
GPS-OU (put-sell) |
11/24/2008 |
1/5/2009 |
23% |
|
VMware (VMW) |
MKT-MG (bought puts) |
8/22/2008 |
10/29/2008 |
83% |
|
iShares China 25 (FXI) |
VHF-MR (bear spread) |
6/25/2007 |
9/15/2008 |
50% |
|
December 2008 Gold Futures |
$930/$950 (bull call spread) |
5/23/2008 |
7/15/2008 |
36.9% |
The Mt. Vernon Research Hall Of Fame
|
COMPANY |
SYMBOL/TRADE |
BUY DATE |
SELL DATE |
GAIN |
SERVICE |
|
Chesapeake Energy (CHK) |
WZY-AV (bought January 2006 $12.50 calls) |
7/28/2003 11/6/2003 |
1/20/2006 1/20/2006 |
4,900% |
400 Report |
|
Interactive Data Corp (IDC) |
VSW-AE (bought January 2007 $25 calls) |
9/14/2004 12/10/2004 |
1/17/2006 1/17/2006 |
4,800% |
400 Report |
|
US Airways (LCC) |
LUL-AB (bought January 2010 $10 calls) |
6/19/2008 |
12/22/2008 |
251% |
400 Report |
|
December 2007 Wheat Futures |
$9.60/$9.70 (call option spread) |
9/12/2007 |
10/16/2007 |
239% |
Triple-Zone Profit Trader |
|
Silver Wheaton (SLW) |
SLW-LV (sold December 2007 $12.50 calls) |
7/17/2007 |
12/21/2007 |
113% |
Strategic Income |