Keep Your Powder Dry

As the title suggests, we are at war, or at least, in serious and dangerous times.
For those that aren't familiar with the phrase, "keep your powder dry" it is a reference to firearms.

In the early evolution of firearms, Flintlocks and later, Muzzle Loaders were the state of the art in weaponry. Where Gun powder was poured into the barrel of a gun followed by wadding, then one or more projectile(s). This layered mix was then tamped down and ready for a some type of ignition. The problem comes when moisture is introduced. If your gun powder becomes, even slightly damp, you are done. Now, if you are in a stressful environment, and those days were filled with them, pulling the trigger and hearing nothing but a "click" could have dire consequences. Later "bullets" as we commonly call them, came into use, more properly called cartridges. These made firearms much more dependable and rendered muzzle loaders obsolete.

I like the imagery that the warning evokes. It conjours up visions of being in stormy weather with dangerous people and/or animals, prowling in the darkness, ready to do you harm, as you hunker down, out of the rain, trying to keep your gun dry and ready to fire when needed.

I do think that this is precisely the position we are in right now. If you listen to the financial community as a whole, you might conclude that we are heading out of dangerous waters, with the storm behind us and conditions improving.

I couldn't disagree more.

If you consider the bigger picture, what really has improved? True the stock market has recovered much of it's losses, but the fundamentals behind it are, at best, wounded and limping along at an anemic pace. At worst, hemorrhaging and desperately looking for someone with a hot iron to cauterize the wound. Recovery is a long ways off and we have yet to stop the bleeding. The longer this economy goes on bleeding, the longer and more painful the recovery.

This administration is trying to give the economy a transfusion, but it is also using failed methods, to heal the patient. It's "bleeding the patient" and applying leeches faster than it can pump fresh blood into the veins. Unfortunately the pool of blood donors(US Taxpayers) is dwindling at an alarming rate.

So where does this leave us?
Waiting.
If I had not already done so I would be taking some profits and keeping cash ready to be deployed. Yes I sold a little early and missed some of the gains over the last month. Much of those gains have evaporated in the last few days, so all in all, my timing may prove to be pretty good. It all depends on what happens next. Is the market taking a pause before proceeding higher? I doubt it. I am expecting a broad pullback in most, if not all sectors.

Most of the resource stocks that I talk about on this blog have pulled back to support levels. If support holds and the stocks move higher from here, I'll look for a point to re-enter those positions and call it a missed opportunity. If you've followed my examples, you've made some nice gains in KOL and MOO. I'm not willing to risk those gains. Remember, it's not only about profits, it's also about preservation of capital, and your gains are also your new capital. There is always another opportunity around the next corner.

If I am right and those support levels don't hold, I'll be able to sit back and let the carnage happen to others and wait for the trend to reverse so I can pick up shares at a discount.

As for my core holdings of gold and silver, I never sell. I am a buyer at all opportunities and I don't think this is one. These are also at support levels and I am concerned about a pull back here. Again, watch and wait and keep your powder dry. Next week may tell the tale and I'll post if things are resolved.

Good Luck and Godspeed

JT

Back To Work

Back to work.
Here's where I'm at; I'm selling. I'm locking in profits(40% in KOL alone).
But then what?
It's very simple, I'm going back to work. I believe that the markets, if not at their tops, are nearly there.
If I'm wrong, the only thing I'm losing is potential gain.
I called oil at $70 when it was trading at $50. True it went down to $40 before moving back up, but that is what trend investing is about. I don't try to hit the tops and bottoms exactly. Just identify the broad trend and get in at attractive levels. Then stand back and let the markets overshoot the range.
I will be posting ideas as I develop my new portfolio structure, but for now, look for oil to correct lower as well as the broader markets. This will probably take metals lower, but I am not selling silver or gold. Those are my core holdings, and part of a mega trend that isn't even close to playing itself out. As always, pullbacks in prices are buying opportunities. Same holds true for my short on treasuries(TBT). I am accumulating.
Stay tuned and stay nimble(in cash).
I may be moving quickly if things turn the way I think they will.

Good luck and Godspeed

JT

The Whisky Fish

My apologies for the lack of attention to this Blog of late, but I have just returned from a week of fishing in Alaska.
So for those of you not interested in that story, I will again apologise. My attentions in this post will be toward that trip. However after reviewing my portfolio and the current financial climate, I find no pending emergencies and I am quite pleased with current positions.
Now on to the fish story:
It occurred to me upon arrival on the Prince of Wales Island in the city of Craig, Alaska, that part of the Alaska experience, is the journey to reach it. While not difficult, compared to 50 years ago, it is still a bit of a jaunt by today's standards. With the last connecting flight being a float plane, you are truly primed for an Alaskan fishing trip. The first day on the boat was amazing. Making our first run to the fishing grounds through the fog, we began to get a "feel" for our captain(Lee) and guide; a young native Alaskan, who upon making a wrong turn in the fog, grinned and explained that he wasn't used to this boat. hmmm.
As we made it through the islands and open Alaskan ocean and into the fishing grounds, I looked and saw several other boats drifting through and hooking up with fish, the adrenalin started flowing and I couldn't wait to get my line in the water.
After receiving instructions from our guide and one of the other, more experienced, members of our group(Eddie), I dropped in my line and began the "top to bottom" technique that would dominate the trip. This simply means dropping your bait to the ocean floor and immediately retrieving it all the way to the surface and then repeating the process. This gives your bait exposure to the bottom feeders as well as the more aggressive and unpredictable Salmon who, as the captain explained, could be hanging out at any depth.
I'm not sure if I hooked up with any Silvers(Salmon) first or whether it was a King that first took my bait, but catching a King salmon first, makes for a better fish story, so I'll stick with that. It wasn't a huge fish by King standards but it was big and it was a King Salmon and I was thrilled. Time went on, several Silvers were boated and another King was nabbed by Eddie, of roughly the same size, and then it happened;
At first I thought I had just hooked up with another fish but as the momentum built, our guide said confidently that I had a King on my line, a big one. He directed everyone to pull in and the fight was on. Later, someone said it lasted for a half hour, another said 45 minutes, again I'll stick with the better story of 45, because afterwards it felt like an eternity. During that time that fish almost spooled me twice(ran out all my line). At one time, Lee said "how much line do you have left?". I looked down at my reel and it looked like a single wrap of cellophane around a thimble.
I grunted "not much!"
He replied "reel faster" as he gunned the little outboard "kicker" toward the chase.
At another point the stubborn salmon ran under the boat. The danger here is that if he rubs the line across the keel or other sharp part of the boat he can cut your line. So all I could do was jam the tip of my rod underwater to try and clear the bottom of the boat. It was at this point that I turned into Captain Quint from the movie Jaws. "he's gone under the boat!" I yelled and I might have even included the pirates "arrg" with it. Lee spun the boat and cleared my line and it was back to work again.
At one point, I'm not sure of the chronology of it, a snapshot was taken by my brain that will stay with me forever. A picture of a brief moment in time, that took my breath away; there in the distance, running directly away from me and toward the open ocean, he broke the surface. With the line singing off my reel, he came out of the water like a torpedo, straight as an arrow and not losing any momentum. As he sailed through the air, something unintelligible escaped my mouth and "click" the moment was eternally captured in the camera of my mind.
As time wore on, my arms began to burn and the only things that kept me going were pride and the repeated urging from the captain of "reel faster". Then the fish gave me a break. He bunkered up at about sixty feet and took a break. He kept swimming and so kept tension on the line, but at that point the real fight had left him. I was able to shake out my arms and get the blood going back into my hands, sending oxygen to my starving muscles.
After the short respite, he began again and the gut check was back on. As I continued to make ground on the stubborn fish, I was exhausted to the point of reeling in square circles. A hurky jerky motion, no angler would be proud of, but anyone has been there, knows what I'm describing.
Another surreal moment came when at one stage of the fight, Eddie who is never given over to much exaggeration, quietly and calmly said "Now JT, I don't want to make you nervous but, remember that fish you caught a little while ago?(my first King), well this one's twice that size."
He made me nervous.
As the King neared the boat, he gave a few more attempts at escape. It was at this point that I really began to think of everything that could still go wrong, I thought "don't you dare let him get away" and the terror of losing this fight began to materialise. More adrenalin kicked in and I summoned up enough strength to finish the fight.
As Lee finally got the net around him and, with help from Eddie, they hauled the fish aboard I got my first good look at the Whisky Fish.
Now, not being familiar with the term and clearly not aware of what I had just accomplished, I was curious about why the captain was jumping up and down hugging me and yelling "you got the Whisky Fish!"
I looked around at my girlfriend Lynn, who, only moments before was struggling against sea sickness, was jumping up and down screaming with delight and stoic Eddie had a big wide grin. Our other group member, Jim gave me a high five which I was barely able to return with a shaky hand and the reality that, hey, this might actually be a really big fish, began to take form.
After the Captain finished calling his fellow captains from the lodge on the radio and telling them that, not only were we "on the Kings", but that we also had caught the elusive Whisky Fish, the rest of the boat started fishing again.
The rest of the day was wonderful.
Eddie nailed another really big King, but even as he was reeling it in, he gave me a wink to tell me "don't worry you've still got the biggest fish". He also hammered the bottom fishing out in the deep water and the Silvers were piling up at his feet.
Lynn, Bravely fought the sea sickness and continued to fish. And while she boated a halibut and caught a couple monster Ling Cod that we had to cut loose, she didn't have many fish to show for her efforts. She was having fun, but was clearly yearning to catch some Salmon. A curse that she would later destroy on our final day of fishing.
Jim had a respectable day and went on the following day, to catch his own monster King.
As for me, that was the last King I would catch on this trip.
As we finally came back to the lodge, word had gotten out that we had bagged the Whisky Fish, and the dock was filled with the other boat captains as well as all the guests. There was back patting and picture taking and generally a bit of a festive mood all the way around. It was my tiny 10 minutes of fame and it was great.
But what's with the Whisky Fish?
After the group on the docks dispersed one of the deck hands from the biggest boat came over and said that Lee wanted to see me on it. So I went over and was invited aboard and into the cabin. There sat all the captains from the lodge, around a monster bottle of Crown Royale, which we proceeded to pass around as I recounted my fish story. Their excitement was genuine as I told of the various aspects of the fight and they interjected their own fishing tales throughout, with much laughter and many more tugs at the bottle. I was briefly invited into their world as I had passed the test and was temporarily a fisherman in their eyes. The following day I would return to being just another guest, but for that brief moment, I was on an episode of "After the Catch"
Any fish over 50 pounds is a Whisky Fish and the owner of the boat buys the captain a bottle of Crown.
Mine was the only Whisky Fish of the season it weighed in at 54 pounds and it represented the return of Captain Lee's Mojo. He had been on a losing streak this season and was clearly relieved that it was broken.
One of the captains informed me that he had fished all his life and his best was 49.
Sure there have been bigger fish, Lee bagged a 64 the year before and further north in the Kenai they get bigger still.
All in all it was a phenomenal trip and I am eternally grateful to the Whisky Fish. Cheers!

Good Luck and Godspeed

JT

A Moment Of Clarity

In a rare opportunity to sit and enjoy the ambiance and view of the Bay with one of my favorite people, I met up with Fred at a local seafood shop. We finally had a chance to sit and talk about investing. Fred is a broker for a great company many of you would recognize by name. And as with most large brokerages, their policy is buy and hold for life. So I'm not giving away any trade secrets.

Fred, being the really great person that he is, has felt his clients pain as they have taken a beating in this last stock crash. I can see the concern he has for people he has known for years, clients as well as friends, and I can tell that my oft stated opinions on the direction of the markets and economy, don't sit well with him.
We discussed many things but I'm afraid I missed an opportunity to illustrate my concerns.
Fred asked me why I believed that the markets were going to crash again. Rather than explain my overall view, I pulled out just one of the many things that come together to complete "The Big Picture".

So Fred, here's what I should have said;
It all started a few years ago when I read a book by Harry S. Dent, The Next Great Bubble Boom Ahead. Mr. Dent, while not perfect, has been spooky accurate in his predictions. His research on demographics are incredibly insightful and it is not possible for me, to ignore the implications. One of his overarching concerns was the cycle of retiring Baby Boomers. The economic effects of this segment of the population have been, and continue to be, profound and they are impossible to deny. Mr Dent does an excellent job of explaining this. That's just one piece of the puzzle, and his book contains a multitude.

Another piece comes from my research into precious metals and as my regular readers know, the historical cycles are well established and we have been following those patterns perfectly.

Yet another chunk of evidence comes from the political climate that we are in and it seems as if, for years, our leaders have had no regard for the lessons of history and indeed seem to be rushing toward disaster with oblivious glee. If my aim was to destroy a country's financial health, I would do everything that these clowns have been doing for the last 20 years. Starting with "Read My Lips, , ," and culminating with "Hope and Change". And yes, I am including Alan Greenspan, Ben Bernanke Hank Paulson, Et all, on the list of big shoe, red nose and funny hat crowd.

And then there are the Kondratieff Wave theories. Without boring you to tears with the details, suffice to say that, when applied to the last 300 hundred years, these cycles have repeated themselves roughly every 50 years without fail. With the current downtrend looking to bottom in 2020. That's 10 years of decline before we can look toward expansion.

Just the one fact, that no country has ever devalued it's currency with successful financial results, in 4 thousand years, is enough to make me trade in my cash for tangible assets. But when you add in all the above and think about levels of Government debt, spending and revenue generation, and the ignorance of a population willing to embrace socialism, it is impossible for me to come to any other conclusion than this, we are facing the perfect storm.
I am constantly researching and for every positive economic argument I come up with, there are 5 counter arguments which negate it.
There is one intangible positive out there. and while it is impossible to quantify it is also impossible to ignore. That is the inventive, ingenious, stubborn, indomitable American spirit.
That's our wild card.
So while I can't ignore the gathering storm clouds, I still have some hope that we can sail around it. But I am continuing to rig for stormy weather.
So Fred, I hope that answers your question more precisely.
Will I be right about my dire predictions? For once in my life I would welcome being wrong and Lord, I hope I am.
With all that said, the portfolio I have put together should do well in a booming economy as well. I will continue to look for those assets that are in demand no matter what the economy does. People will always need to eat, they will always consume energy, they will always need clothing and shelter. And even in the worst of times they will always seek entertainment. Which brings me back to seeing Fred over looking the bay and sipping a glass of wine. Alcohol should be added to my portfolio. I'll find us a good one for next time.

Good Luck and Godspeed

JT

Just The Facts Ma'am

For those of you too young to remember, the title is a quote from a TV series named Dragnet, starring Jack Webb. Webb as Sargent Joe Friday delivers this line as an admonishment to an emotional rant from a crime witness. In other words, stop with the hysteria and give me the straight poop.
I strive to be as positive and constructive as possible. Sometimes I fail. Sometimes I am driven to failure by people who are determined to pee in my Cheerios. Some of the things that I unearth in researching investment opportunities have that same effect on me.
That having been said, in an effort to avoid tainting your breakfast cereal, don't read this if you want someone to blow sunshine up your butt.
Here's the link for those of you who can handle the graphic image and to follow along at home; http://www.usdebtclock.org/
Warning; this stuff is scary.
So here goes, Just The Facts;
National debt, 11.3 Trillion and rising
US Spending year to date, 1.68 Trillion and rising
Tax revenue, 974 billion and rising
Budget deficit 749 billion and rising
Here is the impact on you;
Debt per citizen, $36,920.00
US Govt. spending per citizen, YTD, $5,387.00
Private debt, 6.97 Trillion
Private debt per citizen $22,862.00
US Unfunded liabilities (what we are committed to pay for Medicare, Prescription drugs and Social Security) 57 Trillion
Liability per citizen, $188,406.00
So if we add up US Government debt per person, private debt per person, and unfunded liability per person, we come up with, $248,188.00.
Just the facts.
These are the numbers, as of Today.
If we stop right now.
Now for my personal opinion;
We won't stop now. Washington is just beginning to ramp up the spending.
Please understand that these numbers reflect a trend that is relatively new in this country. 30 years new.
It is not, however, new in historical terms. It has happened over and over again throughout history and every time it happens, countries, governments and civilizations fall.
So just because we have seen deficit spending and increasing national debt for most of our lives, please don't for a moment, think that this is sustainable, it is not.
The question is, which generation will pay our debts?
Even if we wanted to pass the buck down the road to our kids or grand kids (which I believe to be despicable and morally bankrupt), I seriously doubt that the "buck" will last that long.
I used to think we could stop this and reverse the trend, but I no longer believe that we have the ability, collective societal education or self discipline.
So where does that leave us?
With the absolute need to remain positive.
I realise after my dire predictions that sounds ludicrous, but it is not. Being prepared is positive. Being proactive is positive, looking to not only survive, but to thrive is positive. With every crisis comes opportunity. And while we may wish that we could avoid the pain in the future, we can be confident in our ability to turn adversity into advantage.
Be ready and stay financially nimble.

Good Luck and Godspeed

JT

Update

Well, since the various schools around the country are starting to wind down for the summer break, I thought it would be a good time to evaluate my performance on a few picks.
Here are my grades;
Gold A+
I have been championing gold personally and publicly for more than 8 years and I'm still an advocate. In fact more today than ever before. I'm up over 400 percent on this one.
Hold, Buy below $800

Silver A
While I am more bullish on silver than ever, it has taken more abuse than gold in recent pull backs. That having been said I think this grade will be A++ before all is said and done. I'm up 100% here.
Strong Buy/Accumulate. Buy below $16.50

Dow Chemicals (DOW) F-
Wow did I ever screw up on this pick, I caught the falling knife, blade first on this one. I would have been fine had I set my stop 50 cents lower. I was looking for support at $8.50 and it broke down below that, triggering the sale and then, it proceeded to rally to over 16 bucks a share, which is what I paid for it. Oops! That's proof that I make mistakes too. I took a fifty percent haircut on this one. This also demonstrates the importance of position sizing.
Position closed

Johnson and Johnson (JNJ) C-, D+
Down 10%
Hold

Van Eck Global Market Vectors Coal (KOL) A
Up %19
Accumulate

Market Vectors Agri-business (MOO) A
UP %27
Accumulate

Kinder Morgan Energy Partners (KMP) A
Up %5 in 2 months
Accumulate

ProShares UltraShort 20+ year Treasuries (TBT) A
Up %22 in 5 months
Accumulate

Chesapeake Energy (CHK) C
Unchanged
Buy

Not too bad all things considered.

This is not my whole portfolio. This list, just represents what I have been writing about in this blog. I have many other positions in resource and junior resource companies that I have been accumulating for quite some time. Since I am in the accumulate mode in this sector, the radical pull back that wiped out so much value for so many people, allowed me to add to those positions at bargain basement prices. This is the speculative portion of my portfolio and I would not recommend these stocks as investment vehicles for any one, other than a seasoned trader.
The ones listed here, however, should continue to perform going forward, beware of a pull back this month, as I wrote about in my last post. This may or may not happen, if it does, I plan on using it as an opportunity to expand the positions in my "accumulate" rated stocks.
As for my percentages on gold and silver, they represent a much larger time span and they predate this blog. For instance silver; I acquired some shares or ounces at around 4 bucks, some at 5,6,10, 11, 17, 18, 14 and 12. The %100 gain is from the average cost of my holdings. Which works out to about 7 bucks an oz. The thing to be observed here is that you can afford to mistime the market if you are always buying on pullbacks in a cyclical bull market. That is how to "accumulate" a position. The trick is in knowing when it turns from a bull to a bear. We ain't there yet but it'll be dramatic right before it turns.

Good Luck and Godspeed

JT

Legal disclaimer: This post is for informational purposes only and is solely the opinion of the writer. Nothing in this post should be considered investment advice. Before investing in anything, the reader is encouraged to do his or her own research and consult with a certified financial advisor, which John Tompkins makes no claim to be. John Tompkins and Toro Creek Investments accept no liability for financial losses or damages incurred by the reader because of this post

Sell in May? Or right now?

The old adage of "Sell in May and go away" is well known and well played by many on and off The Street. The thought is that many traders simply take the summer off. Whether this is truly the case, is debatable. There are indicators that show a drop in volume during these summer months and trends tend towards the negative. The problem is, as always, determining how to play this. Is this simply a case of self-fulfilling prophesy? I think it probably is. Whatever the cause, I believe this May will be a good time to visit Hawaii.
Does this mean sell everything? absolutely not. But I am moving out of some of my more speculative holdings and shoring up my core positions. I think, at this time, being in cash is not the answer. If you are a short seller I think that this would be a great time to go short several areas. The financials are ripe for another sell off. This would probably cause other stronger sectors to sell off as well and may present another buying opportunity for some other sectors like commodities and energy. Look for disappointment in the usual summer oil rally. I do think oil will return to the $70 neighborhood but not for some time.
Furthermore, this move in precious metals may be another head fake but it doesn't matter I'm still extremely bullish on precious metals and am enjoying buying silver anywhere around 12 bucks. I can't believe that the markets are letting me accumulate at these prices.
I apologise for the short post today but things have really not changed much. The overall Macro picture is playing out exactly as expected and the trend is still in place. The only thing to concentrate on is your short term trades and those moves are typically difficult to predict, so protect yourself against next month and don't be surprised if a sell off happens before May. Traders don't like to "react" They want to be in position ahead of time. If you are reacting, you are probably loosing money and setting your self to lose more of same.

Good Luck and Godspeed

JT

Legal disclaimer: This post is for informational purposes only and is solely the opinion of the writer. Nothing in this post should be considered investment advice. Before investing in anything, the reader is encouraged to do his or her own research and consult with a certified financial advisor, which John Tompkins makes no claim to be. John Tompkins and Toro Creek Investments accept no liability for financial losses or damages incurred by the reader because of this post