Will President Obamas plan work?

Will President Obamas plan work?



It depends on how you measure success.
If you want to re inflate the bubbles, then yes it might possibly. The amount of money we are looking at is truly mind wrenching. This has never been done before. At least on this scale. But what are the longer term ramifications?
Ken Gerbino writes an excellent article, that lays out the details but his overall conclusions are very plausible. While the collective wisdom is that, this is the collapse that all the gold bugs have been waiting for, Ken believes that there is one more recovery before that happens.
I have been pondering this for some time.

This is how I see it panning out;

As this year unravels there will be ups and downs in the market at various levels of volatility. essentially a sideways market. Strangely, times of violent sideways action.
As the "stimulus" money works it's way into the market and these new funds are monetised and ultimately "realised" by the economy. There will be some measure of recovery. This is when I believe inflation will begin. The stock markets will recover much of their losses, but commodities will begin to soar as the supply pendulum swings from over supply to under supply as a direct result of this current climate of demand destruction (people and companies belt tightening). As money floods the system and economic activity returns, companies will rush to ramp up production and the supply will be strained. We still have China and India to deal with. They have had a taste of a higher quality of life and it would be naive to think they are going to give this up.

Here is where my cracked crystal ball, begins to distort the image of the future and it all hinges on time. How long and how far will the recovery go?
Who knows. But I do believe that commodities will soar and the dollar will suffer hugely.

What is the ultimate end game?

Whatever it is, it'll be one for the history books.
And most likely it will be something no one expects, including myself.
But if you stock up on tangible assets now while they are incredibly cheap, you will be in a position to take the best advantage of the situation when the direction becomes clear.

Take a look at MOO, it's a play on Agri-business. And again this is a long term buy and hold.



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.

Is buy and hold, a bad strategy?

With the recent collapse of so many icons of American capitalism, is a strategy of "Buy and Hold" such a good idea?




I think that taken by itself it is more important now than ever.




If taken in the context of buying and holding Blue Chip stocks, I am not so sure anymore.




My approach to navigating this market, while I've been unconsciously doing it for some time, is to buy and hold real tangible assets as my core portfolio. I didn't realize that I was doing this until I went to analyze my over all position and portfolio allocation, which I do periodically to check my"investor psychology".




This is really a 180 degree shift.




The collective wisdom of the past was to buy and hold blue chips and speculate with risk capital(money you can afford to lose), in other markets such as commodities, energy, tech and Bio-Tech.




As it stands now I find that I sleep better at night knowing that my real wealth is protected by hard assets. When you look at some of the monsters in the financial industry teetering on the brink, I wonder if they are in any stronger position than Bernie Madoff was prior to his collapse.
Take for instance B of A, a year ago they were trading at 40 bucks now they are worth 5 and standing under the bailout TARP



Yeah I know that Bank of America deposits are insured by the Government, but who insures the Government?



We do, the people, with our tax dollars. And despite what some politicians believe, that is a finite and unpredictable number. It is a dangerous merry go round that the Government is on. As the economy worsens, they continue to bail out failing companies. Companies that still cut jobs and production with the end result being a smaller tax base.



Fewer workers, fewer payroll taxes.



Less production, less profit for the corporations and therefore less corporate taxes.



Less sales, less sales tax collected.



President Obama has stated that he is not concerned with deficit spending, but I am and we should all be. With foreign nations less willing to buy our debt, the only other way to fund his stimulus plan and various other programs is through the printing press.



Sure he could raise taxes but I doubt that he will do this. Despite the rhetoric the Democrats know that tax hikes in this financial environment would be a disaster.



So that leaves increasing monetary supply as the only avenue.



This is the big picture; Monetary supply has doubled from this time last year, which means that you have half the spending power that you had a year ago.



Don't let the fact that we have had a dramatic drop in the price of fuel as well as other commodities, lead you astray. These things take time to work through the system.



In fact this lag is itself the very opportunity that we should be looking at.



I am looking at this sale in precious metals the way I would have looked at a major pull back in Boeing two years ago.



Or Johnson and Johnson, Dow Chemical, Lockheed Martin even Exxon. Had someone told me last year that I would be able to buy these names at the current prices, I would have thought them insane.



But now, looking at precious metals, I see that they must rise in price and I don't have to know when, I just have to know when they are on sale and then buy and hold.



A very good analyst that I trust, points to a possible, further pull back in metals before they take off to new heights. It's possible. I don't think it will happen, but because I trust his conclusions, I am putting some extra cash aside in case it does. And no, I'm not selling my real metals. Those I will hold for the foreseeable future. Don't try and time this market it is still way too volatile. Buy the dips and hold. Build your positions.



Another position that I will be hanging onto is the short position on treasuries(TBT)(see Obama Bounce? Dated 1/08/09) Again I don't know when these things will happen but in the big picture they must happen.








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.

TEOTWAWKI?

It is very difficult, while searching all the resources on the net, to avoid all of the analysts that believe that this is "The End Of The World As We Know It". But in some ways, I think that they are right.
"The times, They are a changin'"
As those of you who read my stuff regularly know, I think that the dollar is in serious trouble. At the very least I believe that in addition to some really awful times ahead for Real Estate, Auto Makers and Financials, I see some scary hyper inflation in the future.
But do we need to employ the bomb shelter mentality?
In my life time I have experienced several times when this was the "fringe" tendency. While growing up it was The Cold War, with the policy of "Mutually Assured Destruction".
When that threat ended, it was time to create another, Y2K. Remember when the computers were going to ruin the world because they couldn't count from 1999 to 2000?
Then came the very real and frightening 9/11. And now we have the, also very real, collapse of the financial system.
But the question remains, Is this financial Armageddon?
I don't believe that it is, yet.
and I don't really believe that it will be.
It all depends on what Washington does in the next few months.
But, have I stocked my shelves with a few extra cans of Beenie Weenie?
Maybe.
Being prepared is not the same as being paranoid. Having been part of a disaster response team I have been at ground zero for some serious events. Hurricane Ofa, Typhoon Russ, and the Loma Prieta earth quake in San Francisco in '89. I've had to eat MREs, out of necessity before. Here at home, I have also seen a time when our rivers flooded and took out bridges, leaving us isolated for days. So I do believe in being self sufficient and managing risk. That is a crucial element of investing, as well as surviving in any situation.
So let them call you paranoid, stock up on the Beenie Weenie and SpaghettiOs (and maybe some silver and gold) so that if something does happen, be it a man made or natural disaster, you can say "I told you so", as you toss your neighbor a spare can.

Good Luck and Godspeed

JT

Re: Obama Bounce

I received a comment on my latest blog(see Obama Bounce below). When this person read that I was interested in Proshares Ultrashort Lehman 20+ year treasuries. Symbol TBT. They asked me "Didn't you know that Lehman Brothers went bankrupt?".
My apologies to any of you that had the same concern. I should have explained. Yes I did know that Lehman Brothers no longer exist. Their Index, however, lives on. The company that manages the fund in question is Proshares, part of the ProFunds Group. The reference to Lehman is simply an index, collection or list of stocks in a sector or in this case, treasuries. Just like the Dow Jones industrial average or Standard and Poors.
Kudos go out to the reader that pointed out this concern, because in times like these we need to beware and ask questions, keep it up!

Ah yes, another question was raised about my sign off slogan "Godspeed"
Here's the Wiktionary definition that most describes my intent in using the term;
An expression of good will when addressing someone, typically someone about to go on a journey or a daring endeavor.
Or from Wikipedia; Godspeed, as a word, is a wish for a prosperous journey, success, and good fortune.

The key here is that educating yourself is a journey and becoming financially liberated is one of the best gifts that you can give yourself and your family. Please keep the comments coming, because they help all of us on that path to freedom.
Email me at Torocreekinvest@aol.com

Good Luck and Godspeed

JT

Obama Bounce?

The other Night, while chatting with some friends over a couple of drinks the topic of the latest stock market rally came up and someone asked me what I thought (always dangerous when I've had a drink). My answer was, "If you've made a profit, sell". Another friend, who had the good fortune and sense to buy silver around it's current lows, asked if that advice applied to silver as well (I think she was testing me). My answer of course was no. And here is why.


This is not a market that any of us has ever witnessed before. I am even questioning my decision to buy and hold blue chips. So many people have made comparisons to the Great Depression, but there are too many differences to think that we would follow that pattern exactly. I don't know what is going to happen, nobody but God knows that, but here's the thing, if you walk out your door in the morning and the sky is cloudy and dark, grab your raincoat.


The sky is looking very stormy. In fact it looks more like a hurricane is right on our doorstep.


Many people are predicting an Obama bounce in the markets and I think they are right, in fact I believe that is what is happening right now. How high is the bounce? Who knows. But when Mr. Obama says that we are looking at "trillion dollar deficits for years to come" I pay attention.


He is going to kill his own rally.



That is a really negative thing to say to Wall Street. They hate uncertainty. They know how to make money in any environment, the trouble is in determining what your environment is. That statement, so emphatically stated, is not uncertain, it tells Wall Street exactly what environment that they are in and it tells them exactly what to do.


Bet against the dollar.


The President elect has told us exactly what he is going to do. Print more money and sell more debt. Without real economic growth, there are no other real options for generating revenue. Sure he could sell some stuff, like maybe Air Force One, some presidential ash trays or Hawaii or something, but why bother when you own the printing press.


Here's how to bet against the dollar;


Of course buy real silver and gold, but you can also short US Treasuries.


Well how do we do that and what does it mean? First going short or shorting something is just a another way of saying that you are betting that it will fall in value. You can short something by borrowing shares from your broker and sell them, then hope the value will drop so you can buy them back on the cheap, repay your broker the shares and pocket the difference. But you really can't do that with treasuries. For you and I it's not all that easy to take a short position in the US Treasuries market but thankfully there are some ETFs out there that will fit the bill perfectly.

Pro shares Ultra short Lehman 20+ year Treasury Symbol TBT and Pro shares Ultra short Lehman 7-10 year Treasury symbol PST.



Both are designed to move opposite the treasuries. And right now Treasuries are expensive and extremely over bought. There has been a flight to safety which has caused this bubble and that bubble will burst at some point in the future. When? who knows. So, as with other things I'll be buying slowly and building a position.

Remember I'm not advising you to do this, I'm just sharing my strategies. Do your own homework and check with your financial advisor before buying anything.



And as always,



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.