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.