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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
Monday, April 27, 2009
Sunday, April 5, 2009
To my Friends and Family
For my regular readers this weeks post may seem a little redundant, but as the title suggests, I am targeting my family and friends with this article. Why? because the time is upon us to act decisively.
But before I launch into my speech I would like to preface it by making the following distinction;
This is not a political issue. It's just fundamental analysis. I don't care to evaluate the policies just the implications of those policies. If you are on the right I apologise, if you are on the left, I apologise and if you are in the middle, I probably don't have to apologise, but I will just in case. Sorry everybody.
The reason for my concern for family and friends, is that I don't want to see you suffer the consequences of a government gone mad. I don't see anything that can reverse the path that we are on and that path will lead to inflation. Serious inflation. The creation of money on this magnitude can only lead to inflation.
Let me say that again in a different way.
There is no other reaction to an increase in the supply of dollars, than inflation. It's a cause and effect relationship.
If you take that at face value and forget politics, there is only one reaction that you can have; And that is to protect your family and friends from this hidden tax increase.
How is this a hidden tax?
The best way to look at that is to think about what a politician must do if he wants a new program and there is no available money to pay for it. They can either borrow money or increase revenue, that's it, those are their only options. Wait, there is one more option they have now that we are no longer on a gold standard, they can just wave a magic wand and create more money.
Well heck, waving the magic wand sounds pretty easy. You don't piss off voters by raising their taxes, in fact you make them happy by giving them what they want. You don't have to make those annoying debt payments on borrowed money. In fact by making more money out of thin air you actually make the existing debt smaller. Even better!
What politician wouldn't like this. The best part is that when voters look at their savings and their paychecks they won't see that hidden tax, they'll just say that "man, things are getting more and more expensive, it must be those greedy Wall Street guys or those damn oil tycoons". They won't see that there are simply too many dollars chasing too few goods or services.
Why do you think politicians(on both sides of the isle), over the years, have moved us away from a currency backed by gold? It's because you can't create gold by government decree. There is a finite amount of gold in the world and when you peg your currency to that supply, you essentially cap the amount of currency that can be created to the amount of gold that exists.
The problem here, is that we have 4000 years of monetary history that tells us that every nation that has debased it's currency has failed and ended their future prosperity. It's played itself out over and over again throughout the ages and we are doing it again.
People will ultimately return to tangible wealth. Things of value, that can't be created out of thin air. Things that can't be devalued by morally bankrupt politicians. Things that are a store of value. Gold and silver have always been that store of value and they will increase in price, relative to the value of the dollar.
So to my friends and family, you have to save your money in the only form, that the government cannot devalue by endless borrowing, spending and printing. Buy real physical gold and silver and keep it somewhere safe. My preference is silver for various reasons, but I don't care, buy which ever you prefer. If you need help, let me know, I have several reliable sources I can send you to.
There are a lot of talking heads in the financial world that are advocating re-entering the stock market at these levels. I have had a lot of people telling me that I missed the boat on Bank of America. Maybe I did, I can't pick every one correctly. But I still wouldn't touch the financials with anybodies money. I don't have any faith in them and now that they have relaxed regulations on Mark to Market accounting, I am even more afraid of the banking sector. Keep in mind that while they may take off in value, there is no foundation under that house of cards and they can tumble just as fast as they did last time. If you want to come back into the markets, please do so, cautiously and buy stocks with strong underlying value and little or no debt. This storm is not over yet, in fact it's about to take a new turn, an inflationary one.
Debasing the currency has always resulted in it's destruction. This has always happened throughout history. I don't know if it will happen today, tomorrow, next year, in the next 10 years or even the next 100 years, but it will happen. What I do know with certainty is that inflation is here and now and for every dollar that they print, every dollar I have, is worth less and less. I want my friends and family to be safe and prosperous, so trade in those dollars before they are worthless.
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
But before I launch into my speech I would like to preface it by making the following distinction;
This is not a political issue. It's just fundamental analysis. I don't care to evaluate the policies just the implications of those policies. If you are on the right I apologise, if you are on the left, I apologise and if you are in the middle, I probably don't have to apologise, but I will just in case. Sorry everybody.
The reason for my concern for family and friends, is that I don't want to see you suffer the consequences of a government gone mad. I don't see anything that can reverse the path that we are on and that path will lead to inflation. Serious inflation. The creation of money on this magnitude can only lead to inflation.
Let me say that again in a different way.
There is no other reaction to an increase in the supply of dollars, than inflation. It's a cause and effect relationship.
If you take that at face value and forget politics, there is only one reaction that you can have; And that is to protect your family and friends from this hidden tax increase.
How is this a hidden tax?
The best way to look at that is to think about what a politician must do if he wants a new program and there is no available money to pay for it. They can either borrow money or increase revenue, that's it, those are their only options. Wait, there is one more option they have now that we are no longer on a gold standard, they can just wave a magic wand and create more money.
Well heck, waving the magic wand sounds pretty easy. You don't piss off voters by raising their taxes, in fact you make them happy by giving them what they want. You don't have to make those annoying debt payments on borrowed money. In fact by making more money out of thin air you actually make the existing debt smaller. Even better!
What politician wouldn't like this. The best part is that when voters look at their savings and their paychecks they won't see that hidden tax, they'll just say that "man, things are getting more and more expensive, it must be those greedy Wall Street guys or those damn oil tycoons". They won't see that there are simply too many dollars chasing too few goods or services.
Why do you think politicians(on both sides of the isle), over the years, have moved us away from a currency backed by gold? It's because you can't create gold by government decree. There is a finite amount of gold in the world and when you peg your currency to that supply, you essentially cap the amount of currency that can be created to the amount of gold that exists.
The problem here, is that we have 4000 years of monetary history that tells us that every nation that has debased it's currency has failed and ended their future prosperity. It's played itself out over and over again throughout the ages and we are doing it again.
People will ultimately return to tangible wealth. Things of value, that can't be created out of thin air. Things that can't be devalued by morally bankrupt politicians. Things that are a store of value. Gold and silver have always been that store of value and they will increase in price, relative to the value of the dollar.
So to my friends and family, you have to save your money in the only form, that the government cannot devalue by endless borrowing, spending and printing. Buy real physical gold and silver and keep it somewhere safe. My preference is silver for various reasons, but I don't care, buy which ever you prefer. If you need help, let me know, I have several reliable sources I can send you to.
There are a lot of talking heads in the financial world that are advocating re-entering the stock market at these levels. I have had a lot of people telling me that I missed the boat on Bank of America. Maybe I did, I can't pick every one correctly. But I still wouldn't touch the financials with anybodies money. I don't have any faith in them and now that they have relaxed regulations on Mark to Market accounting, I am even more afraid of the banking sector. Keep in mind that while they may take off in value, there is no foundation under that house of cards and they can tumble just as fast as they did last time. If you want to come back into the markets, please do so, cautiously and buy stocks with strong underlying value and little or no debt. This storm is not over yet, in fact it's about to take a new turn, an inflationary one.
Debasing the currency has always resulted in it's destruction. This has always happened throughout history. I don't know if it will happen today, tomorrow, next year, in the next 10 years or even the next 100 years, but it will happen. What I do know with certainty is that inflation is here and now and for every dollar that they print, every dollar I have, is worth less and less. I want my friends and family to be safe and prosperous, so trade in those dollars before they are worthless.
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
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