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