September 25, 2009 Anecdotal evidence offers serious reason for concern about the economy! I just returned from a 2,000-mile Harley trip from Newport, RI, to Blowing Rock, NC, and back. Do you know what struck me the most, aside from the beauty of our country? Empty store fronts from one town to the next. We spend little time on the interstates. Most of our riding is through small towns of 25,000 people or fewer. We noticed the problem in Carlisle, PA, a beautiful little college town that I have ridden through a dozen times or more. I was also shocked by the empty store fronts in Newport’s … [Read more...]
Archives for September 2009
Top 10 Mistakes #6
September 18, 2009 Entry #6 on my list of the 10 biggest mistakes investors make is failing to focus on the Fed’s federal funds rate beacon. Today the fed funds rate is basically zero. That means rates have only one way to go-up! Interest rates have been in a decade-long decline. But as you can see, the decline is over. The last big run-up in the fed funds rate occurred in the 1970s, when it soared to almost 20%. The ’70s were a decade of booming inflation as the Consumer Price Index (CPI) hit 20%, and not surprisingly the stock market in the ’70s went nowhere. By the early ’80s, the … [Read more...]
Peculiar Divergences
What worries me most about the stock market rally are the peculiar divergences we are seeing. What do I mean? Let's look at some charts. My first chart shows that gold is breaking out to the upside on heavy volume. SPDR Gold Trust Gold is an inflation hedge, a currency hedge, and a safe-haven asset. When gold rises, other financial assets are often falling. But my stock market chart shows that the S&P 500 has rallied virtually uninterrupted since bottoming in March. S&P 500 Oddly, though, volume is falling while prices are rising. A divergence in price and volume … [Read more...]
Top 10 Mistakes #7
September 11, 2009 How does a triad of a 20% prime rate, $200-per-barrel oil and $2,000-per-ounce gold sound to you? Are these numbers possible, or even probable? Oh yeah! And, in fact, the record-breaking deficits and printing press activity at home suggests these numbers may be underestimated. If Israel attacks Iran’s nuclear sites (a 50/50 bet), you’ll perhaps see oil prices well above $200 per barrel. Your strategy is to protect yourself from such an outcome while exposing yourself to minimal risk if you are wrong. In my strategy reports, I write about what you should do. And as a client … [Read more...]
Top 10 Mistakes #8
September 4, 2009 More money has probably been lost by overreaching for yield than by any other misguided strategy. Today, investors are really spooked. Money market funds, bank CDs, and treasuries offer little in the way of yield. That’s why I would suggest that you eschew all three, except for your emergency funds. I would also, given my views on inflation (expressed monthly in my letters and Matt’s client letter), avoid long maturities. A middle-ground approach is the way to go. I outline my views in both my monthly strategy reports and use this work to craft portfolios at Richard C. Young … [Read more...]
Get It While It’s Cheap
Natural gas is super cheap today, but it could get cheaper before the cycle is over. There is an abundance of it. U.S. storage capacity is almost full. If excess production does not drop before capacity fills up, the price of natural gas is likely to weaken. Natural gas is out of favor. The momentum crowd is bailing out, driving prices below the cost of production. Smart successful investors move against the crowd. You want to be a buyer when everybody else is selling. Long term, today's depressed natural gas price is unsustainable. It has to rise. Gas is cheap, clean, and available in … [Read more...]