Today's Market
by Dr Invest

More confusion remains in the market. One analyst says, expect stocks to collapse and the dollar to strengthen. He also claims that a recession is eminent. Another analyst says, the FED must stimulate the economy now and expect the market to rise 30% before the end of the year.

Today a rise in applications for unemployment for the fourth straight month was reported. All the while, analysts have been talking about how strong the economy is and debating the unemployment figures. While some analyst are busily arranging the chairs on the sun deck, the ship is going down.

Wait no longer

Your stocks are not going to go up in value. That is my view. Not only have we lost most of the gains from stocks in 2012, we have also have a recession in Europe. Hopes have risen for another stimulus paid for by the U.S. taxpayer. Time is running out. Euporia is beginning to sink. One day, the market rises 1%, the next day the market falls 1%. There is not a DEFINIATIVE DIRECTION in the market at this time. Who can know... but this SIDEWAYS movement is indicative of either a strong breakout or a significant downturn. Hmmm....let me see.... uh, I'm guessing DOWNTURN? Look, is there anything in the market that would make you think that we are on the edge of a prosperous upturn? If not an upturn, then the only other possibility is a DOWNTURN. And in the face of worldwide economic slow down, I'm gonna suggest that if you are holding on to stocks right now, they will only go lower.

Sure, a little stimulus will spark the market for only a short while, but without real changes in the world-wide economies we are set for an immediate downturn and possible years in a pathetically poor GNP.  Wait no longer! Get out of stocks and if you invest back into stocks, only do so when it is most favorable for a positive return.

Being Prepared

When a "recession" returns it will no only affect stocks, but bonds as well. I have suggested utilizing ETFs because they are easy to get into and to get out of. Always, always, always, limit your losses with at STOP-SELL. Do not be caught flat footed! Determine now how much you are willing to lose and if you have any, and I mean any securities, put a STOP-SELL on them.

Listen, I would never lose more than 10%. If I have been invested in some type of security and it has already made me money...and I knew that the market was nearing collapse, I would move my STOP-SELL closer to the daily closing price to get as much profit as possible. (questions: drinvest@mail.com)

This market is nothing to TOY with. It is in this kind of market that fortunes are made and lost. I don't want to do either...I just want to survive. There are complicated ways to HEDGE, but even professionals trip on their shoestrings.

So let's keep our trades simple and make money when we know it is most possible.

A Home for the Cash in your Portfolio

This week, I have been researching the best money market accounts or Certificates of Deposit where you can invest your money an keep it safe. Let me be blatantly honest with you! The FED has made CDs worthless, so you will be forced to buy stocks. They are devaluing BONDS as well with the use of TWIST. More of these actions will take place by the FED because they don't want you to have a "safe harbor" for your money. Even gold, has recently been driven down by designed market pressures. The goal is to GET CASH MOVING. If you invest in real estate... a safe-haven I do believe, someone else may use that cash to buy a new car...or money will flow to real estate brokers, bankers, and mortage brokers... some where, some one, hopes the government, will spend cash.

At this time the safest place for 1/3 of your portfolio, set aside for cash, is in a CD. I also see Real Estate as a viable option, but your cash would become less liquid. There is also the difficulty of a deep-recession devaluing your real estate. But on the other side, inflation has to take hold at some point, where real estate could grow in value 20% to 40%.

Gotta go...if I think of some new ideas, I will share them.

(note: the above article is for entertainment purposes only and not to be used a investment advice.)

Today's Market
by Dr Invest

Shocked! Only a few minutes ago, I had looked at the DJIA (DOW) seeing it down only 30 points. Passing by my screen later, I could see it had declined 50 points. I assumed that the market had closed and the DOW was somewhere around 50 points down. Looking closer, I saw the DOW down almost 143 points.

Spain had been given 125 Billion by the EuroTribe but it did not quell the sick feeling that contagion would sweep into Portugal, Ireland, or Italy. Furthermore, the Greek elections will be held this coming week-end and new political winds are likely to blow Greece out of the Euro currency and back into their Drachma currency. There is complete uncertainty about how this would effect the EURO.

Some think that as countries escape from the EURO they will print as much of their currency as they want. Then a domino effect will take place. Other countries would say, "Forget this austerity, I can print my way out of debt! If I owe China $500 Billion in EUROS, I'll return to my own currency and print enough of my fiat currency to payoff that loan.

In Greece 20% -25% of the people are public sector employees. Many more are retired and dependent upon the liberal pension funds they receive from the government. Printing more currency helps the government meet the immediate demands by the people, but they are paid with an inflated currency. The new French president, Hollande has proposed that the EURO should grow its way out of the recession. "Borrow more money.", he says, "Then invest into infrastructure to pay workers, who will buy things, and companies will produce more, and all of the EU will be flying high." Kinds sounds like our present plan in the U.S. doesn't it. COULD I VOTE FOR HIM IN THE UP COMING U.S. ELECTION?

Someone said, "It is like 10 very poor countries voting in a union of eleven countries, that the one rich company (Germany), should cover all their debts." That's a nice idea if you have no money and can't manage your own financial affairs, but a poor idea if your nation has worked hard, saved, and exercised good financial management.

Some of you Kensians are going to disagree with me, but economies are limited in growth by the lack of demand for product. For example: I make 20 widgets to sell in my neighborhood, but there are only 5 people that live in my neighborhood. Even if 100% buy a widget, 3/4 of my widgets would remain unsold. Even if I went from house to house giving all 5 of my neighbors one-thousand stimulus dollars, there is no gurantee that they would spend it on my widgets.

G. Bush stimmulated the economy by giving each household a check. I got one! Do you think I went out with my $200 check and bought a "new thingy"? Look, I put that money so deep into a bank account, that I still can't find it! I'm sure many people spent theirs right away, but others were like me and horded their check.

OUTCOMES

The last minute drop in the DOW was a surprise to me, I wrongly thought that Spain's bailout would have insured a rise in the market. I am not invested into stocks at this time, nor gold. The BOND FUNDS, TIP and BND both rose today in value. If the EURO continues to fall in value to the U.S. dollar, gold will also fall. I don't really see an end to the downtrend in the Market at this time. Look at the technical chart below.

Remember that technical analysis is not a science, it is more of an art. The market moves in "real-time" and there are no absolutes. A sudden war with IRAN will change every rule used to interpret a chart. For example, look at the YELLOW BOXES. These represent hopes by the market that Bernanke would stimulate the economy with your tax dollars. Even though there was  clear "head and shoulders" pattern in May, the expectation that Bernanke would stimulate the market, led to a spike in speculation. Most recently, and documented in this blog, was the expectation that Bermanke would absolutely stimulate the economy as defined by the last yellow box. So the technical analysis becomes difficult when an "Irrational Exuberance" pushes the market higher by hopes that the FED will do "one more stimulus package".  Even today, a trader was talking about Bernanke coming to his senses by the end of the month and doing a stimulus in the U.S. economy.

The red lines indicate an average fall in a downturn. (see blog on May 16th) Sometimes the DOW turns down more other times less, but most of the time the downturn is as illustrated on the above chart and used to project the possible downturn over the next four months.

I think it likely that we will see the DOW move down to 11,200 and that is is possible that it will move down to 10,200.  These are only estimations and not reliable for trading. For instance, we don't know how quickly it will move down. The DOW could move sideways for weeks and then plunge down or plunge down, rebound, and plunge down again. I think what is important is that it doesn't seem like the DOW is suddenly going to rebound to hit 14,000 points.

Regardless of where the immediate moves may take the market, stick to your Ivy Portfolio trading strategy. TIP and BND seem to be a good investment position to take. Use the 10 month simple moving average as a sell or buy signal. When the price of TIP or BND falls below the 10 month SMA, sell....but only if it is the first day of the month. According to Harvard Business School, this is a desireable method for investing. See http://www.advisorperspectives.com/dshort/updates/Monthly-Moving-Averages.php

(note: the above article is for entertainment purposes only and not to be used as investment advice)

Weekend Report
by Dr Invest

The past week broke market records from the lows to the highs. Friday, the market still seemed to be on an uptrend, but with the economic uncertainty in Europe, there was an overall nervousness in investors. Still, the "talking heads", with their poker-faces, made claims that the market would rebound and new highs would be set for 2012.

Let me repeat myself once again: "The market is the sole determinate of its price". It cares nothing of what I think, of what the President thinks, of what any economist thinks. When you jump in, you are like a cork in a stream, the stream will take you where it wants. One element of control you possess is that of determining when you want to get into the stream and when you want to get out of the stream.

Actively Managed Portfolio

An actively managed portfolio simply means that someone is taking advantage of market opportunities and BUYING when they are apparent; the same person is SELLING when the market is declining.

The reason that people don't actively manage their portfolios is because of “the fear of failure”. The surprise here is that there are many people actively managing their own portfolios, cutting out the investment adviser's 2% and beating the market.

If you choose to go with an investment adviser, ask him to give you five of his actual portfolios that are beating the Dow and S&P over the past five years. He doesn't need to name his clients, but he does need to show you his performance. Let him know that you are not interested in what an investment instrument should do, you want to know what it did.

There are reasons why a “Buy and Hold” can't work in the present market conditions. The best way to see that is with a long-term chart of the market's behavior. What we see is that between 1975 and 2000, the “Buy and Hold” method would have been out standing. But look at the chart below and examine the behavior between 2000 and 2012.

You will find a less than desirable choppy market with big losses and big gains.

Every time the market falls you loose the original value. For example a $100,000 portfolio falls 30% and at the bottom your CORE investment is only $70,000.... now when the market recovers, you gain 30%. What is 30% of $70,000? Yes, your right, it is $21,000. So without adjustment of deflation or inflation, your ORIGINAL PORTFOLIO valued at $100,000 is now only worth $91,000. On the second dip, your portfolio looses 30%, falling to a value of $63,700. The market regains 30% yet again and your new portfolio value is $82,810.

We are getting setup for yet another fall in the market. John Hussman at <hussmanfunds.com> estimates the next fall in the market to be 30% or larger. At the next 30% drop in the market, your portfolio will be valued at $57,967. Assuming it recovers the 30% lost, your NEW PORTFOLIO BALANCE will be $75,357. Over an estimated 15 year period, you will have lost 25% of your portfolio's value and that is without adjusting the inflation.

One more point, a conservative estimate of inflation is 2% per year. Multiply 2 times 15 and your new loss will be 30% to inflation. So our final portfolio's value, inflation adjusted, is $52,750.

Oh, and did I mention the Finanical Adviser's fee of 2% per year. So take off another 30% for adviser's fees. You can't survive an investment that is steadily declining. The final question is... DO YOU WANT TO BUY AND HOLD?

My Approach

 First, if you need an Finanical Adviser at all, pay him an hourly fee. An adviser can be of great help in preparing an investment plan to achieve your financial goal. And my suggestion is that you DO NOT LET HIM SELL YOU ANYTHING. Sells equals earnings for your financial adviser and he will drain you with annual fees, hidden fees, and kick-backs from the companies that are now keeping your money. No matter how good the product he is selling sounds, IT IS NOT!

Second, get a TRADING METHOD. You need a method of investment that consistently works and if it doesn't, you need a new trading method. DO NOT BUT A TRADING METHOD OFF THE INTERNET. Academia is your best source. What methods have been tested by Business Schools and Universities? I am suggesting that as a begining investor that you buy the book "IVY PORTFOLIO" and learn how to use this system.

Third, NEVER LOSE MONEY. Use stop-sells to limit your losses. Before you ever buy an investment, determine how much you are willing to loose. Set your stop-sell at that point and always sell at that point if your investment continues to fall in value. On the other hand, if the investment rises in value (price), move your stop-sell higher.

My Example

 On the 2nd of May, I purchased  $1,111 of BOND FUNDS called: TIP and BND, putting a stop-sell 3% below the purchase price. By the end of May, this investment had gained 1.32%. I  purchased $1,111 more of TIP & BND the first of June which has decreased about .42%. So both May's purchase and June's purchase show an overall increase of .13%. (Go back to previous blogs to learn how to invest in the Ivy Portfolio.) My stop-sell is placed 3% below the purchase price of TIP and BND on the 1st of June.

I will make another purchase in July of $1,111 of TIP and BND, when a full 1/3 of my $10,000 portfolio will be invested into BOND FUNDS. If the price of TIP or BND moves below the 9 month simple moving average will I not purchase more and will sell what investments I have made into BOND FUNDS, unless the prices of TIP & BND rise above the 9 month simple moving average.

Look, had I invested my total $3,333 set aside for BOND FUNDS on June 1st, I would have lost .42% as of this date, but by having bought in stages, I still show a profit in my total BOND PORTFOLIO. I think in August and September, we will revisit the lows of 2011. So I expect that over the month of June, we will see bond funds rising and stocks continue to fall. Remember that BONDS don't move much up or down, so 1/2% per month is good. That returns 6% per year. I don't believe that this year the GNP will see 8% -10% growth. Even the FED predicts a tepid 2% growth in GNP. Bond ETFs should continue to grow modestly and I am expecting a growth of .89% to 1% monthly.  So eventhough I entered the BOND ETFs in MAY, I am still expecting a 6% to 9% return from TIP and BND by the end of 2012. (note: I invested a total 1/3 of my portfolio in May because I wasn't fearful of the risk. Still, you should see 6% in returns. <these are only estimations and you could lose money.>)

As always, the objective is to reduce risks, but raise gains. If the economy tanks, I will stay out of stocks in the fall, but it is most likely that stocks will come alive during the presidental election because of the hundreds of millions spent on the campaign, possible stimulus by Bernanke, and the seasonal gains from Halloween, Thanksgiving, and Christmas.

So the goal will be to place 1/3 of the $10,000 portfolio into stock ETFs in October, like VTI. Projected returns 8%-10% for a stock portfolio. Furthermore, some of the 1/3 held back in cash, may be invested into out performing seasonal stocks like FDO, DLTR, CATM, or PETM. These could move 10% to 14% or more. Other seasonal stocks could be identified.

OVER THE NEXT WEEK, I HOPE TO SHOW YOU WHAT YOU CAN DO WITH THE 1/3 CASH YOU ARE HOLDING IN YOUR PORTFOLIO. I will try to give you some CDs and Money Market Funds that will return some income back into your portfolio.

In such a volatile market, an 8% return on invested money would be commendable. Perhaps we can move that closer to 9%.

(note the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

There's really no new news today. (Read yesterday's blog.) The scenario is really the same as expected. Traders thought a QE from Bernanke was a certainty, but Bernanke made it clear that the Fed would take action if needed and that no action as eminent.

Just as I had said yesterday, the worst is yet to come and when we slide to last years lows, Bernanke will rush in to bolster the market just before the elections. Now is not the time Bernanke is going to stimulate the economy.

The traders were sorely disappointed that the Federal Government was not going to keep the gains coming. http://finance.yahoo.com/news/stock-index-futures-signal-pause-093302524.html Listen to the attitude here:

"Bernanke threw traders a curveball. After his vice chair made it seem like QE was a foregone conclusion, he really messed people up. We tried to shake that off, but there was a lack of follow-through and we lost momentum," said Phil Flynn, senior market analyst with PFG Best in Chicago."

Oh, really? And this guy is managing money for investors? The gains in the market over the past two days have been because financial managers have been betting that Bernanke was going to stimulate the economy. Now that no immediate stimulation is evident, what will happen to the market.

You can expect the market to remain flat, if not to begin a slow decline. OK, it may take two or three months, but in the end we will revisit the lows of 2011. Weakness is still in the market and there is no evidence that Europe is any closer to resolving their own economic disaster. China's economy is slowing and the U.S. economy is also showing signs of a slow-down.

About Gold

I have been trying to get excited about gold. Read my previous blogs on the subject at the first part of June. As explained to my Gold-Bug friends, gold is an investment and deserves your money ONLY, if Gold is rising in price and is in a uptrend. Gold, is no different than a STOCK. If gold is selling-off, get out of gold just as I did in February of this year. If gold shows a consistent rise in price, buy!

The problem is this, Gold has been slowly sliding downward in price. Today it fell $31.20 according to KITCO, a little over 2%. The danger here is gold falling below $1550. There has been a sideways movement, but nothing is really definative either up or down.



As I've said before, I'm not holding gold at this time. I would steer clear of gold for the present, unless it moves into a clear uptrend. For the last few days, gold has been moving lower, this isn't good news. If you bought gold when it was cheap, good for you. I'm glad you gained 20%, 30%, or 100%, but why take a 20% haircut to hold gold when you can sell at a profit and reinvest when gold continues its climb upward.



You will not like what I have to say next, but my investment in to the BOND ETF called TIP, has returned 4.3% YTD. Gold has returned 1.3% YTD (year to date). Please, in no way am I claiming that a BOND fund will out perform GOLD. What I am claiming is that your investment needs to be based on performance, not what is bright and shiney. If gold doesn't perform, dump it! I'm not in love with gold, oil, or stocks, I'm in love with a portfolio that is gaining.

As senseless as it is to attempt a "Buy and Hold" investment method over the past 12 years, it is equally as senseless to use a "Gold Hold" investment when gold is declining or failing to perform.

By April of 2011, I had gained 12% from holding oil stocks. (APA and HK) I sold the stocks with the crisis in Egypt and then repurchased HK. HK (Petrohawk) was purchased by Billington with a gain of 48% to my stock price. In November, I purchased DLTR, CATM, FDO, and PETM with gains of another 12%. There was no fancy trading here, just simple straight forward buys and sells. I promise, my return was better than the rise of gold in 2011.  Hands down, a return of 20% to 30% in gold for six of the ten years reported above is impressive, but those days are over.

Little matters about the returns of 2011, what matters are the decisions made this week, this month, and this year. Gold may surprise in 2012, but at this moment in time, I am underwhelmed.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

"Market conviction" is a firm belief that what you know as truth will ultimately prevail. At this moment the market is scurrying upward, with no real truth to underpin the rise in market. Today's unexplainable rise is due to the "Irrational Exuberance" remaining in the market. Here are some things that this morning's traders are assuming: 1.) Europe will work out their economic problems; 2.) Bernanke will introduce a new TWIST to stimmulate the economy; 3.) That stimmulus will promote new growth and both the U.S. and International economies will be booming once again. (Listen, I got a bridge I want to sell you! Yeah! The Brooklyn Bridge!)

As said in my previous blogs for May, I do expect to see a small rise in the market from June to July but with the overall market remaining largely flat as demonstrated by the "seasonal chart" for the DOW JONES. I do expect that more bad news coming out of Greece and Spain will continue driving down the market to the lows of 2011. I also expect that Bernanke will attempt another "stimmulus program" to create bragging rights for the encombant president, but not so much that the Republican challenger can't point to the presidents dismal record in handling the economy. (I call this the ole political stand-off. The political playing field has to be leveled so there is a fair election and Bernanke will do what all his predecessors have done in a political year.) My view, is that stocks will be a great buy toward the end of October and will continue a strong up trend until the end of 2012 because of Bernanke's stimulus. But watch out in 2013!

The Truth

No! You can't handle the truth! 1.) Problems are going to persist in Europe - The debt is just too large and budgets too bloated to stop the trend downward. 2.) We now know that Bernake's stimmulus programs only did two things reliably - inflated prices and gifted Wall Street with a rising market. A more appropriate name for Bernake's packages is "a Wall Street Stimmulus Package". There has been no dramatic rise in unemployment and one could argue that whatever marginal decrease we haves seen in unemployment has been due to seasonal effects. 3.) If recovery comes at all, it will be measured in years, not months.

Playing the Game Your Way

Don't let the talking Wall Street heads convince you to play the market their way. "Their Way" is to get your money invested in what will profit them, then sell when the time is right to make money for their clients. I promise, you will see that you are left holding and empty bag. Now, more than any previous time, you need to make carefully crafted investments and guard yourself from frivolus emotion driven investments that will rob you of potential gains later.

You will hear a term called, "Chasing the Market". Chasing the market is when you are attempting to buy the hottest stock...but the rally for that stock began many months before it got HOT. Now that you hear about the "Hot Stock", you buy just before all the real traders sell. Your purchase simply sweetens their gains, so when they sell as amateur investors are attempting to buy, they reap the gain and leave you with the bill.

When you have a dip in the market of nearly 2% one day, and a few days later a gain of 2%, it is hard to catch that gain. Most amateurs sell after loosing 2% and when they see a rise in the market of 2%, they buy once again only to see the market descend yet again. Total losses to the amateur? They lost 4% or more. If you do this only three times in a year, you have lost 12%. Ouch!

This is why real traders use a "TRADING SYSTEM". It insures that decisions are made without emotion and that you stick to your "TRADING CONVICTIONS".

Bond Investments Down (for now)

I just bought BND and TIP, first in May and then in June. I am still to the positive in the overall investment, but the past 6 days has not been nice to bond type investments. Don't get panic, people are speculating on a stimmulus in Europe and the U.S.  The Ivy Portfolio trading method is not concerned about rumors or speculation. The method is built on fact. If the price falls below the 9 month moving average, sell! And according to the rules, you only sell at the FIRST OF THE MONTH. You just bought the stock! FOLLOW THE TRADING METHOD.

Wall Street is so attached to government stimmulus, they expect it! No! They demand it! I don't think that Bernanke can do anything right now, other than make promises. For example, Bernake stimulates the economy and then three months from now, the economy tanks again..... would he stimmulate the economy once again before the election.....come on! You don't really think so, do ya! No! Bernake is only going to use the stimmulus when he knows it will provide a fair election for the presidental election in November. DON'T EXPECT A STIMMULUS PACKAGE RIGHT NOW! Expect promises, but not a package.

More bad news is on the way from Europe and when it is clear that no stimmulus is immediate, the market will continue its tumble. Get some conviction and stick to your TRADING METHOD. (See Sidebar)

Update (added at 3:30)

Remember what I predicted earlier in today's blog, no stimmulus until August or September when we may reach last year's lows. I can't help but laugh at the AP headlines: Fed survey: US economy, hiring improve at steady though moderate pace. This is so far from the TRUTH, that it should be criminal to print it.  http://finance.yahoo.com/news/fed-survey-finds-us-growth-180200698.html 

"The U.S. economy grew moderately in most regions of the country this spring and companies kept hiring, according to a Federal Reserve survey released Wednesday." The TRUTH reports that the  unemployment rate just rose from 8.1 to 8.2 last week?  

"The positive survey, which is anecdotal, also makes it less likely that Fed policymakers will take further action in the coming months to lift the economy. The survey doesn't suggest the economy is in dire need of help, many economists said." The TRUTH is that the VIX (fear index) has been rising and recent influxes into the purchases of BONDS and TREASURIES reveal the level of that fear. Finally, as I said, Bernanke will not commit to stimmulus until just before the election.

"This report (I thought it was a survey.) was more upbeat than probably anyone expected," said Jennifer Lee, an economist at BMO Capital Markets. That suggests that "some of the soft reports on payrolls, auto sales, and manufacturing may be temporary."  The TRUTH is that all this positive ooze has no basis of fact, other than a survey. And note: This survey moved from a survey to a report. And note the well crafted wording: SOME OF THE SOFT REPORTS......MAY BE TEMPORARY.

If you are to grow into being a good investor, you need to identify the difference between spin and truth. After one, two, or three days, a market that has decimated your investments for 2012, suddenly is reported as growing moderately with hiring improving. Think with me for a moment. Is this possible that you could lose all the gains in the market for 2012, see a decline in employment, and believe a SURVEY.

Positive news spin supports the "Irrational Exuberance" and spurs the innocent to invest into a market destined to decline in the days, weeks, or months ahead. Stear clear! JPMorgan believed their own PR (public relations) and got scalped 2 Billion. Trained economist and financial analysts are believing this to and guiding your portfolio. When the lies are exposed by the truth, there will be billions more in losses.




(Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Weekend Report
by Dr Invest


The past week has been "Breath Taking" with the rise and fall of fortunes in the Stock Market. A 275 point fall in the DOW over one day is a significant downturn, but some of the great falls in the DOW have exceeded 700 points in only a day. Typically, a sharp one day downturn is followed by an upswing the next trading day. I would expect an upturn, however short, on Monday; but continued expectation of bad news may curb any possible rebound.

The market itself is in a SEASONAL DOWNTREND; and when you add a tepid economy here in the U.S. coupled with a faltering world economy, an upturn in stocks right now doesn't look very favorable. There will be "bold traders" that will try to play this market, and they will either lose a lot of money or gain a lot of money. These kind of "stock traders" do not stay in the market for long. In spite of spectacular gains, there are also spectacular losses. Jesse Livermore, possibly one of the greatest traders in his time, gained fortunes and lost fortunes. At the end of his career, he had lost everything, saving a few million in a family trust. The crowning response to his failing career as a "stock trader" was to extinguish his own life.

At this moment, the market "dicey". In other words, stay away from stocks right now. The trend is not following the seasonal chart for the market at this time. The market will tend follow the seasonal chart and typically the real downturn doesn't take place until August or September. I think we can already see that this has not been an ordinary year and many are thinking that the best of 2012 is behind us.

I think the bubble has burst for the moment and that many investors are coming to the recognition that the bull run of 2012 is over. Monday will determine whether investors are moving toward panic or ready to take-on more risk because in their exhuberance they believe the present lows are buy opportunies. I am in the panic camp, my stocks sold in April when they hit their stop-sell.

My Purchase on June 1st

I recorded on this blog, my purchase of TIP and BND exchange traded funds this past Friday. My original investment into TIP and BND of $1,111 in May, had grown 1.32%. I purchased another $1,111 of TIP and BND that grew 39% on Friday. As of the closing on Friday, TIP and BND had a total of $2,222 invested into the positions with a total gain of 76%. The goal is to see TIP and BND gain a total of 2% by the first of July, when a final $1,111 will be invested into TIP and BND.

We will wait until the end of October to see if there are viable opportunities to invest into stocks at that time. Using a $10,000 portfolio, we have set aside $3,333 for investment into stocks, but we know that NOW IS NOT THE TIME TO INVEST INTO STOCKS.

About Gold

I see gold coming alive once again, but not enough to feel comfortable in investing into the commodity. Below is the recent chart on gold prices. Until gold breaks above $1740 per ounce, an investor would only be speculating that gold would continue a long term uptrend.



Because the downtrend in stocks is going to continue in the near future, gold could continue to rise in price. A speculator might buy in at $1,660 and hope that gold climbs to $1,900 again. If you chose to practice this kind of speculation, limit your losses with a stop-sell. And be prepared to lose some money.

If you just like the idea of having gold, then buy it and walk away. Come back in two or three years to check your gains or losses.

Other Speculation

During a downtrend, some people choose to buy INVERSE EFTs.  You can look at the chart below. Here is my view: Don't speculate! More times than not, your speculation ends up in a reversal of fortunes. That mean that the market gets your fortune.

UltraShort (2x) Sector:

ETF Name	Ticker	Benchmark Index
UltraShort Basic Materials	SMN	Dow Jones U.S. Basic Materials
UltraShort Consumer Goods	SZK	Dow Jones U.S. Consumer Goods
UltraShort Consumer Services	SCC	Dow Jones U.S. Consumer Services
UltraShort Financials	SKF	Dow Jones U.S. Financials
UltraShort Health Care	RXD	Dow Jones U.S. Health Care
UltraShort Industrials	SIJ	Dow Jones U.S. Industrials
UltraShort Real Estate	SRS	Dow Jones U.S. Real Estate
UltraShort Semiconductors	SSG	Dow Jones U.S. Semiconductors
UltraShort Oil & Gas (Read this first)	DUG	Dow Jones U.S. Oil & Gas
UltraShort Technology	REW	Dow Jones U.S. Technology
UltraShort Utilities	SDP	Dow Jones U.S. Utilities

Never the less, if you have plenty money to burn, you might speculate by "betting that the market will go down". If you get weak in the knees and nausea comes easily, I would recommend staying away from these kinds of investments.

Early in my stock trading career, I invested in what was the "hottest stock". I imagined getting a 20%, 30%, even 40% return. I could envision myself announcing to my wife,  "Dear, I just made $6,000 today. Let's pack our bags and head for Rome, I'll make another $6,000 from my telephone as we are flying there!" Any real investor knows that the stock market doesn't provide these kind of returns.

There is no sicker feeling than investing into a stock, then seeing it decline $500 the first day, then another $1,200 the next day. All the while, you hope that the economic winds will bring a reversal and your stock will begin to climb again; but after a month or two of losses, you finally conceed your loss and sell, happy that you only lost $6,000. Did I ever tell you about the time I invested into GE? It seemed like a good idea at the time. After several months of losses, I finally sold the DOG. I expected to see GE suddenly turn upward, but GE continued its march downward until I thanked God that I had such a small loss... as opposed to what I could have lost.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest


We have an investment strategy called, "Ivy Portfolio" by Mebane Faber. This well tested method has brought some remarkable returns. The idea is to use a 9 month simple moving average and when price of the selected EFT (exchange traded fund) falls below the 9 month SMA, you sell the ETF. To sweeten the investment, I use SEASONAL CHARTS to buy at the most favorable time. As the price of stocks begins a decline in May, bonds will move inversely, gaining in value. As predicted, as my stop-sells sold my declining STOCKS, I purchased BONDS.

My portfolio to invest is set at $10,000 for my example below.


My diagram above, shows the $10,000 portfolio divided into thirds. Then, we see the bond investments divided into thirds, so that over a three month period one can safely enter a bond position.

I made my first purchase on May 2nd, investing a total of $1,111 into two ETFs, TIP and BND. I also placed a STOP-SELL 3% below the purchase price of each ETF. Today, I purchased another investment of $1,111 of TIP and BND.

Five shares of TIP was purchased at $120.70, while six shares of BND was purchased at $84.50. The total investment today was $1,231.20. A STOP-SELL was placed at 3% below today's price for TIP and BND. (So my previous gain into TIP and BND was 1.32% as of today. Even if the price of TIP and BND fell 3% and was sold, the actual potential loss would only be 1.68%. Assuming that we see another 1% gain in June, the potential loss will only be .68%. And by the end of July, assuming another 1% gain, even with a 3% stop-sell, set at the most recent closing price, the investor would see a .32% GAIN. This is precisely why we slowly enter a position, whether a stock or bond. )

Should we continue to see bad news coming from Europe and the U.S., your investment into TIP and BND will only grow. I do believe that some form of "Quantitive Easing" or new "Twist" will be applied by the Federal Reserve, but not until we hit the lows of 2011. We we continue to lose 275 points on the DOW for several more days, we will be at the low of 2011.

For the first time this year, we saw PANIC in today's market. THE SMART INVESTORS KNEW IN APRIL, THAT THE MARKET WOULD PLUNGE. Still, Wall Street kept to the mantra, "Buy! Buy! Buy!", while many were SELLING as the "Little Investors" greedily snapped up the opportunity to buy stocks that were valued a historic lows...at least according to the "talking heads" of Wall Street. Go to yahoo.com and call up the DJI chart for yourself. At the first of April there is a "sell off", Wall Street calls it a "buying opportunity" and little investors snap-up what they percieve as "undervalued stocks". When the big decline takes place in the middle of May, the smart money has left the building and those with a "buy and hold" philsophy, plus the greedy, are left with the losses. As of today, 12% losses for the year.

I am a little alarmed by the intensity of the decline. Along with me, are other investors who predict a 20% to 30% decline before hitting bottom. Some notable examples of Institutional Investors that were caught "flat footed" was JPMorgan Bank, who lost 20 billion or more. Their analysts expected a market rally.

Preparing for Potential Losses

Listen, the examples I have cited are important to you as an investor. You can't always believe what you hear on CNBC or read in Money Magazine. These are typically slick media events to spur investment into a fund, a stock, or other investment vehicles. It is a form of "Pump and Dump".

Second, when you invest, you must recognize that you will NOT ALWAYS BE CORRECT in your assessments. The object lesson here for the "small investor" is to get out of a declining investment as soon as is possible.  If you invest, you will lose money. Fortunately, you will gain money too! But when investing, you want to lose as little as possible and gain as much as is plausible.

(note: the above article is for entertainment purposes only and not to be used as investment advice.)