There was a time in my life when I would visit a craps table or two. Based on the money the house had on their side of the table versus mine, I should have chances were they wouldn’t be renaming the casino after me by the time I was done. But I did pick up valuable information that has benefited me in the investment world.
The first thing I learned was despite the game basically offering almost the same odds whether you bet on the shooter or against them, the vast majority of players bet with the shooter. Why? Because our nature is to be part of a crowd rooting for the same thing versus betting against the crowd. Just stand by a craps table and you will see not only how camaraderie develops among those betting on the shooter, especially as he or she makes passes and numbers, but how that crowd reacts to anyone who happens to be betting against the shooter. Another factor that usually develops is as those betting on the shooter win more, they not only tend to bet more, but also make certain types of bets they otherwise wouldn’t if the shooter wasn’t “hot”. Yet another factor is the small minority of players who bet against the shooter, tend not to pile on when they’re winning like those who bet on the shooter. They also seemingly stop making their bets far more often after a few losses than those betting on the shooter.
So what does this have to do with the markets? The vast majority of individuals and professionals go long. The 1990s gave stock market players an unrealistic belief that being long or wrong was the way to play the stock market. That “fable” has since been destroyed or has it? After two months of a virtual straight up move, the “Don’t Worry, Be Happy” crowd has managed to gain the ear of the market by playing the announcers voice at the end of the U.S. versus Russia 1980 Olympic hockey game who said “Do you believe in miracles”? This has rallied the troops after 18 months of near full retreat and given them an air of confidence not seen in quite some time.
Whether or not the dice are hot again for the long side is not the issue before me, but should I make the classic craps mistakes of allowing all my bets to ride only to hear that inevitable call from the stickman – seven out? I think the answer is clear for me – Color in (the craps table terminology whereupon a player places their chips on the table to cash out and leave).
U.S. Stock Market – It’s been an incredible 18-month ride for me. I managed (somehow I think the man upstairs had a hand or two in it) to recommended selling everything (except precious metals) just two days before the all-time high in the stock market and to short the market itself. Then, just one day before this incredible rally began, I left the bear camp and forecasted a rise to DJIA 9000. I say this not to pat my own back, but because such a feat is playing an important part of the following advice – it’s time to cash in some chips.
While 9000 is still a bit away, I’m reminded of my craps theory and recall what ended up happening to me when I let it ride. Yes, to many now the worst appears over and I’m not going to argue with that (at least at this moment). But looking out past the next couple of years, the future socially, economically, politically and spiritually scene here and abroad looks the scariest ever. I will discuss this at another time but by taking the following action now, I believe I’m doing the best possible strategy for those who have been following me given current and future anticipated conditions.
The following open positions are recommended for sale on the opening Monday morning:
DXO
OIL
HOU
IYE
XLE
HEU
IEO
XOP
PHO
XFN
COSWF
GMF
EWH
The thought process on this recommendation is as follows:
- We’re way ahead of the crowd in terms of investment return thanks to the actions recommended since the all-time high in the stock market. By locking in these gains, many of them equal to or surpassing the average gains from the bottom in early March (I’m also getting rid of a couple of bad oil related choices), we should be in the catbird’s seat for whatever lies ahead.
- We still have exposure to oil and the higher prices I see in the years ahead (more in the oil comment) but lock in some great returns from foreseeing oil at a bottom in late December.
- I can continue to be a scale-up seller if the market manages to get to, or rise above 9,000. (There’s a possibility it can get back to 10,500, a factor I’ll discuss as we move forward).
- We simply have gone too far too fast and when the correction of this near straight up move comes, it should be sharp and fast. We’ll be in a position to increase exposure again if warranted.
- There were a couple events this past week that few paid any attention to other than a passing word or two. I’m speaking about the sharp selloff in the dollar and bonds (more later). These events may not end up important now, but I think they will play a critical role in the very ugly picture I see out past the next 24 months or so.
- One of the smartest and most gracious persons I ever met in this business was Kennedy Gammage (old FNN fans will remember this extraordinary gentleman). Besides treating me like a son, he enthusiastically poured out his wisdom on me (the broken glass soothsayer saying I use comes from Kennedy). One of his many great sayings was, “You’ll never go hungry by eating a half of loaf of bread.” Translation- taking profits is never a bad thing.
- The positions and markets exposure my model portfolio still holds appears appropriate IMHO.
Remember, there are bulls, bears and pigs. The bulls and bears will each have their day but the pigs always end up going to the slaughter house.
Oil - Back in late December when I turned bullish on oil at $36.50 and throughout its rise (until most recently), most professional and individual investors were bearish on oil. My target back then was $60 and while we’re not quite there yet, given the reasons above and the factor that I wouldn’t rush out to buy oil for the first time today, I think it was smart to take some profits off the table. This doesn’t change my long-term view that Peak Oil is real and evolving as we speak, but based on my reasons above, this move is being taken.
U.S. Dollar – One of the rarest technical formations we get to see is a diamond formation. It’s one of the surest formations when broken. I believe the break to the downside is yet another signal that the dollar is a “dead man walking”. Don’t be concerned about the next day, week or month’s trading but concentrate on a long-term outlook. The fundamentals are terrible for the dollar, especially since “Helicopter Ben and Dollar bomber Obama have combined to create the most massive creation of paper money in modern history. Ironically, this can be good for the stock market at first as the liquidity has to go some place and rest assured, the “Don’t Worry, Be Happy” crowd will do its best to steer it into the market. The problem is not if, but when, the dollar is devalued and eventually replaced as the world’s currency. I continue to love the Canadian dollar and I’m more confident than ever on its eventual parity to tired and poor Uncle Sam.
U.S. Treasuries – My no-brainer pick for 2009 is not failing me. Both the 10yr. and 30yr. have broken down technically and the fundamental outlook, thanks to our massive debt binge and dying currency, should make my target of a doubling of interest rates more likely now.
Precious Metals - While Platinum and silver are doing well, gold remains trapped in a trading range. Until it breaks out or down, we should just leave it alone.
Base Metals - They, too, have risen too far too fast but shouldn’t correct as sharp and fast when the stock market does. A healthy 10% correction would be a great buying opportunity.
Please Note – I took profits in some foreign equity markets but believe they will do better than the U.S. One of the possible strategies in the future if our market gets as high as DJIA 10,500 or so would be to short it and go long certain foreign markets. Stay tuned.
Hi Peter, are you saying that the dow will not surpass the 9000 point you have predicted? And do you think the bank stocks will continue to go higher yet.
Thanks
Anna
Hi Peter,
Which foreign markets did you take profits in? Canada?
You mention a possible 10% correction in base metals (not as severe as the market correction). Does this mean you are anticipating a market correction of greater than 10%? Do you have an estimated timeline for this correction?
You truly provide exceptional commentary.
Thanks.
I have often pondered, what is money, not the dictionary version . I guess it is whatever the populace thinks it is or maybe what a government edicts what it is. Anything of value, diamonds, art, real estate, metals, contracts, commodities, etc , all represented by a paper medium with the backing, promises, and say so of a government in control . Historically gold and silver (and constitutionally) is what any and every person rely on as the ultimate money, so it appears there is a parallel idea or acceptance of what is money. Giving a vendor some paper for something of value, is a guilt trip, and yet that vendor and his suppliers depend on it, even gold traders. After one gathers all the paper, then what ? Put it back into circulation and that’s why the stimulus program might work, or will it ?
(nothing to do on saturday afternoon)
Peter,
It’s obvious that a correction is long overdue and should start any day now. You think it will be sharp and fast. I suspect it may be more of a sideways move (I know this is not logical, but this just “feels” like 2003 to me). Either way, your strategy to sell now is valid – a sharp pullback allows for a quick and profitable re-entry, while a sideways move costs you nothing.
I do think junior resource stocks will do well even in a general market correction. I hope the link works – it’s a one year chart of the Canadian Venture Exchange ($CDNX – Stockcharts)
http://stockcharts.com/h-sc/ui?s=$CDNX&p=D&yr=1&mn=0&dy=0&id=p32309709097
This exchange is dominated by junior resource stocks – it hardly dropped during the Jan – Mar general market decline and has now cleared all significant resistance.
I have some decisions to make, so I’d welcome any comments by you or anyone else.
Thanks, Klaus
Hi Peter. What about uranium? You used to talk about uranium miners a lot. I’d like to hear from you.
Thanks,
Phil
Peter,
Interesting chart comparing four bear markets.
http://ibankcoin.com/chart_addict/wp-content/uploads/2009/05/dshort1.jpg
Phil
Hi Peter. I’ve been catching you on BNN every once in awhile, and have been acting on some of your picks with some success. I’m in the enviable position of having some substantial gains especially in T.HOU. My biggest problem here is when to get out. The recent sharp rise has me spooked.
Peter, can you please explain why you closed positions on DXO but you kept UCO? Anything in particular you do not like about DXO?
The Canadian dollar has just been roaring along recently, hard to imagine that there wouldn’t be somewhat of a pullback soon.
At inital glance, I agree that the massive stimulas packages will impact the US $ negatively and also cause inflation (buy gold/silver). However I have seen and heard interviews (60 minutes, Charlie Rose,etc.) with Bernanke, Geithner, et al, stating that they will “pull” money out of the economy when (the big question – when?) it starts growing and therefore limit the extent of inflation and US$ demise.
My guess here is the effect of “pulling” money out of the economy is to provide room for investment by individuals, companies, etc. and NOT government. This will be something to witness when the time comes and there will be indicators (GDP, corp profits, unemployment) the government will be closely watching to alert them, as to, when the time is right to begin exiting. So, unless this is a smokescreen, how will this plan by the government impact the US$/inflation over the longer term?
Also, you mention you expect to see interest rates doubling….from what level? The current interest rate is 0-25 basis points, so doubling is not that bad – it’s access to credit that’s bad. The government’s source of income is tax revenues. They still have the power to tax for spending on programs (including earmarking for stimulas programs). But who will they tax in this economic mess??
Obama is the new Robin Hood. He will tax the rich and spare the middle class/poor of America. After all, It’s just good politics.
Going forward, if I earned a high income in the US, I would be very concerned.
Peter, Keep up the good work!
Hi Peter- I have been following your commentaries for some years; and being quite an active speculator i do follow a lot of experts.But i must say that you stand out for two great reasons: the sheer accuracy of your projections, and the simplicity in your approach.
The problem( a good one though) now is that most of your trades have played out exactly your way:short US treasuries,long u.s stock markets, long canadian dollar and long crude oil: what do we do hereon!.Also, because of the swiftness in these moves, it seems wise to exit and lock profits ( as you have also advised).
Are there any major themes that you would recommend trading now- from what i can see you would probably still stay short with the uS dollar index .Need your thoughts as to what trades we can look at now< after having booked ( good) profits on those above.
Also is there any possibility to be able ti interact with you more closely as an investment adviser?would love to hear from you on that.
Regards
Hi Peter,
I have been reading your blogs and indepth analysis on various topic.
Do you think that the market has still some steam in it to push upward.
Will it be a good time to enter into the market or you think the market will retrace from the current level or will surpass 9000 (DOW)
Warm Regards
Hello Everyone,
I started educating myself on investing just a few months ago and I feel blessed to have stumbled onto this blog. I have changed my sign in name from “RelPropsRGr8″ to my real name above, as I want to be taken more seriously, and don’t want to maybe offend any American friends who are having a harder time right now with real properties. I read a comment from another thread and I also was wondering if Peter or anyone had any new insight on NDM. All has been very quiet on the home front. Everthing has been rising with the tide, except NDM. Any reason? Any insight would be greatly appreciated. Keep up the excellent work Peter ( I hope you don’t mind nicknames as I refer to you as the
G-man. Everyone IMHO needs a good nickname.).
Ryan
To # 13 While NDM is a wise investment, you may want to consider uranium stks as they are showing signs of life again and quite possibly peter will be blogging about in the very near future. All the big Ur company stks have been making some big moves from a month ago, and maybe the time to position yourself for some even bigger moves.
Peter
Keep us informed on coppock(spelling??) signal. Hasn’t it just turned up? The S &P has broken through 200 day ma. Isn’t this a tech signal indicating an all clear sign for another leg up?
marty
To #14 Challie,
Thanks for the response. I have been tracking DML (Denison). It has doubled in the past month quite alot. Do you figure there is still more room for share price increases from here. I remember quite awhile ago someone (I think maybe you) asking Peter about Denison, and if I remember correctly he did respond. I think he said they still have alot of debt issues. I know they got some room to wiggle with debt holders and a long term sales contract. Do you have any others you like? PDN, UUU, HAT. I am interested in uranium. I have also been watching NVA climb in the natural gas sector, and watching if Peter has anymore to say about natural gas, since his minor mention of it a couple of weeks ago. I also am wondering if molybdenum mining is a good play as it’s price has been really beaten and has alot of room to move up. I have been tracking ML for this play. I have the outlook of a rally to continue and still looking for some good resource stocks to purchase. Let me know what you think.
Ryan
Hi Peter,
I noticed that my broker received a different email on your May 9th update than I did…
This is what he received and what I received is much shorter. I only received from the US Dollar on down. Am I missing something? Is it because I am a Canucks fan?
Grandich Radio Interview
Posted: 09 May 2009 08:15 AM PDT
This interview was recorded this past Wednesday.
Don’t Look a Gift Horse in the Mouth
Posted: 09 May 2009 08:01 AM PDT
There was a time in my life when I would visit a crap table or two. I should’ve known based on the money the house had on their side of the table versus mine, chances were they wouldn’t be renaming the casino after me by the time I was done. But I did pick up valuable information that has benefited me in the investment world.
The first thing I learned was despite the game basically offering almost the same odds whether you bet on the shooter or against them, the vast majority of players bet with the shooter. Why? Because our nature is to be part of a crowd rooting for the same thing versus betting against the crowd. Just stand by a craps table and you will see not only how comradery develops among those betting on the shooter, especially as he or she makes passes and numbers, but how that crowd reacts to anyone who happens to be betting against the shooter. Another factor that usually develops is as those betting on the shooter win more, they not only tend to bet more, but also make certain types of bets they otherwise wouldn’t if the shooter wasn’t “hot”. Yet another factor is the small minority of players who bet against the shooter, tend not to pile on when they’re winning like those who bet on the shooter. They also seemingly stop making their bets far more often after a few losses than those betting on the shooter.
So what does this have to do with the markets? The vast majority of individuals and professionals go long. The 1990s gave stock market players an unrealistic belief that being long or wrong was the way to play the stock market. That “fable” has since been destroyed or has it? After two months of a virtual straight up move, the “Don’t Worry”, Be Happy” crowd has managed to gain the ear of the market by playing the announcers voice at the end of the U.S. versus Russia 1980 Olympic hockey game who said “Do you believe in miracles”? This has rallied the troops after 18 months of near full retreat and given them an air of confidence not seen in quite some time.
Whether or not the dice are hot again for the long side is not the issue before me, but should I make the classic craps mistakes of allowing all my bets to ride only to hear that inevitable call from the stickman – seven out? I think the answer is clear for me – Color in (That’s a craps table terminology whereupon a player places their chips on the table to cash out and leave).
U.S. Stock Market – It’s been an incredible 18 month ride for me. I managed (somehow I think the man upstairs had a hand or two in it) to recommended selling everything (except precious metals) just two days before the all-time high in the stock market and to short the market itself. Then just one day before this incredible rally began, I left the bear camp and forecasted a rise to DJIA 9000. I say this not to pat my own back, but because such a feat is playing an important part of the following advice – it’s time to cash in some chips.
While 9000 is still a bit away, I’m reminded of my craps theory and recall what ended up happening to me when I let it ride. Yes, too many now the worse appears over and I’m not going to argue with that (at least at this moment). But looking out past the next couple of years, the future socially, economically, politically and spiritually scene here and abroad looks the scariest ever. I will discuss this at another time but by taking the following action now, I believe I’m doing the best possible strategy for those who have been following me given current and future anticipated conditions.
The following open positions are recommended for sale on the opening Monday morning:
DXO
OIL
HOU
IYE
XLE
HEU
IEO
XOP
PHO
XFN
COSWF
GMF
EWH
The thought process on this recommendation is as follows:
§ We’re way ahead of the crowd in terms of investment return thanks to the actions recommended since the all-time high in the stock market. By locking in these gains, many of them equal to or surpassing the average gains from the bottom in early March (I’m also getting rid of a couple of bad oil related choices), we should be in the catbirds seat for whatever lies ahead.
§ We still have exposure to oil and the higher prices I see in the years ahead (more in the oil comment) but lock in some great returns from foreseeing oil at a bottom in late December.
§ I can continue to be a scale-up seller if the market manages to get to, or rise above 9,000 (There’s a possibility it can get back to 10,500, a factor I’ll discuss as we move forward).
§ We simply have gone too far too fast and when the correction of this near straight up move comes, it should be sharp and fast. We’ll be in a position to increase exposure again if warranted.
§ There were a couple events this past week that few paid any attention to other than a passing word or two. I’m speaking about the sharp selloff in the dollar and bonds (more later). These events may not end up important now, but I think they will play a critical role in the very ugly picture I see out past the next 24 months or so.
§ One of the smartest and most gracious persons I ever met in this business was Kennedy Gammage (old FNN fans will remember this extraordinary gentleman). Besides treating me like a son, he enthusiastically poured out his wisdom on me (the broken glass soothsayer saying I use comes from Kennedy). One of his many great sayings was, “You’ll never go hungry by eating a half of loaf of bread.” Translation- taking profits is never a bad thing.
§ The positions and markets exposure my model portfolio still holds appears appropriate IMHO.
Remember, there are bulls, bears and pigs. The bulls and bears will each have their day but the pigs always end up going to the slaughter house.
Oil – Back in late December when I turned bullish on oil at $36.50 and throughout its rise until most recently, most professional and individual investors were bearish on oil. My target back then was $60 and while we’re not quite there yet, given the reasons above and the factor that I wouldn’t rush out to buy oil for the first time today, I think it was smart to take some profits off the table. This doesn’t change my long term view that Peak Oil is real and evolving as we speak, but based on my reasons above, this move is being taken.
U.S. Dollar – One of the rarest technical formations we get to see is a diamond formation. It’s one of the surest formations when broken. I believe the break to the downside is yet another signal that the dollar is “dead man walking”. Don’t be concern about the next day, week or month trading but concentrate on a long term outlook. The fundamentals are terrible for the dollar, especially since “Helicopter Ben and Dollar bomber Obama have combined to create the most massive creation of paper money in modern history. Ironically, this can be good for the stock market at first as the liquidity has to go some place and rest assured, the “Don’t Worry, Be Happy” crowd will do its best to steer it into the market. The problem is not if, but when, the dollar is devalued and eventually replaced as the world’s currency. I continue to love the Canadian dollar and I’m more confident than ever on its eventual parity to tired and poor Uncle Sam.
U.S. Treasuries – My no-brainer pick for 2009 is not failing me. Both the !0yr. and 30yr. have broken down technically and the fundamental outlook thanks to our massive debt binge and dyeing currency, should make my target of a doubling of interest rates a more likelihood now.
Precious Metals – While Platinum and silver are doing well, gold remains trapped in a trading range. Until it breaks out or down, we should just leave it alone.
Base Metals – They too have risen too far too fast but shouldn’t correct as sharp and fast when the stock market does. A healthy 10% correction would be a great buying opportunity.
Please Note – I took profits in some foreign equity markets but believe they will do better than the U.S. One of the possible strategies in the future if our market gets as high as DJIA 10,500 or so would be to short it and go long certain foreign markets. Stay tuned.
Intel subject to a BIG fine in Europe for alleged antitrust practices………for your information…….
http://www.marketwatch.com/news/story/Intel-bracing-big-EU-competition/story.aspx?guid=%7B9A3730F1%2D510D%2D47B4%2D8D89%2DCA979348BB6A%7D
That diamond formation looks more like a kite tetrahedron
A True Human Interest Story
How God Interferred With My Gambling problems
Some people could find this story amusing, but the gambling habit in my teens was not a joking matter and it ended in disaster with a reckless bet on a horserace that cost me a semester of college tuition hard earned. Perhaps it was the humility of begging friends and family to cover the loss that changed me, but thank God, I’ve never been in a position to beg again. A friend came through with the money, but the chances are it was either his Mother or mine who anonymously covered my foolish loss, quickly repaid.
Then there was cards – 7 Card Stud and & 5 Card Poker – which I haven’t played in many decades, perhaps because God interferred in my gambling, and there’s a true story that I would like to tell you.
In my early twenties and newly married, a college acquaintance who worked as a cab driver told me about a Friday Night card game in the back of a cab station and invited me to come down. So it started out at 10:00 P.M., after the drivers were paid for the week, and it seemed proper to go home after a few hours.
The problem is that they don’t like the winner to go out first and you can’t go home. These drivers were putting their weeks wages on the table and the adjusted stakes were $10 for the pot with raises of $20 up to $50. It’s all in memory of the cards played not luck, and these guys had neither; often saying goodnight to watch me walk off with a $1,000 or more in my pocket.
My winnings were consistent, and their belief was that my luck would turn. Even then it seemed to me that there was such a thing as luck. Drawn into this week after week, they had a new rule that the card game would end near sunup about 6:00 A.M. My wife was upset by these games and wanted me out. “But you don’t understand” I would say, “I have all their money and now I know these guys”. She was very worried by all of this gambling until morning hours.
Finally, they decided to change the game. When I arrived one Friday night, after this had been going on for some months, they said that the game changed and that we would shoot craps. Obviously, they wanted to change the game to get even from their Poker losses. Explaining that I was unfamiliar with the game, they explained (As I Recall) that you just throw either a Seven or an Eleven and you win.
There was a makeshift crap table with a back stop so the dice wouldn’t roll off to the floor and they handed them to me. A lot of drivers were gathered around and they handed the Dice to me and told me to roll. Seven ! ..Seven !… Eleven ! … on and on.
Whether or not I recall the numbers correctly that they told me to roll, the Dice didn’t pass my hands. Maybe a dozen or so throws were either seven or eleven and in less than 10 minutes there was no further betting, just total silence with everyone including myself wondering how could the Dice repeatedly be ONLY these two numbers? We were all in shock and didn’t even say goodnight, simply separating shortly after our regular Friday night session had begun. My friend never contacted me again, nor did the cab stand which we occasionally used. They didn’t want me back.
For years I often wondered about that evening and the incredible ‘Run Of Luck For A Lifetime’. Decades later, we were reflecting after my Mother passed on and my Wife commented, — “How your Mother and I used to pray together that you would leave those card games at the cab livery”.
Is there really any such thing as luck at all ? Not in my opinion, but there is such a thing as a connection to God through prayer. Maybe more another time,
Dear Peter,
I have visited your blog using both Google Chrome and IE. I could read the full article on Chrome but only US $ onwards was visible on IE.
I would suggest John (post no 17) to use Chrome till the problem is solved, It is faster too
Regards
Anil
[...] in stocks. Boy did we get a rally! I rode that rally all the way up to May 9th. At that point, I decided to take big profits even though I felt the DJIA could still get to 9000. A significant part of those profits came from [...]