Friday, November 12, 2010

12 November 2010 It’s Over


12 November 2010 It’s Over

So I turn my back,
Turn my collar to the wind
Move along in silence
Trying not to think at all
I set my feet before me
To walk the silent street before me
Now it's over.

It was February 1973 when Elvis recorded the old Jimmie Rodgers Song, “It’s Over” on the Hawaii Satellite Concert. But this was really how I felt today. Ahead of Vector Vest and IBD I am calling the rally over. It started on 9 September and we had a good run. We mentioned last night if we had a downward day with even average volume we would take profits. We did. We took about 40 to 50 % off the table in nearly all portfolios. It was tempting to get in to gold and other commodity ETFs and ETNs, but the fact that China is now bumping their interest rates, even commodity buyers were goosey today and could be for the near future. So we are parking our profits in cash for few days.

I don’t understand the downturn at the moment, but believe it is happening and could continue for a while. If not down definitely sideways. That means I will refresh my value investing skills by reviewing Active Value Investing: Making Money in Range-Bound Markets by Vitaliy N. Katsenelson. This could be range bound market for the balance of the year.

Now what that means to you and I is to take the profits we just enjoyed, take a serious look at your holdings and ask yourself, “Self, do I remember why I bought this stock in the first place?” If you know the answer, than verify all those reasons are still there. Go back and read or re-read their last quarterly financials. Are their balance sheets better or worse? How is their cash flow? What are they doing to improve or protect shareholder’s yield? (Paying down debt, issuing dividends, buying back shares or making strategic acquisitions) If not then consider taking all the profit off the table and move on. If so, look for the dips in the range bound market to get those stocks at attractive values.

Some of you are considered about inflation. It is coming, but no one knows for sure when. Uncle Ben is doing his best to avoid deflation so we don’t replicate the lost decade of Japan. Some say he is over doing it. Regardless, he is doing QE II to lower the value of the dollar. That is the operational definition of inflation.

If you can’t find the value in you key stocks, look for inflation plays in commodities. We mentioned ours JJG, DBA, PPLT, as well as our gold ETF GLD.

307 posts and now 41 Readers

We would like to say a hello to our newest reader.  Michael will be our 41st person on the Salve Lucrum Blog.  Hope you enjoy and that your carefully read the disclaimer on the home page.

Sacremento Gets the Best of The Terminator

Two years ago I had the pleasure of bing involved in a political group called The New Majority.  We had the opportuntiy of working directly with the Governor of California on a few projects and actually had the opportuntiy to go to several events where he was speaking.  Governor Arnold Schwarzenegger was a very fit healthy looking guy.  During the last year he has had some tough battles with the legislature in Sacremento.  A recent picture shows the results of the budget battle.

I think it appropriate if his last words on the steps of the capital building were:

I won't Be Back!

Salve Lucrum and have a great weekend.


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