Monday, January 10, 2011

10 January 2011 Off My Game for Sure


10 January 2011 Off My Game for Sure

You have to remember we have all kinds of toxic fumes in our home right now so obviously they skewed my brilliance in determining how these earning reports were going to show themselves. We got Alcoa wrong, we got Apollo Group Wrong, we got WD-40 wrong. So why are you reading this this blog? You must be like those people who like driving down to the end of our street just to see the carnage. Hey at least I hope I make it fun.

Its shiny, it’s yellow and it’s expensive. (Or is it.)

Gold is doing well despite the little breather it took over the last several weeks. So many of the sound bites I get in the course of a day mention Gold, it is hard not mention it as a portfolio strategy. We have about 9% in gold and have a few other portfolios at a much higher position than that. We buy and hold gold via the iPath ETN with the ticker GLD. There are many other ways to hold the heavy yellow stuff, including coins, bars, foreign holding ETFs and ETNs, and just having a broker buy and hold the metal for you. Each have their advantage and drawbacks. Gold can have some unique tax ramifications so be sure you consider all of that before deciding to put gold in your portfolio or before substantially increasing your holding.

Is it too late to buy gold? If you believe that the Euro Sovereign debt issues will be resolved soon, if you believe that the global economy is very robust and equity markets will grow over the next few years, if you believe the US Dollar will remain the Global Reserve Currency, then yah it might be a little late to come to the AU Dance. If not, dips in the commodity should be considered buying opps. Also look at Silver as a supplemental hedge as well as Gold. In times of financials stress, silver floats to a lower ratio to gold. If you believe historical trends, silver could float to 45-70 an ounce if Gold increases as many expect it will.

Maybe we should be looking at gold as a currency rather than a commodity. Ever heard of the LBMA, it is an association of banks, refiners, and traders of the yellow stuff.

In article today provided by one of our readers (Thanks Tim), of the 24 market influential market participants in the LBMA, they are all bullish of the stuff in 2011. The average consensus is $1,457 an ounce? Which makes you wonder if the dollar is no longer the global reserve currency, how much will gold be per ounce? It would be XXXXX per ounce? It’s kind of like me going into the backpacking store and buying powdered water. What would I mix it with? Think about it.

So what happened in the market today?

Beside some nice beats after the market closing, there was still skittishness about Euro Debt. Portugal was center stage and it kept traders on the their toes all day. The Dow was down over 100 points at one time today and a couple of our PUTs had some nice gains, but we waited patiently. The Nasdaq made a nice recovery today, but as we have said here many times before, the weighted balance of AAPL (at about 19%) skews that number. Apple announced that they might be releasing the iPhone through Verizon by the end of the month (Dah!). More on that later.

Even though they beat estimates and proved me wrong, AA traded lower after markets. See they missed on their top line and margins were healthier than expected. Based upon sales and a standard margin, they would have missed by 3 cents. Mmmmm where have I heard that before? OK, I did not get it right.

Did you hear the news there's good imports tonight

China reports a significant shift in their balance of trade yesterday. Exports rose only 17 % after rising 34 % last month. This is a sign that China is actually importing products and consuming what they make. (As a side note, China just announced domestic auto sales numbers. 18.2 million units. The US sold 12 million units and that was a recovery number up from 9 million in 09. The US used to brag about 17-18 million units.)

An apple a day or 32,867 a day

AAPL had a nice bump today on the news (OK its not news and we have been waiting 3 years for the news.) that Verizon would be carrying the iPhone by the end of this month. The estimated 10-12 million new users is expected to bring another 1-2 dollars a share in profit. We enjoyed a nice bump on the call option we mentioned here several weeks ago. It is currently up 34%, but we will hold our for 50% or better.

Some stock ideas to look at.  WE DO NOT OWN THESE. Here are few that have given nice future earnings comments. AFCE AFC Enterprises, Dot Hill Systems, ASNA Ascena Retail Group, and SYK Stryker. Some bad news might create some downward pressure on SPEC Spectrum Controls, HLS Healthsouth, CELG Celgene, and SMSC. Again, do your homework.

Salve Lucrum


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