March 1st, 2013

Karl's BorB Report Logo Headingcaution

BTI Signal:  CAUTION

(BTI:  Bull or Bear Trend Indicator Signal)  Gains since Jan/2012: +14.16%

Allocated Trading Position in 100% Cash as of 2/28/13.

March 1st 2013 –   Here I am sipping my coffee on Saturday morning and the Sequester deadline of Friday evening midnight came and went.   No end of the fiscal world???  I was digging through all my newspapers last night and what I’m seeing is that this fiscal sequester is only a painted line on the road.  It actually means nothing at the moment and deliberations are continuing with Obama making speeches Friday evening how we must do something still to avert this crisis.  Really a Crisis?  Let’s dig deeper.

Were talking about 85 Billion in an entire year that we spend over 1.5 Trillion in deficits.  And most of these cuts I’m hearing are phased in and back ended.  Seems like typical politicians style.  Just like the 1 Trillion they want to “cut” over the next 10 years.  It will mostly be future cuts in the rate of increase based on “projected growth” that will never materialize.  This way they con themselves into believing it will be painless and easy to swallow for everyone.  Little to they realize that we are in a new reality of no growth, rising commodity inflation, rising local taxes and declining standard of living for the majority of citizens in the US, Europe and abroad.

Just this week the MTA (mass transit system in NY) announced they are raising buss fairs, train passes and other tickets 9% across the board!!!  Are you kidding me?  Thank goodness my office is about 7 blocks from my home and I don’t have to go into NYC.  So I don’t need to deal with traffic, commuting and these insane mass transit fair hikes.  Sure they need to raise the fairs 9%, they need to pay for their out of control pensions, healthcare, vacations, overtime and bloated organizational costs.  There are simply no checks on the mismanagement of both Federal, State and local governments and agencies.  The sky is the limit for spending and if they run out of money, they just raise the fee’s and fairs to the general public.

This is why we NEED to make money and grow our net worth to get ahead of these relentless rising costs of living.  The key is to diversify you assets correctly so you don’t get crushed if any one asset class get’s stuck or fails to work for a long time.  Gold and silver are definitely a core position, but you also have your trading capital (for use with BTI Signal), dividend paying etf’s, and a select group of safe companies, dividend paying stocks that will pay you handsomely over time and finally some cash on hand.  The other key to this formula is patience.  Anyone who has an itch to double their money in a year is looking to loose.  It simply does not happen unless we get an absolute crushing bear market that sends stocks to the basement floor.  Then we will use our cash we raised, because it would have been predicted to be a bear market by our BTI Signal well ahead of that cycle.  We use that opportunity at that time to scoop up bargain blue chips and dividend payers that will rise 100-300% over the next few years.  Will we see another crushing bear market anytime soon? Who knows and trying to predict that event is a fool’s game for sure.  That’s why we rely on our BTI Trend Indicator signal to tell us what the “Current” market conditions are and we adjust our portfolios accordingly.  But from what the Fed is doing with all this insane printing, I definitely feel the risks are to the upside in equities and investments, not to the downside.

One question I received lately is why is the US Dollar going higher then and how can the stock market be rising while the dollar is going up?  Take a look at the chart below.

I try to keep this very simple and not over analyze things into trading paralysis.  First, my view is that the Dollar is rising higher because the rest of the world is printing money out of control, kind of like the US, but since they are not a world reserve currency their currencies are actually depreciating while our currency is like the safe haven currency.  It’s like the best house in the worst neighborhood.  It still doesn’t mean that any of the houses are good.

Second, so much liquidity is being pumped into the system that there is leakage somehow from banker’s profits and it’s finding a way into the equity markets.  With interest rates continuing to be near zero for over five years capital is desperate for returns in fear of loosing money to the relentless cost of living inflation we are experiencing from property taxes, gasoline, insurance, food, etc…   So money is being forced into equities because the general public and money managers refuse to look at Gold and Silver as a realistic alternative.  They have been brainwashed their entire life that Gold and Silver is worthless. So until the fear of currency collapse is staring these money managers squarely in their face, they will refuse to recommend Gold and Silver to any real degree to any of their clients.  I guess they will learn the hard way.

ScreenHunter_05 Mar. 02 09.56

(US Dollar Chart)

Funny that even with the US Dollar hitting a two month high the Dow Jones, Russell 2000 and Transportation index are all at a whisper from their all time highs!  What is that telling you?  Over the last few days I showed you the Housing Chart, Russell 2000 Chart, Transportation chart, all shooting to new highs.  How can you deny that something is going on?  Money is being hoarded and funneled into all major corporation and they are actually busting at the seams with cash.  In my newsletter from two days ago I was showing you the plans from just 3 top corporations that want to build epic campuses and headquarters to the likes never seen in history!  I’m just shaking my head in amazement.  We are going to see a wave of fiat money get unleashed fairly soon and the effects on most asset classes will be simply amazing.  But we will take this economy, rally and money printing experiment one day at a time and see what the next day brings us.  I REFUSE to get married to any position or direction in the market and always have a view of why this could be wrong.  Never be complacent is what I’m saying.

BTI SIGNAL —  Our BTI continues to be in “CAUTION” mode.

Today’s lower opening followed by the impressive reversal was very telling to me.  It’s showing us that money managers are willing to buy “any” dip even going into the all feared Sequester weekend.

The BTI signal almost tipped back into the Bull: Caution camp but just fell short by a fraction.  The lower volume on the NASDAQ rise Friday was the culprit.  Don’t get me wrong, we are still in a Primary Bull Up Trend, but the short term trend has turned to Cautious which has us holding some cash.  We never short any stocks or ETF’s in an up trending market, even if it stalls out on us like recently.  The QQQ has especially had a tough time for the past two months due to the Apple collapse.  But that’s why I have diversified my longs between the IWM & QQQ to get more even exposure to the overall market trend.  If you want you can take it a step further if you have a Large account and even diversify further with some of the funds into the Transportation ETF (IYT). Just another idea for you if you have a larger portfolio of over 100K.  If you have a smaller size portfolio just try to keep it simple with QQQ & IWM.

Note:  As an option you can also use IWM (Russell 2000 etf).  I personally split my trade up 50/50 between QQQ & IWM so half of my position has less exposure to Apple and more exposure to smaller cap stocks.  IWM will usually appreciate higher during Bull markets that we expect to be continuing like the one at the moment.

** Any last minute evening Signal changes will be emailed to you by 7:30am the next morning.

GOLD/SILVER–   Gold and Silver staged a morning come back from another bought of overnight selling that took Silver back under $28.00/oz.  The US Dollar is just putting so much pressure on the metals and other commodities.  Couple that with Hedge funds throwing in the towel because they want to use the capital to invest in equity markets and you have double pressure on this asset class.

Our #1 rule is keep your Silver and Gold exposure below 25% of your Net Worth.  If you look at my section on Sample portfolio I outline what percentage of each is recommended and what I personally do.  And when I mean net worth I don’t mean the value of your house leaving out the mortgage.  Your net worth of actually paid Equity in the home, cash, stocks, bonds, etc….   If you house is paid in full then of course you can include the full value of your Real Estate as part of that formula.  Then your home would be allocated to the “Real Estate” part of that equation as part of your diversified portfolio holdings.

If you follow these simple rules you will sleep well at night and not worry so much about what any one thing is doing and should you sell completely out.  Gold and Silver will have a day in the future when we sell out of it to use to purchase other assets that can earn even more returns.  That time will be when the Dow to Gold ratio get below 2:1 and then we start scaling out of our holdings there.  The most explosive moves in an asset are usually the final 10% so the fireworks have not even begun.
We are now experiencing another shake out to wring out the traders and weak holders of the metals.  Anyone who expects Silver to go back to the $4.00 lows should also expect the Dow to go to $6000 and the Real Estate market to implode.  Then we better prepare for ultimate Armageddon.  But as far as I know Ben Bernanke will REFUSE to let that happen and will print to the worlds end to avoid that.  He has told us over and over that he is an expert on the Great Depression and he knows exactly what to do to avoid it.  Just print print print.

FINAL THOUGHTS–    On this Saturday I just have to say the most important thing to do is to constantly strive to better your self, learn new skills, get debt free as soon as possible and try to start your own small business and keep diversifying your investments. Like I said in my recommended reading section there is a book I have purchased called “Actions Principals” by bill Fitzpatrick.  It’s a small book that is fairly cheap and every day you read one quick page of motivational advice.  This is the type of thing that get’s your mind thinking about what you can do to achieve personal success.

Personally I feel that owning your own small business is the best path to achieving wealth then another other thing.  Look at most successful and wealthy people and you all see they have the same things in common; they owned their own business or have owned real estate.  And owning real estate is like owning your own business because you have to run it like a business.  With all businesses you can write off expenses such as Cell phones, gasoline and other business related costs that normal people have to pay for “after tax”.  The tax benefits are income potential are tremendously better then working for a corporation that pays you after tax.  I have been an investor and small business owner since I graduated from college 20 years ago and would have never been able to become a self made millionaire unless I owned my own business.  What you can do is just start with what you love and turn that passion and hobby into a side business that you can start small at home.  Then see where that takes you.  Just take a step in the direction of your goals that you write down every single day and before you know it, in a few months you will be leaps and bounds further in a better place.

I wish everyone all the best, thank you again for your support and hope everyone has a wonderful weekend.  See you Monday after this scary Sequester weekend  ;-)  (wink)

See you back here Monday evening.  (before 9:30pm)  Weekday schedule

Best regards

Karl

The Bull or Bear Report

MARKET UPDATE   

Dow:  Up +35.17 (+.25%) to 14,089.66 (CAUTION signal)   Old High 14,164 watching.

Transports:  Down -8.45 (-.14%) to 5,984.90

NASDAQ:  Up +9.55 (+.30%) to 3,169.74

S&P 500: Up +3.52 (+.23%) to 1,518.20

Gold:  March Gold  Down -5.80 (-.37%) to 1,572.30 (as of 5:00 pm EST.)

Silver:  March Silver Up +.058 (+.20%) to 28.49 (as of 5:00 pm EST) Back in the range. (26-35)

US Dollar Index:  Up +.322 (+.39%) to 82.325

Crude Oil Futures:  March Crude Up +.34 (+.37%) to 91.02/barrel  (5:50 pm)

Advancers beat Decliners on the NYSE by:  2,145 adv. to 1,800 decl.

Our Recommended Popular Holdings

QQQ  Down -.10 (-.15%) to 67.14 as of 5:20pm  (BULL:Caution Signal)

IWM  Up +.47  (+.52%)  to 90.95  (Russell 2000 etf) ***UP even on a flat day!***

IYM  Down -.30 (-.43%)  to 69.07  (Good long term Core position)

MOO Down -.26 (-.48%) to 54.00

GDX   Down -.18 (-.48%) to 37.22  (obvious bear trend)

SIL   Down -.24 (-1.29%) to 18.25  (diversified way to own the Silver miners.)

GLD Down -.42 (-.27%) to 152.58  (or you can substitute with:  SGOL)

(CVY highly recommended for diversified safer yield)

CVY    Up +.00 (+.00%) to 23.33  (start of year 22.28)

Div Yield 5.03%,  YTD ETF performance: +4.71% (+ dividend yield)

2012 Return: +7.48% + 5% Dividend= 12.48%  (VERY GOOD)

2013 Return:  ?

Extra Suggestions  (once BTI Turns Bullish again):

TAL:  Target:  $55.25  in 6-12 months. (as long as trends continue higher) pays 5%+ dividend

TEF:   Target:  $19.00 (riskier/more volatile trade)  Telefonica

PMT:  Target:  $38.00 (Financial/riskier),  positive earnings, Dividend of 8%+  (Stop 24.50)

BGCP:  Target  $5.00+  (Riskier Real Estate broker play) Dividend 13%+

NTI:    Target   $46.50  (Energy Play. 21.92% Dividend)   (Stop: close below 26.30)

***NTI: I sold out over $30.00 for +10% in 2 days. Now waiting for a re-entry below $27.05,       But you can look at the chart and play it as you see fit.  Great dividend.

HUN:  Target: $24.70 (Chemical company), positive earnings, Dividend 3% (Stop: close below  $16.29) currently in a downtrend.  Put on your watch ist.

Abbott Laboratories (ABT):  Target:  $42.50,  Dividend 1% only.   Stock currently at $33.79.  Maybe wait for a pullback due to run up after stock split 2:1.

MSB, BGCP, TAL (high debt but stable shipping transport business) riskier,

* FDL (First Trust Morningstar Dividend Leaders Index ETF) yields 3.5% from Blue Chip large caps.  Good to buy AFTER major market corrections.  Very conservative income generator.

Permanent Portfolio (PRPFX)  previous close 48.66  YTD Gain: +.001%  (Jan 1st price: $48.64)                                      2012 Gain: +6.02%

(PRPFX is a well diversified holding fund.  Has stocks, bonds, Gold, Silver, etc…)  Great place to conservatively put retirement funds or to park cash Long Term.  The only issue I have with this is the US government Bond Allocation of the fund.

IMPORTANT NEWSLETTERS BELOW FOR QUICK REFERENCE 

July 20th 2012: Real Estate Special Discussion Edition

Nov 19th 12012: How to insure your portfolio

Nov 6th 2012: How to make $200K per year

(newsletters put out every evening before 9:30pm daily)