May 9, 2014

Karl's BorB Report Logo Headingcaution

THE BULL OR BEAR DAILY REPORT

By: Karl Hormann

 (BTI:  Bull or Bear Trend Indicator Signal)  Gains since Jan/2012: +20.84%

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NOTE: NEW MINI-TURBO PORTFOLIO (SEE BOTTOM OF NEWSLETTER).  RETURNED +70%+ in 2013.

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BTI Signal:  CAUTION

Our BTI Allocated funds remain in 100% Cash.

(Using QQQ & IWM)

May 9thWe continue to see a tale of two markets looking for direction.  At the moment the momentum and NASDAQ names are being shunned by the investment community while solid growing companies and dividend payers are being sought after as a safe haven. Remember the money has to go somewhere, it’s just a matter of finding its destination before it gets there. But aside from that the economy continues to be a problem and Central banks realize it.

 

If we look at the chart below of the Teen employment index we see that in 2000 over 45% of teens had part time jobs to bring in some income for personal spending and savings. But since the recessions and market crashes have taken place that number has plunged to a near record low of 26.9%. The reason is that older people are taking the jobs that the teens used to take to carry them over in their older age. I recently went to my local grocery store “Stop N Shop” and I see way more 60+ year old women working the registers and bagging than at any time I can remember.  Those were the jobs that teens used to take. Even look at McDonalds and Starbucks, again we see many older people working those jobs as full time employment. This is not a solution to our economic problems, it’s just a desperate attempt by people to survive and teen’s employment is obviously getting effected.

Teen Employment Index

(Teen employment Chart)

 

But are we heading for a crash in the markets?  I really don’t think so. I was listening to an analysts on CNBC Friday and sometimes they bring up one that has half a good thought. He was saying that nothing is systemically broken or in crisis mode. What we are seeing in markets is just normal rotation by money managers getting out of overpriced stock sectors like the social media and super high PE multiple stocks and rotating that cash into larger safer companies and dividend payers.  Just look at Berkshire Hathaway one of our Core long term holdings just under its 52 week high. Also BGCP one of our real estate dividend plays is holding near its 52 week high while paying up 8%+ dividend. Two etf’s I have recommended as part of a diversified larger portfolio are IYM (Basic Material) and MOO (agribusiness). Both of them look like they have been trading in a sideways range for the past two months but seem to want to break out to the upside. If we get a real boost in inflation these two indexes will definitely rocket higher. Keep accumulating and waiting, the time will definitely come.

 

Another reason again I state why I don’t think we will have any massive market crash is that the banking index continues to be healthy. Look at the XLF Banking Index chart below.  This chart shows nothing wrong except for some minor profit taking off of the record high. Long term moving averages continue to climb and there is no panic selling. I have said many times, if the banking sector remains healthy the Ponzi scheme will continue.  This is the #1 canary in the coal mine. If this index starts crashing ahead of markets than we have to start to get worried.  So far this chart is not giving us any warning signals.

 XLF FINANCIAL EFT

(XLF Chart)

 

Finally we look at the leader Transportation Index.  This index continues to show strength and looks like it eventually want’s to retest its old highs. I would consider that normal action in an inflationary environment. The more money that is pumped into the system the more prices will rise as inflation trickles into the economy. Central Banks WILL NOT tolerate deflation. They made that very clear so we stick with the Fed. Hold inflation benefiting assets like stocks and certain real estate and Gold/Silver as our insurance policy. Notice how in our Turbo Portfolio it selected Union Pacific as one of its holdings. These stocks are behaving the best and should continue to do well in the future. Even Berkshire Hathaway has a large exposure to the train transportation sector through one of its companies Berlington Northern Santa Fe Railroad. Maybe this is why Berkshire continues to do well and is holding near its highs.  Even at these prices Berkshire Hathaway and Union Pacific continue to be undervalued verses their fair market value by at least 30%+.  I love owning companies that generate large profits and at the same time are undervalued.  If they pay a dividend then all the better, as we get paid while we wait. Union Pacific, BGCP & my newest selection NYBM all pay dividends and are undervalued. Now we just sit patiently and wait for our BTI Signal to give us the final all clear sign.

 $TRAN

(Transportation Index)

 

BTI SIGNAL – The BTI Signal remains in full CAUTION Mode. Our BTI System allocated funds are in 100% Cash. This trade is only for our BTI signal allocated funds. (I allocate 1/3 of my account to trading along with the BTI Signal.) The rest of the portfolio is made up of Long Term Core holdings which we do not sell, like IYM, Berkshire Hathaway (BRK.B), CVY, DVY etc…   We continue to hold all Long Term CORE positions.

We continue to add to our long term holdings on all market pullbacks like we just recently went through. Our long term holdings and Turbo-mini portfolio continue to act very well.  Just stay diversified and have some cash ready.

 

Check out my many recommendation at the bottom of my report to get ideas on what you could pick from to diversify your portfolio.

 

http://www.usdebtclock.org/

*We continue to hold our Long Term Core holdings which should account for about 66-70% of your portfolio.*

 

Note:  My portfolio is made up of 70% Core long term positions with dividend paying ETF’s and stocks, Gold/Silver per my sample portfolio & the other 30% to my BTI Trend signal.

The 30% of my portfolio that is dedicated to the BTI signal I trade 50/50 between QQQ & IWM (Russell 2000 etf) 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. Depending on the size of your portfolio you can cut down your holdings to less until the funds grow or you continue to contribute to your savings/investment account.

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

 

GOLD/SILVER— Precious metals continue to bounce around aimlessly near their recent lows. Until we have further price break out, this is like watching paint dry. At this time we just continue to hold 15-20% of our portfolio in precious metals as our insurance policy against the reckless spending all governments have embarked on.

 

I continue to hold onto my newest Silver Wheaton stock purchase with an 8% stop loss from my entry price. Another speculative holding that is undervalued currently is Allied Nevada Gold (ANV).  This stock’s fair value is at around $5.75 while it currently trades near $3.45.  Insiders were aggressively buying stock around $3.25 last year, so I feel it continues to be a good bet for the next 12-18 months.  This is for risk capital only remember.  Miners are very volatile.

 

We continue to hold all our metals (20% maximum of our portfolio) and very very small mining positions if you have any.

Oil ETF complex I like: USO, XLE & IEZ.

 

At this time I am again not invested in miners except for SLW which pays a 2% dividend and ANV.

Shopping list:

(New Bull trend as of last week and CEF crossing back over $15.20)

SLW Deep in the money Call Leaps. (I continue to hold)

SLW  (I continue to hold the shares)

SSRI, ANV, GDX, SIL, EXK, IAG,

Keep the total of any of these trades to under 5% of your portfolio value if you do decide to get involved.  See my sample sector allocation section of the web site to see how much you should have total exposure to Gold/Silver and miners.

 

FINAL THOUGHTS— In today’s Investor’s Business daily they did an interview with Kevin O’Leary, one of the stars on Shark Tank on US TV. I never knew much about him, but I read that he came from nothing. He started small businesses, bought up and merged with other companies until he grew large enough that he and his partners were bought out by Mattel Toys for $3.2 Billion dollars. Once that took place he went on to be on boards of other corporations and started getting involved with other ventures to grow storage business through more acquisitions and cost cutting, until that company was eventually bought out. Through business smarts he acquired a net worth of over $300 Million dollars. He gave a few words of wisdom living through the crash of 2008-2009 that sometimes you forget and burned him just a little.  I think we will all get a little wisdom from these tips:

  • Invest no more than 5% in one stock and only 20% in one segment.
  • Put money in stocks that pay dividends or in interest bearing bonds (I like CVY/DVY instead. Personally I feel Government bonds are a death trap, but that’s just me.)
  • Don’t invest in anything you don’t understand
  • If something sounds too good to be true, it is.
  • Be patient.   Just as crucial is the right investments is not wasting money, says O’Leary. In his book and on his website, he offers tips on how to save the critical 10% of income necessary to become rich with good decisions, big and small.
  • Don’t blow money on a big wedding.
  • Rent instead of buying a house if the mortgage will cost more than 25% of your income – 30% in expensive cities.
  • Don’t buy anything fancy for the baby, who won’t appreciate it anyway while you go broke.
  • Live where you can walk or take mass transit to work.
  • Instead of joining an expensive diet club, have your doctor design a personal food plan.

 

But the one thing I got out of his interview is be relentless, be persistent, stay positive, save money, invest wisely, stay diversified and above all else “work hard”. Nothing comes to you by being lazy or sitting on the couch and watching TV. You have to get up and do something every day to get yourself one step closer to your short and long term goals. You have to be better than the other 95% of the people around you to be successful. Remember that.  So get a pad out, make a goal list and start on your journey to success just like Kevin O’Leary.

 

Everyone have a great weekend and I’ll see you back here Monday before 8:45 pm. (Weekday schedule)

 

Best regards,

Karl

The Bull or Bear Report

(Newsletters put out every evening before 8:30pm daily.  You will receive email notification once posted)

 

MARKET UPDATE:    

Dow:  +32.37  (+.20%) 16,583.34 (CAUTION)

Transports:  Up +15.60 (+.20%) to 7,719.30

NASDAQ:  Up +20.37 (+.50%) to 4,071.87

S&P 500: Up +2.85 (+.15%) to 1,878.48

Gold:  June Gold Up +.90 (+.07%) to 1,288.80 (as of 6:00 pm EST.)

Silver:  July Silver Up +.009 (+.05%) to 19.168 (as of 6:00 pm EST)

US Dollar Index:  Up +.513 (+.65%) to 79.915

Crude Oil Futures:  June Crude Up +.04 (+.04%) to 100.03/barrel

Advancers beat Decliners (from 7K+ stocks) by: 4,044 adv. to 3,222 decl.

 

Our Recommended Popular Holdings

QQQ  Up +.38 (+.44%) to 86.86 as of 4:00 pm

IWM   Up +1.04 (+.95%) to  110.03 (Russell 2000 etf)

IYM  Down -.01 (-.01%)  to 84.04 (Good long term Core position. Basic Materials etf)

MOO Down -.36 (-.70%) to 54.09   (Good Agriculture industry holding)

GDX   Down -.05 (-.21%) to 23.72 (Large Gold mining etf)

SIL   Down -.09 (-.74%) to 12.03  (diversified way to own the Silver miners.)

GLD  Down -.06 (-.05%) to 124.11  (or you can substitute with:  SGOL)

BRK.B:  Berkshire Hathaway’s Class B Shares. [12-18 month target:  $162.00]

July 31st at: $116.21,     Sept. 24th at:  $115.05,     Oct. 9th at:  $111.77   (Book Value: 1.36),      November $114.87,      December 7th at: $116.62,   Feb 5th 2014 at: $108.83,  Mar 5th 2014: $119.02  April 18th $127.18,        May 7th 127.50

**BRK.B IS A GREAT CORE HOLDING FOR LONG TERM AND FOR PEOPLE WITH LIMITED FUNDS THAT CAN ONLY HOLD A FEW POSITIONS.  BUY ON THE DIPS AND HOLD.  Berkshire is a great buy at a Book Value at under 1.1 to 1.2***

Other good diversified Conglomorates like Berkshire but a bit riskier are: LUK, Y & SEB

iShares Russell 1000 Value ETF:  IWD  (pays 2% dividend)

       Oct 17:  $89.25,      Nov 21: $92.37,    Dec 28: $93.74  April 4: $96.43

 

Healthcare ETF’s below. (Great for Core position holdings)

XHS at $75.36 on 4/25/13 (Health Care Services etf. I like more.  Good Core holding)

IYH   at $100.00 on 4/25/13 (Health sector such as J&J, Pfizer, Amgen…, Dividend: 1.42%)

 

(CVY highly recommended for diversified safer yield)

CVY  Down -.04 (-.16%) to 25.40  (start of year 24.71)

Div Yield 5.00%,  2014 YTD ETF performance: +2.79% (+ dividend yield)

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

2013 Return: +11.17 + 5% dividend=  +16.60%  (VERY GOOD)

VYM  (Blue Chip high yielding stocks etf)

DVY   (another great dividend earning etf)

 

Extra Suggestions :

TAL:  Target:  $57.00 fair value (CAUTION NOW) pays 6%+ dividend

We have been long this stock since $30.00  (Stop/Close position below $44.50) protect profits.

BGCP:  Target  $10.00  (Real Estate broker play) Dividend 8%+  (Stop close below $5.50)

EXG:   Target  $12.00 (Global High Income Fund) Dividend  10.22%  (Buy under $9.75 or lower on dips)  Core Longer Term Hold unless conditions change.

HMC  (Honda Motorsport):  no position at this time,   Target: $56.97;    Pays 4.78% dividend

CHK (Chesapeake Energy): Target: $41.00  (stop: Stay out below $24.70)  Pays 1.28% Dividend)

HUN (Huntsman Corp):   Target:  $33.46  (stop: get out if below %23.76)

NYMT (NY Mortgage):  in at $7.58,  Target: $10.00,  **14% Dividend Yield** (I will advise if this is removed from my list)

 

Little Riskier Bank/brokerage plays below

KKR:  No Position,   Target: $35.00,   Dividend: 6.91% (Stop: close below $23.36)

BX:  The BlackStone Group,  No position,  Target: $52.00 , (Stop: close below 31.30)

 

HIGHER RISK MINERS PICS (Turning Bullish on 7/19/13)
Allied Nevada Gold (ANV):   ½ Long Position at $7.00.  Final ½ Long at $4.00 on 10/2 limit order.    Target (6-8 months):  $8.00   If Gold can retake $1900 target could be: $40.00/share.

Mesabi Trust (MSB):   Target: $31.40,  pays +2.33% Dividend  (NO POSITION YET)

SLW (Silver Wheaton): Long partial,    Fair Value Target price: $16.00

 

DEEP IN THE MONEY CALL OPTION STRATEGY I AM TRADING from 4/22/13.

SLW might go lower so be very cautious or wait until bullish confirmation.

Buy  Jan 2015 SLW (Silver Wheaton) 15 Strike Calls for around $9.00

You have almost 2 years for Silver to get back over $50.00/oz. At that price your Calls would be worth $35.00.  I think there is a high probability to get at least a 200% to 350% return on this trade.  It is a form of a synthetic Long because we are Deep in the money.  Of course if Silver Wheaten closes below $15.00 two years from now, the call option will go to zero.  So only use pure risk capital on this trade.  And as soon as you get a double sell half of your investment to take your original money out of the trade.  Good luck.

 

 

Abbott Laboratories (ABT):  Target:  $35.04,  Dividend 1% only.  Recommended at $33.79.

Current price: 38.15 on 11/25/13  (Stop: Close below $34.00)

 

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)

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

 

*****TURBO MINI PORTFOLIO STRATEGY*****

Check out my new mini portfolio below called TURBO MINI STRATEGY.  It’s a purely mechanical computer generated investment model that picks superb S&P companies that have positive cash flow, positive earnings, accumulating interest and are leaders in the S&P for growth. This is a bit more of an aggressive portfolio, but if you have a large investment account then it could be a great way to supercharge a portion of those funds.  Last year in 2013 it only made about 6 trades and currently holds the 5 stocks listed below.  I will list the changes as they occur in 2014. Of course past performance is no guarantee of future results, but if the Fed will continue to print to infinity or face collapse, you can guarantee these monster growers will continue to accumulate the worlds growing cash supply and cause their stock to rise further.  And if one company fails to perform or falls off of its many growth criteria, that particular holding gets cut and replaced with another up and coming company.  I’m very excited about this new addition to our Bull or Bear Report.  Good luck, stay diversified and invest safely.

I will update these as changes need to be made. I will make a note at top of newsletters to changes to TURBO MINI PORTFOLIO.

TURBO Mini Portfolio G/L for today 5/09/14: +.18%

Portfolio Gains from 1/1/13- 5/05/14:    +74.12%  (live trades)

UNP: Union Pacific, (1.94% Dividend Yield) Long 3/25/14 @ $188.56   +.40%

AZO: Autozone,  Long 11/12/13  @ $448.27    +19.55%

AAPL:  Apple, Long 8/12/13  @ $457.03   +28.12%

CASH  (40% of account)

 

HISTORICAL TRADES BELOW for 2014

4/23/14: Covered Short GDP on close (4pm)  26.44

4/16/14: SHORT GDP on open 4/16 (9:30 am) 24.85 Open.

4/16/14: SELL WYNN at open 4/16 (9;30 open) to close position.

*****

4/9/14: COVER OFIX at open 4/10 (9:30 open) to close.

4/7/14:  SHORT OFIX at open  4/7  (9:30 am open) to open

4/7/14: SELL GOOGLE at open 4/7 (9:30am open) to close.

3/25/14: Replaced Priceline with (UNP) Union Pacific at 9:30am open price

3/24/14:  REPLACED NETFLIX with  (WYNN) Wynn Resorts Ltd. at 9:30am open price

 

Portfolio Graph I will post each weekend.

 ScreenHunter_392 May. 09 19.27