July, 2009 Market Timing Update

money

July 2009

"Common sense has died. He was preceded in death by his parents Truth and Trust, his wife Discretion, his daughter Responsibility, and his son Reason. He is survived by three step-brothers - I Know My Rights, Someone Else is to Blame and I am a victim. "

Not many attended his funeral because so few realized he was gone.

~From an opinion regarding Congress and the passage of Cap and Trade.

The Professional Opinion

DJIA Index: 8447

LEI - Leading Economic Index

The month of May showed 7 out of 10 indicators in this index went positive, indicating a turnaround is on the way.

Employment

Don't look for improvement anytime soon, as this is a lagging indicator.

Real GDP Growth

There looks to be a moderate recovery in 2010, somewhere around 2-3%.

Borrowing Money

It is tough and is very slow to ease. Interest rates on Junk Bonds have fallen substantially off their 9.5% highs. A good thing.

Issues Regarding the Economic Recovery Process

1. Massive government debt sales will start crowding out in the credit markets, raising interest rates.

2. How do drain excess liquidity without substantially raising interest rates.

3. Capacity utilization (factories running) is somewhere around 70%, one of the lowest numbers seen since 1982. Idle equipment.

4. Drama queens don't have it right when talking about the risk of runaway inflation short term. It isn't there.

5. Deflation stands at 1.3%, YOY. This is mainly because of the 37%+ slump in energy prices.

Summary

Buy on the dips. Energy stocks, particularly Canadian ones should work as a nice inflation hedge going forward. Stay diversified.

Flowers out in Silver Springs, NV - You could sort of call this deceptive advertising.

Personal Portfolio

June was a month to expand on diversification so a few more stocks were added to the line up.

Since our Teleprompter In-Chief in conjunction with the libs in congress seem bent on wreaking havoc in an economy trying to recover, what is one to do? The job killing Cap and Trade actually passed congress. I still can't believe that. What were they thinking?

I think it is time to hedge a bit more and look at a few companies who you know aren't going to follow the the US down the road to self destruction. China, India and Europe come to mind.

There some serious questions about US debt, the US dollar and the US in general coming from foreign investors and it is right they should do so - no one seems to be asking them here. We seem to be more interested in junk science, 'American Idol" and newly deceased pedophiles possessing a modicum of musical talent.

YTD

Looking around stateside, anything of any real quality sitting around lows not seen in four or five years? There are a few and out of those few, how about H&R Block (HRB). The company is still paying a dividend, which is yielding about 4% at the current stock price.

I ending up buying some of that at $15.61 and think it will probably increase in price as the year rolls on closer and closer to tax time.

Next up is a little stock with a current beta a bit over 6 and that is AgFeed Industries.
This company produces hog feed and through its subsidiaries also has hog breeding programs.
It is listed on NASDAQ and is headquartered out of China.

The Chinese eat lots of pork and produce their own feed for same, and I don't think we buy much Chinese pork over here so we're probably safe. However, the flu 'pandemic' hurt the stock which is well off its $18.00 highs.

This stock I would say is safe from the latest dictates from congress and the FDA so I think it is worth a speculation over the shorter term.

A bit more info:

More FEED Info

Last on the list is a micro cap that actually managed to get itself listed on AMEX last month. (memories of GTE) called China North East Petroleum Holdings LTD (NEP).

China it seems, doesn't have the same reservations we do when it comes to drilling for oil.

NEP

Chinese small cap stocks really got hit hard last year and any funds tracking this index got raked over the coals. I think this stock has some possibilities. Below is an opinion from a poster who I think does a succinct job of opining the merits of a play in this company.

NEP Opinion

This is probably the riskiest stock of the three but every once in a while you strike gold.

Back in 2000-2001 when financial bulletin boards were just starting, I was following another oil and gas stock called Tri-Valley Oil and Gas out of Bakersfield, California. It generally ranged from .50 to 1.50 or so, and traded way less than 100k shares a day. There were maybe 20 - 30 regular posters on the board and they followed the company with intensity.

One day just to see what would happen I bought 5K shares at the beginning of the trading day, which was a big trade for this OTC stock and sat back to see what if anything would happen.
Pretty soon a poster wrote in and said 'George! did you see that trade that just went through? 5k shares! Is something going on?'

By the end of the day the stock was up another .30 - .40 cents and I sold out and ended up repeating this for another nine months or so.

Market manipulation at its finest and cheapest.

Anyway, Tri-Valley actually made it on to the AMEX and rapidly moved up from to somewhere around $10.00 a share. I was holding @ 10k shares and started selling at $3.00, up to @ $8.00 a share.

The brother of a friend of mine was holding @30k shares, sold everything at somewhere @ $10.00 a share and bought a horse ranch in Idaho. Had enough money left over to buy some nice horses too.

I haven't looked at TIV for a while so I did and it serves as a reminder that what goes up can and does go down:

TIV

This is a good place to visit for organic produce, located in Silver Springs, NV - formerly known as 'Pee Corner'.