Are U.S. stocks a “sucker bet” now?

1. Do you think gold can go up without any consumer inflation which is the scenerio at hand today?
I understand about the commodity inflation vs. deflation of other assets happening simultaneously.

2. Why are we seeing strength in the US$ ?
The dollar index is composed of the British Pound, Euro, Australian Dollar, Yen, and Canadian Dollar of which only the Euro seems to be in trouble. The others are holding their strength relative to the US$.

This communist government will continue to spend and lie to destroy the USA. This will not change until conservatism is restored but much of the damage will be done. I have always been uncomfortable with US stocks. The Fed will continue to print. I am looking at theis short term dollar rally as a buying opportunity for gold.. Silver is too fickle for me. Perhaps numismatic US coins. I still don’t understand timiong the market in say EFT”s. I like to invest and hold as I am not a gambler.

I am firmly convinced that penny stocks are the way to go. There are many small, start-up companies that are looking for capital but none of the gurus eve mention them. Beacon and other stock promoters have yet to mention Medefile, a stock I bought last May when it was selling for $0.008. Yesterday it soared up 57 basis points to close at $0.013. Thirteen times what I paid for it. And it’s going to much, much higher over the next weeks and months. It would be a great service to small fry investors to get some information on these puppies; it would help the companies, investors, and the economy. Now, at long last we are starting to see Medefile mentioned after it has topped a penny a share, but I saw the value in this company when it was still sub-penny. I’m not saying tout these stocks, or promote them, just mention them and steer people to them to do their own due diligence. Ever heard of Stan Ovshinsky? Wouldn’t be surprised if you haven’t; just Goggle the name and you;ll see what I mean about great companies that nobody gets to hear about.

Hi Larry,
I am still trying to get my head around ecomonics and markets and how it all seems to be changing over the past couple of years or so. I really appreciate all the effort and hard work you put into distilling everything down to make it meaningful and useful. Thank you! I believe that the best approach for US stocks in particular is to be sector focused. Not all will fare well but some sectors such as natural resources and energy should generally outperform others right now. I still find it surprising, however, that despite strong fundamentals, the strong sectors seem to take a beating along with everything else.

Sean

Larry/Anyone: Would like to tap into the lithium demand and also any stocks/etf’s with a heavy presence in rare earth trading or mining Suggestions/cautions etc. would be welcome. Is this a market that is timely and if so who are the key players and what strategies would be appropriate for investing?

I am mostly in cash and some in gold/commodities nd only alimited amount in stocks.

Hi Larry

For those of your followers in England/UK I believe the only shares we should be holding in dollars are gold shares. Are there any other exceptions?

Re silver, my understanding is you advocate buying gold, not silver as gold is comparatively less volatile and there is no shortage of silver in the world, - or am I mistaken?

Many thanks and regards

Larry,

The economy is consumer driven and now as well as going forward I see pressure on discretionary income. Personal, State, local and Federal DEBT levels are high and unsustainable. This tells me at least that taxes will rise. To attract the funding required for the Federal deficit will at some time see the Treasury offering better returns given the currency risk involved in buying treasuries.

I can’t see the consumer driving a recovery. Also, how many more jobs stand to be lost? Many mid-level salaried positions are vulnerable to being exported to countries where increasingly well educated staff are available for a fraction of the cost here in the U.S.

Rising interst rates tacked onto burdensome levels of consumer debt spell a shrinking market to me. That is to say nothing of the fact that even without higher interest rates, Realty Track and Moody’s both predict home foreclosures for 2010 will exceed 2009.

I am invested exclusively in Foreign and Commodity ETFs although my my indicators I have determined to go to 90% cash at the moment. I think all my holdings have risen so dramatically that profit taking at these levels is inevitable. ETFs offer me a spread while enabling me to target a country or a commodity. I accept some volatility and do trade on intermediate signals..

In the long run I look for countries that have human or natural resources, strong growth history and strong growth potential going forward. If there is also a level of good governance, a young population, a functioning and reasonably conservative banking system,
and an optimistic population I like the country going forward.

Regards,

D.W. RUSSELL

Larry,

I am holding the Vanguard Dividend Growth Fund. I am also holding U.S. engergy limited partnerships. How vulnerable are these now?

I understand the case against U.S. equities and the case for Asian stocks. However, I still see the Asian markets following the lead of the U.S. markets. Even if the fundamentals of the Asian economies are better, what good does it do one to take a position in them if they just follow the U.S. down?

Thank you,

WJW

The only U.S. stocks I hold now are short positions. I think this sucker rally is about to die.

Stocks are always a sucker bet now that the management of every company runs their company for their own benefit and not the shareholders….it’s heads management wins tails stockholders lose….
this is no longer your grandfather’s stock market….it’s a wonderful worldwide casino where the house always wins over the long run….if you have the money to lose and the time it’s great fun.

was 100% in gold stocks, took my profits and now don’t like anything feel like everything is going to go bad.

I have the government retirement account that is TSP. I am in bonds right now and I have earned about 5.99%. What do you think I have ten years till I retire I am just trying to side step this crisis but want to be in stocks. Is now a good time to move back in to small cap stocks, large caps or EAFE Eurpoe, Australasia, Far
East) Index?

Hi Larry, Thank you for this blog. I am currently 95% cash and 5% natural resources waiting for a better time to buy more energy and natural resources in the next 4-6 months. Timing is my issue at the moment.
Cheers
Kris

hi larry,
ive always wanted someone else to pay for my retirement so i have been investing mostly in INCOME real estate. is there a MLP out there that specializes in retirement mobile home parks?

holding my investments

My only investments are in my retirement fund and those option are limited. Forign stocks and currencies appear to be the better long term investment, but how much of retirement funds show be allocated to them.
I would like to have some of my investments in gold, but that is not one of the retirment options offered. How do you start investing in gold (or silver) with limit cash? Do you advise investing in both?

We think the stock market will eventually fail. Our broker tells us it always goes back up again, so stay in it. But we’re retired and we use our invested money, so we can’t ride out a low market. We think we should take the money out, timing is the key here, and buy some rental properties so we can have continuous return on our retirement funds. We can do our own upkeep on any property we buy.

I do not think that stocks are a sucker bet today. But I worry that the current Democratic administration could do something really stupid at any time and radically change the situation. Tax, tax and spend spend is just plain stupid. A future spending freeze of some sort is equally stupid. The Fed’s debt is already so high that it will take generations to pay it off.

I am fully invested in stocks and doing well but am very concerned about next 3 years.

Let’s not sell the USA down the tube quite yet! In spite of the politicians, there are great American companies that are strong money makers that will continue to grow and prosper. Invest in them as well as in China, Brazil, India, etc.

I BOUGHT SOME SILVER THAT I CAN NOT PUT A STOP LOSS ON; SHOULD I SELL IT?

Larry,

I did some research and I’d like your take.

The CBO (the congressional budget office ) says we owe 125 trillion (basically 50 trillion in Social Security, 50 trillion in Medicare and Medicaid, and about 25 trillion in budget deficits). If the country saved 100 million a day it would take us 3500 years to pay it back. If we saved 1 billion a day, it would take 350 years to pay it back. Obviously we are NOT going to save to pay it back. We can default on it which has not been chosen so far, or we can monetize which we and everyone else is doing. This calls for hyperinflation to get the VALUE of the debt down.

Next I went to a government site and found that approximately in our history of a country we have paid the government in taxes about 48 trillion and we have a 12 trillion budget deficit which means for our history we have spent on EVERYTHING 60 trillion. This puts into perspective the huge Social Security and Medicare issue. The only way they could be so huge is because our leaders and “powers that be” have STOLEN the money to do other things with it that we don’t know about.

Looking from this perspective the ONLY thing to be in is gold because it is not about inflation or deflation, it is about we as country are bankrupt and our government corrupt and gold is the only safety. I personally think the price of gold is going somewhere between 7,000 to 10,000.

Would you respond with any ideas that would contradict my thinking and ideas ?

When I studied economics in school, my macro-economics classes discussed monetary and fiscal policy. Over the subsequent decades, I heard the term “regulatory recession,” and it has stuck with me. Of course! Regulation is important too and should be seen as a third macroeconomic tool of government.

We have had political change. The first installment came when Nancy Pelosi and Harry Reid came to leadership positions in the US House and US Senate. The unemployment rate was 4.5% and the DJIA was around 1250 and going up when they took power. The second installment of change came with the election of Barack Hussein Obama. Our government is now in the power of very liberal politicians whose policies have been very liberal (socialist).

We are now testing to see which is stronger, regulatory policy and fiscal policy, or monetary policy. Kill jobs through increasing taxes. Kill jobs through raising the minimum wage. Kill jobs through excessive environmental regulation. Kill jobs through more bank regulation. Kill jobs with pay caps. Crony capitalism and crony stimulus spending lead to more lost jobs than jobs created. Revive the economy by printing money.

Monetary policy is strong medicine, at least in the short run. But it can’t do it all. Killing jobs is a great way to keep a lid on inflation, even when monetary policy would otherwise be expected to yield inflation. That is our current conflict. Regulatory policy is depressing the price level and the general economy. Monetary policy is inflating the price level and the general economy. The over all effect is indeterminate.

What am I doing as an investor? Free money has gone to commodities, and oversees into stocks and bonds. My plan is to sell individual stocks as the market goes higher in order to free up more money to invest oversees. I hope the US economy will revive, but I will never be fully invested in the US stock market again. Obama does not believe in American exceptionalism, and under the leadership of Obama, Pelosi and Reid, neither do I. I’m afraid that the character of the American people has changed; they got the government they chose. We were exceptional, but are not any more.

I would describe the U.S. economy as the ‘Tale of Two Americas’. One group is not affected and the other has been devastated by economic events. The U.S. economy won’t recover until the job situation improves and more people are able to contribute. I can’t see that happening anytime soon because the real unemployment rate is significantly higher than 10% and the jobs that are lost are usually replaced by lower paying jobs.

When you say ‘Washington is broke and the whole world knows it’ you are right on target. Except maybe for the policy makers in Washington. I would look for more of the populist backlash we have seen lately.

Are US Stocks a sucker bet? My guess is yes.
I am and have been totally out of the market for over a year. No intention of going back for quite some time. It will take a while for almost a trillion dollars to come back to bite us, but it will bite us eventually.

I’m committed to real money opportunities.

I recently invested in China through various mutual funds. I hold very little US stocks. I am also invested in Europe. I think from January 2010 going forward for at least the near term, the US is not the place to invest.

Larry:

I agree with your perspective in this mail invitation. As a 79 year old having some down stocks, especially one REIT yield 3% on cost now in my Roth account and 40k also. I am spread over some gold (Amer Cent) since 2001 with some profits taken, sheltered by a loss, early 2008, then reinvested a bit lower. I’m in Kinross Gold smallish amount at broker’s. Also at brokers have oil income in pipeline trust and have some oil income in another trust, both Canadian.

At brokers 25 cash s/t gov, have some consumer staples @ 3%, storage REiT Preferred with 7.5%, Mortgage stock with a 12% yield on purchase price, a Dow short stock.

Also a mutual fund Inc/Gro with 40% int’l 60 US 3% div.

40K treas, variable annuity in cash choice at 3% (1.5% expenses) $260 Bank, $100 Life Ins (75cv)

A paid for house.

I am wary of bonds, tho might consider a total return Pimco fund.

I know you are not in advice management business but am interested in your views, etc.
I would consider moving out of stocks into some other investment for these but do not understand about ETFs enuf, etc.

I want some more income, concerned tho with potential for inflation.

Want to simplify as too much to follow.

I am temporarily playing a junior exploration company in its infancy (6 months or more) and after it erupts I will be diversifying into all the things that you guys are recommending.

Overheard on Cnbc a comment by someone with authority. . . (and there is a lot of sentiment to that effect) that we are on the edge of a cliff . . the values of everything may well be going down sharply.
Those things being stocks and commodities.

I just heard that Phillip Morris is owned by Mormons.
any thoughts on this ?

Larry Edelson rules. . . silver and gold on Earth

what about oil prices , short and long term? And what commodies are a sure bet to invest in?

I’M HEAVY INTO STOCKS, COMMODITY ETF’S AND A FEW BONDS

Those who buy gold (gold is not an investment, it yields no income) are betting that all of the money that has been injected into the economy will eventually lead to run away inflation. But, if the money is used to pay off debt or goes into savings then there will be no inflation. To achieve inflation from the influx of money into the economy, the money must be ciruclated. I believe the factor that will have the greatest impact on the U.S. economy will depend on Obama extending the tax cuts from he Bush administration. If he does not extend those cuts, the best place to invest will be in Master Limited Partnerships, not gold. When people come to realize that we are not going to have infalation, Gold will have only one way to go. At some point people in time those holding gold will go for the exit, and it will be panic selling. Bilions will be lost in just days.

I’m 30% invested - nearly all positions are short US equities.

I’m not experienced enough to make a recommendation–I follow yours! I trust you far more than I trust my very limited knowledge in the art of investing. One recommendation I have, however, is that you might consider writing a series of questions for your clients. I think the results of a short survey might give you insights into important aspects of your client base. For example, one question might be: Do you use a broker for your trades? Another question: Do you use a discount service such as eTrade, TD Ameritrade, or Scottrade? Question: Are you also following the advice of another investment service? Question: What is the size of your investment portfolio? Question: Do you use my stop recommendations? Question: Do you ever use trailing stops? I would think the answers to these questions would help you understand the needs of your client base much better and then be able to address those needs in your communications. If you knew that 80% of your clients used a trading service such as eTrade, then would you modify the wording of your recommendations to come closer to the verbage used on discount trading platforms (especially relating to option trading), rather than to write directions to give to a broker? Would you ever consider recommending trailing stops if you knew that a large percentage of your clients have access to setting trailing stops? Perhpas knowing the average risk aversion of your client base would be helpful to you. Maybe your team could note which recommendations have high risk so we would understand when we might want to opt out of a recommendation. It could be something as simple as the code: HR or stating for clarity that this reco might have more risk associated with it than some would prefer. Maybe everything is HR these days!

I try to take the investment advice of you and Sean and Tony as much as possible. Consequently, I currently have 12 options. None of them are doing really well right now and some look frightful! Do I have too many options all in one account? Some of your views can conflict with Martin’s and Sean’s. That’s also a concern of mine.

Thank you for frequent e-mails to reassure us during times when we see more red than green in our portfolios.

Hi Larry, Weiss has a great group of advisors but your the best! How can you advise anyone to own SLV or GLD? I believe that when push comes to shove in the metals market these two will not be able to deliver the actual metal! Read the prospectus info, there’s no guarantee! They provide a cheap way to trade the price changes, but for safe long term holding they could fold in a crisis. Holding the actual metal in small bars or buillion coins in physical possession is absolutely the safest for the long term small investor! I’m no pro, but historically in times of crisis buillion COINS will set you free! And, if necessary, get you out of the country. We may all have to become “midnight gardners” sometime in order to survive. God Bless, RH.

I run a small business (2 employees total) and have for 25 years. In December I was contacted by the Bureau of Labor Statistics because of the size and location of my business. They are now dedicating enormous resources to contact small businesses nationwide by phone personally every month. They are gathering a tremendous amount of data from people on the ground - finally. They ask particularly whether anyone got paid - not how much - whether anyone got paid. I talk to the same person every month. She’s gotten wise to my questions and now says she can’t answer, but it is clear that the small business situation is truly grim, and many owners are not paying themselves in an effort to keep their employees and keep their doors open. Businesses that did cut back in preparation for tough times have avoided lay-offs so far. The concern seems to be how much belt-tightening can go on before the dominoes start falling - lay-offs and business closings. The Bureau of Labor Statistics is concerned enough to take the risk of making their data-gathering public. It’s gonna hit the fan - is the fan on low, medium, or high?

Tradtional Inflation: I was surprised to read your statement that you “can’t think of one item” that has not gone up in price over “two years”. Your examples, including tuition & medical costs, could not be argued with (I have a son going to college next year and have been looking at the cost for several years in preparation; medical insurance cost went up 27% for my business’s emplyee health insurance this year wth double digit increases for many years). I do not disagree that (potentially serious) inflation is on the horizon. But, is is clear to me that that the “powers to be” are more concerned with deflation and I am not convinced that they will be successful in the short term. I clearly see it in real estate and consumer goods and virtually all businesses I work with are seeing major pricing pressures in the last 12 months. Housing/real estate is the most obvious example. A grading company owner told me I would be crazy to build a new building versus buying an existing one due to the reductions/deals on existing/vacant buildings (of course he is not going to state such a thing when bidding on a job - but those opportunities are not many for them right now). I was recently told by a large insurance broker that they are seeing the first ever reduction in replacement cost for commercial real estate in Fl (down 9+ % - mostly due to labor costs) and corresponding reductions in insurance premiums. Another very obvious example in the last year is oil, on average, but I do not think that will last long. With 17%++ unemployment, retailers have been slashing prices. I can buy a pinpoint cotton button down dress shirt for $20 (promotional price) that I have always paid at least $40+ for. I am not a shoper/spender, but I can clearly see examples of deflation which has had me concerned. The U.S.consumer has been hit on the head, and unlike a Britain I know who stated that it is the U.S. culture to consume, I believe the U.S. consumer will become a saver and stay that way for the foreseeable future (consumer debt reductions and savings increases data clearly reflect that over the last year +). Even the Brit I mentioned is starting to question if Americans will have a sustained culture shift.

i forgot to mention that the “currency markets” or FOREX, are very lucrative ways to make weekly income, the FOREX at most times of the day are the most active and liquid markets in the world

OUT and very cautious. But we’re searching for the right markets and correct timing.

Larry,
I am 40% cash, 5% natural resources 401k, and the rest in a 14% nonperforming hard money real estate loan I am trying really hard to get out of. I do a lot of reading and I am perplexed by the large amount of intelligent but totally opposed opinions for the future. Inflation-deflation, metalsup-metalsbubble,overseas markets and china up-bubble, peak oil- oil bubble. Even your partner on the Weiss webcast today is strong on the dollar for 2010. What is a person to do? Also I have wondered if I have physical gold or silver and things go to hell or not how do I turn it into cash or food or gas for my family? Sell it on the street corner at a 50% or more discount? Kinda ruins the inflation hedge properties of physical position. Thanks, Mark

Stocks will go into a gradual slide until prices reflect the value of companies. The government stimulus effect is running down. Most likely it will not be renewed. Consumers are supposed to pick up the slack, but with unemployment at 10% or 17% depending on your number, consumers will not be able to stimulate. No stimulation, no upward stock movement.

If the govt. drops another trillion into the market, hey, I’m in.

Larry, you have to understand the game plan of these parasites. It’s only in that context that you will follow what is happening. The game plan is that they are the only selected few who are entitled to success. All others must serve them. So whatever it takes to preserve the statusquo it would be done. Even if it means destroying the economy. This only suggests the character of these few individuals.

Larry, my perception is one of cynicism and fear. I don’t like what the Fed. and our government has been doing. Until our government stops bleeding money and gets control of its spending and makes cuts, we are headed for major economic contraction. We can’t spend our way out of this mess, nor can the Fed continue with expansion policies to expand our way out of an over-expanded economy. Everyone keeps talking about dollar weakness and inflation. All I see is fear in every equation; and this fear will provide a clear path to deflation, not inflation. The president and Congress can talk all they want. When the over 7 million jobs get replaced with over 7 million good jobs, then people will be back to being productive and feel good about themselves and this economy. We will once again see a desire for credit and credit expansion. In the meantime, I will be buying gold on the dips and keeping my money safe and out of the market. Once the contraction ends, then I truly believe that we could swing from a deflationary scenario to one of hyperinflation. I just hope what we have been observing this past couple of years doesn’t turn out to be a repeat of what we have observed Japan going through for over a decade…bull rallies within a bearish trend.

Not sure of where the market is going. I beleive it is driven by traders attempting to recoup their losses from 07 and 08. I beleive it will be a sideways market and “channelling” will be widely used and therefore the “herd” will drive the ETF’s higher and then sell. I am waiting for gold to drop to a level below $1,000.00. I will be listening to Larry for the trigger point.

Hello Larry, I have enjoyed reading your column and the comment posts. I work in the “business” and strive to both protect and grow my client assets. I find it troubling and amusing that some posters try to assign blame for the current crisis and build a portfolio around the current administrations’ policies. No government, republican or democrat, has done anything(!) to help investors. We have been deficit spending our way into oblivion since Reagan 30 years ago. If you want to be a successful investor, stop blaming the government and start paying attention to your investments. Buy and hold is dead. Portfolios need diversification and decisions on buying and selling constantly. What works now does not necessarily work in the future..