Gold’s Dip, Plus Oil Chart and More

Good morning from Maine. 

First, let me answer a question from the comments on my recent gold report.  The questioner asked in part:

Everything I’ve read of yours recently says you expect gold to go down some before it starts its anticipated rise, so I assume you did not intend your readers to purchase your picks immediately, but rather to await the expected downward trend. Am I understanding this correctly, or did you mean for your recommendations to be implemented immediately?

Good question.  Yes, when I issued the report, I did say that gold could see short-term weakness, and that’s what has happened so far.

The way I issued the report, I had to start tracking the portfolio when the report came out last week.  But waiting a bit to enter positions probably won’t hurt. 

The only way it could probably hurt is if some of the individual issues mentioned in the report really take off … due to a takeover bid, or some other news that sends individual stocks higher.

There could also be a macroeconomic event that sends the U.S. dollar tumbling and gold, and gold stocks, much higher very quickly.

When I see gold stocks as a group start to trend higher, I’ll shoot out an alert.  That’s when I’ll be more confident of the short-term picture in gold.

However - and this is important - it is possible to miss the early part of the move since I use weekly “buy” and “sell” signals.

And longer-term, I expect all the stocks I talked about to be much higher. If you have a longer-term time frame, and don’t mind a little short-term pain, you can just buy the recommendations now. 

The decision is yours. Stay tuned for an alert, which I’ll send out when gold stocks trend higher.  But I’m tracking the portfolio as if all the positions were entered when the report first came out.

Now, what about things other than gold?

The markets are looking to open lower this morning as the world waits to see key earnings reports.  Not helping sentiment is that The Wall Street Journal reports CIT Group (CIT: 37.54 0.00 0.00%) (the holding company for lender CIT bank) is preparing for a possible bankruptcy filing after so far failing to win government loan guarantees, Another piece of bad news is that Phillips Electronics, the big European lighting maker, reported a 94% drop in quarterly profits. Ouch!

“We did not see a material improvement in consumer or professional markets in the past three months,” Chief Executive Gerard Kleisterlee said in a statement. He said the company remains “cautious about the overall economy and the markets we’re operating in.”

Earnings that I’ll be watching today include CSX Group (CSX: 51.85 0.00 0.00%), Goldman Sachs (GS: 177.45 0.00 0.00%) tomorrow and later in the week, Texas Instruments, Bank of America (BAC: 17.08 0.00 0.00%), JP Morgan (JPM: 43.64 0.00 0.00%) and Evergreen Solar (ESLR: 1.24 0.00 0.00%).

Meanwhile, back at the ranch …

Obama Dismisses Idea of Second Stimulus

President Barack Obama on Saturday dismissed the idea the nation might need a second stimulus to jolt the economy out of recession and urged Americans to be patient with his economic recovery plan. Faced with rising unemployment numbers and criticism from Republicans who have already labeled the $787 billion stimulus a failure, Mr. Obama used his weekly radio and Internet address to remind voters that reversing job losses takes time.

XX Sean’ note:  I think this is all part of the big show.  Obama doesn’t want the stimulus, but more and more people will trot out to say we absolutely need one, and finally he’ll be “aw, shucks, I really didn’t want to do it — I guess we need a second stimulus.”

I’m not passing judgment on the stimulus.  I can’t figure out if it’s working or not.  I know people whose jobs were saved by the Federal stimulus spending.  I still think we’re going to have a second stimulus plan, and it’s going to be a big one.

And here’s another interesting story …

Trouble for Treasuries Lurks as California Melts

It’s time for investors in U.S. Treasuries to toke up, or at least support offers by pot smokers to help narrow California’s budget gap by paying taxes on marijuana. Ludicrous as that legalization ploy may sound, California and its Governator aren’t in a position to dismiss any possible help. Neither are holders of U.S. government debt who would suffer if California’s slow-mo meltdown eventually ripples across the entire country.

XX Sean’ note - why is this dismissed as ludicrous?  David Reilly, the Bloomberg writer who used that description, should choose his words more wisely.  I think legalizing and taxing marijuana is a very smart idea, and one I’ve favored ever since California spent its way into the poorhouse. If you don’t want to raise taxes on the regular economy, you’re going to have to legalize (and tax) the underground economy. The rest of Reilly’s article talks about how bad a California default would be for municipal bonds, something I’ve covered in a previous UncommonWisdomDaily.com column.

 Here’s your chart of the day …

Looking at this chart, you can see that crude oil is at support now, so maybe it will bounce here. I think it more likely that it will dip to touch strong support below $54.00.  Now, that support doesn’t have to hold either. If oil breaks THAT support, we’ll have to reassess.  I”m glad that Red-Hot Commodity ETFs subscribers are long (DUG: 12.12 0.00 0.00%) (the double-inverse energy sector ETF), but we’ll exit if oil stocks turn higher on a weekly basis.

Oil  slid lower this morning.  I think a lot of this has to do with A) Congressional inquiry into commodity ETFs and B) Goldman Sachs coming under scrutiny.  See also:  Goldman Sachs profit bonanza could stoke anger

Now, for some other news I’m reading.  Most of it may depress you. But there’s also a fun quiz.

Unscientific America: How Scientific Illiteracy Threatens our Future

For every five hours of cable news, less than a minute is devoted to science; 46 percent of Americans reject evolution and think the Earth is less than 10,000 years old; the number of newspapers with weekly science sections has shrunken by two-thirds over the past several decades. The public is polarized over climate change-an issue where political party affiliation determines one’s view of reality-and in dangerous retreat from childhood vaccinations. Meanwhile, only 18 percent of Americans have even met a scientist to begin with; more than half can’t name a living scientist role model.

XX Sean’s note - test your own scientific acumen with a science quiz. Are you smarter in science than the average American?  Find out!  I had to think about the antibiotics question (don’t overthink it - they’re going for a layman’s understanding of how antibiotics work), but I got them all.  No googling!

UPDATE:  I just saw that people are arguing about the antibiotics question on theoildrum.com. There IS more than one right answer - depending on how you define antibiotic - so don’t kick yourself if you don’t come up with their “correct” answer.  It figures that Americans can’t even come up with an easily definable science quiz.

The new normal could be a lot more frugal

As an example, it’s entirely possible that the automobile culture, which once dominated us, will never return and that people will be comfortable with smaller cars and rented cars and, most directly, with public transportation.

When Will The Recovery Begin? Never.

In a recession this deep, recovery doesn’t depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.

Welcome to Doomsville

XX Sean’s note: Just in case you’re not depressed enough - this is from an email doing the rounds in the City of London on Friday morning,

“Precarious State”: Stocks Fairly Valued But “Could Go Down a Lot,” Shiller Says

That neutral valuation suggests the stock market is likely to resort to its long-term average of 7% annual gains, Shiller says. That sounds great, but the famed professor isn’t forecasting that outcome due to one major caveat: The economy is in a “precarious state” and, should it stumble anew, the stock market “could go down a lot,” he says.

Obama and the Market’s Carnival Ride

The Presidential Election Cycle is one of the many commodity seasonal and other cycles that we monitor to help inform our investment decisions.

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