Markets Disconnect to Reality. What are these guys thinking? Update August 17, 2010

Marc's Notes:

Talk about market disconnect.

Economic statistics from housing to unemployment to European debt to inflation are all coming in badly yet the market continues its journey into fairyland. It is said the markets can stay irrational longer then you can stay solvent. This means irrational markets can go on for months without fundamentals supporting such levels until such a day when they correct. With government deficits off the charts and more spending on the way, it’s really an anomaly to see this market in the 10,000 range.
Yet here we sit with another UP day today. Wow, talk about investor complacency.

Unemployment is stubbornly high and inflation is rearing its ugly head around the world in foodstuffs, energy, and other necessities. I find few reasons to be optimistic except the fact that despite the money the US is borrowing, interest rates are the lowest in history!
Another anomaly.

If you would like to read what I had to say about this interesting phenomenon, see today’s UNION article called “Treasuries Anyone?’
Here is the link: http://www.theunion.com/article/20100817/NEWS/100819800/1024

Summer doldrums may have a lot to do with this funny market as volume is light as one would expect during these months, but with school starting and fall upon us, you can expect market volatility to pick up very soon, and when it does, I suspect a market downturn will transpire.

Bottom line: Stocks are still expensive, debt is off the charts everywhere, the banking system is at more risk now then before and little has been addressed when it comes to what caused the problems we saw during the downturn.
One bright light besides interest rates still being low is that gold and silver have held up remarkably well with spot gold over $1200/oz as we speak and silently sneaking higher.

Investors world wide are quietly adding to their gold and silver hoards and I suspect Central Banks and Sovereign Funds are adding to their positions as well. A storm of buying is brewing in gold and silver me thinks and those adding now will be glad they did as this thing slowly implodes as I know it will eventually. NO COUNTRY can amass this amount of debt and spending without eventually paying the piper and the mighty US will not escape the invoice when it comes due, trust me on this one.

What to fear?
RISING INTEREST RATES. The absolutely WORST THING and the one thing we do NOT want to see. If you see rates start to rise, bar the door, kiss your kids and your wife and batten down the hatches. It will be the ONE sign that things are about to get real bad. For now, we hold all positions with a summary below:

Gold and Silver in your possession: ADD. If you hold a ton of it already, you might SELL a few coins in here somewhere for cash. Over $1200.00/ oz is a good price to off a coin or 2 to pay some bills and buy ammo.

Dividend Payers: Add a bit along the way but wait until after the correction. I added some more new funds on the Super Dividend Payers List last month so subscribers get your copy if you haven’t already.

Gold and silver stocks- See our Dream Portfolio for our funds. HOLD.

Oil Stocks- Do not add at this time except our dividend payers on our Super Dividend Payers list. Long term oil will run but will correct with market downdrafts much like Nat Gas.

Interest rate funds- Add these as insurance for your bank accounts. These protect your US DOLLAR holdings. These funds are down hard with the interest rates so they are performing their insurance function as your US DOLLARS now have more value. Hold and add these funds as you maintain your bank accounts. One day these will rise helping offset the interest rate risk.

US BANKS ACCOUNTS: Most of your money should be here in FDIC insured or Credit Union Insured accounts. NOT MONEY MARKET FUNDS if you can avoid them as they don’t have to pay you your money in times of market stress and I do not like someone telling me I can’t get my money.

Foreign Currencies: See Dream Portfolio for holdings. Basically hold Aussie Dollars, Canadian Dollars and Swiss Francs for protection against a falling dollar, much like your interest rate funds. All these help insure your US DOLLAR bank accounts. I still have yet to see an EVERBANK product I like. I will keep looking for you.

Swiss Annuities: I can’t emphasize enough the need to get money OUT OF THE US and these annuities can be a way to do it simply and into one of the historically most safe countries of all time. Big money is in Switzerland so you want to be along side them. Nobody messes with Switzerland because they have their money there too!  Order up the easy to read booklet on the right side of the website under Swiss Advantage and read it. It’s a great booklet and really easy to comprehend!

Gamblers plays: Natural gas- its time is not yet arrived and will fall with markets but long term, you will thank me. HOLD AND ADD.
Ditto with Uranium, Oil, gold and silver stocks and funds.
Our China short FXP is down a bit from our 38 buy in but this play is betting on a China Fall. It will happen when our Dow falls and that is probably soon. HOLD AND ADD.

Contrary funds- These have been down hard with the markets rally and much like the interest rate funds provide insurance. Since they are down, that means the market is UP and your dividend payers are fine. Hence the strategy!  See how it works? Some up and some down, but as long as we get paid our dividends, we are happy.

These newsletters have been sparse as summer calls me to family vacations and coupled with the markets dull performance necessitates little more, but hang on. With the fall coming and me back in the saddle, we can expect real fireworks soon and many more of these newsletters.

Next Thursdays show on the 26th will cover market action and what happens next.

Money Margarita Dinner is happening in September so email me for a reservation.

Mini Consults take 1.5 hours and run $250.00 only until October when a new station membership drive will book up my time so email me for these minis now. Full consults take 3 hours and run $575.00.

Turkey Matters starts in 6 weeks!  Send me a check and I match it with my own money and buy Turkeys for Thanksgiving food banks. Last year we bought over 700 Turkeys with your help. Stay tuned for details. Don’t have money too give? How about volunteering your time? Email me and perhaps I will match that too. Since those Wall Street guys won’t help the poor, you and I have to.

All for now, keep the faith.

Marc