Larry Holmes

I’m not sure what to make of it yet, but I’m paying attention. The Baltic Dry Index reached a low in December and has been steadily moving higher.

And since it’s “an assessment of the price of moving the major raw materials by sea,” the index is a clear indicator of economic activity.

As economist Harold Simons says, the BDI “is totally devoid of speculative content. People don’t book freighters unless they have cargo to move.”

I don’t think it necessarily means that it’s time to rush to  buy stocks. I do think it’s a strong indication  that there will probably be upward pressure in commodity prices.

Larry Investing baltic dry index

Since 1984 (that’s as far back as my data goes) nobody has lost a dime by buying gold mining stocks when the ratio of gold to the gold and silver mining stock index (XAU) closes above 5.

And then selling the miners when the ratio gets below 4 (say about 3.75).

In fact, nobody has failed to make money with such a strategy. And — more often than not — lots of money.

This time it’s been quite a challenge. The ratio closed above 5 in March of 2007.  XAU was around 128. And then with the infamous forced liquidation of assets  in the latter part of 2008 the ratio skyrocketed to an unbelievable 11.

And the XAU index dropped to as low as 64.  That was a gift.

However, XAU is back up to 125 and — now this is big — the ratio is still around 7. In other words, gold mining stocks are still really cheap and — in my opinion — still have a long way to go on the upside.

I’ve written about the gold/xau ratio before. I just like to mention it every once in awhile.

Larry Investing gold, gold miners, gold mining stocks, gold/xau ratio

“The  budget should be balanced, the Treasury should be refilled,  public debt should be reduced, the arrogance of  officialdom should be tempered and controlled, and the  assistance to foreign lands should be curtailed lest Rome  become bankrupt.  People must again learn to work, instead  of living on public  assistance.”
- Cicero, 55 BC

Larry Money Culture

Got a 401(k), IRA, or some other long-term investment plan? Want to avoid market meltdown disasters like in 2008 when 401(k)’s became 201(k)’s?

Here’s  your solution. Invest in the stock market when the S&P500 index is above its 12-month moving average.

When it closes below its 12-month moving average get out and don’t get back in again until the index closes above the average.

Look at this chart (click to enlarge):

The red and green line represents the price of the S&P 500 index since 1995.  The blue line is the 12-month moving average. Accept for a whipsaw in 1998 caused by the Long-Term Capital Management crisis, you would have been in the market at the right times.

And — even more importantly — you would have been out of the market at the right times.

Is that simple enough for ya’?

Mebane Faber wrote a working paper detailing the results of using this timing system over a long period of time.  I suggest that you read it.

You could also use a 10-month moving average and other averages and get similar results. Here’s where you can learn more about moving averages.

Market timing actually does work. You just need a system to tell you when to be in and when to be out. And using long-term moving averages will work as well as any and better than most.

Larry Investing market timing, moving averages

Early Wednesday I posted an Apple (AAPL) chart as of Tuesday’s close. I said it looked extremely oversold at 78.20 and primed for a good bounce with a price objective of 90.

It started moving up on Wednesday and then a great earnings report after Wednesday’s close did the trick. On Thursday it popped higher and the high of the day was 90. That’s a 15% move in two days.

This is a tough market for long-term positions, but it’s a great market for trades.

Larry Trading AAPL, Apple, market

Here is a list of stock symbols on my Wednesday, January 21 watch list as candidates for a bounce:

AIN, ACLI, AAPL, ASIA, ASBC, FLY, BLX, BAC, BK, RKH, BBT, BDC, BRY, BX, BTH, BWA, BPO, BT, CM, BEAT, CUK,GTLS, SCOR, CXR, BAP, CVBF, DB, DTK, DKT, DIN, DFS, ENS, IYF, IYG, BUSE, FULT, GS, ASR, HCS, HBC, INDB, INWK, TOK, PFF, JNS, KSU, KMT, LNY, LQDT, MFW, RSX, MRTX, MHP, MSZ, NWL, NEU, NSC, ONB, PTR, PNFP, PNC, PRAA, PGF, PXG, PDS, PBH, UYG, RCNI, REP, RI, RBS, STBA, KBE, STM, STI, SNV, TWI, TMK, TRMB, TRN, TWB, UBS, UNP, UNG, VRGY, V, WBS, WCG, WSF, ZRAN

It’s a long list and they are mostly stocks that people hate. And that’s precisely the point, isn’t it?

Larry Trading stocks

After Tuesday’s sell-off I see a lot of charts like Apple (AAPL):

Apple closed yesterday at 78.20. There is no question that AAPL is trending down. It’s so far below its 200-day moving average (about 139) that is doesn’t even show up on the chart. And the fact that it’s about 45% below its long-term average is one reason AAPL may setting up for a strong counter-trend rally.

And it closed below its November low, but it did it on low volume. Also, the 2-day RSI is at an anemic 0.35 — another indication that the stock may be close to running out of sellers for awhile.

How far can it bounce? I don’t know, but I can see it getting back to its 50-day moving average (about 90).  It should at least be good enough for two or thee day rally.

I’m only using the Apple chart as an example. It’s just one of many.

Larry Trading AAPL, Apple

This was sent to me by a friend of mine:

In a supermarket, Kurtis the stock boy, was busily working when a new voice came over the loud speaker asking for a carry out at register 4. Kurtis was almost finished, and wanted to get some fresh air, and decided to answer the call. As he approached the check-out stand a distant smile caught his eye, the new check-out girl was beautiful.  She was an older woman (maybe 26, and he was only 22) and he fell in love.

Later that day, after his shift was over, he waited by the punch clock to find out her name. She came into the break room, smiled  softly at him, took her card and punched out, then left.  He looked at her card, BRENDA.  He walked out only to see her start walking up the road.  Next day, he waited outside as she left the supermarket, and offered her a ride home. He looked harmless enough, and she accepted.  When he dropped her off, he asked if maybe he could see her again, outside of work.  She simply said it wasn’t possible.

Read more…

Larry Miscellaneous Arizona Cardinals, Kurt Warner, National Football League

Here is a list of stock symbols on my Tuesday, January 20 watch list as candidates for a possible bounce:

AIN, ASIA, BLX, BAC, BDC, EWK, BWA, BT, BEAT, CUK, CTBK, SCOR, BAP, CVBF, DB, DKT, DFS, ENS, FSC, BUSE, FULT, GJM, ASR, HCS, HBC, INWK, TOK, IXG, PFF, JNS, KF, LNY, MTRX, MHP, NWL, NEU, NSC, ONB, VRUS, PNC, PRAA, PDS, PBH, RVSN, RCNI, STM, SNV, THO, TMK, TRMB, UNP, UNG, VTNC, WBS, DHS

From this list I’ll choose a few that  I think are good candidates for a trade. The names change every day.

Larry Trading stocks

Foreclosures, bailouts, financial crisis, recession, depression. It’s bad news every day. But sometimes I think we’re a bunch of spoiled consumer brats.

Maybe Consumers Never Had It So Good. Citing Mark J. Perry, an economics professor, the New York Times says that things are good for the consumer — at least from a historical perspective.

For example, in 1949 it took the average worker four and a half weeks to earn enough to buy a refrigerator. Today it only takes 2.4 days. 

In 1949  a worker had to work 13.5 hours to buy a toaster. Today, only 1.1 hours.

In 1949 a washing machine cost 83.3 hours of work. Today, 17.9 hours. 

1975 required 12.5 hours of work to buy a scientific calculator (I remember that). Today a much better calculator only requires 33 minutes of labor. 

In 1981 you had to work 8 days to buy a microwave oven (The greatest invention ever, in my opinion). Today, a measly 6.5 hours.

One more.  In 1981 a worker toiled for 4.7 weeks to buy a VCR. Today, a VCR/DVD combo can be bought by working 2.8 hours. 

So cheer up! The good  ’ole days may be right  now.

Photo credit: Cape Diem

Larry Money Culture consumer