Dorm Move In, Market Falls
Research for Online Investors

by John Dalt

8/17/09

To answer your questions, we left our daughter at college on Friday.  Her mother and I were sad to leave her, but she has good company.  She has a sweet roommate from Kansas City whose parents are very nice.  She does not have to go it alone as an older sister is also a student and another older sister works and lives less than 45 minutes away.  How did we ever get along without cell phones?  I look forward to her calls to catch up on how her days are going.

Moving your freshman daughter into a dorm, while a thousand other parents are doing the same thing, is akin to trying to get out of a trade when the market is falling!  The stairways are crowded and the elevators do not move!  This was our third move in five years, we knew what to expect.  However, just like the market, it still is a stressful time.

The doors out of the market got a little crowded this morning as everyone woke up to FEAR.  Why?  I don’t know, who does?  A pull back has been predicted for the last few weeks, so it should be no surprise when it materializes.

The question that everyone wants answered is “Where do we go from here?” Will the market bounce back up, or continue to sell off? I do not know, but feel that any pullback will be shallow. 950 on the S&P 500 should bring many buyers out shopping, but FEAR is a very special emotion. Now is a good time to read “Beware of your Rat Brain.” It is one of the first articles I wrote over a year ago, I read it this weekend and profited from the points made. You never are done learning, sometimes re-learning. If you are like me, I forget painful lessons quickly, preferring to concentrate on the positive.

Investors Daily Edge, a web letter I read, reports that the Fed is buying treasuries from primary dealers to conceal the purchases they are making.  Do not believe the news reports that demand was strong in the latest bond auction.  Buyers are fewer and fewer, while the Fed is buying more and more.  The Fed announced the program would end in September after their last FOMC meeting.  As of last week, they only had $47 billion left of the $300 billion earmarked for Fed purchases.  Interest rates are headed higher, and there are fewer and fewer options for the government to borrow the huge sums of money to fund the deficit.  Buy TBT, we are.

Last January 17, I wrote how to guarantee the price of gas for your family at $1.70 per gallon for as long as you wanted.  The United States Oil Fund ETF (USO) was trading at $30 per share.  You are getting another chance to lock in cheap gas right now.  USO is trading at $35.58 as I write this article.  Look to enter on weakness, the closer to $32 the better.  If you believe, as I do, that oil is going higher, why not “lock” in enough crude oil to buy your gasoline into the future at a deep discount?  This is the kind of trade we make all the time in SwingTrader, why not join us?

The FDIC closed number 73 and 74 on Friday.  Colonial BancGroup in Alabama and Dwelling House in Pittsburgh were closed and their assets sold and will reopen Monday under new names.  There were only 25 bank failures last year and three in 2007.

Gasoline prices have plunged from their record highs – down 60% peak to trough. Beginning at the end of 2008, however, gasoline prices have surged and are currently 61% above their December 2008 lows. Today’s chart provides some perspective on the recent spike with a long-term view of the average US price for a gallon of unleaded gasoline. It is interesting to note that most price spikes were a result of Middle East crises and often preceded or coincided with a US recession. So while gasoline prices are currently well below the record set in 2007, this recent rally has brought prices to a level well above what was witnessed from 1984-2004 – a two decade span of relative energy price stability.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

Lock in $1.70 Gasoline

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