Fly First Report Later
Research for Online Investors

by John Dalt

1/04/11

Our newsletter today is short and to the point.  We are busy in the market.  We are mindful of where our bread and butter is, and it is in doing our job.  The reporting comes second.  I learned this lesson the hard way when learning to fly.  I was very concerned about making the “calls” on the radio, and answering all of the tower’s questions quickly and concisely.

The flight instructor corrected this situation very quickly.  He scolded me, “The radio comes second.  You are the pilot in command (PIC).  Fly the plane first, explain it later.”  I have never forgotten that admonishment.  We have all had to tell our kids to turn down the radio and drive the car.  Young drivers don’t need distractions, anymore than young pilots or young traders.  We are all young traders.

If you don’t think you have more to learn, the market will give you a lesson when you least expect it.  This morning commodities are falling.  We own the Ultra Long Silver ETF (AGQ) in the Long-Term Portfolio.  It hit a 52-week high yesterday and is falling like a rock today, along with oil, gold, and copper.

What should we do?  Watch...it hit the 20-day average and bounced back (at this writing).  Going higher is not a straight line.  A healthy market has to drop back to take the scared money out, i.e. knock out the stop losses.  The guys on CNBC are wide awake and bragging they are short precious metals.  We all know the commodity/precious metal bubble will pop someday.   When?

What has changed?  Almost every developed country is propping up their economy with borrowed money.  Inflation is rampant in every way you measure it, except the way the U.S. government measures it.  Isn’t it funny they do not include food or energy in the “official” computations?  Try living without them.

Annaly Capital Management (NLY) announced last night they were going to sell 75 million shares in a secondary offering. Share prices dropped in the aftermarket.  Why?  This is great news.  The stock price was close to 52-week highs, the money the company raises in equity capital replaces borrowed capital.  Short term interest rates are cheap right now, but we all know they will be higher this time next year.  Now is a great time to convert borrowings into equity.  We sent out an alert to our long-term subscribers and capitalized on the dip in price.

The group in Washington needs to learn to talk less, and do less.  Just like a pilot, reporting comes second.  The new guys and gals that are feeling the rush of power need to be humble and go about their work, and quit talking about it.  The news guys won’t like it, but let them watch and comment on success, not set you up for failure in the process.  As an elected county commissioner, I learned the hard way.  The press does not report good news; they want some blood in the streets.  Lacking any, they will draw some from any willing subject.

Oh! Bama says he looks forward to working with the republicans, that there is plenty of time for the 2012 campaign.  This is why he is moving his re-election campaign headquarters to Chicago.  They can go about their work of destroying the opposition, while he tries to stay above the fray. He is returning from vacation in Hawaii, ready to ‘build on…progress when I get back.”

While Oh! Bama is talking about building on progress, Eric Cantor vows to offer one bill a week to cut spending.  Who is winning this media war?  Mr. Cantor would be wise to mimic everything the President says, ‘We are looking forward to building on progress with the White House.’  The liberal media wouldn’t know what to do with this, and he would sound so, so...reasonable.  Then they can go about dismantling and cutting funding for a large swath of the government.

That may sound cruel, but it is what we write about here.  The U.S. is a very short time from facing the kind of market based discipline Greece and Ireland are ‘enjoying’ right now.  Either the grownups do it willingly or they will do it with a credit knife at their throat.  I hope we never get to the point where the market tells us what has to happen.  But we may be too far down the road to serfdom to willingly turn back.

Many investors may find their portfolio overweight in commodities.  What goes up comes down, and we must remember to diversify our holdings.  You never know what sector will be the next hot mover.  Now might be a good time to re-balance your portfolio if you did not do it before the end of the year.  We have article that can help you under Investor Resources on re-balancing and also asset allocation.

We sent out our January stock recommendation last night for long-term subscribers.  It is a great company, pays a nice dividend and you can still buy it under our buy price due to the market weakness today.  Why not join the Long-Term Service?

To the mailbag:
Tell your subscribers to learn a lesson from someone else!  “Just because all the technicals look good on a stock recommendation when it is $1 above your recommended buy price, don’t buy it.  Invariably, it will go down to the recommended buy price and you will have a loss until it comes back up!” - thus sayeth the dumb sage.---paid up subscriber R.A.

John's reply:  You are funny and anything but dumb.

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.

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