North Korea Quiet
Research for Online Investors

by John Dalt

12/21/10

North Korea backed away from their rhetoric Tuesday.  The S. Korean military conducted ‘live fire’ exercises.  This follows the announcement last week of the military drills scheduled to take place between Saturday and Tuesday.  N. Korea said they would retaliate, they did not.  S. Korean had earlier vowed to respond to any aggression from N. Korea.  Markets in Asia were up over 1% overnight in a sigh (buy) of relief.

The U.N. Security Council was not able to agree on the Korea situation.  China and Russia blocked any condemnation of N. Korea.  This morning, The Guardian paper reports that Britain asked a Russian “diplomat” to leave the country.  It seems he became a little too bold in his spying activities.

The expulsion occurred earlier this month, and Russia did the cold war tit-for-tat and expelled one of Britain’s diplomats from the Moscow embassy.  Britain’s new government wanted to improve relations with Moscow.  They have been strained since 2007 when Russia refused to extradite Andrei Lugovoi.  He was charged with poisoning Alexander Litvinenko with polonium in 2006.

U.S. markets look strong this morning.  We are looking at our allocations as the end of the year approaches.  This is a good time to review your portfolio.  Do you have stocks with large gains?  What is your tax situation?

Most investors “re-balance” their portfolio at the end of the year.  Many professional money managers like to re-balance their portfolios at market extremes.  If you have room to take some capital gain income this year, it seems we qualify under both disciplines.

What is re-balancing?  It is simply taking some money off the table on some of your biggest winners, and perhaps putting some additional capital to work in some of your slower growing assets.

This is part of the discipline of admitting that we don’t know with crystal clear clarity where the next “hot” sector may be.  We may absolutely believe that natural resources will supply the best returns in the next year, but that does not mean another sector won’t be just as good or even better.

We may be completely wrong.  Natural resources may be the worst place to be next year.  If you are overweight in one sector, or even one stock, your total return will suffer from lack of action.  You can increase your returns every year by having a well balanced portfolio.  You can avoid significant injury by paying attention to position sizing and rebalancing your portfolio.

We have two articles in Investor Resources you may want to review: Four Legs of Wealth and Re-Balance Your Assets.

To the mailbag:
What is your opinion of the TBT?---subscriber E.H.

John’s reply:  Funny you ask; I just looked at it for consideration in the SwingTrader.  I missed the rise on longer term rates.  I don't know what to expect from here on.  It is amazing, sometimes my clarity is very good, but now I feel torn on so many issues.  I would think TBT should be cleared to move higher, but so much is subject to the Fed and euro credit issues.  If I opened a position, sure as heck the Fed would go after long term rates or Spain would fall flat and investors would push TBT down.  I am sorry, but at this time the crystal ball is cloudy.

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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