On the Sidelines?
Research for Online Investors

by John Dalt

10/26/09

Are you sitting on the sideline?  Many investors pulled money at the worst time and now sit on the side contemplating re-entering the market.

The Wall Street Journal has an article you might read if you are struggling with your investments.  The title of the article is, “Five Ways to Get In on the Rebound.”  Not to sound to crass, but after reading this article, why not join Galt’s Long-Term Portfolio Service?

Our portfolio is up 15.1% this year.  There is a new recommendation coming out tonight, it pays almost a 6% dividend and is over 125 years old.  They have increased their dividend every year for over 25 years.  We take the work out of investing, and leave you the profits!  Read more about our Long-Term Portfolio.  It is cheap, and guaranteed.

The FDIC quietly closed seven banks on Friday, bringing the total to 106 for the year.  This is the most banks closed since 1992 when 181were closed at the end of the savings and loan crisis.  The FDIC still has close to 400 banks on their problem list published at the end of June.

The FDIC is encountering problems finding buyers for the banks they are closing.  FDIC Chairman Sheila Bair said, “In the past several months investor interest has been low.”  The FDIC has relaxed rules and is now courting private equity firms to buy failed bank assets.

The FDIC was reluctant to do this, as they didn’t want private equity firms to profit from FDIC guarantees on marginal assets that are transferred with the failed bank.  Somehow, it seemed better to let other bankers profit from these guarantees.

“Current prices for precious metals are continuing to increase.  Is it your opinion inflation is coming?  Should we consider moving money from stocks to metals?” —Subscriber K.W.

I absolutely believe inflation is coming, perhaps hyper-inflation.  I was just starting in business in the ‘70’s – ‘80’s.  This time will be worse.  I expect all commodities to at least double in price.  Look for the finished products these commodities feed for the biggest price increases.  In the ultimate contrarian view, housing or commercial buildings may experience fantastic gains.  Lumber, copper, concrete, steel, plastics are major inputs.  The only component hard to predict is labor.

The current situation points to stagflation with continuing high unemployment that will depress wages.  I don’t see the present administration encouraging the population to eat bitter medicine and go to work, as Reagan successfully did.  The capitalist system will work, but that is not where we are headed.

Stocks of companies that manufacture or market commodity based items should increase in price as inflation effects their costs.

“I just signed up. Great emails and letters. I’m still reading through the archives but keep up the great work.  I am extremely interested in peak oil and where our world is headed if we don’t come up with a “real” cheap energy source”---subscriber S.C.

I appreciate the compliment, and thanks for reading some of the old letters.  There are only three cheap energy sources, I am aware of.

• Nuclear---made expensive by safety and environmental regulations
• Natural Gas----Amazing we don't use it for transportation
• Geothermal----Good long term play.  Check out HTM and ORA

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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