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October 25, 2011
A CURRENT
UP-DATE
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GOLD IS NOT A "SAFE
HAVEN"
Gold was a
"safe
haven" when it was $250 to the oz., but
not when it is trading over $1600 for one little tiny ounce. I
am not saying gold is finished climbing, but I am saying
anything higher than current prices makes for a very risky
play.
Watching
how fast prices of precious metals fell recently, along with
the fact that it is taking quite a bit of time to recover lost
ground, should be an early warning sign.
As in just
about everything on the planet, nothing goes up forever, but
many gold buyers do not seem to understand this. J.P.
Morgan is touting $2500 to the ounce before the party is over
but this figure was just pulled out of the air as nothing in
the sane world shows any reason for such an absurd
price.
A recent
report has the Gold/CPI indicator suggesting the“Fair Value Average”
of gold is$734 and the“Fair Value
Median” to be$610 . WOW! Makes you want to
run right out and load up.
Seriously,
there are many investments that do not offer such a high
degree of risk. In my opinion, value stocks are possibly the
very best bet, as a 100% move in many of them would not
out of the question, but gold climbing to $3400 an ounce could
be a big question.
No one
knows where gold will end up but we first have to ask
ourselves why gold is so high, then we need to look for signs
of that reason starting to improve. This will be the top of
the gold markets.
The reason
the metals are so high is because of the global financial
troubles. Large buyers, such as funds and even countries
jumped on gold because of fear owning many of the currencies.
Sure, it is easier to buy currencies, but it may not be wise
until we/they know if the problems will be
solved.
Everybody
wants be at the party but there really is a point where we get
there too late. All the booze is gone and the lady s are
taken. This is almost the way I feel about the metals. More
room to go up is certainly a strong possibility, but big drops
on positive global news is also a strong
possibility.
The
countries around the world are dealing with the situation and
the time will come when things will appear to be improving and
currencies we again be the better bet. We don't want to
be in the metals as the world turns to the bright
side.
A good
thing to do, assuming we still want to play the metals, would
be to ease back on the amount we invest in them at this time.
Put the rest in a bargain stock and set back and enjoy the
ride. This way we have two ways of winning.
There has
never been such an active market, that can change directions
at the drop of a hat, like this one. I want to believe in the
recovery, and strong corporate earnings certainly helps, but
with so many Americans out of work and no light at the end of
the tunnel is cause for concern.
Another
concern I have would be the leading indices are all still in
correction territory. When I say "leading
indices" I am speaking about the broad
markets. The Value Line (-15.72),
the NY (-14.65), the RUT (-17.52), and the
SPREAD (-15.96), are all large
indices covering thousands of companies and they tend to lead
in the direction the markets will eventually
take.
The odd man
"out" is the Nasdaq (-8.18)
which normally would be with the rest of the large indices.
The odd man "in" is the DOW Transports (DJT) (-14.69). Only a group of 20 stocks
but the DJT has been one of the top performers in the recovery
and somehow has become a leading index and it is still in
correction territory (a discount of 10% or more from the 52
week high.)
Currently
all of them have lagged behind the DOW 30 and the S&P 500
and this is telling me the rally was not made in stone. If I
am correct the markets will turn down again soon. The only
other way would be for the leading indices to somehow stage a
spectacular rally to catch up and odds on this happening are
slim to none.
My biggest
question is if U.S. corporations can keep up the good work
with so many out of work. The people out of work are not able
to spend and soon, if consumer confidence falls just a little
bit more, the working class won't be buying
either.
Also, the
election year ahead holds promise to be a nasty one and I
doubt our fearless leaders will get anything done
until 2013, and only then if one party has control of both
houses. If not, whoa will be us.
The markets
obviously want to climb and this is going to make the
possibility of a year end rally strong. The problem is
continuing a rally from the current level. If that were to
happen there would be little room left for a
lasting rally.
I am still
betting the markets to sell down, mostly because the
broad market indices are still in correction territory,
but this would create the bargains we want. Another reason is,
the recent rally was because of Europe and not because of good
news coming out of the USA, and that's the wrong
reason.
This is
probably my main reasons I believe we will see the correction
continue soon. Buy the bargain on the next market move lower,
maybe then we can look to the year end rally.
"Spotlight Stocks For This
Market
Advanced Micro Devices(AMD ) (52
week range 4.31 - 9.58), now at $
4.93. The stock
is very active and tends to follow the longer term markets.
The latest revenue and earnings were higher than
estimates.
The company is now in the
final stages before launching its first new architecture
release since 2003's highly successful K8 , an all-new CPU core designed dubbed
'Bulldozer '.
The markets are
confusing but if they turn down again we could see $3.50 on
AMD, which would make it a best buy.
Buy anything under $4.50
!
Cisco
Systems (CSCO ) (52 week
range 13.30 - 24.60), now at $17.61. This newest
member of the Dow Jones Industrial Average (replaced GM) is
here to stay. A very active and well known company.
CSCO
was the number 1 or 2 worst performing of the DOW 30
stocks for several weeks, but pulling off the bottom several
weeks ago tells us higher ground lies ahead.
Entry OK
here but best when under
$15!
EC Development (ECDI) (OTC:PK) (52 wk H/L - 0.10 -
$0.95)), now
at $0.55. ECDI
is our newest "Featured Spotlight"
stock. The company was founded in 2005 and became public just
recently. Over the past five years, the company has continued
to expand and grow its state of the art gaming technology to
provide one of the most comprehensive and cutting edge Casino
Management Systems (CMS).
The
system has been deployed in
casinos in the US and Mexico and has already proved to
be reliable and technologically superior
to that of its established
rivals.
I expect an
explosion in new business and revenues and that is just what a
great company, with great products, is supposed to do.
Buy here and buy
now!
Fonar Corp.
(
FONR) (52 week
range 1.00 - 3.20)
, now at
$1.73. I first started following
Fonar in 1982 and have followed it every day since. The stock
is very liquid, as it usually trades strong volume daily.
Great products would be the reason to own this
stock.
With so
many years behind it, the best MRI scanner on the planet and a
stock price trading in a profitable trading range, this one is
a special one to
own.
For the year ended June 30, 2011, the basic
net income per common share was $0.56 and the diluted net
income per common share was $0.55. This compares to a basic
and diluted net loss per common share of $0.61 for the year
ended June 30,
2010.
With this kind of
earnings per share the stock should trade over $5, but it
never does. However, every year it jumps over 100% in a short
period and we have to be in it when it happens or we will miss
it.
OK for entry here or lower
(best if in near $1.40)!
Rotate Black,
Inc. (ROBK)(52 week range 0.06 -
0.30), now
at $0.17. Rotate Black, Inc. is one of our newest"Featured
Spotlight" stocks and one that has a
solid game plan leading to a great
future.
The"High-Rise Casino Hotel" in
Gulfport, Mississippi is expected to break ground soon. Once
the financing has been completed and I expect to hear about
this very soon, we can forget owning the stock anywhere near
the current 0.20
level.
The stock is becoming
more active in just the last couple of weeks, with the bid
moving from 0.14 to as high as 0.25. A "best guess" says the
Market Makers have built up a slight short
position.
Buy here!
Remember, if in the
right stock, at the right price,
the
market direction will mean
little!
I'm J.R. Budke and
this is my
opinion!
J.R. Budke became a stock broker in 1981,
an options principle in 1982 and a branch office manager in
1987. He is currently inactive as a stockbroker as of
12/31/99. J.R. writes the articles and opinions for the Stocks
in the Spotlight. The stories and stocks found on this
site, or any "Stocks in the Spotlight" written material, are
the opinions of J.R. Budke unless other wise stated, and
should not be considered as advice. You
should not purchase any stocks solely on the opinions found on
the "Stocks in the Spotlight's" web site or in any of its
written material. You should also be aware that options are
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the Spotlight" provides information only, this is not meant to
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purchasing or selling any security profiled, it is encouraged
and recommended that you consult a stockbroker or other
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the companies we select may involve a high degree of
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