1001 BOUL. DE MAISONNEUVE O.,
BUREAU 950,
TEL: (514) 939-2221 FAX: (309) 417-0942
e-mail:
sidklein@sidklein.com
“TERRORISTS”: LONG
or SHORT?
Nikkei: 11,010.02 (
*April low: 7,603.76
*- See March 31 &
SKC’s sole interest in
Japanese equities has been DDOVS, a theme which stood alone in the world for
differentiation, while representing the investment world’s lowest risk
opportunity, despite potential that was no less great. As a result, returns
have, to my awareness, reflected the best Sharpe ratio anywhere since 2000.
Coupled with matching macro timing, performance could not have been better.
More recently, SKC
cautioned that even
Japanese stocks have indeed
been hurt, but the Nikkei has now just about fallen
(1)
to both its 200-day and
200-week moving averages. Against this backdrop, individual names that SKC
classifies as DDOVS are again offering buying opportunities, as seasonal
factors remain part of the Japanese equity landscape. Specifically, the October
– November period is fraught with risk as foreigners do their annual
tax-selling thing. ”Thank heavens”, say the buyers. Meanwhile, many DDOVS
already reflect superb value, seasonal and global market conditions,
notwithstanding.
Conclusion: 70% long DDOVS. That could be raised at any moment.
NEW
YORK:
Several
weeks ago, George Bush proclaimed that he would delay the US elections in the
event of a terrorist attack. In the past, I have explained why our country is
the most likely candidate. Without venturing into that here, such an event
would support the view that Bush has made the US safer against terrorism and
that Canadians need “protection”.
As
a partial aside, the reason political “pundits” (read: self-important
academicians) hardly ever know what their talking about is because they
are ignorant of markets and, as a result, the driving strategy and policy
motivators behind the heavily armed business class.
Writing
commentary for over twenty years, including Sid Klein’s Daily Fax (SKDF) for
over a decade, SKDF went online on Nov. 19, 2001. The following is an
excerpt from that missive www.sidklein.com/comments/19-11-2001.doc:
“…causing ordinary folks, and even politicians (not all,
mostly Canadian), to truly believe that the unfolding stock and economic
crashes are actually related to, and even caused by, the military and terrorist
events. They are not!!!!! Having forecast a September crash, bin Laden rally
toward 10,400 for November and ensuing calamity, be aware that any future
crashes may also appear to be related to political/military/terrorist events.
Be certain that these are coinciding events and that one would be prudent to
plan one's financial strategies in a manner that does not wait to see if the
world's political stage gets any brighter. Smart money should remain technical
and not even look at it, except from the humanitarian point of view.”
With
the coming cyclical debacle compounded by disaster in the real estate markets,
the Dow is en route to 6200 in 2006, with greater secular support at
4000, slated for the subsequent cycle.
In terms of the economy, all this is part of
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a massive bear market for the latter into 2025, or
so. For the relationship between markets, the economy and political (including
military) events, as well as the timing relationships between them, readers are
encouraged to revisit the above- linked 2001 report.
Strategy: Select calendar put spreads offer 1000% potential, based on
SKC’s market forecast, as risk is actually reduced to the extent that leverage
is increased. The “catch” would be the outcome of limited potential, if the Dow
(the index of choice) were to fall even farther and faster than what is already
foreseen here. Tempered greed is better than unbridled and bearishly wishful
greed.
Conclusion:
Dow 10,200 is now formidable
resistance (seen yesterday) and may well not be exceeded, though the point is
moot. Watch out below! It appears that SKC has again perfectly forecast and
identified a critical extreme, in a major world market and index.
GOLD:
Since $420, SKC has been reporting that the metal
should trade between $375 and $430 over a period of several months. In fact,
gold is trading perfectly within its post-2000 up-trend channel, while doing so
in a manner that has been absorbing selling pressure in a very bullish manner.
The pain has principally been in equities that had run too far.
SKC’s allocation model recommended taking sizeable
profits, first in the smaller companies and then in the mid-caps, in favour of
the blue chips that had as yet not really moved. Indeed, this had been the
correct focus, until SKC further advised scaling back in that group as well.
Alternatively, leveraged silver equities were recommended on a limited basis, as
a means by which to take money off the table, while attempting to maintain a
leverage factor to the precious metals that more approximates that of a fully
invested gold portfolio.
As SKC has discussed in the past, it will only be
during the next stock market debacle that gold funds will truly expand in size.
Until now, much of the buying has been in non-gold funds, the primary mandate
of which is not precious metal equities. As a result, the influence of the
general stock market is temporarily greater on such equities.
Conclusion: With gold now better poised for a move
to new highs around $450, given the volatility in favoured silver
issues, a greater weighting in the larger gold stocks, at the expense of high
beta silver names, is once again more appropriate.
(3)
DOLLAR:
Traders are confused and concerned. Perfect.
During major trends, members of the crowd must doubt themselves. This gives the
tree a healthy shake. The reality is that the major trends for our principal
currencies (gold, Yen, Euro, Swiss Franc) remain up. Simple.
Conclusion: The following allocation is with respect to the
currencies referenced in the preceding paragraph, and does not contemplate
equities of any kind, as such considerations are dealt with in the sections
above:
·
40% Yen
·
25% gold
·
15% Swissy
·
10% Euro
·
10% USD
Sid Klein
________________________________________________________________
This newsletter is solely the
work of the author for the private information of intended recipients only.
Although the author is a registered investment advisor at Desjardins Securities
Inc., this is not an official publication of Desjardins Securities Inc. The
views (including any recommendations) expressed in this newsletter are those of
the author alone and are not those of Desjardins Securities Inc. The
information contained in this newsletter is drawn from sources believed to be
reliable but the accuracy and completeness of the information is not
guaranteed, nor in providing it do the author or Desjardins Securities Inc. assume
any liability. No solicitation to buy or sell securities should be
inferred from either the contents of this newsletter, nor its
dissemination. Each potential investment decision and its
appropriateness must be considered within the context of the entirety of
the individual investor's circumstances. This information is given as of the
date appearing on this newsletter and neither the author nor Desjardins
Securities Inc. assume any obligation to update the information or advise on
further developments relating to the information provided herein.
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