M I S Q S

Well the report for Friday was that employers cut 20,000 jobs but the unemployment rate actually fell to 9.7% from 10% (from the way I read it that is for November).  Of Course, these numbers are total bogus and the real unemployment rate is closer to 22% (see below for link).

But meanwhile, the PIGS (Portugal, Italy, Greece and Spain) continue to add fears in the EU about their impending crisis.  Therefore, people are flocking to the Dollar, causing it to strengthen and the Precious Metals Group (PGM) to fall in price.  As long as the uncertainty of the the PIGS fiscal crisis remains the Euro should continue to weaken against the US Dollar.  We will see the PGMs strengthen when weakness of the Dollar reappears. 

Most people purchase PGMs for safety from inflation.  But with the bogus numbers still coming from Washington (Unemployment and CPI/Inflation), these fears will never come to full fruition in the average investor.  I personally like the information provided over at http://www.shadowstats.com/  (you can see unemployment is really closer to 22% and CPI is running 6% right now).  Please remember back in President Clinton's first term he signed into law/authorized/whatever a change in the methodology for calculating the Consumer Price Index.  The purpose of this was to shore up the Social Security system.   Because of the Inflation Adjustment to Social Security, if the old CPI was used then the Social Security system would go bankrupt a lot faster.  By artificially changing the way the CPI is calculated and therefore show a lower Inflation rate, then the Inflation Adjustments to Social Security recipients would be smaller and thus the system could be funded longer from current taxes and interest payments.

I still think gold and silver are a good investment despite the recent run down in price.  In fact, as long as gold can stay above the 200 day moving average (around $1018 as of Friday Feb. 5th).  This would be a good buying opportunity.  However, I think we will see a fall below the 200 day MA and would need to wait for support in the $850 area before committing a large investment.  If gold, stays above $1018 and can pass $1050 and remain there (above $1050) for three closes, then an buy should be well tolerated, provided the Dollar does not continue strengthening but instead moves sideways are weakens slightly).

Silver should remain above $14.37 but if it falls below this level look for support around $12.50.

Overall, this break in the run up is helping form the continued Stair Step Pattern that you really want in a long-term bull market.  The more steps up, the stronger the trend.  If it were to run straight up you could expect it to fall straight down... kinda of like what we see with the run up to around $1200 in December, it is now falling quite quickly back down to the current levels.  If we can get about a month to a month and a half of sideways trading I would be happy.  Then the next up leg will have a solid base to move up from here.

I have heard from a few individuals who believe that the current US Stock market trend is a false up-trend.  Personally, from the charts I have studied and the numerous reports that I have read, I think the stock market will trend in the 9,500 to 10,750 on the Dow Jones Industrial Average.  At this time, I think 7,000 is still possible before we see 14,000 again, however this can change as the market stabilizes over the next year or so.

This next week we should see a slight recovery in the stock market as a late rally on Friday allowed the DJIA to close up by 10 points.  I am not expecting 300-500 point moves this next week...probably closer to 30-40 point moves.  Will also depend on other news which could change the whole market atmosphere back to negative.

I am invested in several stocks personally, and diversified over several sectors.  However, two of what I consider to be the best choices to invest in currently are:

Berkshire Hathaway, Inc. (BRK.B):  With the recent 50:1 split bringing the price down to around $70.00 and with it soon to be added to the S&P 500 index now is a good time to purchase this stock.  When it is added to the S&P 500 the price should increase as Index-based Mutual Funds and ETFs have to add the shares in order to maintain their index basing.  As many BRK investors view their stocks as long-term investments and not short term investments, the number of free-float shares will be somewhat limited.  We have seen an increase from 3m shares traded daily to 10m shares traded.  This should erode as Funds/ETFs buy and hold shares to match the Index make-up which will cause prices to rise.  I think I read somewhere or saw a chart that really prices BRK.B around $100 a share or just over 40% higher than current levels.

Annaly Mortgage (NLY)  This stock pays a 16.5-17% dividend.  They are taking full advantage of the Yield curve by borrowing short-term Dollars at very, very low interest rates and using them to buy long-term (10 year, 15 year) Government Backed Mortgage Securities thereby making a heck of a profit off of interest spread.  This stock will continue to pay 16-17% dividends until the Fed starts increasing interest rates, which will be almost a year from now if not longer.  In the future this dividend could be driven down to a lower percentage by increased stock prices (of course if you buy now, you have it locked in) so that you will continue to get the high dividend and also a potential for capital gains.  I would look for the price to top out around $23-24 if you just want to collect a good dividend and cash out on the capital gain.