Replies to post #2828 on Dow Jones Industrial Average (DJI)

[EquityTrader]

Everyone has to make their own choices...but in this market I just think its topped out and we have a lot of bad news ahead of us. If it sounds like (the rumor) we get a deal done for the debt ceiling it will be time to go long some calls and sell on the actual news. But, being 10 minutes late could cost you. If they can't compromise...we are in for at least a 5-10% correction IMO. I know it sounds huge, but it's kind of a big deal. I still think we see a flash crash in August-October (5-10%). Just glad I'm all cash for now. A LOT less sweat. Just have fun money out to play now (less than 6% of my portfolio).

Keep 10% in precious metals. I seriously doubt they will crash more than 5% in any market right now...and if the crap hits the fan...well, they go UP!

[EquityTrader]

Buying Put Protection on Stocks, Avoiding Bonds, and Staying Long Commodities

http://seekingalpha.com/article/282230-buying-put-protection-on-stocks-avoiding-bonds-and-staying-long-commodities

The trend is still well in place -- it only takes one look at a price chart of gold. Here's how to invest given the new realities of the market:

Shorts

IWM: The Russell 2000 is trading for 30X earnings and 3.5X book value. While all the king's men address the debt ceiling, the country spirals further into insolvency. The fiscal situation and structural employment issues are simply not bullish for already overvalued small-cap US companies that have little to no exports. Unless you are buying small-cap stocks trading well below book value or for 3-7X free cash flows, most small-cap stocks are a solid sell here on a valuation basis and based on the lax rules on monopolies in the US. How this bubble ever got re-flated to 2007 levels is beyond me.

QQQ: The Nasdaq 100 is also in a bubble and when the economy heads lower, Americans may not be able to afford that iPhone 5. Notice how the revenues are rising for many of the bellwether tech companies like Netflix NFLX), Amazon (AMZN), etc., but profit margins are declining. If the economy slips back into recession, which it very well could, the QQQ could sell off hard.

DRN: If you want to buy real estate, you should avoid buying REITs here at nosebleed levels in my view. Many REITs are trading for 50X earnings and 30X free cash flows. If rents continue to rise, people will be moving out, and many of these tenants could be pushed out onto the sidewalks of American cities. It's sad and scary, but it's also not bullish for DRN.

Longs

SGOL: Gold in a bank vault in Switzerland -- what could be less risky than that right now? Cash, you say? I say that Federal Reserve notes aren't money. Gold is one form of money that has been for some 6,000 years. We are held hostage by a fiat system and inflation.

SIVR: This physical silver ETF looks legitimate to me and seems to not carry the execution risks of an SLV. I am long the August $34 and $36 calls here with a fairly low premium to owning the fund directly which lowers the downside risks substantially. The dollar seems to become worth less on a purchasing power basis by the minute. Maybe this trend will reverse itself soon, and in my mind that will be a welcome development for the US worker and saver.

PLPT: This physical platinum offering looks to me to be the best play in the metals because platinum has not rallied as fast as silver and gold. Platinum has essentially traded flat with inflation over the past three years and has not risen like gold or silver, which are actual money. I still think platinum is money, although to me it's just a less volatile currency that Bernanke can't print.

DBA: Speaking of printing, you can't print corn or soybeans, which is why I am long DBA. I would love to go long a lumber ETF, because then I could directly leg into the printing of money bull market. Of course, QE2 is over, but the inflationary pressures are still here to stay if this summer's heat wave hurts crop yields or if the Fed prints more money when we default next week.

DIA: The Dow is cheaper than the Nasdaq, Russell and S&P 500 on a PE ratio basis and the index is up much less than its counterparts. If you back out the best performing stocks in the index, you can see that many Dow components are still 50% or so below their 2007 peaks. I like this index fund, but I would rather be long the August $122 calls and short the August $126 calls than buy the fund directly.

I don't want to scare people, I want to help them to wake up; the more money we spend on policing the globe and the more money we print to move stocks and inflation expectations up, the less our money is worth and the lower all of America's standard of living becomes. We can raise the debt ceiling and make inflation worse to appease a merit-less rating agency, or we can try to stop the bleeding right now before it gets worse. Personally, I am hoping we cap the debt at $15 trillion and put a noose around Geithner's credit card and place a cast around Bernanke's shaky print finger.

Disclosure: I am long SIVR, SGOL, DBA.

Additional disclosure: I am short IWM, QQQ, DRN