Hot Wheels

Investment ideas outside of the norm.

Typically, I am busy putting charts on this page, unfortunately, nobody has contacted me specifically about any charts.  By that reason, I believe that is a very contrarian view that the market is going a lot higher before it has the correction everyone wants to have so they can try to 'buy low'.

So I wanted to dedicate todays post (and very possibly future posts), on some investment ideas that I think make good cash flow sense.  Does anyone remember toys?  With all the computer programs, games, and wireless devices around growing up these days is a lot different than most people have experienced since the beginning of mankind.  Although I grew up with Atari and Nintendo, a large part of my childhood was playing board games and collecting toys.  Had I saved those toys in their original packaging, I would be sitting on a small fortune.  Toys today are more designed to be collectibles and not necessarily something to play with.  I think one of the best toys to focus on with an option to resell later are Lego Toys.  Lego building blocks were first created in 1949 and they are as strong as ever.  Lego has so many license deals with different Entertainment Companies, they have become the ultimate toy for literally all age groups.  Currently Lego makes different themes (ie. Star Wars, Harry Potter, Lord of the Rings, etc.) as well as some general categories.  What Lego does is make certain amounts of Lego sets during different time frames then they retire the set meaning they do not create anymore.  Because there is such a cult out there for Legos, people go out great lengths to snatch up all these Retired Lego Sets, because the window of opportunity to own Lego sets closes pretty fast.  Adding themes to Legos has added additional audiences fueling demand for their product.  Obviously there's no guarantee that Lego's will appreciate, but given that many do not buy toys anymore, because they are busy playing with their handhelds.  I believe that if you apply the basic laws of economics when it comes to low supply (ie. nobody buys as many toys; hence, nobody creates them as much), price plays a bigger role as it becomes a function of demand.  Low supply has a higher probability of attaining higher demand as it has a finite remaining amount.  So go out and buy yourself a Lego Set.  You might find yourself buying two, one to build and the other to keep in the closet for 7 years so you can double your money due to inflation.

EPI - 6 month chart

The emerging markets have been smoking hot for two weeks.  Let's take a look at WisdomTree India Earnings (EPI).  What looked like a reverse head and shoulders that began in early August has now given the impression that this security is in a V-shaped style recovery.  EPI bottomed at the end of August and has retraced everything it lost in the month of August.  

The chart I've attached does not show Volume, but Volume has picked up on average between 50-100% depending on which day you look at.  The optimism in this ETF is coming from both shorts covering as well as value investor putting money to work.  YTD (Year To Date) this ETF is -28% and trailing 12 month return is -15%.  EPI looks like it has resistance at $17 and then at $19.

The stock is way ahead of the 8, 12, and 20 Day Moving Averages.  

So here's the analysis.  8 Day Moving Average is $14.70.  Stock closed at $15.65 on 10-Sep-2013.  Tier 1 is $17.  Tier 2 is $19.

A purchase at $15.65 is giving one upside of $1.35 (1.35 = 17 - 15.65) vs downside/stop loss of .95 (.95 = 15.65-14.70).  You would be risking .95 for 1.35 or 7:5.  7:5 isn't bad at all considering the potential upside in this ETF in the short term.  Yes, the stock is high and it's above it's moving averages, but I'm a fan of "Buy High, Sell Higher".  This isn't investing, it's trading.  

As always, it's important to define risk AND time parameters.  

Markets *PAUSE* before Labor Day weekend.

First, I just want to say Happy Labor Day to those that have worked hard to deserve it.  Unfortunately, there are a lot of working Americans that aren't able to have the day off due to their status being part-time, or they have an erratic schedule, or maybe their employer doesn't recognize the day.  Labor Day was created to celebrate the economic and social contributions of workers.

I've said this before, but we all live in a very extraordinary place on the timeline of mankind.  A time when fiat currency is the prevailing choice of money, a time when deficits are exponentially amplified, and a time when "if something doesn't make sense it usually not true".  Unfortunately, I wish it was not true, but the truth is we live in a society that people are rewarded for not having to work.  In a lot of cases, it makes absolutely no sense to work to qualify for government entitlement programs.  This country has lost its moral compass to distinguish what is right and what is wrong.  As the USA continues to deteriorate, we will look back and be criticized on how economically or socially irresponsible we were.

As a working American to all working Americans, Happy Labor Day!

Onto the markets...

Markets look like they want to pull-in here as they use negative housing data, Geo-political Syria or the September FED Meeting to discuss tapering to add pressure to the markets.  The market was temporarily saved when there was an announcement yesterday saying attacks would not begin until the UN (United Nations) Inspectors were safely evacuated Saturday.  I believe the markets are using any and every headline news to lock in profits and buy on weakness.  There is still a lot of time before the September FED meeting and I believe the FED will come to the rescue (as they have always been doing recently) with asset prices and make the announcement that they will NOT start tapering until later this year.  And then later this year, they will say they will not start tapering until next year due to economic numbers being weak or ________________ (fill in blank).  The bottom line is, the FED can't taper, because everyone will figure out how phony the economy we are living in really is.  I don't see the Dow going below 14k, but that seems to be the short term floor for the market before I believe the Santa Claus rally will end the year.

Uh-Oh Mortgage Market???

http://confoundedinterest.wordpress.com/2013/06/05/whoopsie-mortgage-applications-dive-11-5-as-rates-surge-and-adp-employment-misses/

YTD the 10 year is up .30%.  That might not seem much, but when people are addicted to cheap money (ie. low interest rates), it's very easy to think this is the norm.  In my lifetime, this might be the lowest rates ever.  If it wasn't for our own government keeping rates artificially low (eg bond buying), interest rates would be higher.

Bonds Yields Rising & Gold

Given the recent action in the bond market, how does this affect the price of gold?  It all depends.

If bond yields are rising in the event of a weakening dollar, or weakening economy, or inflation, that's very positive for gold.

However, if the bond yields are rising, because the Fed is aggressively tightening or selling off bonds, this is negative for gold (and stocks).

Bull Pennant Formation for SPY

So ALL the major indexes are under pressure based on the Fed's comments less than two weeks ago.  The news that there may be tapering in the amount of bond purchasing has woken up the bears and has caused some fear in both the US, Global, and World Markets.  However, if we take a look at the charts over the last 6 months, we'll see the first leg (ie. A), second leg (ie. B), and formation of the third leg of a bull pennant.  A bull pennant is developed when you have two intersecting lines coming at two different angles forming an intersection of which the underlying line (ie. support) surpasses the overlaying line (ie. resistance) forming the pennant flag.  The SPY also had resistance at 160 which it broke out and that now provides a reference point to be future support.  I believe the SPY will retest the 160 support line in the coming weeks as the pennant flag completes formation.

I believe the markets will continue to propel forward as the so called tapering will not occur.  The recent economic data has been very week leaving the Fed no choice to continue their bond purchasing as they continue to try and spur the economy.