Investment UPdate: GLD, SSRS, CEF and SRS

First, on our investments in GLD, SSRI, and CEF:

http://online.wsj.com/article/SB125115798031255117.html?mod=djemITP

Several very important articles lead this commentary, as their issues lead our country's issues.

1. Want to understand healthcare, and just how much we have screwed this up. Rolling Stone issue 1086, and gonzo journalist Matt Taibbi (who exposed the Goldman ruse), lets us have it:

http://taibbi.rssoundingboard.com/health-care-reform-sick-and-wrong#

This is a preview of an article written by Matt Taibbi on Health Care. Study the videos a bit, and prepare for the full article to soon be on review. Tabibbi I consider a "gonzo journalist" in the best of ways.

He has few friends in Washington, gets the facts, and is focused in this thinking on this issue

2. The second article is written by Joel Klein, Editor with Time, who carefully explains just what has happened to the GOP, and what it has done to our country:The GOP Has Become a Party of Nihilists - TIME

http://www.time.com/time/nation/article/0,8599,1917525,00.html?artId=1917525?contType=article?chn=us

This article helps us see the overall situation we are in as a people.

3. Lastly, an opposing view from Floyd's bearish commercial real estate thinking, and our investments in SRS, the 2X inverse real estate fund.

The following is an articulate position that REITS may be a screaming buy. Remember, we already own NLY, up 65%, but continue to believe commercial real estate may be the next great hit of banks, and the financial sector.

http://online.barrons.com/article/SB124987654611518761.html

SRS is the same type of inverse fund we've had massive profits and one massive loss on (FAS-1400% BGZ-46%, BGU-(100%) and in the past year we've profited 11 times on SRS, both call (put to the inverse).

We currently own an October call that we've lost money on except for the day traders, who have reported daily .20 profits playing the spread. Level 3 subscriber MP sent this article:

ProShares UltraShort Real Estate (ETF) Investor Class Action Lawsuit

Class Action Lawsuit on behalf of certain investors in ProShares UltraShort Real Estate (ETF) (Public, NYSE:SRS) over alleged securities laws violations by ProShares Trust and others – Deadline: October 05, 2009 – Contact usAug 12, 2009 – An investor in ProShares UltraShort Real Estate (ETF) (Public, NYSE:SRS) has filed a proposed securities class action lawsuit against ProShares Trust, ProShare Advisors LLC, SEI Investments Distribution Co., Michael L. Sapir, Louis M. Mayberg, Russell S. Reynolds, III, Michael Wachs, and Simon D. Collier in the United States District Court for the Southern District of New York, on behalf of all persons who purchased or otherwise acquired shares in the UltraShort Real Estate ProShares fund (NYSE:SRS), an exchange-traded fund ("ETF") offered by ProShares Trust, pursuant or traceable to ProShares Trust' alleged false and misleading Registration Statement, Prospectuses, and Statements of Additional Information issued in connection with the UltraShort Real Estate ProShares fund’s shares.

The UltraShort Real Estate ProShares fund seeks investment results that correspond to twice the inverse (-200%) daily performance of the Dow Jones U.S. Real Estate Index, which measures the performance of the real estate sector of the U.S. equity market. Accordingly, the SRS Fund is supposed to deliver double the inverse return of the Dow Jones U.S. Real Estate Index, which fell approximately 39.2 percent from January 2, 2008 through December 17, 2008, ostensibly creating a profit for investors who anticipated a decline in the U.S. real estate market. In other words, the UltraShort Real Estate ProShares fund should have appreciated by 78.4 percent during this period. However, the UltraShort Real Estate ProShares fund fell approximately 48.2 percent during this period -- the antithesis of a directional play, so the complaint.

Note: All of the inverse funds have received this attention recently and we'll be watching closely on trading these instruments. Of note, any of the inverse ETF instruments are NOT for long term hold , but only option or ETF short term trading.

And yet again, at market tops, we won't be buying yet. It's time to sit on our hands. We continue to see all technical indicators pointing to overflow.

A Fact: The insurance companies have had a 482% change in their profits since 2002

How to Profit from Tops

August's next to last trading day the S & P has been up only ONCE in the last 12 years. We'll see if history repeats itself; it has not done so once this month so far.

We'll end the week with some stock projections we'll be sharing with www.bluechipoptions.com Preferred Subscribers, as a part of your learning experience for how we trade most everything we have in life.

Supply and demand. Cause and effect. That's all it is.

With a proper consolidation, 9250 or lower, I personally will feel there is rational to the market, and not manipulation. If this type of sell off takes place, I will feel less of the GREED that overtakes us right now, as the market hit new highs.

From there, I'm with Harry Dent, not Roubini, and I can see a short term move in this market to Fibonnaci tops of 10,400, to 10,700.

Last year at Blue Chip Options we began selling our stock portfolio, core and speculative, at Dow 14,100. Following our rules we sold 1/3 of our positions. At Dow 11,100 we sold another 1/3, all still profitable trades.

Then, we let it "run". Our remaining one third of core and speculative stocks fell to new lows, and we began buying again at 7400, and made more buys at 6500. We did not add any new stocks, but only increased our holdings in our existing positions. Preferred Blue Chip subscribers can see our portfolio live, but we're making very good money.

We then trade index options, OEX here, and DIA options over at Blue Chip, and we trade other options that we would normally invest in the stocks in.

Here's an example: I like McDonalds (MCD) and it's underperforming. I figured out how much money I would invest in the stock, and thusly with stop loss, how much I was willing to lose on the investment.

I used the stop loss money (what I would have been willing to lose) and am investing in a LEAP option on McD, allowing two buys. I'll hold it long term, and be hopeful to double my money or more, or lose it all, as I had been willing to lose it anyway.

These are some of the ways I use Floydian logic to control emotions in trading.

I never sell at the top. Always leave money on the table.

I always sell when I can make some money, especially in volatile times.

All of these lessons are exactly how to "think" to trade the OEX, or bananas, or anything you are distributing.

You might review my thinking on trading as the art of selling fruit: http://www.oexoptions.com/pages/fruit.html

So, we've sold no stocks yet. There could be new highs. Just a bit of sanity to the market would make me feel a great deal like a bull market was truly emerging. It simply all seems too soon to me.

Commercial Real Estate/Pension Funds

There is much to think about. California's pension funds are in trouble; in fact, California Public Employees Retirement System lost 60 billion last year. It is unsustainable.

Pension funds are irrevocably tied to real estate, and of course, now "owners" of the pensions know this.

They are wrapped up in "commercial real estate", buying and selling commercial properties,which include shopping malls, apartment complexes, and offices.

I've pulled all kinds of real facts on this, and it's scary. We have pension funds across the U.S. using "values" to real estate that may not accurately reflect CURRENT occupancy rate, or rents, including recent adjustments made as commercial tenants worldwide have pushed for rent reductions.

Commercial real estate is hidden in our pension funds, our banks, and still reflects optimism, and a rising economy. Without more consumption, consumer spending, commercial real estate remains a mystery to me, much as the housing boom did for years. Stuff isn't worth what they say. Or the risk is shown in a limited proportion in financials,with strong projections.

I do simple Floydian math and the numbers do not add up.

Commodities

Now that most of the world has bought copper, intent to make the big bucks, it’s falling, as are most commodities.

Quite simply, China has led this entire commodity bent drive as during recession they have used available cash to buy up rights to commodities through Australia, Africa and every third world country they could find.

Commodities and the USD$ trade in opposite directions, and our dollar has done a great job falling, as commodities have advanced.

We at www.bluechipoptions.com do NOT believe we are in an inflationary cycle in any way, but rather a deflationary climate. Just as in the 1930’s stocks and commodities are closely linked, and it’s also why stock and U.S. Treasury prices have been trending in opposite directions.

What this means to us:

*China’s rally has gone on too far, as have commodities. It also has been too much, too fast, and we believe is over extended also and when it falls (track FXI-China Ishares) it will help lead the global economy in falling, and commodities to fall further.

Oil has also doubled for us from $35 to $70.00 a barrel since the start of the year.

At www.bluechipoptions.com we have owned DXO, and double long on oil, and returned up to 50%.

Take a look at a Pnf chart on light crude oil and note the struggle to pass 73.00.

Typically when a stock or commodity repeatedly tries to break a resistance line and can’t pass it, the stock begins to break down.

And, this leaves us with Gold. Gold appears in a pnf chart to be trading to a “triangle”. Floyd at Blue Chip sees a triangle as “converging trendlines”, where anything could go. In the past Gold hits 971.00 area as upper resistance and breaks down. One trader alone owns 38% of the overall GLD sector fund, so imagine how many bets are being made that Gold can cross 971.00, and finally cross 1000.00.

As a hedge, Gold thrives in either inflation or deflation.

The False Facts will soon come out-Sectors to Short

Two sectors are in huge uptrends

-Homebuilders and REITS are booming

2. -The financial sector (the slime boys) are screwing us again

The evidence here mounts that homebuilders/home construction may have finally bottomed. Real Estate shares also show solid increases from March. Both of these sectors have been part of the general uptrend, and we believe both are false facts. Homes are still being sold short, and 1 in 2 sold is in foreclosure. We also do not believe commercial real estate defaults are shown accurately within financials, and remain bullish on SRS, the real estate short fund.

Two types of trades can be made here: Long call traders could trade any at the money October issue on either of the above, for tight 20% profits. Contrarians could watch SRS with us. We're holding an October OTM issue now,losing money, and may soon be buying a more ITM long range SRS call (inverse to the 2X shorting fund) for what we we see will be one of the first fall offs in the market.

The financial sectors, best represented by XLF Financial Select Sector SPDR, we continue to watch for a put entry at market tops. This sector is also showing massive growth, and is soon time to short.

Where to Make Money on Energy under Obama

As environmental work develops under the Obama Administration traders are watching for what sectors to invest in to catch this development.
Talking heads abound with information about solar, wind, geothermal,natural gas (Pickens Plan) and nuclear.

It's math. Solar, Wind take an incredible amount of capital to develop ENOUGH power to make any changes. They are good, but as economists and environmentalists begin looking at nuclear (and all baby boomers shudder from memory) we'll all begin seeing nuclear can be cheap and produce clean energy.

The area not understood, that is being analyzed, is geothermal energy. To a simpleton like Floyd this means: harnessing the heat of the Earth to produce electricity. These are simple wells drilled into the earth that allow steam to rise to the surface. This spins turbines and it generates electricity.

Right now there are only 50 countries around the world harnessing geothermal energy, although it is rumored that Sarah Palin may be considering producing enough of this gas just from her Twits and You Tube insanity.

Transmission companies like ITC, one of our holdings, will do well with any of these programs.

I firmly believe that environmental energy development will be the next real estate bubble, with insane values being created as the development begins.

Geothermal costs big bucks, but the government believes it's the long range answer, and they are covering 1/3 of the current construction costs through grants.

Is The Market following The Charts?

Last Monday the market corrected almost 200 points. This email is being written a week later, and I'll let you draw your conclusions on what the market has done. The facts of the week are all in.

That same Monday I received identification from a prestigious technician and stock charter as follows:

"-Overbought S&P 500 backs down from 1000 barrier. 1000 retested the November peak, and by moving to top resistance at 1014, the S&P actually had retraced Fib 38% of the entire 2007/2009 bear market.

-The RSI line was dropping for a test of its 50 line

-MACD signals were all turning negative

-A short term pullback could find support at S&P500 950, and a more serious pullback could reach the July low, that would represent a 38% retracement of the five month average. It would also provide a test of the rising 200 day average which should provide support."

For four weeks, during the last euphoric run up, Floyd has been referring to the bullish percent index for stocks, and for indices, being too high. Anything over 70 in the bullish percent index shows overbought. The chart above shows how the bullish index looks for the OEX on 8/18.

Run a comparison now. Learn to use bullish percent indicators for the simple "no noise" charting that they can provide.

All the noise we may need in the world, RSI, MACD, oscillators, moving averages, head and shoulders formation, still comes down to supply and demand, and cause and effect.

Any overbought or oversold condition eventually reverses, sometimes dramatically.