Is it the time to buy gold?

First of all, I hope all my friends will be safe when Hurricane Sandy hits us in the next few days. Keep my fingers crossed that we will still have power in service.

Some friends ask me whether now is a good time to buy gold, given gold has corrected quite some percentage now in the past few weeks. It is a difficult question because my answer will be Yes and No, depending on your situation. It is YES, if you haven't bought any gold yet. For me, gold should always be an important part of your portfolio. It may not be cheap compared with a few years ago but it is still very cheap if you look back a few years later. This is what I'm pretty sure about. We can try our best to speculate what may be the bottom of this correction and then wait for that point to get in, but any analysis is indeed just a wishful thinking, which may not always be exactly correct. Good technical analysis may decipher the right direction but it is very hard to pinpoint the exact entry point. I will be very disappointed to miss the big uptrend simply by waiting for an artificial ideal entry point, which may just be a few dollars difference. However, if you have already got some gold and are waiting for a better chance to get more, then I think more correction is likely in the next few weeks. At the moment, gold is sitting around $1700, just dropping below its 50 day moving average (DMA). There is a good chance that gold will further decline to test its 200 day MA around $1660. However, that is a rather strong support for gold and I think it will hold there and start to bounce back. Below is the chart for GLD. You may notice that the 200 DMA for GLD is at around $160 (the red line) and interestingly it is also the low end of the Bollinger Band (the lower grey line). Stocks usually bounce back and forth within its Bollinger Band. This coincidence is further suggesting that gold is likely to bounce back from its 200 DMA. If you are waiting for a better chance to get in, I'd wait till it drops to that level.

Apple is likely bottoming

Apple announced its earnings yesterday, which was very disappointing. Its stock immediately dropped in after-hour trading. I thought it would be a bloodshed day for Apple today. Yes, it was, but just a few hours. See below the price movement for Apple today. It indeed declined below $600 as I hoped and at one moment plummeted over $15 to $590. I hope you have got the chance to get in. However, amazingly Apple managed to climb back all the way and closed only a few dollars below the yesterday's price. I must say I was very impressed by Apple's performance and I think Apple is likely near its bottom, if not yet at the bottom. Why? It is a Wall Street famous saying that when a stock acts well during a terrible time (e.g. poor earnings or bad news), the stock has usually bottomed. In other words, those who want to sell the stock have already all sold the stock and the only people left are those who want to buy. This will of course push the stock upward. Apple today's price action seems to demonstrate that. I and no one know if this is the exact bottom for Apple. Only the time can tell. But I'm starting to pick up a few shares of Apple now.

10 times increase of college costs over 30 years?

I know there are some friends who still have young kids. Don't want to scare you but thought you at least should be informed what is going on regarding inflation, especially related to college costs. Just read something which could be interesting to you. See here. The text below pointed to a 10 times increase of college costs in the past 30 years. What will happen in the next 30 years? I bet it will only be worse. Be prepared!

If you are looking for out-of-control inflation in the US, look no further than the college and hospital next door. The CPI data show that college tuition and fees have increased 1,036% since January 1979 vs. 546% for Medical Care Goods & Services vs. 238% for the overall CPI. In other words, college costs have more than quadrupled relative to the CPI over this period, while Medical Care has more than doubled relative to the CPI.

Ready to bite APPLE

I was tied up with a business trip in Switzerland last week and did not have much time to read and watch. So just a quick note on a stock I have been watching closely for some time. It is Apple (AAPL), a stock I like very much but haven't got into it.

I guess I don't need to say too much how successful Apple is as a company. Everyone knows it and most people admire its products. It is changing the world in many aspects. However, its stock has dropped by about 15% in the past 2 weeks or so, from its top at $705. Why? It has gone ahead of itself too far, too fast. Whenever people got too excited about something in investment, the direction will reverse. No difference for Apple! After shedding 15% of its weight, Apple becomes more attractive from the long-term perspective. I'm still a bit hesitant though, due to the overall market condition. Currently Apple is trading hands at about $610. I think and hope it will come down further to below $600. If that happens, I may start to pick up Apple's shares. By using the naked puts technique, I can also sharply bring down my cost and can buy Apple shares for below $500.

Buy HongKong stocks to get onto the Bernanke bubble train

The way Bernanke is doing to print money unlimitedly will turn all assets into huge bubbles. No question about it. It is not whether but just when. That's why everyone should buy gold and silver as part of their investment portfolio. In addition to that, I have got an idea to catch up the bubble train via stocks, the HongKong stocks. Why so? This is because the unique feature involving the HongKong dollars (HK$).

Not sure if everyone knows that HongKong has pegged its currency to the US$, i.e. the HK$'s exchange rate with the US$ is fixed, which is up and down consistent with the US$ value. In other words, the H$ is not valued based on the HongKong economic conditions but rather it is purely determined by what the US Fed wants to do. Right now, the US economy is in a big mess and its inflation appears to be quite tamed due to very slow economic activities. But this is not the case in HongKong, which is actually economically doing very well. When a currency is depreciating in a strong economy like HongKong, what will definitely happen? High inflation! In other words, as long as Bernanke is printing money as he is doing now, the HK$ will be further depreciating along with the US$, leading to more and more severe inflation in HongKong. You probably have heard that the HK housing market is super hot at the moment, a clear sign of a bubble unfolding. Actually when inflation picks up its pace, everything will go up. I think there is a good chance that the HK stock market will go up much higher than anyone can imagine. There is actually another factor favoring the HK stock market. As I said at the previous blog, I think the Chinese stock market may pick up its steam soon. If that's the case, it will further propel the HK market. This is almost like a double-dosed stimulus for the HK market. As you can see the chart below, the HK stock market (via ETF: EWH, the blue line) is generally doing much better than the Chinese stocks. If you believe this thesis, consider to buy EWH at its pullback.

Chinese stocks become attractive

Am I crazy to be interested in the Chinese stocks? The Chinese economy is quickly deteriorating. Its housing market is substantially cooling down. Inflation is rampant....You name it. Nothing seems to point to a rosy picture for the Chinese stock market. Indeed, the Shanghai index is among the poorest performers in the world, declining over 10% in the past year. It seems most of the Chinese investors have become very desperate and even given up totally. Well, this is actually the time you may find good opportunities for great values. I cannot say the Chinese stock market has absolutely bottomed but if the Shanghai index can hold above 2000 for a while, then its uptrend seems quite solid. At the moment, the index is fighting against this support level. See below:

If indeed this turns out to be the bottom for the Chinese stock market, what is the best way to trade on this trend? You can look for good individual stocks but I'm not so comfortable with this approach since it is very difficult to know whether the fundamentals of each company published are credible. One better way for me is to buy the ETF for the top 25 Chinese companies' stocks, FXI. Collectively, these stocks reflect the best managed companies in China and actually it has consistently outperformed the Shanghai index (the green line for FXI vs blue line for Shanghai index).

Oil may drop another $15 from here

About 2-3 weeks ago I predicted that oil would decline substantially when it was high $90s. It did and it is trading below $90 now. An over 10% drop within a few weeks is quite substantial. So do I think it has bottomed now? I don't think so. There are 2 major forces pushing oil down the slope. The main reason is the fundamental one that oil should not be this high. You see, the global economy is deteriorating quickly and is slowing down everywhere. The three major economic bodies, US, EU and China, are all suffering from significant recessions. Without an economic growth, the oil consumption cannot be supported. Making the situation even worse is that the oil production in the US has increased dramatically in recent years, thanks to the new technology such as frackings and horizontal drilling. It is an economics 101 that high supply with low demand will only lead to a low price of any product. Oil is no exception. So why oil could still be that high till now? It is largely due to the geopolitical tension in the Middle East, especially the Iran's nuclear program. People are worried that if Iran's is attached by Israel or US, the oil production and transportation in that area will be impacted substantially and will cause shortage of crude oil. This leads to the 2nd main reason why oil price has dropped so much in the past few days and will continue to push it down. Iran has been under a very severe economic sanction led by the US. This has led to its significant currency depreciation. Iran's currency, RIAL, has declined its value by 75% in the past few years, and it dropped 30% just in the past few days. Such kind of dramatic currency depreciation associated with hyperinflation has caused its social turmoils and riots in the street. Now there is speculation that the Iranian government may not survive the sanction and the regime may be changed. If that's the case, the risk of a war has been greatly reduced and the sanction may be lifted if the new government yields to the Western pressure to stop the nuclear program. If so, its oil production will increase substantially. With this kind of logical thinking, how can the crude oil price still remain at this level, when it is not supported by the economic fundamentals? Some experts even predict that the oil price may drop another $15 from the current level. I won't be surprised if it indeed happens. Of course, it won't be a straight line dropping down. It may even come back a bit but that will be a great time and opportunity to short it. ERY is the 3 times leverage ETF to short crude oil but obviously this is very speculative with a high risk.

3-D Printing: next life-changing technology megatrend?

I'm not a tech guy and cannot really say too much about this field. But late days, you probably have also heard a lot of talking about 3-D printing. It seems this technology will become part of our life pretty soon. Even as a layman, I'd think this will be a huge market. Today, I'm really shocked and amazed to see this video: the 3-D technology to be used for making a lightweight and flexible working prosthetic for Emma, a magic arm. This is really a life-changing technology, which will change everything we rely on such as how to make or build medical implants, homes, airplanes, etc. That's why it is estimated that this industry is worth at least $1 trillion ( $1000 billion). I think this is a super megatrend one should not miss. So which company is the leading manufacturer for 3-D printer? Stratasys Inc. (SSYS)! Well, as you can see from the chart below, those early investors sensitive to technology have already jumped into this company. In the past year, SSYS has advanced 3 times. At a PE ratio of 70, I think it is a bit too pricey. I will be patiently monitoring this company and jump in if it comes down in the next few months. In the long run, there is a huge potential to get onto this train.

Be careful about what you put in your luggage

This is nothing to do with investment but thought it would also be interesting to you. Stealing of valuable stuff from your checked luggage in airport appears very common. If you think they are safe, be careful and think twice. See this report here.