Blog : State of the Market, Peter's Personal Trades, Previous Pick Update for Jan. 29th

by Peter Leeds on January 29th, 2016

State of the Market

The media would have you believe that the recent stock market troubles were based on China, or low oil prices. This is incorrect, and both are symptoms of the underlying problem, rather than the actual cause.

China will do just as well as ever, if Europe and America continue to buy as much as they had been... but they aren't. As well, low oil prices should be a boon to just about every business and consumer not directly involved with extraction and production.

What is really happening is that, as we recently explained, the global economy is slowing down. You'll see recession, more money printing here in America as well as Europe, and a slowing of the velocity of money [which Peter originally explained here].

Japan, who suffered "the lost decade," which has now become the lost 25 years, surprised the markets today by initiating a negative interest rate policy. Basically, you put $100 in the bank and instead of getting paid interest, you actually see the money get whittled down over time. A few years from now, your $100 will be worth $95 or so...

The idea is that, by punishing savers, it encourages people to spend their money. This should theoretically help the economy get rolling again.

Don't think Japan is that far removed from all of us. There have also been negative interest rates in Europe, and as this did not result in bank runs by the population, the entire world has been encouraged to follow the same path. America will be next.

This is not an alarmist or dramatic statement. Negative interest rates are one of the last tools left to the Federal Reserve (FED) to kick-start the cooling American economy.

  • The FED can print more money, which they will - this is despite QE, QE2, and QE3 inflating stocks, but doing nothing to strengthen economic productivity.
  • The FED can undo their tiny interest rate hike from late in 2015. They may reverse this, especially as they contemplate negative interest rates.
  • The FED can initiate negative interest rates - which they will when they see no panic on the streets in Japan.

From your perspective, some consumer discretionary stocks may temporarily benefit as things play out. As well, more quantitative easing (QE) will have the same effect as the previous 3 rounds - the stock market will go up due to the added liquidity in the system, but main street will see no benefit whatsoever.

For our analysis, and specifically with our new pick coming out Tuesday, we are steering clear of those stocks which will be vulnerable to these macro-events. We are also putting several interesting (and solid) companies through the final stages of Leeds Analysis, which should benefit from the current state of affairs.

 

Peter's Personal Trades:

 

AAPL: Peter picked up $9,850 worth of Apple shares right before the close of the markets on Wednesday. This is not a penny stock of course, but the trade was mainly to start getting some more money into stocks. Since Peter has moved to a nearly all-cash position during the current times of economic volatility, he is engaging some investments while he analyzes several smaller companies he has been watching. Peter will update on all of these, but needs to review a few specific details over the weekend.

As for AAPL, the market was having a significantly bad day (DJIA down 300 points or so), and there were lots of earnings announcements coming out which could turn the tide going intoThursday/Friday.

As well, as AAPL gapped down from Tuesday, many of the shareholders had been "washed out," setting up the potential for the stock to rebound. [See Peter's discussion of how gapping stocks can mean profits]

Peter has a stop-loss on his AAPL shares at $89.99, to limit his downside. However, the upside could be much more significant than the downside.

 

Updates on Former Picks:

 

PLG: Platinum Group just conducted a 1:10 share consolidation, which many refer to as a reverse split.

We applaud the inevitable move, which puts PLG into a more legitimate price level. There were too many shares out, and the price moves were going by fractions of a penny. Not many investors were taking the shares seriously, and even positive news wouldn't move the stock like it should with such a base of outstanding shares.

PLG is a great company from all aspects, and they certainly won't be hurt (long term) by rising precious metals prices, or the share consolidation. They are oversold right now, and we expect the shares to more easily climb from here now that the reverse split is complete.

Disclaimer/Disclosure: This communication, and any comments by Peter Leeds, his company, or his team in any way is NOT intended as financial advice. Published statements are opinions only, and merely disinterested information for entertainment purposes.

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