Week Review

I have been loud about my impression of the Fed rate cut this week. I was against it and I am fully against any other cuts that seem to be pricing into the system. It is a contrarian approach I'm aware. It's just by cutting now will only make the fallout later larger and more painfully. It's kind of like getting chicken pox when you're an adult...it is much worse than if you just got it over with when you were a kid.

That being said, I'm not against taking advantage of earning some money while the getting is good. The S&P advanced an impressive 2.8% this week. Someone over at Nesteggr had written that you had to be pretty dumb to not make money this week, or next. We will see about next week but it does look like it will shape up to be positive for equities.

How did I do? My portfolio sported a gain of 3.9%. It would have been better but a Merrill Lynch analyst downgraded ABX to neutral from buy based on the stocks current run. It shed over 2% Friday. Gold bullion is still a good place to be with a low dollar, which will only continue to trend lower.

AGN was one of my two stocks this week that posted a loss. Allergan was down a whopping 8 cents for the week. It should look a little brighter next week as analysts at Credit Suisse maintained their outperform rating on the stock and raised their price target to $67. That should be good news.

The Rally Ends & Inflation Begins

Told you that FedEx would play a roll in the rally. Today the company announced better than expected earnings but lowered their forecast based on the rising cost of energy. Probably wise on their part, with oil hitting $83.90 as an intraday high. Oil won't get better near term with producers in the Gulf still being jitterish about hurricane season. Also the low dollar doesn't help either.

Two more things about the dollar. First, the Canadian dollar hit parity with the US dollar. Uh, what? My Canadian nickel is actually worth 5 cents? Get out! And second, the Saudi's did not cut their rate in step with the US for the first time. Does this signal the end of their pegging their currency with the US dollar? If so, that is bad news for the dollar and the economy. If the Saudi's end the peg, so will other countries. This will trigger a mass pull out of the dollar, which will make our currency fall further. People, a rate cut cannot help this sort of issue. It would only enhance the issue.

Long term bonds continue to sell off, pointing to inflation. Oil hitting record highs, points to inflation. The lower dollar, points to inflation. Higher gold, points to inflation. You can't cut rates anymore in the face of inflation.

Want to guess what stock was my best performer on the day? Barrick Gold (ABX) was up 5.68% today. The stock is up over 30% on the month.

And just one more issue from my little meeting today. The genius who kept proclaiming the profitability of FHA loans, said that he fully expects mortgage interest rates to come down and we will see a refinance boom (though small) next year. Hey genius! If long term bonds keep selling off (which they will unless the dollar rebounds and oil comes down) the yield will increase pushing mortgage rates higher. Obviously I don't share his view. The mortgage arena is going to stay ugly next year. Rates, at best, will remain at current levels or move slightly higher. Rates aren't bad now.

If you are facing an ARM reset set and do not have a pre-payment penalty, do yourself a favor, get out of the loan sooner than later.

Quick Update & Adding a Stock Pick

So I didn't write a weekly recap last week. Sorry, busy with a trip to Indianapolis, playing Madden on the Wii and drinking. And I'm not going look back either. I'm not going to take the time to crunch the numbers. It isn't worth it. Why?

Well, because I am running away and hiding from the S&P this week. Las Vegas Sands (LVS) has broken out of it's trading range and made a significant move higher. Since the start of the week the stock is up over 16%. The move is based on an upgrade by JP Morgan analyst calling for the stock to hit $120 and giving it an "overweight" value. The stock closed today at $117.

I have also had Barrick Gold (ABX) on a nice little run. The stock has gained over 14% percent since we returned from the Labor Day Holiday. Gold has been the talk lately with so much talk of the Fed cutting rates. If rates are indeed cut, gold does move separately from the dollar. Not a bad place to be.

JP Morgan also issued an upgrade to "neutral" from "underweight" for both Transocean (RIG) and GlobalSantaFe (the company RIG is acquiring). Let's see what that does for the stock over the next couple of days.

At this time, I am going to add another stock to my portfolio. I am going to add DaVita (DVA) based on Jim Jubak recommendation here. Diabetes is something that is immune to stock price ups and downs and DaVita provides the services necessary (such as dialysis).

I think this is a great idea and I am not afraid to ride on someone else's research and know-how. I think Jim Jubak is someone you should read every Tuesday and Friday. He covers a lot of ground in his writing. Is not afraid to admit when he is wrong. And explains the most difficult ideas in easy to understand terms.

Back to Our Winning Ways

Three out of four, thus far. That is how many times my stock portfolio has outperformed the S&P since I started this blog.

What I did Get Wrong

This week was not as rocky as I thought it might be. Trading volumes were low, as they normally are this time of the year, and some M&A activity was seen with E-Trade and TD Waterhouse apparently joining forces. I was wrong on my housing information. New home sales actually posted a better than expected report, with sales actually showing a gain. But I still do not hold much weight in the numbers. We really didn't see the news of a "credit crunch" until the end of July. I don't think we will be seeing an uptrend in sales August.

What I Got Right

The S&P gained 2.3% this week. My portfolio gained just a smidge more than 3%. My big winner this week...Barrick Gold (ABX) posted a solid gain of 8.5%. Las Vegas Sands (LVS) bounced back nicely with a gain of 7.9%. And even my dog, so far, Transocean (RIG) finally put together a nice week with a gain of 4.3%. RIG's gained was based partly on the fact that Hurricane Dean missed the companies equipment in the Gulf of Mexico. It was a good week for most of my picks. In fact, I only had one loser, PepsiCo (PEP) which posted a lost this week of 1.7%. Not too bad.

Personal Note

I promise this will be the last little note that I post for a while, since this is the third in two days. I started this blog a month ago, just hoping to find a voice and maybe get some traffic. I think I have finally hit a groove with how I want my blogs to read. I never expected to be asked to write on another site, such as when Nesteggr came and asked a week into my blogging experience. Full Disclosure: Nesteggr pays for my services. I also started a third blog, Mortgage Bullet, where I am giving advice on the home buying process. It's definitely a different blog structure. Check it out too. I am very excited with my progress and look forward to continue providing content here and on my other blogs. Thanks!