This Week’s Commentary – November 17, 2007 – Dines and the Markets

by JDH on November 17, 2007

Before we discuss the week that was on the markets, let’s talk about the really big news:

The price of The Dines Letter is going up! Wow.

I guess it’s true; the best defense is a good offense. Mr. Dines has been recommending PNP.TO – Pinetree Capital Corp for many years. This year he put it in his “Good Grade” portfolio (Moderate risk; good long-term capital gains). On April 13, 2007 it traded at $14.98. On August 31, 2007 it traded at $4.08, a drop of 73%. It closed Friday at $5.34, still down 64% from the peak. That doesn’t sound like “Good Grade” to me, which is why I haven’t had it in my portfolio for many months.

Am I being too picky here? Am I wrong to think that a stock in a conservative portfolio should not drop by 73%? Am I wrong to think that at some point there has to be a sell signal? Maybe I am wrong.

Mr. Dines originally recommended Pinetree back in November of 2005 at .795 cents in U.S. funds, and on November 14 he quotes it at $5.85 in U.S. funds, for a gain of 635%, or a per year gain averaging around 318%. That’s pretty good; what’s to complain about? My complaint is that all of that gain occurred in the first year. From November 17, 2006 to today the stock is down 35%. That just doesn’t sound like that good a result to me.

He also recommended a stock, which shall remain nameless (they make drinks) in which he had some direct involvement in product development. In this issue he recommends selling, at a 66% loss (although he says he has not yet sold any of his shares, but might for “tax loss purposes”). Hmm. Big write up when it’s time to buy, and a footnote on page 15 when it’s time to sell at a huge loss. Hmmmmm.

Why the price increase for The Dines Letter? Because “we have not raised our prices in over 20 years”. Okay, I buy that, prices of everything have gone up over the last 20 years.

Except, wait a minute. Twenty years ago everyone got their TDL by mail. Now virtually everyone gets it my e-mail, which costs essentially nothing to send. No printing costs, no postage, no envelope stuffing. That’s why I think it funny that he says that TDL “is also available by e-mail at no extra charge.” No extra charge? Should we not be getting a discount for saving him the postage and handling costs? Or should he not charge a premium for mail delivery?

But I digress. As I have said before, it pains me that Mr. Dines appears unable to admit his mistakes. Yes, he, amongst a few others, did correctly call the uranium boom (although he missed the correction of the last six months). He did identify gold as a good investment (he did identify it five to ten years early, and so subscribers would have been better off in cash during most of that time, but again, I digress). His comments still move the markets, and therefore if you want to invest in junior resource stocks you should still subscribe to TDL. You must take everything he says with a grain of salt, and you must do your own thinking, but like it or not, his opinions still matter.

So, what else is Mr. Dines saying? Well, buy his newsletter and you can find out, but his thoughts are similar to mine. He likes silver, and in a recent IWB recommended a silver stock that his been on Casey’s list for a few months. I agree with him. As I said on October 27, silver is about 26% of my portfolio. Silver has been in gold’s shadows, but with the recent small pull back in gold, it is probably silver’s time to shine.

The Week That Was

Okay, enough about Mr. Dines. Where are we at in the markets? Well, last week we were in a consolidation week, and I lost money.

Last week I predicted that gold would have a brief spurt up to the $850 level and then pull back for the inevitable correction. Nope. Monday started with the inevitably correction, and down we went.

Gold Chart

However, when I look at the chart, I see a healthy consolidation. The uptrend line going back to August 16 is still intact, although only just barely. Gold is still trading well above it’s 50 and 200 day moving averages. And, the RSI is now down below 50, a significant drop from last week, which probably signals a buying opportunity.

I am now fully invested, so my plan is to sit tight. We will have lots of volatility, but that’s the way it goes. The November options have now expired, so volatility will probably be lower this week, and I assume with the pullback this week next week will be better.

Time will tell. (I’m bound to be right one of these days; it’s when we look most wrong that we are often the most right).

As always, thanks for reading, let me know if you think I’m missing the boat, and feel free to share your thoughts on the Buy High Sell Higher Forum.

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