June 21, 2008 – The Summer Doldrums

by JDH on June 21, 2008

Welcome, officially, to the summer doldrums.

Not much happened this week. Some stocks were up, some stocks were down, but overall my portfolio remained about where it was last week.

The biggest winners were my biggest gold stocks, lead by K.TO – Kinross Gold Corp. up 6.7%. This is an interesting one because last week Kinross was my second biggest loser, down 8.5% The next biggest winner was G.TO – Goldcorp Inc., up 4.9%. Since I had stink bids placed on both stocks, I have been purchasing over the last week, so I’m glad to see them increasing.

Does this mean that gold is due to start a new run? Perhaps, but perhaps not.

We are clearly still in a trading range that started with a top in mid April, followed by a bottom at the start of May. I’m encouraged that gold is now above it’s 50 day moving average, but it’s done that three times before in the last two months, stayed there for a few days, then fell. If I was a betting man I’d guess that we will see $880 before we see $940. With that in mind, I’ll probably play the roll of day trader.

Specifically, the extra shares of Kinross and Goldcorp, and AEM.TO – Agnico-Eagle Mines Ltd. that I’ve picked up over the last two weeks will probably be listed for sale at prices above what I paid. If I get it, great. If not, that’s fine too; these are long terms holds for me, so I don’t mind hanging in there with them.

Interestingly, while the gold stocks were up, the silver stocks were down.

My worst performer on the week was SVM.TO – Silvercorp Metals Inc., down a disappointing 9.7%. I’m not going to panic on this one; they announced good but not great drilling (and tunneling) results on June 18, so some investors probably took some money off the table. I’m sitting on a big loss on this one, but I may pick up some more at these levels over the next few weeks.

My next biggest loser was DML.TO – Denison Mines Corp., down 8.2% on the week. While I don’t like to see stocks I own going down, I have been a buyer in the last two weeks, and I’ll be placing stink bids at around the $6.50 level to complete the accumulation of my position.

Going back to the winners again, my next biggest winner was the only non-Canadian exchange traded stock I own, RSW – Rydex Inverse 2X S&P ETF, which is an Exchange Traded Fund that goes up when the S&P goes down. (In theory it tracks the S&P 2 times the inverse, so if the S&P goes down 1%, RSW should go up 2%). This is my insurance stock, to give me protection against a stock market correction or crash. So far, it’s proved to be a good investment.

So, here’s my point (the same point I have been making for the last few weeks):

We are in the summer doldrums. The big guys are starting their summer vacations, and the golf season is in full swing (except for Tiger, but that’s another story). Trading volumes will be lower, so unless there is important news, stocks will drift lower. It’s not the time to panic. Now is not the time to watch your stocks every single day and worry about price swings.

Now is the time to decide what stocks you want to own, and place your stink bids well below market value to begin accumulating. You can see the stink bid list here on the Buy-High-Sell-Higher.com Target Portfolio. The goal is to have a full portfolio by the end of the summer. I’m currently still holding 27% in cash, so I have a long way to go before I’m fully invested.

I expect choppy waters over the next two months, so if some stocks, like the golds mentioned above, go on a short run, I may take some quick profits.

Long term, uranium is going higher, because it’s our only hope for a stable, clean energy source.

In the medium term gold is going much higher, as the flight away from paper currency continues.

That means that I want to own gold, silver, and uranium stocks, so while they are on sale, I will be buying.

Volume also drops on the Forum over the summer, but if you have any thoughts, feel free to post them on the Buy High Sell Higher Forum, and thanks for reading and contributing.

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