Dines, Casey and the Blogosphere

by JDH on March 14, 2009

Over on the Buy High Sell Higher Forum last week, Sidewinder posted an article called What Just Happened?, which discussed the evolution of a trader: We think we are smart when we are in a bull market because everything goes up, and when the market falls we listen to “gurus” who probably don’t know any more than the rest of us. We end up spending lots of money on newsletters, and unless we are in a raging Bull Market, we lose money.

If a newsletter writer can get a few thousand subscribers, they can recommend a small cap penny stock, and if each of their readers buys a few shares, the price of the stock goes up, making the newsletter writer a genius. Until, of course, there is no more buying, and the price falls.

In the past I have subscribed to two publications: The Dines Letter and various Casey Research publications.

The Dines Letter

I started subscribing to The Dines Letter in 1999. I made a lot of money from his recommendations in 2005 in 2006. I lost a lot of money in 2007 and 2008 (the painful details are all to obvious on my Portfolio Performance page). Overall, during the period from 2005 to 2008, I made nothing. So much for following the “guru”.

You know you’ve got problems when your bio on your website starts with “James Dines, truly a living legend, is one of the most accurate and highly regarded investment analysts today.” Yup, “living legend” pretty much summarizes it, all right.

I have nothing against Mr. Dines. He has no doubt earned a very good living for himself over the years, so more power to him. His commentaries are interesting, and at times very insightful. He was correct to suggest investing in uranium stocks ahead of the boom. Unfortunately knowing when to buy is only half of the equation. You must also sell, and unfortunately for Mr. Dines’ subscribers, he advised “holding” all the way down.

My favourite quote, which I commented on in my July 26, 2008 posting, had him bragging about PNP.TO – Pinetree Capital Ltd. which had fallen 89% from it’s peak. Priceless. I don’t need a guru to show me how to lose 89%. I’m fully capable of doing that on my own, thanks very much.

Casey Research

The problem with Dines is that he will recommend the purchase of a stock, but he will often not give reasons. It often looked as though he was recommending the purchase of a penny stock simply because he already owned it. With his subscriber base he could often drive up the price, temporarily, but longer term it was just a pyramid scheme. Which is why I started to read the publications produced by Casey Research.

Casey Research has well thought out, reasoned opinions. They have publications that specialize in Big Gold stocks, junior speculative stocks, and the excellent The Casey Report with general commentary to tie it all together. They actually visit the companies they invest in. They talk to management. They run the numbers. They integrate their specific company analysis with a well thought out view of the economy in general.

And, in 2008, their recommendations got killed. Investing in their recommendations cost their subscribers a ton of money. Trust me, I know.

Unfortunately a well reasoned, well thought out approach is of no use in the worst bear market any of us have ever experienced. The correct strategy, in hindsight, was to be in cash, or to be short for the last two years, and Casey didn’t figure it out.

That being said, I still read Casey publications. I just read everything with a critical eye, because ultimately I am responsible for my own decisions.

So where else can you get information to help you make investment decisions?

Blogs

Obviously I am somewhat biased, because I post to my blog every week. My blog is not full of information; it’s full of my opinions, so in that sense is useless if you are looking for usable information. However, that’s the point of a blog: you read someone else’s perspective on the world, and you take what they’ve said, and use what you want, and ignore the rest. So, who do I read?

My favourite blog is the Urban Survival web site, written by George Ure. He posts his thoughts five days a week (and usually on Saturday as well) at 7:55 am CDT (8:55 am Toronto time). George is a bit of a nut. He has no clue how to use spell checker, so there are numerous spelling errors every day. He is partners with the HalfPastHuman guys who use predictive linguistics to predict the future. They analyze words being used on the web, and use that to predict the future. If there is talk of earthquakes, they will predict when an earthquake will strike, for example. (For a more lucid explanation of this, read sidewinder’s post on the Forum from Wednesday). (And that’s the second time I’ve quoted sidewinder today; perhaps he should be writing this blog instead of me……..).

Having read the site daily for a number of months, it’s my impression that most of the predictions are incorrect, or the predictions are correct but the timing is wrong. It’s easy to predict that “the market will crash”; that prediction is only meaningful if you can tell me when the crash will happen, and how severe it will be. Unfortunately, George’s predictions don’t have a lot of value from that point of view.

So why do I read him every day? Because even though his predictions are often a bit off, his general thought process is basically correct. He believes we should take care of ourselves, and I agree with that basic philosophy.

His daily reports are free; you can subscribe, for a nominal fee ($40 U.S. per year), to his Peoplenomics newsletter, that is published every Sunday evening. Again, you may not agree with everything in it, but the perspective is what’s important.

To keep up with happenings in the gold conspiracy world, I read the GATA web site, that republishes information from other sites. It’s free, and is a quick read most days.

I also like Juggling Dynamite, a blog written by Danielle Park, a Canadian investment advisor. She has a good, down to earth perspective, and it’s also free.

Investor’s Insight, written by John Maudlin, has been quoted repeatedly on the Buy High Sell Higher Forum (by davidslane, I believe). Mr. Maudlin writes comprehensive and often somewhat technical commentaries, also free each week. While you may not get any concrete investment ideas from his writing, it does give you another perspective on the financial world.

Finally, and this will be offensive to some of you, I’m a big fan of Planet Moron, a satirical look at the world. Those of you who love all forms of government, and believe that government should be more involved in our daily lives, will NOT like this blog, so be warned.

I read a bunch of other non-investment related blogs as well (like Seth Godin’s for example), but that’s a good introduction to what’s out there.

How Do I Read All of This Stuff?

If you are going to read blogs, you need a blog reader. There are lots of them out there, including ones from Google Reader. My preference is one called Wizz RSS. It’s a free download. I use Firefox, and it sits on the left hand side of my browser screen. When I want to read the blogs I subscribe to, I click the title of the blog, and in a separate pane it displays all of the blog entries I have not yet read.

As an example, if I click on the Buy-High-Sell-Higher.com blog, it highlights all of the entries in the blog. The green dots indicate blog entries I have not yet read (in this picture it’s last week’s blog entry, “Happy Days are Here Again – Briefly”. I can then click on the link to see a preview of it, or double click on it to go to the website to read the entire entry. To subscribe to a new blog feed, simply go to the blog you want to subscribe to, and click on the “Find Feeds” button (circled on the picture), and it will grab the feed and add it to your watch list.

Simple.

What other blogs are worth reading? Feel free to post your thoughts on the Buy High Sell Higher Forum.

The Markets

Now, for some brief comments on the markets.

Last week I said that Happy Days are Here Again – Briefly, and I had closed out my short positions, and I went long, buying the RSU – Rydex 2X S&P ETF. I also gambled and I also bought some call options. I bought the April 76 S&P 500 calls (the SPYs, ticker symbol SZC C APR 76.00). I said I believed we are still in a depression and a bear market, but the RSI on the major indices had fallen to very oversold territory, and a small bounce was inevitable.

Well, Tuesday was more than a small bump; it was a huge up day.

See a profit, take a profit, so at the close on Tuesday I sold my RSU and my call options, at a nice profit, thank you very much. Not a huge profit, but in this market if there is cash on the table, I take it. And I did.

Then, Wednesday morning, the Dow approached 7,000 but never quite made it there. 7,000 is a meaningless number, but psychologically traders believe it’s important, so a failure at that level usually isn’t good. So, I immediately went short again, buying some RSW – Rydex Inverse 2X S&P ETF, which go up in value when the markets are falling. As a gamble, I also picked up some S&P puts (the April 65 puts); if the market does fall, I’ll make a buck. If it doesn’t, I invested so little it won’t matter.

Of course Thursday saw the Dow go back up and through 7,000, so I may be crazy on this one.  Friday’s close at 7,224 would also appear to indicate I’m on the wrong side of this trade.  I don’t think so.  This is probably nothing more than a dead cat bounce, with more downside to come.  Time will tell.

The game plan from here is to expect further market weakness, so I will remain in cash, and gold and silver stocks, with a few short positions like the RSW to round things out.

In the medium term I assume we will be testing much lower market levels, and I assume gold is going much higher, so I will continue to add to my positions on weaknesss. Time will tell if I’m early to the party.

That’s it for this week; feel free to post thoughts on your favourite blogs on the Buy High Sell Higher Forum, or any other topic you see fit. Thanks for reading; see you next week.