Thursday, December 31, 2009

Happy New Year

The January 2010 edition of  THE GERRITZ LETTER has been posted. Please click the link below to view it right now.

All of us here at Gerritz Wealth Management, Inc. wish you a very Happy New Year and a prosperous 2010!

Wednesday, December 16, 2009

Market Comment 12 16 09

The stock market is generally in a trading range with a positive bias. Junk bond funds are trending up, but some other bond/income funds have weakened due to recent weakness in Treasury bonds. Greater than normal crosscurrents are in play during the end of the year and the first few trading days of the new year, which can lead to significant volatility at the beginning of the new year.

In the December issue of The Gerritz Letter I pointed out the negative market technicals at the time. The technicals have since improved and has resulted in a sideways trading range market rather than a correction.  The S&P 500 has been in a trading range since Nov. 13th. View the chart below.

(Click on chart to enlarge it for easier viewing)

I recently estabilished a position in Putnam Diversified Income Fund (PDVYX) for most accounts. This fund is in a low volatility uptrend and pays a very nice dividend.

Sunday, December 13, 2009

Jim Rogers Betting On US Dollar Rally, Would Buy More Gold Around $1000

Jim Rogers Betting On US Dollar Rally, Would Buy More Gold Around $1000

Jim Rogers was on Tech Ticker and ReutersTV (Reuters: Investor bets on USD rally) recently and he's betting on a US Dollar short squeeze. He also said commodities will do well if there's massive growth, a currency crisis, continued money printing or WW3. He told Reuters he'd buy more gold around $1,000.

"When everybody is pessimistic about something it's usually time to buy that. Now I cannot give you any fundamental reason..... but in the last couple months I've been accumulating more dollars. I think there's probably going to be a rally. If it happens I hope I'm smart enough to sell it somewhere down the line. If it doesn't happen it will collapse and I'll panic like everyone else and dump." (Reuters Interview)

(click on link below to view Jimmy Rodgers Video Interview)

Friday, December 11, 2009

How to Predict the Price of Gold

The following article discusses the relationship between the value of the dollar and the price of gold. At the moment the US Dollar has broken it's recent down trend and is heading higher. This sudden trend reversal has caused a correction in gold. Longer term if the dollar resumes it's downtrend and if inflation becomes a factor gold may sparkle again.

How to Predict the Price of Gold

Jeff Clark, Editor, Casey’s Gold & Resource Report

Long-term readers know that gold moves inversely to the dollar, meaning if the dollar drops, gold tends to rise (and vice versa). This happens with about 80% regularity. But what many gold writers haven’t acknowledged is the leveraged movement our favorite metal has demonstrated this year to the world’s reserve currency.

The U.S. dollar index, a six-currency gauge of the greenback’s value, has dropped 7.8% so far this year (as of December 3). Meanwhile, gold is up 38.7% year-to-date. In other words, for every 1% drop in the dollar index, gold has risen 4.9%. If that approximate percentage holds over time, one can begin to estimate what the gold price might be if you know what the dollar might do.

While the dollar is likely to bounce at some point, making gold correct, the long-term fate of the dollar has already dried in cement. If the dollar were simply to return to its March 2008 low of 71.30 next year – a 4.6% drop from current levels – this would imply a rise in gold of 22.5% and a price of about $1,478 an ounce.

The long-term scenario is more dramatic. If you believe the dollar will lose half its value from current levels, this would imply a gold price around $4,164. If you believe it will lose 75% of its value, gold would reach about $5,642. Doug Casey has called for a $5,000 gold price; if he’s right, guess what that implies for the dollar?

And think about this: these calculations ignore what else might “show up,” such as when price inflation shows up in the economy, the greater public shows up to buy gold, or the Chinese don’t show up at an auction. Could $5,000 gold be too low?

Market comment 12 11 09

The stock market rallied yesterday, but all the major indexes are still in trading ranges. Movement within a trading range is usually not very significant, so I don’t consider this short-term strength to have any longer-term significance. In the meantime, junk bonds funds continue to slowly trend higher, so I recommend ignoring the day-to-day volatility in the stock market while we continue to hold uptrending low-volatility bond/debt funds. We continue to use moving average stops to protect our bond fund positions.

Thursday, December 10, 2009



Pimco Total Return Fund (PTTAX) paid out a 12 cent capital gain yesterday. That alone accounts for the price drop yesterday. All GWM clients are currently reinvesting dividends, so this will merely add to the shares investors currently own.

Pimco closing price on Dec. 9, 2009.

Market comment 12 10 09

The stock market remains in a narrow trading range and junk bond funds are trending up with very low volatility. High yield bonds are yielding more than 9% and are slowing appreciating with very low volatility. We use our moving average stop discipline to limit risk. We will ride this wave until until the trend ends.

Wednesday, December 9, 2009

U.S. Dollar Soars To A Five-Week High: What Now?

U.S. Dollar Soars To A Five-Week High: What Now?

"Fundamentals" can hardly explain the dollar's recent strength

By Nico Isaac

Wed, 09 Dec 2009 16:15:00 ET

Long since thought of as "the rotting corpse" of the currency markets, the U.S. dollar reawakened to new life this week by rallying to its highest level in more than a month. For many -- namely those affiliated with the financial mainstream -- the dollar's revival came as a huge surprise.

Reason being: The two main fundamentals that supposedly drove the dollar to its 2009 "deathbed" were still very much in force. To wit:

The Interest Rate Factor: According to the usual pundits, the persistent, easy money policies of the Federal Reserve have held the dollar's head below water. Those being: Ten rate cuts in 12 months to a historic low of 0%. Here, a recent Wall Street Journal writes:

"Ultra-low rates have weighed on the dollar as investors use cheap dollars to fund bets in riskier assets, such as the euro and other high-yielding currencies... For [a sustained change in the dollar's trend], the Fed would have to be moving clearly toward an exit of its extraordinary easing measures."

Flash to December 7: That day, the Federal Open Market Committee released a very "dovish" periodic statement in which chairman Ben Bernanke reaffirmed his commitment to an "extended period of low rates." YET -- the U.S. dollar has continued to soar.

Next, the Economic Factor: Here, I'll let the following news item do the talking: "For most of 2009, the paradigm in the currency markets has been that good economic data was bad for the dollar as investors shun the low-yielding greenback... on hopes of a faster recovery." (Wall Street Journal)

YET -- in the wake of a recent, better-than-expected Jobs report, the dollar experienced its strongest single-day rise in a year.

Nico Isaac

US Dollar Index Chart -  12 09 09 (below)

(Click on chart to enlarge it for easier viewing)

For a longer term perspective, view the Dollar index chart below.
(Click on chart to enlarge it for easier viewing)

The US Dollar is still to the premier safe haven for the world when fear starts to rattle the foreign markets. Dubai and now Greece and Spain are nearing default on their debt. This fact plus the better than expected jobs report issued last week has sent the Dollar higher. We will have to wait and see if the US Dollar has begun a new uptrend or if this is just a blip and the dollar resumes it's down trend.

Market Comment 12 09 09

The stock market has been moving sideways in a narrow trading range for the past month.  Trading ranges are always due to a balance between buying and selling pressures. A strong move is required to establish a new trend direction.

The current advance shows signs of losing upside momentum. This may be due to portfolio managers wanting to lock in profits for the year. We should expect a lot of position shuffling and increased volatility in late December and early January.

We will maintain our relatively conservative posture until the market breaks out of the current trading range.  If an uptrend is established we will add equity position.

Tuesday, December 8, 2009

Market Comment 12 08 09

The US Dollar Index continues to rise. It has broken above its 50 day moving average.

Gold and the US Dollar are currently inversely correlated. Consequently gold is correcting. I have a sell discipline based on price action. Since the Dollar has decisively pierced it's 50 day moving average I have sold our gold position.

Friday, December 4, 2009

Market Comment 12 04 09

The numbers from the November employment report issued this morning were much better than expected. The market has rallied by better than 100 Dow points. If the gains in the stock market hold today the market will have completed an upside breakout on improved breadth and volume. Gold and the dollar have retreated, breaking the recent link between the dollar and market. This is a positive sign.

Wednesday, December 2, 2009

Market Comment 12 02 09

The stock market moved higher in November, but with deteriorating  fundimentals. Volume steadily declined and market breadth was poor as small caps underperformed large caps. During the past two days, those negative internals have reversed. Volume and breadth have improved significantly and small caps have outperformed large caps.

Tuesday, December 1, 2009

November 09 Market Performance

(Click on chart to enlarge it for easier viewing)

Dubai mini-crisis has run its course

The mini-crisis resulting from Dubai’s debt problem last week appears to have run its course. The stock market may now resume its bull market uptrend.