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» Simit's Stock Portfolio & Trading Plan
The Portfolio

The portfolio below does not include Simit's investments in high growth potential companies with market capitalization below $100 million. Those investments and more are available to Gold Club subscribers.

The Plan

1. I'm willing to risk at least 50%, while looking for at least 5X return on overall portfolio.
2. Buy at support, or a massive sell-off. Focus accumulation of uranium miners employing ISR techniques, gold miners with unique properties, royalty gold stocks, and firms with top management.
3. If any position doubles in value, sell half.
4. Hold the rest till top of market. For uranium miners, this is at least a price per pound of $140 in the uranium market; for gold, it depends: need to see a new international monetary agreement and some type of resolution to the global sovereign debt crisis.
5. Exit uranium if China and India back off nuclear.
6. Possibly exit on change of management.
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» Thoughts from the Frontline: The Flat Debt Society (John Mauldin)
Oct 22, 2014 - by InformedTrades
Originally Published by Mauldin Economics

International Monetary Fund chief Christine Lagarde says the global economy is facing “the risk of a new mediocre, where growth is low and uneven.”… Lagarde said Europe's 18-nation bloc that uses the euro currency – collectively the world's biggest economy – is facing the "not insignificant" risk of falling back into a recession. (VOA News)

Since at least the beginning of 2006, the most asked question I get after a speech is “Do you think we will have inflation or deflation?” In an attempt at humor, my answer has been “Yes.” I go on to try to explain that we are in a deflationary environment, but eventually we will see inflation. When QE1 was announced, there were many pundits (none of the Keynesian variety) who immediately said the risk was for significant inflation, and there were even those (like Peter Schiff) who talked of hyperinflation and the demise of the dollar. Interest rates would rise, and US government bonds would collapse.

My response at the time was that the Federal Reserve would print more money than any of us could possibly imagine (and who imagined $3+ trillion?), and we would not see any inflation. My reasoning was that we were in a deleveraging world where the velocity of money was clearly falling. I explained – once again – the relationship between inflation and the velocity of money.

Beginning with last week’s letter, “Sea Change,” my answer to that question for the foreseeable future will be simply, “Deflation.” In Endgame Jonathan Tepper and I described the economic environment of a deleveraging world, especially that of Europe. In Code Red we described the coming world of currency wars, with Japan having fired the first shot. Sadly, we continue to see the themes of those books play out in the real world.

Over the coming months we are going to explore the implications of a rising dollar for equity markets, global trade, commodity prices (especially oil), interest rates, and Federal Reserve policy, just to mention a few of the areas that will be impacted as global currency flows shift and protectionism is on the rise. Not all markets and governments will be affected in the same way, and there will be any number of opportunities for investors who are willing to think outside of the status quo.

In this week’s letter we’re going to explore some of the implications of deflation. We will start with an internal client letter from my friend Charles Gave that deserves to be shared. Then we’ll explore a few thoughts on the velocity of money. I should note that I am deeply indebted to Dr. Lacy Hunt for my understanding of the velocity of money. To the extent I get things right it is because of his frequent and long-suffering help, and if I get something wrong it’s because I didn’t understand the things he said correctly or couldn’t communicate them properly. These two men, both of whom I think of as mentors and statesmen, have had a huge impact on my thinking. The fact that they both talk with deeply resonating basso profundo voices that remind me of the voice of God in a movie soundtrack may have something to do with that impact! In any case, it lends an air of authority to their musings. Charles even has the long flowing white hair. (Thanks to David Hay for sending me the following note from Charles.)

The Return of the XIX Century Panic?

The readers may have noticed that for the last few months, I have almost never written on economic activity, monetary policy or inflation. Most of my writings and presentations have been on one topic and only one, how to construct an “antifragile” portfolio to use the terminology coined by Nassim Taleb. For me, the monetary policy followed by the central banks had to lead to a collapse in the velocity of money, and from there to deflation.

My recommendation was thus to hedge any equity positions with a long-dated US zero. So far so good.

Let me hazard for the first time in quite a while a prognosis on the future of ‘economic activity’ in the US. In the 19th century, which was deflationary most of the time, we did not move from a recession to a bear market, but from a bear market, called a “panic” at the time, to a recession. Let me explain.

When there is no inflation [see my notes below – John], the choices are between a deflationary boom and a deflationary bust. And the sober reality is that we move from one to the other only when the stock market crashes. What create the recession are not excess inventories or capital spending as in an inflationary period but the collapse in asset prices which had been pumped up by the general mood of optimism.

[Reread that paragraph at least a few times. We’re going to explore this concept further.]

Since we had plenty of debts attached to the prices of those assets, margin calls came in, and from there we moved to a true collapse in the velocity of money, accompanied more often than not by banks going belly up (see Barings with Argentina for a good example).

I have absolutely no doubt that trillions of dollars must have been borrowed one way or the other to play the rise in asset prices engineered by the central banks. Similarly, I have no doubt that huge amounts must have been borrowed to develop new sources of energy and that the break-even price for these new sources is probably being reached as I write. [Emphasis mine.]

To use my usual Wicksellian analysis, it is probable that the market rate is moving very quickly ABOVE the natural rate. If it were not, bonds would have no reason to outperform equities as they have for the last 12 months….

If I am right, it implies that a recession may be arriving and this recession should be preceded by a genuine collapse in bank shares, where most of the bad debt is probably parked and the bank shares are underperforming big time. The good news [is] of course that we are arriving at the end of one of the stupidest periods in economic history; the bad news is that asset prices will have to adjust to the new reality.

I maintain what I have said for a long time: No negative cash flows. No big debts. Hedge with government bonds.

The Velocity Trap

Hold those thoughts for a moment, as we need to explore the velocity of money a little further before looking at the implications of what Charles is telling us.

The St. Louis Fed defines the velocity of money as “the frequency at which one unit of currency is used to purchase domestically produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time.”

Irving Fisher gave us the famous Fisher Equation of Exchange. Reduced to its most simple form, it comes out as P=MV, where P is the nominal gross domestic product (not inflation-adjusted here), M is the money supply, and V is the velocity of money. You can solve for V by dividing P by M. By the way, this is known as an identity equation. It is true at all times and all places, whether in Greece or the US.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

Important Disclosures

The article Thoughts from the Frontline: The Flat Debt Society was originally published at
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» Canada maintains rate on balanced risks to inflation
Oct 22, 2014 - by InformedTrades
Canada's central bank maintained its benchmark target for the overnight rate at 1.0 percent, as widely expected, saying the "risks to its inflation projection are roughly balanced" while the risks to financial stability associated with household debt were edging higher.
The Bank of Canada (BOC), which has maintained its policy rate since September 2010, omitted giving financial markets and investors specific guidance about its expected future policy, a move that was expected following a speech earlier this month in which Governor Stephen Poloz said forward guidance was best reserved for times of crises.
At its last policy meeting in September, the BOC said it was neutral with respect to the next change in its policy rate, with the timing and direction depending on how new information influences its outlook. Economists expect the BOC to start raising its rates around the middle of next year.
In today's statement, the BOC said total consumer price inflation was evolving broadly as expected, with underlying inflationary pressures muted but as the economy reaches full capacity in the second half of 2016, both core and total consumer price inflation are projected to be about 2 percent on a sustained basis.
In its latest monetary policy report, the BOC raised its forecast for inflation marginally from July. Core inflation is forecast to average 2.1 percent in the fourth quarter of this year, up from July's projection of 1.8 percent while total CPI inflation rises to 2.2 percent, the same as forecast in July.

In the fourth quarter of 2015, core inflation is seen averaging 1.8 percent, the same as in July, rising to 2.0 percent in the fourth quarter of 2016, unchanged from July. Total CPI inflation is forecast at 1.8 percent in the fourth quarter of 2015, down from July's 1.9 percent forecast, rising to 2.0 percent in the fourth quarter of 2016, the same as seen in July.
In September Canada's core inflation rate was steady at 2.1 percent while headline inflation eased to 2.0 percent from 2.1 percent in August.
Although the BOC said the outlook remains for stronger momentum in the global economy in 2015 and 2016, it noted weakness since July and "persistent headwinds continue to buffet most economies and growth remains reliance on exceptional policy stimulus."
But the BOC was relatively optimistic about the economic outlook, saying "confidence in the sustainability of domestic and global demand should improve and business investment should pick up. Together with a moderation in the growth of household spending, this is expected to gradually return Canada’s economy to a more balanced growth path."
It also noted that the U.S. economy is gaining traction, particularly in sectors that are beneficial to Canada and the country's exports have begun to respond.
Canada's economy is forecast to average close to 2.5 percent over the next year before slowing gradually to 2 percent by the end of 2016, roughly what the BOC considers to be the growth rate of potential output.
In its latest forecast, annual growth is forecast at 2.2 percent in the fourth quarter of this year, up from July's forecast of 2.1 percent, and then pick up speed to 2.4 percent in the final quarter of 2015, the same as seen in July. In the fourth quarter of 2016 Gross Domestic Product growth is forecast at 2.2 percent, the same as forecast in July.
In the second quarter of this year, Canada's GDP expanded by 0.8 percent from the first quarter for annual growth of 2.45 percent, up from 2.14 percent in the first quarter.

The BOC issued the following statement:

"The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
Inflation in Canada is close to the 2 per cent target. Core inflation rose more rapidly than was expected in the Bank’s July Monetary Policy Report (MPR), mainly reflecting unexpected sector- specific factors. Total CPI inflation is evolving broadly as expected, as the pickup in core inflation was largely offset by lower energy prices. Underlying inflationary pressures are muted, given the persistent slack in the economy and the continued effects of competition in the retail sector.
Although the outlook remains for stronger momentum in the global economy in 2015 and 2016, the profile is weaker than in July and growth prospects are diverging across regions. Persistent headwinds continue to buffet most economies and growth remains reliant on exceptional policy stimulus. Against a background of ongoing geopolitical uncertainties and lower confidence, energy prices have declined and there has been a significant correction in global financial markets, resulting in lower government bond yields. Despite weakness elsewhere, the U.S. economy is gaining traction, particularly in sectors that are beneficial to Canada’s export prospects. The U.S. dollar has strengthened against other major currencies, including the Canadian dollar.
In this context, Canada’s exports have begun to respond. However, business investment remains weak. Meanwhile, the housing market and consumer spending are showing renewed vigour and auto sales have reached record highs, all fuelled by very low borrowing rates. The lower terms of trade will have a tempering effect on income.
Canada’s real GDP growth is projected to average close to 2 1/2 per cent over the next year before slowing gradually to 2 per cent by the end of 2016, roughly the estimated growth rate of potential output. As global headwinds recede, confidence in the sustainability of domestic and global demand should improve and business investment should pick up. Together with a moderation in the growth of household spending, this is expected to gradually return Canada’s economy to a more balanced growth path. As the economy reaches its full capacity in the second half of 2016, both core and total CPI inflation are projected to be about 2 per cent on a sustained basis.

Weighing all of these factors, the Bank judges that the risks to its inflation projection are roughly balanced. Meanwhile, the financial stability risks associated with household imbalances are edging higher. Overall, the balance of risks falls within the zone for which the current stance of monetary policy is appropriate and therefore the target for the overnight rate remains at 1 per cent."

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» Central Bank News Link List - Oct 22, 2014 - Carney’s BOE majority holds firm on heightened euro-area risks
Oct 22, 2014 - by InformedTrades
Here's today's Central Bank News' link list,click throughif you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don't miss any important news.

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» Namibia holds rate but still concerned over credit growth
Oct 22, 2014 - by InformedTrades
Namibia's central bank maintained its repo rate at 6.0 percent to "support domestic economic activities" while it monitors the impact of the two interest rate increases in June and August.
But the Bank of Namibia, which has raised its rate by a total of 50 basis points this year, said it was still concerned over the strong growth in household credit that is largely financing the import of unproductive luxury goods, such as cars, and putting pressure on international reserves.
The central bank said credit to the private sector increased to an average rate of 15.5 percent in the first eight months of the year from 14.2 percent in the previous eight month period, with strong growth in credit to individuals in overdrafts, loans, advances and installment credit.
This resulted in a further widening of the trade deficit in January-August period, the bank said, adding that its international reserves remain sufficient to meet its foreign obligations.
While the central bank did not provide any data for international reserves, it said in August that foreign exchange reserves had declined 15 percent since the start of the year to 15.9 billion Namibian dollars (NAD) in June.
Data showed that foreign exchange had risen in April to 17.482 billion NAD from 14.595 billion in March.
In the second quarter of this year, Namibia's trade deficit amounted to 5.649 billion NAD, down from 6.785 billion in the first quarter while the current account deficit in the same period fell to 1.685 billion NAD from 3.216 billion.

Namibia's inflation rate eased to 5.3 percent in September from 5.4 percent in August, continuing the decline since hitting a 2014-high of 6.1 percent in June, with the decline mainly reflected in the cost of food, transport and housing, the bank said.
Inflation is expected to average around 5.5 percent for 2014, the bank said, down from its August estimate of 6.0 percent.
Namibia's economy has benefited from exports of diamonds, beef and fish and the bank said it is expected to improve this year compared with last year, supported by construction, strong domestic demand, diamond mining and manufacturing.
But activity in agriculture, uranium and zinc production have performed poorly in the first eight months of the year, the bank added.
The risk to growth remains low commodity prices due to depressed demand which could negatively affect export earnings, mining profits and employment.
On Sept. 30, the central bank forecast in its quarterly report that the economy would expand 5.4 percent this year, up from an estimated 5.1 percent growth in 2013.

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» Trend Trading For Dummies in Bookstores Now! (top dog trading)
Oct 22, 2014 - by InformedTrades
Ready for a cutting-edge, thorough trading book about what’s working NOW in the markets?

One of my mentors told me that I needed to write a book and that he’d keep bugging me until I did.

I resisted because I knew how much work it would be.

He kept his promise. He bugged me and bugged me … and kept bugging me!

Well, I’m excited to announce that I finally wrote that book and it’s officially published and in the bookstores as of a few weeks ago.

It’s called “Trend Trading For Dummies,” and is part of the famous Dummies series of books that’s so famous for creating books that make subjects easy to understand.

I have to admit I’m very proud of this work. I poured my over 40 years of trading education into this work, so it’s very comprehensive, practical and real-world.

On the other hand, being just published, it’s also very current about how to trade the markets in today’s high-tech trading environment that is dominated by computerized trading programs and High Frequency Trading.

It’s about what works NOW.

Get a copy now at:
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It’s an amazing work if I must say so myself , and I’m sure you’ll find it very fresh, insightful, honest and practical to improve your trading and take it to the next level.

Go to the Top DogTrading Blog

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