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The stock market has been dropping for the past week.  Gold stocks have taken quite a hit.  We are starting to see real bargains in the precious metals.  Stocks like PAL and CDE are reaching lows not seen since 2009.  I think the technicals say there is still much chance for the stocks to drop more.  The stoichastics show the weekly and daily are at lows, but we have been rising for quite some time.

For those that like to play it safe, it might be a good time to get in some conservative long-term holds.  Pfizer, PFE, and AT&T, T, offer nice dividends for those that do not need money right away and are willing to wait for the stock market and the economy to improve.  I would not be in the boat to be shorting stocks right now unless you’ve known of stocks that have risen too high as of late.

Looking at the SPY, we’ve only hit the monthly low of the stoichastics about once every two years.  It looks like the SPY might drop down to the 102 or 103, but from there on, it should be time to start buying and looking into long-term stock plays.  The market will improve.  The government has put too much cash in it for it to drop to march 2009 lows.

Electronic Arts (ERTS) has had a terrible winter quarter.  They had massive layoffs, miserable sales during the holidays, and lowered guidance in January.  Their stock has been punished.  It’s almost at $16 which is very near its all-time 5-year lows which was hit previously in March 2009.  However, I tend to look at the long-term case especially the risk vs rewards.  The last time stocks reached these levels were in the year 2000.

Let’s take a look at it’s financials.  They have had annual losses for 2009 and 2009.  Could they be finally getting out of their cold?  The economy is picking up, but consumers are still not buying.  If you’re unemployed, I’d bet you’d still have $60 to buy a game.  Anyways, long-term wise their financials do not look that good.   They have negative cash flow and net losses for the year.  However their game lineup is strong this year.

Games influence the price.  If Electronic Arts can get a ‘Modern Warfare 2′ effect, they will be able to hit profits again.  You’ve also seen it with Rockstar Games with Grand Theft Auto.  They just released Mass Effect 2 last week.  It has already sold over 2 million copies.  Especially with their lower guidance it makes their stock much average to what it should be priced out.  We’re looking for the future though.  If the games are good, the stock price will move with it.

In 2009, we saw a pretty mediocre lineup: Madden NFL, Battlefield, Fight Night, Dead Space, Tiger Woods Gold, Godfather Part 2, My Sim Party, Nascar Kart Racing, Skate 2, Lord of the Rings, and Mirror’s Edge.  These games did mildly well, some did bad, but none of them were blockbusters.  Here’s what is coming out in March 2010: Command & Conquer 4 (PC), Battlefield: Bad Company 2 (PC, PS3, XBOX).  These are two very strong games.  I’d say for the short-term 6 months there’s money to be made with ERTS.

I’ll be taking a further look into ERTS in the future.  If the market continues dropping, it might be better to wait it out before buying.  The stoichastics have already hit the lows for the daily and weekly.  The RSI(2) is weak also.  There could be continued downside for this stock as the video game industry continues to drop, but the long-term perspective continues to get better.

You are looking at two big bell companies that will continue to thrive through the recession.  Both give a dividend of 6+% and both have EPS.  I consider them to be Warren Buffet-like stocks.  Looking at the results, they have both increased the EPS as the years have progressed.  AT&T has increased net income year-after-year.  Even though their stock prices have barely moved for the past 5 years their dividend has increased and they continue to be profitable.

I consider them both to be safe bets.  Why hold a bunch of cash in the bank when you can be getting a safe 6% dividend?  You also help stimulate the economy

Short-term things to consider: AT&T has continued to get deals with Apple.  They will be the exclusive provider of 3G for the iPad.  This is a big win as the iPad is a GSM made table.  In the 3rd quarter 2010, Verizon and other phone networks should be getting the iPhone.  This is not for sure as their has been a good relationship of AT&T and Apple.

AT&T’s 10 Year Summary

Verizon’s 10 Year Summary

Bank of America (BAC) and Citigroup (C) are both repaying their TARP funds so they can reward their executives with huge salaries and bonuses.  Citigroup made a huge offering this week to sell over $30 billion dollars of common stock.  Bank of America already paid off its $45 billion TARP funds with a $19.3 billion equity offering recently.  Both stocks trade at lows that we won’t see for a long time.  Citigroup went as low as $3.20 recently this week and Bank of America reached a low it set in July at $15.  These prices are valid bargains and with the amount of money the FED is creating you can bet these stocks will go up as inflation-protected stocks.  They also will continue to make more revenue as they release more loans out which the government is encouraging to help create more businesses and jobs.

I got in CDE this morning at $20.60.  However, I changed up my strategy.  I know silver will be a big money maker but I don’t know short-term where it’s headed.  So I bought puts, that’s right, naked $20 puts at 55 cents.  Once it expires on Dec 19, I make some easy dough.  If that backfires, I end up owning the stock for $20 which is a discount of 60 cents.  It ended the day at $20.80 so it looks like my naked put is already doing well.

Last week the US dollar got weak with the economic reports of better unemployment rates and job growth.  I expect even with the better economy we will have to have a weaker dollar.  You can’t justify a strong dollar when the FED is producing billions of dollars to stimulate the economy.  Once of the gold guys stated that gold could up to $8,000.  I don’t expect that to happen but you never know.  This is the first president to break the deficit within three months.  It usually takes a president at one-term (4 years) to break the deficit.

CDE, Coeur d’Alene, released the third quarter earnings earlier this november.  The numbers were not what analysts expected and the stock plummeted to below $19.  Of course, gold and silver kept rising so the stock just had a temporary dip before breaking $23.  If you read the third quarter transcript, the CEO Dennis Wheeler stated they invested the company for $900 gold.  Gold is now over $1,100.  You can bet that their next quarter will be a smashing hit.  They have more mines coming into production than any other junior mining company.  They also are highly invested into silver which will rise with gold and bring up their revenues.

Long-term great trade!

Yup, I’m calling it.  They broke the record for most pre-orders of any video game with Modern Warfare 2.  The first day they make over $310 million dollars.  If you think that’s good, try calling any Best Buy (BBY) or Game Stop (GME) and you will surely get a ‘inventory is sold out’ or you will need to order it and pick it up later on.  Activision is putting a huge advertising campaign to promote the game.  You might have seen the spectacular trailers, game footage, and/or reviews.  This is definitely the block-buster game of 2009.  They put it out just in time for the holidays also.

I’m expecting this baby to hit $18.  However, I don’t think it stops there either.  Their lineup for 2010 includes Starcraft 2 which is the top-selling game in Korea for over 10 years.  It’s played like an olympic sport with sold-out crowds of people watching Starcraft gamers play head-to-head.  Don’t forget Activision also holds the largest MMORPG with World of Warcraft.  They also have expansions of WOW which bring in additional revenue.

I like getting Activision right now.  It’s at really low prices and anything can make this thing boom up.  You still have Diablo 3 online for 2011.  Long-term or Short-term, this is a great trade!

We are looking at a unsustainable rally.  The government has put a lot of programs in place that are propping up the stock market.  Look at all those TARP payments.  They’re all in the billions and they have kept the bank stocks up in the market. Some banks have more than doubled from their March lows.  Bank of America, BAC, has increased 300% from its bottom.  That’s insane!

China has a problem with these TARP payments.  They have been continously funding our economy by buying our debt.  However, their funding has been decreasing as they see us printing billions of dollars to pull ourselves away from this recession.  Tim Geithner recently made a visit to China to persuade them to continue to buy the US Dollar.  He went to a university and all the chinese students got a good laugh when he stated the economy was in great shape and the United States will continue to have a strong dollar.

The chinese need some convincing to continue to help us out.  They don’t want to fund us if our US Dollar is going to get weaker.  They can start buying other currencies that still keep their strength.  Hence, the government needs to give them ‘more for their money’.  They start raising the yield on the treasuries.  To do this, the government starts buying the treasuries.  Countries like China will get a fat yield for holding the US Dollar.  However, this artificial buying to keep the yield up cannot last forever.  Our treasury yields are reaching historic lows, and when these prices finally drop, we need to plan to take advantage of the situation.

This is where our two short ETFs come in, ProShares UltraShort Lehman 20+ Year Treasury ETF (TBT) and Direxion Daily 30 Year Treasury Bear 3x Shares (TMV).  When the government keeps lowering the price, we make money.  People will not buy treasuries unless they can get a nice yield for their money.  The government will have to raise interest rates, lower the price of the treasuries, or continually buy them up to continue this trend.  Whatever way they do it, shorting will be the way to go.  It’s just a matter of time to do it.  Currently, treasury prices are kind of high but in the next few months I expect there will be a good time to get in.  Just monitor those prices and yields and wait for the right time to bite!

Yup, it’s time to start loading up on UNG, the natural gas ETF.  The summer has hit so it would seem like the worse time to buy this commodity, but market conditions and technical analysis give us a good reason to start getting into this stock.  It’s showing high volume, a flat-lining curve, and it appears to have start it entry back up.  This stock was at a high of over $40 just one year ago.  It has reached a very low price of $14 within the last month, and currently goes for $14.56.  As we get furthur into the weeks ahead, I see a increase in the price as demand starts increasing with futures trading.  Look as oil, it has irrationally moved back over $70 not because of demand but people are trading it and bumping that thing back up to levels from last year.

The normal ratio of oil to gas has averaged 6:1, we’re looking at over 14:1 currently.  It’s time for natural gas to move.

This must be the investors’ ultimate game stock.  There is no other company that encompasses so many great games: Guitar Hero, Starcraft, Diablo, World of Warcraft.  They have a line of games that will bring in recurring income for a long time.  Starcraft is a very old game, but it still gets lots of press coverage.  In Korea, there is even a channel specifically for Starcraft.  They have game shows and prizes with audiences passing over 10,000 people just to show the video game on projectors and have the best players come out.

Starcraft II will be coming out sometime this year.  It has been said to be released sometime in the first half.  If you visit Gamestop, you will notice a link for the pre-order of the game.  You can bet this game will break major records in sales.  Also, if you look at the stock chart, you will notice this company has a very strong uptrend since January.  The big dips and drops of the stock market has not affected this company at all!

I’ve also recently got access to MarketClub.  They have a feature for their members that gives a trending system.  0 being negative and +100 being very positive for the future.  Activision/Blizzard is ranked to be +75.  This means it is showing some near term weakness. However, this market remains in the confines of a longer term uptrend Uptrend with tight money management stops.  This is very good looking for the future.  If the market looks right tomorrow, maybe I will pick up some shares.

That’s correct, I’m calling it.  Back in 2001-2002, we had over a 25% drop, then it went up, but it followed another huge 20% drop in the DOW market.  These two drops happened in a span of one year.  We’re facing a loan crisis that we should seriously not be able to come back from.  Japan attempted to bailout their country in the 1990s and still continue to face a stagnant economy that never fully recovered.  We just made a $1 trillion bailout plan to help fix the mortgage security problem.  The money does not exist, but the government is asking international parties, international banks, private investors and forcing tax payers to front some of the amount.  Suffice to say, we are the heart of the economy to the world.   We will survive and will come out stronger.  However, this might be the last time we get to push around other countries to help us.  China will continually try to move their economy from a US export economy to a domestic and international power house.

Back to the DOW, many analysts say we are bottoming out.  However, look at the 1980s oil crisis, you will also notice a 10% drop, a rise, and then another 10% drop.  We will face not only another drop, but possibly more than one.  Obama has been doing a great public campaign to persuade the people that there are better days.  We will survive this problem, but it’s not over yet.  I suggest investors continue to hold their cash in the bank or put it in CDs.  Wait some time to see where things go.  You’ll have a nice nest egg eventually to put in the stock market, but now is not the time.