PCUG Investment SIGThursday,October 13th, 2011

Agenda

• Welcome to Visitors• Timely Topics• Some Recent Security Recommendations

from Analysts • Current Month Special Topic-Utilities

Investments• Investment Learning Opportunities• Group Discussions• Inputs from Attendees on future topic

Welcome visitors

• Thanks to our visitors for joining us tonight• You’re invited to join the 1960 PC Users Group

and attend any or all of our six Special Interest Groups(SIGs)

• The annual dues for a couple to attend any of our meetings and events is $40 per year

• Please check our web site www.1960pcug.org for more details and copies of our prior presentations

• We have membership applications available tonight

Timely Topics –From Last Month: Social Security Discussion

Do Social Security System funds deposited with the US Treasury get paid interest on the excess funds that have been accumulated over the years?

Is Social Security an entitlement?

Timely Topics –From Last Month: Social Security Discussion

(Answers from the Houston Chronicle article) Do Social Security System funds deposited with the US

Treasury get paid interest on the excess funds that have been accumulated over the years? Yes. Per a Chronicle article, those excess funds have been

invested in US Treasuries—the same funds that China buys, the same funds that the panicky investors flock to when they are risk averse even though they are rated AA-

Is Social Security an entitlement?

Timely Topics –From Last Month: Social Security Discussion

(Answers from the Houston Chronicle article)

Do Social Security System funds deposited with the US Treasury get paid interest on the excess funds that have been accumulated over the years? Yes. Those excess funds have been invested in US Treasuries—the same funds that China

buys, the same funds that the panicky investors flock to when they are risk averse even though they are rated AA-

Is Social Security an entitlement? By law, the social security program cannot pay out more than

is paid in. If they do not collect enough, then by law they must reduce payments—or collect more.

Hence, The government is not permitted to fund it from the treasury and in my opinion is not an entitlement.

While there is concern about long term solvency, it should not be considered part of the national debt problem.

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Timely Topics ---From Last Month’s PresentationCurrent Market Indicators For August 2011

Market Indicators (Bad): Numerical Measurements Be careful of the headlines – The details may have an entirely

different message: “ZERO JOBS ADDED IN AUGUST” VS. EXPECTED 68,000

Private jobs – net added: 17,000 But it includes Verizon Strikers: 45,000 sub total: 62,000 Also includes seasonal reduction 35,000 Sub total: 97,000 Reduction of Government jobs - 17,000 Sub total: 80,000 Note: a reduction of government jobs is a very positive change in

my humble opinion

Timely Topics –From Last Month’s PresoCurrent Market Indicators For August 2011--AS REVISED By the BLS

Market Indicators (Bad): Numerical Measurements Be careful of the headlines – The details may have an entirely

different message: “ZERO JOBS ADDED IN AUGUST” VS. EXPECTED 68,000

Private jobs – net added: 17000 57,000 But it includes Verizon Strikers: 45,000 sub total: 62,000 102,000 Also includes seasonal reduction 35,000 Sub total: 97,000 137,000 Reduction of Government jobs - 17,000 Sub total: 80,000 120,000 Note: a reduction of government jobs is a very positive change in

my humble opinion

Timely Topics –Current Employment Statistics For September 2011

BLS current trends in employment:

...\K October Hyperlinks and data\ceshighlights (1).pdf

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Timely Topics –When to Sell?

At a recent discussion in The Woodlands Investment Group (TWIG), there was a discussion about “When to sell”? Often there are many recommendations on what and when to buy, but seldom much comments about when to sell.

Below are some valuable comments on “when to sell”: By Ben Anthony:

1. Establish an objective when you buy a security, and when that objective is reach then sell.

2. If the price of the security is still going up, then put in a trailing stop limit. Use Fidelity ATP if you are a member to determine the recommended stop/support /resistance levels

Per Ben after the meeting: click on Research, then Stocks, type in the stock name, change text box from snapshots to Technical Analysis, Click Go, scroll down to Events, click on any item in the Events column , scroll down until you see the blue letters the buttons labeled Support/Resistance and Stop. Also can do the same on Market Edge’s “Second Opinion”

Timely Topics –When to Sell?

At a recent discussion in The Woodlands Investment Group (TWIG), there was a discussion about “When to sell”? Often there are many recommendations on what and when to buy, but seldom much comments about when to sell.

Below are some valuable comments on “when to sell”: By John Hawkins:

1. He typically buys securities based on major events that are happening. 2. He makes assumptions about the effect of that major event and then he either buys

long or short depending on the assumptions he develops 3. If the assumptions he develops don’t come true, then he gets out of the deal. 4. When the event happens and his expectations materialize, then he gets out.

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Timely Topics Looking at Gold

A theory of why gold price is so high ( Facts from WSJ of 9/12/11) From 1989 to 2008, World’s central banks disposed a net

190 million ounces of gold at an average price of $398/ounceEuropean Central Banks in 2000 had 30% of Euro

zone’s reserves in gold valued at less than $300/ounce—compared to 12% world average

Even after selling gold up through 2000, with the escalation of the price, gold now accounts for 61% of euro zone reserves

What do you think about that?

Timely Topics Looking at Gold

A theory of why gold price is sohigh (Facts from WSJ of 9/12/11)Current Trend: World banks added 6.7 million ounces YTD August That is more than they added in all of 2010 That is 2.5 times this year’s inflow into gold backed ETF’s Without central banks’ purchases, the demand for gold would have

dropped 3.2 million ounces in the first half The central banks have thus created a major element 0f demand for

gold

Timely Topics Looking at Gold

A theory of why gold price is so high ( Facts from WSJ of 9/12/11)What Banks are buying?The central banks buying the most are from emerging

markets, especially China and RussiaChina’s central bank has only 1.6% of official reserves in

gold. If it were to target 5%, it would have to purchase 74 million ounces or 58% of total demand last year

Timely Topics Looking at Gold

A theory of why gold price is so high ( Facts from WSJ of 9/12/11) Conclusion: If China continues to purchase gold at it’s probable

current rate, that could prop up the price for years However, consider the opposite: What if the central

banks stopped buying gold. A major portion of the demand would evaporate. With the elasticity of demand, the price would drop precipitously.

Also the value of the Euro zone’s reserves would also drop precipitously—assuming they are valued at the market price.What then???

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Some Recent Security Recommendations from Analysts

Elliot Gue, Personal Finance Newsletter Market Observation:

Extremely bearish Sentiment and an oversold market set the stage for a 4th quarter bounce

Four out of the five times the market has been 10% below the 200 day moving average since 1950, it has rallied in the fourth quarter

Buy on the depressed cyclicals and defensive stocks Recent Recommendations:

Defensives: Fidelity(FGMNX) Cyclicals:) Eastman Chemicals NYSE (EMN) up to $97.50

Sea Drill NYSE(SDRL) up to $38.00

Some Recent Security Recommendations from Analysts John Dessauer – Hot Line Market Observation:

The fundamentals for global and US growth look very favorable. He has a simple solution for the Euro Crisis He cites Boston Consulting Group’s study that over 2 million jobs

will be returning to the US from offshore by 2015 Recent Recommendations:

Aetna NYSE (AET) @36.58 Now deeply undervalued Intel NASDAQ (INTC) @$22.99 Strength of research is the key

Some Recent Security Recommendations from Analysts

Carla Pasternak – High Yield Investor / Dividend Opportunities

Market Observation: Doesn’t provide an analysis Recent Recommendations:

Georgia Power Co 8.2% Senior notes, NYSE (GAT), a senior debt obligation of Southern Company (SO) selling at $30.98 now yielding 7% at that price.

ONEOK Partners (MLP) NYSE (OKS) Yield 5.5% Fairfax Financial series C Preferred shares: (TSX:FFH-PC) 5.6% yield. Is a floating rate preferred share. Resets in 5

years for inflation. Now selling at $0.66 above $25 par

Some Recent Security Recommendations from Analysts

Richard Band Market Observation:

Expects a year end rally to 1300 for S&P but with much volatility Fed has lit a fire under high yields: Utilities, MLPs, high yield bonds Defensive stocks are trending up

Recent Recommendations: Government Properties Income Trust NYSE (GOV) 7.7% up to $24 Weitz Short-Intermediate Term Income Fund (WEFIX) 2.4% yield, up to

$12.50

Some Recent Security Recommendations from Analysts

Steven Leeb Market Observation:

Expects year end rally (7 of 8 occasions when majority of stocks are below the 200 day moving average, the market was up over the next 3 months

Recent Recommendations: SPDR Select Sector Utilities (XLU) 4.31% yield, buy up to 33.68 Powershares Dynamic Utilities Portfolio (PUI) 3.16% yield, buy up to

Some Recent Security Recommendations from Analysts

Bank Of America / Merrill Lynch Market Observation:

The probability of major catastrophes is very low: Greece Default, China Downturn hard landing, global recession (curiously they are silent on US debt super committee results)

• Recommendations • Buy high quality US stocks, Emerging Markets, and select

Commodities.• Buy corporate bonds and municipal bonds

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Current Month Special Topic-Utilities Investments

How are they performing? Check SPDR ETF as proxy: XLU

..\October Hyperlinks and data\XLU Basic Chart SPDR Select Sector Fund - Utili Stock - Yahoo! Finance.htm

Current Month Special Topic-Utilities Investments

Is now the time to invest in Utilities? Look at the time to invest in the sectors based on what part of the market cycle

the sector usually does best. Utilities excell during the part of the market cycle from the peak to the down side. See my prior presentation in the archives entitled “Strategic Stock Selection”

..\October Hyperlinks and data\StockCharts.com - Simply the Web's Best Financial Charts.htm

Current Month Special Topic-Utilities Investments

Is now the time to invest in Utilities? ..\October Hyperlinks and data\StockCharts.com - Simply the Web's Be

st Financial Charts.htm

Current Month Special Topic-Utilities Investments

Is now the time to invest in Utilities? What are the analysts saying:

Fidelity.com—click on “Research” then look for S&P and Ned Davis Research (Must be a member to access Ned Davis, but S&P is free. ..\October Hyperlinks and data\Online Trading, ETFs, Mutual Funds, IRAs & R

etirement - Fidelity.htm

Investment Learning Opportunities

October 17th , Monday- The Woodlands Economic Forum (TWEF)- meeting- Montgomery County Library at 2101 Lake Robbins Drive. Topic:Dr Bill Gilmer VP of the Dallas Federal Reserve will be

discussing topics on economics, Fed policies / Twist and answering questions, -- 10am to noon

October 20th, Thursday – Fidelity Seminars at the Woodlands Fidelity office at 1701 Lake Robbins Drive:

Topics: ABC’s of ETFs --10:00 am Getting started with technical analysis – 2:00 pm

October 21st, Friday – Fidelity Seminars at the Woodlands Fidelity office at 1701 Lake Robbins Drive:

Topic: Is a Professionally Managed Account Right for you? 12:00 Noon

Investment Learning Opportunities

October 31st , Monday- The Woodlands Groups will not meet.

November 2nd Wednesday– Fidelity Seminars at the Woodlands Fidelity office at 1701 Lake Robbins Drive:

Topic: Quarterly Market Update—2:00pm November 7th, Monday- Woodlands Investment Group (TWIG)

meeting- Montgomery County Library at 2101 Lake Robbins Drive. Topic: Members sharing specific security recommendations

and exchange market information -- 10 am to noon.

November 10th, Thursday, 1960 PCUG Investment SIG? I will probably not be able to conduct this meeting

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Open Discussions

Occupy Wall Street Protesters have been criticized for a lack of focus.

Interviewees do not seem to be able to articulate very specifically what they want.

If you were to select a point to protest about the economic crisis, what would you say needs to be done?

Inputs from attendees on Future topics Candidate subjects:

American Association of Individual Investors’ Concept of “The Other Stock Market”

My investment approach using funds instead of stocks Technical Analysis as a guide to investing Various Sector Investments How to find and evaluate investment candidates Options Trading (Guest Speaker?) Additional On-line sources of investment information Others? I welcome additional suggestions (Not in any order or priority listing)

Also it particularly enhances the attractiveness of the meetings when we find some guest speakers on special topics. If you know a candidate, please let me know

Oliver JuergensMarket theory

..\August Hyperlinks\Welcome - Independent Investment Ideas - Pearlfisher Investments.htm

That’s All for Tonight