To OTC Journal Members: 
 

Take Your Profits on DXO

About one hour after the open today I locked in my 20% profit in one week on DXO- the ETF triple long on oil I recommended last week at $2.20. Here's why.

The market rocketed today on news CitiGroup was operationally profitable in the first two months of this new year. This news was followed by Senator Barney Frank announcing the SEC was going to bring back the Uptick Rule (something they should have and could have done some time ago), and could be modifying mark to the market for the financials.

While I applaud the intent of modifying Mark to the Market, I don't believe it's the right course. The regs currently force the banks to Mark their assets to the Market based on the current pricing of the asset. In today's completely disconnected banking universe, there are no bids around for mortgage portfolios. AAA post 2007 mortgages are being booked at 28 cents on the dollar, and subprime is about 17 cents on the dollar. In foreclosure and auction, these homes are worth far more.

The market needs to recognize this and price a more realistic "implied" value on these assets. The soon to be announced results of the "Stress Tests" could do much to alleviate the concerns.

I took my profits on DXO at $2.60. I picked it up last week at $2.03, and advised everyone to do so at $2.20. Net- 15% to 20% in one week, which is just fine with me.

If this market rally continues, Gold will struggle until we really come out of the recession, at which point it will return to being a defensive play against inflation. Therefore, if you don't want to be in gold long term, go ahead and sell. As Warren Buffet points out, the US government is the only player that can leverage up while the remainder of the world is leveraging down. We're going to have to pay for today's lunch sometime out in the future, and inflation will be our payment. Gold will do really well in the second half of 2009, but hard to predict in the short term if some of the fear comes out of the markets.

I didn't like the way oil behaved today against the huge move up in the market, so I sold. If this rally continues, my Inverse Long Bond Trade- TBT, should continue to do well. Money will come out of Treasuries into stocks, forcing prices down and yields up. TBT will go up with the yield in the long bond. It closed at $47.58, up substantially from my suggested entry level of $39 in December. FXI traded back over the $25 level again as news flow out of China continues to suggest their recession will be short lived.

On Thursday I'll be introducing my first stock idea in quite a long time. This company is revolutionary. If you didn't own 800 numbers when they first came out, or "Cyber Squatted" web addresses when the internet was in its infancy, you have another chance with the cellular versions of those revolutionary ideas. Did you know that if you dial #anything from your cell phone, one company owns them all? Every possible combination: #FOOD, #TAXI, #SAVE- one company owns them all, and the numbers work with all the cellular carriers. They have relationships with most of the huge players already. There are a lot of ways this company can make money through mobile couponing, commerce, and transaction fees.

Stand by for an early release on Thursday morning. It's been a while, but this one is too good to wait on.

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