I picked up 0.2% today in my portfolio, although most of my holdings were green. But on to the weekend…

For this weekend’s open thread, I bring you a video clip with a few of Christopher Lloyd’s (IGGY!) classic scenes from the tv show Taxi, one of my personal favorite tv shows of all time. Enjoy:

Have fun folks! You know the drill here: The open thread is yours. You choose the topic. Just keep it clean and civil. But don’t…go…TOO…slow!

After looking into my crystal ball (yours for only $19.95 plus shipping and handling!), I decided I needed some oil exposure for the next month or so. For that, I am looking  to ProShares Ultra DJ-UBS Crude Oil (UCO), which is a double long etf. I have set my limit buy price at $63.35, although I might chase it.

UPDATE: I got it for $63.65. Oil is running strong today.

As good as the silver trade has been to me, it is time to look for the exit. This trade is too hot. I think silver may have one more good day left in it, but anything after that is just bubble growth.

I am setting my limit sell order on ETFS Physical Silver Shares (SIVR) at $50.

Imagine you are trying to blow up a raft that has a hole in it. The raft will appear to inflate, but as soon as you stop filling it with air, it will eventually return to a flattened state. That is our economy right now.

As the Federal Reserve has been trying to get our economy (the raft) inflated, we have been getting every appearance of inflation, except where the hole is: housing. All the fixes which the U.S. has attempted to plug the hole haven’t worked, as housing prices continue to drop, and demand for houses is even beginning to drop. The banks won’t lend, and they are even reluctant to foreclose (why foreclose on it if you can’t sell it?). We have too much supply, and the only demand is from bargain seekers, which leaves people selling with a choice of either taking less than they are asking, or staying in their homes.

Meanwhile, all the money that the Federal Reserve is pumping into the economy is flowing to everywhere except the housing sector: overseas (creating inflation with all of our trading partners), commodities, and into stocks. While we have seen some business improvement in the U.S., does anyone really think it’s sustainable? Parts of it, maybe, such as the tech sector (see Apple, Google, and Intel). However, the unemployment rate remaining above 8%, with most of the drop due to people falling off of unemployment (after their benefits ran out), and not because of any real economic growth, shows we never really fixed the hole in the raft.

What about the inflation we have seen so far? When you pour money into an economy, inflation is bound to happen. But when you stop the money flow, the economy will return to whatever state it wants to. With the deflating housing market, that means we will be back in a state of deflation.

In other words, until the end of QE2, we will continue to experience inflation. At the end of QE2, our economy will immediately begin to deflate, as the extra liquidity being blown into our economic raft comes to an end, and begins to flow out the hole.

What does this mean to investors?

Until the end of QE2, commodities are safe plays. Even as we hear about the gold and silver bubbles (which they are, by the way), they will continue to rise. Oil and other commodities will continue to rise, as too many dollars continue to chase too few goods (the definition of inflation). After QE2, we will see the precious metals crash, followed shortly thereafter by a slow leak in other commodities. Oil will drop, but I would be surprised to see it drop below $90/barrel. If oil does go below $90, look out below! We have a severe economic crisis happening then. Watch oil to determine how bad it really is.

Ironically, one side effect heading into the end of QE2 will be a return of the bond markets. Part of that will be the usual “sell in May” response by professional investors, putting their funds somewhere safe for the summer. Part of it will also be people looking to get into a “safe” investment prior to the end of QE2. While we all know the bond markets should crash, too much “common knowledge” on Wall Street calls for a move into bonds during “risk-off” periods (when they don’t know what to expect). After QE2 ends, the bond markets might even surge if things get really ugly.

The stock market will inch along until QE2 ends, and maybe even move up slightly, but the stock market is already overvalued. Much of the tremendous earnings we have seen can be attributed to a weakening dollar, especially from multinational corporations. As they convert their overseas profits to dollars, they get instant growth without having to do much. But when the dollar turns the other way, expect to see some disappointments, especially in 3rd quarter earnings (which will be the first quarter without QE2). However, I expect the markets to anticipate this, and those losses will get priced into the market in July. Then, expect to see the markets begin to fall. Even if the markets have started to drop before July, the fall will continue in July, lingering until…when?

And that is the great question. QE3? Maybe a hare-brained scheme thought up by the brain surgeons in Washington? Or maybe China will start dumping dollars? Who knows. Pedicting an economy beyond the next quarter gets cloudy, because a lot can happen before then.

Pre-QE2’s end, the main plays are gold, oil, and treasuries. Post-QE2, look for treasuries to do well for a short period of time, but look for the exit, probably after stocks hit bottom. That is when you want to swoop in and vulture some cheap company stocks, but it could take a month or two.

1. Normally, I wouldn’t bother announcing the last day of the month. But we are heading into May, and that is cause for concern. If you are an ultra-conservative investor, now is the time to get into cash or cash-equivalent investments. The markets have the cliche “sell in May and go away” for a reason, as many professional investors and fund managers start moving into larger cash positions in May, in preparation for their own vacations later this summer. In addition, we are fast approaching the one year anniversary of the “flash crash” from last May. Finally, we have enough economic uncertainty to make Chuck Norris sweat bullets. My advice: Approach May with caution.

2. In today’s news, nine state attorney generals have written a letter to the National Labor Relations Board, calling the NLRB’s complaint against Boeing “an assault upon the constitutional right of free speech, and the ability of our states to create jobs and recruit industry.” Aside from a bit of political flourish there (free speech?), the attorney generals do have a point. Many companies which have unionized workers frequently build plants in other places without unions. Ford has a plant in Brazil, and GM has a plant in China, just to name two companies. At least Boeing is building in the U.S., even if it is in a “right to work” state.

Note the phrase “right to work”. In many states, there are regulations which will prevent you from having the ability to pursue a specific line of work within a specific company unless you are in a union. Once the union has been formed in a company, it never goes away. Unions rarely de-unionize, and have a tendency to hang around until they have killed off their host company (much like a leech). Without the auto workers unions, would we have ever been talking about bailouts for GM and Chrysler? Even our state governments are starting to turn on their unionized workers, as their budgets need tightening, and the excessive collective bargaining agreements are unrealistic. And I am still waiting to hear what unions do for workers that state and federal laws don’t do? Other than providing a means for workers to get artificially inflated wages and benefits, I am unaware of anything.

By the way, the issue of companies holding states and localities hostage with a threat to move is a strawman here, since Boeing was opening a new plant in another state. If we start requiring companies to only stay in one state, they can just move their operations overseas.

3. Inflation is picking up in Europe thanks to crude oil prices going up. Expect more interest rate increases from the ECB, although I doubt it will do any good.

4. China’s yuan has quietly moved up to 6.5 per dollar over the past seven weeks. That is the only way China can control inflation, although it runs the risk of hurting exports to the U.S. Expect higher prices coming to a Wal-mart near you…

5. The SPDR S&P 500 ETF (SPY) came in second to another etf in volume on Thursday: the iShares Silver Trust (SLV), which traded 180 million shares versus the SPY’s 120 million. While there are legitimate economic reasons for this (Bernanke’s Magic Dollar Printing Machine, aka QE2), this kind of action still makes me nervous.

6. The markets are closed in the United Kingdom today. Something about a wedding there…

Ironically, the biggest mover in my portfolio today wasn’t gold or silver. It was the triple leveraged 20 year treasuries which I added today (and that movement was just since I bought them!):

EMLC: 0.02 to $27.79 (0.07%, 0.80% overall)–bought at $27.57
FXA: 0.62 to $109.66 (0.57%, 2.49% overall)–bought at $107.00
IAU: 0.06 to $15.01 (0.40%, 7.21% overall)–bought at $14.00
PFF: 0.06 to $39.96 (0.15%, 1.94% overall)–bought at $39.20
SIVR: 0.29 to $48.20 (0.61%, 26.01% overall)–bought at $38.25
TMF: 0.28 to $34.28 (0.82%, 0.82% overall)–bought at $34.00

OVERALL: +0.20%

You know you’ve been doing an awful job when InTrade starts accepting bets that you’ll be out of your job by the end of this year.

(hat tip to Tyler Durden at Zero Hedge for the image)

I have decided to sell GreenHaven Continuous Commodity Index (GCC), but not because there is anything wrong with it. As an inflation hedge, it has done what I wanted. However, with a deflationary drop appearing on the horizon, and with my gold and silver holdings carrying me until the end of QE2, I just don’t need the added inflation hedge in my portfolio.

I have placed a limit sell order at $36.

UPDATE: I sold GCC at $35.96. I’m not going to quibble over 4 cents. The final line:
GCC: -0.05 today, +0.91 overall to $35.96 (-0.14% today, +2.60% overall)–bought at $35.05

I apologize for my delay in posting this, but I had a lot happening at work after I had already put in the limit buy order for Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF) at $34.00.

Earlier today, Sam added a link in his comment to an MSN article called “Investors, it’s time to run and hide” by Anthony Mirhaydari. The logic in the article pretty much supported what I already suspected, but Mr. Mirhaydari suggested something I hadn’t thought about, which was going long on 20 year treasuries:

The one asset class that appears ready to benefit from all this is Treasury bonds. I admit that at first blush this seems crazy. The dollar is under attack. Inflation is marching higher, which should punish any bonds that aren’t inflation-protected. Also, the U.S. credit rating is at risk, which should send bond prices lower as investors demand higher yields to compensate for added risk. And the Federal Reserve is set to end its daily purchases of T-bonds in June.

But professional futures traders are building big positions in Treasury bond futures — betting with real money that higher bond prices (along with lower interest rates) are on the way.

The explanation? Traders are looking past current inflationary pressures, anti-inflation rhetoric and credit warnings. They see a deflationary future in which a weak economy is sucker-punched by tighter credit, higher taxes, reduced spending and lower consumer confidence, an environment in which demand and prices both fall. For that reason, T-bond ETFs like iShares Barclays 20+ Year Treasury Bond Fund (TLT) seem to be popular while the rest of the market languishes.

For a little more punch, I’ve recommended Direxion Daily 20+ Year Treasury Bull 3x Shares (TMF) to my newsletter subscribers. This is a leverage bet that Treasurys move up.

After a little more research, I agree with his recommendation of TMF, so I have already added it to my portfolio. It has dropped under $34, so you should be able to get it cheaper than I got it.

1. You may have noticed I haven’t spent any time discussing Bernanke’s press conference yesterday, nor do I plan to. He didn’t say anything we didn’t already know. Moving right along…

2. I find the whole situation with Berkshire Hathaways’ audit committee whining about David Sokol now to be simple damage control before the company’s annual meeting this weekend. If Sokol broke company rules, what does that say about Warren Buffett, who claimed Sokol told him that he had some shares of Lubrizol before Berkshire decided to buy the company? Let’s call this what it is: Berkshire is circling the wagons to protect Buffett, because without him, they are nothing.

3. CNBC’s Herb Greenberg had a post on their website which includes an important lesson for investors. He was talking about a comparison Jim Cramer made between Groupon’s IPO and Netflix. Here is Greenberg’s money quote:

I can’t tell you what’s going to happen to Netflix’s stock. If Groupon’s IPO is valued at $25 billion, Netflix could very well bounce higher. Or not. But if we’ve learned nothing else: Just because one stock is priced higher than another doesn’t mean the less expensive one is cheap.

4. Baidu (BIDU) beat earnings estimates in the 1st quarter. However, be careful investing in Chinese stocks now: China’s Consumer Price Index rose 5.4% in March, and is expected to remain that high in April, and even rise in May and June. So China will undoubtedly be tightening their monetary policies even more. Eventually, they will have to raise the Chinese yuan against the dollar if they are going to have any hope of beating inflation.

5. U.S. 1st quarter GDP report at 8:30 am EST today. Get your popcorn ready…