A possible and risky Taser-like play

Small float, defense/security company, new technology, non-lethal weapons, constant terror threats, war in Iraq.

Metal Storm Ltd (MTSX, $5.49 on 6/25/2004) - Metal Storm Limited is engaged in R & D of electronic ballistics and programmable electronic firing technology.

MTSX $5.49 on 6/25/2004

Investing with an eye on the Interest Rate Cycle

Stage I - rising interest rates:
When the Short Term interest is in rising trend, one can consider going long on money market funds.
When Long Term interest rises, one can consider going long on 2 to 5-year Treasury notes till maturity and placing a tighter stop loss in corporate bonds, dividend paying stocks and mutual funds. Long Term interest rates can lag 4 to 5 weeks the changes in T-bills and CDs. Short Term interest rates start to fall while Long Term rates are still lagging at highs.

Stage II - plateau:
When Short Term interest is in a flat trend, one can consider going long on 6-month Current Income Funds (CIFs) and 6-to-12-months T-bills at the beggining of the plateau as well as money market funds, 90-day T-bills, 90-day Commercial Paper and CDs for the entire stage.
When Long Term interest reaches a plateau, one can consider holding Treasury notes till maturity and discard other long term buys.

Stage III - declining interest rates:
When Short Term interest is in a declining trend, one can consider selling money market funds and not renewing other short term investments.
When Long Term interest is in a declining trend, one can consider going long 2-to-5-year Treasury notes (looking for the ones with large float and narrow bid-ask spread) on 50% of the portfolio and holding till maturity (even if it was wrong-timed), keeping 20% in foreign higher-interest savings accounts in currencies that are in a rising trend or very cheap (Canada, England, Swiss, ...), and, when the decline is established with the Dow Jones Utilities starting to rise in the 4-month chart, buying high quality 2-to-10-year corporate bonds (rated Aaa to A-), tax-free dividend-paying stocks and mutual funds.

Stage IV - interest rates bottom:
When Short Term interest is at the bottom, one can consider disposing of all short term instruments but holding a little change in money market funds, buying 90-day Canadian Treasury bills or British Warbonds (gilts) if their interest rates are higher.
When Long Term interest is at the bottom, one can consider holding all the securities bought at stage III.

During all stages:
One can consider keeping 5 to 10% in gold stocks and trade them, buying on weakness and selling on strenght.

Things to avoid according to this strategy:
municipal tax-exempt bonds, Long Term bonds, below A- corporate bonds, Latin American banks/savings, futures, EE and HH savings bonds and bear market rallies.

This strategy was conceived by Samson Coslow during the 80s. Sam Coslow was the pioneer in the use of stock market and economic indicators and investment newsletter writing, one of the first gold bugs.