Investors 411 Blog

by Barr Jozwicki
September 28, 2008

Market Update – European Banks

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Another massive injection of liquidity by European Banks and the Fed. Another $430 billion was injected into the system. The 3 Month Treasury Bill was dropping like a stone till European Banks injected $. Well over $2 trillion has been injected by our Fed and other foreign Fed banks. Link

As mentioned this AM 3 major European banks failed. City Bank also bought Wachovia. One bank buying another is just like kick the can. All it does is take the toxic debt of one bank and put or "kick" it onto another bank.

Bottom Line – The credit crisis has obviously spread to Europe and the rest of the world. If congress does pass a plan it will take at least a month to put in place. By then it may already be too late.

Best advice – Protect your money.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING.

Barr

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Market Update – Harry Reid Blames McCain

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

McCain will debate.

Just listened to Harry Reid ( Senate Democratic leader) go way overboard and blame McCain for so many things I lost count of them. This is stupid and folks should all be working in a non partisan fashion toward a solution.

Finally after skimming probably 100 editorial’s here somebody who gets the problem.

First off we are NOT bailing out Wall Street, we are bailing out America’s financial system, that made some huge mistakes. So far this bailout has cost the Fed $1.5 trillion. What Sovereign wealth funds and other US financial institution have tossed in easily bring the total over $ 2 trillion.

That $1.5 trillion is either going to come back and hit us as taxes or inflation. Probably the later. You will get nailed.

The following editorial doesn’t go far enough to Main Street, but it gives you an idea of the problem. The credit market is frozen and business is grinding to a halt. You don’t feel it now, but you will later.

It is by Ken Lewis the CEO of Bank of America and was in the WSJ.

Lot’s of you won’t like it because its coming from a bank CEO, but if someone like me who naturally distrust guy’s like Lewis thinks there is wisdom perhaps so will you.

The Fed/US government is the only institution that is big and strong enough to soak up the bad assets. The only alternative as Warren Buffett said is that we go over the cliff.

It is going to be very difficult for Main Street to understand why this works because they don’t see the blood on the streets and we are a totally reactionary society.

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Market Update – Consensus Building

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Sorry – there will be many fewer Updates over the next two weeks and I will be unable to answer your emails in a timely fashion.

Debates

McCain did a good job . His campaign was bleeding and Obama had taken a 4 to 5% lead in most polls. Clearly weaker on domestic issues he showed extensive knowledge of foreign policy. The (right wing ) WSJ scored the debate a victory for Obama on domestic issues and for McCain on foreign policy. This was the best I’ve seen McCain debate. Best line something like this "I’ve looked into Putin’s eyes too and I saw KGB." His focus was clearly on staying in Iraq till we win. He tried to paint Obama as inexperienced. Almost an impossible task since he chose Palin as his VP.

Obama did a good job . Again the best debate yet for Obama. Best line – "You act as if the Iraq war began in 2007 not 20003… You thought we would be greeted as liberators with garlands of flowers" (might not have quote exactly right.) Obama clearly showed he had the knowledge, depth of understanding, and character to be President. In this way the debate was much like the Kennedy/Nixon debate and the Reagan/Carter debate. Folks wondered wether the new guy (Kennedy and Reagan) had the stuff it took to be president. Think Obama passed this test with flying colors.

Mistakes/Blunders – Lots of press on McCain’s inability to look at Obama and what seemed to many as a condescending, mean attitude. He even looked away when he shook his hand at the end of the debate. Obama was too nice and failed to deliver any big knockdown blow. He had built up an argument that because we focused exclusively on Iraq – all these other problems arose – No Osama Been Forgotten, Taliban stronger, US further in debt because of war, Iran stronger, more dependent on foreign oil, etc. but when asked "Are we safer now" gave a weak answer. Obama should have used the opportunity to nail McCain with a series of reason why we are weaker.

Great Format – America won

Rescue/Bailout Plan

It is almost more important that there be a broad consensus on this plan than the plan itself. There’s a lot of panic and fear that is driving this financial meltdown. Credit market’s did momentarily freeze last week (see chart of 3 Month Treasury Bill) and the whole lending system could have shut down if it were not for the AIG rescue/bailout. The Fed alone has already injected $1.5 trillion dollars into the monetary system to keep it afloat.

American’s and the world need to feel confidence on whatever plan comes out of congress and if it passes by a narrow margin it simply will not work because too many ego’s will be fighting against it 40 days before election. Everyone has their own idea. Reality is we are in uncharted waters. What seems to be holding the credit markets around the world together is the hope of a unified plan coming out of congress. Paulson and Bernanke (two smart guys – moderate Republicans) have created a framework that has been debated for a nine days.

Why trust Paulson and Bernanke over Republican, Democrats and many economists? Because they are less concerned with ideology and have a greater understanding of the depth of the problem and the inner workings of the credit market. You should be feeling stampeded like a cow going over a cliff and remembering the WMD, bull about Iraq. CNBC, the financial channel is fear mongering a meltdown if it looks like no broad consensus happens on a rescue/bailout plan on Monday.

However, psychology, fear, panic are driving the credit and stock markets right now. They are hanging on because of the hope of a unified plan coming out of congress early this week The unprecedented move to eliminate shorting has helped the stock market, but the credit markets are barely hanging on. WaMu’s collapse indicated that there is a big run on banks quietly happening across the USA. Major investors are taking out all uninsured funds (funds over FDIC insured limit – $100,00) See CNBC’s Jim Cramer editorial "Dow 8000 "

The doom and gloom of CNBC and others is hopefully overstated, but there is an understandable sense of urgency.

Is a tentative deal happening? YES says one left wing source that quotes Republican’s lead negotiator Senator Gregg and Paulson. See link

There are 435 members of congress – the closer you get to that number the better the chance that panic and fear will fall and the plan will work. The better the chance the we will have only a short recession instead of something far worse. If over 100 members of congress oppose this plan then lots of the fear and panic will remain. The closer to 400 yes votes the better. 50 No votes would be disappointing , but manageable.

Best Advise

Being out of stocks is best. Make sure your $ are FDIC insured and money markets are SPIC insured. Think Cramer has a valid point and there are a few "super banks" banks on Wall Street that are raking in the $ from this crisis. Money is being taken from smaller banks and being put in the super banks, gold, and short term treasuries.

Obviously there will be a big rally if it looks like some sort of bipartisan solution has been agreed on by most Dems and Reps and both major presidential candidates support it.

The more yes votes coming out of congress the more $ I’d nibble back into the market.

Stocks

Index  % Change  Volume

Dow  +1.10%  up

NASDQ  -0.15% up

S&P500 +0.34% down

Russell2000  -0.13% –

US Market

Technicals mean nothing right now. Volume is below average. The stock market is NOT YET AGAIN in panic mode. The hopes of a bailout plan seem to be holding both CREDIT and stock markets together

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

How Close is Credit to Freezing UP?

The 3 Month Treasury Bill is the barometer that gives some indication of the level of panic out there. It shows the rate below 2.00% (Fed rate) people are willing to pay to have a safe place for their $.

It may also be compared to LIBOR rates that are rising (2.49% one month ago to 3.21% now) Adjustable mortgage rates and a lot of other credit is set to LIBOR. So the increasing spread between LIBOR going up and 3 month T Bond so low is at best alarming.

The 3MTB rose +16.90% yesterday to 0.83% Last week’s low when credit froze it was 0.01%. See chart What analyst are universally saying is that the 3 MTB is moving higher in hopes of a rescue/bailout plan.

3 MTB chart

THIS IS THE CHART TO WATCH TO TELL IF CREDIT MARKETS ARE FREEZING UP.

All the below charts are relevant, but what’s happening to Paulson/Bernanke rescue/bailout is driving the markets.

OIL no longer RULES

Chart of oil (WTIC)

The Dollar

Inverse relationship to oil prices.

Chart of Dollar

The VIX

Chart of VIX.

Short Term Outlook – It certainly looks like stocks are going to rally if there is a bipartisan rescue/bailout plan.

NB – Warren Buffet is buying. He is buying companies at a discounted price. He did this because he believes congress will "do the right thing."

Mea Culpa – I misread the WaMu bailout and predicted a bigger fall in bank stocks. Hopes of a bailout plan are keeping stocks afloat.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – Cautiously Bearish
Technicals – Not too relevant right now
Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought. But there is hope in a bailout plan, especially one that has broad support. Thing are looking up right now if this story is accurate , See link
(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

People feel like we are in a recession. The actual strict definition – 2 quarters of negative GDP growth has not occurred. How bad the recession will be is be is the major question.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100% Cash

* 10% US Index Funds
UWM (2x what Russell 2000 does) & QLD (2X what the NASDQ does)

*5% Emerging Markets
EEM (emerging markets)

Chief Strategy – Buy the dips of trending sector You have to have a strong tolerance for risk and belief that the bailout will work to jump in now.
Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

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September 24, 2008

Market Update – Mother of all Bailouts

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Palin

It is now 26 days since her nomination and Sarah Palin has still failed to hold a single press conference. She’s had only 2 milk toast "deferential" interviews vs. 80 for Joe Biden. Palin is billed as a tough pit bull with lipstick yet the sexist lobbyist/men running the McCain campaign are making her look like "a delicate flower that will wilt at any moment" One that is too afraid to hold a press conference. See CNN Campbell Brown CNN anchor on this video.

Mother of All Bailouts

Almost everyone is against or putting conditions on the mother of all Wall Street bailouts. Everyone is against giving $ to those who created the fiscal mess. The Paulson/Bernanke/Bush proposal in its current form is DOA. There is also almost a universal feeling that we are being fear mongered just like we were into Iraq. One feels like a cow being stampeded off a cliff.

About the best case for a bailout was told by a Columbia economist about the Great Depression. His great grandfather owned and Army and Navy store and was actually happy when Wall Street had its Black Monday in 1929. Those greedy bastards got what was coming to them. A year later his great grandfather had to close his store and went broke.

After getting blurry eyed watching this proposal being debated my best read of the tea leaves was a proposal by NY Senator Schumer – He said you’re not going to spend the $700 billion all at once. It takes time to get it started and estimates were that they would spend $50 billion a month as they went through each problem or asset group. Let’s try $150 billion and if that works come back to congress for more.

Here’s different editorials on the bailout – see RealClearMarkets . This site is the best I’ve seen on giving different views from all sides on Wall Street. It has a pro Wall Street bias because most of the financial sources out there are pro Wall Street. Yet it attempts to give the other side too.

Best editorial out there is from Obama economic advisor and former mucky muck (think it was Sec.of Treasury) in Clinton administration Robert Reich . Hope he takes his advice.

His "Bottom line: Unless Americans on Main Street have more money in their pockets, Wall Street’s bad debts will continue to rise — which means the Bailout of All Bailouts grows even larger, which means taxpayers take on even more risk and cost."

McCain/Obama politics of Bailout

The absolute best political position to be in is make sure the bailout has enough votes to pass and then oppose it because it does not give enough help to Main Street.

Bottom Line

Democracy and free markets work better than anything else. The problem is that both democracy and free markets need enforcement and regulations. Greed is a powerful force and it will overwhelm the basic principles that make both democracy and free markets work.

Stocks

Index % Change Volume

Dow -1.47% down
NASDQ -1.18% up
S&P500 -1.56% down
Russell2000 -1.56% –

US Market

Major US and most global markets fell yesterday. The losses were moderate compared to some of the wild swings that we have been having. The volume was well below average. Again this is probably due the fact that short selling is no longer allowed on 800+ Wall Street firms.

Technically, the new abolishing of shorts makes volume comparisons difficult. If shorts were still in place the losses of the last two days would have probably been far greater. The markets went from flat to down @1.5% in the last 45 minutes. This is a short term bearish sign.

Warren Buffet is buying. He is buying companies – Latest acquisition at least $5 Billion of Goldman Sachs. See story link
His eal is far bette than the one you and I would get (like a 10% dividend etc). Like Constelation Energy deal last week.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

How Close is Credit to Freezing UP?

The 3 Month Treasury Bill is the barometer that gives some indication of the level of panic out there. It shows the rate below 2.00% (Fed rate) people are willing to pay to have a safe place for their $) Yesterday the 3MTB fell -8.57% to 0.80%. This may seem like a big number, but it is not relative to last weeks low. Last week the low was 0.10%. See chart.

3 MTB chart

Bottom Line – Nothing coming close to last week’s wild moves. At least not yet.

OIL no longer RULES

Oil prices close down -2.76% at $106.61 .

Chart of oil (WTIC)

Right now the inverse relationship between the dollar and oil prices is driving the price of oil. The bigger the bailout, the higher the price of oil. (see below.

The Dollar

The US dollar rebounded and gained +0.49% Technically is stabilized right above its 50 day moving average. Fundamentally, there are growing doubts over the bailout plan.
Chart of Dollar

The dollar recently plunging because the $700 billion rescue plan/bailout puts the USA in that much more debt and therefore, makes the USA/dollar weaker or more in debt. When you put this all together any bailout is going to increase oil prices and force the dollar to decline in price.

The VIX

Still the best indicator of market bottoms in bear markets. However since you are no longer allowed to go short on 800 stocks this messes up the VIX. How much is beyond my pay grade.

The VIX moved up another +5.52% and closed at 35.72. When markets reached their lows last week the VIX high was 42.16. The higher the VIX goes the more fear/volatility there is out there. A closing of 35.72 is the second highest closing in 3 years (how far weekly chart goes back) and probably the 2nd highest closing since 911.

Chart of VIX

Short Term Outlook – It certainly looks like stocks are going to fall until there is a bailout plan.

NB – Warren Buffet is buying. He is buying companies at a discounted price.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook BEARISH -

Technicals -
Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought.
(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

People feel like we are in a recession. The actual strict definition – 2 quarters of negative GDP growth has not occurred. How bad the recession will be is be is the major question.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100% Cash

* 10% US Index Funds
UWM (2x what Russell 2000 does) & QLD (2X what the NASDQ does)

*5% Emerging Markets
EEM (emerging markets)

Chief Strategy – Buy the dips of trending sector You have to have a strong tolerance for risk and belief that the bailout will work to jump in now.
Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

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September 23, 2008

Market Update – Bailout

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Palin -

It is now 25 days since her nomination and Sarah Palin has still failed to hold a single press conference. This is unheard of. Other candidates from Mitt Romney to Hillary Clinton begged for press conferences almost daily while they were running. Yet Palin/McCain is afraid of the press.

It is now 40 days since McCain has held a press conference Is he just too old and frail to stand up to the press. No wonder conservative Icon’s like George Will are saying he may be unfit for the presidency. (see yesterday’s Updates) Washing Post keeps a record of McCain failing to hold a press conference.

There are a lot of people out there who are sometimes not too bright. (including me) but you have to be a total idiot to realize that Palin is all packaging and no substance. Why is she and McCain afraid of the press. If she is so afraid of the press how afraid of the rest of the world will she be.

Problems with the Bailout.

Thanks for all your emails on this. Lots of the below comes from your emails.

1) We’ve all been fooled by the government before (WMD’s, Iraq was behind 911, there were al Qaeda in Iraq) Why should we believe Fed chair Bernanke, Treasury Secretary Paulson, and Bush now?.

For over a year they have been telling us everything is fine and now they tell us unless we get bailed out Armageddon will follow tomorrow. One should certainly be skeptical especially of Paulson because he formerly led Goldman Sachs – one of the major players in in this whole mess. Does anyone still trust Bush? Bernanke is like Colin Powell and has a certain amount of credibility. Powell lost a lot of that credibility over Iraq.

Things could get a lot worse and there obviously could be a run on the banks and money market funds. This began before the bailout of AIG as people had already lined up in Asia and Europe to cash in their insurance policies. Money markets failed and investors started withdrawing funds from all banks, and stocks hit new lows. (down 25%+ from their highs)

Last week it did look like we were on the brink of the sky is falling panic . How close are we today? Best barometer is the 3 month Treasury Bill

Link to chart of 3MTB

Notice that at the hight of the panic investors were willing to basically accept nothing in return for a 3MTB – 0.01% was the return (you have to add another zero to the chart to get the actual percentage). Yesterday ended at .875% which is considerably better but still below the basic Fed rate of 2.00%. So thee is not yet the kind of panic there was last week.

You can also watch gold prices as a barometer.

There is a huge amount of toxic debt out there, but panic makes things worse. It is very possible that panic could set of a depression – pension plans, housing values, employment, growth, stocks, and the kitchen sink could take a huge hit. It is impossible to calculate just how many banks would fold and businesses would go under this would be.

Bottom Line – Best read of the the leaves there is a huge problem and it did spill over into the general economy last week. Remember the media hypes everything – The resulting panic could set off a major depression Barometer’s show we have at least some time before that panic returns. (see above)

2) Collective outrage over bailing out wealthy CEO’s and others who created this mess. Why should they be rewarded.

3) Paulson or the next Secretary of Treasury becomes GOD over the bailout plan and nobody, no court and no official can even challenge him. What happens to democracy and our system of checks and balances when we create a dictator/God. – See The dirty 32 words no one wants you to read – link

4) Why is this a bailout for Wall Street and not for Main Street? A stimulus package for middle and lower class Americans would help, but there are holes in this. If there is a run on banks, money markets, insurance companies Main Street is going to get the crap kicked out of it.

There are more points but, I’ve run out of time.

Stocks

Index % Change Volume

Dow -3.27% down
NASDQ -4.17% down
S&P500 -3.82% down
Russell2000 -4.82% –

US Market

Massive down day, but decreased, below average, volume. For the first time in three weeks volume on the stock exchange was below average. We’ve had some days where the volume was massive – @ 2X the 50 day moving average. Volume is the chief confirmation factor behind any price move.

This tells you lots of the major money (institutions is staying in the markets.

This also,in part could be due to the rule that now investors and traders are not allowed to short – link over 800+ stocks. I’m just not knowledgeable enough to tell you exactly how much volume was diminished because of the rule that short trading is no longer allowed. Best guess is that it is significant and volume would have been 50% higher

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

OIL no longer RULES

Oil prices close up +6.64% at $109.37 The WTIC is the continuous contract. The price for October oil whose contract closed yesterday reached over $120.00 dollars. This was a classic short squeeze, so the hue hike up was probably artificial.

Chart of oil (WTIC)
Oil prices are moving higher primarily because the dollar is moving lower. (See Updates #2 from yesterday)

The Dollar

The US dollar plunged the most it has in one day in at least 3 years (that’s how far back the chart linked below goes) Dollar down -2.13% This amount looks small, but it is really huge. Imagine the money in your back pocket just became 2.13% less valuable vs, the other currencies in the world. As stated yesterday, the reason behind this is the fact that the USA because of the rescue/bailout plan will have to go further in debt. Sure looks like the fall will continue.

Chart of Dollar

The dollar is plunging because the 700 billion rescue plan/bailout puts the USA in that much more debt and therefore,makes the USA weaker. When you put this all together any bailout is going to increase oil prices and force the dollar to decline in price.

The VIX

Still the best indicator of market bottoms in bear markets. However since you are no longer allowed to go short on 800 stocks this messes up the VIX. How much is beyond my pay grade.

The VIX moved up +5.55% and closed at 33.85 and when markets reached their lows last week its lowest point was 42.16. The higher the VIX goes the more fear/volatility there is out there.

Again the no selling of short’s rule, seriously impacts this volatility/fear measurement of the SPX. It would have probably spiked much higher and the markets fell significantly more if the rule had not been in place.

Chart of VIX.

Short Term Outlook – It certainly looks like stocks are going to fall until there is a bailout plan.

NB – Warren Buffet is buying . He is buying companies at a discounted price.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook BEARISH -

Technicals -
Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought.
(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

People feel like we are in a recession. The actual strict definition – 2 quarters of negative GDP growth has not occurred. How bad the recession will be is be is the major question.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100% Cash

* 10% US Index Funds
UWM (2x what Russell 2000 does) & QLD (2X what the NASDQ does)

*5% Emerging Markets
EEM (emerging markets)

Chief Strategy – Buy the dips of trending sector You have to have a strong tolerance for risk and belief that the bailout will work to jump in now.
Changes to Bottom Line Section Bolded .

As Always Do Your Own Research Before Investing

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September 22, 2008

Market Update – Flourish or Flatline

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Obama – No Blank Check Bailout.

Fed chair Bernanke and treasury Secretary Paulson have asked congress for a $700 billion dollar bailout. The or else behind this bailout seems to be the belief that the world’s banking system is freezing and that no bank will loan another bank because they do not know the amount of toxic debt that each bank has. This will lead to a total financial meltdown. Obama offered qualified support.

Obama called the $700 billion "a staggering price" He made two major statements

"the must be no blank check when American’s are on the line for this much money"

"Taxpayer shouldn’t be spending a dime to reward CEO’s on Wall Street while they are going out the door."

Nancy Pelosi – "We will simply not hand over a blank check to Wall Street."

Link to story here and link here

McCain’s Initial Response

McCain has called for the firing of SEC Chair Harvey Cox. For this has been strongly criticized by conservatives like the editorial board of the right wing WSJ and by conservative icon George Will who called the action "decidedly unpresidential" Countries all across the world are following first England and then Cox in banning short selling.

John McCain started this week which has exposed the the worst economic crisis since the Great Depression by saying "fundamentals of this economy are strong."

ABC’s Sam ee – McCain’s "erratic response on the economy again raises questions about his age." (see yesterday’s Updates)

McCain has now calmed down and both candidates called for "oversight " this AM.

Story Link from ABC here

Major Message to All investors

The Dow under Democrat Bill Clinton (8 years) flourished from 3000 to 11,000. Under Republican George Bush (8 years) the Dow flatlined at 11,000 and will end with the most exorbitant financial bailout in the planet’s history. Who voted with Bush 90% of the time and was a champion of deregulating (major cause behind the meltdown) for a quarter century – Republican John McCain. See Big Charts for Dow over last 30 years.

Send the above message to all your friends who are interested in making financial gains

Many thanks to all of you who have sent in emails. The above statement was the end realization of a series of emails over the weekend

Stocks

Index % Change Volume

Dow +3.35% down
NASDQ +3.40% flat
S&P500 +4.03% down
Russell2000 +4.15% –

Morgan Stanley and Goldman Sachs Become Commercial Banks.

The big 5 unregulated investment US investment banks are now all gone. For story on MS and GS becoming bank holding companies

Japanese bank to buy 10 to 20% of MS – Just announced on CNBC.

US Markets

Second huge rally day in a row. Big Volume. Technicals mean very little because fundamentals (news) are in control.

The fact that short selling seems to be shutting down across the world is very bullish for stocks. Will explain more when there is time.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

OIL no longer RULES

Oil prices are now followers instead of leaders. If stocks go up – oil prices will follow. If they go down so will oil. Oil prices close up at $102.75 Friday and pre market trading at 8:30 AM is $106.54

Chart of oil (WTIC)

The VIX

Still the best indicator of market bottoms in bear markets.

Chart of VIX

Short Term Outlook – Those of you who had the guts to buy while there was blood in the streets – Bravo. The elimination of short selling for over 800 US companies is very bullish for stocks. This is like

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook CAUTIOUSLY BEARISH

Technicals – New Rally – Will it Last?
Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought.
(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

People feel like we are in a recession, the actual strict definition – 2 quarters of negative GDP growth has not occurred. The financial crisis is overwhelming bad news.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100% Cash

* 10% US Index Funds
UWM (2x what Russell 2000 does) & QLD (2X what the NASDQ does)

*5% Emerging Markets
EEM (emerging markets)

Chief Strategy – Buy the dips of trending sector You have to have a strong tolerance for risk to jump in now.
Changes to Bottom Line Section Bolded .

As Always Do Your Own Research Before Investing

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September 21, 2008

Market Update – McCain’s Health

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Stocks

The Long term outlook call to NEUTRAL is way too premature. I got caught up in the excitement or hope behind the bailout package. Sorry. Let’s change it to CAUTIOUSLY BEARISH. (See below)

No one knows what the bailout package will look like. What we do have a good idea of is almost all the banks in the USA and across the world are basically frozen, and afraid to make loans to each other because they do not know how much toxic debt there is at the other bank. The world’s banking system is in danger of collapse if nothing is done in a timely fashion.

Is this a bailout just for banks and not homeowners?
Will regulations/regulators be put in place to stop the same thing from happening again?

Politics

Palin Plummets

One should never underestimate Sarah Palin.

However, the more people are finding out about Sarah Palin the less they are liking her. One poll taken right after the Republican convention had her at 67% favorability and about 4 days ago it had dropped to 49%. Here is a poll conducted by Research 2000 that shows her negatives now outweigh her positives and from 9/11 to 9/19 her favorability has fallen from 52% to 41% See Link

Reasons

1) Lack of experience – Hiding her from the press. Asking the few press interviewers that she has to be treated "deferentially." Will she hide from a crisis and will Putin be deferential to her?. Mistakes she has made (example – Bush doctrine.)
2) Introduced as the person who will stop pork spending and as the one who stopped "Bridge to Nowhere" Facts – Alaska gets 10 times the pork most other states do and congress not Palin stopped the bridge. She was for it, is still spending money on a road to it, now she is against it.
3) Her right wing religious views make Bush look like a Democrat. example – Her belief in creationism (world was created 10,000 years ago- what happened to the dinosaurs?)
4) Her troopergate scandal. She is getting caught daily in more and more fabrications. Her, her husband and staff refusing to even meet with investigators makes it look like she is hiding something

Out of bound stuff like Maureen Dowd in NYT helps Palin – her daughter who is -
"17 and pregnant and unmarried and the father was a teenager hoping to launch a rap career with “Thug Life” inked across his chest"

Palin makes McCain’s Health a major Issue

2032 Doctors have signed onto the following because they are so concerned about McCain Dying and Sarah Palin taking over.

This weekend, Brave New Films released a short video featuring doctors calling on McCain to make his health records public—so Americans can make an informed choice.

Please watch and pass this email to your friends (If you’re a doctor or nurse, there’s a special action you can take on the video page.) Example from Video – 40% of those who have melanoma (skin cancer) like McCain die within 10 years. McCain had his last cancer operation 8 years ago and is 72. Here’s the video:

If McCain got sick or died while in office, the leader of the free world would be Sarah Palin—someone with no foreign policy experience and a domestic agenda more extreme than George Bush’s. Voters deserve to know how likely that might be.

The good news so far is her favorability ratings have dropped from +17 to -1 in just a few weeks.

Long Term Outlook CAUTIOUSLY BEARISH

Technicals – New Rally – Will it Last?
Fundamentals – financial mortgage transparency problem is far far far far far bigger than anyone thought, looming global recession vs the shop till I drop US consumer and lower gas prices
(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

The question for Wall Street is not whether there will be a recession or not, but how long will it last and when will it spread to the rest of the world People feel like we are in a recession, the actual strict definition – 2 quarters of negative GDP growth has not occurred.

Asset Allocation/Recommended Sectors (long term)

* 85% Cash

* 10% US Index Funds
UWM (2x what Russell 2000 does) & QLD (2X what the NASDQ does)

*5% Emerging Markets
EEM (emerging markets)

Chief Strategy – Buy the dips of trending sector

Changes to Bottom Line Section Bolded .
As Always Do Your Own Research Before Investing

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September 17, 2008

Market Update – No Armageddon

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Sorry I will not have a chance to answer email till the weekend I’m really pressed for time.

No Armageddon

AIG, the world’s largest insurance company got bailed out by the Federal Government (you the taxpayer) last night. You are loaning them 85 billion dollars for a 80% preferred stake in the company. You get 80% of AIG. Full story here at NYT -Link

The Good news

1 )Stocks should rally today.
2) Financial Armageddon is averted – Stock across the world would have dropped far more than 10% if AIG went bankrupt.
3) Message to market is you will get bailed out if you are too big to fail. Psychologically investors may/will look at this as a bottom.

The Bad News

1) If you own stock in AIG – you’re screwed – The government’s 80% stake comes first. The value of your stock diminishes significantly.
2) AIG was an international company – why is just our Fed putting up the $ for a bailout. and not other countries?
3) $20 billion was the bailout figure last Saturday and by waiting it rose to $85 billion because the situation so rapidly deteriorated.
4) Short sellers could force other major companies out of business knowing the gov’t will back them up.
5) Banks did not have the capital or ability to value assets to bail out Lehman or AIG. Sovereign funds have got burned by their bailouts. This is pretty scary when your country is so far in debt and the only one left to bail out trouble companies.

The Ugly

1) The same guys at AIG that created the mess are still running the show. Who is looking over their shoulders is unknown.
2) There are obviously other institutions out there that could fail – Giant Washington Mutual and a whole lot of mid size banks. – However, this does buy them some time.
3) The credit/transparency crisis is far larger than than anyone expected. We have turned to basic socialism as a solution. Socialism (your tax dollar) is coming to the rescue of the free market.
4) People in Singapore were/are lining up to withdraw their $ from AIG. Are foreigners loosing confidence in AIG & USA? One bailout too many?

Why this is a Gold Mojo Moment for Obama

Economic is the #1 issue of this campaign. All these bailout are going to cost you and your kids hundreds of billions of dollars. The root of this problems is that almost all Republicans and Wall Street want deregulation and to leave the "free market" alone. Almost all Democrats want stricter regulations. Stronger regulations/transparency on Wall Street are what is needed.

Some of the following comes from an editorial in a Philly paper by Dick Polman – Link listed below and Obama and allies should be hammering away at this.

1) McCain been is the Senate a quarter century and until this week has never called/voted for stronger regulations on companies. Obama 19 months ago included stronger regulations in his initial platform.

2) Republicans created this mess and the #1 culprit is Republican Senator Phil Graham who lead the deregulation effort.(Chaired Banking Committee) McCain chaired Graham’s run for President in 96 and Graham was the initial co chair/top economic advisor of McCain’s run for President. You should remember Graham – he call American’s "a nation of whiners" and McCain too blundered in ailing the "US economy fundamentally sound."
Adds tying Bush/McCain and Graham should flood the air.

3) McCain quickly put out an add saying he would go after Wall Street and said we should do it the old fashion Washington way by setting up a commission. "This is rich" since for 25 years he and his buddy Graham have been championing deregulation. McCain in the WSJ stated earlier this year "I’m always for less regulation"

4) McCain tax plan (make the Bush plan permanent) continues to reward the rich who benefit most from deregulation. Obama’s tax plan gives more money back to everyone earning under $250,000, and slams the rich Wall Street CEO types earning over 250,000k. Obama has done a poor job of selling this. McCain may talk tough, but he is giving the folks who got us into this trouble another juicy tax break.

Obama’s Problem

Obama needs an injection of Buba (aka Bill Clinton) He needs to show he feels the pain of independent voters. His roots, Broken family poverty should help. He needs to tell independent voters he understand them and how his tax plan will help them. Other’s should focus on how priviliged "not knowing how many houses" and how out of touch McCain is. The lefty blogs should be giving out Obama’s tax plan and solutions daily instead of wasting more time on Palin.

Stocks

Index % Change Volume

Dow +1.30% big
NASDQ +1.28% big
S&P500 +1.75% big
Russell2000 +3.03% –

US Markets

Caution – This AIG bailout averts Armageddon, but also show how very weak the whole financial structure is. The big Question IS THIS BAILOUT ENOUGH MONEY FOR A WEEK OR FOREVER?

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

These two factors combined make a case for investing some funds at the end of October.

OIL RULES

Oil prices are moving up – Sorry I don’t know why – Oil futures up over 3%. Best guess is that investors realize that the US economy is really weak and they think the dollar will fall. Since most oil is traded in dollars oil prices will therefore rise to compensate. The Saudi’s (OPEC) have also called for a floor of $85.00.

Chart of oil (WTIC)

The VIX

Technically, the VIX worked like a charm. It went to 33 and then the buying began. Above 30+ on the VIX (measures fear/volatility) is usually a peak of fear and a turning point for markets

Chart of VIX

Short Term Outlook – Washington Mutual is the next in line for failure. If the largest Savings Bank goes under will it create a panic on all banks? We’ve bought some time for WaMu

It is still a short term players market. Buy the dips and sell the the rallies. Investors are trading on volatility instead of value.

No one still has any idea of how big the problem is. AIG ,obviously had no idea how bad it was until it was too late.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Bottom Line

Long Term Outlook Bearish

Technicals – The bullish trend of the summer rally has been broken.
Fundamentals – financial mortgage transparency problem is far bigger than anyone thought, looming global recession vs the shop till I drop US consumer and lower gas prices
(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

The question for Wall Street is not whether there will be a recession or not, but how long will it last and when will it spread to the rest of the world People feel like we are in a recession, the actual strict definition – 2 quarters of negative GDP growth has not occurred.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100%% Cash

* 15% US Index Funds
UWM 2x what Russell 2000 does SSO 2x what S&P 500 does & QLD (2X what the NASDQ does) ( short term plays only on dips)

Chief Strategy – Buy the dips of trending sector Nothing is immune in a true Bear market. Therefore this is not a time for investors to buy. Shorter term traders and risk takers can always find something to buy-
Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

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September 16, 2008

Market Update – Meltdown Continues

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

After the worst day Wall Street has had since 9/11 the fundamentals are getting worse. The world’s largest insurance company AIG had its bonds downgraded by S &P and Moody’s. This is going to hit the entire insurance industry and other banks because they are all tied together. You can listen to a video from CNBC – link (the financial station) now call this possible collapse "Financial Armageddon"

Washington Mutual, the nation’s largest financial institution has fallen from a $43,00 stock to $2.00. Scroll down at following chart/link . Check out the following link on yesterday’s meltdown

AIG – down 60%
Bank of America – (bought Merrill Lynch) down 20%
Morgan Stanley and Goldman Sachs (potential buyers of AIG) down 13%
Lehman is now a 17 cent stock.

Cramer (CNBC’s most popular analyst on why AIG must not fail. Link

Silver lining – oil prices are falling like a stone and the Fed meets today. The Fed will probably lower interest rates and this will psychologically help. Of course this will have nothing to do actually fixing all the toxic debt there is out there.

Politics and the Meltdown

This is mana from heaven for the Democrats, because it brings the focus the on the economy. Simply put the Republican’s have been in charge for the last 8 years and they have blown it. This is a clear simple fact. They are responsible for Iraq and they are responsible for the economy.

1) We’ve added at least $5,000,000,000 to the national debt and have the largest trade deficit ever. (Past Updates has explained how phony the $5 trillion numbers and it is actually several time larger.

2) Republican’s lowered taxes, especially for the wealthy and launched the $3,000,000,000 war. See reviews of Nobel Prize winner Joe Stigletz’s book -"The Three Trillion Dollar War -Link"

3) Trillions of American dollars for eight years have been flowing out of this country to petro dictators, and authoritarian governments (see past Updates)

All of this has made our financial and economic structure much weaker. Now that we have a major financial crisis we are in a far weaker position to deal with it than before we invaded Iraq.

The systemic cause of this whole mess is the lack of regulation and enforcement on Wall Street. For decades McCain, lobbyists, Republicans, and Wall Street have screamed the orthodox mantra of more financial regulations and enforcement will devastate free markets. We don’t want Washington telling you how to run our businesses was their mantra. Realty is that there are just as many crooks on Wall Street as there are on Main Street. Nurses, teachers, steel workers, salesmen, artists (etc) all have regulations and enforcement – why should Wall Street have less. Enron was the first and this financial meltdown is a hammer over the head.

John McCain is/was not just an orthodox Republican who blocked moves for more regulation and moreenforsement he was up to his neck participator in the last major banking meltdown.

"John McCain has excellent experience–a ringside seat–in the vagaries of this experiment in greed and anarchy. He was a member of the Keating Five. This was the signature scandal of the Savings and Loan crisis, twenty years ago. It concerned the insider help that five Senators gave Charles Keating and his Lincoln Savings and Loan, in return for contributions and gifts. The deregulation of S&Ls–community banks dedicated to local mortgages (like George Bailey’s bank in "It’s A Wonderful Life")–enabled slick operators like Keating to make reckless loans in new areas where they had no expertise. The final tab to the taxpayers was $165 billion."

To be fair the other 4 members of the Keating 5 were Democrats. But most are long gone and they r not running surrounded by lobbyist for president. If you’d like to read more on the above quote see link from Time Magazine .

Stocks

Index % Change Volume

Dow -4.42% up
NASDQ -3.60% up
S&P500 -4.71% up
Russell2000 -4.23% –

US Markets

Biggest one day meltdown since 911. The volume was huge. S&P 500 broke support levels (this year lows) and the Dow had its lowest closing in two years.

The silver lining is that technically this sure looks like a climax sell off or the beginning of one. The bad news for Wall Street technicians is that the benchmark S&P 500 has established a lower low this year. (see the VIX below)

The Fed meets today and announces at 2:15.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

These two factors combined make a case for investing some funds at the end of October.

OIL RULES

Good news oil prices crashed and burned yesterday and is down to @ $93 in pre market trading Bad news – this is a signal that long term we are heading for a worldwide recession.

Chart of oil (WTIC)

The VIX

In a bear market the VIX is a reliable prognosticator of when the market will turn. The VIX measures fear/volatility in the markets. When the VIX spike to levels of great fear – that usually wipes out all those who will panic. Therefore there are few left to sell and the markets move higher. The VIX is now above 30 and each time it has reached this level of fear goes up so high no one is left to sell and stocks go up.

Chart of VIX

The VIX is now at 31.4 and has reached 37.5 twice in the past. So one could argue that the VIX needs to move a higher before the markets turn.

Short Term Outlook – Those who love risk can buy especially if the VIX reaches 37.5. But obviously do not invest large amounts of capital. All eyes on AIG – the situation worsened for them overnight because of the downgrades. Warning – If AIG goes down the 5 % meltdown over Lehman yesterday is chicken feed. Already the downgrade of their bonds is going to ripple though out the world’s economy.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Bottom Line

Long Term Outlook Bearish

Technicals – The bullish trend of the summer rally has been broken.
Fundamentals – financial mortgage transparency problem is far bigger than anyone thought, looming global recession vs the shop till I drop US consumer and lower gas prices
(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

The question for Wall Street is not whether there will be a recession or not, but how long will it last and when will it spread to the rest of the world People feel like we are in a recession, the actual strict definition – 2 quarters of negative GDP growth has not occurred.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100%% Cash

* 15% US Index Funds
UWM 2x what Russell 2000 does SSO 2x what S&P 500 does & QLD (2X what the NASDQ does) ( short term plays only on dips)

Chief Strategy – Buy the dips of trending sector Nothing is immune in a true Bear market. Therefore this is not a time for investors to buy. Shorter term traders and risk takers can always find something to buy-
Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

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