Investors 411 Blog

by Barr Jozwicki
December 24, 2008

Market Update – Happy Holidays

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

Going to London and Paris over holidays. May be able to send abbreviated Updates from Europe. Otherwise no Updates till Jan 5th.

HAPPY HOLIDAYS!

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Santa is Applying for a TARP Loan

Index % Change Volume

Dow -1.18% down
NASDQ -0.71% down
S&P500 -0.97% down
Russell2000 -1.35% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

The Dow fell for the fifth day in a row and took out its support level of 8500. Dow at 8419 The other indexes are still above their respective short term support levels. Volume was weak/decreased and therefore did not confirm the fall.

Historically light trading for this and next week. Still if the Dow drags the other indexes along with it we are looking at challenging last years lows.

Foreign markets are reflecting the fall in the Dow.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals-

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

Holiday’s – Bah Humbug

From Reuters a consensus outlook . US GDP down 6% in this quarter. Down 2% next quarter and a weak recovery at the end of 09.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress is being made. LIBOR has fallen from 3.4% two months ago to about 1.47% LIBOR rates are on their second leg down and have again fallen significantly. LIBOR is the rate banks charge each other, not businesses. Some credit cards, loans and mortgages are tied to LIBOR so this is good news. Some credit cards & mortgage rates are tied to Fed prime rate.

LIBOR chart (3 month)

Treasury Bonds

The 3 month has basically flatlined at 0.01% Longer term rose yeilds rose slightly. The 3 year fell slightly.
Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks. Investors are willing to pay an unbelievably low 2.17% for a ten year treasury bond.

Yields keep falling = Continued deterioration of credit market. Low Yields = There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI fell about 2% yesterday to 784. We have had a significant rally off the lows of @660 two weeks ago week, but again have started to fall again.

Long term picture The BDI had seen an almost 90% loss since June. It seems, a least for a week international trade has picked up but has again begun to slowly fall. These shipping figures confirm world wide recession.

Dollar Falling

Dollar was flat again yesterday.

Wild ride over the last three weeks- especially last week. Basically, the dollar has gone from a high of $88 to low of $78 and at the end of the last two days setteled at $81. Chart of the dollar .

The dollar is falling because of the low US interest rates and it looks like the Fed will bee printing a whole lot of $ to keep the financial system liquid. Other countries are doing the same thing. This collective devaluation of currencies can lead to a worldwide deflation if it continues. This is not what we want to have happen.

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates. Long term stock rallies simply do not have the money supply to exist as long as the credit panic continues.

Dow 8500 support has been broken. However in the short term the Dow is a bit oversold. The other major indexes are still hanging in above support. However the uptrend has been broken in the Dow.

How markets react to news is out #2 forecasting tool after volume. Bad news seems to be impacting stocks more that it has a week ago. Then bad news had little impact a week or two ago. Therefore, the shorter term uptrend is showing some signs of cracking.

Another major dip would be a buying opportunity

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally may be starting to fade

Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought.It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips ) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds

UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the
NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets

EWZ (Brazil) should out perform other emerging markets in a rally and under
perform in a fall – highest risk and dependent on oil prices

FXI (China ETF) should outperform USA

*5%+ Alternative Energy

GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold

GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market – over the 8 Bush years the Dow has gone from 11,000 to 8,500 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000

QID – ultra short NASDQ

SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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December 23, 2008

Market Update – What Me Worry

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

Going to London and Paris over holidays. May be able to send abbreviated Updates from Europe.

"Recession Plagued Nation Demands New Bubble to Invest In."

The above headline is from "The Onion" Sometimes humor tell the truth better than analysts. After an internet and housing bubble American’s are looking for the next Ponzi scheme.

Nobel prize winner Paul Krugman expects "were in for months, perhaps a year of economic hell ."

Paulson and Bernanke as Heroes

In the past few month Updates has spent a lot of time punching holes in the TARP bailout and other financial moves. The government loans/bailouts have been termed "Not accountable," "did not fix the lack of regulation problem," "not transparent," "arrogant" and "what looks like Paulson giving $ to cronies (banking buddies like Rubin)" While there is a clear negative side the actions taken it does not necessarily add
up to failure.

Herbert Hover failed to act. He let bank after bank go under and the end result was the Great Depression . When Lehman Brothers failed this year the almost $400 billion of bad over leveraged debt shook countries and banking systems worldwide.

Twice the entire world economic/financial stood on the brink of the abyss.

  1. The AIG bailout. The world’s largest insurance collapse would have taken down the entire insurance industry. AIG was/is overloaded with credit defaults swap obligations. – just like Lehman.
  2. The TARP financial/bank bailout and the second bailout to the world’s largest bank Citigroup. Again Citi and banks are over leveraged with obligations like credit default swaps.

Paulson and Bernanke have not fixed the problem - but they have kept the entire world’s financial system ticking . The ships been hit by an iceberg, but it is still afloat. Bernanke and Paulson do deserve some credit.

Solutions

There are many. Some of the more obvious ones

  1. We need laws to regulate financial companies, – free markets and especially Financials (credit default swaps etc.) need some structure or else they go wild.
  2. The over leveraged situation needs to get reduced.
  3. Temporarily stop building houses or find some other way to stabilize housing/foreclosure market.
  4. Stimulus – This worked for FDR until he tried to balance the budget too soon in 1937. Then he needed the a huge stimulus package (WW 2) to ultimately fix things.

"What Me Worry" Alfred E Neuman

Huge financial entities (domestic and foreign) knees are trembling with worry.

  1. Banks are not loaning money – they are probably over leveraged and need the cash just to stay in business.
  2. Big money is all hiding in Treasury Bonds. – the Yields are ridiculously low
  3. Corporate bond yields are ridiculously high – this means a whole mess of defaults should happen in the future.
  4. Check out the drop in the Baltic Dry Index (see below)
  5. We’ve entered this mess with an already huge deficit.

Hope Krugman is right and "we are in for months, perhaps a year of economic hell" and not something worse.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Still Consolidation
Index % Change Volume

Dow -0.69% down
NASDQ -2.04% down
S&P500 -1.83% down
Russell2000 -2.30% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

This week and next have historically had light trading. Also the next three weeks have historically been positive.

The shorter term mojo is still with the bulls until stock’s close below their opening price on last Tuesday. This area just above 8500 held for three days in a row (last Friday, Mon. and Tues.) and is a short term support level – 8500

The Dow fell below 8500, but rallied to close above it at 8517 So technical support while threatened, held yesterday.

Today again will be a test of this level.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals-

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

Lots of down grades of companies by brokers was most cited reason stocks fell yesterday.

Here’s about a disastrous an outlook as I can find from a self described Dr Doom and Gloom .

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress is being made. LIBOR has fallen from [MISTAKE 4.8 is the European LIBOR rate high 3.4% is the US high] two months ago to about 1.46% LIBOR rates are on their second leg down and have again fallen significantly. LIBOR is the rate banks charge each other, not businesses. Some credit cards, loans and mortgages are tied to LIBOR so this is good news. Some credit cards & mortgage rates are tied to Fed prime rate.

LIBOR chart (3 month)

Treasury Bonds

The 3 month has basically flatlined at 0.01% Longer term rose yeilds rose slightly

Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks. Investors are willing to pay an unbelievably low 2.17% for a ten year treasury bond.

Yields keep falling = Continued deterioration of credit market. Low Yields = There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI fall more than -2% yesterday to 801. We have had a significant rally off the lows of @660 two weeks ago week, but again have started to fall. Big long term picture The BDI had seen an almost 90% loss since June. It seems, a least for a week international trade has picked up but has again begun to slowly fall. These shipping figures confirm world wide recession.

Dollar Falling

Dollar was flat yesterday.

Wild ride over the last three weeks – especially last week. Basically, the dollar has gone from a high of $88 to low of $78 and at the end of the last
two days setteled at $81. These are historically big moves for the dollar. Chart.

The dollar is falling because of the low US interest rates and it looks like the Fed will bee printing a whole lot of $ to keep the financial system liquid.

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates. Long term stock rallies simply do not have the money supply to exist as long as the credit panic continues.

Dow 8500 is the technical support level that’s closest and 9000 is the upside resistance level.

Historically the markets turn before the economy, however fundamentally its hard to see signs of any long term economic turn.

Hedges

As I’ve discussed with many of you, personally I am long (bought lots of) FXI (the China ETF) and I’m hedging it with a short position in US equities – SDS or others listed below. The higher FXI gets the more I hedge. The lower it goes the less I hedge.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems to be taking hold. Look for range between 7449 and 9654 for rest of year .
Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought.

It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%

Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds

UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets

EWZ (Brazil) should out perform other emerging markets in a rally and under
perform in a fall – highest risk and dependent on oil prices

FXI (China ETF) should outperform USA

*5%+ Alternative Energy

GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold

GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market – over the 8 Bush years the Dow has gone from 11,000 to 8,500 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000

QID – ultra short NASDQ

SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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December 22, 2008

Market Update – Veil of Secrecy

Author: Barr Jozwicki - Categories: Bailout/Stimulus - Tags: , , , , , , , , , , , , , ,

We got a mountain of snow in Boston over weekend and still shoveling – so have to cut this short

Veil of Secrecy – Banks

What happened to all the $100′s of billions we gave to financials and banks? No one knows. They know less about the amount of "toxic debt most financials have. Even the #1 right wing financial channel is concerned or banks sitting on a trillion in cash AP – They still fly corporate jets.

Oh Canada

Canada added $4 billion to the American auto bailout/loan . Their $4 billion is a far bigger chunk of their GDP than our loan/bailout to American auto’s was.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Consolidation

Index % Change Volume

Dow -0.30% up

NASDQ +0.70% up

S&P500 +0.29% up

Russell2000 +1.48% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Friday, was what they calla "triple witching" day where options expire and there is almost always a lot of trading. Markets were basically flat.

The shorter term mojo is still with the bulls until stock’s close below their opening price on last Tuesday. This area just above 8500 held for three days in a row (last Friday, Mon. and Tues.) and is a short term support level.

Dow now at 8579 with the first resistance level at 9026 and major resistance at 9654. The Technical aspect of US equities has been very solid since the late November lows. Short term the momentum is still with the bulls . Downside support level just above 8500 is in danger of falling. Today’s test of this level is relevant to the Santa Clause/Obama rally continuing.

Chartof the benchmark S&P 500

Chartof the Russell 2000

Chartof the NASDQ

Chartof the Dow

Fundamentals-

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

Auto Bailout/loan is now history.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress is being made. LIBOR has fallen from 4.8% two months ago to about 1.46% LIBOR rates are on their second leg down and have again fallen significantly. LIBOR is the rate banks charge each other, not businesses. Some credit cards, loans and mortgages are tied to LIBOR so this is good news. Some credit cards & mortgage rates are tied to Fed prime rate.

LIBOR chart (3 month)

Treasury Bonds

The 3 month has basically flatlined at 0.01% 6 month fell slightly and longer term rose yeilds rose slightly. Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks. Investors are willing to pay an unbelievably low 2.08% for a ten year treasury bond.

Yields keep falling = Continued deterioration of credit market. There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI fall more than -1% yesterday to 818 . We have had a significant rally off the lows of @660 in the last week. However, The BDI had seen an 90% loss since June. It seems, a least for a week international trade has picked up but has again begun to slowly fall. These shipping figures confirm world wide recession.

Dollar Falling

Wild ride over the last three weeks- especially last week. Basically, the dollar has gone from a high of $88 to low of $78 and at the end of the last two days setteled at $81. Chart of the dollar .

The dollar is falling because of the low US interest rates and it looks like the Fed will bee printing a whole lot of $ to keep the financial system liquid.

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates. Long term stock rallies simply do not have the money supply to exist as long as the credit panic continues.

Dow 8500 is the technical support level that’s closest and 9000 is the upside resistance level.

Historically the markets turn before the economy, however fundamentally its hard to see signs of any long term economic turn,

Hedges

Definition of hedges .

As I’ve discussed with many of you, personally I am long (bought lots of) FXI (the China ETF) and I’m hedging it with a short position in US equities – SDS or others listed below. The higher FXI gets the more I hedge. The lower it goes the less I hedge.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems to be taking hold . Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought.
It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds

UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the
NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets

EWZ (Brazil) should out perform other emerging markets in a rally and under
perform in a fall – highest risk and dependent on oil prices

FXI (China ETF) should outperform USA

*5%+ Alternative Energy

GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold

GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market – over the 8 Bush years the Dow has gone from 11,000 to 8,500 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000

QID – ultra short NASDQ

SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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December 19, 2008

Market Update – Ronald Reagan + Posh Spice

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

Thanks to one of you who sent this very funny video of Robin William’s on American Politics (Obama to President Jack Nickelson) and more. PoliticalIrony.com is a great humor site.

"Scam of the Century"

Yesterday Tom Friedman called the Madoff scandal the "cherry" on top of the whole financial mess.

Today Nobel Prize winner Paul Krugman echo’s Friedman – "How really different is Mr Madoff’s tale from the story of the investment industry as a whole."

Bottom Line – Many of you have talked about investments in the financial sector. Your reasoning – After all financials are so beaten up and the government is not going to allow this sector to fail – Citigroup the prime example. You’re right but -

The other side to this coin is that – we do NOT have transparency in this sector, We have not enforced a new restructuring, we do not know how much "toxic" debt each company has.

In the end financial companies are all going to have to de-leverage. They made their profits from huge risks (leverage like credit derivatives) and you the taxpayers are now subsidizing that risk. Financials, therefore, will not be as profitable as in the past unless we continue to allow them to run unregulated Ponzi schemes. So, as a long term investment the financial sector’s outlook does not seem as bright as other sectors.

Since financials used to be the largest sector of the market it is hard to see stocks(especially financials) recover significantly in the upcoming years because their earnings are going to shrink.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING


Headline – Consolidation

Index % Change Volume

Dow -2.49% down

NASDQ -1.71% down

S&P500 -2.12% down

Russell2000 -1.52% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Major US stock indexes took it on the chin in weaker volume Thursday. Volume did NOT confirm the move lower, but the last two days have seen the four major indexes erase almost all of Tuesday’s big gains. That’s not good news for bulls.

All the major indexes have failed to breakout through their 50 day moving averages (see charts – the blue line) and the highs established two weeks ago. This makes the area around 9000 on the Dow a stronger and significant technical resistance area. Two failures to break it and the fact that the 50 day moving average is close to this level all combine to make it a line in the sand resistance level for stocks.

The shorter term mojo is still with the bulls until stocks close below their opening price on Tuesday. This area just above 8500 held for three days in a row (last Friday, Mon. and Tues.) and is a short term support level.

Dow now at 8605 with the first resistance level at 9026 and major resistance at 9654. The Technical aspect of US equities has been very solid since the late November lows. Short term the momentum is still with the bulls . Downside support level just above 8500 is in danger of falling. Today’s test of this level is relevant to the Santa Clause/Obama rally continuing.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals-

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

Mea Culpa – Several of you caught a mistake the company mentioned was another Financial giant Morgan Stanley and not BS. (Thanks for the emails) Bear Sterns had a bad earnings report yesterday, but this had little impact on overall markets. After volume, how markets react to news is the #2 confirmation factor. The lack of a major fall in stocks despite the Bear Sterns and continuing Madoff see yesterday’s Update) fallout is bullish.

GE – The mother of all conglomerates was the reason for yesterday’s fall. GE finance is loaded with "toxic debt" and as mentioned in the past negatively impacting this stock.

GM and Chrysler – Yesterday Bush said he had not made up his mind on loan/bailout and auto stock got toasted – Today Reuters says agreement near. Toyota has first loss in 70 years of operation. Bush speaks on this at 9:00 AM.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress is being made. LIBOR has fallen from 4.8% two months ago to about 1.52% LIBOR rates are on their second leg down and have again fallen significantly. LIBOR is the rate banks charge each other, not businesses. Some credit cards, loans and mortgages are tied to LIBOR so this is good news. Some credit cards & mortgage rates are tied to Fed prime rate.

LIBOR chart (3 month)

Treasury Bonds

All the yields fell. The 3 month has basically flatlined at 0.01%
Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks. Investors are willing to pay an unbelievably low 2.08% for a ten year treasury bond.

Yields keep falling = Continued deterioration of credit market. There is simply
NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI rose almost less than -1% yesterday to 828. We have had a significant rally off the lows of @660 in the last week. The BDI had seen an 90% loss since June. It seems, a least for a week international trade has picked up. This is very good news for bulls.

Dollar Falling (more later)

Yesterday the dollar rose and oil prices declined significantly. Weak oil prices are also a sign of worldwide recession is going to get worse before it gets better.

The dollar is falling about as fast as it ever has for the last week. Chart of the dollar .

The dollar is falling because of the low US interest rates and it looks like the Fed will bee printing a whole lot of $ to keep the financial system liquid.

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates. Long term stock rallies simply do not have the money supply to exist as long as the credit panic continues.

Fundamentally the market reacted negatively to the GE news (see above) US stocks had been ignoring bad news. How markets react to news is an early indicator of a reversal, so the technical support around Dow 8500 is in trouble.

Best guess is that 8500 will hold.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded.

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems to be taking hold.
Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought.
It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%

Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds

UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets

EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices

FXI (China ETF) should outperform USA

*5%+ Alternative Energy

GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold

GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market – over the 8 Bush years the Dow has gone from 11,000 to 8,500 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000

QID – ultra short NASDQ

SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

  • Share/Save/Bookmark
December 18, 2008

Market Update – Scam of the Century

Author: Barr Jozwicki - Categories: Obama, Politics - Tags: , , , , , , , , , , , , , , , , ,

Obama’s Cabinet

Remember Republican’s fear mongered that Obama was going to be a "socialist" – "the most liberal Senator" out there who would "surround himself with ultra left wingers" (Bill Ayers).

The exact opposite has come to pass. Left wing blogs who were the original supporters of Obama have now openly started to openly attack Obama over his cabinet choices. Latest example – choices for Interior and Agriculture – an ex Iowa governor and Colorado Senator are certainly not the environmentalist that the left expected to fill these positions.

Secretary of Education was also a questionable choice – Arne Duncan . What makes the lawyer who runs the Chicago school system a good choice? Does Chicago have such a great school system? One of you sent in a reference to the following editorial. (Thanks)

A Republican for Secretary of Transportation .

Perhaps the most flack is over anti gay televangelist Rick Warren to lead the invocation at his inauguration.

The jury is out on if these choices will be the agents of change Obama promised, but the questions surrounding these and other choices are legit.

"Scam of the Century"

CNBC, the financial channel, is running a special this evening with the above title on the Bernard Madoff scandal. This 50 billion dollar Ponzi scheme is going to have many after shocks. How many other are there out there who will blow up like Madoff? Why is there no huge cry for regulations and enforcement that will protect investors?

Tom Friedman calls the Madoff scandal "the cherry on top of the national breakdown of financial propriety, regulations and common sense."

Mortgage Market Meltdown

Foreclosures are rising, housing values falling and unemployment rising. This is not a good combination. Add to this – in the longer term – Alt A & Open Arm mortgages are going to be recalibrated at a higher rate over the next few years. There are more Alt A and Open Arm mortgages subprime.

Bottom Line – Almost nothing has been done about the housing problem and it is going to get a whole lot worse before it gets better.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Consolidation

Index % Change Volume

Dow -1.12% down
NASDQ -0.67% down
S&P500 -0.96% down
Russell2000 +0.77% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Most major US stock indexes retreated slightly in weak volume after Tuesday’s massive rally. Technically low volume pullbacks are just what bulls like to see if stocks have to retreat. The shorter term mojo is still with the bulls.

Technically, this looks like a consolidation after a rally. Sort term technicals still positive.

Dow now at 8924 with the first resistance level at 9026 and major resistance at 9654. The Technical aspect of US equities has been very solid since the late November lows. Short term the momentum is clearly with the bulls.

Chartof the benchmark S&P 500
Chartof the Russell 2000
Chartof the NASDQ
Chartof the Dow

Fundamentals-

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

Point of interest for CNBC Jim Cramer fans on his picks for Obama based stocks. Some of these stocks have had a nice two day run higher. GEX is the alternative energy ETF that Market Updates recommends and yesterday it broke out to a new short term high (would have liked to seen stronger volume) -  GEX chart . Cramer’s choices .

Financial giant Bear Sterns had a bad earnings report yesterday, but this had little impact on overall markets. After volume, how markets react to news is the #2 confirmation factor. The lack of a major fall in stocks despite the Bear Sterns and continuing Madoff (see yesterday’s Update) fallout is bullish.

CAUTION – US equities have Short Term positive momentum.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. LIBOR has fallen from 4.8% two months ago to about 1.58% LIBOR rates are on their second leg down and have again fallen significantly. LIBOR is the rate banks charge each other, not businesses. Some credit cards, loans and mortgages are tied to LIBOR so this is good news.

LIBOR chart (3 month)
Treasury Bonds

Yields on the short term Treasuries rose slightly and the long bonds fell (10 & 30 year) The 3 month has basically flatlined at 0.01%
Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks.

Yields keep falling = Continued deterioration of credit market. There is simply NO confidence in the credit markets. PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI rose almost +1% yesterday to 836. We have had a significant rally off the lows of @660 in the last week. The BDI had seen an over 90% loss since June. It seems, a least for a week international trade has picked up. This is very good news for bulls.

Dollar Falling (more later)

The dollar is falling about as fast as it ever has. Chart of the dollar .
This is due to the fact that the Fed has already lowered interest rates as low as they can go and now they are going to sell Treasuries and print money to stimulate the economy. This is potentially an inflationary and very dangerous situation if the fall continues.

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates.
A Santa Clause/Obama rally seems in the works. However, announcement of an auto bankruptcy would have an immediate negative impact.

All the recommended sectors are doing quite well.

FXI (China) is clearly out preforming the USA. Chart of FXI .

EWZ (Brazil) chart is not as good as China, but again outperforming USA. Chart of EWZ . Caution – Brazil s tied to rising oil prices and will under perform on the way down.

GEX (Alternative energy) chart is basically forming a base. Chart of GEX. Will rally with US equities. Broke out to new short term high yesterday This is a play that the Obama stimulus package contains a lot of green energy proposals.

GLD (Gold) weekly chart is not quite as good as major US indexes – then again gold did not fall as much as the US indexes. Gold is a play that inflation emerges at the other end of the recession. Chart of GLD .

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems to be taking hold.
Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought.
It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market – over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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December 17, 2008

Market Update – Massive Fed Cut

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

How we got into such a huge financial mess.

Nobel Prize winner Joe Stiglitz has a comprehensive piece on just how this economic meltdown began. He traces its roots all the way back to Alan Greenspan becoming Fed Chair. Some of the incidents he mentions have already been covered in Updates. History can repeat itself unless we do something to change it. His basic premise is what Alan Greenspan already admitted to – that free markets are not self regulating entities.

You can read about the 5 major causes that made us "Capitalist Fools ."  More on this later.

Flying Shoes

Thanks to one of you who sent in the following video. Got to admit Bush is fast and for the first time he moved to the left.

Green – An Electric Car Bailout?

We all know Detroit is in trouble, but the falling oil prices and world wide recession has meant major set backs for emerging electric car companies . Even Prius is cutting back. LINK

Peak oil is a reality. Our dependence on foreign sources for oil is another reality. So is global warming and the pollution that burning fossil fuels create. Now that prices drop in a worldwide recession so does the desire for green energy.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Fed Cuts = Big Rally

Index % Change Volume

Dow +4.20% up
NASDQ +5.41% up
S&P500 +5.14% up
Russell2000 +6.69% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Therefore, both the primary (volume) and #2 factor (how markets react to news) seem to be bullish right now.

As predicted we had a rally yesterday. It was one of those big time bear market rallies (were still not out of the woods) in increased average volume. Volume up is a good sign and there was a significant increase in volume, but in total the volume for the major indexes was average. All in all a very good day , but, it sure looks like there are a whole class of investors unwilling or unable (not enough $) to invest large amounts of capital in stocks.

Dow now at 8924 with the first resistance level at 9026 and major resistance at 9654 . The Technical aspect of US equities has been very solid since the late November lows. Short term the momentum is clearly with the bulls.

Chart of the benchmark S&P 50

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals-

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

The auto bailout/loan is in limbo. Will Paulson and Treasury act?

Major action taken by US Fed lowering interest rates more than expected. They lowered rates 0.75% to 0.25%. That’s the lowest they’ve ever been. Great one day news for the markets, but there is little the Fed can do to lower rates any further.

Some credit cards and mortgages are tied to US Fed interest rates.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. LIBOR has fallen from 4.8% two months ago to about 1.8% LIBOR rates are on their second leg down started to fall . LIBOR is the rate banks charge each other, not businesses. Some credit cards, loans and mortgages are tied to LIBOR so this is good news.

LIBOR chart (3 month)

Treasury Bonds

All the yields kept falling – relative to last year. month, week and day. The 3 month has basically flatlined at 0.01%
Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks.

Yields keep falling = Continued deterioration of credit market. There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI rose over +3% yesterday to 823. We have had a significant rally off the lows of @660 in the last week. The BDI had seen an over 90% loss since June. It seems, a least for a week international trade has picked up. This is very good news for bulls.

Dollar Falling and Therefore Oil Prices Rising (more later)

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates.

A Santa Clause/Obama rally seems in the works. However, announcement of an auto bankruptcy would have an immediate negative impact.

Same outlook holds Santa Clause /Obama rally is chugging along. Shorter term traders should buy the dips. Rally looks like it has enough technical juice to make it close to 9654.

All the recommended sectors are doing quite well.

FXI (China) is clearly out preforming the USA. Chart of FXI .

EWZ (Brazil) chart is not as good as China, but again outperforming USA. Chart of EWZ . Caution – Brazil s tied to rising oil prices and will under perform on the way down.

GEX (Alternative energy) chart is basically forming a base. Chart of GEX. Will rally with US equities. Broke out to new short term high yesterday This is a play that the Obama stimulus package contains a lot of green energy proposals.

GLD (Gold) weekly chart is not quite as good as major US indexes – then again gold did not fall as much as the US indexes. Gold is a play that inflation emerges at the other end of the recession. Chart of GLD .

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems to be taking hold.
Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought.
It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 20 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market – over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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December 16, 2008

Market Update – Flying Shoes

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

China, Buffett and the Electric Car – Green Technology

China has just launched its first home grown electric/hybrid vehicle – the F3DM. BDY co. which Buffett own 9.9% of just announced the new car. If or when American auto companies collapse, we will once again be sending boatloads of money abroad to buy cars like the F3DM that will be manufactured in China. Story LINK

Fox in Charge of the Old Hen House.

The feature story since Friday in financial news has been the $50 billion lost by those investors who trusted Bernerd Madoff and his Investment Company. The SEC is supposed to govern folks like Madoff, hedge funds, financials and anyone who trades stocks. Since Greenspan took over as Fed Chair in 87 we have lived by the philosophy of free market zealots (like Ayn Rand) who believes any almost regulations on capitalism was unnecessary. One again we are getting hit over the head with another example of lax or non existent enforcement and regulations.

It was all a big Ponzi scheme and there is no silver lining – the money is gone. It makes you wonder about all those big unregulated hedge fund. How many more Madoff’s are there?

Bank Robbers Get Jail Time.

But what happens when the banks or financial institutions rob you? You bail them out with your tax dollars and watch as confidence in the American financial system crumbles. Of course other industries Insurance, Auto’s and others get sucked down with the implosion of over leveraged banks. Transparency, regulations have not been put in place to prevent this from happening again. We don’t even know which financial/banks are in trouble.

Flying Shoes

Throughout the rest of the world (from China to Mecca) the headline has been the story of the Iraqi news reporter who threw his shoes at President Bush. al Zaidi who called Bush "a killer of children" as he threw the shoes has become a hero throughout most of the world. Foreign news sources quote his family as saying he had become depressed after watching/covering the destruction of Iraq neighborhoods and the loss of "innocent" lives.

You can google almost any foreign news source and you’ll find al Zaidi almost universally depicted as a hero. For a starting point on sources outside US mainstream media on this -  al Zaidi .

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Obama Rally

Index % Change Volume

Dow -0.75% down
NASDQ -2.10% down
S&P500 -1.27% down
Russell2000 -3.39% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Over the last few trading days stocks have moved lower in decreased below average volume. Monday’s volume was the lightest since the 1/2 day’s trading after Thanksgiving. Falling markets increased volume is just what bulls like to see.

The news has been pretty negative and its surprising to see stocks holdup as well as they have. Seems most of the bad news is already factored into the markets.

Therefore,Both the primary (volume) and #2 factor (how markets react to news) seem to be bullish right now.
Chartof the benchmark S&P 500
Chartof the Russell 2000
Chartof the NASDQ
Chartof the Dow

Fundamentals-

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

The auto bailout/loan is in limbo. Will Paulson and Treasury act?

Some major financials are announcing earnings results today. Goldman Sachs just announced bette than expected earnings.

Fed meets rates today. Lower (0.50%) interest rates expected. They could lower rates to zero.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. LIBOR has fallen from 4.8% two months ago to 1.85% LIBOR rates have again started to fall . LIBOR is the rate banks charge each other, not businesses. Some credit cards, loans and mortgages are tied to LIBOR so this is good news.

LIBOR chart (3 month)
Treasury Bonds

All the yields kept falling – relative to last year. month, week and day. The 3 month has basically flatlined at 0.01%
Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks.

Yields keep falling = Continued deterioration of credit market. There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI rose over +5% yesterday to 803. We have had a significant rally off the lows of @660 in the last week. The BDI had seen an over 90% loss since June. It seems, a least for a week international trade has picked up. This is very good news for bulls.

Dollar Falling and Therefore Oil Prices Rising (more later)

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates.

Other indicators covered above are all showing short term signs of life. A Santa Clause/Obama rally seems in the works. However, announcement of an auto bankruptcy would have an immediate negative impact.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems to be taking hold.
Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought.
It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15-20+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market – over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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December 10, 2008

Market Update – Financial Thunderdome

Author: Barr Jozwicki - Categories: Bailout/Stimulus - Tags: , , , , , , , , , , , , , ,

Last Update for week – No Updates Thursday through Monday

Auto Loan/Bailout – Green Technology

News headline – Bush to appoint Car Industry Czar in tentative short term $15 billion auto loan compromise. If some technology innovator and business person like Bill Gates or Steve Jobs got the Czar job I’d enthusiastically jump up and down in support of the package.

Tom Friedman has an editorial in today’s NYT that mirrors a lot of the concepts in this section yesterday. He focuses on "Project Better Place " (PBP is often cited in Updates) that is working to build an electric car network in different countries across the world (Hawaii just agreed to participate). TF editorial "While Detroit Slept ."

One interesting fact is that GM refused to participate in this network, instead Nissan and Renault are producing their electric cars.

"Financial Thunderdome"

Best term (from old Mel Gibson movie) used by some TV personality to describe the shadow financial system and that is being protected by the Cheney/Bush government. Absolutely still no transparency. They forced about 10 major financial institutions to take bailout money and we have no idea of the solvency of any of them. The exception, of course, is Citigroup who has been given $45 billion plus another $300 billion in probable loans.

Fixing American Foreign Policy – A huge task

By almost every metric our foreign policy has been a disaster over the last eight years. First step – list some of the major problems besides 911 occurring and Osama Been Forgotten.

1) Our position as leader of the free world has been greatly diminished.
2) A far more powerful and still dictatorial China , a less democratic and far more confrontational Russia, and petro dictators have all grown in power.
3) We have created a factory that fosters terrorism by occupying Iraq.
4) Radical terrorist groups Hamas and Hezbolah and others have gained power.
5) After initial success in Afghanistan/Pakistan the situation has deteriorated.
6) Americans and the world have been divided by Cheney/Bush into "you’re either with us or against us" and our fundamental democratic right greatly diminished
7) American "exceptionalism"/arrogance (see earlier updates this week) has blinded us to the reality of the world
8) Saddam is gone, but the 3rd most corrupt gov’t in the world now rules which is closely tied to Iran – cost a staggering $3 trillion dollars and horrible human toll when all factors are considered.
9) Iran’s power and influence have increased.
10) Fear mongering instead of rationalism rules foreign policy.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Obama Rally

Index % Change Volume

Dow -2.72% down
NASDQ -1.55% -
S&P500 -2.31% down
Russell2000 -3.26% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Technical signs continue to favor the bulls as the markets retreated in declining volume. Both the amount of the fall and the amount of volume was less than the previous few rally days. The fact that the markets have moved higher despite some really bad news is also bullish. Simply by looking at technical signs the "Obama" rally seems to have legs. Investors are not stepping in to buy, but short term traders are moving this market.

The line in the sand number is 9654 – the November high. (see charts – these numbers are presented in rectangles)

Chartof the benchmark S&P 500
Chartof the Russell 2000
Chartof the NASDQ
Chartof the Dow

Fundamentals-

Obama Rally = A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

This market is trading on momentum. It seems to have factored in the horrible earnings results and all the warnings that are coming out of companies. We could see a -4% GDP growth for the last quarter. The positive that traders are focused on is that all the stimulus will work. Markets tend to look six month in advance. Six months from now folks are expecting thing to improve.

If the $15 billion dollar auto deal in congress does NOT pass you are probably going to see stocks fall dramatically.

CAUTION – There is very little volume behind the rally. Few are jumping in off the sidelines. The closer stocks get to 9654 resistance level, the more protection (shorts) of long positions is recommended. This is to protect any gains made from buying on the dips. But for now it looks like a rally is in the works.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. LIBOR has fallen from 4.8% six weeks ago to @2 .17% LIBOR rates have flattened over the last three weeks. LIBOR is the rate banks charge each other, not businesses.

LIBOR chart (3 month)
Treasury Bonds

All the yields fell except the 6 month.
By no means are we out of the woods, – Fundamentally BEAR’s RULE

Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks.

Yields keep falling = Continued deterioration of credit market. There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI rose again over +1% yesterday to 679. Two days in a row of small gains. The BDI has seen an over 90+% loss since June. This is a clear indication that worldwide recession is growing. Best hope is that this index is finally reached a bottom.

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates. The Balitic Dry Index chart another major concern. Low oil prices are another indication of growing recession Fundamentals continue to show worldwide recession growing.

Technically, a short term rally is likely. Stocks moving higher on extremely bad news (unemployment report) is a very bullish sign. This right now this s a momentum trade based on stimulus being pumped into the system.

Personally – Will be adding some more ETF’s that short US indexes if rally continues . Right now still hold more long positions than short positions.

CAUTION: If a monkey wrench is thrown into the stimulus being offered – like NO auto bailout/loan happens could fall dramatically impact markets.

Old Wall Street expression "Buy the Rumor and Sell the News" – Right now the rumor/hope is in Obama and the news/reality would be his inauguration. Obviously most people (even many right wingers) believe he is far more competent and less political than Cheney/Bush. The caution here is we have a huge "shadow" financial system, housing prices falling, a world wide recession and a huge amount of debt.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems to be taking hold.
Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion?) is far far far far far far far far far bigger than anyone thought.
It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15-20% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market-over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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December 9, 2008

Market Update – Francis Fukuyama

Author: Barr Jozwicki - Categories: Bailout/Stimulus - Tags: , , , , , , , , , , , , , , , ,

Art show at end of week – No Updates Thursday through Monday

Auto Loan/Bailout – Green Technology

The new technology of the future is going to be based around alternative energy. Countries like Spain (30% renewable energy by 2010), Israel (plans to use use almost all electric cars in 10 years) etc. have already made major commitments to this new technology. It’s unpardonable to see so many solar, wind, and other forms of alternative energy companies based or move overseas.

We are more dependent on cars than most every other nation. We send 100′s of billions to petro dictators every year because of our dependency. The future is hybrid, electric even solar cars. Yet this massive and new technology will probably continue to be produced in other countries. Just like oil we will have to import this technology will have to be imported Japan, China, Europe and other countries. We led the internet revolution and the next recognizable major technology shift is going to be led by countries outside the USA.

Perhaps we are just too fat, arrogant, politically polarized, to make a difference any more. However right now Green technology is leaving the USA. We need American companies, including car companies that can innovate and compete with foreign manufacturers.

Three Reagan Ideas That Need to Die

Francis Fukuyama is a well known former neocon who has become a realist. Like Alan Greenspan who admitted he was wrong about unregulated free markets, Fukuyama admitted his errors and is offering alternative solutions. He list the 3 ideas that need to be "reformulated or discarded."

1) The belief that the enormous "shadow" financial market could regulate itself. (Greenspan’s false premise)
2) Tax cuts would always be self financing – these cuts led to growing deficits
3) Overwhelming US military dominance would lead to the collapse of all American enemies.

Too many on the far right are caught up in emotionalism, fear mongering and American "exceptionalism." (see yesterday’s update) to change. But there are folks like Greenspan and Fukuyama that are willing to admit mistakes and look for solutions.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Obama/Santa Clause Rally

Index % Change Volume

Dow +3.46% up
NASDQ +4.14% up
S&P500 +3.85% up
Russell2000 +4.40% --

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Some resistance levels fell and stocks again staged a major rally in volume that was slightly higher than the day before. We’re not getting the major spike higher you’d like to see when markets move higher, but any increase is better than none. Technicals are showing that this rally could continue. Dow at 8937. The 50 day moving average resistance level is at 8941 and falling. 9000 is another minor resistance level.

The line in the sand number is 9654 – the November high. (see charts – these numbers are presented in rectangles)

Major rally even though unemployment numbers were extremely bad. Rallies on bad economic news = Bull Rule the short term momentum . Again, volume was only slightly higher and therefore did not really confirm the rally.
Chart of the benchmark S&P 500
Chart of the Russell 2000
Chart of the NASDQ
Chart of the Dow

Fundamentals-

This market is trading on momentum. It seems to have factored in the horrible earnings results and all the warnings that are coming out of companies. We could see a -4% GDP growth for the last quarter. The positive that traders are focused on is that all the stimulus will work. Markets tend to look six month in advance. Six months from now folks are expecting thing to improve.

If the $15 billion dollar auto deal in congress does NOT pass you are probably going to see stocks fall dramatically.

CAUTION – There is very little volume behind the rally. Few are jumping in off the sidelines. The closer stocks get to 9654 resistance level, the more protection (shorts) of long positions is recommended. But for now it looks like a rally is in the works.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. LIBOR has fallen from 4.8% six weeks ago to @2 .17% LIBOR rates have flattened over the last three weeks. LIBOR is the rate banks charge each other, not businesses. LIBOR is the rate banks charge each other. LIBOR has flatlined.

LIBOR chart (3 month)
Treasury Bonds

Again 3 Month Treasury Bond rose to to 0.03%. Most of the 2,3,5, 10 & 30 year Treasury Bonds also rose.
By no means are we out of the woods, but the trend has turned for the last two days – Fundamentally BEAR’s RULE

If investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks.

Yields keep falling = Continued deterioration of credit market. There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI actually rose over +1% yesterday to 671. The BDI has seen an over 90+% loss since June. This is a clear indication that worldwide recession is growing. Best hope is that this index is finally reached a bottom.

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates. The Balitic Dry Index chart another major concern. Low oil prices are another indication of growing recession Fundamentals continue to show worldwide recession growing.

Prices in the BDI & the 3MTB, as well as oil have moved higher in the last two days. A small move in the right direction.

Technically, a short term rally is likely. Stocks moving higher on extremely bad news (unemployment report) is a very bullish sign. This right now this s a momentum trade based on stimulus being pumped into the system.

Personally – Will be adding some ETF’s that short US indexes now and more into any rally. Right now still hold more long positions than short positions.

CAUTION : If a monkey wrench is thrown into the stimulus being offered – like NO auto bailout/loan happens could fall dramatically impact markets.

Favorite Investment

China – They have a budget surplus, A huge stimulus package (relative to GDP) and if the USA is going to improve so will China. Over the course of the next year they seem to be in a more favorable position. Also technically ETF for china FXI is far closer to breakout from its November high of 28.00. FXI now at 27.83. See chart .

China FXI did break out of its trading pattern and rose +8.8% yesterday.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems o be taking hold.
Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion?) is far far far far far far far far far bigger than anyone thought.
It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15- 20% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market-over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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December 8, 2008

Market Update – Foreign Policy

Author: Barr Jozwicki - Categories: Foreign Policy - Tags: , , , , , , , , , , , , , , ,

Art show at end of week – No Updates Thursday through Monday

Obama and Foreign Policy

Will there be some of the substantive changes so many were hoping for or will Obama turn into Bush lite? Over the last month this has been the subject of most of your emails. The jury is out, but in 6 months to a year we should know the answer.

Will Obama change the Bush approach to foreign policy? So many of us hoped his early opposition to the Iraq war was a signal that he better understood that the invasion of Iraq just fomented more terrorism and lost us allies though out the world. Major question to be answered.

Will their be a timely withdrawal from Iraq?
Will Obama junk the Bush doctrine?
Will we still be God’s chosen people, above international laws or will we rejoin the other nations of the world?
Will Guantanamo get closed?
Will Obama try to stupidly nation build Afghanistan into an American mini me – a nation that historically has always been ruled by tribalism?
Will the War on terrorism continue to be the organizing principle of foreign policy?

Andrew Bacevich called the problem "American Exceptionalism " – We are the superiors of everyone else and as the "chosen people" our nation is above the rules that govern everyone else. This "exceptionalism" has led to runaway free markets that required no regulations and the neocon’s who ran Cheney/Bush foreign policy that labeled any American’s who disagreed as against democracy or against the troops.

Americans, because of this exceptionalism/arrogance have lost almost all of their self awareness. How do you solve any problems when only YOU know the answer.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Obama/Santa Clause Rally

Index % Change Volume

Dow +3.09% -
NASDQ +4.41% up
S&P500 +3.65% -
Russell2000 +4.91% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Dow closed at 8635 . Up side resistance level is 8831 and downside support at Monday’s low @8175 . Technically, bulls still have the short term momentum. More significant resistance is around the 50 day moving average at 8985 (and falling), and the round number 9,000. The line in the sand number is 9654 – the November high. (see charts – these numbers are presented in rectangles)

Major rally even though unemployment numbers were extremely bad. Rallies on bad economic news + Bull Rule the short term momentum. Volume was only slightly higher and therefore did not really confirm the rally.

Chartof the benchmark S&P 500
Chartof the Russell 2000
Chartof the NASDQ
Chartof the Dow

Fundamentals-

Obama this weekend talked about huge infrastructure spending (stimulus package) – This should put some more juice behind Friday’s rally. "Biggest stimulus since 1950′s" Obama’s economic team, his stimulus plan and confidence (hope) in Obama are obviously impacting stocks favorably. Combine this with all the Fed action and while this stimulus does not have an immediate impact, it will have a long term impact.

Is the worst over? Some investors believe this. These folks believe might get another month or two of bad unemployment news, but Obama’s economic stimulus and team are coming to the rescue. It looks like these folks believe the absolutely horrible numbers (a -4.0%+ GDP) are already factored into the markets.

CAUTION – There is very little volume behind the rally. The closer stocks get to 9654 resistance level, the more protection (shorts) of long positions is recommended. But for now it looks like a rally is in the works.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. LIBOR has fallen from 4.8% six weeks ago to @2 .17% LIBOR rates have flattened over the last three weeks. LIBOR is the rate banks charge each other, not businesses. LIBOR is the rate banks charge each other. LIBOR has flatlined

LIBOR chart (3 month)
Treasury Bonds

Again 3 Month Treasury Bond held steady at 0.01%. 2,3,5, 10 & 30 year all rose reversing the trend.
Example – a 30 year Treasury Bond fell from 3.53% last week to 3.15% t0 3.04% Thursday and rallied to 3.12% Friday – Fundamentally BEAR’s RULE

If investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks.

Yields keep falling = Continued deterioration of credit market. There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

Set range indicator to one month and you will see this chart has dropped to 663 – @7% loss lat week on top or a 13+% loss last week – An over 90+% loss since June. This is a clear indication that worldwide recession is growing.

Short Term Outlook

Reading the Tea Leaves-

PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates. The Balitic Dry Index chart another major concern. Oil prices fell to $40.81 a barrel – another indication of economic deterioration. Fundamentals continue to show worldwide recession growing.

Fundamentally its hard to see any extended stock rally if fundamentals keep getting worse.

Technically, a short term rally is likely. Stocks moving higher on extremely bad news (unemployment report) is a very bullish sign.

Some of you invested/traded more on the dip Friday as stocks dropped after the job news – Thanks for the emails. Yes this is exactly what investing on dips is all about.

Favorite Investment

China – They have a budget surplus, A huge stimulus package (relative to GDP) and if the USA is going to improve so will China. Over the course of the next year they seem to be in a more favorable position. Also technically ETF for china FXI is far closer to breakout from its November high of 28.00. FXI now at 27.83. See chart .

Lots of investors believe that if a stock builds a base and after breaking out it is still within 5% of its breakout level it is still a good investment. Usually breakout levels (in the case of FXI 28.00) are retested.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded .

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally part 2 seems o be taking hold.
Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion?) is far far far far far far far far far bigger than anyone thought.
It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15- 20% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market-over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

  • Share/Save/Bookmark
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