Investors 411 Blog

by Barr Jozwicki
February 27, 2009

Market Updates – Danger Will Robinson Danger Danger

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , ,

 

Index Percentage % Volume
Dow -1.22% down
NASDQ -2.38% down
S&P500 -1.58% down
Russell2000 -2.11% -

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News

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Citi Group/Government Deal

The NYT has announced that our government is taking over 30 to 40% of mega bank Citi Group’s common shares in exchange for giving up preferred shares. Translation –  If Citi goes bankrupt YOU basically go from from first to last in line as a debt holder. Great for Citi because preferred shares were a liability and they are up to their necks in liabilities (credit default swaps etc) What was used to sweeten the pot for taxpayers (you)?

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AIG, Fannie & Freddie 

You do have a majority stake of preferred shares in these mega companies. Judging from the stock price and their need for additional capital infusion the deal has not turned out as well as expected. 

What is nationalization? When you own 10 times the stock of the next largest shareholder you pretty much can run the company or is nationalization owning 50%+ of a company?

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The Black Hole

The obvious black whole is the growing amount of unfunded liabilities. As more people default on mortgages the greater the pressure on banks. As quoted earlier in Time magazine Citigroup’s unfunded liabilities vs assets ratio from 2009 to 2010 will shrink from 7.7% to 3.8%.  This would make Citi one very sick sick bank. It’s already in the hospital and got IV’s pushing green paper into it.

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The Bottom Line

There is fodder for more than dozen editorials here. But the major point is that this financial crisis is “far, far, far, far, far, far bigger” than most folks realize. Right now we are running a virtual banking system hiding its liabilities and bankruptcies.  The world’s financial system is on life support and if the financial system collapses there will be blood. Remember what happened when tiny Lehman Brothers collapsed.   An enlightening editorial  in Financial Time on – Time To Expose Financial Collateral Debt Obligations

 

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Technicals & Fundamentals

Here we go again. The Benchmark S&P 500 closed at 752 just above its 750 support level.  Don’t look at 750 as an exact number because we are comparing it to a 2002/2003 low. The 2008/2009 low has been 741/742. As stated before this is the mother of all support battles.  When major  support falls usually creates a flood of selling.

The fact that we have to buy more share of Citigroup to keep it afloat is going to be very negative for all major financials and therefore most stocks.  By buying more shares of common stock we dilute the existing shares of stocks. 

Therefore, It’s time to bring out the old Lost in Space Robot who protected young Will Robinson by shouting “Danger Will Robinson Danger Danger”

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 The Bad news - We could get a nasty break of a major technical support.

The Good news – If we do get a climax sell off (big volume fall) its an opportunity to nibble. 

The Ugly news – The SPX ends closing  a bit below 741.  This would just establish a lower low (see chart on right side of blog) and further entrench the bears rule chart pattern.

 

Long Term Outlook BEARS RULE

 

See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

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February 26, 2009

Market Updates – Jobs, Jobs Jobs

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , ,

 

Index Percentage % Volume
Dow -1.09% up
NASDQ -1.14% flat
S&P500 -1.07% up
Russell2000 -2.68% -

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News

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Worried – Your Job/Income?

In about a week the jobs (unemployment #’s) will come out for the month of February. 598,000 was the number for January and the previous two months were about the same. Estimates for February are in the same ballpark. To understand the depth  of  “the great recession” lets compare the job loss with the last 2 recessions of 2001 and 1990 – How Bad Is It Now? (Link from Time & CNN)

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What Job Loss Means -

Almost Everything – Consumers (70% of the economy) consume a whole lot less when they loose their jobs. The unemployed are no longer able to afford their mortgages payments and more defaults will occur in the worst housing and credit crisis since the Great Depression. Add to this our media that over sensationalizes every major story and Americans who are very vulnerable to fear mongering. If not stopped, the  job losses create a vicious growing cycle 

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The Edge of the Cliff

The #1 Insurance Company (AIG), American auto Industry, the #1 conglomerate (GE – stock price dropping like a stone) and mega banks are on the edge of a cliff.  If all these were allowed to collapse like Lehman Brothers (a relatively smaller institution that had $400 billion in over  leveraged debt) imagine what would happen to the unemployment rate, increased debt, and the panic that would follow. Again see link - How Bad Is It Now?

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Solutions

Some on the far right want to do nothing, just let it all crash and burn. The following worldwide economic chaos would easily lead to wars, protectionism, and another Great Depression. Others believe we should act in similar ways that solved other recessions – Bailouts, stimulus packages, tax cuts, increased money flow, lowering interest rates etc.. The problem that exacerbates any active solution is that since 2000 our fiscal and trade deficits have mushroomed

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Who Pays for the Solutions?

This is along with what solutions to choose is the major questions confronting our government. So far lowering interest rates, Fed loaning/printing money, & foreign countries adding capital have been relatively less controversial ways of offering solutions.  But its not working nearly as well as we want it too.  So that leaves the following to pay – YOU (taxpayers), Shareholders, Bond holders, Employees (from CEO’s or gofor’s) or another Ponzi scheme.

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There is Hope

Obviously, not enough time and space to go over all the solutions. However, President Obama has outlined his plan and the vast majority of Americans have agreed to follow his general outline.  There is NO quick fix and its going to get worse before it gets better. See yesterday’s blog.

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Technicals & Fundamentals

Another huge volume day. Stocks pulled back about 1%.  Our mother of all support levels has held - Benchmark S&P 500 area around 750 – the 2002/2003 low. Stocks are oversold so it looks like at least a short term technical rally off the support levels will occur. 

Two major fundamentals impacting markets. Jobs numbers for February announced next week and Treasury Secretary Geithner’s plan on how to fix banks. On the later, the more YOU pay to fix the bank the better it is Wall Street. 

Weekly jobless claims grew (announced 8:30EST) from an average of 633,000 to 667,000.  Bottom Line  - Worst than was expected numbers and gives you an idea how bad February will be.  

 

Long Term Outlook BEARS RULE

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See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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February 25, 2009

Market Updates – Obama, Obama Obama

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , ,

 

Index Percentage % Volume
Dow +3.32% up
NASDQ +3.90% up
S&P500 +4.01% up
Russell2000 +4.54% -

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News

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President Barack Obama waves after his address to a joint session of Congress in the House Chamber of the Capitol in Washington, Tuesday, Feb. 24, 2009.  Credit: Pablo Martinez Monsivais/AP 

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Obama – “We will rebuild,We will recover”

Easily, Obama’s finest hour a President - Vision, substance, oratory and he connects with the American people. CNN 68% very positive, 24% somewhat positive. CBS 80% positive for his economic plan vs. 63% before the speech. Memorable moments.

  • “We are all Americans, we all  love this country” instead of “your either with us or against us”
  • Offering a vision and hope instead of fear mongering
  • Speaking to us as adults not adolescents.
  • Long term solutions/vison (energy, education, & health care) instead of reactionary politics
  • Returning to moral values/leadership – “American’s do NOT torture”
  • Gave Americans, not Washington or Wall Street insiders a sober assessment of the of how we benefit from the bailouts
  • The last 10 minutes was a clear vision of hope that only a gifted orator like Obama could deliver
  • He gets it – Its not Wall Steet or the wealthy that makes America great its our working class who fighting together build American dreams.

One speech does not make a presidency, but is can crystalize a vision. A comprehensive analysis from different authors at NPR. Another comprehensive analysis including Republican response  (Lesson – Do ask to follow an Obama speech) at perhaps the most accurate polling analysis organization FiveThirtyEight

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Bernanke & Technicals

The Bulls won the battle yesterday as “the mother of all support levels” (see yesterday’s blog) on the benchmark S&P not only held, but traders staged a significant rally in increased above average volume = confirmation of rally. It is vital for  the SPX to hold onto the support level around 750. (see chart at side of blog.) The SPX closed at 774. The stock market price today is a forecast of where traders/investors think the future will be for US companies 6 to 9 months from now 

Many analysts felt Bernanke’s report to congress was the fundamental behind the rally as he summaries the past and presented a future vision that did not include “nationalization.”  What all this comes down to is the definition of nationalization. If the gov’t owns 40% of  the common shares of our #1 bank, Citigroup, is that nationalization?  Interesting video from Bloomberg financial news channel on Bernanke

Short Term Outlook – Your $

If you’re a long term investor who looks 3 to 5 years out and have very little invested in stocks the time to nibble just a bit is now while the Dow is near 7300, not 9000  If you own or bought gold (recommended GLD) and now have a 15+% gain take some profits. See Positions & Strategy section of blog. Yes markets could still break down through that mother of all support levels at 750 on the  S&P500.  But, hopefully, many of you were smart enough(as recommended) to get out of stocks when the Dow was well over 10,000.

Bottom Line - We had 6 to 8 down days in a row (depends on which index you use) and hit a very powerful support level. A bounce is to be expected as all the shorts covered their positions. Don’t get too exited about a one day rally, lets wait for some follow through

 

Long Term Outlook BEARS RULE

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See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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February 24, 2009

Market Updates – Fork in the Road

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , ,

Market Updates – The Fork in the Road

 

Index Percentage % Volume
Dow -3.41% down
NASDQ -3.71% down
S&P500 -3.47% down
Russell2000 -3.99% -

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News

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The Stories/News not Covered in Depth Today

  • Long Term Structural Analysis (part 2) The How and Why the imbalance of wealth between the rich and poor in the USA caused the “Great Recession,” and why we need to address this problem.
  • AIG – The mother of all Insurance companies is again near collapse. If the collapse of the much smaller Lehman Brothers sparked the financial crisis and sent 400+ billion dollars of over leveraged debt throughout the world, imagine the collapse of AIG.
  • GE – The mother of all conglomerates is now trading below $10 because of its financial units over leveraged positions. Sure looks like a death spiral similar to auto industry.
  • Banks“How Stressed is Your Bank” from Time magazine. The real problem s not now, but what happens when the bad/toxic debt grows in 2010 and beyond
  • The latest wisdom from Nobel Prize winning Princeton economist Paul Krugman  ”Banking on the Brink” or multi time Pulitzer Prize winner Tom Friedman “Start Up the Risk Takers.”
  • Obama speaks to nation tonight

Today’s editorial is on the technical fork in the road.  Just at the mention of the word technical your eyes may glaze over, but - 

We are at one of those turning points in the history of the US Stock market and perhaps the world.  

See stock section below.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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The Fork in the Road

Who knows why looking at chart patterns usually works as a forecast of future events. Perhaps its because we are creatures of habit or perhaps its because so many analysts simply believe technical analysis works. One item of technical analysis that works better than others is the more time that occurs the more accurate the predictability and significance the pattern becomes.

The benchmark S&P 500 is at one of those critical forks in the road and so are world economies.

1970 to 2009 Chart of the S&P 500 below

(sorry for the overlap)

Here’s the Fork on the benchmark S&P 500 – Notice just like the price peaks in 2000 & 2008 at about 1500+, there are two vallies around 750 in 2002/2003 and today.20002/ 2003 was the result of the tech bubble bursting and the uncertainty behind 911. Today, two economic bubbles have recently burst – housing and credit. The critical support level for the S&P 500 is around 750. Since November the rapid fall of the S&P 500 (as well as the other major US indexes) has leveled off at @750 like in 2003.

The good news – The fact that we’ve held onto 750 since November shows strong support. (note – this chart is a bit distorted but it gives a rough approximation)

The bad news – The rate of decline falling to from 1500 is faster than 2000 to 2003, and yesterday the S&P 500 closed just below 750 at 743. If support at 750 fails we could really see some additional significant stock meltdown.

The Dow has already broken down though its 2002/2003 lows but the NASDQ and Russell 2000 are doing a bit better than our benchmark.

This is the mother of all technical trading pattern battles  


Long Term Outlook BEARS RULE

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See STRATEGY, POSITIONS, OVERVIEW (new) & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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February 23, 2009

Market Updates – Deer in the Headlights

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , ,

 

 

Index Percentage % Volume
Dow -1.34% up-huge
NASDQ -0.11% up
S&P500 -1.14% up-huge
Russell2000 -1.38% -

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News

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Deer in the Headlight

 

deer_in_headlights.jpg

Stop staring at the headlights and Get out of the road

The reason Investors411 brings you news like “the worlds financial system has effectively disintegrated” (see last post on blog – Roubini, Volker Sorosis so YOU can stop standing like a deer in the headlights and do something to protect your economic well being. - 

Obviously, the Laissez-Faire capitalism under the previous four Presidents has spectacularly failed. The tech, housing, and credit bubbles have all burst under the absolutism of “free market capitalism” and something better has to arise from the ashes. 

Over the last eight years we have so decimated/cut and tainted the staffs of regulatory agencies from the SEC to the FDIC that any short term solution from Madoff to Nationalization becomes,at best very very difficult. 

The Real Structural Problem

What we watched over the last 8 years is an orgy of economic bubbles bursting because of unregulated greed of our capitalist system. Yes its time to restore balance, but first you have to recognize the long term structural problems. Researchers Picketty and Saez on where the money’s gone in our country over the last 40 years. Quote from economist Robert Reich& graph from Picketty and Saez -

since the late 1970s, a greater and greater share of national income has gone to people at the top of the earnings ladder. As late as 1976, the richest 1 percent of the country took home about 9 percent of the total national income. By 2006, they were pocketing more than 20 percent. But the rich don’t spend as much of their income as the middle class and the poor do — after all, being rich means that you already have most of what you need. That’s why the concentration of income at the top can lead to a big shortfall in overall demand and send the economy into a tailspin. (It’s not coincidental that 1928 was the last time that the top 1 percent took home more than 20 percent of the nation’s income.)


This is the beginning of a “Great Recession.” and the real long term structural problems of income inequality have to be addressed. (see Overview section of blog) Only then will we find a long term solution.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

Short Term Outlook

Both Citi Group and Bank of America were again had massive losses on Friday based on fears of nationalization.  The ETF that mirrors financials is XLF

The major indexes recovered from -3% losses in huge volume on Friday.  After 5 straight days of financial meltdown technically it looks like we may see a short covering rally continue.  The huge volume in financial stocks, the Dow and the S&P indicates a short term climax selloff. This is where all the weak or frightened investors panic and sell. The more solid long term holders remain. The rally from the 3+% fall is all the short term traders caught in short positions selling. Technically, Friday’s trading and the oversold conditions indicate a short term rally in stocks should continue.

You shouldn’t get too excited  - this is a technical bounce. Sometimes these bounces can be the start of something bigger. What we need is some major change in fundamentals like slowing unemployment or decline in the default rate of mortgages to give any rally substance.

Long Term Outlook BEARS RULE

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See STRATEGY, POSITIONS, OVERVIEW (new) & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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February 21, 2009

Market Updates – The sky fell

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , ,

The Sky Fell

Three very significant economic/business guru’s (George Soros, Nouriel Roubini and Paul Volker have basically all come to the conclusion that “the world’s financial system has effectively disintegrated.” and “there is [little or]no prospect for any near term solution.”

Investors411 has concluded each Market Updates with the same for months. “The problem in financial sector is far far far far far bigger than first imagined. Impact of mess is going to take years to resolve.” This conclusion is now under the Positions heading at top of blog.

Photo

Legendary Investor George Soros- “Sees no Bottom for World Financial Collapse” (Yes you are seeing double my mistake)

Former Fed Chair and head of Obama’s economic advisory council Paul Volker - “I don’t remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world.” Same Reuters’ source

The columbia economist who predicted this meltdown Nouriel Roubini “Laissez-Faire Capitalism Has Failed”

Long Term Outlook = BEARS RULE

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

 

 

 

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February 20, 2009

Market Updates – Danger Will Robinson Danger Danger

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , ,

 

 

Index Percentage % Volume
Dow -1.19% up
NASDQ -1.71% down
S&P500 -1.20% up
Russell2000 -1.53% -

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News

It’s time to again bring out the old Lost in Space robot with all its bells and whistles shouting Danger Will Robinson Danger Danger. This is the second time this week.

Until some resolution is reached in the banking sector – probably nationalization – Financials are going to drag markets down.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

Short Term Outlook

Both Citi Group and Bank of America were down 14% yesterday on fears of nationalization.  This lead the all the major indexes lower. The Dow closed at its lowest level since 2002. If ever there was a sector that looked like its fallen off a cliff its Financials.  The ETF that mirrors financials is XLF

Until, nationalization actually happens (hopefully this will only be a temporary phenomena) the uncertainty should drive US financials and all markets lower.

The next significant support level is the November low of the benchmark S&P 500.  This technical support may be able to halt the meltdown.

Best case senerio – and this is ugly – is a big volume big fall that signals a climax selloff. This would establish a bottom.  Right now it sure looks like any rally will get a lot of investors/traders selling into it. 

What positions do I Have?

This is the most common question for those of you who have my email address?

I practice what I preach for my accounts and a handful of others that I manage.  The non profit that I am treasurer of does is guided by a board and does not have these positions. Almost all are ETF’s – Exchange Traded Funds  

Long positionsGEX, FXI, EWZ & GLD.

Short positions - “ultra” shorts SDS & DXD (see Strategy section of blog)

Also have a small position in BRSIX (a mutual fund I’ve owned for almost a decade) and a few bonds. Also a small “ultra” short position in QID (short NASDQ)

I regret not having SKF which is “ultra” short financials. Predicting a meltdown in financials for over a month and concentrating on it this week in editorials you’d think I would have been smart enough to buy this position.  I did mention it in a few Investors411.

NBGLD is at new highs.

NBB –  Hedging  - As GEX, FXI & EWZ fall their size decreases. As “ultra short” positions SDS & DXD grows in value it increases in size. Therefore, right now  my overall net position is short the markets.

NBBB – Unfortunatly, I exited some short positions when the Dow fell below 8,000. I will exit some more short positions when financials stop falling. (this of course is a judgement call)

——–

Each of you has different circumstances and asset allocations. So if you have my personal email address and can give me your overall % of long & short positions I will be happy to suggest what to do.  

Everyone else is selling so I’m thinking more now about dropping shorts. Investors 411 (see positions & strategy sections) did recommend protecting your gains when Dow got close to 9,000

Bottom Line – Cash is king right now and a 15 to 30% long position (depending on your level of risk) in stocks is recommended. Long positions should have been protected when the markets rallied. (see strategy section of blog.)

Long Term Outlook BEARS RULE

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See STRATEGY POSITIONS & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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February 19, 2009

Market Update – Its Here

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , , , , , ,

 

Index Percentage % Volume
Dow +0.04% down
NASDQ -0.18% down
S&P500 -0,10% down
Russell2000 -1.33% -

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News

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Nationalization

It’s here. The concept of nationalization has come out of the closet and now even Bernanke and Greenspan are using the term.  Worries over nationalization have caused a meltdown in stocks, but it seems to be better choice than the systemic chaos of bankruptcies or the taxpayers continuing to to be the major shovel throwing money at the problem.

Now the big boys  Bernanke and Greenspan are  using the N word. At Investors411 (see archives) you watched this significant trend develop from a whisper to a market mover that will significantly change our governments response to the financial crisis.

Learning lessons from India

India has been terrorized by multiple terrorist attacks that have originated from inside Pakistan. Yet they have not gone to war with them unlike the Bush administration who went to war with a country that had nothing to do with WMD’s or 911. The significant Muslim population of India has rejected the Mumbai terrorists. For more see Tom Friedman’s editorial – No Way, No How, Not Here.

Helping Mortgage Holders

Finally a plan to keep the rate of foreclosures from growing. All he Paulson TARP plan did was shovel money at banks. Obama has announced a plan to help possibly 9 million threatened homeowners.  The ripple effect of not helping would bring down a lot more financial institutions and further devalue home across America. Many comments on this are like those on the stimulus plan – while significant it is not enough – NYT editorial

Israel Elections

The vast majority of elections analysts see the right wing gaining power in Israel. To most Israeli’s and Americans the war against Hamas had a far better outcome than the war against Hezbollah. Of course there are many worldwide angered by both wars. While the centrists  did barely win the most seats in Israel’s parliament the  divided right wing parties picked up a substantial majority. 

Bottom Line – The peace process has become a whole lot harder

Stanford, Another Madoff

Another this time smaller $8 billion dollar Ponzi scheme has come to light.  Seems investors thought nothing of  investing in 10% to 14% yielding CD’s controlled by the Stanford Group. Mr S is on the lamb.  

Bottom Line - Once again the understaffed, incompetent SEC is caught with its pants down. When all you had under Bush (really since Reagan) was cut cut cut government and don’t you dare dare dare regulate free markets – Stanford/Madoff and an over leveraged financial catastrophy is the result.

 

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

Short Term Outlook

Major US markets took a breather yesterday. Foreign markets have rebounded somewhat overnight. CNBC, the most popular financial channel (they are right wing cheer leaders corporations) has a decent morning compilation of how markets are setting up for the day.

Momentum is still with the bears.

Long Term Outlook Bears Rule

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See STRATEGY POSITIONS & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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February 18, 2009

Market Update – Plunge

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , , , , ,

Market Updates – Plunge

 

Index Percentage % Volume
Dow -3.49% up
NASDQ -4.15% up
S&P500 -4.56% up
Russell2000 -4.34% -

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News

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Major Plunge on Wall Street

The tug of war over who is going to pay to clean up the huge financial mess became even more apparent yesterday as the major US stock indexes took a nose dive. Wall Street wants anyone else but the bank bondholders, shareholders and executives to pay to clean up the trillions of dollars lost by under regulated financials over leveraged losses. News seemed to indicate that Wall Street would pay more, so stocks tanked.

On the other side is YOU the taxpayers who along with foreign countries are paying to clean up Financials/banks mistakes. (See yesterday’s Investors411 “That Dirty Word – Nationalization”for more). The less compensation/control you are given the better it is for Wall Street.  Since foreign entities are willing to soak up only so much of the debt the old bottom line is whose going to pay for the trillion(s) of financial debt that remains – YOU or Wall Street.

Alan Greenspan, one of the primary architects of the financial crisis, has chimed in with we need more TARP money for “what will surely be the longest and deepest” recession since the  Great Depression.- Greenspan’s answer you and your kids pay. 

Other economists are coming up with alternatives all of which favor one side over the other.  Robert Reich is another noted economist who believes “It would be far cheaper, quicker, and safer for the government to just take over every questionable bank”

Do we keep sending truckloads of your money to prop up major banks while they continue to disguise their losses?  Right now it looks like Geithner and Summers may not be as generous as Paulson in bailing out the financials with your money.

But who knows? Geithner, Summers, Paulson and Greenspan all advocated for the over leveraging policies that created the financial quagmire that has put us in a worldwide recession.

The enormity of the problem is almost overwhelming.  How do you keep Insurance Companies, Manufacturing (cars), Financials, Homeowners, Taxpayers, Wall Street and the Future solvent. Who pays and how much? No matter what you do some group(s) is going to get whacked more than another. 

We will get through this mess, but for months Investors 411 has warned “Problem in financial sector is far far far far far bigger than first imagined. Impact of this mess is going to take years to resolve.” (See positions section of blog)

 

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Short Term Outlook

“Danger Will Robinson Danger Danger” - Yesterday’s Danger signal about the potential for markets to meltdown was, unfortunately, 100% correct. The 4 major indexes took major body blows in increased, above average volume.  Volume, therefore, confirmed the move lower. Fundamentally the fear of nationalization was a huge hunk of the reason Wall Street melted yesterday.

The Dow (see all chart on right hand side of blog) closed at 7551 perilously close to its 7449 multi year low of last November. The benchmark S&P 500 broke through its major support level at @800 and closed at 789. It, like the other major indexes has a ways to go before it reaches its multi year low of 741.

Short Term Outlook

While markets may pause or win back some of yeserday’s losses today, we have already technically confirmed the longer term “Bear’s Rule” chart pattern of lower lows and lower highs. The financial sector (ETF  - FLX) is already at a new multi year low. (click on charts at right hand side of blog)

Momentum is with the bears.

Long Term Outlook Bears Rule

If you look at the 3 year weekly chart of the major indexes we are still just keeping out heads above water because the November lows have not been broken. (scroll down on S&P chart on right  side of blog) However even the weekly chart looks ugly.

(see strategy and positions section of blog for more)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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February 17, 2009

Market Updates – That Dirty Word

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , , , , , ,

Market Updates – That Dirty Word

 

Index Percentage % Volume
Dow -1.04% down
NASDQ -0.48% down
S&P500 -1.00% down
Russell2000 -0.46% -

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Trends, Politics & Economics

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“Vengeance is Mine…”

“saith the Lord.” Another list of the top 25 people to blame for the financial crisis from Time magazine. Here’s the top 5:

 

  1. Angelo Mozilo- CEO of Countrywide. America’s biggest mortgage leander popularized exotic mortgages.
  2. Phil Gramm-  Head of Senate Banking wrote the infamous 1999 legislation and championed deregulation
  3. Alan Greenspan- Fed chair who admitted his mistake “that financial firms could regulate themselves.”
  4. Chris Cox- SEC chair whose  hands off attitude  and lax enforcement  failed to act against over leveraging and fraud.
  5. The American Consumer-  Borrowing, borrowing, borrowing.

 

That Dirty Word – Nationalization

First it starts as a whisper then the voices grow.  Now more and more from every political and economic stripe are considering controlled reorganization under the government – Nationalization The unlikely trio of R – Phil Graham, D Maxine Waters & R Peter King have all used the N word. Obama has left the door open. Harvard’s ultra bear Niall Ferguson Economist Nouril Roubini makes the case for nationalization and so does Joe Nocera of the NYT business page. So has Simon Johnson from MIT’s Sloan Business School.

Who is going to pay for all this hell our deregulated, over leveraged financial/banking industry has brought down on us? Bank bond holders, shareholders, China,management, employees, pensioners, taxpayers(you). How big a haircut is each group going to take? How many of you want just your tax dollars to go to bailing out banks?

The Roubini and Nocera editorials bring up all the times we have successfully temporarily reorganized banks or put them into “receivership.”(why not include GM)

 

  1. The USA in the 1980′s – called “bridge banks”
  2. Sweden in 1992
  3. The International Monetary Fund – This is exactly what the IMF tells emerging markets to do
  4. Indy Mac – A 9 billion dollar bank was recently taken over by the FDIC and emerged far more solvent 6 months late

 

The downside here is Wall Street doesn’t like the idea because bond, shareholders, and management would take a hit.  So would the stock market. Many banks in Europe are already being temporarily nationalized.

 

 

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Short Term Outlook

Danger Will Robinson Danger Danger - The growing threat of nationalization is going to start taking its toll on stocks – especially financials. (see above)  Even though volume was low (volume not confirming downside price move) technicals especially on the Dow are deteriorating. Sort of like a death of a thousand cuts (See Dow chart on right)

Its time to bring out the old Lost in Space robot with all its bells and whistles shouting Danger Will Robinson Danger Danger. – The threat of nationalization could cause another leg down in the markets.

Our Positions

These are listed under Recommendations or Stocks Picks on the Blog. Also the strategy of when to buy is listed under the strategy section on the blog.  Why fundamentally were these Exchange Traded Funds chosen?

 

GLD (Gold) – Investors usually buy gold when everything else is going bad. The second reason is all the stimulus plans around the world in the long run means inflation and that’s also good for gold.

FXI (China) Simply relative to the USA China is far better off.  They have a surplus of money while we are massively in debt. Their stimulus plan is is a greater percentage of GDP than ours. Our military costs are huge and w are deeply involved in wars/conflicts throughout the world. China is far less involved militarily. Vhina has a growing middle class and our is shrinking.

EWZ (Brazil) Brazil simply has an abundance of natural resources – Both oil and alternative energy.  About 5 years ago a left wing government took over and spread the wealth to more middle class working families. Even more so than China they are vulnerable to the worldwide recession because oil prices fall in recessions and they have lots of oil.

GEX – (Alternative Energy)  If we do not start developing alternative energy resources then our future as an industrial, economic power will decline even faster.  Obama was elected, in part, because of his belief in alternative energy.  The stimulus plan begins to deliver on this commitment to energy indpendence and America’s economic well being.

UWM (small caps) & QLD (mostly technology) over  SDS (S&P 500) and DXD (Dow).  The later two are short positions and the first two long positions.  Small caps and technology are less impacted by the financial crisis.  The are far less likely to be over leveraged. (See strategy section of blog)

Cash is king.

Long Term Outlook Bears Rule

(see strategy section of blog for more)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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