Larry Summers

Lord Vader/AKA Larry Summers

If their is one man to single out for the lack of coherent response to a massive destabilization of the worlds economy its Barak Obama’s now former economic chief Larry Summers.

Last Tuesday a mass of increasingly bitter, alienated and emotionally driven people voted for change. Few realize that Lord Vader and his oligarchy of Casino Capitalists won the election.

Summers stands at the apex of the triangle of “hugely damaging conflicts of interest of the senior academic economists who move among universities, government, and banking.”

Every Investors411 reader knows about the legion of lobbyists corrupting government and now the legions from academia who are bought by the shadows of casino financial capitalist.  Millionaire economists, Fed officials, and university professors who “refuse to disclose their conflict of interests”

See Charles Ferguson’s “Larry Summers and the Subversion of Economics” editorial (a must read) for a broader list or see Inside Job docudrama.

Perhaps the most damaging moment (and it is a hard call) is when the head of the International Monetary Fund, Raghuran Rajan in front of a field of world’s top economic experts (2005)  including Greenspan, Paulson,  Bernanke, & Geithner is shouted down by Summers for warning that the impending 2008 financial shadow bank meltdown is coming.

If you’re a true blue Democrat then Summers is Benedict Arnold. But I prefer to look at him in a battle between true transparent capitalism and the casino, opaque, oligarchy of monopolists  that is increasing their wealth and stranglehold over working Americans.Economist John K Galbraith opens his editorial on the election with the following paragraph –

The original sin of Obama’s presidency was to assign economic policy to a closed circle of bank-friendly economists and Bush carryovers. Larry Summers. Timothy Geithner. Ben Bernanke. These men had no personal commitment to the goal of an early recovery, no stake in the Democratic Party, no interest in the larger success of Barack Obama. Their primary goal, instead, was and remains to protect their own past decisions and their own professional futures.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

Index Percentage Volume
Dow +0.08% up
NASDQ +0.06% down
S&P +0.39% up
Russell 2000 +0.43% -

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

US Stock Markets -

King dollar rallied on good economic news (employment report) and some bad news out of Ireland/Europe forcing the Euro lower.

Stocks held their own despite a a major rally in the dollar. (a surprise) = Bullish Sometimes there is a delayed reaction and certainly if we have another major move higher in the dollars the reaction of stocks will not be as benign.

Huge trading volume  move higher into the close Friday. Technically this is usually bullish It is also highly unusual because major US indexes are trading so far above their 50 day moving averages or Bollinger Bands

The hope – Obviously a lower dollar means US goods cost less abroad and major exporters will benefit. Stocks go up, investors/traders/401k’s/etc. get wealthier and Americans spend more on US economy & employment improves

The curveballMost of the wealth is going to a super rich oligarchy that invests $ in faster growing emerging markets, derivatives, Black Boxes, or cash rich companies that buy other smaller companies, eliminate workers of smaller companies and hire abroad.

Conclusion - Investors411 has pounded the drums ad nausea on how huge the 2008 credit crisis really is & the fact that no significant solution is in place to prevent it from reoccurring. – Therefore, there is likely to be more QE2 or a QE 3, 4, 5.

Fundamentally, US Stock win both ways – Economy/employment improves in USA and we don’t need QE 3, QE4 etc. The Fed keeps printing and dumping the dollar goes down and stocks improve.

There is, of course, an imbalance (possible inflation down the road) to print and dump. (see past Investors411), Europe could tank, or a dollar war develops into a trade war. But, right now it looks like print and dump will be the underlying force for US stocks for a while.

Sweet Pineapple Upside Down Cake – So bad economic news in USA turns into good news for stocks because it means more Fed printing and dumping.

Repeat From Friday – The Black Box/High Frequency Traders are now going to get some resistance from what’s left of regular traders/investors (the other 20 to 50% of stock traders) and they are worried.

  • Insider selling is at all time high.
  • S&P is at major resistance – this years high.
  • Many Oscillators and Indexes are showing overbought US markets
  • Our own MO while not in overbought territory yet is the highest in over a month.

US stocks used to be controlled by normal investors and traders – If it still was I’d be ducking, covering & selling big time.

Employment numbers for last month on Friday +151,000 jobs rate (positive surprise) & a continued -9.6% unemployment rate More here

Significant Indexes

  • The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] The dollar rose a significant +0.94% yesterday. Dollar broke its support level last week,but on Friday is back to the same resistance level (Remember its called support on the way down and resistance on the way up.) Trend for stocks = Bullish
  • The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China, emerging markets,&  exporting countries]Fell  -0.61% Friday. BDI now consolidating after bull run that began in June. The BDI has been overshadowed by the dollar moves. Sitting directly above major support. Longer term Pattern now= Bearish/Neutral
  • McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] Fell slightly +35.51% Friday. Getting close to overbought (more NEUTRAL than bearish) = Bearish/NEUTRAL

Reading Tea Leaves.

The dollar bulls rules – This is because the Fed has announce it will print & dump $600 billion into economy. Maybe more or less depending on how the economy does. this puts strong pressure on dollar to go down. Other factors obviously influence currency markets, but right now QE 2 (print and dump $) is the bull in the china shop.

Watch tracking stock for dollar - UUP during day and keep an eye on MO nearing overbought levels. However for the short term -

Short TermStocks are way over extended. I’ve never seen major indexes trade above their Bollinger Bands for more than 2 or 3 days before falling. We have two days in a row above these bands. Another way of putting this is we are far too extended above 50 day moving average. Everyone who believes in technical analysis knows about this Bollinger Band stuff and they and are telling those they advise to sell.

Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

(I do manage 6 accounts that have other positions)

  • EWS (Singapore)
  • SSO (2x what S&P does) Sold 1/2
  • EEM (emerging Markets)
  • TYH (3X tech stocks) Sold 1/2
  • DGP (2x gold)

The more highly leveraged the ETF is the more it is a shorter term trade (days/weeks) instead of a longer term investment (weeks/months) DGP is the ETF most likely to turn into an investment.

One strategy has been to lock in 5 to 10+% profit on the trades by selling 1/2 the ETF when/if it reaches those levels.

Traders would need a dip in MO before nibbling some more.  Investors, preferably, would like an MO of near -60 or higher before investing. Traders anything close to zero (highest risk) to -30 on MO

However first concern for traders is to lock in profits or keep tight stops on stocks and highly leveraged ETF’s.

Personally – I’ll probably  be  selling today, hopefully into an AM rally, the rest of the leveraged ETF’s. and perhaps 1/2 gold. I know MO is not at +60, but, the Bollinger Band/over extended from 50 day moving average means a short term reversal/consolidation. .

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including ”YOUR Stock List.”

Announcements of purchases/selling can first be seen in the comments section of the blog and/or if you are on the private mail list. If you’d like to get on mail list send me an email – see HELP/EDITOR section of blog

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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