The Problem is Suburbia

Geography 101

Throughout the last 100 years geography has worked for and against the USA. Today mega trends dominate the flow of what happens. Investors411 has focused on 3 megatrends for years. There are, of course more. Lets look at an overly simplistic view of US history as a geography lesson to understand the pickle where in today.

  • We ended the Great Depression with the massive spending of FDR’s New Deal and World War 2
  • The end result was a debt that was 30% of GDP (relativity — today its @10%)

How did we fix this huge debt problem? We relocated people into suburbia  - built massive highways, factories, shopping malls and developed greater tolerance. Yes, we had much higher taxes then. The middle class and suburbia flourished and perhaps reached its zenith in the late 70′s (see comments section of blog for amount of wealth in top 1%) The Geography here is we sprspeadead out in & built a vast suburban sprawl , worked hard, eliminated a massive deficit. This achieved a lot for many Americans.

Along comes mega trends of  globalization (jobs move abroad) and peak oil (end of cheap energy sources). Geographically, the suburban sprawl depended on cheap energy and the building of more suburbia to thrive. We did hold ourselves together for a while with innovation (computers/internet) but soon because of “scaling” these too are being developed faster and cheaper overseas.

Now. Unlike almost every other country we’re stuck in a geographical nightmare that is dependent on cheap energy and its own further suburban growth to survive.

If you’d like to see a more radical apocalyptic presentation of this kind of scenario read Minnesota economist Jim Kunstler for a while. (Thanks to AG who first showed me this site)

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!

Index Percentage Volume
Dow -0.01% down
NASDQ +0.13% down
S&P 500 +0.01% down
Russell 2000 +0.07% -

Technicals, Fundamentals & Analysis

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

Same Mantra for this week -The Black Box/High Frequency Traders BB/HFT control the vast majority of trades.

Many thanks to Paul R for providing stock information in the comments section over the last 5 days. We are both working together on YOUR on a stock list. Many of you have sent in stocks to be considered and a few more will be added. Hopefully, we’ll be able to get this together by mid week before we both leave.

Significant Indexes-

  • McClellan Oscillator (MO) fell  to +40.41 over the last few days [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. MO is back from overbought to = Neutral
  • US Dollar –  The dollar  rose slightly  +0.12% yesterday [Anything over +/- @0.50 is significant.] The dollar/stocks relationship is strong – Dollar up = stocks down and visa versa. Dollar  is in a two month long fall and is approaching a major support level. The fall = Bullish
  • BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also, good proxy of China.) BDI was in free fall from a high of @4200 to 1700 . This was a huge -60% drop in 8 weeks is very bearish Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI has staged a two week rally and is up +16% rally and is at 1942 = Bullish

Reading Tea Leaves-

We’ve had what looks like a four day breather in a month long rally. The MO is back in the upper end of neutral territory. It did establish a higher high above 90 (see chart) This gives the bulls over 50 points (90-40=50) of wiggle  room to move higher. The benchmark S&P is at 1101 and major resistance is at 1131 (see chart) The dollar and the BDI have turned bullish for stocks. So another charge higher is likely.

While the possibility of a good week for stocks exists, not only will we impact resistance levels on the S&P 500, but we will also confront support levels for the dollar. The BB/HFT traders that dominate stocks pay very close attention to the larger currency markets.

Simply put and longer term - GLOBALIZATION is a reality. Jobs and GDP growth are in emerging markets. The US can remain stagnant economically and US stocks can/will move higher along with China, India, Indonesia, Viet Nam etc. There is long term danger here, but for now globalization, peak oil mega trends are back dominating and the financial meltdown (the problem has NOT been fixed)  is not taking its toll on these markets.

Positions

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

The remaining 1/2 of SDS (ETF that double shorts the S&P 500) was sold at 33.17 on Friday for a +2% gain. Total gain a measly +1% on this position. Again will enter buy short ETF’s when MO gets overbought. This week will wait till/if we reach at least +80.

EWZ (Brazil ETF) - Bought 10% of portfolio position at 69.80 on Friday.

FXI – Under consideration if market does not make huge move higher today.

Any US or foreign stocks that benefits from emerging markets is back on the table.

Long Term Outlook - NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!


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