Ben Bernanke

The NYT reports this AM that the Obama administration will keep Bernanke as Fed chair LINK Investors411 praised the choice of Bernanke as Fed chair & think its not a good idea to change horses in mid stream.

Bernanke shares some of the blame for allowing the financial meltdown, but not nearly as much as much as Greenspan . Greenspan in front of congress admitted his error.  He thought that the free markets could regulate themselves. Boy was he wrong .

As stated before a combination of the Fed chair and the Obama administration’s stimulus and loans have pulled the back from the edge of the economic cliff.

Official announcement at 9:00AM EST this AM.

Medicare, Social Security,& Health Care

These programs on the whole have been decently run by the federal government.  The problem is that post World War Two we had a population explosion called “the post war baby boom” That population explosion in the late 40′s and early 50′s is reaching maturity and will be using the assets in those programs. Thank God Lehman Brothers or the Free Market is not running these programs

The best proven  justification for a public health care option is all the other industrialized democracies (dozens) have voted to have public systems and none have voted to remove them. However American’s are so egocentric, that what generally works in other countries has less meaning here.

Economics 101 & the Recession

What the Fed and the administration have done is stimulate growth.  What they are trying to do is keep the growth alive and hope shadow banks can wind down debt. At this point, using stock prices as a measurement, this is working.  This argument is a gross oversimplification, but rally right now confirms this outlook.


STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index Percentage % Volume
Dow +0.03% down
NASDQ -0.14% down
S&P500 -0.05% down
Russell2000 -0.22% -

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

  • Brown = repeat statements
  • Green = usually bullish statements
  • Red = Usually bearish statements

Technicals and Fundamentals

This is a market that is overbought and ready to reverse itself.  The Bernanke news should be good news for stocks.  However markets that need a temporary reversal (overbought) and after the rally we should see some immediate selling.

Again, check out these financials – especially the huge volume. The one fundamental that is the driving force behind the stocks surging is financials – Lets take a look at the price charts worst of the worst.

These are the companies (AIG, CitiGroup & Fannie Mae) that were among the leaders on the downside and the trend is clearly higher.  (See above editorial) The trend is your friend and let’s ride it.

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Significant forecasting tools/Indexes for stock markets

BDI The Baltic Dry Index measures the flow of goods by price (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern .  The BDI fell - 31 on Friday . We’ve again broken a support level and formed another lower low. The rat of decline is slowing, which means a reversal is coming. Unfortunately, we have created a lower low that confirms both the mid term trend. The mid term trend since early July is clearly bearish, with a series of lower lows and lower highs. @ 2298 is a major area of support and the BDI has fallen since early June from 4291 to 2468.  This is just 129 points away from a major support level.

In a nut shell the BDI is

  • short term - Bearish pattern
  • mid term Bearish pattern
  • long term - Bullish pattern

Bottom Line – Mid term trend is not good for world markets, especially countries that rely on exports. exports

While this index does not have as immediate impact on stocks, as the Dollar does, it is very significant to long term worldwide economics.

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$USD - Check out the 6 month chart (to the left) or a multi year chart of the US dollar of the US dollar.

The dollar rose +0.25 % yesterday and, you guessed it, the stock rally stalled . The Dollar is in a range between $79.5 and $77.5 . A breakout to either side will seriously impact stocks. Dollar closed at $78.24. Its  major support level is @$77.5

Mantra Dollar up = US stocks down & Dollar down = US stocks up

A gradual reduction in the price of the dollar is part of the solution to global worldwide recession

This is the index to watch because its impact is immediate.

Positions

The whole Positions Section has been revised (Click on “Positions” at top of blog). Check it out

Investors411 will become more involved in the financial sector. – ETF’s – XLF. UGY (2x financials) & FAS (3X financials) Investors411 will also be taking profits in some.  – Even though its not a dip lets start small and reopen the  position in financials…. Up to 20% of portfolio

The Hedge – At one point we had almost a 5% gain in this position that hedge the NASDQ 100 against the S&P.  The growing trend in financials has wiped that all out.  Investors411 is closing this position because it looks like financials will continue to drive the S&P higher. Yesterday there were massive trades (again) in those financials (shadow banks) that needed the biggest bailouts.

Closing position for zero gain.

One very important rule in investing is don’t lose money.  Fundamentally this trade is turning sour.

Long Term Outlook = CAUTIOUSLY BULLISH

See Changes in STRATEGY, POSITIONS, & OVERVIEW sections of blog

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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