Note changes to Long Term Outlook

Social Security Fix

Remember Republicans, & Wall Street demanding lots of Social Security funding to should be tied to he stock markets. The Dow is now down 20+% and could go a lot lower if oil prices keep climbing. Can you imagine seniors panicking as their life saving evaporate. Several years ago this was a major topic in Market Updates. Security means the investment is secure.

The UN and Zimbabwe

One truly wishes the UN was strong enough to truly challenge the death of democracy in in Zimbabwe. However the UN has, in effect, lost its former leader the USA. The UN lost its moral pro democracy), economic (30% of worlds GDP) and military (50% of arms spending) leader.

The US went rogue or unilateral in its invasion of what the head of the UN called an “unjust” war in Iraq. UN weapons inspectors found no WMD . Scott Ritter The UN’s chief weapons inspector editorializes constantly about what’s happened then and now in Iraq. American corporate media ignores or censors the views of the man that was right about Iraq.

The Cheney/Bush administration relentlessly attacks/criticizes the UN and preaches the “You are either with us or against us” mantra. The rest of the world looks at the US differently now after Abu Graib, Guantanamo Bay, rendition & torture became our mantra not democracy.

Without the moral might, will or military backing (tied down in Iraq) of the US, the UN does not have the power or character it had before the Republicans took over the White House. The UN is still our best hope, but it has been critically weakened by the country that used to be “the leader of the free world.”

Big Oil

What Big Oil needs to do is become Big Energy today

In one sense Big Oil is ever so slowly changing – example Exxon admitting their working on solving the greenhouse gas problem. That is a move in the right direction. Unfortunately the change is happening at a slow pace. The Democrats/Obama threat of a windfall profits tax has light a fire under Big Oil and increased the rate of change.

Maybe its too optimistic or hopeful view, but Big Oil/Energy should be leading the charge in alternative energy sources. There are a lot of folks outside and within Oil companies that are trying to make this change happen at a far more significant rate. Keep pushing.

The Cost of Waiting for Big Oil To Do the Right Thing editorial by Robert Kennedy II and William Achtmeyer


Index % Change Volume

Dow -1.46% down
NASDQ -2.32% down
S&P500 -1.82% down
Russell2000 -2.78% –

US Markets

Oil Prices are trumping all other aspects of the market. Technically markets had a significant meltdown in reduced volume. The lighter volume is usually a decent technical sign, but Oil Prices are in the spotlight. Whatever they do US and worldwide equities will move in the opposite direction.

Chart of benchmark S&P 500 S&P reached a new closing low and like the Dow is almost certain to enter ear market territory.

Chart of oil (WTIC) Oil rose 1.84% After a three week consolidation oil broke out of its trading pattern and is on the rise again.

Earnings season begins next week.


Chart of VIX The VIX rose 9.60% to 25.92. The bad news here is that the VIX which measures fear in the market is no where near the levels it was when we had out other reversals in stocks. The VIX (measures fear through volatility in s&P 500) needs to pass 30 and the last three reversals happened when the VIX inter-day went to 35.

Reading the Tea Leaves – OIL RULES – Nothing else seems to matter and a worldwide stock and economic meltdown is getting more likely each day. The oil supply/demand equation is the leading factor. The US is where this breakdown began. US credit /transparency problems, falling housing prices and lack of consumer confidence are all spreading negatives to the rest of the world.

The Dow has failed to hold its major support levels, the S&P has just broken through its major support and the NASDQ and Russell 200 seem like they are going to get dragged down too. The rest of the world is on the same train and eventually will follow.

Long Term Outlook Changed to Bears Rule – The lowest of the 5 categories Market Updates uses.

Recommended Sectors (Long Term)

OUTLOOK (results for June and outlook for July and Beyond)

Gains and Losses are approximations from looking at charts

USO - Chart – Gain +14% USO is the ETF that tracks oil prices. No explanation needed.

UNG – Chart – Gain +13% UNG is the ETF that tracks natural gas prices.

EWZ – Chart – Loss -9% EWZ is the ETF for Brazil.

RSX – Chart – Loss -10% RSX is the ETF for Russia.

TRAMX – Chart – Loss -4% TRAMX is a mutual fund whose main focus is the oil rich Mideast.

Tomorrow Updates will cover the outlook for these 4 ETF’s and 1 mutual fund.

Changing the Asset Allocation. – Reasons

1) Dow has broken support and officially entered bear market territory.
2) The level of fear (VIX) has a long way to go before reaching a point where the s&P will reverse itself.
3) Consumer confidence numbers are horrible and the media is spreading bad news.
4) Oil prices (daily chart) show no sign of a climax buying where they go elliptically higher
5) unemployment numbers should continue to rise

If everyone was throwing in the towel, you could call a bottom, but the VIX does not show this. So there is more pain and volatility to come. I really hope I’m wrong

Note changes in BOLD

Steel (SLX) has been combined with other commodities and this whole section reduced. Cash allocation has grown 5%. The + is for more conservative investors. If you do not like wild and bumpy rides cash and to a much lesser extent gold is the place to be.

Bottom Line

Long Term Outlook BEAR’S RULE 

Dow at low of the year, gushing high oil prices, record low consumer confidence, growing US unemployment, declining US housing prices vs. a government rebate check and hope that global growth will hold up in China/India. Looks like the good guys are outnumberd. (Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

The question for Wall Street is not whether there will be a recession or not, but how long will it last.

Asset Allocation/Recommended Sectors (long term)

* 45 +% Cash
* 35% Energy-
EWZ, (Brazil) & RSX (Russia) two energy rich countries. TRAMX – mutual fund for oil rich Mideast
PBW and GEX (alternative energy).
XLE (energy companies) OIH (oil services)
USO (oil prices) UNG (natural gas prices)
KOL (coal companies)
* 15% Commodities – MOO Agribusiness, XME (mining & minerals) SLX (Steel)
* 5 +% Gold – GLD (Gold)

Chief Strategy – Buy the dips of trending sector
Changes to Bottom Line Section Bolded
As Always Do Your Own Research Before Investing

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