Sob stories of the Rich

Photo from Hasbro.com

The me first – Screw Everyone Else Crowd

The following comes from an editorial by David Sirota and you can find it here

What They Will Scream: We can’t raise business taxes, because American businesses already pay excessively high taxes!

What You Should Say: The Government Accountability Office reports that most U.S. corporations pay zero federal income tax. Additionally, as even the Bush Treasury Department admitted, America’s effective corporate tax rate is the third-lowest in the industrialized world.

What They Will Scream: But the rich still “pay close to 60 percent of this nation’s taxes!”

What You Should Say: Such statistics refer only to the federal income tax. When considering all of “this nation’s taxes” including payroll, state and local levies, the top 5 percent pay just 38.5 percent of the taxes.

What They Will Scream : But 38.5 percent is disproportionately high! See? You’ve proved that the rich “contribute more than their share” of taxes!

What You Should Say: Actually, they are paying almost exactly “their share.” According to the data, the wealthiest 5 percent of America pays 38.5 percent of the total taxes precisely because they make just about that share—a whopping 36.5 percent!—of total national income. Asking these [rich] folks to pay slightly more in taxes—and still less than they did during the go-go 1990s—is hardly extreme.

Obama Caves into Drug Companies

Four major financial factors contribute to our heath care mess and Obama has caved in on one.

  • The uninsured get free hospital care and you end up paying the bill.
  • Insurance companies make huge profits
  • Waste  and inefficiencies
  • Drug companies make huge profits.

Obama has made a deal with the drug companies that promises if public health care becomes reality he will not use their buying power to lower the costs of drugs for everyone. Story here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index Percentage % Volume
Dow +1.23% down
NASDQ +1.37 % down
S&P500 +1.34% up
Russell2000 +2.65% -

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

Surprise the fall in unemployment numbers from 9.5% to 9.4% was not a bigger headline on Saturday.  In Jan & Feb. we were loosing a little under 700,000 jobs a month and now a little under 250,000 a month. This is a clear positive fundamental trend. It looks like the coordinated Fed (Bernanke) and administration (Obama stimulus) plan is working.

Stocks fell into the close on Friday, but still had significant gains on the employment numbers.  There seems to be a ready pool of investors, who have been on the sidelines or not fully invested ready to buy any dip. – The S&P 500 ( a lot of this gains is financials) is beginning to lead.

AIG – We bailed this company out to the tune of 10′s of billions of dollars. In early July it rose @ 100% and last week it took another massive 100% gain in huge volume before and after its earnings report.  Scroll down to weekly chart here.

It’s starting to look like we may get all our money back, plus interest. On the surface this would make these bailout programs a financial success for US taxpayers.  AIG was , by far the worst of the lot of bailout shadow banks/companies. Problems at AIG and other shadow banks are still disguised because we no longer use mark to market accounting, but as far as the investment community is concerned AIG is a risky but increasingly positive bet.

Obviously the issues that created these problems have not been addressed in any significant way.

Other shadow banks should follow this path.

The Obama administration has a lot to crow about, but they should keep their lips sealed since stocks are overbought and due for a correction.

  • Shadow banks/companies are returning to stock market stability. (see AIG above)
  • S&P now up +5% this year
  • Unemployment number have been reduced from Jan.’s almost 700,000 to July’s 250,000.
  • Only part of the stimulus package has been spent and the rest should help over the next year or two.

Friday’s NYT article now confirmed by jobs data – Experts See Some Lift From Stimulus ” Story link here


Significant forecasting tools/Indexes for stock markets

BDI The Baltic Dry Index measures the flow of goods (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern . 2975 is the major support level and the BDI closed at 2772 down last seven days in a row. 

In a nut shell the BDI is

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

Warning - The BDI falling through its support level at 2975 is very bearish. It ha s That breakdown was confirmed Friday with another significant drop. BDI fell 109 points 3 days ago, 144 points 2 days ago and 135 points Friday. We broke through a major support level and Friday confirmed that breakdown.   The impact of these numbers are more long term than short term. However clearly this = Bears Rule

Simply put - if the cost to trade is breaking down between countries, so is the amount of goods that flow between countries.  One of the greatest dangers to a worldwide economic recovery is the breakdown of buying and selling goods between countries.


$USD - The dollar rose a health +1.25% Yesterday. It also moved back above its broken support level.  Here’s a multi year chart of the US dollar Dollar up usually = stocks down. That inverse correlation got crushed yesterday as both the dollar and stocks moved higher. The dollar moving higher shows both worldwide confidence in both the USA and stocks= Extremely bullish move

Fearless Forecast

Last week forecast - “It looks like another rally week” came true.

Markets are way overbought and technically we are due for a pullback.  This would be healthy for the market.  Hope and predict a flat market or slightly down market.- +0.5% to – 2.0%

The dollar and stocks rose Friday. An unusually combination.  The BDI is in what looks like free fall.  Our major indicators are moving in opposite directions. Something has to give.

Bottom line – At least in the short term things look might good for US relative to rest of world right now since both dollar and stocks are rising.

Positions

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

Going to build a large position in the S&P 500. (SPX) This will be kind of a default position instead of cash.  Starting with @5% of portfolio and adding 5% chunks on dips till we reach 25+% of portfolio.

Added to EWZ (Brazil) on Friday (more later)

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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