The more you know about investing, the more you realize that everyone else (especially the more $ they have or control) knows more, has a bigger support team , more computers, better access to data and knows how to bend/manipulate whatever they are investing in.  These wealthy investors/entities/countries are like huge slow moving/turning super tankers. Therefore, your advantage is to recognize which way the fleet of tankers is moving and get their first.

Baltic Dry Sea Index

Nothing could be less exciting than something called the BDI.  But it is one way to measure the FLOW of money or direction our globalized world is moving in. The top 20 economic countries are meeting in London (see comments by “Critic” from London on right side of blog) The G 20 meets later this week and perhaps the drop in the BDI shows how fractured or nationalized the worldwide response to the recession is.  (Lots more below on BDI under fundamentals)

Money Flows

  • To start realize that the standard of living just in the USA has or will drop from 20 to 50%. My guesstimate is combining the loss in home value, investments, jobs and the increase in debt. 
  • Other countries, especially those like England, Iceland, and Eastern European countries whose banks adopted the same “free market” unregulated, over leveraged financial system are in worse shape. 
  • Protectionism, just like in the Great Depression stops money flows, and we are a global economy. The world wide recession’s greatest danger is nationalism stopping money flows.
  • Money flows best when goods are bought and sold. The more people that spend  money the faster it flows. When money is hoarded by an oligarchy or debt is forced on working folks money flows dry up.
  • The major question emerging from our “Great Recession” is how to get the money flowing again and whose going to pay for the past mistakes.

Investment Choices

 Our huge debt, over leveraging and reliance on credit before the meltdown hit has put this country in much worse long term position to fix the problems created. This is why Investors411 recommends using hedges (ETF’s that short the markets – see Position sections) when markets rally to far too fast in the USA.

This is also why Investors411 recommends in Brazil and especially China (see Positions section of blog). They don’t have debt, but do have other resources.

Gold, GLD, is also recommended because in the long term all the money thrown by super takers (governments and other entities) to fix the problem is going to create inflation and devalue currency. This usually makes gold and other commodities more valuable. 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Stocks

 

Index Percentage % Volume
Dow -3.27% up
NASDQ -2.81% down
S&P500 -3.48% up
Russell2000 -3.04% -

-

Technicals & Fundamentals

Monday was a significant meltdown day. When you put it together with Friday losses total over 5% for the major US indexes.  The same for most of the rest of the world.  Volume, the chief confirmation factor of a price move was below average (Dow was at its 50 day moving average). Technically, volume is still not confirming the significant price move lower.

The S&P 500 did close just below its 50 day moving average – support level (50 day MA 791 & closing 788-see link to chart on side of blog). Technicals, still look good, but…

Fundamentally, all the companies related to financials from GE to AIG saw what happened to GM. Obama administration got a whole lot tougher than they expected and financial giants worried the same could happen to them. GM was supposed have some sort of special protection because of the close relationship between Democrats and unions.

Remember the bottom line issue is who pays to fix the problem created by the over leveraged crooks in the US financial companies – You (taxpayer), stock/bond holders, employees, some foreign entity, etc. and  how much will each group pay? – Stock markets in the short term go up the more taxpayers pay and the less transparent companies have to be.

Baltic Dry (Sea) Index - (see chart link on side of blog)  This rather obscure chart measures the flow of goods across the world. 

Why its so important is that we are in a world wide recession and if the flow of goods increases, its a sign of things improving. PROTECTIONISM or the lack of trade hinders the flow of money and the creation of wealth.  So when this index starts to deteriorate we have a problem.  

The BDI is also important because it is more of a leading indicator rather than a lagging indicator.  Check it out and compare it to the major US indexes. It’s not perfect, but the BDI usually moves in one direction before worldwide stock indexes. Why not if the flow of trade dries up a nation’s economy will suffer.

Here’s the problemthe BDI since 3/10/09 has done nothing but decline – from 2298 to 1646. Very bad news for world trade and stock market bulls. Before we had our three week rally this month the BDI was slowly building off a bottom around 660 and rose significantly in February an then continued up in March.  

Reading the Tea Leaves – In the shorter term – Thursday the gov’t committee (Its called something like FASBY) meets to supposedly change Mark to Market accounting.  This should give financials a boost.  But longer term watch the BDI, if it keeps falling so will worldwide stocks.

Long Term Outlook CAUTIOUSLY BEARISH

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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