WHAT’S UP? - The Upcoming War – Shadow banks vs. the ordinary American Taxpayers: We are loosing; Simon Johnson (again) and “The Quit Coup;” Privatizing gains and socializing risk; The major issues between the shadow banks and us. Your questions on investing – When to invest & the long term outlook.


Battle of Stalingrad from Wikipedia

The Upcomming War

This is the war between the between the shadow banks and you the ordinary taxpayer.  

  • Will we continue to operate a system where shadow instutions privatize the gains and you socialize the losses?
  • Will big banking, insurance, conglomerates continue to be too big to fail?
  • Will this oligarchy continue to control Washington?  
  • Will their be a return to regulations?
Investor’s 411 has over the last few month described the sides and consequences in this war.

Still the best article out there describing how the shadow banks are winning  The Quiet Coup comes from Simon Johnson (former head of IMF and MIT prof)

Your Questions

 Popeye raises some interesting questions in comments section of blog.

  •  Be more specific as to when to invest - The Positions section of the blog carries some specific recommendations. However I simply do not have the time to watch stocks and exactly determine when a “Buy the Dip” opportunity exactly occurs.  Also, each of you is a different kind of investor/trader. What you do depends on your level of risk.
  • What about the long term? – Unless we radically change the shadow institutions privatizing gains and you socializing losses, the American economy as we know it is doomed to oblivion. What will emerge is a wealthy oligarchy and a poorer underclass. Far more bullish on some foreign economies that are building their middle classes than America’s that is diminishing its middle class. See Overview section of blog. Hope Obama can change this. (See above – The Upcoming war) More on this later.
  • I try to change the Positions section each weekend. The Changes are in plum. Check it out. I do realize some of this can be unclear to less sophisticated investors/traders. So either make a comment on the blog or privately send me email. 



Index Percentage % Volume
Dow -0.19% down
NASDQ -0.54% flat
S&P500 -0.38% down
Russell2000 -0.84% -


Technicals & Fundamentals

Major markets held onto most of their gains from the “Wowie Zowie” rally as volume dropped a bit. Consolidation after a major rally is bullish for equities. As long as we hold onto at least 50% of Friday & Monday’s gains the bulls are in charge of short term momentum.

XLF - The ETF that tracks financials (mostly shadow banks )Broke out of its consolidation pattern Monday and fell  -1,45% in decreased volume yesterday.  Again it looks like consolidation after a big move higher. 

Reading the tea leaves - [Longer term]  As stated in Strategy section (click on Strategy at top of blog – mostly written at the start of 2009) Dow 8000 is basically the cut off line. Below 8,000 slowly adding to positions or “nibbling” was suggested.  The Dow is now at 8,410.  

Therefore, Longer term investors should be more cautious about buying the dips. The Dow unlike the benchmark S&P 500 has not yet reached its yearly high at around 9,000. It is the trailing index.  It does have some wiggle room to move higher.

Markets are dynamic and right now Dow 9000 is probably going to be the new standard instead of 8000.  The 8000 was the standard at the beginning of the year.

It  looks like the Dow (30 major companies) will get dragged along higher by the other 3 major indexes. Short term momentum is still clearly  with the bulls. 9000 is not impossible and neither is 9654 (the November 2008 high). However -

Bottom Line – The rapidity of the bulls momentum will probably slow the higher we go.  Shadow banks  and China are still leading the bulls.  

At some point in time this year the major WAR between shadow banks and  the taxpayers over regulating financials and their size will happen. This in the short term will negatively impact stocks and in the long term impact the viability of our economy. (See above) Lots of the negatives in America’s economy are still growing.

Example – Right now according to WSJ 20% of homeowners have bigger mortgages  than the home are worth

Long Term Outlook = NEUTRAL

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


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