All About Oil

This editorial by John W Schoen does a good job explaining why oil prices are so high. Plus the difference between the limited supply of cheap oil and the far more expensive shale oil.

He ends his piece with an illuminating point.

Europe and Japan have a much higher tax on gasoline. This economically forces people  to use and find alternative fuels. When there are sharp price hikes these governments can lower the taxes to soften the blow. This is a major reason why so many other countries are so further along in seeking alternate energy solutions than the USA.

Four outstanding blogs go into depth on on energy related subjects

• The Oil Drum
• Peak Oil
• Tree Hugger
• Oil Traders Blog (For investors)

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KISS & Stocks

(Keep It Simple Stupid)

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

BUBBLE-ICIOUS - Investors411 term for the stock market – We are all riding on the outside of an ever expanding &  Central Bank manipulated stock bubble. See Investors411 STRATEGY section for more

• Same old manipulated by the Fed’s dump of liquidity, low volume stock rally that we have seen for the last few years.
• From Seeking Alpha an editorial on commodities
• Here’s a contrarian economist on what happens to stocks and the economy when the Fed’s QE2 stops on June 30th.

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Shorter Term Forecasting Indexes

• The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] Dollar rose for the third day in a row. Up +0.40% yesterday. Chart for last three weeks still clearly bearish for dollar.   Oil prices now are by far the #1 forecasting index and its trumping the dollar see below) For stocks dollar short term trading pattern = Bullish/Neutral
• McClellan Index - (MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] MO rose to -1.86. Over the last three months the new parameters seems to be +/- 30 as an overbought/oversold level.  This narrow range is something I have never seen before. MO Stocks outlook = Neutral

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Reading The Tea Leaves

From Yesterday – Today’s the big day - For three months the bulls have built a strong support level at -30 on the MO. Each time it has been approached it has held. We are just 2 points away. The bears have a big battering ram - oil prices over $100+ for an extended period of time.

The support level held – The bears, as they have been for the last three months, were defeated.

As Chris states in the comments section of the blog the “MO at -30 works like magic” For three months the -30 level has been a buy signal.

No fundamental factor can seem to overcome the -30 level. Stocks can only become so oversold then the buyers step in.

• Tunis & Egypt revolution – No problems
• 100+ dollar oil – No problems
• Libya – No problems
• Other possible and simmering outbreaks in oil rich dictatorships – No problems

What’s holding up the bulls is the Fed’s market manipulation – O% interest rates to the TBTF & other shadow banks and quantitative easing.   This is all one big economic bubble building.

The problem for the bulls is that they can not break the bears resistance level at +30. This gives stocks a very small range on the MO to trade in – 60 points over the last three months. The range for the last three years and beyond had been over 200 points.

Why? - Best read of the tea leaves is all but the strongest holders have been chased out of the US stock market over the last few years. Every time stocks are threatened the Fed’s liquidity tsunami takes over. Our managed stock market  is bought when it starts to fall by the manipulators or money printers.

Bottom Line – Stocks have moved into a smaller trading range.

Special Note - Considering changing the Long Term Outlook to NEUTRAL at long as oil prices keep rising above $100+

What to watch today

• USO - ETF for oil - Oil up = stocks down
• UUP - (Tracking ETF for dollar) Clear 2 month pattern of bears ruling Remember - The dollar is a contrarian indicator. Bad dollar = good stocks
• AAPL – Took a hit yesterday as it approached former high.

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Positions

A 5% trailing stop today on both REMX & RJA today.

5% trailing stop on UCO  today.

One strategy of Investors411 is to take 5+% profits on 1/2 the position and let the rest ride.

Will post when I buy/sell in comments section of blog.

This market is excellent for short term stock players

Buy when MO approaches -30 and Sell when it approaches  +30

UCO -(2x oil prices) Why not, its also a hedge against higher gas prices.

REMX (Rare Earth ETF) - Really believe this a good long term holding.

DGP – (ETF is 2X gold) . Set to follow silver SLV and approaching breakout. Broke out to new all time high and has started to pull back. Buy the dip to 17 DMA of SLV or DGP

DBC - (Commodities ETF) For a more complete list of commodity ETF’s see POSITIONS listed at top of blog  DBC is tilted to energy.  A good alternative would be DJP that is more agriculture and metals - Both DBC & DJP are on breakout runs. Buy the dip to 17 DMA

RJA (Agriculture commodities Index)An ETN, not an ETF. Hopefully longer term holding. .

UWM (2x small cap stocks) TNA (3X small cap stocks)

Mea Culpa - In hindsight – It was unfortunate that the UWM positions trailing 5% stop was hit.

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Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See “POSITION“ section of blog (at top of page) for lists of potential stocks & ETF’s including the new ”YOUR Stock List.“

Special Note - Considering changing the Long Term Outlook to NEUTRAL -if oil prices remain above $100+ a barrel for a significant amount of time and/or keep rising.

Iran Gets Caught Red Handed

Perhaps this is one reason why the Russian President came out and said sanctions are inevitable.

Breaking news – Iran has been caught by US, Ger., Eng. and Fr. secretly trying to enrich Uranium . This news should dominate news cycle. Holocaust denying, illegitimate President Ahmadinejad (photo above) announced he got caught with his hand in the nuclear cookie jar. LINK

Obama’s Bill to triple non military aid to Pakistan passes Senate. LINK

These two news items are interconnected .

The US obviously has limited resources. We should NOT be trying to spend trillions (Nobel prize winner Joe Stigletz put this cost at $2 to $3 trillion) nation build in Iraq, Afghanistan, or other countries.  What we need to focus on is the nuclear problem especially in Iran and Pakistan.  If we can increase stability in Pakistan now (the $1.5 billion in aid is still too little)  we could prevent spending trillions there later.

Obama directly addressed cutting nuclear weapons at the UN Here’s al Jazeera’s interview of Jordan’s Queen Noor. Remember al Jazeera is basically a Sunni arab news outlet and Iran is Shia and Persian. No love lost between the two. LINK

Alternative Energy (+ and -)

Tom Friedman is back writing about alternative energy or lack of alternative energy manufacturers in the USA. Also there is  in the comment section of the blog an insightful reference to a Newsweek story “Big Oil Goes Green For Real ” LINK

Last week Friedman bemoaned the fact that the 14 new solar energy plants (one significant component of alternative energy) has all been built outside the USA. LINK

G 20

The G 20 countries are meeting in Pittsburgh and if corporate media let’s us get buy protests you can find some substance. The NT hits the nail on the head. The G 20 nations with a lot of stimulus packages and other measures have averted a worldwide economic meltdown. Now the tough part begins – Getting past self interests and coming up with some global regulatory solutions and avoiding protectionism LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

There hasn’t been big volume behind this current short term dip, but it has been moderate.  The NASDQ (tech’s have lead) the retreat and has had the biggest volume.  A second day of losses usually acts as confirmation of the first days turn, especially if volume rises.  So we get a kind of partial confirmation.

One of the internet darlings and AAPL competitor, RIMM got toasted in an early earnings report – down 10+% – Bearish news for techs

A Fed Governor Kevin Warsh has said that we may have to raise interest rates sooner than later.  Stocks love a 0% interest rates and rising interest rates means other ways of making $ become more viable than stocks. WaPo editorial LINK = Bearish Fundamental

Earnings season is around the corner.

G 20 summit taking place in Pittsburgh.

BDI seems to be turning higher = Bullish

Iran has a secret uranium enrichment program just announced by US government = Bearish news

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Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

2388 is support level/number to watch – Yesterday BDI fell -10 t o close at 2165. Major support level has been broken and the rate of fall is dramatically intensifying – From @ -70 to -10 Short term Bullish for stocks

The BDI is @49% off its high (early June) Before that it gained almost over 630% from its all time low of 663 in Dec. of 2008 (April 2009 high of 4291 ) A 50% retracement from highs is a major support level. Therefore some stabilization is understandable.

What this means – World trade is in trouble – lots of ships are sitting in ports empty.  To some degree, China has stopped buying raw materials and/or the US consumer is not buying as rapidly as earlier in the year. Braking a support level is significant, but 2250 (current level) is still a long way from the Dec. 2008 663 low. = Storm clouds gathering

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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.

As predicted the $76 support level held.

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

The dollar rose a very significant + 0.76% yesterday and closed at $76.91. Technically this is a new short term high from a few days ago = Bullish for dollar and bearish for stocks

Last year’s low was around $71, so there is a long way to go before the next major support level.

Positions

The  Positions Section (top of blog) to see all the latest buys and sells

Sold all of 10% stake in XLF (financials) at 15.01 for a 7+% profit.  Reasoning – if markets do have a 5 to 10% correction higher beta (those stocks that are most volatile) names will get hit.  There’s a lot of talk about a consumer protection agency passing congress with financials as its focus. LINK

I keep waiting for some sort of regulation to be voted on so the same kind of meltdown does not happen again and Democrats, who are in control, keep disappointing.

Again just like selling AAPL, not being greedy sometimes hurts.  As a trader I do play with ETF’s that do 3x financials both long and short (FAS &FAZ)

Plan to add to EWZ (Brazil) on a dip.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Iraq Fireworks

US troops are leaving Iraq cities today. Last night there was a different kind of fireworks in the skies in Iraq. (Huffington Post photo)

Here’s one big problem – The fascist government in Iran is a major backer of their fellow Shia in Iraq. This includes Sadr who fought US occupation and immediately recognized Ahmadinejad as President. Reasonable to predict the "Supreme Leader" in Iran will try to have the same fascist and militant influence in Iraq as they do over terrorist groups Hamas and Hezbollah .

Iran (week 3 )

Nico Pitney’s blog at the Huffington Post has broke and provided more info than any other US news outlet . here

Elections were certified by Supreme Leader’s government. More, but smaller (in thousands not 10′s of thousands+) demonstrations and increasing arrests. Iranian protesters are shouting Allah Acbar on their rooftops every night in defiance.

Climate Change/Environmental Legislation

Willing to bet that 75% of America’s population has no idea that this legislation is working its way through Congress. Yesterday Investors411 went over one reason why this legislation is important – to combat global warming . Let’s go over one more.

#2 Pollution

Close the garage door, turn on the car engine, open the car windows, go to sleep and you don’t wake up. Pollution kills

We are a carbon based economy and this has had a huge positive economic impact. But the cumulative effect of growing population and increasing pollutants has turned many Chinese cities days into nights where cars have to drive around with headlights on and use windshield wipers to view the road (massive pollution mostly from coal). Simply put, pollution kills by everything from cancer to emphysema.  Trillions in health care costs could be saved and life expectancy would grow with less pollution.

Realism is needed here . Carbon based energy is very efficient and transitioning to alternatives is going to take many decades.

Chevron has "human energy" ads that proclaims we are going to need to work on ways of creating new sources of energy – wind, solar, geothermal, natural gas and oil. They’re right. You simply can’t just shut down oil exploration without devastating the world’s economic structure. But we can take some concrete steps to more environmentally friendly solutions.

(to be continued)

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Your Market Questions (part 1)

Thanks for all the public and private comments on how well Investors411 did in the first 1/2 of the year .

See Positions section & last Thursday’s update . (click on calendar) The major question is will we do as well in the first 1/2 of the year in the 2nd 1/2. Also, a general worry over the long term viability of stocks and the economy .

These questions are  outlined and addressed  in the Strategy and Overview sections of blog. Most of those sections were first introduced at the beginning of the year, then added to a few months ago. Little has changed.

The long term economic problem is the huge hole that was dug by removing the regulations on capitalism and letting greed run wild.  When it takes decades (especially the last one) to dig an economic hole, you don’t climb out of it overnight.

What’s happened is most savvy investors realizes that we almost had a complete world wide financial collapse last September and it now looks like we will survive. The major problems is getting banks to make loans, keeping loans affordable, and fixing growing unemployment.  Fixing these now could have long term negative impact.

China, India, Brazil simply have better balance sheets than the USA and in the case of Brazil more natural resources. They also did not did deep holes.

If we don’t develop alternative energy we will be stuck in a downward energy spiral forever. Cheap oil (the kind that bubbles out of the ground) is a finite commodity. Any recovery is going to be accompanied by rising oil prices.

Will the second half be as good as the first? I doubt it. Our core holdings should outperform, and if stocks do go higher in the USA our ETF’s should do even better . Investors411 biggest mistake is not being disciplined enough in buying dips.

(More later)

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown. Added the VIX back as a prediction tool .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . If trade is diminishing through out the world then a worldwide recovery is in big trouble. BDI started back up yesterday Long term Bullish although consolidating right now.

$USD - The Dollar fell-0.72% Friday and -0 0.04% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons. Neutral – we are in a consolidating pattern.

Long term momentum for dollar is bearish. Short term  mo is neutral, but we are closer to a bottom side breakdown than an upside breakout. Any breakout or breakdown would be significant.

VIX – Measures Volatility in S&P 500. Notice this chart is in almost a straight line down.  The less volatility means the better investors are feeling. Yesterday the VIX fell to the same level it was when Lehman Brothers collapsed and markets exploded to the downside.  Stocks still have not reached the level they were when Lehman collapsed. Long term Bullish for stocks

NB – The above are secondary indicators. Our mantra has always been Volume is the #1 forecasting tool – Right now volume is not giving any clear long term signal.

Reading the Tea Leaves .

This weeks fearless forecast – A rally, but one that does not get to new highs. Yesterday we had a mild to moderate rally in 3 of the 4 major indexes. Small caps(Russell2000) lost ground, but this is probably due to the annual rebalancing where some stocks are added and others kicked out of the index.

Short term – Volume dropped and markets rallied – you like stocks to go up, but when volume drops in a rally a reversal is usually around the corner.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Iran Day 14

Collage of dead protesters – Photo Andrew Sullivan Blog

Sorry, I’m just too emotionally exhausted and heartbroken to continue sifting through the blogs and tweets on Iran. You look at too many videos, audios blogs, tweets, and analysis and it’s overwhelmingly sad.

Best 4 sources still

Nico Pitney at the Huffington Post here

Andrew Sullivan at the Atlantic here

Robert Mackey at the NYT here

BBC- world’s largest news outlet that strives to be unbias here

The Obama Debate

We’ve had an excellent debate over Obama’s policies and effectiveness in the comments section of the blog .  You all have make some great points. Investors411 has both praised Obama and condemned him (mostly over the choice of Larry Summers as chief economic advisor)

Right now Obama is a very popular president (something like 60% positive and 32% negative) So what.

To jumble the title of his book – We have The Hope , but not enough Audacity .  This summer is the time for him to forget about consensus building and take charge. The single issue he alone can make the most difference in  this summer is health care.

"[Obama's]command of the issues — and ability to explain those issues in plain English — is a joy to behold. His administration has spent months talking and working with everyone on health care. Fine. Now its time for Audacity.  Take one plan and lead. See Nobel Prize winner Paul Krugman editorial here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Volume was below average again  and up just a smidge for the NASDQ and Dow. Perhaps some expert analyst can glean something from the volume, but the bottom line is no big moves are being made by the big institutions and there are a lot of people sitting on the sideline. Some of these folks are very unlikely to get back into investing in stocks. Volume is NOT confirming any price move.

Yesterday’s big move higher was probably a whole bunch of traders (as opposed to long term  investors) getting caught having to cover their short positions.

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Top 3 Recommendations/concepts

Very happy with the mid term results posted yesterday! Obviously Investors 411 toasted the benchmark S&P 500.  Going forward 3 recommendations/concepts

• China (FXI )will continue to outperform USA (See Positions & Overview at top of blog for more on this and other recommendations)
• Brazil, (EWZ ) India (INF ) and alternative energy (GEX/PBW ) are still decent buy the dips plays.  But you have to be careful on all of the above including China. Even though they will outperform USA. They will fall faster in a meltdown.
• The economic problems  created over the past decade are massive. Over leveraged or phony wealth accounted for huge part of economic growth and where is that growth going to come from now?  Our (the USA) debt, dependence on foreign oil, and our inability to change entrenched special interest groups are three large anchors holding our economy back.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Today - How many more bubbles have to burst before we take action? Obama’s getting hammered by the far left, far right, & reporters  - yet he pulls off another another press conference with grace, substance, and and purpose. YOUR comments bring up some different and provocative points of view.  The one chart or index that’s on the cutting edge of the rally .  IBM and Green technology. 

Meet The Press

You can read a full transcript of last night’s press conference here. American’s demands microwave solutions and turning around the economy is not something that’s going to happen overnight. The last 8 years built a massive deficit and a massive financial problem. What Barack showed was a command not only as a communicator but in the details of what he’s trying to accomplish.

Obviously, this blog takes its shots at his administration, but I truly hope he succeeds.

You

Three different comments bring up well reasoned and different points of view. See comment section on the side of blog. 

• Popeye – References a Bill Gross article (check out the graph in the editorial) on Shadow Banks
• Fred Mays – Seemed to know exactly what Obama would say in his press conference and called for patience and long term thinking.
• ewanapat - Also defended Obama and brought up his editorial that was published in 31 papers across the world.

The One Chart

Will the stock rally fizzle again? There’s one chart that’s on the cutting edge. See technical analysis section below.

IBM goes Green

IBM is helping to build high speed energy efficient trains in China, Taiwan and the Netherlands. Also this is going to mean a lot of new jobs for those countries. One wonders how much of Obama’s alternative energy proposals will get cut from the budget. Full story from CNET

Cyclical vs. Structural

There are those who think that all we have to do is do nothing, others believe the shadow banking system will fix itself, others think the only problem is toxic assets. These are all reactionary solutions 

Investors411 looks at economics structurally. Granted its hard to structurally solve economic problems like energy, education and heath care with the deficit we’ve built up.  But unless we structurally change the bubbles will keep bursting and America will keep sinking. For more see Overview section of blog.

How many more bubbles have to burst before we deal with the structural problems?

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! 

Market Updates – That Dirty Word

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Trends, Politics & Economics

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“Vengeance is Mine…”

“saith the Lord.” Another list of the top 25 people to blame for the financial crisis from Time magazine. Here’s the top 5:

1. Angelo Mozilo- CEO of Countrywide. America’s biggest mortgage leander popularized exotic mortgages.
2. Phil Gramm-  Head of Senate Banking wrote the infamous 1999 legislation and championed deregulation
3. Alan Greenspan- Fed chair who admitted his mistake “that financial firms could regulate themselves.”
4. Chris Cox- SEC chair whose  hands off attitude  and lax enforcement  failed to act against over leveraging and fraud.
5. The American Consumer-  Borrowing, borrowing, borrowing.

That Dirty Word – Nationalization

First it starts as a whisper then the voices grow.  Now more and more from every political and economic stripe are considering controlled reorganization under the government – Nationalization The unlikely trio of R – Phil Graham, D Maxine Waters & R Peter King have all used the N word. Obama has left the door open. Harvard’s ultra bear Niall Ferguson Economist Nouril Roubini makes the case for nationalization and so does Joe Nocera of the NYT business page. So has Simon Johnson from MIT’s Sloan Business School.

Who is going to pay for all this hell our deregulated, over leveraged financial/banking industry has brought down on us? Bank bond holders, shareholders, China,management, employees, pensioners, taxpayers(you). How big a haircut is each group going to take? How many of you want just your tax dollars to go to bailing out banks?

The Roubini and Nocera editorials bring up all the times we have successfully temporarily reorganized banks or put them into “receivership.”(why not include GM)

1. The USA in the 1980′s – called “bridge banks”
2. Sweden in 1992
3. The International Monetary Fund – This is exactly what the IMF tells emerging markets to do
4. Indy Mac – A 9 billion dollar bank was recently taken over by the FDIC and emerged far more solvent 6 months late

The downside here is Wall Street doesn’t like the idea because bond, shareholders, and management would take a hit.  So would the stock market. Many banks in Europe are already being temporarily nationalized.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Short Term Outlook

Danger Will Robinson Danger Danger - The growing threat of nationalization is going to start taking its toll on stocks – especially financials. (see above)  Even though volume was low (volume not confirming downside price move) technicals especially on the Dow are deteriorating. Sort of like a death of a thousand cuts (See Dow chart on right)

Its time to bring out the old Lost in Space robot with all its bells and whistles shouting Danger Will Robinson Danger Danger. – The threat of nationalization could cause another leg down in the markets.

Our Positions

These are listed under Recommendations or Stocks Picks on the Blog. Also the strategy of when to buy is listed under the strategy section on the blog.  Why fundamentally were these Exchange Traded Funds chosen?

GLD (Gold) – Investors usually buy gold when everything else is going bad. The second reason is all the stimulus plans around the world in the long run means inflation and that’s also good for gold.

FXI (China) Simply relative to the USA China is far better off.  They have a surplus of money while we are massively in debt. Their stimulus plan is is a greater percentage of GDP than ours. Our military costs are huge and w are deeply involved in wars/conflicts throughout the world. China is far less involved militarily. Vhina has a growing middle class and our is shrinking.

EWZ (Brazil) Brazil simply has an abundance of natural resources – Both oil and alternative energy.  About 5 years ago a left wing government took over and spread the wealth to more middle class working families. Even more so than China they are vulnerable to the worldwide recession because oil prices fall in recessions and they have lots of oil.

GEX – (Alternative Energy)  If we do not start developing alternative energy resources then our future as an industrial, economic power will decline even faster.  Obama was elected, in part, because of his belief in alternative energy.  The stimulus plan begins to deliver on this commitment to energy indpendence and America’s economic well being.

UWM (small caps) & QLD (mostly technology) over  SDS (S&P 500) and DXD (Dow).  The later two are short positions and the first two long positions.  Small caps and technology are less impacted by the financial crisis.  The are far less likely to be over leveraged. (See strategy section of blog)

Cash is king.

Long Term Outlook = Bears Rule

(see strategy section of blog for more)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Trends, Politics & Economics

Banks – Is the Sky Falling?

Answer – No, but its being held up by smoke and mirror

The simple truth is, if you were to value the assets vs. the liabilities of most major banks and many smaller banks you would find that they do NOT have the collateral to back their loans.  Plane and simple – If the government (your tax dollars) paid the market price for troubled assets now these financials would go bankrupt . No assets would be left. If this happened, the whole banking sector would probably meltdown in panic. What’s more – as the unemployment figures grow this problem is going to increase.

Tim Geithner , like Paulson before him is going to take a shot at blowing the smoke and moving the mirrors today at 11:00AM EST.  The question is can he keep the banking/financial sector afloat long enough for the economy to turn positive and some of over leveraged positions become more solvent.

The ultimate answer or last line of defense to this problem that nobody wants to even take about is NATIONALIZATION .

The Bottom Line –  there is a massive shift in wealth from those who created this problem (they made truckloads of $) plus those who own the banks/financials, and you the American taxpayer who is bailing out banks to prevent an economic collapse. MAD? – smoke should be coming out your ears. The co director for The Center for Economic Research, Dean Baker makes the case Nationalization or Welfare

Obama on Stimulus

Lost count last night of the times Elkhart Indiana (middle class America) was mentioned is Obama’s stimulus speech  You can read or watch videos of the Obama’s speech at CNN – Paraphrasing his money quote – "It s only government that can break this cycle of recession."

Early review- NYT – unfortunately concludes "Odds are…even an $800 billion stimulus package will fall short of what’s needed to combat today’s downturn, and that more will be needed later. When the Obama administration asks for more, it will need to be able to make a compelling case that the first round was the best it could possibly be. It’s certainly not there yet."

#1 Progessive Voice in American Media

He’s quoted by everyone from Pelozi to Limbaugh – Nobel prize winning, NYT columnist Paul Krugman . His latest editorial "The Destructive Center"

What’s Pork?

A Bridge to Nowhere, Compensation for Filipino WW 2 Vets as part of the stimulus plan are certainly pork. But as one of you suggested does a "water park" wanted by a governor as part of the stimulus program constitute pork? Thanks for this and all your emails .

First a water Park like Disney World or a baseball park creates jobs to build the facility. Both workers and suppliers benefit. Once built it continues to create jobs for workers and revenue for products it sells (food, souvenirs, etc) It also generates tax revenue for the state.  So is a Water Park pork?   I’d certainly prefer money going to education bridges etc., but a ready to go water park in the right location (not Alaska) could create jobs jobs jobs and increased tax revenue for states.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Technicals

US stock markets held onto last weeks gains. Technically, this is a positive sign .

Troubled GE shot up like a rocket reversing most of last weeks losses.  Another positive.

Both volume and how markets react to news (our primary indicators) still show a rally building .

Secondary Indicators

Both Treasury Bonds and LIBOR have moved in a bullish direction over the last few months. The Baltic Dry Sea Index that measures the flow of goods between countries, is on fire +48% over the last 4 days and another +10% on Monday. = Big Time Short term bullish signal.

Fundamentals

Today we learn what Tres. Secretary Timothy Geithner and what he plans to do with the second 1/2 of the TARP money. (see yesterday’s comments) Can’t over emphasize the impact the importance of this plan to both financial stocks and world markets.

Dr. Doom and the Black Swan – These two guys predicted the current financial crisis. Their comments "Even if we play our cards right…it will take at least 12 months to get out of this recession." That’s the good news. For the bad news read full article on Roubini and Taleb

Short Term Outlook/Strategy

Technically signs of a rally building are about as strong as they get. Fundamentally, the stimulus package has passed the Senate and that’s a whole lot of money about to juice US economy. However, what Geithner says about allocating the the TARP money is key to any short term rally.

Oppenheimer analyst Meredith Whitney, a financial bear,  is on a winning streak and therefore the analyst that has Wall Street’s ear. If she goes thumbs down on Geithner so will the markets according to CNBC’s Jim Cramer

Bottom Line – Still no long term light at the end of the tunnel, but technical signs for the rally to continue exist.

Long Term Outlook = BEARS RULE

• On a 1 to 5 scale Bears Rule is at the bottom.
• This section rarely change s
• Changed are bolded and in plum or crossed out

Technicals - Best read of the tea leaves – 2009 Markets range bound between Dow 7449 (last year’s low) and 9654 (November 08 high )

Fundamentals – Problem in financial sector is far far far far far bigger than fist imagined. Impact of mess is going to take years to resolve.

Asset Allocation

15% to 30%+ Stocks (Depends on your level of risk) Buy/nibble the dips below 8,000 – the bigger the better.  -

Recommended Sectors

• 5%+ US Index ETF’s - UWM (Exchange Traded Fund does @ 2x what Russell 2000 does ) & QLD (does 2X what NASDQ does)
• 5%+ Emerging Markets - FXI (China ETF) & EWZ (Brazil ETF)
• 5%+ Alternative energy - GEX (alternative energy fund)
• 5%+ Gold - GLD (ETF for gold)

Chief Strategy -

Buy the dips. Use the Dow as a barometer for all of the above sectors except GLD. This is NOT your fathers buy and hold market. Under 8 years of Bush the Dow went from 11,000 to 8,000 and left a whole dung heap of economic problems.

Protect your gains – After rallies you can protect your long positions by using ETF’s that short the market. Two ETF’s that short major indexes (@ 2x the loss). These indexes go down you make money. The closer markets get to 9000 the more you think about shorting. Until the long term outlook changes this hedging strategy will remain.  Note – long positions/ETF’s  NASDQ & Russell, short positions/ETF’s S&P & Dow

• SDS – Ultra short S&P 500
• DXD – Ultra short Dow

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

These two words were supposed to put the intended victim in a hypnotic trance in an old 60 or 70 comedy movie. For Barak Obama the two key words don’t rhyme – Afghanistan Iraq .

In the last few days a US predator drone killed @20 al Qaeda or civilians at the Afghan/Pakistan boarder (depends on which news account you believe in) and there is a promised surge of another 30,000 troops in the face of diminishing foreign support.

It is heartening to see increased diplomatic efforts in Afghanistan and Pakistan. However even US military commanders say Afghanistan "cannot be won on the battlefield" AP report .

Afghan/Pakistan/India is the center of Sunni terrorism. However, If like Iraq the focus is on guns and bullets instead of hearts and minds we’ll get the same results. We may be able to eliminate some despicable people like Saddam but the end result is worse. The level of violence that we created by "unjustly" invading has diminished but -

* 3 to 5 million refugees (mostly Sunni’s) displaced or killed
* a corrupt religious Shia government replacing a corrupt secular government
* Militia’s that rule throughout Iraq an infiltrate the army.
* Radial leaders like Sadr who hold sway over the Shia majority (60+% of pop.)
* a new pro instead of anti Iranian government – making Iran more powerful to export terrorism
* loss of our positive image throughout the world Abu Ghraib and Gitmo.
* a war simmering between Turkey and the 20% Kurdish minority
* cost of $3 trillion dollars to American economy
* deaths and long term wounds of American soldiers.
* an economic disaster in Iraq.
* a inspiration or factory for producing terrorists
* a deeply divided America on Iraq

Yes there is a quazi elected government in Iraq, but the terrorists of Hamas were also elected.

Geithner Genuflects

Yesterday Wall Street favorite Tim Geithner was appointed Obama’s Treasury secretary. In his acceptance he payed homage or genuflected to Larry Summers, Obama’s chief economic advisor. Geithner is a Summers protegee. Larry Summers, as reported several times before, was instrumental in deregulating the banking industry in 1998 under Clinton. The guys who played a role in digging this economic hole should not be the major players in leading us out.

Far preferable to this dynamic duo would be Nobel prize winning economists like Stiglets and Krugman. Hero’s like Former Fed Paul Volker does have a more minor role in the Obama administration.

Lifting Global Gag

One of Obama’s first act was lifting the Global Gag on giving funds to any organization that in any way supported abortion. Bravo. Several of you emailed me on this. Thanks. Story at LINK

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Treading Water/Drifting Higher

Index % Change Volume

Dow -0.48% down
NASDQ +0.82% down
S&P500 +0.56% down
Russell2000 +1.28% –

Brown = same comments as yesterday.

US Market & Foreign Markets

Technicals – Major US indexes are treading water and foreign indexes are doing the same. Even though we are treading water major indexes are drifting in the right direction. The Dow closed at 8116 and is now 150+ points above its strong support level at 7950. We are a long ways from the 9088 Dow resistance level (see chart) established in early January.

Volume did NOT confirm the drift higher.

XLF is the financial sector ETF Chart here. Financials declined – 1.78 yesterday. A relatively minor move considering some of the wild swings. Financials are the major reason stocks are in trouble. This is the index to watch.

The area around DOW 7950 to 8000 is turning into a strong support level. The more times its tested and holds the stronger it becomes. Of course, this also means if it breaks down we should have a major fall.

Stocks are down 8% in January. Old Wall Street saying – "as January goes do goes the year."

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals-

7 Major Companies announced 56,000 more layoffs yesterday, Earnings news continues to disappoint, and we have a huge expected-5.2 to-5.5% GDP loss expected to be announced on Friday. Despite this chorus of bad news major indexes managed to tread water and drift ahead. What do investors see that they remain slightly bullish in the face of a pie of bad news?

A stock market is after all just a market of stocks. If major companies like Caterpillar (builds major construction equipment) (chart link ) falls over 8% after a dismal earning report yesterday and is perilously close to breaking through its low (support level) are in trouble be very cautious. CAT stands to to be one of the companies that gains from Obama’s stimulus plan.

If Financials are the index to watch, then CAT is the stock to watch. If CAT can keep treading water and drift ahead there is hope.

Forecasting Future Trends

LIBOR – LIBOR is the rate banks charge each other. It price has fallen from 3.4% three months ago to about 1.18% Its held steady in this area for about a week. (good news for stocks)

LIBOR chart (3 month)

Treasuries – T Bills yields show how fearful investors are. The lower the rate the more the fear. Short term yields – 3 month T bill flat at 0.07% yesterday and the longer term rates again rose a bit. The ten year rose 2.64% (low yields show fearfull investors flooding to Treasuries instead of stocks)

Treasury Bonds chart

Baltic Dry Index – Measures flow of goods between countries. Yesterday ir rose again almost 1.5% . Almost 85% drop since June. (We’ve had a solid steady gain since the early December lows of around 660 to 995, but we fell from pre recession figures of around 12,000 – That’s along way to go)

BDI chart

Short Term Outlook/Strategy

Reading the Tea Leaves – Strategy – Shorting rallies to protect gains is working. (see below) Until we see some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.

Technically, markets are consolidating despite some horrible economic news. That’s bullish news. Volume is not confirming or denying the bulls or bears right now. Secondary indicators (LIBOR Treasuries and BDI) are improving. The area around Dow 7950 has turned into one strong support level . It has bent but it has nor really been broken.

Therefore, Some sort of short term rally seems probable. Buying/nibbling close on dips at Dow 8,000 is much better than doing the same at 9,000. Protecting any purchased position as stocks rally (get closer to 9,000) seems to be working.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

This Section Rarely Changes
Changes to Bottom Line Section Bolded and in Plum or crossed out

Technicals – Series of Lower Lows and Lower Highs = Bears Rule.. Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.

Fundamentals – Financial transparency/accountability problem is far far far far far far far far far bigger than anyone thought. Cleaning up this mess is going to take years and growth will suffer.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 8000 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

SDS – ultra short S&P 500
DXD – ultra short Dow – (Both small caps and tech stocks are outperforming the DOW and S&P)
SKF – ultra short Financials (this is the sector that’s most broken)

As Always Do Your Own Research Before Investing

The overwhelming crowd in Washington was certainly uplifting. However, at our hotel far more Jamaican’s than white American’s on holiday joined together to watch Obama take the oath of office. Tears flowed freely in the room. Obama’s inauguration has had a major impact on Jamaican’s and others throughout the world. At least now there is hope, but hope alone in not enough.

Another interesting point is that the resorts and plane flights were packed with people = what recession.

Banks

Updates has warned over the impending meltdown in financial/bank stocks. (see below) Bank prices collapsed yesterday and the FLX (see below) reached new lows. Now Bank of America and Citi group, two huge financials loaded with credit default swaps, are again melting down. Will the Obama administration, like the Bush administration just throw money at these and other institutions without any accountability or transparency?

One major concern – It was Obama’s new chief economist Larry Summers (as Clinton’s Tres. Sec. Clinton) who enthusiastically supported the deregulation that opened the door for most of the problems are swamping financial companies.

Few banks made any loans with the cash they were given in part 1 of the TARP. England and other countries have nationalized trouble banks that were "too big to fail" and are forcing these institutions to make loans instead of buying other banks, paying dividends, & handing out bonuses. Obama’s administration this AM halted the regulatory process pending review.

Bottom Line – Over the last few decades we have cut government so that it became too weak to regulate big business. Mega companies from CitiGroup to General to GM proved that left to themselves they were incapable of self regulation.

The absolutism of "free trade" and "free markets" have let greed run wild. Combine this with no real central planing and an eviscerated government. The result is a stock market, country and world facing the largest economic crisis since the Great Depression.

Remember – You should be very critical of TARP part 1, but it did prevent a worldwide run on the banks. While major banks are in trouble there is currently no run on the banks.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Financial Meltdown

Index % Change Volume

Dow -4.01% down
NASDQ -5.78% down
S&P500 -5.28% down
Russell2000 -7.03% –

Brown = same comments as yesterday.

US Market & Foreign Markets

Technicals – Major meltdown led by financials. The Dow broke through its major support at 8,000 and ended the day at 7949.

XLF is the financial sector ETF Chart here. As the chart shows financials fell another -16.53% yesterday to new lows. Financials used to be the largest sector of the market and may no longer hold that distinction. But, they are certainly capable of leading all major indexes lower. Other banking indexes are approaching or have broken through November lows. Mega banks Bank of America and Citigroup are leading this deterioration. The problem is all their over leveraged debt. (credit default swaps)

Bank Sector is collapsing. Volume did NOT increase (probably because of the inauguration). However this sector could easily drag the rest of the American and foreign markets with it.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals – All the talk of passing the second 1/2 of the TARP ($350 billion) is focusing investor attention on the problems of the markets.

IBM – Had a very positive earnings report.

Both Citi and BAC are leading financials and the rest of stocks DOWN. State Street Bank and others are also getting clocked.

Forecasting Future Trends

LIBOR – LIBOR is the rate banks charge each other . It price has fallen from 3.4% three months ago to about 1.12% (good news for stocks)

LIBOR chart (3 month)

Treasuries – T Bills yields show how fearful investors are . The lower the rate the more the fear. Short term yields – 3 month T bill was falt at 0.07% and longer term treasuries were basically fell 10 year rose to to 2.38% (low yields show fearfull investors flooding to Treasuries instead of stocks – Bad news for stocks)

Treasury Bonds chart

Baltic Dry Index – Measures flow of goods between countries . Yesterday it remailed flat . Almost 85% drop since June. (short term good news are the gains over the last two weeks)

BDI chart

Short Term Outlook/Strategy

Reading the Tea Leaves-

PANIC STILL RULES the credit markets

Strategy – Shorting rallies to protect gains is working. (see below) Until we some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.

Support levels have broken for all major indexes. Dow at 8200 and has a minor support level at 8148 (see chart) and the psychological 8000 number. Both these levels have broken and the Dow is at 7949. The 8000 level is the line in the sand. If the Dow can regain 8000 today there is a chance we could rally.

The short term Obama inauguration rally has been OVERWHELMED by the financial meltdown.
We could stabilize today, but confidence in banks seem shattered. Economist Nourille Roubini yesterday announced that banks are basically insolvent. Any extended rally is impossible without a solvent banking sector.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded and in Plum or crossed out

Technicals – Series of Lower Lows and Lower Highs = Bears Rule.. Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought. It’s looks like the recession will last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 8000 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

Jobs Jobs Jobs

The Jobs report comes out at 8:30 EST this AM. Right now there seems to be no end in sight for job losses MSNBC story .  Jobs are central to how fast and how deep the recession progresses. Current unemployment stands at 6.7% and consensus figures have this rate rising to 8% by years end. Layoffs are going to grow. Its one thing to know this and another to live through it. -525,000 jobs and 7% rate are the expected numbers

Waiting for announcement… and the number is -524,000 and unemployment rate at 7.2% – a huge 0.5% increase in just one month. Last two months revised down add to the +0.5 increase. Total job loss for 2008 was 2.6 million.

Bad, but could have been worse. Probably will not negatively impact stocks because the private ADP report earlier this week was much worse. (see previous Updates) Major question – will this 524k number get revised downward at the next report. Sure looks like we will reach 8% sooner rather than later.

Imagine This

What if Bush plan to tie social security to the stock market had passed? How much worse off we’d all be now – especially seniors.

23 Electric Cars of the Future

Treehugger.com has a photo and well referenced presentation of 23 electric cars. You can skim through the presentation or follow some of their links – LINK

Project Better Place

This Israeli company just keeps growing. Better Place has introduced an entire electric car system and its partners include Renault, Nissan and A123 Systems. They are launching systems in Israel, Denmark, Australia and Hawaii. A123 has applied for $1.84 billion in loans to build its lithium ion battery plant in the USA.

Good Economic News

Everywhere you turn you get the bad news – Let’s focus on some positives.

#1 Oil prices have fallen from $140 to $40 a barrel
#2 Mortgage rates are now at or near all time lows (30 year fixed – 5.01% and 15 year down near 4.70%)
#3 We have the mother of all stimulus plans about to be launched.
#4 An administration that is less likely to waste $ in Iraq and pork spending.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Job’s Report

Index % Change Volume

Dow -0.32% down
NASDQ +1.12% down
S&P500 +0.34% down
Russell2000 +0.91% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals – Major US markets were mixed yesterday as volume fell. Markets did well despite Wal Mart and Intel coming out with negative news. The Dow is at 8742 almost exactly midway between its consolidation range – 8500 to 9000.

Bottom Line – The jobs news is going to impact markets at 8:40 this AM (see above). However yesterday US markets held up pretty well despite some bad economic news.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals – See above editorial. ADP numbers take investors by surprise. 8% unemployment seemed built into stocks, but the rapidness of the decline has caught everyone with their pants down.

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’s economic team & his proposed stimulus package.
Earnings season begins in a week.

Forecasting Future Trends

The following is a group of indexes that are all interrelated and strongly influence how stocks moves. At different times one index may be more influential than the other.

LIBOR – LIBOR is the rate banks charge each other. It price has fallen from 3.4% three months ago to about 1.40% (good news for stocks)

LIBOR chart (3 month)

Treasuries – T Bills yields show how fearful investors are. The lower the rate the more the fear. Short term yields – 3 month fell to 0.04% and longer term 10 year fell to 2.44% (low yields show fearfull investors flooding to Treasuries instead of stocks)

Treasury Bonds chart

Baltic Dry Index – Measures flow of goods between countries. Yesterday it rose 4% yesterday. Almost 90% drop since June.

BDI chart

Strategy and Recommended Sectors (Listed below)

Buy the dips.

US Indexes (ETF’s) – Buy the ETF that go long when there is a 5 to 10% drop in the Dow and short of sell them when prices rise. Volatility is he recognizable trend and shorter term traders shout
use it.

Emerging Markets – China (FXI) technically is the best play. China is economically better off than the USA – Better growth and less debt. Brazil (EWZ) Solid economy – tied to oil and alternative energy (sugar cain ethanol). If/when the US recovers Brazil will outperform, but right now more volatile than US stocks.

Alternative energy – (GEX &PBW) These two market baskets of alternative energy stocks should outperform because of Obama’s economic stimulus plan.

Gold – (GLD) Technically still in a negative pattern, but fundamentally countries are devaluing their currencies and printing money. This should keep gold prices high. If gold can break out of its trading pattern is could explode higher.

Short Term Outlook

Reading the Tea Leaves-

PANIC STILL RULES the credit markets and trade markets
Without credit (treasury bills/bonds) and goods (BDI) flowing, a long term stock rally is unlikely.

Strategy – Shorting rallies to protect gains is working. (see below) Until we some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.

Best guess – We should again challenge 9000 next week.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally phase 2 is underway. Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought. It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 9000 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing