Last Night’s

Republican Debate

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Here’s Andrew Sullivan’s (fiscal conservative/social liberal)

View

“11.05 pm. Frank Luntz just gave us the quote of the night, as explosions – fireworks? – boom around the convention center. “It sounds like Fort Sumter out there.”

10.58 pm. I’m not sure what to say about this evening, except I want to take a shower. I’ve rarely been repulsed by the atmosphere of a debate as I was tonight…”

Want more?

Link here and here

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Why Republicans want an end to the debates NOW?

LINK

“Romney #47 in jobs creation”

Thanks to EW for heads up on this

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1. EUO – (ETF that’s double Short the Euro) – You might also want a put on this because they are cheap.
2. UCO – (ETF that’s double long oil)  Oil historically goes up in the spring and this video Thanks to HG for heads up on video.

• DAX way up 1.77% this AM (7:30EST) The correlation between European & US stock markets has become weaker, but still significant. Latest data below.

Investors411 record – 4 1/2 years of beating benchmark S&P 500

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Barack The Barbarian

Picked up my copy of “Barack the Barbarian” with my grandson at the local comic book store yesterday. “You betcha” I choose the copy with the scantily clad Red Sarah on the cover. Opening scene – A  better than buff with loin cloth and boots Obama riding a blue donkey - “into a place where the interest of a wealthy few were placed before the interests of the needful many.”

For more including bigger photos click here

The CIA Lied

This should come as no shock. CIA director Leon Panetta has admitted that the CIA lied to Congress about the war in Iran. More here

No surprise here. The whole Cheney/Bush continually lied about the “unjust” Iran war (“unjust” was the term used by the Sec. General of the UN and pretty much the rest of the world)

Californification – Why Referendum’s Suck.

By far California has the deepest fiscal problem of any state . Californian’s are pointing and blaming a whole lot of people from the “Governator” on down.  But they have only themselves to blame or more specifically their referendum system. I’m not specifically singling out people in California, because most people will vote their self interest in any referendum and few look at the big picture.

Just a few example of how California went broke through referendums.

• Prop 13 – Your property is valued at the time you bought it – So, two simialar houses one bought 30 years ago is worth sometimes 80% less than the  similar property bought today = Huge shortfall in revenue.
• State legislators need a 2/3 vote to make any changes in taxes. (one of two states with this law)
  
• All residence are given tuition free admission to state colleges.

Actually this is strikingly similar to the US government. Over the last ten years our federal government similarly voted to let capitalism have almost  no regulations, ran trillions dollar wars, created huge trade deficits, and instituted new spending programs while reducing taxes.

Iran

photo from Truthdig

Another day of demonstrations in Iraq.  Protestors shouting Allah Acbar from rooftops at night in defiance of the government.  Nico Pitney at Huffington Post & Andrew Sullivan (scroll down) at Atlantic carry lots of videos.

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)

Technicals and Fundamentals

As predicted at the beginning of the week we are already challenging the major support level. We did stay above the mega 875 support level on the benchmark S&P 500 yesterday. Technically – a short term bullish sign.

Earnings season around the corner.

Another major forecasting tool is how markets/stocks react to news.

• Yesterday the first company to report was Alcoa Aluminum with better than expected news.
• The Dollar fell dramatically
• Unemployment figure for the week fell dramatically.

This was a lot of good news and US stock markets went nowhere. = Bear’s Rule

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

The BDI has become the best of these three forecasting tools .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell for the 7th day in a row .  Clearly established  bears rule trading pattern of lower highs and now lower lows over the last month.   WARNING -  The breakdown in trade is very significant to any worldwide recovery . BEARS RULE

The BDI is now the first chart I look at each day. – Globalization has greatly added to the interconnectedness of the world’s economies. It’s a worldwide recession, and if trade prices break down so will individual economies.

Here’s a bit more descriptive look at the BDI. Again you can adjust the chart’s time period.

$USD - The Dollar fell dramatically yesterday -0.98% The strong inverse correlation between the dollar and stocks has existed for many moons. Dollar up = markets down.

Just like that the dollar went from close to the top of its consolidation pattern to close to the bottom (see recent Investors411). This should have given stocks a real boost higher.  It didn’t. Bad news in short term for stocks Long term Bearish pattern for Dollar = bullish for stocks

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Reading the Tea Leaves

Forget adding to any positions right now. Until the BDI starts to turn up adding to long positions are way too risky. The fact that US markets did not move higher on yesterday’s good economic news is another bad sign.

Warning – Sure looks like the major support level of 875 on the S&P 500 is still in trouble. Expect a major attack today. If 875 goes down we could see a quick 2 to 5% loss on the S&P 500. Next major support around 830 .

Our Positions (For more see Positions section of Investors 411-scroll down)

Cutting back on the last 2.5% of GEX seems prudent at this time. We will reenter alternative energy using PBW (a more liquid alternative energy). Hopefully at a lower price than it is now.

Why – Oil prices are tumbling and energy is tied to oil. It will be a while before cap and trade makes its way through congress.  Technically even though oil prices paused in their decline there is probably another leg down and this will take alternative energy with it.

Short Term Bottom Line – Investors are waiting to see how earnings season develops. Alcoa’s better than expected earnings failed to move markets. Some or the giants report next week. If they too have better than expected earnings and investors fail to buy we’re in trouble.

Still look at a dip below 875 as a “buy the dip” opportunity.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Iran Week Three

Two points of view

More Optimistic – Andrew Sullivan here (above photo from his blog)

More Pessimistic – Jaun Cole here

Unfortunately, think Cole has better insight.

Photo to left – Your editor in the fabulous Summer of 1951

Why the USA Is in Such Trouble

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One of my left wing friends lamented that the Mark Sanford debacle didn’t get enough media attention this week. Sanford is a Republican family values governor who hypocritically had a torrid long term affair with an Argentina "firecracker," then likened himself to the biblical King David.

Farrah Fawcett (an actress who fought a courageous battle against cancer) and Michael Jackson (music icon with some strange behaviors) died and they sucked up all the news coverage. He wanted the Republican toasting to be the story of the week. All these events were secondary.

There was one big headline last week and these three events will have far less impact on your life and especially those of your children. - The US House of Representatives for the first time passed a major climate and environmental bill. As a society we just don’t get what’s important. That’s why this country is in such trouble.

There are 4 reasons why climate/environment legislation is so important, but today let’s deal with reason #1

Global Warming and The World Is Flat Society

In every society there are the flat worlders who for some reason (mostly self interest or emotionalism) want the opposite to be true. Example: Smoking doesn’t cause cancer or the CIA orchestrated the 911 attacks. Usually you will find a mix of these two groups in Flat Worlders – one that makes a profit and the other, close minded followers.

If you search through any relatively unbiased media source like Wikipedia you’ll find that "the Scientific community has reached consenus that global warming is man made" and "Since 2007 no scientific body of national or international standing has maintained a dissenting opinion." Link

Unfortunately, American culture is locked in the here and now of the Stanford of Jackson stories. Just like  smoking causing  cancer,  global warming will not kill me now and Stanford and Jackson sell.

Nobel prize winner Paul Krugman puts it bluntly -  those who think global warming is a hoax are committing "Treason against the planet" Unfortunately there are Republican members of the Flat World Society who voted against this legislation because hey believe global warming is a "hoax."

Research, the latest from MIT , (an evil scientific institution that the World is Flat Society hates and ignores) are seeing an even more rapid deterioration than expected. There are imperfections in the climate change legislation, but to vote against it because you think science is a "hoax" puts you in The World is Flat Society.

Reasons 2,3 & 4 tomorrow & apologies to Tom Friedman who has a totally different meaning in his book The World is Flat.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Big spike higher in NASDQ volume. Other major indexes up, but below average. NASDQ spiked probably due to rebalancing of the Russell 2000. So, no real help from volume in making a prediction.

Big events of the week

• Madoff Monday – The financier gets sentenced
• Consumer Confidence Numbers on Tuesday.
• Gov’t employment numbers come out Friday (Market closed on Friday)

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). You have to get out of the box and stop thinking just of the USA. This is a worldwide integrated economic planet and this Index is perhaps the best forecasting tool. If trade is diminishing through out the world then a worldwide recovery is in big trouble.

Look at the chart. (Click on the blue BDI above) You can adjust it from 5 years to one day.  You’ll see what looks like a recovery. Friday the BDI was flat and its started to trade in a range. This is better than the bearish fall over the previous four days. Right now the long term momentum is bullish and short term neutral

$USD - The Dollar fell-0.72% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons.

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.  This is clearly a long term bullish indicator .

Reading the Tea Leaves

Last weeks  fearless forecast – Another down to flat week. All indexes except the NASDQ were slightly down. NASDQ rose 0.6% .

This weeks fearless forecast – A rally, but one that does not get to new highs. Volume, the #1 forecasting tool, is not cooperating.   Its hard to have confidence in the prediction because volume is not confirming the price move. Secondary indicators are more positive than negative.

Our Positions

Let’s take the 5% loss on SDS and sell it. SDS was bought as protection against a big downside move. For Mid Year Results see last Thursday’s Post.

Our Hedge (SDS & QLD ) is starting to work.

Our other new position IFN (India) is also off to a good start.

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

Neda, The Iranian Freedom Fighter

Photo of Neda by unknown Iranian

• You can see the tragic end of Neda’ s life-on the Andrew Sullivan Blog here or the whole video  (you’ll have to scroll down to 2:27 PM yesterday of Nico Pitney’s live blog )at the Huffington Post here

• NYT’s Roger Cohen has an excellent editorial from inside Iran here His first hand account on "Islam stands for Freedom" and what’s happening on the streets is riveting. Violence has escalate during the day and each night cries of God is Great (Allah Acbar) and death to the dictator ring out over  the rooftops of Iran.

• The BBC is the world’s largest news organization and it strives to be neutral unlike American Corporate media (or me – I clearly have chosena side in this). They question the honesty of the Iran elections here The BBC lists many doubts. They also quote Professor Juan Cole who makes the same argument that Investors411 has made – How does a country 4 times the size of France collect 39 million folded paper ballots and count them in less than 4 hours?

• Read Obama’s latest statement invoking Martin Luther King here
  

The question of the week is what do you think of Obama so far – Good, Bad, Ugly? Besides Iran, there are some huge issues facing the USA – Today Frank Rich editorializes its Obama’s Make or Break Summer here

Back with stocks on Monday

Barr

What’s Up? Mullah’s at war – Split in Shia Muslim Orthodoxy – Obama’s financial Fix – Change in Market Outlook & Why – Iran want’s nukes – IAEC’s #1 – The dollar, BDI & other forecasting tools – Reading the Tea Leaves and more.

Major Develops in Iran

photo of yesterday’s opposition demonstration -Huffington Post

List of Major Devlopments

• The “Assembly of Experts” Top Mullahs in Iran that choose the Supreme Leader will hold an “Emergency Meeting”
• Massive demonstration again yesterday (see photo) More scheduled
  
• Continued violence/deaths and signs that some elements of Army are supporting/protecting demonstrators.
• The most Senior Ayatollah is backing the opposition.
  
• It’s like the cardinals of the Roman Catholic Church split into two large different warring faction. Perhaps like when Martin Luther and the Protestant reformation split Christianity centuries ago. Remember this is the Shia branch of Islam.

The three key sources continue to be The Huffington Post’s live blog . Andrew Sullivan’s blog and the BBC .  News breaks there well before cabal or networks. The first two are 24 hours a day bringing live twitters and videos.

One Caution – Like many I’ve been caught up in the “fascist” oppression of the Iranian people. (one of your posts – “One suggestion. Instead of calling Ahmadinejad a holocaust denier, why not label him a fascist beast who would kill anyone from Israel to his own people to rule the world.” )

What if the opposition wins and still wants nuclear weapons? How different are they from their predecessors?

Iran wants nukes – Mohammed ElBaradei – Nobel Prize Winning head of International Atomic Energy Commission.

New Financial Rules

Obama is announcing the new financial rules and regulations today. Lots of it has been already leaked. This is just a start, but at first blush it looks like they are weaker than many expected . NYT’s lead story on this.  Basically think economist Robert Reich has clearly defined the changes we need. “The Three Changes We Need” is his Tuesday, June 16th editorial.

Sorry, have not spent enough time on analysis and time is short (more tomorrow)

This is just the start – Congress is going to debate this over the summer.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Markets took a less sever, but still significant hit yesterday. Again the volume was below average. (The NASDQ was close to average) Volume is NOT confirm the breakout of the trading pattern over two weeks ago and volume has not confirmed the move back into that trading patten. The benchmark SPX (S&P 500) closed at 911 and has several significant support levels around 900. (see charts)

Significant forecasting tools/Indexes for stock markets

$USD - Repeated statements in brown – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down-stocks and oil prices go up and visa versa. After two significant days where the dollar was up a total of over 2% it fell -0.58% yesterday The dollar broke to higher through a resistance level (see chart). Investors 411 mantra is Dollar rallies = Oil & Stock prices fall. Yesterday was one of the rare days this did NOT happen.

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. -1.73% in increased but weak volume

WTIC – Oil prices down -0.21% yesterday. Closed at $71.15

BDI - The Baltic Dry Index measures the flow of goods (world trade). 24 up days in a row, 6 down day in a row, & now a 4 day rally. Bullish sign.

Reading the Tea Leaves

Monday’s lead statement - Expect a tired low volume market to retreat this week . This technically still looks like a market that just got too over extended – went up too far too fast and needs a breather.

The rising dollar is technically the most important influence on stocks. The correlation between the dollar rising and stocks doing the opposite is perhaps greater than 80% over the last few months.

Because we have fallen back into the old consolidation pattern, technically we have had a failed or false breakout. Therefore the Long Term Outlook is changed back to NEUTRAL

You have a Grand Central Station of support levels all converging around SPX 900. SPX now at 911. Then the last line in the sand the May low @875 Taking out  these levels would be a bearish. If 900 falls expect 870/875.

NB – Volume is confirming Nothing. So it looks like the support levels will hold. View this as an opportunity to buy (especially for traders) Longer Term investors IFN (India)  is beginning to look like a buy the dip opportunity. Strong volume is the enemy of bulls.

CAUTION – “This is not your parents buy and hold forever market” We have moved away from the edge of the financial cliff, but the long term structural problems still exist in the world’s # 1 economy and fixing those is going to hurt economically.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

What’s UP? - Battle for the soul of the Shia branch of Islam continues in Iran between forces that back the militants and those that back change. Going Green like leading blog in support of the millions of protestors for greater freedom in Iran – Reactions from outside self centered USA media – Battling Mullahs-  The dollar rises = stocks fall – major meltdown – why- and more

Battling Mullah’s

Protester standing for freedom in Iran

from http://andrewsullivan.theatlantic.com/

Following the battle for the soul or future of the Shia branch of Islam is critical to our future.

The militant faction is the #1 backers of  Hezbollah, Hamas and others taking a more violent approach. al Quaeda and others radicals are Sunni’s not Shia.  Therefore, Arab Sunni news outlets like al Jazeera are reporting on the violent Persian Shia revolution in Iran. No love lost between Shia and Sunni’s.

The Asian Times is the #1 English news outlet in Asia. Pepe Escobar is arguably their most outstanding reporter.  The American media imprints our values on their reporting. If you want the REAL story that of the battle between religious mullahs in Iran see this LINK Escobar – “This is no less than “1979 all over again.” Those of you who are too young to remember the 1979 Iranian revolution should definitely read this editorial.

The biggest danger we pose to those who are dying and demonstrating for freedom is to over react. Already Ahmadinejad and state controlled TV is fear mongering FOX TV video quotes and claiming that the protestors are tools of the Americans. I’m sure FOX news means well, but they and anyone who gives Ahmadinejad an excuse to fear monger the freedom fighters as tools of  outsiders is hurting the cause.

Obama has said that “the whole world is watching” The real battle is between the mullahs. There is a huge split that has torn the Shia branch of Islam in two.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Yesterday’s lead statement – Breakout is not an accurate description of what’s happened to the market.  We have “INCHED FORWARD”  There is no real conviction in the volume behind the move higher. Yes markets have remained above “breakout levels” for about a week, but it seems like a very hesitant bunch of investors waiting for a massive counter attack.

The “attack” came. US and most world markets fell over 2%. However the attack was NOT massive. Volume was well below average. Volume did NOT confirm the fall. This is a strong indication that the meltdown was technical – Markets had rallied too far too fast and some sort of technical correction is happening. This also does not mean stocks will move lower, but the fundamental events are probably not behind yesterday’s fall.

Significant forecasting tools/Indexes for stock markets

$USD - Repeated statements in brown – The dollar is the index to watch You could write a book on the dollars influence on everything but for us the bottom line right now is – When the dollar goes down -stocks and oil prices go up and visa versa. Dollar rallied significantly again +0.97% on Friday & +1.18% on Monday. The dollar broke to higher through a resistance level (see chart).  Investors 411 mantra is Dollar rallies = Oil & Stock prices fall

XLF - The ETF that tracks financials (mostly shadow banks ) have been stuck in consolidation for over 3 weeks. -2.56% in increased but weak volume Friday

WTIC – Oil prices down -1.98% yesterday

BDI - The Baltic Dry Index measures the flow of goods (world trade). This is extremely important because one of the greatest obstacles to a worldwide recovery is the lack of trade between countries (protectionism) 24 up days in a row, 6 down day in a row, & now a 3 day rally. Bullish sign.

Reading the Tea Leaves

Yesterday’s lead statement t - Expect a tired low volume market to retreat this week .

The rising dollar is fundamentally the most important influence on stocks. The dollar falls because we are just printing money/paper at a rapid rate so the dollar becomes less valuable. However we are a relatively stable country and perhaps the Green Revolution in Iran reminds investors that even though we are rolling out money like toilet paper to fix our economic mistakes, we are a relatively stable country to invest in.

The above is an oversimplification – Obviously there is a lot more going on that moves the dollar. Bottom Line – The dollar has a heavy counter influence on the movement of stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING