Bank of America

A Trillion Dollar Fraud

Over the past few years we watched as the Obama administration has caved into major industry groups and given them huge financial mounds of money and freedom at left the taxpayers to subsidize the risk or pick up the bill. Every major bill has given the lions share of profits from whatever “compromise” or major piece of legislation to a wealthy oligarchy within various industry groups – Insurance, military manufacturers, shadow banks etc. (See a year of past Investors411′s)

Yesterday Bank of America was given mana from heaven from Tim Geithner, Obama’s Secretary of Treasury.  BAC had is biggest single day stock gain in this year. It broke out of a trading pattern and rocketed 6.37% higher.

What happened was BAC settled with the government over their responsibility in 2008 financial meltdown. Analysts had expected their liability to be in the 10′s of billions range and Geithner and BAC negotiated for a payment of a few billion. Guess who ends up getting hurt the most my this? – YOU.

So much for accountability as a major shadow bank ends up squeezing YOU the American taxpayer.

Obviously none of the major media outlets are going to carry this news and to the Average American the couple of billion in the settlement sounds like a big number.

This is a backdoor bailout and more will come where losses are transfered from shadow banks to the government. (Fannie & Freddie) If you’d like to read more , John Lounsbury in Seeking Alpha – Click on LINK below

BofA Settlement With Fannie and Freddie: Part of a Trillion Dollar Fraud

——————————

.

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

——————————

.

.

——————————

.

Technicals, Fundamentals & Analysis

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

• Biggest rally in a month. A breakout in increased above average volume, = Bullish.
• Big news at end of week is the unemployment report.
• There’s  POMO buying by the Fed today and each day (differing amounts) till next Wednesday when the new schedule will be announce. (see past updates for more on this and what POMO means)
• Translation of above for stocks short term – bullish
• Another translation – US stock markets are being “manipulated higher” and manipulations almost always create bubbles.
• The BAC settlement had a lot to do with yesterday’s rally (see above)

.

——————————

.

——————————

.

Reading The Tea Leaves

From Yesterday -The Bulls are back. - We had the biggest rally in a month.

Today is a confirmation day – If we hold onto most of the gains bulls rule.

Fed on a 6 day spree of buying bonds from its biggest member banks (see above) – bullish for stocks

The McClellan Oscillator has been hovering around neutral for a long time. It  has also been in a bullish  pattern of higher highs and higher lows (see chart above) However we have almost reached levels that start to show stocks are overbought.  This has to be balanced with the following.

Over the last few sessions, Investors411 has given you data showing some (key word some – definitely not massive) is flowing back into stocks. This in combination with the Obama Tax Compromise and QE2 should give the same punch to US stocks that the Obama Stimulus and QE1 gave back in mid 2009.

The bears side of this discussion is that we have already come so far so fast that this stimulus is NOT going to matter. Investors411 has outperformed the S&P 500 since over the last few years by using the McClellan as our main tool for when stocks are oversold and overbought. The long term outlook continues to be CAUTIOUSLY BULLISH.

Bottom Line – Short term – Bullish, would temper this if/when MO gets over +60.

.

——————————

.

Positions

• #1 UWM - (2x small cap stocks ETF) – 1/2 position -Will put a 1.5% trailing stop on this again today.
• #2 UWM
• SLV – (Silver ETF)
• DGP -(2x gold ETF)
• REMX -(ETF for Rare Earth Metals) Bought yesterday at 24.52

Under consideration

UCO -(2x oil prices) From Friday – Too high waiting for dip..

REMX (Rare Earth ETF) – Will consider more on a dip. Limited supply. China which dominates market is limiting exports. All this makes for a massive supply/demand problem forcing prices higher.  Rare earth goes in everything from hybrid cars to TV’s

EWZ (Brazil) & LBJ ( 3x Latin America – majority Brazil) Obviously the later is more risky because its leveraged 3X. On a role with 5 big up days in a row. Short term traders may risk buying a dip, but again afraid there will be no dip

US Financials – The major shadow banks are outright getting away with Financial robbery – Probably over a trillion dollars and no accountability. They run an opaque system of accounting and have a cozy relationship with the Obama administration – These bastards are going to do well in 2011. Will dig up some relevant ETF’s tomorrow.

.

——————————

.

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including ”YOUR Stock List.” (YSL#3)

Sorry limited time this AM - 20 criminal probes into possible corruption of the $750 billion dollar government bailout have been opened;  Bank of America down 24% after earnings and Financial sector down  11.6% ;  Bears back in control of markets    

Ken Lewis – Head of BOA

Major Fraud Suspected in Bailout

 20 cases of fraud into the $750 billion bailout program are being opened and this may just be the tip of the iceberg. Story from LA Times. CNN Money. Washington Post/Reuters

Neil Barofsky - chief watchdog of bailout program released a 247 page report yesterday. Basic conclusion –  “TARP is ‘inherently vulnerable to fraud, waste and abuse.”

The report recommends the government abandon its partnership with private sector in buying toxic assets.

Bottom Line - Not good for confidence in stocks, the economy, the government & especially banks. As each case becomes apparent the call for banker’s heads will grow.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

STOCKS

Big 3 to 4+% losses across the board on fears of bank nationalization and poor profits. Big volume. Short term momentum definitely turning negative.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! 

-

News

-

Deer in the Headlight

Stop staring at the headlights and Get out of the road

The reason Investors411 brings you news like “the worlds financial system has effectively disintegrated” (see last post on blog – Roubini, Volker Soros) is so YOU can stop standing like a deer in the headlights and do something to protect your economic well being. - 

Obviously, the Laissez-Faire capitalism under the previous four Presidents has spectacularly failed. The tech, housing, and credit bubbles have all burst under the absolutism of “free market capitalism” and something better has to arise from the ashes. 

Over the last eight years we have so decimated/cut and tainted the staffs of regulatory agencies from the SEC to the FDIC that any short term solution from Madoff to Nationalization becomes,at best very very difficult. 

The Real Structural Problem

What we watched over the last 8 years is an orgy of economic bubbles bursting because of unregulated greed of our capitalist system. Yes its time to restore balance, but first you have to recognize the long term structural problems. Researchers Picketty and Saez on where the money’s gone in our country over the last 40 years. Quote from economist Robert Reich& graph from Picketty and Saez -

“since the late 1970s, a greater and greater share of national income has gone to people at the top of the earnings ladder. As late as 1976, the richest 1 percent of the country took home about 9 percent of the total national income. By 2006, they were pocketing more than 20 percent. But the rich don’t spend as much of their income as the middle class and the poor do — after all, being rich means that you already have most of what you need. That’s why the concentration of income at the top can lead to a big shortfall in overall demand and send the economy into a tailspin. (It’s not coincidental that 1928 was the last time that the top 1 percent took home more than 20 percent of the nation’s income.)

This is the beginning of a “Great Recession.” and the real long term structural problems of income inequality have to be addressed. (see Overview section of blog) Only then will we find a long term solution.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Short Term Outlook

Both Citi Group and Bank of America were again had massive losses on Friday based on fears of nationalization.  The ETF that mirrors financials is XLF

The major indexes recovered from -3% losses in huge volume on Friday.  After 5 straight days of financial meltdown technically it looks like we may see a short covering rally continue.  The huge volume in financial stocks, the Dow and the S&P indicates a short term climax selloff. This is where all the weak or frightened investors panic and sell. The more solid long term holders remain. The rally from the 3+% fall is all the short term traders caught in short positions selling. Technically, Friday’s trading and the oversold conditions indicate a short term rally in stocks should continue.

You shouldn’t get too excited  - this is a technical bounce. Sometimes these bounces can be the start of something bigger. What we need is some major change in fundamentals like slowing unemployment or decline in the default rate of mortgages to give any rally substance.

. 

Long Term Outlook = BEARS RULE

-

See STRATEGY, POSITIONS, OVERVIEW (new) & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

The Sky Fell

Three very significant economic/business guru’s (George Soros, Nouriel Roubini and Paul Volker have basically all come to the conclusion that “the world’s financial system has effectively disintegrated.” and “there is [little or]no prospect for any near term solution.”

Investors411 has concluded each Market Updates with the same for months. “The problem in financial sector is far far far far far bigger than first imagined. Impact of mess is going to take years to resolve.” This conclusion is now under the Positions heading at top of blog.

Legendary Investor George Soros- “Sees no Bottom for World Financial Collapse” (Yes you are seeing double my mistake)

Former Fed Chair and head of Obama’s economic advisory council Paul Volker - “I don’t remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world.” Same Reuters’ source

The columbia economist who predicted this meltdown Nouriel Roubini “Laissez-Faire Capitalism Has Failed”

Long Term Outlook = BEARS RULE

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING