Investors 411 Blog

Dow 10,000

Yesterday the Dow closed over 10,000.  Some major facts that cheerleading American corporate media has ignored about Dow 10,000

• The Dow was at 10,000 ten years ago. Buy and holding stocks over the last 10 years has really LOST money. A whole lot more than you think
  
• If you adjust for inflation the Dow is really at 7,537 – you lost 25% of your purchasing power. Thanks to one of you who sent in this LINK
• If you compare the Dow to Gold (in some ways this is like showing how far the dollar has fallen in value relative to other countries) “It cost about 30 ounces to buy the 10,000 Dow last time. Now it costs less than 10.” The  loss in purchasing power becomes even bigger.

Therefore, relative to the rest of the world and inflation major US companies/the Dow has taken a huge fall over the last 10 years.

Relative to this years Dow low 6470, Dow 10,000 sounds mighty good .  Financials have lead this Dow/Stock Market recovery from 6470 to 10,000.

• JPM * (see below) just announced multi billions of dollars in better than expected profits. So will other shadow banks
• These financials are giving big rewards to top executives who still look for ways to make bets on money (Credit Default Swaps etc) and are building up hoards of cash in order to have collateral on these hidden bets.
• Obama and his Wall Street administration have even made it less transparency for shadow institutions – mantra, we now have NO mark to market accounting.
• The banks are not making loans to small businesses like they’re supposed to and the gov’t instead is making those loans/gifts – cash for clunkers, tax cuts, $8,000 first time homeowner gift etc.
• These big shadow institutions are here to stay. LINK according to Obama’s administration “the genie is out of the bottle.” Looks like these huge unregulated institutions are here to stay.

Therefore shadow banks, the creators of “financial weapons of mass destruction” (Warren Buffett quote) rule. Obviously those who robbed you and brought the world to its financial knees are being rewarded. Investors411 has screamed about the injustice and future doom of continuing the  hidden financial system, but it has contributed significantly to the Dow reaching 10,000.  Like greedy little pigs we are again building a financial system on illusion.

Investors411 recommends the following  (see overview for more)

• Traders – Play the financial stocks (shadow banks). They rule. Ride the wave. Dow 10,000 means lots of wealth has been again created for upper middle to ultra wealthy. Some of this will get spent and help the American economy and the blackmail shadow banks have is if they go under so does the stock market . Never forget we are only building another hidden asset bubble
• Long Term Investors – Do what everyone else is realizing buy Gold GLD (see past Investors411)
• Long Term Investors – Buy countries that create wealth by manufacturing real goods or producing real commodities – China & Brazil

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+1.47%	up
NASDQ	+1.51%	up
S&P500	+1.75%	up
Russell2000	+2.00%	-

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

“Expect other indexes to follow Gold & Brazil. ” (Both GLD and EWZ have broken out to new highs.)

Put on your Rally caps and watch volume – Today should be the day that we know if the money on the sidelines is willing to start to get back into stocks.

Volume showed a wee bit of new money did come into the market, but let’s see if it gets sustained. CNBC and everyone who has money invested in Wall Street is cheerleading for that money to return (see above editorial)

So we’ve had at least a one day rally, but more importantly we’ve fundamentally had top line (sales) growth from Intel and some minor companies.

* JPM , Perhaps the #2 shadow financial institution also hit an earnings home run. Remember, instead of TARP money going toward the elimination of bad debt (credit default swaps) all the Bush and Obama administration have done is shovel money at them and allow them less transparent accounting. Most likely shadow banks/financials are hoarding funds because their real debt from the financial crisis is still huge.

Google & IBM are the next major tech to report after markets close today.

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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) .

The BDI is @ 40% (I haven’t done the math) 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 )

The BDI nine day rally flattened out two days ago and has fallen 99 points. It fell a -49 points yesterday and closed at 2579 . Even though a reversal seems eminent, we have technically achieved a higher high even though the BDI is falling.  Another 100+ point drop well start to get a little concerned and the line in the sand support level is 2163 =  Bullish for stocks & world trade right now

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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.

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

Stocks went up so guess what happened to the dollar – The dollar reached a new yearly low fell a significant -0.46 % The dollar closed at $75.47. We have developed a support level just below $76 . The dollar closed below its support level. = Bullish for stocks

NB –

• Earnings will probably trump the dollar as the #1 influencing factor for the nest two weeks. But the falling dollar is the main driver of stocks right now and we have a long way to go till we hit last year’s $71 low.
• A slow decline in the dollar = good a rapid decline = bad .
  

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

Positions

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

See comments section of blog for a complete update on positions.

EWZ – Brazil up +4.05 % yesterday is starting to go parabolic.  It’s going up way too fast as investors are chasing the stock.

GLD – Remains a solid buy the dip opportunity (even small dips)

XLF, UYG & FAS (big financials/shadow banks) are also buy the dip opportunities . UYG is riskier and FAS is most risky. Traders could see a buy the dip opportunity today.

Sold FAS yesterday for +8% profit

Your (Monitor’s) Questions – See comment section of blog

INTC did fizzle yesterday – up only +1.66% vs our positions in China (up +3.55% ) and Brazil (4.05%) Technically, Intel had gone up almost 40% last quarter and a whole lot right before earnings – so the higher price was already built into the stock. China & Brazil have not had the same huge run up, although Brazil is reaching the same overbought position that INTC.

For US and other countries to move forward we’ll have to see other companies show top line sales growth.

Outlook is still CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

WHAT’S UP? – GM crumbles – the impact; Major trend establishes itself – Reverse Colonialism; Your broker’s bias; Stocks -Buy and hold is dead – why; Changes to Positions section; Your stock questions

Auto Parts Workers – Josh Anderson/AP photo 

GM/US Auto’s Crumble

GM sock fell over -20% yesterday to below 1933 prices. It ended the day at $1.15.

What happened is that big companies that hold GE bonds also have Credit Default Swaps (remember how CDS’s crumbled housing) protecting their bonds.  Therefore, they have no financial incentive keep the company in business. Looks like bankruptcy is almost inevitable. Story link to pain of car sector dissolving. This looks like a death spiral.  Consequences of bankruptcy -  

• The worse case senerio the Stress Test had for unemployment (now -8.9%) was -10.3% - We could easily surpass this.
• More unemployment = more foreclosures = Home prices fall = less consumers buying = more stress on banks= greater chance of economic meltdown. 
• The USA is addicted to oil and cars. Transportation is vital to the economy. We are already dependent on foreigners for oil and now we will be dependent on them for cars/manufacturing. 

The Trend – Reverse Colonialism

One significant trend that is almost ignored is just how significant a role other countries are playing in buying our debt.

Most talking heads put foreign ownership of the US at @$5 trillion now. The whole way our financial structure has been moving over the last 40 years has depended on expanding and over leveraged credit. Foreigners have bought up lots of this credit.

Inevitably, foreigners are going to demand better and better assets as they become bigger and bigger shareholders in the USA. Already in  countries like Saudi Arabia – the  #2 form of income is foreign ownership.

It’s doubtful that foreign entities will stop buying US debt because it will hurt their own economies. But what is more likely is that they will demand more significant and better American assets to finance America’s future debt. In essence - Reverse colonialism

Bottom Line – Teach your kids Chinese.

Buy and Hold is Dead

Thanks for all the  personal emails on specific stocks (see comments section) I will answer them. But, I do NOT recommend individual stocks because I’ve long since realized that everyone else knows more and has access to better information than I do. 

Your broker is biased.

• Brokers are paid by how much $ they have in the market 
• Each AM they are given a list of companies to push that their bosses have made deals with. This info is given to most wealthy clients first.  
• Individual stocks are too easy to manipulate like GM (see above) Your broker might not be, but brokerage companies play this game.

Buy and hold 

• Buy and hold used to work in multi decade bull markets.  Since 2000 (Dow at 11,000 & now at 8,400) we’ve been in a Bear Market.
• Markets now move much faster because hedge funds and private mega institutions dominate trading. The buy and hold mutual funds are not as significant a factor as the past. Even mutual funds trade far more often than they use to.
• Short term traders with computers and far more esoteric trading tools dominate the markets.

This is why Investor’s 411 looks for mega trends and follows them with low cost stable market baskets of stocks (ETF’s)

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index	Percentage %	Volume
Dow	+0.60%	up
NASDQ	-0.88%	flat
S&P500	-0.10%	up
Russell2000	-1.35%	-

Technicals & Fundamentals

Major markets closed mixed. Mostly to the downside. Volume was up but below average for the S&P 500 and Dow. Above average and flat for the NASDQ. Volume so far this week is not showing any sign of confirming the price move. Therefore …

Still looks like natural profit taking after a big run higher. I could develop into a reversal if volume increases.

XLF - The ETF that tracks financials (mostly shadow banks ) fell -2.12% in flat below average volume.  Repeat - Since the current rally began two months ago only 4 times have we had two down days in a row for financials.  So if today is another down day in, especially in light volume, short term traders might (day and swing traders) might see it as an opportunity to buy.

Short term Traders only – would buy the dip today (see above) and use stops to limit losses

If Shadow Banks go up – so will stocks. If Shadow banks go down so will stocks – The mantra of the markets for the past two months continues.

WTIC charts “Light Crude Oil”.(see chart). Oil prices momentarily crested over $60. Prices were up 0.30% to $59.71.  In one sense high oil prices are bullish. Higher oil prices indicates that investors think demand will be strong in the future. The downside is higher energy prices is it further diminishes the buying power of the middle class consumer in America,

Repeat from yesterday-What happens to Shadow Banks is still the dominant factor controlling what other stocks do. Investors411 has given the good,the bad and the ugly of the privatizing the gains and socializing the risk in Shadow Banks – The good is the gains on Wall Street.

 The Upcoming war We have rapidly created an incredibly massive subsidy system for America’s Shadow Institutions – How do we disconnect from these wealthy welfare recipients?

Most likely senerio for week -  Consolidation or profit taking. Let Shadow banks be your guide.

Email Question from MamaJama

Should we take profits on China and Brazil now? (see Comments and Positions section of blog) 

Reading the Tea leaves - There is at least a short term dip coming. Investors411 has already dumped positions in financials and techs.  Do plan as a trader to buy the dip in financials.

 Yes you can take some money off the table/take profits in China & Brazil. No one evr went broke taking profits. You can also buy some protection.

Remember, the last time I recommended this (the “swine flu scare”) I was wrong. Right now, personally I’m selling some Brazil (EWZ) with the intention of buying the dip.

As stated many times in the past month – what happens to shadow banks is what moves stocks.  China and Brazil right now (in the short term) will follow this trend. As long as Shadow Banks rule – and right now they seem to have the Obama administration in their pocket – stocks should not fall too far too fast.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !