Investors 411 Blog

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Jonas Salk’s Gift

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Yankee Bob (Conclusion from Monday’s Editorial)

It was easier in the 60′s. The End the war hippy dippy back to the earth  Counter culture became the dominant narrative.

The counterculture said to popular culture’ Hey, your institutions told me to love one another, how can you send me around the world to kill people I have no quarrel with? How can you send me to kill yellow or brown people in the name of freedom and liberty and then discriminate against people of color  at home ??? Counter culture simply held the mirror up to society’s face and cried

“Hypocrisy”.

We have to do that again! Society has to function for the greater good of many not just for the greed of a few. There is no doubt about the need for social change and social justice. There is no doubt that our political institutions are dominated by greedy corporate interests. Change will have to come from the ground up and not imposed from the top down.

We are many. The greedy are few. I hope. Can you imagine someone tomorrow announcing that they have a cure for HIV and AIDS and that they are making a gift of it to the world?? The  Talmud commands that we not shall stand idle our neighbors blood or suffering.

Our leaders like Obama are disappointing. Our Religious Institutions are too busy worrying about Gays and defending their pedophiles to be a force for social justice.

I think we have to organize from the ground up. Unions probably offer an effective vanguard for social justice. The Occupy Movement does too  in the sense that at least it is a demand for social justice.

Yankee Bob

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STOCKS

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Strong correlation between Europe and US stock opening price

• We have just started to enter moderately oversold territory (-30) We hit @-140 in early Aug & @-105 in late Nov.

• Therefore,  there is a ways to go ( -36 to -105 = 69 points) before  we get any kind of solid reversal area.

So not expecting any technical help in the short term. Any reversal is going to have to come from some major change in fundamentals.

The whole financial world is again skating on thin ice

• A rising MO 50DMA , what we have now, usually correlates with a bull run. The relatively rapid rise in the MO’s 50DMA (below 0 to +25) is almost always associated with a longer rally

Fighting Crony Capitalism

Take the crony out of Capitalism – NYT’s Nicholas Kristof’s excellent defense of Occupy Wall Street

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Boycott BOA

10 Reasons NOT to Bank with the mother of all Bankstas

Bank of America.

From Nomi Prins at Truthout. Of all the ways  (hidden fees, lawsuits, nailing vets, over charges, pay’s no taxes) BOA charges vs other local banks I find reason # 6 the most compelling. They use your deposit to gamble hidden over leveraged derivatives.

“The total amount of derivatives in the FDIC-insured portion of B of A as of mid-year was $53.7 trillion, up 10 percent from $48.9 trillion the prior year, and up nearly 35 percent from its pre-fall [2008] crisis level of $40 trillion.”

Your over leveraged FDIC insured deposits at BOA  multiplied the severity of the 2008 housing/financial crisis. Who knows how deep BOA and other banksters (shadow banks) were into the European sovereign debt crisis? – Our Fed is not audited, US banks don’t have mark to market accounting, and the whole 500 trillion derivitives market hides its trades.

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Bankstas Take A Hit In Europe

Yes, over leveraged European financials did get a $1.4 trillion bailout fund. But they were also forced to take a “50% haircut”on the Greek bonds the held. How much of this haircut that will come out of their bottom line is open for debate. (See links in yesterday’s blog)

Bankers and Bankstas - There are normal Bankers who take our deposits and use them as collateral for loans that help people and small businesses. The good guys.

Bankstas take our FDIC insured deposits and use them  as protection to play casino capitalism, on bundles of mortgages, sovereign debt, student loans etc., called derivatives  or Credit Default Swaps.

This over leveraging is done in hidden transaction in an opaque $500 trillion derivatives market. The biggest poorly regulated bankstas are now too big to fail – Example BOA.

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STOCKS

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Reading Tea Leaves

• Our #1 technical forecasting tool, the McCellan Oscillator, is at +93.06 - OMG overbought = Bearish.

• Our secondary indicator, the Put Call Ratio is at 0.91. Well below its 50DMA which is at 1.15 = Bullish

• For more on MO & PCR see POSITION Section of blog (scroll down)

Stock traders/investors put their money down yesterday -  The proposed solution in Europe looks like it will have a somewhat similar impact on stocks that the  of 2009/2010 Obama/Bernanke bailouts did. In fact, traders/investors have been putting their money down since the lows almost a month ago.

It is rational to expect some kind of pull back today. But, there are lots on the sidelines who have missed out on the move looking to buy the dip. Volume was big yesterday, but not yet the huge kind of volume associated with a climax selloff.

Unfortunately, the bigger part of this move off the bottom is probably over, but it looks like we may be able to reach this year’s highs again.

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Positions

SPY – (ETF tracks S&P 500 or SPX) bought at 123.5, now at 128.63

Reminder – Your Stock List#5 – . 5 of our 14 stocks took  some big earnings hits (one on an analysts downgrade) So Paul & I have decided to drop TSU, RES, CROX, GMCR, & CPHD. . LINK to entire list (scroll down)

Under consideration.

SSO (ETF that is @2X SPX) Buy on dip. Investors411 uses a buy the dip strategy in markets that are trending higher.

EWG (ETF that tracks Germany) and/or EWQ (ETF that tracks France) Both are higher risk because they are on the cutting edge of what’s happening. A bigger technical breakout than US indexes. Yesterdays melt up was fundamentally focused on the fact that specifically German and French financial institution would weather the default crisis.

I favor Germany – better overall economic fundamentals. Buy the dip.

XLF (ETF for financial stocks) For those that can handle more risk UYG (2X financials) & FAS (3x financials) Several Investors411 bloggers have made out handsomely with gains of 50+% trading January Calls on FAS.

Mea Culpa – All of the above new considerations should have been listed Monday after the Upgrade.

Note – These are official Investors411 Positions – I buy each position mentioned.

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Long Term Outlook

3 to 6+ months

Investors411 upgraded its Outlook on Monday to CAUTIOUSLY BULLISH. Reasoning

• Technically, we broke out of this summers trading pattern. The resistance and now support level for benchmark S&P 500 is @ 1225.
• Fundamentally, the perception that European banks will survive (see Banksta at War) another over leveraged crisis
• A 2.5% GDP Growth in the third quarter is NOT a recession number.

CAUTIOUSLY BULLISH

Investors411 has 5 different valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

CHECK ALL DATA, I MAKE MORE THAN GRAMER ERRORS.

Bankstas At War

European Theatre

Just like the 2008 mortgage debt crisis we have a sovereign debt crisis in Europe. The major question is who is going to end up paying the bill? Will risk be again privatized by banksta’s with their politicians and socialized by the people?

The Big Picture – One reason why the NYT is the world’s most respected newspaper is they come up with outstanding charts and information “A Spectators Guide to the Euro Crisis”

800 LBS Gorilla – Hidden Derivatives Market

The NYT chart shows what happening on the surface. The real picture is full of smoke and mirrors because, just like the 2008 meltdown, the 800 pound gorilla in the room is the opaque, unregulated, derivatives market. Remember – Warren Buffets calls CDS’s (derivatives) “Financial WMD’s.”

Quite simply, once again, who knows what the exposure any major financial company is?  Remember – how interconnected  AIG was? MIT Economist Simon Johnson does.

Do they make a calculator big enough to measure the profits that banksta’s made off the European countries with debt problems in the opaque $500 trillion derivatives market?

Whose going to pay? The too big to fail interconnected (both globally and politically) banksta’s, the bond holders, or the people. The prevailing powers in Europe are now suggesting a 50% haircut for bond holders of Greek debt. (the most pressing problem country)

The austerity measures (raise taxes, fire workers, sell national treasures) imposed on Greece, already with 18% unemployment, would put the country into a long depression and benefit the financial elite who will pickoff Greek assets at fire sale prices. Bankstas war against people by Economist Mark Hudson quantifies this.

We have a broken globalized financial system that benefits a few at the expense of many. Banking used to promote growth, not make hidden bets (CDS’s) on repackaged debt. Profits gets privatized and risk gets socialized.

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Two groups with very different solutions passionately recognize privatizing the gains and socializing the risk is tearing down the financial stability of western democracies.

Poverty creating casino capitalism is being fought by both Libertarians (Ron Paul) and the Occupy Wall Street believers. (the 99%)

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STOCKS

Why the Rally – The perception by major market movers that in Europe the gains is being privatized and the risk socialize. Best measurement of this would be German financial companies- Thought to have largest exposure to European debt. Second best German stock market – Up 1.5% at 8:15 this AM.

• Our #1 forecasting tool MO rose to 91.33. OMG overbought levels. The highest in 3 years. = BEARISH
• Our #2 the PCR rose to 0.96. Shows pro’s who trade Puts and Calls are not very worried = Bullish
• See Strategy section of blog for more on MO & PCR

Reading Tea Leaves

Same as yesterday – Right now the news out of Germany trumps everything – Their financials move higher and so does everything else. Pro’s are bullish (PCR) takes some of the sting off how overbought we are (MO).

Traders - rallies in the AM, should be met by selling in the PM.  Because  like the MO and virtually every oversold/overbought indicator like it is so high.

Investors – Technically we have broken out of this summers trading range – That’s bullish and the long Term Outlook is now CAUTIOUSLY BULLISH. More often than not we retest breakout levels. However, Investors411 is nibbling on the SPX. (Any ETF that tracks this will do) It was chosen because it tracks the S&P 500 and is relatively safe.

JS suggests the SSO and The Critic suggests FAS (although she has a Put/Call play on this.)  Both are good but involve more risk.

Paul tells us there is great risk out there – he’s right. Paul is at a HGSI stock seminar in CA this week.

Bottom Line - The only other time the MO was so high and did NOT see at least a 5% fall in stock prices within a week or two was back in 2009.  Right now the insiders seem to be seeing the same dynamic happening. -

Privatizing Gains and socializing risk works for short term gains – but in the end if you keep putting more and more people in poverty at the expense of a wealthy few the end result is revolution

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Long Term Outlook

3 to 6+ months

CAUTIOUSLY BULLISH*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

CHECK ALL DATA, I MAKE MORE THAN GRAMER ERRORS.

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• “Must Know News” – From Seeking Alpha’s Rachel Granby

Investors411 Technical Forecasting Tools.

The McClellan Oscillator

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Reading The Tea Leaves

Short Term Outlook

days, week+

• We have again bounced off support levels with a slight HFT dominated low volume  rally Friday. Momentum is with bulls.

• Path of least resistance for HFT dominated US markets is higher.

• Energy , Financials and Copper (proxy for global growth) all made significant new lows Thursday= Long Term Bearish.

• US Dollar – Investors411 has used the dollar many times before tp forecast market direction. It’s worth noting an upside breakout - Chart. That’s bearish for stocks and gold. The contrarian side of this is a strong dollar, low interest rates/inflation coupled with a weak stock market give the Fed a reason to launch another liquidity move (QE #3) This would drive stocks higher.

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Current Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500

See POSITIONS Section of blog for more on YSL#5.(scroll to bottom)

NLY – Will buy back into  this high dividend stock on Dip.

Gold - Major move to downside. If the Fed comes out with QE #3 gold should instantly regain its shine. For now its fallen too far too fast to buy. Traders who can handle the risk – a third gap down at open and another  significant fall should bring us to longer term support levels. GLD is at very oversold levels. Perhaps a trade, but not an investment.

Strong dollar is significant factor in gold’s meltdown.

Traders - We still have a risk on trading opportunity. Our two forecasting tools are slightly bullish, but not yet at the more extreme levels where its even safer to buy. Rising dollar is counter weight to an extended rally, but momentum with bulls.

Investors - Thursday’ lead story is the Long Term Outlook for the Fall.  If the Fed introduces more liquidity, or by some miracle without Fed help technicals show an upside breakout of the trading range we are in (S&P 500 at 1136 – Range 1120 to 1220) – Outlook remains CAUTIOUSLY BEARISH outlook remains.

You can find YSL #5 in Positions Section of blog.

No long term positions held at this time (See last Friday’s blog for more)

Disclaimer - I buy everything in the hypothetical Investors411 portfolio. If stock is mentioned and I own it you will know.

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Long Term Outlook

(for US stocks only – not our economy)

CAUTIOUSLY BEARISH*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

Jon Stewart

Amerigasm

On Monday night we had the CNN/Tea Party sponsored Republican Debate. “A truly remarkable pairing, as a fringe often derided incopetent bunch of yahoos was granted legitimacy by pairing with the TEA Party.”

How totally incompetent was CNN.? How horribly low and devolved into spectacle has news become? Watch the Jon Stewart video Their debate rivaled The World Wrestling Federation in hype and spectacle.

Our mainstream news media as devolved into a very laughable parody.

Einstein

Relativity

Obama’s Job Program

This week many of you made some excellent comment on Obama’s job program.

• Content credible
• He proposed how to pay for it – again credible with more to come next week on cuts to entire budget.
• It’s political – Obama  intends to run on this.
• Republicans have no plan or ones that include cutting taxes on big business/wealthy, and no specifics on deficit reduction.

Relativity – We have a patient whose dying and Obama’s job plan does offer  the patient  a pint(s) of blood. But the problem is that the wound is open and bleeding.

We have a dysfunctional shadow gambling/financial system that need regulating and regulators. This shadow system is now impacting Europe. Major US companies continue to bleed US jobs overseas.  Until the wound is stitched and closed the prognosis – negative.

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Investors411 Technical Forecasting Tools.

• Investors411 uses the PCR to measure the path of least resistance for HFT dominated stock market. HFT’s love leverage and if there are more puts then calls, there is simply a supply glut on one side that forces a move to the other. See above.

The McClellan Oscillator

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Reading The Tea Leaves

Short Term Outlook

days, week+

• Our forecasting tool are  Bearish/Neutral (see above) - You rather enter oversold markets and exit overbought markets. Advantage to Bears.

• If the PCR was below 0.80, the Bulls would rule. (See Current Positions below for more)

• We do have a technical series of higher highs and higher lows build on major indexes.

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Current Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500

See POSITIONS Section of blog for more on YSL#5.(scroll to bottom)

• Tea Leaves – Any @200 point Dow rally should bring the MO to or above +80.  Ideally we like a lower PCR. However, this (a potential +200 point Dow rally today) could be a risk on trade to nibble at - GO SHORT – Use a leveraged ETF like SDS or TZA or sell some long positions.

• Monday was a risk on to go long. It worked.

• If @+200 Dow points today – HTF will have pump this market higher and some technical levels will have fallen (higher highs). Institutions will get excited and buy, then HFT’s will dump it. CAUTION – This is contrarian advice. Most analysts will see  a +200 point move on the Dow as bullish. Longer term it technically is.

• Risk on = For those that can tolerate the risk you have a fair trading opportunity – GOING SHORT in this case -. It could be better, even much better, but the tea leaves put the odds in your favor

• If Investor411 goes short or buys GLD you will see it first in the comments section of the blog.

Positions

NLY - Annaly Capital Mgt. Ultra high dividend stock –a @14% dividend

GLD – (Long Gold ETF) Bought at 167.05 - Sold 1/2 for 8% gain. GLD closed at 174.40. Gold is contrarian to stocks and More willing to buy tan sell right now into a stock rally.

Disclaimer - I buy everything in the hypothetical Investors411 portfolio. If stock is mentioned and I own it you will know.

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Long Term Outlook

(for US stocks only – not our economy)

NEUTRAL*

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

Why Are Stocks Rising?

• China – The Chinese stimulus package was directly aimed at infrastructure and was well over twice as large as ours (relative to GDP). China went on a buying spree of natural resources (they were cheap) and the BDI (see below) exploded higher over 600% in the first 1/2 of the year. China still has a large net surplus and can offer another similar stimulus package without going into debt. India and Brazil have helped, but China is the driver.
• The USA - The USA was at the epicenter of the financial meltdown. We built phony wealth (phony GDP) by trading Credit Default Swaps and it all exploded when housing prices fell. The consumer, and our government was in significant debt before the financial/economic meltdown. The consumer and banks (especially the larger shadow banks/institutions) have benefited from our stimulus package, bailouts, and printing money by Fed and government.
• Stocks  Moving Higher – The consumer is saving more and the government borrowing more. Robert Reich has a similar view LINK ( scroll down-thanks to one of you for referencing this) Problem here is we were already in significant government debt and had been running an unregulated financial market that created “Financial Weapons of Mass Destruction.” (Warren Buffett’s term for CDS’s) This unregulated capitalism is GROWING – up 14% from last year. LINK There has been almost no regulation or transparency imposed by government to solve the problem. In fact, we removed mark to market accounting, making less transparency.

So US financials (everyone who traded or still trades CDS’a from AIG to GE) have had (directly or indirectly* ) wheelbarrows of money thrown at them – their profits/stock prices have grown.  China and other emerging markets have maintained a positive GDP and helped move US markets higher. Its great that consumers are saving more. However, we do need consumers (70% of the GDP) to spend to get the US economy moving again.  US stocks can move higher on a falling dollar and selling more abroad.

Bottom Line – It’s the US economy or Main Street that is in deep trouble, not Wall Street.

* AIG was bailed out by US government. They in turned paid obligations to shadow banks & hedge funds, who paid GE Financial and/or big banks, who paid Fannie, Freddie, & smaller banks, who paid mortgage companies etc..  This order is not 100% accurate, but it shows how by paying money to AIG  others “indirectly” got money. Every TARP bailout recipient had its own domino chain of debtors.

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

Volume exploded lower and stocks exploded higher.  Volume is the #1, confirmation factor of a market rally and in no way did volume confirmed yesterday’s rally. The excuse given by talking heads was it was the a major Jewish holiday. Jews are less than 1% of the US population and they don’t control 50+% of US equities.

Long term – Even more significant is the fact that as this rally gets extended volume has declined. Check out the 4 key US stock indexes (listed above) longer term charts and what you will see is an overall drop in volume as the markets move higher. You’d think it might be due to seasonality – summers are usually slower, but after Labor Day volume historically rises. It has NOT this year.

This does not mean that markets will not move higher, at least temporarily, but it is reason for caution. When the #1 conformation factor of any price move decreases while prices flow in one direction (higher) you have to be skeptical.

A bubble is building. This is why you see me almost begging for a market correction of 5 to 10% sooner rather than later.  You combine this with the fact that the BDI (measurement of world trade) has fallen almost 50% since the summer began and this adds fuel to the fact a price bubble is building. If volume was building you could say new money was coming into the stock market. It’s NOT .

Big news for week is the jobs number fro the month of Sept. coming out Friday.

BDI seems to be temporarily turning higher = Bullish

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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 now resistance level/number to watch – two days ago the BDI reversed direction and  BDI was up +20 . Yesterday the BDI gained +9 closing at 2192 . These are very small moves, but in the right direction.

The BDI is almost 50% 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 2192 (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.

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

The dollar rose +0.27% yesterday.  Somethings up that raises caution flags. Both the dollar was up and stocks exploded higher. Usually there has been an inverse relationship.

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

revised to reflect recent trades last weekend

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!