19 months ago in his 2010 State of the Union Barak Obama made perhaps his biggest mistake.

He did not focus on  the clear and present danger of jobs growth (which would have lowered the deficit) instead he focused on deficit recuction through cutting programs and raising taxes.

Perhaps he thought the other side would compromise in good faith. Perhaps, as some believe, he’s just a tool for the corporate oligarchy and in the end would make sure the folks who finance elections would get what they want.

On the battlefield General Petraeus in Iraq compromised with the terrorist who had fought Americans and brought them over to the other side = a compromise. But is the USA compromise to conservatives is an abortion – Tea Party Patriots – Don’t compromise.

Thanks to Jim J (for finding) and Erin Clouse (editor of the Brookline TAB for posting) this editorial from which the following points are drawn. The Tea Party and all the Republican candidates have take taken oaths NOT to compromise. The Tea Party -

• - It badmouthed the economy and the government at every opportunity, undermining the confidence of consumers, businesses and investors both here and abroad. And yes, the confidence of credit rating agencies.

• - When President Barack Obama and House Speaker John Boehner got close to making a deal for $4 trillion over 10 years, the tea party caucus yanked Boehner’s chain, and he pulled out of the talks. The grand bargain was dead.

• - Tea partiers spread the myth that a default wouldn’t be so bad, further feeding the perception that a powerful political bloc couldn’t be trusted to be responsible with the nation’s finances.

• - The tea party drove the debate — its leaders say so with pride and most pundits agree — to an unsatisfactory and unpopular conclusion: the debt ceiling reluctantly lifted, a last-minute deal nobody likes, a scant $1 trillion in deficit reduction, no reforms to taxes or entitlements, a disgraced and dysfunctional Congress, and a December date for another battle over the same turf.

As most of you realize, progressive are almost always willing to compromise – to look for a win win situation, but a conservative shoots first and asks questions later. Their world is black and white, heaven and hell, you’re either with us or against us and best your either a patriot or the enemy.

Click on picture below for enlargement  of latest (no compromise) brown shirted Republican to enter race

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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

Shorter Term Outlook.

day/days/week

Gert Frobe from James Bond movie Goldfinger

Over the last two weeks almost every serious investor learned about gold or GLD. Two of the three legged stool that hold up the world economy wobbled over the last two weeks and investors rushed in fear to the shiny sparkle of gold.

The Three Legs

• USA – Total incompetence in congress. The far rights  strident refusal to compromise has set off warning bells from the stock market to Standard and Poors. Every European solution has included a tax cut on the wealthy, but NOT the USA which is dominated by Tea party Ideologues. Consumer confidence in the USA is near an all time low while retail sales is still blissfully chugging along. See chart below show a massive disconnect.

• Never forger our mantra – High Frequency Traders Rule US Equities – These entities make their decision in microseconds and not on long term trends.

• The McClellan Oscillator (MO) fell to-8.20 (-30 somewhat oversold, -60 oversold, -90 OMG oversold). Chart shows we are almost dead center in the middle of oversold and overbought territory. There’s wiggle room for stocks to move either way = Neutral

• Reading The Tea Leaves - Stocks are moving on headlines and that move is exaggerated by all the HFT trading.

From Friday’s Bottom Line - Technically because of the retest of the low and strong momentum higher HFT’s will take markets higher.  Headlines still rule and HFT traders can react instantly and with great volume to headlines.

Investors411 has been on a hot streak with daily calls and let’s see if we can make it 4 in a row  - Momentum carries markets higher today. It’s been relatively easy to get out of massively oversold territory, as we get more and more overbought the going for the HFT’s will get tougher and tougher.

Longer Term Outlook

weeks, month, months

• Repeat - May 20th forecast still stands. The recent Washington debt crisis debacle has focused everyone on cutting the money supply.  Simple math – The less money that’s out there = less jobs = greater chance the “Great Recession” returns. European debt and emerging market’s inflation fears add to this. As predicted the 15+ % drop has come to pass this summer Best read of tea leaves is a 1 in 3 chance for a bear market (20% drop from highs)

• Long Term Outlook Listed Below. Major long term trend (monthly) lines that have been broken. LINK. However, we are close to climbing back to NEUTRAL (see 50 day moving average on monthly chart), The Fed has promised long term low long term interest fates till 2013, and that’s significant for US economy. If the Fed does some type of QE #3 – this could also get us back to CAUTIOUSLY BULLISH LINK

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Look for Paul’s Corner every Tuesday and Thursday

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Current Positions

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

YOUR Stock List #5 is done and except for some last minute tweaking and waiting for an earnings report. It will be published on Thursday in Paul’s Corner.

NB – With the exception of NLY & GLD (both profitable and remember NLY’s 3 to 4% dividend) Investors411 held no long positions for most of the summer and especially August.

NLY - Annaly Capital Mgt. Ultra high dividend stock – It’s been shaky, but so far NLY has held up reasonably well through current stock market slide. NLY is the only position in Investors411 hypothetical portfolio

I still have a Put position to protect NLY. (strike price $17.00 for 3rd Friday in Sept) Also puts on other dividend stocks.

GLD – (Long Gold ETF) Obviously a MAJOR mistake to sell and take meager +3% profits. Like a millions of other people who see worldwide economic problems ahead – waiting to buy another diptobuy. Also sure looks like GLD had its climax run and could be settling. We’ve had a two day dip and will buy if day 3 of a dip occurs.

Disclaimer - Personally I own  a group of dividend stocks including NLY, SNH, KMP, MO, HTD, T, ABV & AGNC and a few other smaller positions I have puts on most of dividend stocks I own. I buy everything in the hypothetical Investors411 portfolio. I also own some (about 80% of thisposition has been sold) SDS & TZA (ETF’s that double and triple short the market) as hedges.

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Long Term Outlook (for US Economy)

BEARISH

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Long Term Outlook (for US stocks)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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Stocks 2011

The economic outlook for the USA is no better than 2009 or 2010. Every time we learn more about the unregulated, over leveraged 2008 financial and housing meltdown the wore it gets.

The 3 dominant mega trends are still significantly impacting economics and stocks across the world. Investors411 has added a 4th – Lies/deception/opaque capitalism.  The 4th trend is growing in the world’s largest economy – the USA & ultimately will devastate economics if it continue.

The problems in the USA are both systemic and due to our dependence of unregulated, opaque, casino capitalism.

There are sectors, countries and asset classes that should do well in 2011. So here’s a rough list that I will  go over in detail tomorrow and Friday

• Gold
• US financials (I hate these bastards)
• Brazil, Norway & other energy rich countries
• Rare earth sector (from steel to solar materials)
• China’s wind and solar power industry
• Energy
• Even US major indexes should do well – as long as Fed supports them.

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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 – 5 years of beating benchmark S&P 500

• Markets were flat & volume abysmal
• Infamous AIG rocketed almost +10% higher Monday. Opened higher  and ended day with slight loss. AIG held almost all of 10% gain is Bullish for stock and shadow financials.
• Repeat – Weak trading means two entities dominate High Frequency Traders and the Fed.
• Double dip In Housing Prices is happening. – Roubini – Data seems to back up his conclusion that home values are on way down again.
• Decline in housing value is bad news economically for the economy & your house. But good news for stocks because it gives Fed more justification to keep quantitative easing and low interest rates going.
• Consumer confidence dips amid job worries

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Reading The Tea Leaves

Paul R stated last evening in comments section that “Looking at the charts and market internals again, things are NOT looking good. Market leaders are breaking down.”

He’s Right - Nothing has felt right about this overbought market. All the major indexes are over extended above their 50 day moving averages. Many of the momentum stocks are consolidating or heading down. This is also a strange holiday week & because of the ultra light volume so its hard to make a clear call.

AAPL is the big kahuna out there for stocks and especially technology. It’s not over bought. If you look at the chart you can see a pretty constant 6 week trend where Apple moves,let’s cal it one standard deviation higher than its rising 50 day moving average. APPL inched out to a new high yesterday. If Apple breaks down watch out!

Always remember – This market is being held up by artificial means – the Fed. That means when bad news occurs like housing prices dipped for 4th straight month & consumer confidence is falling – stock traders think the answer will be more quantitative easing by Fed. This doesn’t mean we can’t have a correction, but over 18+ months its shown there is support under stocks that make buying the dip successful.

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Positions

• #1 UWM - (2x small cap stocks ETF) – Sold 1/2  for +9% profit
• #2 UWM
• EUO – (double short the EURO currency)
• UCO – (double long oil) Bought Tuesday at  12.39 (this is a trade of short duration)

Below is rather technical and might make your eyes glass over. However, if you want to have the basic tools for investing I do strongly urge you go to Chart School (see below)

UCO - Trade -Reasoning –  This is NOT a trade I should have made in Investors411 because it breaks the basic strategy of buy the dip of a trending sector. My bad – several of you sent me personal emails on this and the following is my reply.

• To make any trades (as opposed to long term investments) you have to understand candlestick chart patterns,
• In fact, StockCharts – perhaps THE best FREE site on technical analysis has a who tutorial or school section.
• Almost All the links to charts at Investors411 are links to StockCharts.com charts from the $USD to the individual stocks listened on Your Stock List in the POSITIONS section of blog.
• Tom DeMark developed a 9 day momentum trading system that has nothing to do with Stockcharts, but to understand the system you have to know how to use candlestick charts.
• Here’s a good example of the DeMark system on ETF’s in video I did go over this on Dec. 1.
• I believe UCO is going to be a good long term investment because oil is likely to hit $100 or more. Historically oil prices go up as summer riving season approaches and emerging markets are demanding more oil.
• However oil prices are at a new yearly high and a long term investor (not trader) should buy the dip in UCO.
• What I saw was a half decent DeMark 9 trade. A breakout that had yet to run out of momentum. It had only 6 days of momentum from a low and I plan to get out on the 9th.
• This is not the best use of this system. Another reason I regret announcing the UCO trade.
• However I will hold onto UCO till day 9 and willing to take a 2% hit on the ETF. (I placed a 2% stop below the price I bought it for)

Bottom Line – there are a lot of trading systems out there. This is one of the better known. None of these systems is perfect. I just happened on this system over a decade ago and often use it for shorter term momentum trades. From DeMark’s Wikipedia listing “His timing techniques have become the industry’s standard.”

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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 for lists of potential stocks & ETF’s including ”YOUR Stock List.” (YSL)-

What’s Up? – David Patraeus on torture and Gitmo – The Supremes sing in Spanish – Californification, Is the Golden State falling into the sea? Will the US join them – Women’s historic win in the Islamic state of Kuwait – Fearless market forecast.

Petraeus – Huffington Post photo

Torture

• Obama says – torture bad – closing Gitmo good – Right wing says NO
• McCain says the same thing – Right wing says NO
• Powell says same thing – Right wing says NO
• Admiral Mullin (chair joint of staff & a Bush appointment) says the same - Right wing says NO
• Sec. of Defense Gates says the same (another Bush appointee) says the same - Right wing says NO
• Now the hero of the right wing General Petraeus says Obama is right – what will Cheney, Limbaugh and the rest of the right wing now say  about torture and closing Guantanamo Bay?

Californification

California is up to its neck in quicksand. Its one of the leading states in foreclosures and unemployment. Will the US follow California? Previous posts over the years have brought up California’s two major problems

• Proposition 13 - This state taxes property at what you payed for it. So for example if you payed $50,000 for a property 30 years ago and it is now worth $1,000,000, you pay only a tax on$50,000. Someone who buys property now pays today pays a whole lot more – This has lead to a serious short fall in revenues.
• You need a 2/3 vote in the legislature to make any serious changes in tax structure.

In the USA we too have self interested people who want to pay almost no taxes & have to overcome a 60% filibuster in the Senate to make any serious tax changes.  Not as bad as California, but still a problem.

Want to learn more – See Nobel Prize winner Paul Krugman’s editorial California - A State of Paralysis. 

Sotomayor – AP Photo

Supremes

Front page of every newspaper – An “inspired” (obviously others might disagree) choice for the Supreme Court – Sonia Sotomayor. – - Impressive legal background, compelling life story, first Hispanic ever nominated to Supreme court. For more see NYT editorial

Aseel al-Awadhi photo – Boston Globe

Women in Kuwait

4 of the recently elected 50 members of parliament in Kuwait are now women. This begins to breaks the mold of how women are treated in Muslim countries and a first for the Gulf States. This is truly a historic move

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals 

Forecasting what markets will do is all about how potential investors feel about the  fundamental aspects of stocks and the economy. Technicals (looking at chart patterns) gives us some idea of where the traffic signals are. It all about predicting attitude.

Yesterday the US stock markets exploded higher as volume rose. However volume was below average and below the down days of both Wed. & Thur. of  last week. While the price move is encouraging and explosive, what natural for a sustained rally is increasing above average volume. This show buyers or potential investors are not moving back into stocks.

Yesterday is certainly not a bad day and it may be the start of another leg higher. However for right now it is a move from near the bottom of the consolidation pattern we’ve been in for the last three + weeks to near the top. Therefore, no big green light till volume confirms a breakout.

One interesting pattern is developing – The first trading day of each week recently shown a  a significant move higher and the rest of the week has given up those gains.

Good consumer confidence numbers were said to be the fundamental behind the market move. Never seen consumer confidence boost the markets this much. Very suspicious over lack of volume.

News this AM – GM bondholders say no and it looks like GM will go into bankruptcy.

XLF - The ETF that tracks financials (mostly shadow banks ) rose +3.26% . This index closed at 12.04. As stated in past updates for the last 3 weeks financials have been trading between @ 13+ and @11+ (more specifically support at 11.33 and resistance at 13.08) Any close above or below these support of resistance levels would turn confirm a longer term trend for bull or bears.

WTIC - Oil prices again closed over their $60 support level +1.26% at $62.45. Energy related stocks kept the rest of the US markets from loosing more ground. As stated before – Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.

Reading The Tea Leaves - Yesterday we moved up within the consolidation range. (see above or chart of SPX) There has yet to be any breakout in any US or world indexes.(except Brazil) The formerly leading Financials (shadow banks) are now a bit behind the major US indexes. The NASDQ (techs) seems in the lead.

Positions - (See positions section of blog for more)

•  EWZ - sure looks like it was a mistake to take our substantial profits (+26) in Brazil (EWZ) Brazil reached a new closing high yesterday. As stated Thursday looking for a dip (-5 to 10%) to get back in.
• Inflation – GLD (gold) is one of the hedges against inflation. As recommended last week I was able to add to this position as about $93. We sold some gold at $95 earlier this year. 
• There are ETF’s that also will move higher if/when inflation occurs. Considering TBT  (explanation later this week), but is has way too high a price right now.
• FXI – our major position here only rose +1.24% yesterday due to the proximity of China to the nuclear test in North Korea. 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !