Bada Bing, Bada Bang, Bada Boom!

YOUR Stock List gained +14.4% vs. a gain of +1.5% for the benchmark S&P 500. Just like YOUR first stock list earlier this year we crushed our benchmark index over the last 6+ weeks. (more below)

Fear Mongering/Globalization/Jobs

The biggest plate of warm turds being fear mongered to the US public through the Tea Party and like minded folks is that if we don’t extend tax cuts on the ruling oligarchy job growth will suffer.

Investors411 readers already know that jobs are being outsourced abroad through “scaling”.

Now, lets take a look at some figures from when we had the massive tax cut to the rich in 2000 to today. Figures are from the Financial Times and if you would like a video presentation check out Cenk Uyger’s presentation (sorry short add before 4 minute presentations)

1. $1.3 trillion in tax cuts for the rich since 2000.(not compounded) Result – we loose 7.3 million jobs.
2. 1950 to 1990 we have 3.5 to 7.4% real growth Compare - 2000 to now 1% real growth.
3. 1950 to 1990 investment in equipment & software 5.7% to 9.9% Compare – 2000 to now 1.9%

So where did all that money go?

1. Emerging markets grew 120% Compare to -6% for the USA (FSCI emerging market stock index)
2. US investment abroad in 2000 $1.3 trillion Compare to now $3.2 trillion

This means that the our weathy oligarchy spent $1.9 trillion (much more than just their $1.3 tax cut dollars) in creating jobs jobs jobs in China India and throughout the globalized economy.

Add to this figure Shadow banks money going abroad, TARP money going abroad, and US corporations building and investing abroad.  The American working class is getting crushed by our corporate oligarchy.

Postscript – If you like you can officially call me a hypocrite. Because for 6 years I’ve been telling anyone who’d listen to invest in emerging markets. If you go to the POSITIONS section at top of blog and click on it. Scroll down and you will find a list of emerging market recommended ETF’s to invest in. We have made money together

My only defense is every major US company is globally connected to some degree. Even smaller companies are at least indirectly connected to globalization.

But the Bottom Line is – Tax those who profit most off globalization and use it to help the US working class who are getting clobbered.

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

Mantra for September - “The Black Box/High Frequency Traders BB/HFT control the majority of trades. Jim Cramer -”BB/HFT make up 80% of trades.”

US Markets

Very Strange – Usually the big rally day (2 days ago) has more volume than the confirmation day that follows. We did basically hold onto the gains so the rally is confirmed. However this and what’s happened in the dollar (see below) are breaking usual patterns.

Bada Bing Bada Bang, Bada Boom

Paul R has computed the results of YOUR Stock List (more info in  POSITION section at top of blog)

“14.4% UP! Your Stock List (based on a dollar weighted index) from 8/3 to the close on 9/20! S&P 500 was up about 1.5% at the same time. PCLN has enjoyed a 48% gain during this time and it skews the return of the whole list a bit, but the dollar weighted chart buys an equal dollar amount of each stock so PCLN doesn’t effect the chart too much.

Here are the actual PERCENTAGE gains of the stock on the list from the 8/3 close to the 9/20 close.

AAPL 8.37
BIDU 7.75
SAM 1.95
UFS 4.39
F -1.59
GMCR 18.70
HMIN 12.60
IMAX 6.57
PCLN 48.91
RADS 25.46
SWKS 17.87
UPS 1.02
VCI -3.81

After yesterdays pop, many of these stocks “may” pause to refresh for a day or two (maybe). When a stock pauses to refresh like this, and takes off again this may give a chance to buy.”

Significant Indexes

• The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar moves inversely to stocks] The dollar, crashed  -1.10% yesterday. It ended the day right above key support level. = Bullish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Fell a -2.51%yesterday.  The BDI does not have the immediate impact that the MO or Dollar does. 7th down day in a row, with rate of fall decreasing. After 8 week bull run trend could be changing to bearish,= Neutral/Bearish
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO fell  to +23.67 yesterday.  A huge drop considering how small the fall was on the NYSE. Back just above 50 DMA/ support level which is at 19.03 Trend = NEUTRAL

Reading Tea Leaves

Something’s big is happening. The dollar fell a huge -1.10% and this usually translates into a sizable stock rally. Yet equities went nowhere. We are just above major support for the dollar. Is the inverse relationship between stocks & the dollar breaking down? Is the dollar @ to crash and burn? This answer is above my pay level.

Reality is there a whole lot of major institutions doing a whole lot of market manipulation (hedge funds, central banks, sovereign wealth funds, BB/HFT’s etc.)

One clear pattern/trend developing – We keep bumping up close to +60 on the MO & stocks can’t get beyond this now strong resistance level. It might be that stocks are just too overbought to move higher.

Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

(I do manage 6 accounts that have other positions)

Current Longer Term positions -

• EWS (Singapore)
• USO (price of oil/commodity)
• SSO (2x what S&P does- this ETF is more a trade that may turn into an investment) I have a 3% trailing stop on this trade

If, we get up over +60 on the MO and  the Dow/major indexes rally – that would be a selling or shorting point.

Recommendations -For everyone who uses trailing stops on trades -It may be time to tighten them. If you’ve made profits over the last month, no one ever went broke by cashing some of them in. That’s what the Tea Leaves seem to be saying.

Long Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

1967 TV Show Lost In Space-

Danger Will Robinson Danger Danger

It’s time to take out the Old Lost In Space TV show robot with all its bells and whistles and  have him flap his arms and announce Danger Will Robinson Danger Danger.  We’ve reached a critical technical support level of the US stock market (see stocks below) and if that level falls you could see growing panic.

The fundamental behind all of this is the revaluation of European currency down and the US currency higher. This reflects the worsening shape of Europe’s economy. Eventually a lower Euro will mean their goods will cost less to export. This will help their recovery. Relatively it means a rising dollar. Therefore, our goods will cost more to export. This will hurt American companies that export and cut profits.

It looks like the Central Banks across the world will step in to soften the fall. But right now a fall seem very likely. Lots more below under Stocks

Your Comments

Some Great threads going in comments section. See comments on right side of blog

• Paul R and others on stocks.
• Jim J., John S. & Popeye on Israel
• Yankee Bob and others on BP

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!

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

The Bears Growled Again Monday. Sorry had a hard time reading volume charts (see right side of blog) and click on each Financial Chart in light blue on right side of blog.

Volume has NOT been as relevant as it has been historically as a confirmation factor. This makes the day after a major move more significant. Another decline (about 50% as big as Friday’s) is bad news for bulls. You can feel the fear investors have. = BEARISH.

The benchmark S&P 500 reached 1049.86 – a closing low for the year = Bearish

There is two interday lows that were lower this year – the lowest at 1040.78 (see chart) This is the line in the sand major support level for most technicians. Breaking this could open the DANGER WILL ROBINSON DANGER DANGER Floodgates. For right now it’s holding = Bullish

Approaching support with a lot of downside momentum (last two days), a rising dollar, and not yet over sold MO (see below) gives the bears a big battering ram. = Bearish

Significant Indexes

• McClellan Oscillator fell dramatically Friday to -47.68 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. Momentum down/Bearish, and approaching oversold. Remember in the past month+ twice the MO has fallen to over -120 So the MO can go much lower than -60 = NEUTRAL
• US Dollar –  The dollar rose +0.25% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Massive breakout to new high is bullish for dollar and for bearish for US stocks. That big breakout Friday was confirmed by yesterday +0.25% gain = Bearish

Reading the Tea Leaves . Expect central banks to intervene and BUY the Euro to stop the growing panic. They might get overwhelmed by fearful investors today. Eventually it will fall. The fundamentals in Europe are bad (See Investors411 over last few weeks)

Would expect some sort of relif rally today after two days of significant price declines and strong support level in front of us. But watch out later in week.

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekend.

From Yesterday – “ SDS (2x Short S&P 500) Will sell 1/2 for hopefully 5% profit.”  - Sold 1/2 SDS (3% of portfolio) at 37.32 for +8% gain. Letting the rest ride for now.

From yesterday – Small remaining 1% positions in VCI & ESRX - Also considering selling into rally – Still Have VCI and ESRX will probably sellone or both into any rally this AM

The only position Investors411 has is a 3% in SDS (ultra short S&P 500)

Others we should be in include more ETF’s that short/ultra short major indexes, GLD & UUP (mirror’s dollar) Wating  for dips and MO to be higher to buy. These are all contrarian plays.

From Yesterday – Invetors411 main strategy remains wait for the McClellen Oscillator to fall below - 60 before going long.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? – Ballots over Bullets – Oprah, that’s right Oprah Winfrey – Healthcare vs. for profit illness care – Our Positions – The new Hedge is starting out with positive results – FXI, QLD, EWZ & IFN

Ballots Over Bullets

Tom Friedman has a Ballots Over Bullets editorial in today’s NYT. He echos what Investors411 has described as the results of Obama’s speech, and the relationship to the Lebanon elections. Like the economy, there are a few green shoots of hope in the Mid East. They may get crushed, but at least we’re not locked into the "you’re either with us or against us" mantra.

Oprah and HealthCare

Never thought you’d see Oprah Winfrey in Ivestors411. She is one hell of a business women. But Ophra also is setting a standard in health care. It may not be perfect, but what her show deals with is heath care and what we in the USA deal with is a for profit illness care .

Oprah promotes "wellness,  prevention, and alternative medicine" far more than our conservative, for profit medial establishment. Our mainstream medical establishment is addicted to drugs, surgery, and pills  like Cheney is addicted to bullets, hate and torture. There are alternatives that work.

Dr. Deepak Chopra , who I had the privilege of spending some time with decades ago, is now one of the loudest voices for change in the medical establishment. Take a look at his "Mainstream Medicine and the Oprah Factor"

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Remember – 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.

NASDQ is again separated from the pack.  The distinction may look small, but over time is has and hopefully will continue (see our "hedge" position) to outperform.

Volume was below average. No confirmation of a price move.

Reading The Tea Leaves

• Oil prices now over $70 a barrel - WTIC
• The BDI (measures world trade) has fallen 5 days in a row
• Interest rates of 30 year fixed mortgages have risen over 0.50% in last month.
• Chrysler’s bankruptcy deal and possible GM’s could get bogged down in supreme court. = Way more unemployment and foreclosures

There is fundamental long term trouble brewing just under the surface. The above factors is they continue in the same direction combined could crush a budding economic recovery.

What’s moving this market is a falling dollar. Russia did/said something this AM to cause the dollar to fall further – So stocks and oil prices should move higher this AM.

Position s – (See positions section of blog for more)

• The Hedge – Q LD went up +1.68% and SDS went down -0.54 %. This means our latest and second largest position made +1.24% yesterday.
• FXI – China -1,25% yesterday.  #1 position has dramatically clobbered the benchmark SPX this year. This ETF is falling in decreased volume and a new buying opportunity is/may arise.
• Looking to buy  into IFN (India) EWZ (Brazil) on dips.
• Looking to buy back into QLD (a separate position from "the Hedge")

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTIN G !

“The significant problems we face today cannot be solved at the same level of thinking we were at when we created them.

Albert Einstein

Barack Obama addressed (video & Transcript) the Muslim world yesterday in Cairo Egypt. He earned a standing ovation from the crowd of 2500 many with “tears in their eyes” (al Jazeera report) and no one threw shoes.

If you think in one dimensional fundamentalist terms like Osama Bin Laden and others you hated the speech. True fundamentalists everywhere believe your “either with us or against us.” In fact, Obama did not even once dignify the radical extremists  by  mention the word “terrorist” in his address. Instead he mentioned the word “peace 29 times.

“I have come here,to seek a new beginning between the United States and Muslims around the world; one based upon mutual interest and mutual respect; and one based upon the truth that America and Islam are not exclusive, and need not be in competition. Instead, they overlap, and share common principles — principles of justice and progress; tolerance and the dignity of all human beings.”

Yesterday the USA started building a bridge or, for those old enough to remember, you might call it introducing”detente.”  Extremists need growing hate to swell their numbers. Obama took that away.  al Jazeera, the #1 media outlet in the Arab world, editorialized Obama’s speech “was more than just soaring oratory and soothing words.”   This was just one small speech of a man, but perhaps one giant step for mankind.

For more see David Levy’s 10 Comments, or David Corn’s Obama’s Tough Tour de Force

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals 

The NASDQ was the only index that had confirming (the price move) above average volume. Volume is still not confirming the price move for both the Dow and the S&P 500.

8:30 AM EST Unemployment Numbers for May -345,000 Much less than expected and a 154,000 drop from previous month. Last two months revised down @80,000 and unemployment rate at 9.4% Wow! Blow out numbers for stocks.

$USD - The Dollars fall significantly impacts the rise in oil prices (oil , for the most part is traded in dollars) The fall of the dollar influences a  lot more (stuff for future posts)

XLF - The ETF that tracks financials (mostly shadow banks ) rose +3.58%. 

WTIC - Oil prices rose +4.07% to $68.81 – A new high for the year. As stated before – “Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.”

BDI - The Baltic Dry Index measures the flow of goods (world trade).  After what seems like almost a month of consecutive up days in a row the BDI fell yesterday.  A one day drop from 4,291 to 4080 in itself is not significant, but a 5 day trend to the downside would be. 

Reading The Tea Leaves -  

The longer we stay above breakout levels, the better it is for the bulls. Lack of volume is a concern and we have to watch the BDI to see if the reversal grows. Until we fall back into the consolidation pattern the new CAUTIOUSLY BULLISH outlook holds.

The Hedge

This is both a new concept and a new position for Investors 411. It’s really not that complicated and does not involve you buying puts and calls. It’s simple and if it works you could money no matter if the market goes up or down.

Basically your investment is that the NASDQ 100 will outperform the S&P 500.  If markets rise the NASDQ will go up faster (it did today by +0.17% – see above chart) If the markets fall, hopefully the NASDQ will fall less.

Reasoning – A large part of the top 100 NSDQ are well capitalized tech companies and tech usually outperforms the S&P in up markets. The S&P 500 contains a lot of insurance and financials that already have had a massive run. In the future there will be a battle over how to regulate these companies. This should negatively impact these stocks. 

Technically this hedge has been working over the last two months.

Here’s the trade – Buy equal dollar amounts of the following two issues.

QLD -Does @2x long what the NASDQ 100 does (ProShares Ultra ETF of QQQ)

SDS – Does @2x short what the S&P 500 does (ProShares Ultra Short S&P 500)

Because the NASDQ outperformed the S &P by 0.17% this hedge probably made @0.34% yesterday. Caution there is rarely a 100% correlation to the the two major indexes do. Basically it aproximates.

Either QLD or SDS is going to make money over time the other will loose. You probably will not make as much $ as you will in going all long or all short. But my read of the tea leaves is this stands a good chance of being a winner,  I’m personally committing @15+% of portfolio to this hedge.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

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News

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Nationalization

It’s here. The concept of nationalization has come out of the closet and now even Bernanke and Greenspan are using the term.  Worries over nationalization have caused a meltdown in stocks, but it seems to be better choice than the systemic chaos of bankruptcies or the taxpayers continuing to to be the major shovel throwing money at the problem.

Now the big boys  Bernanke and Greenspan are  using the N word. At Investors411 (see archives) you watched this significant trend develop from a whisper to a market mover that will significantly change our governments response to the financial crisis.

Learning lessons from India

India has been terrorized by multiple terrorist attacks that have originated from inside Pakistan. Yet they have not gone to war with them unlike the Bush administration who went to war with a country that had nothing to do with WMD’s or 911. The significant Muslim population of India has rejected the Mumbai terrorists. For more see Tom Friedman’s editorial – No Way, No How, Not Here.

Helping Mortgage Holders

Finally a plan to keep the rate of foreclosures from growing. All he Paulson TARP plan did was shovel money at banks. Obama has announced a plan to help possibly 9 million threatened homeowners.  The ripple effect of not helping would bring down a lot more financial institutions and further devalue home across America. Many comments on this are like those on the stimulus plan – while significant it is not enough – NYT editorial

Israel Elections

The vast majority of elections analysts see the right wing gaining power in Israel. To most Israeli’s and Americans the war against Hamas had a far better outcome than the war against Hezbollah. Of course there are many worldwide angered by both wars. While the centrists  did barely win the most seats in Israel’s parliament the  divided right wing parties picked up a substantial majority. 

Bottom Line – The peace process has become a whole lot harder

Stanford, Another Madoff

Another this time smaller $8 billion dollar Ponzi scheme has come to light.  Seems investors thought nothing of  investing in 10% to 14% yielding CD’s controlled by the Stanford Group. Mr S is on the lamb.  

Bottom Line - Once again the understaffed, incompetent SEC is caught with its pants down. When all you had under Bush (really since Reagan) was cut cut cut government and don’t you dare dare dare regulate free markets – Stanford/Madoff and an over leveraged financial catastrophy is the result.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Short Term Outlook

Major US markets took a breather yesterday. Foreign markets have rebounded somewhat overnight. CNBC, the most popular financial channel (they are right wing cheer leaders corporations) has a decent morning compilation of how markets are setting up for the day.

Momentum is still with the bears.

Long Term Outlook = Bears Rule

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See STRATEGY POSITIONS & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Trends, Politics & Economics

Banks – Is the Sky Falling?

Answer – No, but its being held up by smoke and mirror

The simple truth is, if you were to value the assets vs. the liabilities of most major banks and many smaller banks you would find that they do NOT have the collateral to back their loans.  Plane and simple – If the government (your tax dollars) paid the market price for troubled assets now these financials would go bankrupt . No assets would be left. If this happened, the whole banking sector would probably meltdown in panic. What’s more – as the unemployment figures grow this problem is going to increase.

Tim Geithner , like Paulson before him is going to take a shot at blowing the smoke and moving the mirrors today at 11:00AM EST.  The question is can he keep the banking/financial sector afloat long enough for the economy to turn positive and some of over leveraged positions become more solvent.

The ultimate answer or last line of defense to this problem that nobody wants to even take about is NATIONALIZATION .

The Bottom Line –  there is a massive shift in wealth from those who created this problem (they made truckloads of $) plus those who own the banks/financials, and you the American taxpayer who is bailing out banks to prevent an economic collapse. MAD? – smoke should be coming out your ears. The co director for The Center for Economic Research, Dean Baker makes the case Nationalization or Welfare

Obama on Stimulus

Lost count last night of the times Elkhart Indiana (middle class America) was mentioned is Obama’s stimulus speech  You can read or watch videos of the Obama’s speech at CNN – Paraphrasing his money quote – "It s only government that can break this cycle of recession."

Early review- NYT – unfortunately concludes "Odds are…even an $800 billion stimulus package will fall short of what’s needed to combat today’s downturn, and that more will be needed later. When the Obama administration asks for more, it will need to be able to make a compelling case that the first round was the best it could possibly be. It’s certainly not there yet."

#1 Progessive Voice in American Media

He’s quoted by everyone from Pelozi to Limbaugh – Nobel prize winning, NYT columnist Paul Krugman . His latest editorial "The Destructive Center"

What’s Pork?

A Bridge to Nowhere, Compensation for Filipino WW 2 Vets as part of the stimulus plan are certainly pork. But as one of you suggested does a "water park" wanted by a governor as part of the stimulus program constitute pork? Thanks for this and all your emails .

First a water Park like Disney World or a baseball park creates jobs to build the facility. Both workers and suppliers benefit. Once built it continues to create jobs for workers and revenue for products it sells (food, souvenirs, etc) It also generates tax revenue for the state.  So is a Water Park pork?   I’d certainly prefer money going to education bridges etc., but a ready to go water park in the right location (not Alaska) could create jobs jobs jobs and increased tax revenue for states.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Technicals

US stock markets held onto last weeks gains. Technically, this is a positive sign .

Troubled GE shot up like a rocket reversing most of last weeks losses.  Another positive.

Both volume and how markets react to news (our primary indicators) still show a rally building .

Secondary Indicators

Both Treasury Bonds and LIBOR have moved in a bullish direction over the last few months. The Baltic Dry Sea Index that measures the flow of goods between countries, is on fire +48% over the last 4 days and another +10% on Monday. = Big Time Short term bullish signal.

Fundamentals

Today we learn what Tres. Secretary Timothy Geithner and what he plans to do with the second 1/2 of the TARP money. (see yesterday’s comments) Can’t over emphasize the impact the importance of this plan to both financial stocks and world markets.

Dr. Doom and the Black Swan – These two guys predicted the current financial crisis. Their comments "Even if we play our cards right…it will take at least 12 months to get out of this recession." That’s the good news. For the bad news read full article on Roubini and Taleb

Short Term Outlook/Strategy

Technically signs of a rally building are about as strong as they get. Fundamentally, the stimulus package has passed the Senate and that’s a whole lot of money about to juice US economy. However, what Geithner says about allocating the the TARP money is key to any short term rally.

Oppenheimer analyst Meredith Whitney, a financial bear,  is on a winning streak and therefore the analyst that has Wall Street’s ear. If she goes thumbs down on Geithner so will the markets according to CNBC’s Jim Cramer

Bottom Line – Still no long term light at the end of the tunnel, but technical signs for the rally to continue exist.

Long Term Outlook = BEARS RULE

• On a 1 to 5 scale Bears Rule is at the bottom.
• This section rarely change s
• Changed are bolded and in plum or crossed out

Technicals - Best read of the tea leaves – 2009 Markets range bound between Dow 7449 (last year’s low) and 9654 (November 08 high )

Fundamentals – Problem in financial sector is far far far far far bigger than fist imagined. Impact of mess is going to take years to resolve.

Asset Allocation

15% to 30%+ Stocks (Depends on your level of risk) Buy/nibble the dips below 8,000 – the bigger the better.  -

Recommended Sectors

• 5%+ US Index ETF’s - UWM (Exchange Traded Fund does @ 2x what Russell 2000 does ) & QLD (does 2X what NASDQ does)
• 5%+ Emerging Markets - FXI (China ETF) & EWZ (Brazil ETF)
• 5%+ Alternative energy - GEX (alternative energy fund)
• 5%+ Gold - GLD (ETF for gold)

Chief Strategy -

Buy the dips. Use the Dow as a barometer for all of the above sectors except GLD. This is NOT your fathers buy and hold market. Under 8 years of Bush the Dow went from 11,000 to 8,000 and left a whole dung heap of economic problems.

Protect your gains – After rallies you can protect your long positions by using ETF’s that short the market. Two ETF’s that short major indexes (@ 2x the loss). These indexes go down you make money. The closer markets get to 9000 the more you think about shorting. Until the long term outlook changes this hedging strategy will remain.  Note – long positions/ETF’s  NASDQ & Russell, short positions/ETF’s S&P & Dow

• SDS – Ultra short S&P 500
• DXD – Ultra short Dow

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Turkey’s of the Year (Decade?)

This elicited a whole bunch of email responses from you – Thanks for the email. More economic TURKEY’S OF THE DECADE – from you

1. Most mentioned – 911 "Bush was caught with his pants down and stocks went up in flames."
2. The housing bubble
3. The internet bubble
4. The growing gap between rich and poor
5. Katrina’s "economic and human devastation"
6. Bailouts – "The $6 trillion amounts to $24,000 for every citizen" (bailouts = tax dollars, sovereign wealth funds, takeovers, mergers, & biggest – Fed printing $)
7. Trying to privatize Social Security and not fixing other future unfunded mandates.
8. Alan Greenspan and the Fed

Bailouts and Stimulus

Many of you are extremely frustrated at the way government and the Fed is dishing out the dough. – You should be – We failed to properly regulate the credit system and now we and our children will be paying for it.

First it is important to remember that the Fed is NOT a government agency, but a group of banks that work with the government .

The main rational behind these bailouts and stimulus packages is at the start of the Great Depression President Herbert Hoover did nothing and banks collapsed left and right. This and the lack of stimulus caused/intensified the Great Depression. Roosevelt took many actions that diminished the Great Depression and the ultimate public works/jobs program – WW 2 ended the Great Depression. The Bush and Obama administration are trying to prevent another Great Depression.

Not All Stimulus Packages Have the Same Impact.

1. Tax Cuts – Across the board tax cuts obviously benefit the wealthy more than everyone else (see countless past Updates). They do have a positive impact – the middle class goes out and spends the tax cut money and that stimulates the economy. During war you are supposed to increase taxes. During good economic times you are supposed to decrease deficits.
2. Rebate Checks – This is a one time tax cut and has the same stimulative impact. Great positive impact for politician who voted to give you money.
3. A Jobs Based Stimulus Program – Hopefully, Obama Stimulus Package – This is as close as you get to consensus among Economists.

According to a Univ.of MD. prof on ABC when you give a taxpayer cash he/she goes out and spends it and stimulates the economy. Not always the case with wealth individuals, but this economist put the true value of money given by the government at $125 for every $100 given. However, if you create a job, the true value of the same $100 dollars given becomes $325. – The worker builds a bridge and it has a much larger ripple effect from subcontractors getting payed, commodities being used to the fact that transportation flows better over the new bridge.

Economists might differ on the figure, but JOB creation is far more important economically than giving you your tax dollars. A second factor in this – unemployment compensation and lack of tax revenue from a jobless person. This increases the burden on those who hold jobs/pay taxes. Example auto makers and related industries loose their jobs it ends up costing you $200 billion in unemployment compensation, aid to the states involved & lost tax revenue. (see past Updates.)

(More to come on this)

Note #1 – The big downside of all stimulus and bailout plans is it adds to the deficit and/or long term inflation.

Note #2 – The only entity betting on America is YOU (the government/taxpayer) – If this all works we actually make money on all these loans. We need luck, new paradigms, new regulations, and enough people to believe Obama can walk on water to pull it off.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Happy Thanksgiving!

Index % Change Volume

Dow +0.43% down
NASDQ -0.50% down
S&P500 +0.66% down
Russell2000 +1.46% –

US Market & Foreign Markets

Technicals

US markets held onto their huge gains of the previous days yesterday and the benchmark Dow inched forward. Holding onto gains is a technical bullish sign.

Technically the volume behind the rally is encouraging. Dow at 8,443. Dow 8923 is the first minor resistance level and the falling 50 day moving average at 9337 is the next. 9654 is the major resistance level (see chart of Dow below) There is also a technical resistance level at around 8550 to 8600. This is the midpoint between the last high and low of the Dow. If you want to learn more about this 50% technical retracement theory (Fibonacci retracement ) being a resistance level.

What resistance levels are barriers that hinder the movement of prices going higher. They are called support levels as prices move down.

What needs to happen is for us to break the series of lower highs and lower lows that began over a year ago. Dow 9654 is that line in the sand.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

- Jobs data is going to get worse and this in the short and long term will drag markets down. This economic downturn is going to get worse before it gets better.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a four weeks+ ago to @2 .20. LIBOR inched higher yesterday. LIBOR rates have flattened over the last two weeks. LIBOR is the rate banks charge each other, not businesses.

The 3MTB fell from 0.13% yesterday and closed at a rate of 0.10% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – The situation is still dismal.

Sure looks like PANIC has returned to the credit markets again (check out chart) It eased a bit last two days

3 MTB chart

LIBOR chart (3 month)

New added spread sheet listing all the Treasury bonds traders of last 15 days. This gives a broader picture of the panic or lack of panic over US financial systems. This We will use the 3 MTB as a benchmark, but notice the 1 month MTB is down to 0.04% Not good.

Daily Treasury Yield Curve

Bottom Line – LIBOR (Interbank lending rate) falling helps Main Street’s a bit – Credit cards to adjustable mortgage rates are often tied to LIBOR. But by no means is credit back to normal.

OIL

Chart of oil (WTIC)

The Dollar

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook

Reading the Tea Leaves – italics = same comments as yesterday

Overall strategy remains in place – buy big dips, sell of short into major rallies. The current two day rally, while impressive has a ways to go before reaching a major resistance level (see above) The rally has a strong base (big volume) to build on.

Remember, more often than not new lows are tested

Short term – We are nearing the midway point of the technical trading range and this is often a resistance area. We do have at least a bear market rally that seems to be based on a more competent administration solving the greatest financial crisis since the Great Depression.

Best guess – Rally looks to have legs to take out some minor resistance levels.

Long term – Bears Rule Trend is still firmly in place. When it looks like the sky is falling nibble a little. Even if you think Obama can walk on water this is one hell of a mess and there is NO quick fix.

The established technical trend is Bears Rule – A long term series of lower lows (in price) and lower highs. Until this pattern is broken, Shorting (See ETF’s suggested below) as markets get closer to old highs is recommended.

NB – Will be adding GLD (gold) on dips to recommended sector. (More Later) Technically its chart has broken out of a trading pattern and fundamentally investors are thinking of it as a hedge against inflation. Market Updates held GLD for years and its time to bring it back.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded

Technicals – Series of Lower Lows and Lower Highs = Bears Rule

Reading tea leaves – Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought.

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to looks like the recession might will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance – Long Term Investors (up to 15+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY.

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5% + Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) (Obama administration will focus on this area )

*5% Gold
GLD is the ETF for gold

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

Turkey’s of the Year (Decade?)

In honor of the upcoming Thanksgiving holiday – there have been two major blunders that easily qualify for Turkey of the year and also could make it into the top five economic blunders of the decade.

1. Failure to Bailout Lehman Brothers – This spread $365 billion dollars of toxic debt (credit default swaps) throughout the world and shook financial markets to the core.
2. The Paulson Bit and Switch – We were told that the financial system would meltdown unless we spent $750 billion to take "toxic debt" out of the financial system. Instead the money was used to bailout financial companies History will tell if this was the right move. However bait and switch destroyed any credibility that investors had that the Treasury and the Fed knew what they were doing or had some sort of coherent long term plan.

Three major economic blunders of the last decade do overshadow this.

1. The massive growth of the unregulated and over leveraged credit in the USA
2. The huge growth of Federal and trade deficits.
3. An unnecessary "for profit" (Iraq) war that will end up costing tax payers $3 trillion dollars.

Citigroup’s Second Bailout

Obviously, some sort of bailout was needed or else the mother of all financial company’s meltdown would have caused financial markets across the world crash and burn. You (your tax dollar) have again bailed out and international company. Remaining questions:

1. Citi still has an unknown and huge amount of over leveraged debt. Will they need another bailout?
2. What other major banks and companies that traded CDS’s will need bailouts.
3. Where is the transparency? Where’s the plan that this failed company is going to have for the future?
4. Why did Warren Buffett get a better deal than US taxpayers?

Some decent editorials with more positives and negatives -
Another Crisis, Another Guarantee NYT
Citigroup Flop Exposes Folly of Empire- Building Bloomberg
Thumbs Up For Citigroup Bailout WSJ

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Obama Rally

Index % Change Volume

Dow +4.93% down
NASDQ +6.33% down
S&P500 +6.47% down
Russell2000 +7.44%–

US Market & Foreign Markets

Technicals

As predicted. the Dow support levels fell and all major US markets made a lower lows last week. (see charts) We have had a very significant two day "Obama" rebound The two day rally has had strong volume behind it. Therefore volume confirmed the move higher and we could see the rally get extended.

Technically the volume behind the rally is encouraging. Dow at 8,443. Dow 8923 is the first minor resistance level and the falling 50 day moving average at 9337 is the next. 9654 is the major resistance level (see chart of Dow below)

What needs to happen is for us to break the series of lower highs and lower lows that began over a year ago. Dow 9654 is that line in the sand.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

- Obama rally – In the last 1/2 hour of Friday US markets staged a major rally on the news that NY Fed Chair Tim Geithner would become Treasury Secretary. News that Obama’s news stimulus package would be bigger than expected, the announcement of his economic team, and another bailout for Citigroup added fuel to the rally.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a four weeks+ ago to @2 .17. LIBOR inched down yesterday. LIBOR rates have flattened over the last two weeks. LIBOR is the rate banks charge each other, not businesses.

The 3MTB bounced back some from 0.02% yesterday and closed at a rate of 0.13% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – The situation is still dismal.

Sure looks like PANIC has returned to the credit markets again (check out chart) It eased a bit last two days

3 MTB chart

LIBOR chart (3 month)

New added spread sheet listing all the Treasury bonds traders of last 15 days. This gives a broader picture of the panic or lack of panic over US financial systems. This We will use the 3 MTB as a benchmark, but notice the 1 month MTB is down to 0.01% Not good.

Daily Treasury Yield Curve

Bottom Line – LIBOR falling helps Main Street’s a bit – Credit cards to adjustable mortgage rates are often tied to LIBOR. But by no means is credit back to normal.

OIL

Chart of oil (WTIC)

The Dollar

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook

Reading the Tea Leaves – From last update – "Perhaps this week, maybe next week, maybe later but the major Dow support levels (8000 or 7800) are in trouble" The support levels did fall last week to 7449

Dow rebounded inhuge rally. Dow at 8443 – a little less that 1/2 way back toward the major resistance level at @ 9650 We have a another 500 points on the upside before we reach the first resistance level.

Overall strategy remains in place – buy big dips, sell of short into major rallies. The current two day rally, while impressive has a ways to go before reaching a resistance level (see above) The rally has a strong base (big volume) to build on. Remember, more often than not new lows are tested

Short term – We are nearing the midway point of the technical trading range and this is often a resistance area. We do have at least a bear market rally that seems to be based on a more competent administration solving the greatest financial crisis since the Great Depression.

Best guess – Rally looks to have legs to take out some minor resistance levels.

Long term – Bears Rule Trend is still firmly in place. When it looks like the sky is falling nibble a little. Even if you think Obama can walk on water this is one hell of a mess and there is NO quick fix.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded

Technicals – Series of Lower Lows and Lower Highs = Bears Rule

Reading tea leaves – Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Hopes of a more competent Obama administration have rallied stocks.

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance – Long Term Investors (up to 15+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY.

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*10%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 8,000 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

Big week in local politics and an art show = very few Market Updates this week. LAST UPDATE TILL TUESDAY.

Obama’s Character

Turning rhetoric into reality – You all remember Obama’s speech’s closing line – after pointing out divisions that separate Americans the it ends … this is the UNITED States of America. After 8 year of "your either with us or against us" Cheney/Bush Obama’s speech resonated. You can argue that this is a better or worse approach. Perhaps he should be a little more partisan or hard line. But his presidency is already taken three major steps to heal wounds and he certainly has a different vision.

1. Invited McCain (former opponent) for a well publicized sit down
2. Advocate Liberman (Dem. who publicly turned against him in election) keep his most important post
3. Offered Secretary of State job to Clinton (former opponent)

Of course there are those that disagree. 5 reasons why Clinton should not be Secretary of State . (thanks for the email on this)

The Economic trends

Your jobs, your house’s value, Your money (stocks) – Job losses are feeding stock losses that are feeding falling home prices. In the last sentence you can put jobs, housing, and stocks in any order you want. Underlying this spiral is those Financial WMD’s- Credit Default Swaps

The status quo – Governments and other entities have thrown, printed, borrowed (your tax dollars) money. Paulson says his $750 bailout bait and switch has "stabilized financials." However, the financial group as a whole stocks are falling far faster than the DOW. Add to this housing prices continue to decline – relatively meager financial efforts to halt housing and foreclosure problems. Stocks have fallen to near lows of year. Unemployment is rising.

The entire auto sector and related industries are about to loose some or most of 3 million job – A bailout, Chapter 11, or Chapter 7? Banks are hoarding cash and not making anything close to normal amount of loans – this negatively impacts auto’s and all business throughout the USA.

We have two months of limbo before Obama takes office. Sure seems that this situation can and will deteriorate. The more it deteriorates the harder it is to fix.

The good news – Gas prices and a new administration (hope). Will Obama’s middle class tax cuts, a stimulus package and a proposed auto bailout turn the tide? Lots depends on the details of these plans.

So You’re an Environmentalist

Don’t need to tell you about the last eight years under Cheney Bush and the lack of progress on everything from pollution to global warming. But have you considered another group of politicians who have put major road blocks to environmental progress and in doing so lined the pockets of petro dictators. – The entire (mostly Democrats) Michigan political delegation. Tom Friedman editorial

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow +1.83% up
NASDQ +0.08% up
S&P500 +0.98% up
Russell2000 -0.84%–

Headline – (Still) Support Challenged

US Market & Foreign Markets

Technicals

Number to watch is Dow 8,000 support level

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

- See Economic Trends above.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a three weeks ago to @2 .2 LIBOR inched down yesterday. (sorru do not have exact figure)
LIBOR at 2.13% according to talking head on financial channel this AM. – Moving in right direction.

The 3MTB bounced back some +22.22% yesterday and closed at a rate of 0.11% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – A little stability, but situation is still not good

Sure looks like PANIC is starting has returned to the credit markets again (check out chart)

3 MTB chart

LIBOR chart (3 month)

Bottom Line – LIBOR falling helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Chart of oil (WTIC)

The Dollar

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook

Reading the Tea Leaves – Perhaps this week, maybe next week, maybe later but the major Dow support levels (8000 or 7800) are in trouble Jobs, Housing and stocks are all in a downward spiral.

Personally – For now – I’m making sure my long term positions have some sort of protection. (leaving for art show and downside risk of Dow 8000 falling too great)

Shorting rallies with ETF’s listed below

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded

Technicals – Double bottom has formed, advance in strong increased volume,. Technically all this = at least a short term rally and maybe a long term bottom.

Reading tea leaves – Look for range between 8000 and 10,000 for rest of year. Very concerned 8000 Support level will NOT hold

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance – Long Term Investors (up to 10+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%

For now - PROTECT ANY LONG POSITIONS.

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*10%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 8,000 and uncertainty clouds the future. The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing