Paul Otellini – Intel CEO with new billion $ China Factory

US Employment – A Deep Dark Whole

Today in the NYT Tom Friedman has an interesting article on US competitiveness and an interview with and an interview with Intel CEO – Paul Otellini – who is opening a new billion dollar plant in China in October.  Freedman/Otellini try to sell their reasons this plant and future plants will go abroad and they make a few decent points.  But, let’s not kid ourselves, globalization, gives emerging markets huge advantages over the US. Besides tax breaks why do US companies like Intel build plants & create jobs in emerging markets.

• There are already plants here and emerging markets are growing over twice as fast as us. It beneficial to have a plant near faster growing markets where few exist.
• Cost for engineers (workers) in China is about 75% less and 35% less in Germany than the US.
• Labor costs to build the factory (usually the #1 cost in construction) are significantly less in emerging markets.
• There are no health care costs in China and a universal health care in othe indutrialized democracies – In the USA health care over 17% of GDP while other indutrialzed democracies are between 5 & 10%.

Solution – One area we should all agree on is increasing funding for the Research Tax Credit. From today’s San Jose (Silicon Valley) Mercury News – “What’s really needed is to increase the value of the credit, and to make it permanent, as President Barack Obama proposed in his 2010-11 budget.”

This will NOT solve the problem. Those 4 bullet points are very significant to the profit bottom line. But its a step in the right direction toward getting us out of a deep dark unemployment hole.

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!

Index	Percentage	Volume
Dow	+0.02%	up
NASDQ	+0.32%	up
S&P 500	+0.23%	up
Russell 2000-	+0.88%	-

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

Technicals, Fundamentals & Analysis

See Positions , Strategy , and Overview for changes made over weekend. (No changes this weekend)

A bigger rally collapsed in the last 1/2 hour of trading. Volume was up, but only the NASDQ was above average. Longer term rallies are usually lead by the NASDQ & small cap stocks (Russell 2000)  These two indexes have taken over market leadership in the last few weeks.

Most foreign indexes are higher overnight and this AM. The fundamentals behind this are probably the fact that Greece has approved budget cuts demanded by European Union (really Germany) for a loan,

But, and its a big BUT the broad New York stock exchange is now in oversold territory according to our McClellan Oscillator.  This is not your parents buy and hold forever stock markets more and more economic bubbles have burst or are forming.  So right now, even though momentum is with the bulls, its time to start cashing in on some of your profits. The more oversold we get the more you sell.  See positions below.

Significant Indexes

• McClellan Index rose to +62.51 yesterday We are now over +60 or Oversold territory. Time to seriously consider selling into any rallies.

Positions

The  Positions Section = latest buys and sells – (Revised positions last weekend) - These are positions I actually own

The mistake made was not buying enough long positions when markets got oversold last month or at -60 on the McClellan Oscillator.  Right now in Wall Street terms its time to start taking money off the table.

• recently bought (added to) EWZ (Brazil) - considering selling into any rally today or at open
  
• 1/2 of MOO (agriculture ETF), - Sold at 44.55 for +5% gain
• The remainder of THY (ETF that does 3X what techs do) – Sold into rally yesterday at 143.50 for +15% gain
  
• remainder of EWZ – Will sell into larger rally
• remainder MOO – Will sell into larger rally
• FXI (China) – Will sell into a larger rally
• IMAX – Still holding on (rallied 4+% yesterday)

ETFs because of their size and diversity are more prone to follow the broad NY Stock Exchange’s McClellan Oscillator.  Individual stocks less so, but most will.  Of course in the past few years there have been times the NYMO has reached over 100.  This is why you sell in moderation and not all at once. If we get up to area’s close to 100 Investors411 will start using ETF’s that short the market.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

-

National Georaphic – Great Wall of China (Emerging Markets)

Trends, Wars, & YOUR Money

Investors411 has followed 3 or 4 major investment trends over the last decade - Globalization, Peak Oil, Spread the Wealth & The Great Recession (the later needs some revision).  Global politics and events have impacted these trends and therefore investment choices.

• Fall 2008s financial meltdown proved again Free markets need regulations or they form boom and bust cycles . Even, arguably, the #1 proponent of self regulating free markets Alan Greenspan admitted he was wrong
• Working middle class taxpayers in the USA and around the world bailed unregulated markets with stimulus, packages, printing money, TARP programs, taxes , etc. This was socialism for the rich . It further expanded the gulf between the rich and poor in many countries.
• Emerging markets have kicked our asses as far as growth is concerned for almost a decade. Globalization and Spreading the Wealth to a growing, not shrinking, working class were the primary causes behind this.
• Most emerging markets have a managed or planned economy vs. our more unregulated economy. Few emerging markets were involved in highly speculative trading vehicles (example – Credit Default Swaps)

More recent events impacting trends.

• Wars - The US weapons budget has exploded over the last decade to the #1 budget sector and to @ 50% of the world spends on weapons. Obama has increased the weapons budget and the secret war in Pakistan is no longer a secret.
• Trade war brewing – Relationship between the world’s #1 economy and the world’s fastest growing economy is souring. Check out NYT’s stories on China over last few months
• China – has moved to defuse a growing housing (people moving to cities for better jobs) and a possible  inflation bubble before it pops. Decent month old editorial on this. Remember Chinese banks did NOT sell credit default swaps on housing, so this housing bubble is not as sever as USA’s. But, this is still a serious problem.
• JOBS – While the job losses have declined in the USA from -700,000 to @ -50,000 a month, we increased last month. Obviously US jobs over the last decade have been lost to globalization and consumers in the USA are now saving more. Considering the above 3 bullet points its hard to see stimulus plan alone keep this figure from flattening or falling. (more later)

Bottom Line – Let’s try to be as objective as possible and look at the technicals. In this case, the chart of either the FXI (China) or EEM (Emerging Markets)

Both charts are similar, but China (FXI ) is a little more sever. Notice how fast they exploded in the first 1/2 of 2009 and that growth slowing in the last 1/2. Now for the first time the 50 day moving averages are heading down . In fact China is trading below its 200 day moving average. The countries led us out of recession (Indonesia, Brazil, India, & China never even entered a recession)

It certainly looks like growth has peaked and emerging markets are now in a correction phase.

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!

Index	Percentage	Volume
Dow	-0.26%	down
NASDQ	+0.04%	down
S&P500	-0.55%	down
Russell2000-	-0.55%	-

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

Technicals, Fundamentals & Analysis

See Positions , Strategy , and Overview for changes made over weekend.

US Markets basically held onto the significant gains of the last two days – an oversold bounce. Holding onto gains = short term Bullish

CSCO – again had a great earning report and is putting 2000 to 3000 new people to work.

Hard to see a major  move in stocks in front of – The Monthly jobs report t on Friday Each of these reports becomes more and more important.  In November we reached positive job growth (+6,000 ). But this is looking like retailers hiring folks for Christmas buying season.

Best Read of Tea Leaves – You’re NOT going to be happy with the jobs numbers.

Significant indexes

• McClellan Index at -32,18 = We’ve pulled way back from -90 or oversold levels two days ago. Over -60 + Oversold
• BDI – This chart shows the Baltic Dry Index (scroll down) , a measure of shipping costs, Has broken through a major month long  support level at @ 3000 and is keeps falling. Yesterday the BDI closed at  2673.= Bearish However the rate of decline is SLOWING and this almost always indicates at least a short term reversal.
  

Positions

The  Positions Section (also at top of blog) has the latest buys and sells (Usually updated over weekends – will try to update last few weeks today) – These are positions I actually own

SELLING & BUYING

Thanks to 5 of you who sent in suggestions fo r Stock Watch Lis t!

ETF’s – were still 6% FXI (China), 10% EWZ (Brazil), & 10% MOO (Agriculture) – Since we have rallied would consider selling  another 5% (hopefully in a rally – which seems unlikely today)

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Happy New Year

EWZ (Brazil) – Investors411 #1 holding up +117% this year

This issue of Investors411 is the beginning of a 3 part series on ETF’s, stocks & economic forecasts for 2010. It is designed to educate YOU on how to make the same kind of money others have by following some simple investment strategies that Investors 411 has used for years to beat almost all major US indexes for the last 5 years. But first a word about

Avatar and IMAX

I’ve now seen the movie and it is truly jaw dropping . Some of the genius belongs to Director James Cameron and the rest to the Imax (a publicly traded stock) theater technology. To quote Time magazine "Look around! Embrace the movie – surely the most vivid and persuasive creation of a fantasy world ever seen in the history of moving pictures – as a total sensory, sensuous, sensual experience. " It’s like The Wizard of OZ going from black and white to c o l o r .

The IMAX theater concept is an investment choice suggested by one of you.  Right now the stock (which was on our list of YOUR recommendations) is exploding higher (LINK to chart) in HUGE volume. I’m going to nibble on/invest in the first small dip.  It will be hard to top Avatar, but IMAX is the future of movies & 3D TV is on the way.

2010 Economic and Stock Forecasts

Part 1 Positions

For 2010 Investors 411 is going to keep its focus on basically 4  core positions that it has held, throughout most of the last five years. These are the ETF’s (Exchange Traded Funds). An ETF allows you to buy a market basket of stocks or an actual commodity for less than it costs to own a mutual fund and it gives you a better tax break because it trades less (buys/sells different stuff) than most all mutual funds. ETF’s also trade like stocks and have NO hidden fees.

The fundamentals behind the choices of these core positions are simple and  explained in greater depth the OVERVIEW section on the top of blog LINK These mega trends include-

• Globalization – The key force that is allowing some countries to develop faster than others.
• Peak Oil – The world has a limited supply of commodities  and we are running out. As we run out these commodities get more expensive.
• Share the Wealth – Countries that have growing middle classes expand faster that counties that have wealth oligarchies that hoard their money.

Over the years these Investors411 core positions have outperformed almost every major US stock index are-

• EWZ – Brazil
• FXI – China
• GLD – Gold
• EEM – Emerging markets

Especially this year Investors411 held a lot of related positions and some stocks. You can find a list of these at the POSITONS section on the top of the blog LINK (check these out NOW before they change for 2010)

Investors411 did stray too far from its core holding – partly because of the enormous swings in the market this year. Top gainer was EWZ held from the beginning of the year (8% of portfolio total holdings) gained +117% . The biggest loss was a STUPID hedge on China (FXI) position. It was made because of fears about the Swine Flu epidemic seriously impacting China. FXP and ETF that is a double short of basically the FXI. Translation – if Chinese stocks go down FXP goes up @ twice as much.  The short term FXP trade (2.5% of portfolio total) lost -13%

Several NEW position may/will be used in 2010

• MOO – Agriculture based ETF – Will outperform because the huge growing middle classes in especially China & India will eat better. Already opened a position here
• EDC – This is an ETF that does 3 times what emerging markets do. Lots of risk here so it will only be bought or sold under specific conditions involving the McClellan Oscillator (see below & more later)
• ROH & TYM – Technology. Again like EDC these two involve lots of risk because they do 2 and 3 times what tech stocks do. Only to be bought/sold under special circumstances and are short term trades. (see above)
• Commodities – There are many ETF’s that are solely based on a commodity like GLD and not based on a company. Diminishing resources and increased demand for these commodities make for a decent investment.
  
• Stocks – Because YOU asked for it some stock positions like IMAX will be suggested. (see last few Investors411)

Tomorrow Economics – The Good ,The Bad, The Ugly - 2010 Forecast

KISS & Stocks

Keep It Simple Stupid

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+0.03%	flat
NASDQ	+0.13%	up
S&P500	+0.02%	flat
Russell2000-	+0.04%	-

Investors411 record – 5 years of beating benchmark S&P 500

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals, Fundamentals & Analysis

Weak volume continues. Most technical analysts consider flat trading (stocks have gone basically nowhere for the last few days) after a trend (upward in this case) a sign  that the trend is revering itself (bearish).  The problem here is it is usually accompanied by strong volume.  All in all THIS IS A BORING WEEK for analysis on stocks. YAWN – Investors are waiting for the monthly employment report at end of next week.

Weekly jobless claims number at 8:30 came in better than expected  Weekly claims fall to lowest since 7/19/2008.

The McClellan Oscillator (see below) has wiggle room on the upside but is slightly overbought.

FEARLESS FORECAST – same as before "Up to flat week" – Historically this is an up period (Santa Clause rally) Even though we are entering overbought territory – hope of a positive employment report for Dec. & historical bullish factors should keep stocks on the up.

If you don’t understand a term look in up at Investopedia.com dictionary LINK

——–

Significant forecasting tools/Indexes for stock markets

The Dollar & the BDI have been temporarily eliminated. Right now how overbought we become is taking on more significance.

——-

$NYMO The NY Stock Exchange McClellan (EOD) Index measures how much the NYSE is oversold or overbought .

The index closed at +22.57 This is a slightly  Overbought Position. This chart has recently formed a series of higher highs and higher lows over the last 5+ weeks.  So it looks like there is a possibility of one more swing higher before we get to a clear oversold position (over +60).

Oversold conditions (@-60) = buy, Overbought positions (@+60) = sell The closer we get to +/- 60 the better our chances of making money with a shorter term buy/sell signal

Positions

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

These are positions I actually own

Resource for ETF’s -MSN Money has 821 ETF’s listed according to performance 1,4,13 weeks 1, 3 5, years on a 20 minute delay for daily prices. LINK

SELLING & BUYING

One of the ETF’s we are going to use in 2010 is EDC – an ETF that does 3 times what emerging markets do.

Still holding onto all of UWM.

When/If McClellan Index gets back above +60 will sell some more.

Long Term Outlook = CAUTIOUSLY BULLISH

Shock & Awe for Bears

The unemployment report Friday both shocked and awed Wall Street Bears and almost all economists . Even more than the startled jumping Panda. (Thanks David Fry for photo)

The dramatic drop in job losses coupled with a positive +2.8% GDP growth for the last quarter is certainly good news for every bull on Wall Street and Main St. Economic momentum is flowing in a positive direction both in the USA & especially emerging markets.

Why?

There’s good, bad, and ugly behind the positive economic news . Since, Obama’s Afghanistan policy is such a disaster (at least to those of you who have commented and Investors411 – See additional Clinton, Gates LINK [we're nation building & there for as long as it takes] and Friedman [against surge LINK ] on Talk shows over weekend) lets start out today with the good and give Obama some credit.

There are 4 major reasons why we have seemingly turned a corner. - TARP, emerging markets, printing money, and stimulus.

TARP – Bailing out Shadow Banks was started by Paulson/ Bush and continued under Geithner /Obama.  TARP is working better than almost everyone expected. Last week Bank of America announce plans to pay back $45 billion (plus interest)and losses far less than expected. See NYT. See LINK

Emerging Markets – They kept emerging, especially China. (see past Investors411) They’re the locomotive and we are the caboose.

Printing Money – The Fed just kept printing trillions of dollars faster than a super market buys toilet paper. The unusual part is investors from around the world bought truck loads of that toilet paper in the form of US treasury bonds with insignificant interest rates. If/when rates go up, boy will those  investors have a huge supply of TP to whip their ____.

Stimulus - Around the world governments stimulated their economies with programs. You can make a case for Germany & China’s program being better than ours, but Obama’s stimulus (he was limited by Republican opposition) was relatively good.

Remember the old story of you can give a poor man a fish or you can teach him to fish. Well, economists have ways of measuring just how stimulative throwing money at a problem is. Does your dollar buy  even one fish or lots of fishes?

• The Republican mantra is always cut taxes – Mark Zandi , economist from Moody’s and a McCain’s economic adviser “making all the Bush tax cuts permanent and cutting the corporate tax rate–would raise GDP by at most 37 cents for each $1 of revenue loss. ”
  
• Obama’s stimulus – “By contrast, increased outlays for infrastructure, aid to state and local governments and extended unemployment benefits increase GDP by between $1.41 and $1.57 for every $1 spent.”

The bipartisan Congressional Budget Office measured the whole thing and you can find more on why/what stimulus worked at LINK

Common Sense – Yes there are time tax cuts work especially targeted and in a recession.

But, when you cut taxes to a company you never know where that money is going to go – Fat bonuses for executives, a new home in Dubai (the global sex slave capital of the world), buying financials WMD’s (Warren Buffett’s term for Credit Default Swaps) or sometimes even good stuff like into research & development.

What you want to have happen is DEMAND increase for your product. The more money flows, the more demand. The reason you see sources like CNBC, right wing polls and think tanks always call for tax cuts is they control the companies or the companies are their big advertisers/sponsors.  Greed is good for me is their mantra.

KISS & STOCKS

Keep It Simple Stupid

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage percentage	Volume
Dow	+0.22%	up
NASDQ	+0.98%	up
S&P500	+0.55%	up
Russell2000-+2.38%		-

Investors411 record – 5 years of beating benchmark S&P 500

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals, Fundamentals & Analysis

Economic Bears were shocked and awed at the fall in unemployment. Great news for Main Street USA, but we have a deep deep hole to climb out of.  This is mixed news for US Stocks.

The news is mixed for Wall Street, because good economic news in employment means the government/Fed will probably stimulate less. Therefore,  financial companies will no longer be able to borrow for nothing,  and their interest rates will rise sooner rather than later.  The dollar also gets stronger and those companies making more because the cheaper goods sold faster overseas will cost more – looss demand & profits.

Technically we had HUGE volume accompany a price rise. Unfortunately, for most major indexes the rally was less than a significant 1%. Stocks first went way up, then down and settled for moderate gains.

Small cap stocks, are more dependent on a recovery on Main Street did gain a significant +2.38% Bigger companies have more contracts abroad.

Fearless Forecast – Last weeks unexpected positive jobs number helped create a positive week. Investors predicted a flat to down week. Oops. This week we should be all over the place, but some solid economic fundamentals are coming into the light. This should help stocks in the long run. Once the dollar calms down (expect it to rise and gold to fall) we should improve. Flat to up week .

Now going to get a bit more technical

If you don’t understand a term look in up at Investopedia.com dictionary LINK

——–

Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

The BDI a small rose +45 points yesterday and closed at 4107. Technically  the BDI broke out through its major resistance level 4291 (this year’s high) over a week ago.  The BDI has rallied about 1800 points since late September. After 16 up days in a row, 9 down days in a row & now up 3 days in a row. Multi day moves in one direction are common and the decline in rate of change usually signals a reversal.

What it means – Long term we created a higher high on the chart = Bullish. The BDI is far more useful as a long term indicator of not only world trade, but specifically China and growing emerging markets. After, what looks like a technical correction we are agin moving higher.

——-

The Dollar is currently the #1 forecasting tool .

$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 US dollar rose an ENORMOUS +1.44% Friday . Anything close to or over +/- 0.50 is significant  The dollar closed at $75.59 .

The dollar’s rise did temper the rally, but the whole dynamic or fundamentals have changed. See Positions below.

——-

$NYMO The NY Stock Exchange McClellan (EOD) Index measures how much the NYSE is oversold or overbought .

The index closed at +23,51 This is a Slightly Overbought Position . This chart is showing we seemed to have reached a plateau. It’s spilled over a little bit, but the McClellan index has moved between +25 & -25 .  There has been no clear buy or sell signal for over a month.  Oversold conditions (@ -60) = buy, Overbought positions (@+60) = sell

The closer we get to +/- 60 the better our chances of making money with a shorter term buy/sell signal

Positions

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

(again a little behind on latest moves)

We’ve had, and volume has confirmed, a quantum shift in markets. This may be temporary and it may be long term, but it necessitates major changes in positions.

Today is a confirmation day for Friday’s move.  More than anything else – looking for dollar to hold or add to gains.  Will buy some ETF’s and stocks until McClellan says we are overbought (@+60)

Recommended ETF’s and Trades

SELLING

GLD – Investors411 sold all of DGP several trading days ago and 1/2 of GLD on Friday. Last entry into this position was at $92.7 .  Traders should sell the rest and longer term investors could hold onto last 1/2 position (5% of portfolio).

Gold will rise again, but for now there is just too much downside momentum. Will be back into GLD & GDP late.

NVS -The flu scare is over. Thenumber of states that have serious flu has dropped from 43 to 25. Time to take profits on last 1/2 this position. Let’s take our profits 21+%

AMZN – Taking profits. Markets rallied yesterday and AMZN dropped 2.54%. Never a good sign to see NASQ rally 1% and your tech stock drop. Again, this in part, was a flu play. Why be greedy we have about a 16+% profit.

BUYING

FXI – Adding more to this positions. If Main Street is recovering faster than expected, so will China. Their currency & exports is tied to the dollar. So in one major sense, their recovery is tied, in part, to the USA. They have under performed major USA indexes recently.

IWM or UWM (an ultra fund that does basically 2x IWM) These ETF’s both track small cap stocks (Russell 2000) IF, Main Street is recovering faster than expected they should outperform the other indexes. They have under performed so far and should,like China, make up soe lost ground relative to other major US indexes.

BAC – Bank of America. They’re paying back TARP shows solid fundamental strength. (I know they are a shadow bank bad guys) Bought BAC Friday.

Start small & Build your position – Buy the dip.

Again any stock investment or ETF that doubles or triples what a normal ETF does is a short term play for traders and short term investors – NOT long term Investors .

Long Term Outlook = CAUTIOUSLY BULLISH

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!

Index	Percentage %	Volume
Dow	+1.28%	down
NASDQ	+1.90%	down
S&P500	+1.78%	down
Russell2000	+2.38%	-

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

——–

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

——-

$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!

Trends, Politics & Economics

Index	Percentage %	Volume
Dow	-0.12%	down
NASDQ	-0.01%	down
S&P500	+0.15%	up
Russell2000	-0.59%	down

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

These two words were supposed to put the intended victim in a hypnotic trance in an old 60 or 70 comedy movie. For Barak Obama the two key words don’t rhyme – Afghanistan Iraq .

In the last few days a US predator drone killed @20 al Qaeda or civilians at the Afghan/Pakistan boarder (depends on which news account you believe in) and there is a promised surge of another 30,000 troops in the face of diminishing foreign support.

It is heartening to see increased diplomatic efforts in Afghanistan and Pakistan. However even US military commanders say Afghanistan "cannot be won on the battlefield" AP report .

Afghan/Pakistan/India is the center of Sunni terrorism. However, If like Iraq the focus is on guns and bullets instead of hearts and minds we’ll get the same results. We may be able to eliminate some despicable people like Saddam but the end result is worse. The level of violence that we created by "unjustly" invading has diminished but -

* 3 to 5 million refugees (mostly Sunni’s) displaced or killed
* a corrupt religious Shia government replacing a corrupt secular government
* Militia’s that rule throughout Iraq an infiltrate the army.
* Radial leaders like Sadr who hold sway over the Shia majority (60+% of pop.)
* a new pro instead of anti Iranian government – making Iran more powerful to export terrorism
* loss of our positive image throughout the world Abu Ghraib and Gitmo.
* a war simmering between Turkey and the 20% Kurdish minority
* cost of $3 trillion dollars to American economy
* deaths and long term wounds of American soldiers.
* an economic disaster in Iraq.
* a inspiration or factory for producing terrorists
* a deeply divided America on Iraq

Yes there is a quazi elected government in Iraq, but the terrorists of Hamas were also elected.

Geithner Genuflects

Yesterday Wall Street favorite Tim Geithner was appointed Obama’s Treasury secretary. In his acceptance he payed homage or genuflected to Larry Summers, Obama’s chief economic advisor. Geithner is a Summers protegee. Larry Summers, as reported several times before, was instrumental in deregulating the banking industry in 1998 under Clinton. The guys who played a role in digging this economic hole should not be the major players in leading us out.

Far preferable to this dynamic duo would be Nobel prize winning economists like Stiglets and Krugman. Hero’s like Former Fed Paul Volker does have a more minor role in the Obama administration.

Lifting Global Gag

One of Obama’s first act was lifting the Global Gag on giving funds to any organization that in any way supported abortion. Bravo. Several of you emailed me on this. Thanks. Story at LINK

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Treading Water/Drifting Higher

Index % Change Volume

Dow -0.48% down
NASDQ +0.82% down
S&P500 +0.56% down
Russell2000 +1.28% –

Brown = same comments as yesterday.

US Market & Foreign Markets

Technicals – Major US indexes are treading water and foreign indexes are doing the same. Even though we are treading water major indexes are drifting in the right direction. The Dow closed at 8116 and is now 150+ points above its strong support level at 7950. We are a long ways from the 9088 Dow resistance level (see chart) established in early January.

Volume did NOT confirm the drift higher.

XLF is the financial sector ETF Chart here. Financials declined – 1.78 yesterday. A relatively minor move considering some of the wild swings. Financials are the major reason stocks are in trouble. This is the index to watch.

The area around DOW 7950 to 8000 is turning into a strong support level. The more times its tested and holds the stronger it becomes. Of course, this also means if it breaks down we should have a major fall.

Stocks are down 8% in January. Old Wall Street saying – "as January goes do goes the year."

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals-

7 Major Companies announced 56,000 more layoffs yesterday, Earnings news continues to disappoint, and we have a huge expected-5.2 to-5.5% GDP loss expected to be announced on Friday. Despite this chorus of bad news major indexes managed to tread water and drift ahead. What do investors see that they remain slightly bullish in the face of a pie of bad news?

A stock market is after all just a market of stocks. If major companies like Caterpillar (builds major construction equipment) (chart link ) falls over 8% after a dismal earning report yesterday and is perilously close to breaking through its low (support level) are in trouble be very cautious. CAT stands to to be one of the companies that gains from Obama’s stimulus plan.

If Financials are the index to watch, then CAT is the stock to watch. If CAT can keep treading water and drift ahead there is hope.

Forecasting Future Trends

LIBOR – LIBOR is the rate banks charge each other. It price has fallen from 3.4% three months ago to about 1.18% Its held steady in this area for about a week. (good news for stocks)

LIBOR chart (3 month)

Treasuries – T Bills yields show how fearful investors are. The lower the rate the more the fear. Short term yields – 3 month T bill flat at 0.07% yesterday and the longer term rates again rose a bit. The ten year rose 2.64% (low yields show fearfull investors flooding to Treasuries instead of stocks)

Treasury Bonds chart

Baltic Dry Index – Measures flow of goods between countries. Yesterday ir rose again almost 1.5% . Almost 85% drop since June. (We’ve had a solid steady gain since the early December lows of around 660 to 995, but we fell from pre recession figures of around 12,000 – That’s along way to go)

BDI chart

Short Term Outlook/Strategy

Reading the Tea Leaves – Strategy – Shorting rallies to protect gains is working. (see below) Until we see some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.

Technically, markets are consolidating despite some horrible economic news. That’s bullish news. Volume is not confirming or denying the bulls or bears right now. Secondary indicators (LIBOR Treasuries and BDI) are improving. The area around Dow 7950 has turned into one strong support level . It has bent but it has nor really been broken.

Therefore, Some sort of short term rally seems probable. Buying/nibbling close on dips at Dow 8,000 is much better than doing the same at 9,000. Protecting any purchased position as stocks rally (get closer to 9,000) seems to be working.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

This Section Rarely Changes
Changes to Bottom Line Section Bolded and in Plum or crossed out

Technicals – Series of Lower Lows and Lower Highs = Bears Rule.. Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.

Fundamentals – Financial transparency/accountability problem is far far far far far far far far far bigger than anyone thought. Cleaning up this mess is going to take years and growth will suffer.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*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 and dependent on oil prices
FXI (China ETF) should outperform USA

*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 father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 8000 and huge 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 and/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 major indexes do.

SDS – ultra short S&P 500
DXD – ultra short Dow – (Both small caps and tech stocks are outperforming the DOW and S&P)
SKF – ultra short Financials (this is the sector that’s most broken)

As Always Do Your Own Research Before Investing

Obama’s first two days are "a burst of executive sunshine " and "transparency".

Here’s 10 of Obama’s orders and/or acts

#1 Closing Guantanamo within a year
#2 Stopping the unfair and unconstitutional trials there
#3 Directing federal agencies to err on the side of transparency and not the Bush delay/secrecy over public records.
#4 tough new limitations on power of lobbyists
#5 Countered Bush’s order that allows past Presidents and VP to keep potentially embarrassing order from the public.
#6 Barred anyone in his administration from leaving and becoming a lobbyists while he is in office
#7 No one can serve in Obama administration who was a lobbyist over past two years.
#8 Both Obama and his future AG declared waterboarding "torture" and prohibited.
#9 Appointed competent top level envoys to Mideast and Afghanistan/Pakistan (Mitchell and Holbrooke) as negotiators.
#10 Spoke to all Mideast leaders (minus terrorist group Hamas)

George Washington and company when confronted with a massive foreign army not only won the day but came up with the Declaration of Independence, the Constitution and Freedom. George Bush when confronted with a small band of religious terrorist – declared war on secular Iraq, denied some basic freedoms that Washington had won and created far more adversarial and confrontational world – "You’re either with us or against us."(I know you could add to this list)

Certainly Obama is going to make mistakes, but its heartening to see America move back in the direction of our founding fathers.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Major Support Level Cracking

Index % Change Volume

Dow -1.28% up
NASDQ -2.76% ?
S&P500 -1.52% ?
Russell2000 -3.05% –

Brown = same comments as yesterday.

US Market & Foreign Markets

Technicals – Sorry could not accurately read volume figures on charts. Looks like volume was above average and flat. Because there was no significant increase volume, the #1 confirmation factor behind a price move, tells us little. Stocks were much lower but recovered some losses by the end of the day.

XLF is the financial sector ETF Chart here. As the chart shows financials after two huge swings (down then up) lost -6.35%. While this is a substantial amount it is not close to the 15% swings of the previous two days.

The financial sector is currently leading the US and world markets. Overall even though we had a massive gain yesterday the XLF has a multiyear series of lower lows and lower highs (change setting on chart to weekly to see this) – Technically this chart is about as bearish as you can get. In the shorter term a major move like yesterday’s in big volume indicates at least a short term low.

The area around DOW 7950 to 8000 is turning into a strong support level. The more times its tested and holds the stronger it becomes. Of course, this also means if it breaks down we should have a major fall.

For those of you who like to invest in individual stocks internet advertising and education stocks are doing well.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals -

MSFT fell over -11% yesterday (poor earnings report). When you consider this and the bad unemployment/housing figures and slowing +6.8% China GDP growth, the markets did a bit better than expected.

The emperor of internet advertising Google beat earnings expectations last night and was up 4+% in after hours trading. Now up +1.3% 9:22 EST

Another giant GE earnings met expectations (a loss of 44%) Analysis of their troubled financial unit. So much of GE’s business comes from financial part of business and it is way over leveraged. GE is down this AM.

Forecasting Future Trends

LIBOR – LIBOR is the rate banks charge each other . It price has fallen from 3.4% three months ago to about 1.16% Its held steady in this area for about a week. (good news for stocks)

LIBOR chart (3 month)

Treasuries – T Bills yields show how fearful investors are. The lower the rate the more the fear. Short term yields – 3 month T bill fell to 0.07% and the longer term rates rose a bit. The ten year rose 2.58% (low yields show fearful investors flooding to Treasuries instead of stocks)

Treasury Bonds chart

Baltic Dry Index – Measures flow of goods between countries. Yesterday ir rose again 5+% . Almost 85% drop since June. (We’ve had a solid gain since the early December lows of around 660 to 945, but we fell from pre recession figures of around 12,000 – That’s along way to go)

BDI chart

Short Term Outlook/Strategy

Reading the Tea Leaves – Strategy – Shorting rallies to protect gains is working. (see below) Until we see some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.

All three forecasting indexes are beginning to indicate a positive move for stocks.

LIBOR has fallen significantly and even mortgage rates have fallen. Treasuries while low are starting to rally and we have seen a significant move higher in worldwide trade (the BDI) Looks like a stock rally is possible. Overall PANIC does still rule the credit markets, but it is easing.

Financials are the problem and will be until the toxic debt question is resolved. Could take years for this to happen. But now with a new administration there is hope. Hope of future transparency, accountability and rules in this area are vital for the economic health of the US and the world.

The other major negative is the employment numbers.

The Dow is hanging in at 8123. Still above its major support level. Even though there are some positives out there, Financial Companies and Employment numbers are overwhelming investors. Bad earnings reports like MSFT led to an 11% decline. This means that bad news is NOT built into market prices. The strong 7936 to 8000 Dow support level is in danger of collapsing today. You can feel a major downside move building.

Financials/Banks are in a lot of trouble with no resolution of their toxic assets in sight. Dow 7449 is last year’s low and the next major support level.

Long Term Investors who can handle risk and are less than 10% invested in stocks – Nibble a little on any major dip. Shorter term investors keep protection (short ETF’s) for now. You may want to drop some as we get closer to 7449.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded and in Plum or crossed out

Technicals – Series of Lower Lows and Lower Highs = Bears Rule.. Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.

Fundamentals – Financial transparency/accountability problem is far far far far far far far far far bigger than anyone thought. It’s looks like the recession will last through 2009 – perhaps longer Cleaning up this mess is going to take years and growth will suffer.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*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 and dependent on oil prices
FXI (China ETF) should outperform USA

*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 father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 8000 and huge 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 and/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 major indexes do.

SDS – ultra short S&P 500
DXD – ultra short Dow – (Both small caps and tech stocks are outperforming the DOW and S&P)
SKF – ultra short Financials (this is the sector that’s most broken)

As Always Do Your Own Research Before Investing