Fighting Crony Capitalism

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

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Boycott BOA

10 Reasons NOT to Bank with the mother of all Bankstas

Bank of America.

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

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

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

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Bankstas Take A Hit In Europe

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

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

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

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

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STOCKS

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Reading Tea Leaves

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

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

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

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

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

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

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Positions

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

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

Under consideration.

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

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

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

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

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

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

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Long Term Outlook

3 to 6+ months

Investors411 upgraded its Outlook on Monday to CAUTIOUSLY BULLISH. Reasoning

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

CAUTIOUSLY BULLISH

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

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

CHECK ALL DATA, I MAKE MORE THAN GRAMER ERRORS.

• Rumors of a possible QE #3 announcement  and  a short sale ban on financials also seemed to juice the algos of the HFT’s. (see Jackson Hole link below) Add to this the Somewhat oversold conditions of stocks and you have the fundamentals behind yesterday’s rally.

But maybe the following can help turn those bears into bulls.

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“Demystifying  and Discussing  Simple Option Strategies”

by JS

COVERED CALLS

Most people think using options is an exotic and a very risky strategy, however using options can actually lower risk for investors, and can also be used to increase yield for conservative investors.

An option is a “right” to buy or sell a stock at a fixed price anytime up to a specific date.

Options are sold, or bought  by contracts: One contract covers 100 shares of a stock. When you see a price (premium) for an option, it is the price for coverage of one share of stock.  Example:  listed price of option is $.35, which means you’ll pay $35 for each contract  (100 shares) you buy. Expiration date is the date the option has to be acted on (generally 3rd Saturday of each month) or it will expire worthless to the buyer.

Example:

KMP is the underlying stock these options are covering. First you must own 100 shares of KMP and want to keep it as a long term investment.

The symbol for a KMP call is:   -KMP110917C67.5

What these numbers/letters mean:

• - (minus sign) means option;
• KMP is ticker  symbol of stock covered;
• 11 means yr. 2011;
• 09 means Sept. (the 9th month);
• 17 means Sept 17 (expiration date),
• C means a call,
• 67.5  is the price you must sell the stock if you sold the call.

KMP closed Fri. @66.25  and  you bought the stock at that price. The price of this option then was bid 1.79 – asked 1.91.

Strategy:

You own the stock, want to hold it but you want to increase your yield, taking a chance it may be CALLED (taken). You SELL  the call,  pocket $1.79 per share, and wait to see if it’s taken from you by Sept 17. If taken, you profit:

• 67.50 price paid for your stock when called
• - 66.25 price when you bought the stock
• 1.25 profit (price above where it was when you bought the stock)
• 1.79 premium you received for call you SOLD (the bid price)
• 3.04 Total profit for less than a month, less commission

Commission =  commission to buy stock + to sell call + when your stock is taken from you. If the commission is $8 on each the total would be $24

Per 100 shares, profit $304 – $24 = $280 total profit

If you want to, you can buy KMP again if your option is bought.

If KMP is not taken (price dropped or stayed below $67.50), you keep the premium  (179.00) and can sell another call for a future month. Either way you make a profit if the stock is taken or an extra dividend if it isn’t.

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

JS is a frequent contributor in the comments section of blog. Also look for Paul’s Corner every Tuesday and Thursday.

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You don’t have to be rich to use covered calls  or many option strategies – [editor]

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Financial Reform

From high Frequency trading to opaque credit derivatives our financial system is broken. If we go forward with this over leveraged opaque system it would be like never fixing BP’s gusher in the Gulf. We have the Tea Party members who want virtually no government oversight to the Obama administration who keeps saying, “go softly, go softly.”

Dallas Fed Chair Richard Fisher is another whose is standing for reform.

Turkey/Israel/Gaza = Crisis

Turkey, has called for Israel to join all kinds of international inquiries into what happened. Ranging from a joint US/Israel/Turkey group to one set up by the UN. The Turkish foreign minister said, unless they accept “it shows, they have something to hide.”

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	-3.15%	up
NASDQ	-3.64%	up
S&P 500	-3.44%	up
Russell 2000	-5.00%	-

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

Technicals, Fundamentals & Analysis

The Bears Growled Friday. Major meltdown Friday in above average increased volume. (NASDQ volume less of an increase) = Bearish

Fundamentals behind meltdown-

• Less than expected in over hyped (by Obama administration) jobs report
• Hungary announces economic troubles
• The Big News is France“

Troubles in Europe again causing major currency shift – Euro falls and dollar to rises. = Bearish

Market Leader -AAPL - still haing in at 258 = Bullish

Technically – The area around 1040 on SPX (S&P 500) is the line in the sand. SPX now at 1065 – Beyond 1040 the Limbo Line breaks down.

Fearless Forecast Last Week – “Down Week“ Unhappily right

Fearless Forecast This Week - Down Week – See Tea Leaves section below – Basically investors fearful of more problems in Europe will have traders selling into rallies.  Partial success with Gulf spill, Central Banks propping up Euro, Government officials saying things aren’t so bad in Europe could give us an up week. But, traders will probably sell into rallies. Eventually, the Euro, China’s problems & casino capitalism will take its toll.

Significant Indexes

• McClellan Oscillator fell dramatically Friday to -30.48 [+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, but in not yet oversold = NEUTRAL
• US Dollar –  The dollar rose a massive +1.20% [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 stocks = Bearish

Reading the Tea Leaves All those former communist countries of Eastern Europe who bought into the American capitalist “free market” over leveraged, shadow system starting with Hungary are in economic trouble. France has problems and together the Western and Eastern countries of Europe have a bigger GDP than the USA. More shoes will drop before this gets better.

Its no longer a question of if but when will these shoes drop. This week, next week, next month.

Positions

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

Bought SDS (2x Short S&P 500) at 34.52 Friday. Will sell 1/2 for hopefully 5% profit. Have stop/loss at 34.52. Its contradictory, but willing to buy more in any large stock rally. (S&P rallies, this stock goes down)

Small remaining 1% positions in VCI & ESRX – Also considering selling into rally

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

FEAR

Photo from great article “Fear is the Mind Killer” Link

Your Comments

This week many of you have offered very valuable comments and concepts on the health care debate. Check out the comments section on the side of blog.

The latest fear mongering is somehow “death panels” are going to be created if you pass a health care plan. LINK

The irony here is that insurance companies now have an army of agents who look for cracks in legislation (many consciously developed by corporate interests) to deny health care to those who need expensive often life saving procedures.

Why the far right Lies, Shouts down and tries to promote Chaos – It works! When you don’t have truth and facts on your side – you use fear to win.

Likely Course of Health Care Debate

Most Likely the House will have some sort of Heath Care Plan with a public option and the Senate will pass another watered down plan without a public option. Then there will be discussions.  Bottom line comes down to this – Are the Democrats willing to make the vote a simple majority rules vote rules? They have the power to do this or allow for  a Republican filibuster in Senate which will probably get less than a handful of Democrats to join in and therefore kill the public/private plan

The issue at stake is will we have a Public system like all the other industrialized Democracies who have for decades voted to keep them or will we have some watered down untested health care system.  Neither result will be universal health care. One plan may be a slight improvement, and a public option a significant improvement.

Cancer Breakthrough

Scientists at MIT have developed a ” a drug that can selectively target and kill the stem cells that drive the growth of tumors has been identified for the first time by scientists who searched more than 16,000 compounds to find it.” Story link here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+0.39%	down
NASDQ	+0.53 %	down
S&P500	+0.69%	down
Russell2000	+0.53%	-

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

Fed meeting this week went pretty much as expected – they’re pledged to keeping interest rates low and that’s good news for stocks.

France and Germany announced positive GDP growth in last quarter (+0.3% ) meaning they are no longer in recession. Good news for world’s economy. Their banks were far less involved in financial weapons of mass destruction (CDS’s) than ours. So in addition to more managed economies like China and India add France and Germany instead of the more “free market” USA economy as leading us out of recession. The far right should cringe because this looks like the socialists leading us out of recession.

One of the keys to keeping this recovery on track is mortgage rates . Rates below 5.5% = decent and the lower the better. Here’s a decent chart and story LINK

Significant forecasting tools/Indexes for stock markets

BDI - The Baltic Dry Index measures the flow of goods (world trade) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern .  After a ten day drop the BDI has turned back higher  – up +78 points yesterday. The mid term trend since early July is clearly bearish, with a series of lower lows and lower highs. Bulls need a good long run here to break out of the bearish trading pattern.

In a nut shell the BDI is

• short term - Bulls are back (for now)
  
• mid term -  Bearish pattern
• long term - Bullish pattern

$USD - Check out the 6 month chart (to the left) or a multi year chart of the US dollar of the US dollar.  What has become quite clear is that the dollars 50 day moving average has become and ultra strong resistance level . This is signified by the blue line on chart . Every time prices close to this descending line since the end of June they have failed to break out higher.

Once again we tested that 50 day moving average this week and failed to break out. The dollar has fallen the last three days in a row since the test. Down -0.61% yesterday. Long term the dollar is in a bearish trend and the short term bearish trend has returned. Mantra – Dollar down usually = US stocks up

A gradual reduction in the price of the dollar is part of the solution to global worldwide recession n

Positions

The whole Positions Section has been revised (Click on “Positions” at top of blog). Check it out

The Positions section will be revised this weekend to show new positions in SPX 10+% EWZ another 5+ % FXI another 4% and more.

Personally I have been day trading US financials (FAS &FAZ) – I do not list day trades in Positions

Sometimes it’s surprising at just how long a trend last. But buying dips of trending sectors still works. -We are coming up on historically the worst two months of the year for stocks Sept. and October.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!