Investors 411 Blog

Afghanistan Bubble Building

Islamic Republic of Afghanistan جمهوری اسلامی افغانستان (Persian: Jomhūrī-ye Eslāmī-ye Afġānistān) د افغانستان اسلامي جمهوریت (Pashto: Da Afġānistān Islāmī Jomhoriyat)

So after adding 21,000 to the original 38,000 troops in Afghanistan the generals are calling for another 45,000 troops for Obama’s “necessary war.” This would be a unilateral increase of American troops. This unilateral increase would put over 100,000 troops in nation building Afghanistan for the next 5 to 10 years. Basically we will end up unilaterally increasing troops by almost 200%. How is any of this different than the unilateral Cheney/Bush military approach.

Have we learned nothing from the trillion(s) spent in Iraq. – A corrupt government, dominated by Shia’s who love Amadinejad & still have huge economic problems. Imagine Israel bombing a suspected Iranian nuclear plant. It not only would turn Iranian religious fanatics into terrorist bombers, but the Shia’s in Iraq would join them.

What happens next probably Pakistan, Yemen, the Sudan ? Frank Rich has a column on this “Obama on the Precipice” in the NYT LINK

China blowing by the USA

Tom Friedman had another column this weekend entitled “The New Sputnik” on China blowing by the USA in the creating of alternative energy. LINK

This is just another reason why the #1 investment choice of Investors411 continues to be FXI -The China ETF.

Blowing and Building Economic Bubbles

Both the WSJ and the major financial channel are cheerleading unregulated capitalism this AM. Why not, the Lehman Brothers collapse is a year behind us and taxpayers have bailout Wall Street. Happy days are here again and nothing substantive has been done to regulate or reform what got us into trouble in the first place. Economist Simon Johnson on “Was the G 20 Summit actually Dangerous” traces the lack of capital requirements for US financial institutions. LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0,44 %	down
NASDQ	-0.79%	down
S&P500	-0.61%	down
Russell2000	-0.47%	-

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 declined and was below average. Technically, it looks like the bears are running out of momentum. In the very short term we are a bit oversold – so look for an early rally.

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

BDI seems to be turning higher = Bullish

Fearless Forecast – Took it on the chin last week as major US indexes fell. However September is turning out to be a pretty good month. The dollar is the over ridding factor in market direction. It would be good in the long run  if US markets stopped moving higher without some sort of more major retreat (5 to 10%) Constantly going higher feels too much like a bubble building.  Fearless forecast for the week is for the dollar to fall and markets to rise.

This rally is built on the falling dollar, means US goods (exports) will cost less abroad. Therefore for major US companies that sell overseas profits will grow.

——–

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 – Yesterday BDI +20 t o close at 2183. Short term Bullish for stocks

The BDI is @49% 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 2183 (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 fell -0.17% yesterday and closed at $76.78. After a major two day rally that created a higher price high (bullish) the dollar cooled off a bit.

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 this weekend

Plan to add to EWZ (Brazil)

Also MVIS (a stock) NOT an ETF is technically looking like its small three day retreat makes it a possible buy.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Iran Gets Caught Red Handed

Perhaps this is one reason why the Russian President came out and said sanctions are inevitable.

Breaking news – Iran has been caught by US, Ger., Eng. and Fr. secretly trying to enrich Uranium . This news should dominate news cycle. Holocaust denying, illegitimate President Ahmadinejad (photo above) announced he got caught with his hand in the nuclear cookie jar. LINK

Obama’s Bill to triple non military aid to Pakistan passes Senate. LINK

These two news items are interconnected .

The US obviously has limited resources. We should NOT be trying to spend trillions (Nobel prize winner Joe Stigletz put this cost at $2 to $3 trillion) nation build in Iraq, Afghanistan, or other countries.  What we need to focus on is the nuclear problem especially in Iran and Pakistan.  If we can increase stability in Pakistan now (the $1.5 billion in aid is still too little)  we could prevent spending trillions there later.

Obama directly addressed cutting nuclear weapons at the UN Here’s al Jazeera’s interview of Jordan’s Queen Noor. Remember al Jazeera is basically a Sunni arab news outlet and Iran is Shia and Persian. No love lost between the two. LINK

Alternative Energy (+ and -)

Tom Friedman is back writing about alternative energy or lack of alternative energy manufacturers in the USA. Also there is  in the comment section of the blog an insightful reference to a Newsweek story “Big Oil Goes Green For Real ” LINK

Last week Friedman bemoaned the fact that the 14 new solar energy plants (one significant component of alternative energy) has all been built outside the USA. LINK

G 20

The G 20 countries are meeting in Pittsburgh and if corporate media let’s us get buy protests you can find some substance. The NT hits the nail on the head. The G 20 nations with a lot of stimulus packages and other measures have averted a worldwide economic meltdown. Now the tough part begins – Getting past self interests and coming up with some global regulatory solutions and avoiding protectionism LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0,42 %	down
NASDQ	-1.12%	down
S&P500	-0.95%	flat
Russell2000	-1.89%	-

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

There hasn’t been big volume behind this current short term dip, but it has been moderate.  The NASDQ (tech’s have lead) the retreat and has had the biggest volume.  A second day of losses usually acts as confirmation of the first days turn, especially if volume rises.  So we get a kind of partial confirmation.

One of the internet darlings and AAPL competitor, RIMM got toasted in an early earnings report – down 10+% – Bearish news for techs

A Fed Governor Kevin Warsh has said that we may have to raise interest rates sooner than later.  Stocks love a 0% interest rates and rising interest rates means other ways of making $ become more viable than stocks. WaPo editorial LINK = Bearish Fundamental

Earnings season is around the corner.

G 20 summit taking place in Pittsburgh.

BDI seems to be turning higher = Bullish

Iran has a secret uranium enrichment program just announced by US government = Bearish news

——–

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 level/number to watch – Yesterday BDI fell -10 t o close at 2165. Major support level has been broken and the rate of fall is dramatically intensifying – From @ -70 to -10 Short term Bullish for stocks

The BDI is @49% 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 2250 (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.

As predicted the $76 support level held.

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

The dollar rose a very significant + 0.76% yesterday and closed at $76.91. Technically this is a new short term high from a few days ago = Bullish for dollar and bearish for stocks

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

Sold all of 10% stake in XLF (financials) at 15.01 for a 7+% profit.  Reasoning – if markets do have a 5 to 10% correction higher beta (those stocks that are most volatile) names will get hit.  There’s a lot of talk about a consumer protection agency passing congress with financials as its focus. LINK

I keep waiting for some sort of regulation to be voted on so the same kind of meltdown does not happen again and Democrats, who are in control, keep disappointing.

Again just like selling AAPL, not being greedy sometimes hurts.  As a trader I do play with ETF’s that do 3x financials both long and short (FAS &FAZ)

Plan to add to EWZ (Brazil) on a dip.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Four Bad Bear Markets – Understanding long term bear markets is critical and the following two charts will give you a relative idea what a bear market looks like.  The G 20 – rhetoric and results.  Israel – right wing takes control and spurns Obama/Clinton peace process. Stimulus & Budget. Employment #’s. Why the current rally may continue – “Rotation” and volume.

 

 

 

 

 

 

 

 

 

 

Click on either chart to see bigger chart. Charts from dshort.com

 

 

 

Four Bad Bears

These charts graphically put in perspective where we are relative to 3 other major bear markets starting with the Dow from 1929 to 1932  The first chart is over 34 months and the second is over 10 years.  The second includes the often never mentioned 9 year long NASDQ bear market.

You can draw you own conclusions, but notice how far we’ve fallen and how close we are to the Dow 1929 to 1932 crash. Each bear market is different, and we are fundamentally moving a lot quicker than they did in 1929 to fix the problem.

 

G – 20

The rookie, Barak Obama, didn’t hit a home run but he certainly was a hit. He translated his world wide star power into results from refereeing a France/China verbal spat to getting a trillion for emerging markets. You can read the NYT editorial  the G 20 here More came out of G 20 than almost everyone expected. Obama message – “the world is in this together” – resounded.

This AM (EST) Obama is speaking to an packed audience in France and tying the failure of a mortgage in Florida to the failure of a bank in Iceland.

Israel

My closest Israeli friend absolutely hates the newly elected Netanyahu government. It’s like giving American neocons complete control of Israel. Netanyahu has already told the Obama  “Stop Iran or I Will.” 

Netanyahu picked an extremist as his foreign minister – a former Moldovan night club bouncer named Avigdor Lieberman, who like Iran’s Ahmadinejad has made some outrageous threat. He immediately  “spurned” the peace process started by Bush and supported by Obama/Clinton.

Stimulus & Budget

Although many Republican’s voted against Obama’s stimulus plan the last Republican (South Carolina) holdout governor caved in and will accept the stimulus for his state to keep teachers in the schools and cops on the street.

House and Senate have passed basically the Obama budget.

 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

The ongoing war over the “Shadow Banking” System –  the major battles – whose winning - the sides -. Is London Burning? – The G 20 meeting – winners and losers – The Critic. Economic tends for the future – more regulations, delevering, & degloblization.

Photo of riots in London over G 20 meeting from the Atlantic

Shadow Banks

Definition – Over a decade ago Shadow Banks were formed when the US congress began to strip regulations from the financial system. Huge “to big to fail” institutions (from AIG to GE) were created and allowed to hide their over leveraged assets. This created false wealth and 100′s of billions for those crooks who ran the scam. It brought the entire world to the precipice of economic meltdown.

The Battle – Shadow Institutions are winning (so far)

• Trillions of taxpayer dollars and printed money are being given prop up shadow banks
• Programs designed to have taxpayers bailout banks (See nobel prize winner Joe Stiglet’s in NYT editorial
• Accounting rules (Mark to Market) are being changed to allow less transparency
• almost nothing outside of political jaw boning has been done to break up  ”to big to fail” shadow institution

 

The Sides - These sometimes fluctuate  and politicians know how to hide their true colors, but basically a partial list looks like

• Defenders of shadow banks – The Bush administration, the Obama administration, Wall Street and the shadow institutions. 
• Opponents – unlikely and less powerful group- Most notable Paul Krugman, France Pres. Sarkozy, Alan Greenspan, Joe Stiglets, Lindsey Graham (R senator), some other major Republicans and Democrats & American taxpayer who is going to pay.

Is London Burning?

One photo says a thousand words (see above). No matter how right you think your position is – is it right to break into institutions, hold CEO’s hostage, cause the death of an innocent bystander, destroy property, attack your employer when the business folds, write letters to the families of workers for banks threatening their kids?

Both the media far left and far right are pouring oil on this fire. The lefties in London are hurting their own cause. See comments made by “The Critic” on right hand side of blog.

One big positive coming out of G 20 is greatly increased funding for IMF (International Money Fund). MIT’s  Simon Johnson has an editorial on this and credits Obama.

 

Long Term Trends

Future trends depend on if or how much major Shadow Institutions are able hide their toxic assets and keep their to big to fail  size.  The following trends (good or bad) seem to be gaining at least a foothold.

• The desire for more regulations to prevent bubbles.
• “Delevering” – Over leverage risk will get reduced as everyone saves more
• “Deglobalization” – Nationalization, protectionism, will grow as countries turn from greed to survival

Very interesting editorial on this by PIMCO (bond giant) Bill Gross and its negative long term future for stocks

 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

The more you know about investing, the more you realize that everyone else (especially the more $ they have or control) knows more, has a bigger support team , more computers, better access to data and knows how to bend/manipulate whatever they are investing in.  These wealthy investors/entities/countries are like huge slow moving/turning super tankers. Therefore, your advantage is to recognize which way the fleet of tankers is moving and get their first.

Baltic Dry Sea Index

Nothing could be less exciting than something called the BDI.  But it is one way to measure the FLOW of money or direction our globalized world is moving in. The top 20 economic countries are meeting in London (see comments by “Critic” from London on right side of blog) The G 20 meets later this week and perhaps the drop in the BDI shows how fractured or nationalized the worldwide response to the recession is.  (Lots more below on BDI under fundamentals)

Money Flows

• To start realize that the standard of living just in the USA has or will drop from 20 to 50%. My guesstimate is combining the loss in home value, investments, jobs and the increase in debt. 
• Other countries, especially those like England, Iceland, and Eastern European countries whose banks adopted the same “free market” unregulated, over leveraged financial system are in worse shape. 
• Protectionism, just like in the Great Depression stops money flows, and we are a global economy. The world wide recession’s greatest danger is nationalism stopping money flows.
• Money flows best when goods are bought and sold. The more people that spend  money the faster it flows. When money is hoarded by an oligarchy or debt is forced on working folks money flows dry up.
• The major question emerging from our “Great Recession” is how to get the money flowing again and whose going to pay for the past mistakes.

Investment Choices

 Our huge debt, over leveraging and reliance on credit before the meltdown hit has put this country in much worse long term position to fix the problems created. This is why Investors411 recommends using hedges (ETF’s that short the markets – see Position sections) when markets rally to far too fast in the USA.

This is also why Investors411 recommends in Brazil and especially China (see Positions section of blog). They don’t have debt, but do have other resources.

Gold, GLD, is also recommended because in the long term all the money thrown by super takers (governments and other entities) to fix the problem is going to create inflation and devalue currency. This usually makes gold and other commodities more valuable. 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Government rejects GM/Chrysler bailout plan. The G 20 meets. Asking the wrong questions – What’s wrong with our prisons/justice system? The real question - What’s wrong with the USA? The “Quiet Coup’s”  ominous forecast referenced in Sunday’s blog deserves further consideration. One solution that prevented/delayed the downfall of the Roman Empire.

 

Rejecting Autos & G 20

(see  fundamental section below)

What’s Wrong with the USA?

Parade (the Sunday news magazine/supplement in many newspapers) headlined What’s Wrong with Our Prisons? Investors411 asked what’s wrong with our Justice System Friday?

Yes our justice system is a “national disgrace” (Sen. Jim Webb)   Our rate of imprisonment is “5 times the world’s average… Either we are the most evil people on the earth or we are doing something very wrong.”  (headline from front page of  Parade) The real question is what wrong or what’s happened to America’s culture? Webb has some good ideas, but the roots of this problem go well beyond the justice system. 

• Why are we so violent, 
• Why are we so fearful?
• Why are we so focused on me instead of we?  
• Why do we focus on retaliation instead of mediation?
• Why is mob mentality growing and individual accoutability vanishing?

I’m sure you could add to this list. 

The Quiet Coup

Here’s the conclusion of the MIT professor Simon Johnson’s editorial

What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

How a Roman General Beat the Terrorists.

Pompey in 67 BC beat the terrorist pirates who threatened to destroy Rome. Here’s how

 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING