Bank of America

A Trillion Dollar Fraud

Over the past few years we watched as the Obama administration has caved into major industry groups and given them huge financial mounds of money and freedom at left the taxpayers to subsidize the risk or pick up the bill. Every major bill has given the lions share of profits from whatever “compromise” or major piece of legislation to a wealthy oligarchy within various industry groups – Insurance, military manufacturers, shadow banks etc. (See a year of past Investors411′s)

Yesterday Bank of America was given mana from heaven from Tim Geithner, Obama’s Secretary of Treasury.  BAC had is biggest single day stock gain in this year. It broke out of a trading pattern and rocketed 6.37% higher.

What happened was BAC settled with the government over their responsibility in 2008 financial meltdown. Analysts had expected their liability to be in the 10′s of billions range and Geithner and BAC negotiated for a payment of a few billion. Guess who ends up getting hurt the most my this? – YOU.

So much for accountability as a major shadow bank ends up squeezing YOU the American taxpayer.

Obviously none of the major media outlets are going to carry this news and to the Average American the couple of billion in the settlement sounds like a big number.

This is a backdoor bailout and more will come where losses are transfered from shadow banks to the government. (Fannie & Freddie) If you’d like to read more , John Lounsbury in Seeking Alpha – Click on LINK below

BofA Settlement With Fannie and Freddie: Part of a Trillion Dollar Fraud

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KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Technicals, Fundamentals & Analysis

Investors411 record - 6 years of beating benchmark S&P 500

• Biggest rally in a month. A breakout in increased above average volume, = Bullish.
• Big news at end of week is the unemployment report.
• There’s  POMO buying by the Fed today and each day (differing amounts) till next Wednesday when the new schedule will be announce. (see past updates for more on this and what POMO means)
• Translation of above for stocks short term – bullish
• Another translation – US stock markets are being “manipulated higher” and manipulations almost always create bubbles.
• The BAC settlement had a lot to do with yesterday’s rally (see above)

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Reading The Tea Leaves

From Yesterday -The Bulls are back. - We had the biggest rally in a month.

Today is a confirmation day – If we hold onto most of the gains bulls rule.

Fed on a 6 day spree of buying bonds from its biggest member banks (see above) – bullish for stocks

The McClellan Oscillator has been hovering around neutral for a long time. It  has also been in a bullish  pattern of higher highs and higher lows (see chart above) However we have almost reached levels that start to show stocks are overbought.  This has to be balanced with the following.

Over the last few sessions, Investors411 has given you data showing some (key word some – definitely not massive) is flowing back into stocks. This in combination with the Obama Tax Compromise and QE2 should give the same punch to US stocks that the Obama Stimulus and QE1 gave back in mid 2009.

The bears side of this discussion is that we have already come so far so fast that this stimulus is NOT going to matter. Investors411 has outperformed the S&P 500 since over the last few years by using the McClellan as our main tool for when stocks are oversold and overbought. The long term outlook continues to be CAUTIOUSLY BULLISH.

Bottom Line – Short term – Bullish, would temper this if/when MO gets over +60.

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Positions

• #1 UWM - (2x small cap stocks ETF) – 1/2 position -Will put a 1.5% trailing stop on this again today.
• #2 UWM
• SLV – (Silver ETF)
• DGP -(2x gold ETF)
• REMX -(ETF for Rare Earth Metals) Bought yesterday at 24.52

Under consideration

UCO -(2x oil prices) From Friday – Too high waiting for dip..

REMX (Rare Earth ETF) – Will consider more on a dip. Limited supply. China which dominates market is limiting exports. All this makes for a massive supply/demand problem forcing prices higher.  Rare earth goes in everything from hybrid cars to TV’s

EWZ (Brazil) & LBJ ( 3x Latin America – majority Brazil) Obviously the later is more risky because its leveraged 3X. On a role with 5 big up days in a row. Short term traders may risk buying a dip, but again afraid there will be no dip

US Financials – The major shadow banks are outright getting away with Financial robbery – Probably over a trillion dollars and no accountability. They run an opaque system of accounting and have a cozy relationship with the Obama administration – These bastards are going to do well in 2011. Will dig up some relevant ETF’s tomorrow.

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Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including ”YOUR Stock List.” (YSL#3)

Barack’s Big Bubble

Senator Maria E. Cantwell

Every Sunday, the NYT’s  Frank Rich , produces one of the most insightful columns LINK that is outside the box of the ordinary pablum of America corporate media. It’s entitled The Night They Drove the Tea Partiers Down . But let’s expand on some of his secondary points and forget about the Tea Parties for now.

Those of you who follow the stock portion of this blog and have beat the S&P 500 financially again as in the last 4 1/2 years, have notice Investors411 repeating as a mantra that volume is falling as markets are rising .  A very very very unusual scenario. Money is NOT coming into US equities for the sidelines if anything its exiting stocks. Why?

There is a growing lack of confidence & building anger over the US financial system (“shadow banks”). The vast majority of Republicans have always wanted the financial system to have no umpires or rules (think baseball without umpires or rules) Obama and the Dems have blessed this position and actually made it worse. They are stripping away vital protections that made our financial system accountable and transparent. If anything proposed changes are cosmetic. (story for another editorial).  Here’s a few relevant points that Obama and the Dems have pushed making our financial system less transparent.

• They dropped Mark to Market accounting . Now financial simply don’t have to account for losses in real time.
• Even though former Fed Chair Paul Volker is supposedly the Head of Obama’s Economic Recovery Board they have ignored his pleas to break up the too big to fail banks. In fact these banks are bigger and badder than before. LINK
• They (The Dems led the charge) voted to gut the reforms instituted after the World Com accounting scandal/collapse n 2002 that Bush helped put in place LINK
• At least one Democratic Senator has had the guts to stand up for the public - Maria Cantwell – “I’m not sure” why Treasury Secretary Timothy Geithner still has his job, calling his financial reform plans “appalling.” LINK

I know you’re getting a lot of happy talk or “political bromides” about what’s going to get done, but that does nothing. The anger is only going to grow as the bubble expands. Our finacial system is LESS accountable and transparent than when Lehman collapsed.

Bottom Line for Longer term investors and everyone else – Invest in tangible assets and countries that are less involved with the US financial system. No NOT make long term investments in US financials. Recognize another bubble is building. The longer we wait to fix it the worse its going to be when it pops.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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, Fundamentals & Analysis

The end of the week saw a rally, again in low, decreased volume.

In my decades of watching markets, I’ve never seen the US markets rise so far on volume that kept decreasing. The USA is a market of short term traders not long term investors. This can bet be exemplified by CNBC, the #1 financial channel, whose focus is “Fast Money,” “Mad Money,” (actual names of popular shows) & what’s happening NOW. Its exiting to watch, but its like watching a poker TV channel.

We have moved from way oversold positions to a neutral position. Perhaps the best chart you can use to tell if a market if oversold of overbought is the McClellan Indicator LINK ( more on this later – key to chart – 0 is neutral and when you get to @ +60 you are overbought and approaching -60 you are oversold)( buy at oversold and sell at overbought) We are going to use this chart a lot more.

As stated many times before The new #1 forecasting tool is what happens to the dollar.

FEARLESS FORECAST FOR WEEK – Tomorrow, not enough time for full analysis, but it looks like we are in rally mode.

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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 is @ 21% 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 )

The BDI rose a significant +58 points yesterday and closed at 3393. We look to be starting another major move higher. A higher high price on its chart pattern has been confirmed The BDI has rallied almost 1300 points since late September. =  Bullish for stocks & world trade right now. Especially good for our positions in FXI & EWZ

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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 a modest  +0.05% yesterday. The dollar closed at $75.76 . 

From last week – The next important resistance level for the dollar is the falling 50 day moving average (blue line on chart). This is at $76.52 this AM . The support level is a t @$75.00 Both are important lines in the sand. A breakout on either side will move US equities in the other direction and the world will follow. Right now smack dap in middle of trading range, but 50 day moving average is decreasing so the squeeze is on.

Positions

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

Our major core positions into weekend. – See Wednesday’s post – Click on Nov. 4th (last Wednesday) on the calender on to of blog.

Will return Long Term Outlook  to CAUTIOUSLY BULLISH when a higher high (we break out to new high) is established on S&P (chart pattern).

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Cautious Optimism on Stimulus

Christina Romer

We’ve come back from the edge of the financial cliff, Stocks have rallied significantly, & Job loss has decreased from @700,00 a month to 216,000 last month.

“We have absolutely seen a change in trajectory,” said Christina Romer, top White House economic adviser. White House said that translated to about “one million jobs that would have been lost without government efforts “

There have certainly been many different government programs along with the Fed that have change the financial picture – In its first report to Congress on the stimulus, the White House Council on Economic Advisers said the economy was improving and would have been far worse without the stimulus . LINK

Also Treasury Secretary Tim Geithner both in front of congress and on the CNBC echoed some of those achievements and future problems – LINK

One interesting point is besides these economic gains $80 billion have come back in from the loans.

Making $ off the Stimulus

Instead of editorializing on the stimulus, let’s take a look at how to trade/invest on this huge amount of cash stimulating the US and the world’s economy and make your portfolio grow. Some significant points.

• The Chinese stimulus is over twice as large as the US relative to the GDP of each country. Their stimulus is more focused (one political party) and faster acting. We’ve already seen a far bigger move in their market than ours. This should continue. Invest in China
• US has guaranteed the solvency of the giant “too big to fail” shadow financials. Smaller banks are not covered and getting toasted. From the best Goldman Sachs t o the worst AIG & Citi , if the government is going to guarantee your survival you have a huge advantage. Invest in too big to fail shadow financials
  
• All the printing of money,taxpayer stimulus, & government loans is forcing the dollar lower. The US is a deficit nation. This forces commodities (traded in dollars) higher. Invest in commodities – Copper, Gold, energy & and energy rich countries – Brazil

Health Care

One of you sent in the a link to different views on health care from the NYT. Will post this on the comments section of the blog. This echoes a comment made by Doggie’s Mom.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

NASDQ continued its breakout move. Both the Dow & the S&P, joined the NASDQ  broke out to new yearly price highs yesterday. Small cap stocks (Russell 2000) broke out two days ago. – Bullish sign

Up five trading days in a row for major indexes – we’re getting a bit oversold.

This rally is very much related to the dollar dropping. According the talking heads over 1/2 of the profits of the S&P 500 come from foreign countries – so when the dollar drops their profits grow.

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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) It looks like we could be forming another lower high and that would reinforce the mid term bearish pattern . The BDI has leveled off and started to rise over the last two weeks. Flat yesterday +01 yesterday.

Each day this looks more like a base has been formed above a key support level Longer flat bottoms and slowly moving higher is usually indication of, at least, a short term bottom-Bullish short term outlook for BDI and we have certainly recovered from the devastating lows of Dec./Jan.

The BDI is 41% off its high (early June) Before that it gained almost +170% from early April to Jun e

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$USD - Check out the 6 month chart (to the left) or a multi year chart of the US dollar of the US dollar.

The dollar dropped of the table and through its major support level three days ago and has continued to fall.  It fell -0,30% yesterday. This added drop is confirmation of the technical breakdown the day before. Dollar closed at $76.81. Its  major support level is @$77.5 . After 11 days of consecutively being up one day and down the next, the dollar has fallen 4 days in a row. Short term Bullish for most stocks

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

Bottom Line – Both the BDI & the Dollar are forecasting at least a short term rally.

Last year’s low was around $71, so there is a long way to go before the next major support level.

Positions

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

Instead of waiting for that illusive 5 to 10% dip to invest nibble a little bit now. This is a dollar dropping rally. Don’t get a sugar high from it.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

140+ Dead in Demonstrations in China

You’ll here a lot more about Iran, but the Muslim minority has demonstrated or rioted (depends on which side your on as to which term is correct) in a far western Chinese Provence. The BBC headline story here

China owns a huge part of our debt and we need her cheaper goods. Will condemnation here be as great as Iran or hypocritically silent?

Biden – We “Misread”  Problems

Photos – Huffington post

Since last fall Investors411 has continuously repeated “The problem in the financial sector is far far far far far bigger than fist imagined. Impact of this mess is going to take years to resolve.” See positions section of blog.

Investors411 continually cited a significant group of economic thinkers who clearly demonstrated just how bad the economic problem was. Investors411 also criticized Larry Summers and the economic crew of the Obama administration.

The only good news is they finally woke up and smelled the coffee . Tax cuts good, Stimulus plan good but way too back ended (only 10% spent so far) The same problems that led to the financial meltdown are still out there. Yes, we’ve moved back from the edge of the cliff and everyone starting with Paulson, Bernanke and Geithner do deserve some credit by throwing the car they were driving into reverse as we approached the cliff.

However Greenspan, expanding deficits, wars, housing and unregulated capitalism have created a massive economic black hole. Short term stimulus usually worked as a solution in the past. The problem here, besides the holes massive depth, is the accumulated debt was already humongous. Biden’s admonition of misreading economic crisis here

For in depth previous prediction and solutions see Overview section of blog.

Iran (Week 4)

Huffington Post’s Nico Pitney’s daily blogging on events here

There has been one group of cleric’s come out in support of demonstrators and he wonders what’s happened to the head religious leader in Iraq – Sistani. He supported democracy for Iraq, but has remained silent on Iran

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Investors411 record – 4 1/2 years of beating benchmark S&P 500 (see results at 6/25-scrolldown)

Technicals and Fundamentals

A huge price decline, but again in weak declining volume Friday. How markets react to news is just behind Volume as a prediction tool. In this case it was the Unemployment figures that sparked the fall are lagging indicators.  Therefore, the huge downside reaction is way more than expected = Bearish.

The lack of volume still troubling factor. – One things for sure-money on the sidelines is staying here. Its hard to make a long term forecast with volume as a confirming factor. Weakly forecast below.

Earnings season begins next week. Historically, this week companies that are not going to do well warn – this is bearish

Oil futures are way down this AM trading at $63.88 at 7:15 EST. = Bearish

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

These are important forecasting tolls, but secondary to volume .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell sharply Friday.  This index is winding up like a spring, within a consolidation pattern and is close to a downside breakout (3452 is breakdown point and index closed at 3529)  See chart  Watch out! Long term Bullish rise from bottom, but coiling right now for next move . Potential bearish breakdown possible this week

$USD - The Dollar rose 0.74 % . The strong inverse correlation between the dollar and stocks has existed for many moons. Market. Dollar up = markets down. That’s just what happened Friday Long term Bearish pattern for Dollar that is consolidating pattern now (neutral) = Bullish for stocks

Fearless Weekly Forecast – Last week Broke Investors411 winning streak of forecasts for the week  as US markets fell on some bad consumers confidence and unemployment data. Momentum is with the Bears as we enter earning season. Check out all the red bearish signs above.

The S&P resistance level (@875 & SPX now at 896 )  should at least get challenged, especially in the beginning of the week. Watch BDI. Forecast – Bears Rule

Back to CAUTIOUSLY BEARISH outlook. This is in anticipation of a further breakdown of the BDI and S&P 500.

NB – Volume has confirmed nothing. So confidence in above predictions is a bit shaky.

Our Positions . -  China, Brazil, & India (FXI, IFN & EWZ )(Partial list)

Unlike the USA that has seen two economic bubbles burst housing and financials these growing countries have been relatively less impacted. The decline in trade with US is going to impact all 3.  China and India have positive GDP’s predicted for the year and resource rich Brazil’s GDP is predicted to be close to zero. The World Bank predictes a -2.9% loss of GDP for the rest of the world..predicts a-2.9% loss of GDP for the rest of the world.. For more see Positions section of Investors 411.

Recommendations – Investors has a very big position FXI a very small position in IFN , and a closed position in EWZ .  Again see Positions section of blog. Short term traders might want to take some profits in FIX and both traders and investors  should look at possible “buy the dips” opportunities that should emerge this week or next in IFN & EWZ .

More tomorrow

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Below is your very own collection of photos of the men who have privatized the profits and socialized the risk.  The Masters of the Universe who have rescued the dishonest and  greedy banks, kept the financial system afloat,  and created an explosive rally on Wall Street by moving in the shadows and stripping away financial transparency. Of course that’s just how they helped create the financial meltdown in the first place.

The Masters of the Universe

(above photos – Tim Geithner, Larry Summers, Hank Paulson)

“To the Moon Alice”

was Ralph Kramdon’s (John Herbert “Jackie” Gleason Jr.) famous line.  That’s just where the stock market is now going. See technicals and fundamentals below.

Masters of the Universe

was , of course, was the term author Tom Wolfe used in to describe all  the greed, arrogance, and shadow deals that personified Wall Street in the 1980′s. Since Obama’s took office his boys (Summer’s & Geithner), like Paulson before them, have become the personification of Wolf’s term.

Nobel Prize winner Paul Krugman  in an editorial entitled “Zombie Financial Ideas” states “ Every plan we’ve heard from Treasury amounts to the same thing — an attempt to socialize the losses while privatizing the gains.”

Arianna Huffington In her editorial pleads with Obama to take the “steering wheel out  of Geithner’s hands.”  She chronicles the war within the Obama administration between Axelrod and Geithner/Summers over AIG, Wall Street bonuses and just who is going to pay to fix the worldwide financial problem. Right now the fixer sure looks like YOU (the taxpayer) your children and your chldren’s children. 

John Bogel (legendary founder of Vanguard) - This AM on CNBC – The solution gets the government back in the shadow banking business

The solution, brings the world’s financial system back from the brink and ignites a Wall Street rally lead by the financials that scammed the world.  Probably later rather than sooner ordinary folks are going to realize how big the bill will be. 

A whole lot more on this later and since we’re all in this together you can lead the conversation by  submitting YOUR editorial/comments at the bottom of the blog.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING! 

Got stuck in a massive traffic jam late last night. A major wreck on the CT/MA border. So this Investors411 is short and sweet.  

One editorial to bring to your attention is by American Prospect editor Bob Kuttner.  He sees team Obama’ – Rubin +Summers+ Geithner = Paulson = AIG = Wall Street.  The good news in all this – the stock markets in the short run should move higher. The bad news is the taxpayers are going to pay for Wall Street mistakes. 

What, Summers and Geithner have done is “double down” on the Paulson/Bush plan and the recent AIG debacle is just the latest example of this.  He’s disappointed with new TARP plan and offers an alternative that seems to “winning converts through out the political spectrum. 

Kuttner concludes “Barack Obama is a president of great promise, reassurance, and political skill. In the next few weeks, we will learn how he performs in a crisis that is being worsened by his own appointees.”

Long Term Outlook = CAUTIOUSLY BEARISH

See Changes in STRATEGY, POSITIONS, & OVERVIEW sections of blog 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

A quick sharp technical bear market rally exploded Tuesday. Investor411 cautioned yesterday  -”Warning to all those who are short stocks/sectors.  We are long overdue for an oversold technical rally.  A bear market rally could see a quick explosion higher in a short period of time as shorts rush to cover.”  

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Another Shoe Drops

Remember the wealthy wife of Philippines Dictator Ferdinand Marcos – Imelda?  Well she truly loved shoes.   The above is a photo of a very minor potion of Imelda’s collection.

Imelda is no longer with us, but her shoes are raining down on Wall Street in increasing numbers every day. It’s not just the other shoe that’s falling but  but a symphony of shoes that are hitting their marks each day and destroying what’s left of the non transparent American Financial system.

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Bernanke and the Shoes

Smoke was coming out of the Fed chairs ears as he angrily denounced AIG in front of a congressional committee. AIG is an Insurance company that was running an (unregulated) “hedge” fund according to Bernake . We gave these crooks another $30 billion because the collapse of the company (shares now worth $0.42) would devastate the world’s financial system. Yahoo news on Bernanke: Bail Out Bad Borrowers Too

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Imelda’s revenge

The shoes are not only clobbering their targets – other companies that ran similar “hedge” funds full of over leveraged toxic assets – but are also hurting the entire world. AIG has tanked. Citigroup is 27 cents away from becoming a stock counted in pennies. GE down over 95% from highs. Wells Fargo, Bank of America, and the other “usual suspects” stock and bond prices are disintegrating. XLF (the Financial market basket of good and bad financial companies) has fallen from 30 to under 7 within a year and many stock markets all over the world hit new lows yesterday.

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Senator Bernie Sanders and the Shoes

Vermonters love their independent (socialist) Senator. Here’s why – Sanders to Bernanke – Tell us what banks have sought bailout money. Bernanke – We have a new web site… Sanders again – tell us what banks. Bernanke NO. Sanders dropped a shoe on more than Bernake

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Why are Bernanke Obama and Geithner’s lips sealed?

First any bank that has taken bailout money is likely (like AIG and CitiGroup) to keep asking for more. Who knows how vast the “hedge” fund trading or toxic debt is?  It’s all hidden.  Therefore, the shoes keep falling and the markets keep melting down.  If the government & companies exposed the facts investors would realize the dreaded N word – Nationalization – would get used. These stocks would fall off a cliff and the markets would take a big hit. So we keep dying a death of a thousand cuts from falling shoes and the market slowly melts down. Which is worse?

Stop hiding the facts. Take the hit. Stop the shoes. Let’s start fixing the financial problem.

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Technicals & Fundamentals

We did NOT get the predicted oversold bounce yesterday. Instead markets consolidated in declining volume. Perhaps we’ll get some sort of over sold bounce today, but more and more its looking like the short term momentum is totally owned by the bears. 

The benchmark S&P 500 closed below 700 yesterday. These round numbers are support levels. So another support barrier fell. 

Reading the tea leaves – Until there is clarity in the financial sector (see above) stocks have little chance of sustaining a rally.

Major fundamental for the week is the monthly jobs report on Friday.

How will you know when there’s a chance for a sustainable rally? When there’s bad news and the market’s ignore it or even better – move higher on negative news.

Long Term Outlook = BEARS RULE

See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

A Stiff Upper Lip 

You’ve got to admire the Brit’s for their stiff upper lip. Across the pond they’re in a lot more trouble than we are from England to the Ukraine. Most of the emerging democracies of Eastern Europe bought into what they thought was the American dream. It turned into an over leveraged toxic asset bubble with banks/countries wobbling on the cliff of insolvency nightmare.  

But at least the Brits  have some degree of transparency. Here almost everything  except the amount of bailout and stimulus funds is a deep dark secret. Take the deeply troubled Bank of Scotland now all but completely nationalized by the Bank of England.

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Transparency

The Royal Bank of Scotland has put admitted to  $722 billion of “troubled assets” of over leveraged toxic debt and are trying to wind down those liabilities. This loss is staggering England with about 1/5th the gross GDP of the USA.  But, they are dealing with the problem in the open.  We don’t even know the staggering amount of over leveraged debt of AIG, GE, GM or any of our major/minor banks.  The only thing we do know is the near meltdown of the financial system when Lehman Brothers went belly up and its toxic debt brought the entire worldwide banking system to its knees.

Unfortunately we also know this problem is going to get worse. Because more defaults are on the way,  unemployment is growing, home prices declining, and esoteric mortgages will soon start charging higher rates of reurn.

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Obama Pass/Fail

Let’s give the guy credit for a transparent budget. He’s getting some excellent reviews because he stopped hiding many items like the Iraq war as part of the overall budget. 

But on the other hand he’s getting clobbered with his rosy economic assessment of the future. Whose he kidding? The US GDP will be -1.2% this year and +3.2% next year. A consensus of Economists believes otherwise as Peter Goodman in NYT point out. (Many thanks to one of you who emailed me this article)

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“Geithner’s Folly”

Our new Sec. of Treasury has come up with something called a “stress test” for big banks.  Let’s get real. The vast majority of these toxic institutions invented the stuff that the Bank of Scotland has already admitted to. Big banks are broken. Wake up and smell the coffee – Geithner “is asking the wrong question. The question he is posing is: how can the government save Citigroup? The right question is: how can the government rebuild the banking system?”  Bob Kuttner, columnist for BusinessWeek, Boston Globe and co founder of the American Prospect on no matter how good the rescue plan is it doesn’t matter a lick if you don’t fix the banks.

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Technicals & Fundamentals

Just about every front page is covering the biggest ever quarterly loss - $62 billion by AIG. 

From Friday – “The Ugly news” would be - “The SPX ends closing  a bit below 741.  This would just establish a lower low (see chart on right side of blog) and further entrench the bears rule chart pattern.”  

The SPX ended up at 735 (A bit below its mother of all support barriers) and technically this along with no climax selloff  shows there’s more down side to come. Perhaps today we may see a climax selling panic today and a chance to nibble. To have a “climax” sell off you need both a big fall and big volume.

Big news of the week is the employment numbers for February come out Friday. 

Reading the Tea Leaves – How many Danger Will Robinson Danger Danger signals can there be?   – Hope you protected any long investments.

Long Term Outlook = BEARS RULE

See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!