Lord Vader/AKA Larry Summers

If their is one man to single out for the lack of coherent response to a massive destabilization of the worlds economy its Barak Obama’s now former economic chief Larry Summers.

Last Tuesday a mass of increasingly bitter, alienated and emotionally driven people voted for change. Few realize that Lord Vader and his oligarchy of Casino Capitalists won the election.

Summers stands at the apex of the triangle of “hugely damaging conflicts of interest of the senior academic economists who move among universities, government, and banking.”

Every Investors411 reader knows about the legion of lobbyists corrupting government and now the legions from academia who are bought by the shadows of casino financial capitalist.  Millionaire economists, Fed officials, and university professors who “refuse to disclose their conflict of interests”

See Charles Ferguson’s “Larry Summers and the Subversion of Economics” editorial (a must read) for a broader list or see Inside Job docudrama.

Perhaps the most damaging moment (and it is a hard call) is when the head of the International Monetary Fund, Raghuran Rajan in front of a field of world’s top economic experts (2005)  including Greenspan, Paulson,  Bernanke, & Geithner is shouted down by Summers for warning that the impending 2008 financial shadow bank meltdown is coming.

If you’re a true blue Democrat then Summers is Benedict Arnold. But I prefer to look at him in a battle between true transparent capitalism and the casino, opaque, oligarchy of monopolists  that is increasing their wealth and stranglehold over working Americans.Economist John K Galbraith opens his editorial on the election with the following paragraph –

The original sin of Obama’s presidency was to assign economic policy to a closed circle of bank-friendly economists and Bush carryovers. Larry Summers. Timothy Geithner. Ben Bernanke. These men had no personal commitment to the goal of an early recovery, no stake in the Democratic Party, no interest in the larger success of Barack Obama. Their primary goal, instead, was and remains to protect their own past decisions and their own professional futures.

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US stocks used to be controlled by normal investors and traders – If it still was I’d be ducking, covering & selling big time.

Employment numbers for last month on Friday +151,000 jobs rate (positive surprise) & a continued -9.6% unemployment rate More here

The more highly leveraged the ETF is the more it is a shorter term trade (days/weeks) instead of a longer term investment (weeks/months) DGP is the ETF most likely to turn into an investment.

One strategy has been to lock in 5 to 10+% profit on the trades by selling 1/2 the ETF when/if it reaches those levels.

Traders would need a dip in MO before nibbling some more.  Investors, preferably, would like an MO of near -60 or higher before investing. Traders anything close to zero (highest risk) to -30 on MO

However first concern for traders is to lock in profits or keep tight stops on stocks and highly leveraged ETF’s.

Personally – I’ll probably  be  selling today, hopefully into an AM rally, the rest of the leveraged ETF’s. and perhaps 1/2 gold. I know MO is not at +60, but, the Bollinger Band/over extended from 50 day moving average means a short term reversal/consolidation. .

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.”

Announcements of purchases/selling can first be seen in the comments section of the blog and/or if you are on the private mail list. If you’d like to get on mail list send me an email – see HELP/EDITOR section of blog

Going to add to positions today, hopefully on a dip. (see past Investors411 for options or look at Positions section of blog) I’d love the MO to be lower. Preferably at or near -60. But, it is to the benefit of both the High Frequency Traders (they make money with huge trades in microseconds) and the Fed to manipulate stocks higher.

• The HFT’s are not going to kill the goose that lays golden eggs for them the stock market.
• The opaque Fed actually  has the rough data on just how over leveraged the opaque shadow banks still are. The fact that the Fed is into QE 2 (QE 2 = the on the surface print and dump money – the rest is hidden and we really don’t know the grand total print and dump which is collectively easily in the trillions) says the shadows still need bailout protection.

The Hive – Goldman Sachs brand new billion dollar building

Goldman Sachs Fallout

From movie Casablanca – Captain Renault to Rick:” I’m shocked, shocked to find that gambling is going on in here!”

Perhaps Alan Greenspan’s Shocked disbelief in front of congress was real in 2008 – Greenspan ” I made a mistake” in believing free markets could regulate themselves without government oversight.

Investors411 readers understand that market manipulation - GREED – exists and it is unfortunately its human nature that if you cut the amount of regulators and regulations, greed can run wild.  A hypothetical and real examples.

• Cut penalties for theft, eliminate guards and surveillance cameras, leave chunks of money laying around the bank and what happens?
• Cut regulation, call for smaller government with less regulators in the Energy market = Enron
• Cut regulations, regulators of SEC and Justice Department = Bernie Madoff
• Cut  regulation in banking and you get “repro trades” driving the collapse of Lehman Brothers and Greek current debt crisis Lehman’s collapse (almost 1/2 trillion dollar loss) was the breaking point of the 2008 financial meltdown.
• Now Goldman Sach‘s has also been accused of “Fraud” leading up to the 2008 meltdown.

Best analysis – “Goldman Sachs Too Big to Obey the Law” – comes from MIT’s Simon Johnson. Also, decent article on legal ramifications in NYT for both SEC and Goldman

Bottom Line - In this case, Goldman Sachs is Goliath and the SEC is  David. GS has a dream team of legal experts that would make OJ Simpson, and the SEC look like little leaguers. GS face a danger of others piling on. We all face a danger of a run on the bank that is too big to fail.

Best Line you can tell your right wing friends who will argue that the left will over regulate everything from Credit Default Swaps to Shadow Banks -” I just want the regulation to be like they were under Ronald Reagan or was he a socialist too.”

Post Script – Bill Clinton has also admitted he was given the “wrong advise“ on derivatives (by Summers, Greenspan and Rubin) It’s time a lot of other politicians admit this error too.

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

Technicals, Fundamentals & Analysis

See Positions for changes made each weekend

US markets took a major hit in increased HUGE volume on the news that the SEC had launched a case against mega bank Goldman Sachs.  Quote/paraphrase this AM on CNBC from SEC – “The Agency [SEC] is not done yet.” translation – there are more prosecutions to come involving the time period before the 2008 meltdown.

The best analysis I could find on what will drive markets this week. Interesting in this analysis they put the Greek debt crisis ahead of Goldman Sachs. (I wouldn’t) It also ignores the economic impact that the Iceland volcano is having on European economy.

Fearless Forecasts Last Week - “Up week” 3 of 4 major indexes were higher, despite Goldman Sach’s news.

Fearless Forecast This Week – We should have better than expected  earnings, but ash clouds over Europe, Goldman Sachs, European/Greece crisis will probably overshadow earnings – “Down Week.”

Significant Indexes

• McClellan Oscillator fell dramatically to -29.37 yesterday.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is still in NEUTRAL territory – but we are approaching oversold territory – A time to buy.
• US Dollar – rose +0.39% yesterday. [Anything over +/- @0.50 is significant.] Mantra – right now The Dollar Rules Remember, dollar down almost always = stocks up. The 50 day moving average is a major support/resistance level. Right now the dollar is just above the 50 day MA.  Think of a huge battle going on over the last 4 trading days as to wether the dollar goes up or down,

Positions

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

TYH position has been completely closed – O% gain. UWM will be probably sold for what looks to be a 7% loss today.

When the McClellan Index gets below 60 Invetors411 will again add to positions.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

“You Lie Boy”

Remember back in Oct. of 2002 when over 100,000 protesters gathered in Washington to protest the Iraq war. Even the supposedly left leaning Washington Post buried the story in its metro section. The paper’s ombudsman later lamented, “a couple of ho-hum photographs that captured the protest’s fringe elements.”

The Same WaPo puts on the front page Sunday, an anti government protest organized by the right wings favorite cable channel (Laughably called FOX news ) of “60,000 to 70,000 almost exclusively WHITE pro corporate interest protesters . The WaPo is only the tip of the corporate mainstream media that has focused on screaming protesters depicting opponents as Nazi’s or socialists rather than on the substance of heath care. LINK

This is no surprise when you consider Pew Research’s statistic that “the politics and the protests of health care, accounted for a staggering 62 percent of all cable news coverage” for one week in mid August.  LINK

Your comments recently have captured this inequity and American’s media focus on the disruptive lunatic fringe elements as a way to hide any legitimate discussion of the issues.

• From  a personal email – Other significant health care issues not discussed LINK to article
  
• From Doggie’s Mom – “Let’s get back on track” LINK
• From Bob Sadinsky – “the race card… Of the 47 million without coverage, I am sure that mainstream thought is that they are either Slackers, Black or Latino or Illegals. So why should my money go to cover them and worse yet,why should my coverage suffer so these “people” can be covered. LINK
• From NYT’s Maureen Dowd – “You lie boy” LINK
• From Think Progress A Sunday protestor (Fox media fan) on why Obama will opress white America video LINK

More and more its looking like the mainstream media is bias is promoting, but hiding an ugly racial divide that is growing in America.

Anniversary of Meltdown

On the eve of the collapse of Lehman Brothers and the near collapse of financial institutions throughout the world, President Obama has a major address today.

Sherwehe , who has sent in some other very enlightening emails refers to an article in Vanity Fair entitled “Good Billions after Bad ” LINK to article

The lack of regulations to the “free market” got us is into the worldwide recession. Even Alan Greenspan admitted this. But as good as Obama’s speeches are his administration sure looks like a paper tiger when it comes to doing something. So far no real corrections have been made. Printed $ and tax payer funds have been given to shadow institutions throughout the world. OK, financial markets are recovering, but while their stocks have sizzled reform has fizzled.

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

Technically Friday’s slight loss in falling, below average volume , is just what bulls like to see.

Fearless Forecast for last week – ” is for a down week” – Except for Friday markets rallied – Therefore, prediction correct

Fearless forecast for this week – Down early, as dollar stabilizes and fears of regulation (see below/above). But, rallies are getting bought into. So prediction is for another positive week.

The second long term risk – Protectionism – If the BDI breaks down further is means huge cargo ships are sitting empty and protectionism is growing throughout the world.

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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 few weeks. BDI fell a minor -22 Friday. BDI trading at 2468 and has recently formed a resistance level at 2388. Would not trust any rally, especially in foreign exporting countries if the BDI breaks down below this number.

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 multi year chart gives you a much better picture of  where we seem to be headed (down) and the next major resistance level. An orderly/slow fall in the dollar is good for the majority of S%P companies that make most of their $ abroad. Dramatic longer term falls indicate loss of confidence in America.

One big reason Investors411 is currently  focusing more on US equities (XLF & SPX ) is because of the drop in the dollar making foreign exports more expensive in the US and US exports less expensive abroad. However, On the whole an orderly/slow drop of the dollar helps US markets and a case can be made that it helps worldwide recovery.

The dollar has fallen 5 days in a row.  It fell less, but still dropped -0.17% yesterday. Dollar trading at $76.68 Short term Bullish for most stocks

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

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

This is a dollar dropping rally. Don’t get a sugar high from it.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

WHAT’S UP? – Two unsung Heroes -Health Care Rescourses – Bears with stock market football – Our stock positions (some recommendations) – Oil prices breakout – Shadow Banks – Profiles in courage.

Two Unsung Heros

This year two outstanding women won the Profile’s in Courage Award given out by the JFK Presidential Library. 

Shelia Bair – (google photo)

Bair is the head of the FDIC and a Republican.  She opposed many aspects of the Paulson/Geithner shadow bank bailout. She was “the lone voice in the wilderness for her early warnings about the sub prime lending crisis.” She like Elizabeth Warren stands out as a voice of economic dissent in the Obama administration. For more see Bob Kuttner’s editorial

HealthCare

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals 

The losses might seem small, but the major US indexes were up almost 2% in the early afternoon. That’s a big drop into the close. Much bigger than yesterdays last hour plunge.  What’s worse is that Volume increased and was above average. Therefore volume confirmed the move lower.

XLF - The ETF that tracks financials (mostly shadow banks ) fell -2.66% . This index closed at 11.72. As stated in past updates for the last 3 weeks financials have been trading between @ 13+ and @11+ (more specifically support at 11.33 and resistance at 13.08) Any close above or below these support of resistance levels would turn confirm a longer term trend for bull or bears.

WTIC – Oil prices confirmed their breakout above $60 and ended the day +3.23% at $62.04. Energy related stocks kept the rest of the US markets from loosing more ground. As stated before – Higher oil prices are an indication of economic recovery, but also hurt that recovery because it means energy prices will rise.

Reading The Tea Leaves - For more than a week volume has not given us a signal as to the direction of the markets. It did yesterday. Two or three high volume meltdowns can turn the direction of stocks.  The football is now with the Bears. Watch the XFL. If it breaks down through its support level and closes significantly below 11.33 in big volume, then you will probably see more damage to markets. Also 891 in the S&P 500 is another critical support level.

Positions - (See positions section of blog for more)

Long Term Investors 

• Looking to increase positions in gold (GLD) 
• Waiting to get back into Brazil (EWZ) on dips.  Right now Brazil’s 2 main exports coffee and oil are at multi month highs. 
• GEX (alternative energy) is running higher with the move in oil.  It too broke out to a new 6 month high. Best read of tea leaves is the move in oil above $60 is unsustainable and both (GEX & WTIC) will fall. You can take some profits here especially if you bought the dip around $15 to 18. GEX closed at $25.67 and hopefully buy back in on a dip. 

Shorter term traders - 

• Personally, if I had the time, I would probably trade any drop of the FNX to its support level. 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

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News

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Nationalization

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

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

Learning lessons from India

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

Helping Mortgage Holders

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

Israel Elections

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

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

Stanford, Another Madoff

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

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

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Short Term Outlook

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

Momentum is still with the bears.

Long Term Outlook = Bears Rule

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See STRATEGY POSITIONS & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Market Updates – That Dirty Word

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Trends, Politics & Economics

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“Vengeance is Mine…”

“saith the Lord.” Another list of the top 25 people to blame for the financial crisis from Time magazine. Here’s the top 5:

1. Angelo Mozilo- CEO of Countrywide. America’s biggest mortgage leander popularized exotic mortgages.
2. Phil Gramm-  Head of Senate Banking wrote the infamous 1999 legislation and championed deregulation
3. Alan Greenspan- Fed chair who admitted his mistake “that financial firms could regulate themselves.”
4. Chris Cox- SEC chair whose  hands off attitude  and lax enforcement  failed to act against over leveraging and fraud.
5. The American Consumer-  Borrowing, borrowing, borrowing.

That Dirty Word – Nationalization

First it starts as a whisper then the voices grow.  Now more and more from every political and economic stripe are considering controlled reorganization under the government – Nationalization The unlikely trio of R – Phil Graham, D Maxine Waters & R Peter King have all used the N word. Obama has left the door open. Harvard’s ultra bear Niall Ferguson Economist Nouril Roubini makes the case for nationalization and so does Joe Nocera of the NYT business page. So has Simon Johnson from MIT’s Sloan Business School.

Who is going to pay for all this hell our deregulated, over leveraged financial/banking industry has brought down on us? Bank bond holders, shareholders, China,management, employees, pensioners, taxpayers(you). How big a haircut is each group going to take? How many of you want just your tax dollars to go to bailing out banks?

The Roubini and Nocera editorials bring up all the times we have successfully temporarily reorganized banks or put them into “receivership.”(why not include GM)

1. The USA in the 1980′s – called “bridge banks”
2. Sweden in 1992
3. The International Monetary Fund – This is exactly what the IMF tells emerging markets to do
4. Indy Mac – A 9 billion dollar bank was recently taken over by the FDIC and emerged far more solvent 6 months late

The downside here is Wall Street doesn’t like the idea because bond, shareholders, and management would take a hit.  So would the stock market. Many banks in Europe are already being temporarily nationalized.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Short Term Outlook

Danger Will Robinson Danger Danger - The growing threat of nationalization is going to start taking its toll on stocks – especially financials. (see above)  Even though volume was low (volume not confirming downside price move) technicals especially on the Dow are deteriorating. Sort of like a death of a thousand cuts (See Dow chart on right)

Its time to bring out the old Lost in Space robot with all its bells and whistles shouting Danger Will Robinson Danger Danger. – The threat of nationalization could cause another leg down in the markets.

Our Positions

These are listed under Recommendations or Stocks Picks on the Blog. Also the strategy of when to buy is listed under the strategy section on the blog.  Why fundamentally were these Exchange Traded Funds chosen?

GLD (Gold) – Investors usually buy gold when everything else is going bad. The second reason is all the stimulus plans around the world in the long run means inflation and that’s also good for gold.

FXI (China) Simply relative to the USA China is far better off.  They have a surplus of money while we are massively in debt. Their stimulus plan is is a greater percentage of GDP than ours. Our military costs are huge and w are deeply involved in wars/conflicts throughout the world. China is far less involved militarily. Vhina has a growing middle class and our is shrinking.

EWZ (Brazil) Brazil simply has an abundance of natural resources – Both oil and alternative energy.  About 5 years ago a left wing government took over and spread the wealth to more middle class working families. Even more so than China they are vulnerable to the worldwide recession because oil prices fall in recessions and they have lots of oil.

GEX – (Alternative Energy)  If we do not start developing alternative energy resources then our future as an industrial, economic power will decline even faster.  Obama was elected, in part, because of his belief in alternative energy.  The stimulus plan begins to deliver on this commitment to energy indpendence and America’s economic well being.

UWM (small caps) & QLD (mostly technology) over  SDS (S&P 500) and DXD (Dow).  The later two are short positions and the first two long positions.  Small caps and technology are less impacted by the financial crisis.  The are far less likely to be over leveraged. (See strategy section of blog)

Cash is king.

Long Term Outlook = Bears Rule

(see strategy section of blog for more)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Trends, Politics & Economics

Banks – Is the Sky Falling?

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

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

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

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

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

Obama on Stimulus

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

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

#1 Progessive Voice in American Media

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

What’s Pork?

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

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

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Technicals

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

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

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

Secondary Indicators

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

Fundamentals

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

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

Short Term Outlook/Strategy

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

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

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

Long Term Outlook = BEARS RULE

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

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

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

Asset Allocation

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

Recommended Sectors

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

Chief Strategy -

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

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

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING