Investors 411 Blog

Obama – Leadership & Polls

Lots have analysts have remarked how fast Obama (now at about +50%) poll numbers are dropping .  The one missing ingredient is leadership.

Yes, Obama has lost  support among Democrats and Independents for nor following though on some of his promises. However, the most visible issue is the health care debate . He is getting slaughtered on this because he has NO POSITION . There is something vague about if nothing’s done medicare will go broke and in another 8 years costs will double. This is True, but what or where is the Obama Health Care plan?

Right now Obama looks like that 98 pound weakling who is getting sand kicked in his face.  They labeled him and his non existent Obama plan all sorts of names and it sticks because he doesn’t have a concrete plan. Unless he chooses something and leads the only way to go is down and the mob will win .

Cash for Clunkers

The best stimulus program to come out of government .  The government spends something like $3,500 and gets the consumer to spent $15,000 to $20,000 on a new more fuel efficient car.

The government is getting the consumer to spend @5 times what it has invested .  That 5 times gets multiplied by fuel efficiencies, tax revenues, keeping manufacturing jobs, and the employees of the dealers and manufacturers spend that money to buy other stuff. This all gets money flowing even faster.

This program should be continued with other big ticket items that can be made more fuel efficient .

The best rival to Cash for Clunkers is the $8,000 stimulus for first time home buyers. This also has a huge multiplier effect.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-1.96%	up
NASDQ	-2.00%	up
S&P500	-2.21%	up
Russell2000	-2.45%	-

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

Major US markets had a significant meltdown in increased above average volume .  BEAR’S RULE the short term momentum and the volume indicates that there is more downside to come.

A week ago I mentioned that Jim Cramer was wrong and we were due for a more significant correction.

Support levels to watch on benchmark S&P 500. SPX currently at 998. The first is 980 . If that falls we could see a lot deeper correction .  Lots depends on the jobs data on Friday. However, we had great manufacturing news and when good news sinks the market – that’s an indication of more pain to come.

Lots of analyst look at this as a technical correction.  We came too far too fast. But there is a major underlying fundamental factor. The BDI shows worldwide trade falling. Much of this is due to China pulling back on buying commodities. China also has a technically overheated market. (see yesterday’s blog)

The big news for the month is the jobs report on Friday Right now we reacted so poorly to the good ISM (manufacturing) news, you have to worry about the employment news.

On financials from yesterday-If you prefer gambling to investing, I’d wait another day or until prices get closer to 200& 50 day moving average before putting bullish chips on the table.

Therefore , FEARLESS FORECAST – is for a down week .

The  jobs report for August comes out Friday most important fundamental of the week. ISM (manufacturing ) report out today.  What’s key here is  we get a good number (above 50 would mean manufacturing growth) If market does not move higher on good number, it is a strong indication that market correction underway. - You betcha-what now looks like a  correction is underway not only in exporting countries, but importing countries (USA)

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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 – Up +2 yesterday

“Remember almost every country has based their recovery on exporting their way out of this mess” (Source – seeking Alpha)The infotainment financial channels and analysts used the BDI when things were going well and are now ignoring it. The #1 factor behind the BDI’s retreat is China seems to have stopped or seriously slowed down buying commodities.

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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 was rose a significant +0.75 % yesterday. Dollar closed at $78.74. Its  major support level is @$77.5 & it has 2 major resistance levels – a falling 50 day moving ave. at @$79.20 and the August highs of @ $79.5 .  If it breaks down through support stocks should rise, if it breaks up through resistance stocks should fall.

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

This is the index to watch because its impact is immediate.

Positions

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

The high Beta names are getting beaten up. Financials took a big hit yesterday.   The BDI’s drop and the fall of the Shanghai Index technically (see yesterday’s update) certainly forecasted and forecasts further deterioration. If the BDI has stopped its fall we’re OK

My philosophy has always been why be greedy – China/Brazil in the long run will outperform the USA. But a correction will take those stocks further down.

• If you’re in this for the long term (years) hold onto all FXI & EWZ
• If you’re not let’s sell 1/3 to 1/2 the positions. The gains should be @ 20+% and hopefully buy back in at a lower price

When the BDI starts to recover – reaches a higher high. Then jump back in. Right now, this is NOT some huge reversal, but a correction of an overheated market. If the BDI continues to fall from current levels, we are much deeper trouble.

Your Comments

Both privately and in the comment section of the blog you are asking for individual stock recommendations. OK I have a few. Stay tuned.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Investors411 record – 4 1/2 years of beating benchmark S&P 500

Note: Last Investors411 for the week.

Health Care, Obama and Leadership

Huffington Post Photo

Does anyone really know what Obama’s heath care plan is? NO. Unlike Hillary over a decade ago he has set broad goals – he wants to save Money. Congress has come up with a slew of different plans. Perhaps this attempt at consensus building is the best way to achieve results. After all Hillary Clinton failed.

However, the best way to show leadership is simply to lead.  Congress is fighting like chickens in a hen house over health care, each individual and side protecting her/his specific interests. The powerful interest groups who want NO change are spending huge amounts of $ to shoot down reforms health care. It’s a waste of time to go on TV to defend a non existent plan that has no concrete structure.

Obama set a charismatic vision and followed though in his campaign for president. American’s back someone who leads and right now all Obama is doing in health care is following.

Stats on Tax Rates

10% on income between $0 and $8,025

15% on the income between $8,025 and $32,550;

25% on the income between $32,550 and $78,850;

28% on the income between $78,850 and $164,550;

33% on the income between $164,550 and $357,700;

35% on the income over $357,700.

15% on investment income

For single individuals – From the Fed tax tables

An interesting editorial by Tohm Hartman called The Great Tax Con Job is worth reading. One interesting point he makes is that both times we had massive tax cuts for the wealthy they ultimately lead to a period of growing over speculation and collapse.

• Massive tax cut in 1920 from 73% to 25% led to the roaring 20′s and the Great Depression
• A 70% to 90% tax rate from 1930 to 1980 on the uber wealthy lead to America becoming the strongest economic power on the planet.
• A Reagan tax cut from 74% to 38%, later followed by cuts on investment income, and another 3% cut led to the biggest meltdown since the Great Depression.

There are some mitigating factors, but the bottom line is clear a culture that focuses on  giving massive breaks to the wealth does NOT prosper

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+0.77%	down
NASDQ	+0.36 %	up
S&P500	+0.36%	up
Russell2000	-0.33%	-

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

All the major US indexes are screaming OVERBOUGHT conditions. You can only go up so many days in a row. Only the NASDQ has shown  some moderate volume behind the move higher. This increased volume acts as confirmation of the trend.

The major US indexes have all reached new closing highs, except for small caps (the Russell 2000 is almost there) This does set up a longer or mid term bullish trend for stocks.

Check out on the bottom of the charts for the major indexes ( see list on side of blog) the CMF (Chalkin MONEY FLOW) We are over 3 standard deviations away from the mean. ( the green color is above 0.3) This is about as overbought as markets gets without some kind of reversal.

Fundamentals (earnings reports) have driven this rally.  At first company’s like Intel surprised. Others followed, but now that surprise is built into stock prices. Last night AAPL (Apple Computer) hit another grand slam home run earnings report. More here

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 . The rate of decline increased on the BDI yesterday.  We have had a series of lower lows and lower highs since early June. We have a way to do before we establish a new low (see yesterday’s update), but we definitely have a momentum change. Bears are gaining momentum

In a nut shell the BDI is

• short term - Bullish
  
• mid term -  Bearish pattern
• long term - Bullish pattern

Here’s an ominous forecast on global trade from the Director General of the World Bank. – Pascal Lamy.

$USD - The Dollar went down and tested its major support level yesterday.  It held. Dollar ended up flat +0.04% . The last remaining support level is the June lows at @78.4. The dollar index closed at 78.90 . Breaking this support would be very bearish for the dollar and bullish for stocks.

Conclusions

The “Fearless Forecast” predicted a down week because we are overbought.  Now we are way overbought , the BDI has turned negative and the dollar stopped dropping at its support level. Technically everything is turning negative. Bears are growling

Both the dollar and the BDI are the indexes to watch. If the rate of fall in the BDI increases – take more $ off the table. No one ever went broke taking profits.

Positions

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

IFN - (India)  Sold entire position yesterday. Gain @ + 3.5% See Positions section of blog.

FAS – Perhaps the third time is the charm. Last two times (see Positions) Investors411 took defensive position we got burned. Opening a small position (2.5%) in FAS (3X short the financial sector) Overbought markets & BDI falling call for some caution.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!