Investors 411 Blog

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Ronald Reagan – Historic Hero

For most of the World (and me) Republican Ronald Reagan and Russian President  Mikhail Gorbachev most historic and heroic event was the signing of the 1987 Treaty Limiting Nuclear Weapons.

Democrat, Barak Obama, along with Russian President Dmitry Medvedev have agreed to another historic & heroic treaty further limiting nuclear weapons to about 1550 deployable warheads each. Now its up to our Senate and their Duma to approve the treaty. Trouble is  US Senators like John McCain have promised “no cooperation” with Democrats and their is an election coming up in November. Happy we did not elect a man who puts political vengeance in front of American safety. Why we should pass this treaty (all the protocols have been set in advance)  ASAP and not wait is obvious.

• A 30% reduction means less nuclear weapons in the world (US & Russia have @95%)
• A 30% reduction, and no reduction in defensive missile systems, means 30% less to defend against.
• A 30% reduction is 30% less missiles a terrorist can get his hands on.
• A reduction by Russia and the US gives them a better moral position in asking others to reduce or not develop nukes (Iran)
• Another verifiable treaty with Russia, like the first could lead to more.

Behind the scenes, those who benefit from fear & profit from weapons growth are powerful and will fight this treaty. Ironically terrorists have killed 30+ in Russian subways today.

Frank Rich Scores Again

NYT’s Frank Rich scored another slam dunk with his Sunday editorial on right wing rage/violence – “The Rage is Not About Heath Care.” Today, when you think about left wing radicals in the USA you think about Michael Moore, and a huge group of pacifists protestors, but right wing radicalism has a clear and present violent side that YOU have voiced concerns about in the comments section of the blog.(See Bob Sadinsky for latest).

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage	Volume
Dow	+0.08%	down
NASDQ	-0.10%	down
S&P 500	+0.07%	down
Russell 2000	-0.02%	-

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

Technicals, Fundamentals & Analysis

See Positions , Strategy , and Overview for changes made over weekend.

Light volume and stocks went nowhere Friday despite a big drop in the dollar (see below). The sinking of a S. Korean warship was used as the reason stocks went nowhere.  This has been downplayed by western governments.

Monthly JOBS report on Friday is the big news of the week. Analyst’s expect a positive +100,000+ jobs created. Some are expecting a lot more.

Fearless Forecast for Last Week - Oops, expected a down week and we rallied a bit. This breaks a string of correct calls.  Expected Republican investors believed all the “Armageddon” hype surrounding Health Care and it would transfer to stronger regulations for financial stocks.  It barely dented stocks. Money talks.

Fearless Forecast for This Week. – Up week. The big dollar drop Friday took some of the pressure off stocks. The conventional wisdom is that there will be a good (+100,000 to 150,000) jobs report on Friday. Remember –  Too good is bad for stocks, because it will mean interest rates will rise sooner rather than later. While stocks rallied last week the McClellan Oscillator fell. So we are no longer over bought.

Believe Market’s closed on Good Friday.

Significant Indexes

• McClellan Oscillator fell a bit to -19.61 yesterday. +60 or above = Overbought -60 or below = oversold. StockCharts has a better version of the McClellan chart ($NYMO)LINK. -  The $NYMO chart has made a series of lower highs and lower lows = Bears Rule.
• US Dollar – fell significantly -0.69%. This takes some of the pressure off Friday’s “almost merits a DANGER… warning” What the dollar does over the next few weeks is critical to stocks and economics around the world. The dollar has risen 10% since Dec.. This means that US & China (their money is pegged to ours) exports are 10% more expensive to the rest of the world.

Positions

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

3D stocks – IMAX, DWA, RGC, CNK - Investors411 will be trying to build long term positions in these and related 3D technology stocks. The last two are major theater chains.

The DWA, 3D How to Train Your Dragon’s movie opened to a respectable $43+ million weekend, but still popular AIWL (#2 at 17+ million) stole some 3D screens from Dragons. Comparison to another 3D movie same time last year (Monster’s vs. Aliens) $59.3 million. Detailed Box Office info here

Bottom Line – DWA will probably be the weakest of the 3D stocks.  In part because of the competition. If I remember correctly there are going to be 24 3D movies released this year. We will probably see a dip in in 3D stocks today/this week. All 3D stocks fell on Friday and will probably fall today (maybe tomorrow) Would look at this as a Buy the dip opportunity especially for IMAX, RGC & CNK.

Sold FXI position (see Positions section at top of blog)

One rule of investing is to limit your losses – No matter how good a stock or idea is its always good to limit your losses or know when you will sell.  I usually have a 7% loss limit on stocks.

if a Have a stop on 1/2 of DWA at what it was bought for.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Let Them Eat Cake

“Marie Antoinette à la Rose”

Harry Ried and the Democratic Senators have come up with  a Health Care plan that insures an additional 31 million Americans and closes some coverage loopholes -  Even though this plan is far weaker than other plans that have been voted and kept in place by the voters of other civilized industrial democracies the left wing Huffington Post seems to be happy - LINK

Michael Moore and others call this a giveaway to the health insurance industry LINK

The Marie Antoinette crowd who would rather tell the children, those seeking employment and others to “let them eat cake” have come up with nothing to help even the uninsured.

Global Trends & KISS

(Keep It Simple Stupid)

Yesterday, Investors411 went over an obvious global trend - sex , from politics to economics, sells . Incidentally, all the stores I went too were sold out of the Newsweek  magazine with the hot Sarah Palin cover. It probably went as fast as the  Washingtonian magazine with the hot Barack Obama cover.

In the Overview Section LINK of the blog, written a year ago are outlined 4 major trends that that greatly influence economics and the stock market.

Relative to all the major investors out there, I’m for lack of a better word stupid . They know more, have armies of help and banks of computers. So I’ve identified 4 major mega trends that not only make YOU and me better investor, but helps understand or relates to all things from economics to politics. It’s worked for the last 5 years so there is probably something to it. In short they are -

• Globalization
• The shortage of commodities (Peak Oil)
• Spread the Wealth
• The Great Recession

Yes,the  Overview Section which covers this in more depth, should get revised or updated.

In a narrow sense, they are investment tools that have given Investor411 the ability to outperform the benchmark S&P 500. In a broader sense, they make the world more understandable.

KISS & STOCKS

For those of you whose eyes gloss over in the stock section I’ve tried to KISS it today, but I left a little in for those who want the deeper analysis

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.11%	up
NASDQ	-0.48%	up
S&P500	-0.05%	up
Russell2000	-0.36%	-

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

Volume – Volume or how many people buy/sell a stock on a given day his usually the #1 confirmation factor of a price move. That’s why in the above chart the price and volume figures of the major US stock indexes are used. When lots of investors buy or sell the price move becomes more significant.  Kind of like a crowd that rushes through the front door (the door would be called technical support or resistance level in stock market terms) on the day of the big sale.

Today even though the volume was up from the previous day its NOT significant because it is still below the average volume.

If you get lost with a term or want to know more use Investopedia.com dictionary and other help programs or Stockcharts.com tutorial programs.

Why Stocks Are Moving Higher – There are several major reasons and lots of those reasons relate  to the 4 mega trends.

• Many emerging markets like China never entered recession. They have managed or regulated capitalism, not our unregulated free market system.
• Stimulus programs around the world in all the G 20 countries. Basically governments printing money, cutting taxes, low interest loans etc. Stimulus works best if you have lots of money saved (are a creditor nation) and badly if you are in debt. (you are a debtor nation)
• While the financial meltdown caused by not regulating the US financial system  did spread and impact the world. Countries that bought into the US “free market” or “greed will regulate itself” system were hurt the most. Therefore, there are some heathy countries.
• The US government/taxpayers socializing the risk of the shadow banks and let them remain in the shadows by eliminating mark to market accounting and has NOT offered any real solutions. The same bubble is building again and stocks ar rising.
• Zero interest loans by US government creates a whole bunch of cash that has to go somewhere – Under the sofa, collateral for bad loans, and/or into the stock market.  So stocks look relatively cheap.

Now going to get a bit more technical

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

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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 has broken out to new yearly high

The BDI rose a  HUGE +258 points yesterday and closed at 4643. Up 15 days in a row . Technically it broke out through its major resistance level 4291 (this year’s high)  The BDI has rallied about 2400 + points since late September.

The BDI is starting to go PARABOLIC – starting to move up too far too fast-inevitable result is a crash and burn. DANGER for Bulls

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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 fell  -0.32% yesterday. The dollar closed at $75. 06. This is back above the major $75.00 support level. 

CAUTION – The first breakout (up or down) is often false. This happened two days ago Right now the momentum (since the long term trend is down) is with the Dollar bears and consequently stock bulls

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$NYMO The NY Stock Exchange McClellan (EOD) Index measures how much the NYSE is oversold or overbought .

The index closed at +12.85 This indicates stocks are slightly overbought 

Even though the Dollar Rules consider overbought levels (60+) on this index a point to lighten up on stocks)

Key to chart – Zero  is roughly  neutral and roughly when you approach to @ +60 you are overbought and approaching -60 you are oversold . Buy at oversold and sell at overbought. Nothing is absolute in this chart. In fact using the moving averages as a central point is better than using zero. Nothing is absolute about the minus or plus 60 number either.

Oversold conditions = buy, Overbought positions = sell

Positions

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

Sorry have not had a chance to update Positions section in well over a week – see past updates

Investors – Folks who buy and want to hold for months/years.

Comments – NOT the time to buy or add to recommended positions. (FXI, EWZ, GLD )  Enjoy the rally. Shorter term investors may want to sell part of the 3 major positions while they are at highs.

Repeat – Clearly NOT the time to be adding long positions.  We’re close to new highs in major positions and the BDI looks like its started a parabolic run. (GLD might be an exception here and buying a small dip still makes sense)

MOO agriculture ETF has just broken out of its trading pattern to the upside and a minor position could be started. (more later) Still considering minor position in  VNM (Vietnam ETF – has dipped recently)

Obviously would like to buy more but waiting for a more oversold environment. Looks like we may be starting a correction.

Traders – Folks who day trade or are in and out of stocks within a month or two

AMZN & NVS positions are on hold right now. We’ve already sold 1/2 these positions.

Long Term Outlook – The dollar looks like it may break down through major support and the benchmark S&P 500 is on the verge of a yearly high – Outlook will change to CAUTIOUSLY BULLISH if/when this happens. But subject to further change back to neutral since breakout was weak.

Long Term Outlook = CAUTIOUSLY BULLISH

Note  - Last Update for the week.

Where are the New Jobs?

Dorothy Lange’s famous photo –  Migrant Mother from Wikipedia

Right now – job cuts are declining in the USA - down @700k in January to @200+k last month. Major reasons why -

• China India and other emerging markets keep growing and stimulus packages around the world stimulate their growth. Therefore US global companies  don’t need to lay off more workers.
• The US government stimulus package creates jobs and cuts taxes. In a year or two the Obama or US stimulus package will run it course.
• The Fed has injected massive amounts of capital into the system propping up the shadow financial system and keeping it from failing-thus saving jobs.
• The automotive sector has been bailed out preventing a total collapse of jobs in the sector.

What happens when the stimulus, and cash infusions run their course. Where will the new jobs come from?

Wall Street companies are playing cut throat with each other trying to get into Emerging Markets (China #1 on the list). Labor costs are cheaper there and they have growing GDP’s. (some of this is phony accounting, but overall they far outstrip the USA in growth) So Wall Street companies will as they have in the past hire lower cost and now better educated workers from abroad. Now there is even more incentive to hire abroad because of their growing markets. It’s even cheaper for US companies to hire European workers because they don’t have to worry about health care costs.

Bottom Line –  Jobs has historically been a lagging indicator after a recession because of globalization. It sure looks like job creation is going to be worse this time than after other recessions. What’s going to happen in the long term after all the stimulus, tax cuts, money printing etc. becomes no longer sustainable?

One major  Obama/Tom Friedman’s solution is to turn alternative energy into the next tech explosion (like the internet). But, the investment, so far is way too limited and others from Germany to China are already leading the charge in this area.

Your Comments

Check out “Doggies Mom” who has a LINK to an editorial on health care by Rose Ann DeMoro and Michael Moore .

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.48%	up
NASDQ	-0.31%	up
S&P500	-0.22%	up
Russell2000	-0.45%	-

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

Volume rose a bit as stocks retreated. Volume was below average. No real confirmation or follow through of Monday’s rally.  Probably means all eyes are on the Jobless claims at the end of the week.

There is some clear change in overall feeling. The BDI has fallen for 4 months – although the rate of decline has slowed. This indicates China, who was buying all kinds of raw materials because they were cheap has stopped.  China was a major growth factor in leading us out of the recession. This also indicates that the US did not buy as many holiday items from abroad. Potential for a slow holiday season.

The up side fundamental is the stock market. Because it has had a phenomenal run from the lows investors may feel like spending some of those gains.

Bottom Line – Although we could move higher and Dow 10,000 is drawing investors like a magnet, there is reason for CAUTION. If we get a reasonable jobs number – under 200,000 lost jobs in September you may see a short rally.  Its starting to feel like traders will sell the rally.  Still holding on to the Long term CAUTIOUSLY BULLISH outlook

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

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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) .

2388 is support now resistance level/number to watch – After a short two day rally of +29 points the BDI fell yesterday -7 and closed at 2185. These are very small moves, but in the right direction.

The BDI is almost 50% 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 2192 (current level) is still a long way from the Dec. 2008 663 low. = Storm clouds gathering

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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.

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

The dollar rose +0.17% yesterday to $77.12 . Its chart shows it has clearly formed a short term higher high over the last two weeks. Higher dollar usually leads to lower stock prices.

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 last weekend

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

This is the Moment

Huffington Post photo

You can make a difference. I joined to make a difference in the health care reform not for me (I’ll soon be on Medicare) but for my/your kids, grandchildren and the future of America. Hope you will too. LINK HERE

Just in case here are some more facts on health care in America.

• The illusion that we have the “best health care system in the world” – link here
• Among the developed countries we have the 10th highest death rate of cancer patients. link here
• Staggering health cost prevent 38% from getting access to heath care access vs. 11% for Canada and 6% for the UK link here
• I know he’s theatrical, but his facts check out. Here’s Michael Moore’s SICKO blog link here

The public health care component proposed does not go far enough to really make me happy. But, its a start.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.42%	up
NASDQ	-0.91 %	up
S&P500	-0.29%	down
Russell2000	-0.83%	-

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

Big news is JOBLESS FIGURES for July that come out on Friday. Anything over -400,000 will be bad for stocks. The “cash for clunkers ” program will improve auto sales for the next month or two. Senate just approved more funding. Unfortunately after the Ford Focus the next 4 top selling cars in the program are foreign. Link here

Tech giant  Cisco CSCO (see chart) marks the end of major earnings reports for the quarter. There were some positive comments about the economy from the CEO 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 . 2975 is the major support level and the BDI closed at 3051 down last five days in a row. As long as we hang in above 2975 stocks should do well.  This chart (click on BDI at beginning of paragraph) moves rather smoothly,

In a nut shell the BDI is

• short term – Bearish trend starting
  
• mid term -  Bearish pattern
• long term - Bullish pattern

Warning – The BDI falling through its support level at 2975 would be very bearish. BDI fell 109 points yesterday. The rate of decline is growing. At this rate we will reach critical support today.

.

$USD - We broke that major support on Friday and dollar took another big hit Monday Tuesday the dollar inched forward +0.19% Yesterday the dollar gave back those gains -0.23% Here’s a multi year chart of the US dollar that show the line in the sand support level or its all time low below $71.00 in April to June of 2008

What this means for stocks – The dollar has a long way to fall before it hits major support. Y esterday’s close - $77.56 Therefore, stocks (and oil prices that are tied to the dollar) have a long way to rise before this support level is reached .

Falling dollar is Bullish for most US stocks

Positions

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

The problem here is investors are buying the smallest of dips. We’ll keep adding until the dollar and the BDI fall to their major support levels. The Dollar dropping is key to this rally and it has a long way to go before reaching major support levels. The BDI is close to breaking support and this will impact all exporting economies.

• Sold all EWS (Singapore ETF) at 10.25 . This was bought at 9.4 (see positions section of the blog) The net gain on this trade that was @6% of portfolio was @+8%
• Sold all of EWY (South Korea) at 41.75. This was bought at 39.9. The net gain on this trade which was @5% of portfolio was @ +5%
  

If job numbers are bad, but not a disaster, ill buy QLD Friday when stocks fall. Also considering add more EWZ (Brazil) on dips ASAP. This again depends on the jobless numbers.

Perhaps I’m wrong, but the downside risk (markets are also way over bought) outweighs the upside gain right now. Also the BDI sure looks like its going to break support levels and make a lower low. That’s bad for world trade especially Singapore and S. Korea that depend on it.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Since Health Care  is clearly part of the long term structural economic problems of the USA and 3 of the last 5 comments on the blog have been about heath care (see/click on right hand side of blog for your comments) today’s focus is health care.  But first one of the best adds ever happened to be recently contained in the Atlanta Journal’s personal section –