Photo of dead Moslem Freedom Fighters in Stolen Iranian election – Investors411 6/26/09

“Fear Is The Mind Killer”

Frank Herbert’s SF novel Dune was the first place this expression was used.

Fear mongering works especially in politics but it has long lasting and significant consequences.

Back in the 50’s President Eisenhower made a very unpopular decision to support sending a little black girl to an all white school. He sent in the 101 Airborne to protect her. This nation that grew strong because we grew united – all races & religions became more tolerant.

Now The major US news story being fear mongered is the possibility of a Moslem cultural center a few blocks away from the former site of the Twin Towers. Have we all forgot the events of last summer?

On June 21st Investors411 ran the following picture of Moslem Freedom fighter Neda Agha Soltan

How the Fear Mongering Will Spread

• Fear monger advocates in the USA  blame ALL Moslems for the attacks NOT al Quaeda fanatics
• Moslem Jihadist groups like Hezbollah, Hamas, al Qaeda will respond and “say see the USA is not about freedom” as word of the hatred of the Islamic Center in NYC spreads.
• The blood lusting jihadist will hold up the example of the NYC Moslem culture center to all their potential recruits as an example of how ALL Americans hate ALL Moslems.
• Fear mongering right wing polls in the USA will say Hamas, Hezbollah and Ahmadinejad wants a Culture Center. You’re either with them or us.
• And so the fear will grow into a deadly spiral

The fear mongers on both sides will be political winners, and our Military industrial complex (weapons our #1 export and we are 43% to 60% of the worlds military budget) Osama Been Forgotten & company is laughing in his cave at the of thousands of new recruits he will enjoy.

The biggest losers are those who believed this country stood for religious freedom. Not just here but the moderates throughout the Moslem world, especially those moderates like Neda who fought and died on their own or with us in Iran, Iraq, Pakistan, the Sudan or anywhere in the world.

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!

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

Mantra for the month - The Black Box/High Frequency Traders BB/HFT control the majority of trades. Paul R in the comments section has found a great source describing the BB/HFT traders and consequences of what they do.

Pitiful volume and flat US market.

Covered Calls

We all owe a debt to JS for an illuminating presentation of a more conservative form of investing.  From the comments section of the blog –

“This is a strategy I use to replace CD’s bonds when rates are extremely low. My goal is to replace the income lost by such low rates. This is NOT a strategy for growth. This is a strategy to severely limit losses.
Example using today’s prices: buy CSCO $21.95; sell a COVERED call for January 2011 at strike price of $17.50. (this means you have sold the right for someone to buy CSCO from you for $17.50 anytime till 3rd Fri in January 2011. You will get $5.00 for selling this option. Why did you do this? Because they paid you a premium above current price for this option: $21.95 minus $5.00 =$16.95 (your net cost of CSCO. Math: 21.95 minus $5.00 =16.95, your net cost. Taken at $17.50 = $.55 profit after 5 months which equals 7.78% year. ( $.55 divided by 5 months =$.11 x 12 [ to get yearly rate] =$1.32 divided by your net cost [$16.95] =7.78%.

Positives: you beat CD rates; you have 20% downside protection (from 21.95 to $16.95). Even with all the fear out there, prices are not highly inflated, so 20% is decent protection.

Remember, this is income part of my portfolio; I’m trying to limit risk as much as possible. CSCO has to go below $16.95 (my net cost) to lose money. You must buy companies that have much cash and won’t go under. Also, after Jan 2011, I can sell another call.

Significant Indexes

• The Dollar (USD)  [Anything price move over +/- 0.50 is significant] The dollar fell -0.50% yesterday. A fall of this magnitude should have translated into a rally in stocks. =
• The Baltic Dry Index (BDI) [measures cost of world trade/proxie for China & emerging markets] Rally +0.81% yesterday. Has broken up through 50 day moving average. But upside momentum slowing shows possible trend reversal. Overall trend still = Bullish
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] MO rose to -26.12 = Neutral

Reading Tea Leaves

You have both the dollar dropping significantly and most emerging markets in the third day of a rally. Yet US stocks have failed to move.

Somethings got to give. – Rally Ho. – Perhaps its short term, but it could be a sharp rally as short positions caught off guard. Remember I’m reading tea leaves.

NB – This rally is dominated by BB/HFT traders.

Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

Current positions – EWZ & EWS

Bought  small positions yesterday in EWZ (Brazil) at 69.00  & EWS (Singapore) at 11.99

Will add resource rich Australia EWA in list of ETF’s

Each time we have a MO below 40 and a dip, I plan to buy.  First nibbles and the lower we go the more riskier ETF’s.

Same strategy – Will sell 1/2 ETF at @3 to 5% gain/loss and let the rest ride till the MO moves higher.

Long Term Outlook - NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

45 Park Place NYC – Former Coat Store

Burlington Coat Store

It seems American media has one again spun, hyped, fear mongered & distorted facts to create a monster controversy. Building a Moslem Culture Center at the Burlington Coat Factory Store (45 Park Pace) building near the former Twin Towers has become Building a Mosque at Ground Zero or “Sacred Ground” (Newsweek Headline)

Now across the country this outrage has spread to protest building of ANY Mosque for the 6 to 10 million American Moslems.  This makes sense to the growing numbers of bigots in America. Why not, there are those that believe no Catholic Churches should be built because it is a religion of terrorist child molesting priests.

If winning the war against the lunatic jihadists who attacked us on 911 shown anything, it is that we must separate them from the moderate Moslems (the 6 to 10 million in the USA alone)  - almost all of whom are not Al Qaeda terrorists. Obama, General Petraeus and even George Bush realized this and developed appropriate strategies to divide the terrorists from the moderate Muslims.

Our American bigots want to lump all Moslem’s together Remember Neda heroic death protesting the brutal Iranian dictators?

Moslem’s/Neda did not attack us on 911. It was a group of vicious, fanatical, insane terrorists from al Quaeda. The answer to defeating these terrorist is NOT to devolve into the same kinds of beliefs and intolerance they and others like them have.  If we as American’s cave in to the bigots then Osama Been Forgotten has truly won.

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!

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

Mantra for the month – The Black Box/High Frequency Traders BB/HFT control the majority of trades. Paul R in the comments section has found a great source describing the BB/HFT traders and consequences of what they do.

O.M.G. Another day in the world of BB/HFT trading.

Even though Investors411 stated yesterday “the bulls seem to be loosing control” – Cowabunga - what happened? Collectively the dollar opened up an unheard of +1.80% and stayed their. (You can follow this by using often mentioned dollar ETF – UUP) Didn’t see that dollar move coming.

Your average investors have flocked to low yield bonds and are huddled their under the table. Some braver investors have chosen high dividend stocks – They got burned yesterday, but they should be more successful than your average stock holders in the long run.

The reason for the massive selling in moderate/average volume - ???? – There was no news out there that didn’t seem already built into most investors consciousness.

• The FED suggesting the US economy is shaky – We all know that.
• China slowdown. This is a planned slowdown as their stimulus funds have run their course and their worried about overheating GDP.
• Yes, there is a lot of vacant buildings in China and a housing bubble building, but there is also 10’s of millions of new members to China’s middle class each year.

Significant Indexes

• The Dollar (USD) had a OMG rally yesterday. [Anything over +/- 0.50 is significant] USD up a massive +1.84%. Don’t ever remember such a huge move. For stocks = Bearish
• The Baltic Dry Index (BDI) [measures cost of world trade/proxie for China & emerging markets] kept starting to go parabolic (+7.50% yesterday) Prices starting to go parabolic are a Danger sign but still = Bullish
• McClellan Index – (MO) [Basically longer term  - the rough guideline is over +60 = overbought market = sell or short stocks & -60 = oversold market = buy stocks.] MO fell to -32.95 Approaching oversold,but still = Neutral

Reading Tea Leaves

Welcome to the world of BB/HFT trading/investing - Jsovajani in his last comment states right now  ”the most important concept is capital preservation” and many of you bemoan the fact that Investors411 has not plunged into stocks this year like it has in the past. = capital preservation.

The good news – Our +/- 60 level on the MO has clearly become a fairly decent forecasting toll of when the BB/HFT will turn (see chart). Investors411 is going to stay and expand on this strategy. But we all need to have patience (including me) till the time is right to invest and to realize that its probably NOT going to be a long term investment, but one that lasts a couple months, weeks or days.

Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

Current positions – NONE

• EWZ (Brazil – Now 0% of portfolio position) Bought at 69.80. Sold last 1/2 at 69.03 for -1% loss First 1/2 sold at +2% profit.

From yesterday – “The Bulls seem to be loosing control.” They lost it. “Perhaps the MO will drop low enough to consider buying again.” At -33 on the MO we are approaching the -60 oversold level

Long Term Outlook – NEUTRAL

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Iran Day 11

Iranian protestors – Photo from Andrw Sullivan blog

Neda Agha-Soltan has become the hero of the Iranian revolution from American media (LA Times here ) to Arab media here In fact al Jazeera has a whole section devoted to "Iran in Crisis" here Al Jazeera is an outlet for mostly Arab Sunni’s and Iran is Persian Shia’s. No love lost between these two groups. You heard and saw Neda’s story at Investors 411 3 days ago.

More of the same in Iran. Less on street demonstrators and more violence. Previously listed best  sources are still telling the story to the world. Some predictions from BBC – What’s next for Iran here

One issue that many on the far left are not going to like to hear. Israe l has certainly made mistakes in its two recent wars with Iran and her proxies (Hamas & Hezbollah). But seeing how the Iran’s "Supreme Leader" treats his own people you can see how hard it is to make some peace with him or his clients. Of course, the first the recognize and lavishly praise Ahmadinejad’s & "Supreme Leader’s" victory was Hamas (here) and Hezbollah (here )

Barack "Hoover" Obama?

Yesterday Abby posted an article by Kevin Baker on Obama from Harper’s magazine. Unfortunately you have to be a subscriber to reference the article. You can view some excerpts here The focus is that Obama has not and may not be able to change the strong intrenched interest that created the economic mess we are now in. President Hoover (his picture above) did nothing and the Great Depression grew.

Context We tore down the regulations on "free" markets and developed a massive credit debt over the last decade that has exploded. Yes, Paulson, Bernanke (more the previous Fed chair Greenspan) and Bush were leaders in creating this mess, but late last year when we stood on the edge of economic catastrophe they (PB & B) instituted a plan and prevented world economies from falling off a cliff. Bernanke, Geithner & Obama have followed through and added to that plan

Remember Lehman Brothers cause over $400+ billion dollars of debt to spread throughout the world when it went bankrupt. People were lined up in panic at insurance companies and banks. What if AIG, CitiBank, Merrill Lynch Fannie, Freddie. AIG and so many others had followed Lehman. The end result would have rippled through out the system and economic catastrophe would have been the result.

How Obama handles the economy is priority #1. Because it is the world’s economy and he is easily the most important/influencial figure. Unlike Hoover whose inaction significantly added to the Great Depression Obama has acted. But its those entrench interests that have dug in. Time will tell.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

US markets took a major hit on a bad economic forecast from the World Bank.

The volume was again below average. It hard to be sure about making a forecast when our #1 forecasting tool – volume – gives no indication of which way prices will flow.

Major event – Fed Meets today and issues statement on Wednesday

Yesterday’s major event was The World’s Bank lowered its outlook for the world’s economy this year from -1.7% to -2.9% .  This is some truly bad new s for long term investors.

Since volume is out as a forecasting tool right now, today’s price move will act as a confirmation of yesterday’s move. Do we fall further (bearish) or rebound (bullish)?

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown

Right now, there are two indexes that are significantly influencing stocks in the USA & world. The US dollar in the short term and the BDI in the longer term

$USD -  The dollar is the index to watch. Dollar went up +0.57% yesterday. Any move over 0.50 is significant.  It looks like the dollar may be establishing a short term bullish pattern (see chart)  of higher highs and higher lows. Still to early to tell.

All together now -  our mantra – when the dollar goes up stocks go down . This strong inverse correlation has existed for many moons.

BDI - The Baltic Dry Index measures the flow of goods (world trade). 24 up days in a row, 6 down day in a row,  a 6 day rally and the BDI fell minimally on Friday and significantly yesterday. This is a very important chart that has just rolled over. It usually moves in one direction for an extended period of time.  If it moves past and creates a lower low than it had eight days ago it would be a serious sign of trouble Right now, the momentum is with the bears.

If trade is diminishing through out the world then a worldwide recovery is in big trouble.

You can play with the chart and create different settings to get a better idea of what’s happening, (the same with all other links to different charts)

Reading the Tea Leaves

Still think this market has moved too high to fast and is a technical rebound. As stated two weeks ago we may see a 5 to 10% technical fall or consolidation. This week fearless forecast – Another down to flat week. The benchmark S%P 500 has already broken through support and fallen 6 to 7% from its high to  893. Next significant support level is 875 to 880. As stated above volume is NOT confirming (or has yet to confirm) the downside move. So far this still is a technical correction of a market that went too high too fast.

Both the dollar and the BDI have started to trend in the wrong direction (If you’re a bull on stocks) Add the World’s Bank prediction and you have lots of reason to hear the bear’s growl.

Got burned with this the last time I did this, but buying a little protection on any minor rally. Adding small position in SDS (ETF that does 2X the opposite of the S&P 500)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING