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

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Barack The Barbarian

Picked up my copy of “Barack the Barbarian” with my grandson at the local comic book store yesterday. “You betcha” I choose the copy with the scantily clad Red Sarah on the cover. Opening scene – A  better than buff with loin cloth and boots Obama riding a blue donkey - “into a place where the interest of a wealthy few were placed before the interests of the needful many.”

For more including bigger photos click here

The CIA Lied

This should come as no shock. CIA director Leon Panetta has admitted that the CIA lied to Congress about the war in Iran. More here

No surprise here. The whole Cheney/Bush continually lied about the “unjust” Iran war (“unjust” was the term used by the Sec. General of the UN and pretty much the rest of the world)

Californification – Why Referendum’s Suck.

By far California has the deepest fiscal problem of any state . Californian’s are pointing and blaming a whole lot of people from the “Governator” on down.  But they have only themselves to blame or more specifically their referendum system. I’m not specifically singling out people in California, because most people will vote their self interest in any referendum and few look at the big picture.

Just a few example of how California went broke through referendums.

• Prop 13 – Your property is valued at the time you bought it – So, two simialar houses one bought 30 years ago is worth sometimes 80% less than the  similar property bought today = Huge shortfall in revenue.
• State legislators need a 2/3 vote to make any changes in taxes. (one of two states with this law)
  
• All residence are given tuition free admission to state colleges.

Actually this is strikingly similar to the US government. Over the last ten years our federal government similarly voted to let capitalism have almost  no regulations, ran trillions dollar wars, created huge trade deficits, and instituted new spending programs while reducing taxes.

Iran

photo from Truthdig

Another day of demonstrations in Iraq.  Protestors shouting Allah Acbar from rooftops at night in defiance of the government.  Nico Pitney at Huffington Post & Andrew Sullivan (scroll down) at Atlantic carry lots of videos.

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)

Technicals and Fundamentals

As predicted at the beginning of the week we are already challenging the major support level. We did stay above the mega 875 support level on the benchmark S&P 500 yesterday. Technically – a short term bullish sign.

Earnings season around the corner.

Another major forecasting tool is how markets/stocks react to news.

• Yesterday the first company to report was Alcoa Aluminum with better than expected news.
• The Dollar fell dramatically
• Unemployment figure for the week fell dramatically.

This was a lot of good news and US stock markets went nowhere. = Bear’s Rule

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

The BDI has become the best of these three forecasting tools .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell for the 7th day in a row .  Clearly established  bears rule trading pattern of lower highs and now lower lows over the last month.   WARNING -  The breakdown in trade is very significant to any worldwide recovery . BEARS RULE

The BDI is now the first chart I look at each day. – Globalization has greatly added to the interconnectedness of the world’s economies. It’s a worldwide recession, and if trade prices break down so will individual economies.

Here’s a bit more descriptive look at the BDI. Again you can adjust the chart’s time period.

$USD - The Dollar fell dramatically yesterday -0.98% The strong inverse correlation between the dollar and stocks has existed for many moons. Dollar up = markets down.

Just like that the dollar went from close to the top of its consolidation pattern to close to the bottom (see recent Investors411). This should have given stocks a real boost higher.  It didn’t. Bad news in short term for stocks Long term Bearish pattern for Dollar = bullish for stocks

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Reading the Tea Leaves

Forget adding to any positions right now. Until the BDI starts to turn up adding to long positions are way too risky. The fact that US markets did not move higher on yesterday’s good economic news is another bad sign.

Warning – Sure looks like the major support level of 875 on the S&P 500 is still in trouble. Expect a major attack today. If 875 goes down we could see a quick 2 to 5% loss on the S&P 500. Next major support around 830 .

Our Positions (For more see Positions section of Investors 411-scroll down)

Cutting back on the last 2.5% of GEX seems prudent at this time. We will reenter alternative energy using PBW (a more liquid alternative energy). Hopefully at a lower price than it is now.

Why – Oil prices are tumbling and energy is tied to oil. It will be a while before cap and trade makes its way through congress.  Technically even though oil prices paused in their decline there is probably another leg down and this will take alternative energy with it.

Short Term Bottom Line – Investors are waiting to see how earnings season develops. Alcoa’s better than expected earnings failed to move markets. Some or the giants report next week. If they too have better than expected earnings and investors fail to buy we’re in trouble.

Still look at a dip below 875 as a “buy the dip” opportunity.

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

Iraq Fireworks

US troops are leaving Iraq cities today. Last night there was a different kind of fireworks in the skies in Iraq. (Huffington Post photo)

Here’s one big problem – The fascist government in Iran is a major backer of their fellow Shia in Iraq. This includes Sadr who fought US occupation and immediately recognized Ahmadinejad as President. Reasonable to predict the "Supreme Leader" in Iran will try to have the same fascist and militant influence in Iraq as they do over terrorist groups Hamas and Hezbollah .

Iran (week 3 )

Nico Pitney’s blog at the Huffington Post has broke and provided more info than any other US news outlet . here

Elections were certified by Supreme Leader’s government. More, but smaller (in thousands not 10′s of thousands+) demonstrations and increasing arrests. Iranian protesters are shouting Allah Acbar on their rooftops every night in defiance.

Climate Change/Environmental Legislation

Willing to bet that 75% of America’s population has no idea that this legislation is working its way through Congress. Yesterday Investors411 went over one reason why this legislation is important – to combat global warming . Let’s go over one more.

#2 Pollution

Close the garage door, turn on the car engine, open the car windows, go to sleep and you don’t wake up. Pollution kills

We are a carbon based economy and this has had a huge positive economic impact. But the cumulative effect of growing population and increasing pollutants has turned many Chinese cities days into nights where cars have to drive around with headlights on and use windshield wipers to view the road (massive pollution mostly from coal). Simply put, pollution kills by everything from cancer to emphysema.  Trillions in health care costs could be saved and life expectancy would grow with less pollution.

Realism is needed here . Carbon based energy is very efficient and transitioning to alternatives is going to take many decades.

Chevron has "human energy" ads that proclaims we are going to need to work on ways of creating new sources of energy – wind, solar, geothermal, natural gas and oil. They’re right. You simply can’t just shut down oil exploration without devastating the world’s economic structure. But we can take some concrete steps to more environmentally friendly solutions.

(to be continued)

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Your Market Questions (part 1)

Thanks for all the public and private comments on how well Investors411 did in the first 1/2 of the year .

See Positions section & last Thursday’s update . (click on calendar) The major question is will we do as well in the first 1/2 of the year in the 2nd 1/2. Also, a general worry over the long term viability of stocks and the economy .

These questions are  outlined and addressed  in the Strategy and Overview sections of blog. Most of those sections were first introduced at the beginning of the year, then added to a few months ago. Little has changed.

The long term economic problem is the huge hole that was dug by removing the regulations on capitalism and letting greed run wild.  When it takes decades (especially the last one) to dig an economic hole, you don’t climb out of it overnight.

What’s happened is most savvy investors realizes that we almost had a complete world wide financial collapse last September and it now looks like we will survive. The major problems is getting banks to make loans, keeping loans affordable, and fixing growing unemployment.  Fixing these now could have long term negative impact.

China, India, Brazil simply have better balance sheets than the USA and in the case of Brazil more natural resources. They also did not did deep holes.

If we don’t develop alternative energy we will be stuck in a downward energy spiral forever. Cheap oil (the kind that bubbles out of the ground) is a finite commodity. Any recovery is going to be accompanied by rising oil prices.

Will the second half be as good as the first? I doubt it. Our core holdings should outperform, and if stocks do go higher in the USA our ETF’s should do even better . Investors411 biggest mistake is not being disciplined enough in buying dips.

(More later)

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown. Added the VIX back as a prediction tool .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . If trade is diminishing through out the world then a worldwide recovery is in big trouble. BDI started back up yesterday Long term Bullish although consolidating right now.

$USD - The Dollar fell-0.72% Friday and -0 0.04% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons. Neutral – we are in a consolidating pattern.

Long term momentum for dollar is bearish. Short term  mo is neutral, but we are closer to a bottom side breakdown than an upside breakout. Any breakout or breakdown would be significant.

VIX – Measures Volatility in S&P 500. Notice this chart is in almost a straight line down.  The less volatility means the better investors are feeling. Yesterday the VIX fell to the same level it was when Lehman Brothers collapsed and markets exploded to the downside.  Stocks still have not reached the level they were when Lehman collapsed. Long term Bullish for stocks

NB – The above are secondary indicators. Our mantra has always been Volume is the #1 forecasting tool – Right now volume is not giving any clear long term signal.

Reading the Tea Leaves .

This weeks fearless forecast – A rally, but one that does not get to new highs. Yesterday we had a mild to moderate rally in 3 of the 4 major indexes. Small caps(Russell2000) lost ground, but this is probably due to the annual rebalancing where some stocks are added and others kicked out of the index.

Short term – Volume dropped and markets rallied – you like stocks to go up, but when volume drops in a rally a reversal is usually around the corner.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Iran Day 14

Collage of dead protesters – Photo Andrew Sullivan Blog

Sorry, I’m just too emotionally exhausted and heartbroken to continue sifting through the blogs and tweets on Iran. You look at too many videos, audios blogs, tweets, and analysis and it’s overwhelmingly sad.

Best 4 sources still

Nico Pitney at the Huffington Post here

Andrew Sullivan at the Atlantic here

Robert Mackey at the NYT here

BBC- world’s largest news outlet that strives to be unbias here

The Obama Debate

We’ve had an excellent debate over Obama’s policies and effectiveness in the comments section of the blog .  You all have make some great points. Investors411 has both praised Obama and condemned him (mostly over the choice of Larry Summers as chief economic advisor)

Right now Obama is a very popular president (something like 60% positive and 32% negative) So what.

To jumble the title of his book – We have The Hope , but not enough Audacity .  This summer is the time for him to forget about consensus building and take charge. The single issue he alone can make the most difference in  this summer is health care.

"[Obama's]command of the issues — and ability to explain those issues in plain English — is a joy to behold. His administration has spent months talking and working with everyone on health care. Fine. Now its time for Audacity.  Take one plan and lead. See Nobel Prize winner Paul Krugman editorial here

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Volume was below average again  and up just a smidge for the NASDQ and Dow. Perhaps some expert analyst can glean something from the volume, but the bottom line is no big moves are being made by the big institutions and there are a lot of people sitting on the sideline. Some of these folks are very unlikely to get back into investing in stocks. Volume is NOT confirming any price move.

Yesterday’s big move higher was probably a whole bunch of traders (as opposed to long term  investors) getting caught having to cover their short positions.

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Top 3 Recommendations/concepts

Very happy with the mid term results posted yesterday! Obviously Investors 411 toasted the benchmark S&P 500.  Going forward 3 recommendations/concepts

• China (FXI )will continue to outperform USA (See Positions & Overview at top of blog for more on this and other recommendations)
• Brazil, (EWZ ) India (INF ) and alternative energy (GEX/PBW ) are still decent buy the dips plays.  But you have to be careful on all of the above including China. Even though they will outperform USA. They will fall faster in a meltdown.
• The economic problems  created over the past decade are massive. Over leveraged or phony wealth accounted for huge part of economic growth and where is that growth going to come from now?  Our (the USA) debt, dependence on foreign oil, and our inability to change entrenched special interest groups are three large anchors holding our economy back.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Mid Year Review of Stock Positions

Scroll down to bottom of STOCK section

Iran Day 13

Iran Photo from Andrew Sullivan Blog

Violence continues. See previously recommended sources – Lede from NYT, Huffington Post, Andrew Sullivan & BBC for more. At 9:13 EST Nico Pitne y at Huffington Post has a video of the Supreme Leaders military firing on demonstrators here

What can you do to help the protesting Iranians? Tom Friedman has an interesting long term approach. Iran’s Green Revolution = America’s Green Revolution. you can read about it here

Obama Debate Rages on

The are you happy with Obama ? debate continues to rage in the comments section. More fireworks See posts by  "A Friend" and D.

Health Care

Going to spend a lot more time on this . Two important points for now .

• From D’s comments post - "if a private option is so bad why have none of the dozens of counties that have public heath care voted to change back to private health care?"
• Time magazine’s Michael Grunwald has an excellent article on Health Care costs here Why some major hospitals and areas charge less than others for comparable services. Example Mayo Clinic & Cleveland Clinic @40% less than UCLA Med Center and John Hopkins.
  

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

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 .

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 rose +o.73% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons. In the short term we are seeing some breakdown in the strong inverse correlation between the dollar and stocks. The best explanation for this is that the dollar is trading within a range and when it breaks out of that range (78+ to 81+ see yearly chart here ) this inverse correlation will again become  more apparent.

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 now a 4 day fall. Technically we failed to make a higher high and if/when we make a lower low it will be technically a very bearish sign .  Momentum is building to the downside.

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

Reading the Tea Leaves

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. Look for the areas around 875 and 850 on the benchmark S&P 500 as support levels.  So far because of the lack of heavy volume this looks like an over bought correction and not a total meltdown that tests the old lows.

Investors411 has recommended buying some downside protection on any minor rally. A 5%+ position in -SDS – An ETF that is ultra short’s the S&P 500 -  Bought yesterday at @$57. This is probably not going to be a position that will be held for a long time.

Caution – The last time I was worried about a drop (Swine flu) I bought FXP (ultra short China) and got burned

Mid Year Review of Our Positions

Part #1-Part 2 tomorrow

I’ve rounded off some of the numbers and the first number is the % of the entire portfolio invested. You can learn more by going to "Positions" section on top of blog. Some position in the same ETF were added at different times, so they have different results.

All numbers are approximate All position are year to date or from when they were bought this year (This does not include some short term day or swing trades – If your interested in this send me a separate email)

Our benchmark S&P 500 is flat for the year

FXI -(China)

• 8% of portfolio, up 24% position open
• 8% of portfolio, up 37% position open
• 8% of portfolio, up 20% position open

FXP – (Ultra Short China)

• 5% of portfolio down 13% position closed

EWZ (Brazil)

• 6% of portfolio, up 26% position closed

GLD (Gold)

• 3% of portfolio up 13% position closed.
• 3% of portfolio down 4% position open
• 3% of portfolio up 9% position open

QLD (Ultra long NASDQ 100)

• 6% of portfolio up 16% position closed

XLF (Financials Stocks)

• 5% of portfolio up 23% position closed

IFN (India)

• 3% of portfolio up 1% position open

GEX (alternative energy)

• 3% of portfolio up 10% position closed
• 3% of portfolio up 3% position open

The Hedge (Equal amounts of QLD – ultra long NASDQ 100 & SDS ultra short S&P 500)

• 15% of portfolio up 1% position open

SDS

• 5% of portfolio up 1% position open

Analysis tomorrow – But obviously Investors411, as in past years, toasted of our benchmark S&P 500

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Neda, The Iranian Freedom Fighter

Photo of Neda by unknown Iranian

• You can see the tragic end of Neda’ s life-on the Andrew Sullivan Blog here or the whole video  (you’ll have to scroll down to 2:27 PM yesterday of Nico Pitney’s live blog )at the Huffington Post here

• NYT’s Roger Cohen has an excellent editorial from inside Iran here His first hand account on "Islam stands for Freedom" and what’s happening on the streets is riveting. Violence has escalate during the day and each night cries of God is Great (Allah Acbar) and death to the dictator ring out over  the rooftops of Iran.

• The BBC is the world’s largest news organization and it strives to be neutral unlike American Corporate media (or me – I clearly have chosena side in this). They question the honesty of the Iran elections here The BBC lists many doubts. They also quote Professor Juan Cole who makes the same argument that Investors411 has made – How does a country 4 times the size of France collect 39 million folded paper ballots and count them in less than 4 hours?

• Read Obama’s latest statement invoking Martin Luther King here
  

The question of the week is what do you think of Obama so far – Good, Bad, Ugly? Besides Iran, there are some huge issues facing the USA – Today Frank Rich editorializes its Obama’s Make or Break Summer here

Back with stocks on Monday

Barr