Investors411 has a 6  year record of beating the S&P 500

Fat so called “Free Markets” and the public

Investors411 2008 prediction – “The problem in the financial sector is far far far far far bigger than first imagined. Impact of this mess is going to take years to resolve.”

Each year in the POSITION section of the blog the above statement has been repeated. The so called “free market” capitalism that is sinking the US economy now looks like it will now take at least a DECADE before any resolution is is forthcoming and that’s if we are lucky. For a more detailed outlook as to what’s happening see OVERVIEW

Unfortunately The MAY 20 downgrade of the US economy and stocks has come to pass (we’re still a couple % short of the predicted amount, but that should happen today)

Like the two guys on the seesaw above –

A list of the economic imbalances in the future for the USA.

• Loss of focus on jobs – Without jobs the economy doesn’t grow and the deficit does not shrink
• Stimulus runs out – You can argue its effectiveness, but bottom line it added to GDP
• QE2 ends – The FED liquidity supply that propped up both stocks and the US economy is over
• Constriction of money supply begins – Government programs that helped create a vibrant and united America will be cut and jobs get cut with them. Simple math less money supply = less GDP growth= Great Recession Part 2
• Japan and Europe are in trouble, Emerging markets have inflation problems. (see Great Recession/Roubini link above)
• A “Misguided” S&P downgrade that is going to further decimate the state budgets/jobs and consumer confidence

Blame - What’s needed is short term stimulus and medium and long term austerity measures. (paraphrase from Roubini link above)

Tea Party/Republicans = Only one presidential candidate, Jon Huntsman, has dared take an opposing view to Tea Party orthodoxy.

• No compromise attitude.
• Free markets or nothing at all.
• No government regulations on markets.
• Abolish the Fed.
• Return to the gold standard.
• It’s the fault of the teachers, cops, firefighters, union workers, blacks, foreigners, foreigners and every low wage earner in America that we are in this crisis.

Democrats

• The Democrats started caving in under Clinton when Greenspan and others deregulated investment banks leading to over leveraging and the 2008 meltdown.
• Obama has caved in to big business/”free market” at almost every turn (see past blogs). From his health plan, to trade treaties to caving in on taxes for the wealthy. He’s NO Teddy Roosevelt.

US (you and me) – The reality is we have no one to blame but ourselves for letting greed triumph over common sense and caring about our fellow partners on the planet

Investors/YOU

Its sad to see so many Americans who have made out financially because of our economic system now turn on the system that gave them their wealth.

QE #3 may stabilize the meltdown, but  the Tea Party will do everything possible to block it.

Cash is a better position than equities, but as explained before it too has its drawbacks.  I hate having a negative position on American companies but in reality the major corporations are globalized entities and care far more about profits than you.

These globalized entities or corporate oligarchy care far more about profits than where they hire workers or find consumers. The less governance they have the more they will exploit workers and working conditions.

Current Positions

Below – Investors411  hypothetical portfolio that should outperform the S&P 500.

NLY - Annaly Capital Mgt. Ultra high dividend stock – It’s been shaky, but so far NLY has held up reasonably well through current stock market slide.

In  my personal portfolio I still have a Put position to protect NLY. (strike price $17.00 for 3rd Friday in Sept) Also puts on other dividend stocks.

GLD – (Long Gold ETF) Bought at 157.1 last week. (see last weeks blogs and comments section) –  Sold at 162.4 last Wednesday for over +3% gain,  Will buy back in on dip.

Disclaimer - Personally I own  a group of dividend stocks including NLY. I have placed puts most  of of dividend stocks I own. I buy everything in the hypothetical Investors411 portfolio. I also own some SDS & TZA (ETF’s that double and triple short the market) as hedges.

My overall positions in stocks is to be short the US markets

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#1 Technical forecasting tool – The McClellan Oscillator (MO) chart fell to to -111.38 (-30 somewhat oversold, -60 oversold, -90 OMG oversold).

So we are at clearly OMG oversold levels.

Context -  last summer after QE 1 ended and before QE2 started we reached -135 However, he situation now looks worse than last year, but not as bad as 2008.  It’s reasonable to expect a -135 or lower on the MO

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Long Term Outlook (for US Economy)

BEARISH

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Look for an enlightened Paul’s Corner every Tuesday & Thursday and the always informative Comments Section every day.

The Long Term Outlook has been downgraded because technical support has fallen and above.

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Long Term Outlook (for US stocks)

CAUTIOUSLY BEARISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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Stocks 2011

The economic outlook for the USA is no better than 2009 or 2010. Every time we learn more about the unregulated, over leveraged 2008 financial and housing meltdown the wore it gets.

The 3 dominant mega trends are still significantly impacting economics and stocks across the world. Investors411 has added a 4th – Lies/deception/opaque capitalism.  The 4th trend is growing in the world’s largest economy – the USA & ultimately will devastate economics if it continue.

The problems in the USA are both systemic and due to our dependence of unregulated, opaque, casino capitalism.

There are sectors, countries and asset classes that should do well in 2011. So here’s a rough list that I will  go over in detail tomorrow and Friday

• Gold
• US financials (I hate these bastards)
• Brazil, Norway & other energy rich countries
• Rare earth sector (from steel to solar materials)
• China’s wind and solar power industry
• Energy
• Even US major indexes should do well – as long as Fed supports them.

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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!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

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Technicals, Fundamentals & Analysis

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

• Markets were flat & volume abysmal
• Infamous AIG rocketed almost +10% higher Monday. Opened higher  and ended day with slight loss. AIG held almost all of 10% gain is Bullish for stock and shadow financials.
• Repeat – Weak trading means two entities dominate High Frequency Traders and the Fed.
• Double dip In Housing Prices is happening. – Roubini – Data seems to back up his conclusion that home values are on way down again.
• Decline in housing value is bad news economically for the economy & your house. But good news for stocks because it gives Fed more justification to keep quantitative easing and low interest rates going.
• Consumer confidence dips amid job worries

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Reading The Tea Leaves

Paul R stated last evening in comments section that “Looking at the charts and market internals again, things are NOT looking good. Market leaders are breaking down.”

He’s Right - Nothing has felt right about this overbought market. All the major indexes are over extended above their 50 day moving averages. Many of the momentum stocks are consolidating or heading down. This is also a strange holiday week & because of the ultra light volume so its hard to make a clear call.

AAPL is the big kahuna out there for stocks and especially technology. It’s not over bought. If you look at the chart you can see a pretty constant 6 week trend where Apple moves,let’s cal it one standard deviation higher than its rising 50 day moving average. APPL inched out to a new high yesterday. If Apple breaks down watch out!

Always remember – This market is being held up by artificial means – the Fed. That means when bad news occurs like housing prices dipped for 4th straight month & consumer confidence is falling – stock traders think the answer will be more quantitative easing by Fed. This doesn’t mean we can’t have a correction, but over 18+ months its shown there is support under stocks that make buying the dip successful.

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Positions

• #1 UWM - (2x small cap stocks ETF) – Sold 1/2  for +9% profit
• #2 UWM
• EUO – (double short the EURO currency)
• UCO – (double long oil) Bought Tuesday at  12.39 (this is a trade of short duration)

Below is rather technical and might make your eyes glass over. However, if you want to have the basic tools for investing I do strongly urge you go to Chart School (see below)

UCO - Trade -Reasoning –  This is NOT a trade I should have made in Investors411 because it breaks the basic strategy of buy the dip of a trending sector. My bad – several of you sent me personal emails on this and the following is my reply.

• To make any trades (as opposed to long term investments) you have to understand candlestick chart patterns,
• In fact, StockCharts – perhaps THE best FREE site on technical analysis has a who tutorial or school section.
• Almost All the links to charts at Investors411 are links to StockCharts.com charts from the $USD to the individual stocks listened on Your Stock List in the POSITIONS section of blog.
• Tom DeMark developed a 9 day momentum trading system that has nothing to do with Stockcharts, but to understand the system you have to know how to use candlestick charts.
• Here’s a good example of the DeMark system on ETF’s in video I did go over this on Dec. 1.
• I believe UCO is going to be a good long term investment because oil is likely to hit $100 or more. Historically oil prices go up as summer riving season approaches and emerging markets are demanding more oil.
• However oil prices are at a new yearly high and a long term investor (not trader) should buy the dip in UCO.
• What I saw was a half decent DeMark 9 trade. A breakout that had yet to run out of momentum. It had only 6 days of momentum from a low and I plan to get out on the 9th.
• This is not the best use of this system. Another reason I regret announcing the UCO trade.
• However I will hold onto UCO till day 9 and willing to take a 2% hit on the ETF. (I placed a 2% stop below the price I bought it for)

Bottom Line – there are a lot of trading systems out there. This is one of the better known. None of these systems is perfect. I just happened on this system over a decade ago and often use it for shorter term momentum trades. From DeMark’s Wikipedia listing “His timing techniques have become the industry’s standard.”

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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.” (YSL)-

Sorry to have been away. Unfortunately this is going to be another week of short and limited updates.

Just Stocks

Technically we’ve had some big volume  reversal days where volume has gone up and stocks down. Volume has been above average on these down days for the US markets. Our #1 confirmation factor is = Bearish short term signal .

We’ve had two down days in big volume and 2 or 3 are enough for a full fledge reversal of trend.

Out #2 confirmation signal how markets react to news has also change. Previously markets moved up on bad news or that bad news dip was bought buy investors. Now markets are falling on bad news. = Bearish short term signal

The good technical news is, in concert, major US indexes have fallen to just above their 50 day moving average (see charts on side of blog) and this should offer some support.  That’s why technicians call the 50 day moving average a major support/resistance area.

The BDI has reversed itself and moved higher over the last few days. (2185 to 2357 in last 3 days) = Bullish short term signal especially for exporting countries,

The dollar had moved higher, especially on Thursday when stocks had their biggest losses.

Remember Investors411 has been beating the drums for a 5 to 10% pullback and we’ve passed the 5% mark. The whole world stock markets have gone up too far too fast.

A more complete update later this week.Here’s an editorial from Dr. Doom, who accurately predicted the original crisis, Nouriel Roubini, on unemployment staying above 10% for most of 2010. – LINK

Fearless Forecast- Stocks should steady at the 50 day moving average, but the bulls have clearly lost momentum. It would be very troubling to see markets sink further today and the 50 day moving averages to fall.

Positions

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

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Iran Day 10

Photo  Flckr user Jamie Vatanhah

The BBC has an excellent post of brown shirted Iranian government forces riding on there motorcycles and shooting into a crowd here or a women from inside Iran describes what’s happening to BBC here

NYT lead story has Government publicly admitting that there were more ballots than votes cast in 50 Iranian cities here here The usual sources still provide the best description of what’s happening . Also add the live NYT blog the Lede

Read Scott’s worthy description of Iran’s/US past history in his post on the right side of blog.

The Obama Debate

Frank Rich editorializes its Obama’s Make or Break Summer here (See Sunday’s blog) Bob and D already staked out there positions. Here they are.

Bob – I am feeling badly betrayed by Obama. His health care reform is nothing that will help and his reforms for Wall St look like they were written by Wall St. He has not kept his promise on Don’t Ask, don’t tell and his Justice Dept is defending DOMA. His energy head is pushing for Govt.subsidies for Nuclear Power,but not for renewables. He refuses to prosecute the High Crimes and War Crimes of the Bush administration. I am angry,ashamed and I feel betrayed! Maybe Nader was  right! Obama is not going to give us health care ,or green energy. He is giving us endless war,a fascist state and new nuclear power plants. At least Bush never pretended to represent us,but O did. Damn him to hell!

D – Bob, I can understand people being frustrated with Obama, he hasn’t done everything I want too. But sometime you you get what you get and your cup is 1/2 full. I hope it fills up more over the course of the next 4 years. Some of the Positives that Obama has helped create -

1) As Barr said under Bush we got Ahmadinejad, Under Obama we got the Cairo speech, Lebanon election and the Green Revolution in Iran
2) We don’t have a right wing radical nominated to the Supreme court, we have Sonia Sotomayor
3) Laws expanding children’s health care funded by a cigarette tax
4) science means something again and we passed stem cell research
5) Abolishing torture, ordering Guantanamo closed and a fixed timetable for Iraq withdrawal.
6) A big stimulus bill/taxcut to get the economy moving again.
7) Moving toward better lower cost heath care for more Americans
Keeping the economy from crashing and a stock market rebound
9) Money in the stimulus for green jobs and education.
10) The new respect the US has gained from other countries around the world.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Both the NASDQ and the S&P moved higher in above average volume.  However Friday was what is called a "quadruple witching day"  This means either a whole bunch of stock traders were riding around on their broomsticks in audition for the new Harry Potter movie or a whole lot of options expired.

Bottom Line – Increased volume NOT a fact on Friday.

Major event – Fed Meets this week

Technicals & Fundamentals

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 dollar in the short term and the BDI in the long term

$USD -  The dollar is the index to watch. The bottom line right now is – When the dollar goes down-stocks and oil prices go up and visa versa. Dollar went down-0.34% .   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

Fundamentally its hard to understand why the dollar is rising, because we are printing to much $ and have s large stimulus package. Still other countries and traders are buying dollars. Lots of different ways to spin this – one is there is still confidence in the US economic system.

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 4073 to 4070 . The BDI is more a long term indicator. The chart pattern shows that the BDI has reached a critical resistance level its high of the year.  This could either be a double top chart pattern (bearish) where price fails to move higher or we may break out to new highs. Time will tell.

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

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.  But one Economist who called the whole stock meltdown in the first place Nourille Roubini see a "significant market correction" LINK His reasoning is oil prices and interest rates are rising too rapidly.

If these do continue to occur, what started out as an over bought technical retreat could turn into a full scale test the low bottom.  So in future Investors will keep an eye on interest rates and continue to watch oil prices.

This week fearless forecast – Another down to flat week.

• Holding onto long term positions FXI ,
• PBW/GEX (sold 1/2 of GEX and waiting for dip to buy similar amount of PBW – then will sell other 1/2 of GEX and buy PBW.  PBW is just a better preforming alternative energy ETF
• IFN Bought a small amount India ETF.

Personally, have not reinvested in the other positions that Investors411 held – QLD ( 2x NASDQ) EWZ (Brazil) & XLF/UYG (financials) Waiting for more of a dip.

"The Hedge"  SDS and QLD is basically flat since it was introduced.  For more see Position s section at top of blog

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

THE BIG TAKEOVER- “The global economic crisis isn’t about money, its about power. How Wall Street insiders are using the bailout to stage a revolution.” The growing tent cities across America – a slide show.  Also an overview or reading the tea leaves of the US economy and the stock market – a longer term view. 

(photo from Rolling Stone)

The Big Takeover

Matt Taibbi piece in the Rolling Stone is a must read for anyone who wants to understand why your lives will change dramatically over the next decade. 

First you have to check out the comments by Robert Sadinsky on the right hand side of the blog. In passionate colorful terms he offers in a much shorter vision/comments on Taibbi’s Big Takeover.

(NYT photo)

Tent Cities of California

As the unemployment rate keeps growing, tent cities are spring up around the country. The NYT has a slide show of this growing problem in hard hit California.  

Even supposedly healthy tech giant IBM is accelerating laying offs - another 5,000 people.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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News

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Deer in the Headlight

Stop staring at the headlights and Get out of the road

The reason Investors411 brings you news like “the worlds financial system has effectively disintegrated” (see last post on blog – Roubini, Volker Soros) is so YOU can stop standing like a deer in the headlights and do something to protect your economic well being. - 

Obviously, the Laissez-Faire capitalism under the previous four Presidents has spectacularly failed. The tech, housing, and credit bubbles have all burst under the absolutism of “free market capitalism” and something better has to arise from the ashes. 

Over the last eight years we have so decimated/cut and tainted the staffs of regulatory agencies from the SEC to the FDIC that any short term solution from Madoff to Nationalization becomes,at best very very difficult. 

The Real Structural Problem

What we watched over the last 8 years is an orgy of economic bubbles bursting because of unregulated greed of our capitalist system. Yes its time to restore balance, but first you have to recognize the long term structural problems. Researchers Picketty and Saez on where the money’s gone in our country over the last 40 years. Quote from economist Robert Reich& graph from Picketty and Saez -

“since the late 1970s, a greater and greater share of national income has gone to people at the top of the earnings ladder. As late as 1976, the richest 1 percent of the country took home about 9 percent of the total national income. By 2006, they were pocketing more than 20 percent. But the rich don’t spend as much of their income as the middle class and the poor do — after all, being rich means that you already have most of what you need. That’s why the concentration of income at the top can lead to a big shortfall in overall demand and send the economy into a tailspin. (It’s not coincidental that 1928 was the last time that the top 1 percent took home more than 20 percent of the nation’s income.)

This is the beginning of a “Great Recession.” and the real long term structural problems of income inequality have to be addressed. (see Overview section of blog) Only then will we find a long term solution.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Short Term Outlook

Both Citi Group and Bank of America were again had massive losses on Friday based on fears of nationalization.  The ETF that mirrors financials is XLF

The major indexes recovered from -3% losses in huge volume on Friday.  After 5 straight days of financial meltdown technically it looks like we may see a short covering rally continue.  The huge volume in financial stocks, the Dow and the S&P indicates a short term climax selloff. This is where all the weak or frightened investors panic and sell. The more solid long term holders remain. The rally from the 3+% fall is all the short term traders caught in short positions selling. Technically, Friday’s trading and the oversold conditions indicate a short term rally in stocks should continue.

You shouldn’t get too excited  - this is a technical bounce. Sometimes these bounces can be the start of something bigger. What we need is some major change in fundamentals like slowing unemployment or decline in the default rate of mortgages to give any rally substance.

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Long Term Outlook = BEARS RULE

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See STRATEGY, POSITIONS, OVERVIEW (new) & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

The Sky Fell

Three very significant economic/business guru’s (George Soros, Nouriel Roubini and Paul Volker have basically all come to the conclusion that “the world’s financial system has effectively disintegrated.” and “there is [little or]no prospect for any near term solution.”

Investors411 has concluded each Market Updates with the same for months. “The problem in financial sector is far far far far far bigger than first imagined. Impact of mess is going to take years to resolve.” This conclusion is now under the Positions heading at top of blog.

Legendary Investor George Soros- “Sees no Bottom for World Financial Collapse” (Yes you are seeing double my mistake)

Former Fed Chair and head of Obama’s economic advisory council Paul Volker - “I don’t remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world.” Same Reuters’ source

The columbia economist who predicted this meltdown Nouriel Roubini “Laissez-Faire Capitalism Has Failed”

Long Term Outlook = BEARS RULE

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING