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Greece, Debt and YOU

You may or may not know Greece is having a problem with its financial debt. (NYT article) This small country, thousands of miles away is the tip of the iceberg of unsolved problems that directly relate to YOUR financial well being. Let’s put this in Bullet points

• A major reason Greece is in such trouble is because, like AIG and so many homeowner mortgages, Credit Default Swaps were placed on their debt. They still are being place on them today by shadow banks and hedge funds (Aside – hedge funds – are the equivalent of “economic hit men” and are perhaps even worse than  shadow banks – more later)  So there are a whole crew of hit men or CDS traders who will make money or are investing to see Greece fail and default on their debt.
• If Greece goes down, a lot of other European countries, who are in an almost similar situation, could follow. The list includes Ireland, Portugal, Spain, England and former Russian satellite countries. “Economic hit men” (Harvard/Oxford prof Niall Fergeson’s term for hedge funds) are the vultures circling here waiting to make money off the kill.
  
• California, Michigan Rhode Island and many US states are likewise in the same boat. Without the Stimulus package they could have gone under already.
  
• So is the USA – Except we have printed, & borrowed over S10 trillion to temporarily fix our problems.

This recovery, so far, is based on smoke and mirrors – Not transparency and rules that keep economic hit men like the traders at from AIG, or hedge funds from bringing the financial world to its knees.

Investing bottom Line - For years it was easy to recognize that globalization economically favored both emerging market growth and the privileged/wealthy class in the USA. Investors411 was very successful and careful in choosing investments outside the USA.  That potential still exists. However, an unregulated shadow financial system full of roving economic hit men exits. So, we have to move more cautiously, because the chances of economic bubbles growing and bursting is still INCREASING.

Therefore, using technical shorter term oscillators like the McClellan makes more sense right now.  It, no longer your parents buy and hold forever market.

Coming next – Economic Hit Men – Hedge Funds

Bloom Box (con’t)

About the most discouraging news, when you separate the hype is that the Bloom Box has not yet been built as an “in home power plant.” The technology may not be revolutionary, but who cares as long as it works and can be put into production sooner rather than later.

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!

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.

The day started out as a disaster for US equities and recovered a lot of those losses. Even though we closed down in higher volume bulls had something to be happy about because of the recovery.  It seems like this market is looking for an excuse to rally.  It’s fundamentally hard to understand why, but some pretty bad news recently including weekly jobless data, Greece (see above) increased housing problems, & double dip inflation fears  yesterday, doesn’t seem to be able to sink stocks. Markets holding their own or have slight losses on bad news is a bullish sign.

Therefore, best read of the tea leaves is that we will hit +60 on the McClellan before we hit 0.

Significant Indexes

• McClellan Index fell to +28.62 We are somewhat oversold, but have a ways to go to +60 Oversold territory.

In answer to an email question – how did I come to determine +/- 60 as overbought or oversold? The McClellan Oscillator on the NYSE is one of dozens of indicators that show the market oversold or overbought. I like it because it is relatively simple.  Most stocks follow the trend of the entire markets. (say @ 80+%). This is especially true for, the ETF’s which are market baskets of stocks.

Click on the chart of he index above and adjust it to 2 or 3 years.  Note every time chart went over +/- 60. What I did then was also put up a chart of S&P 500 adjusted to the same time and compared the two. It’s not a perfect correlation, but if you go long (buy) when the McClellan dips to -60 or below you or sell (or go short) when it reaches +60 you would have done better. There are some weaknesses in just using the +/- 60 system that I’ll go over at a later date.

Positions

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

Will be lightening up when/if positions reach oversold 0n McClellan Oscillator.

As stated on Tuesday –

I’ve also set what’s called a stop/sell orders  on at @ 2% above what it was bought for

• recently bought (added to) EWZ
• 1/2 of MOO, a longer term position.
  
• The remainder of THY

Came very close yesterday to reaching stop/sell or selling TYH. This AM I raised stop/sell order to about 3% above what they were bought at. Will also, preferably, sell these positions if/when stocks are overbought.

IMAX – doing fine – really hope this will be a long term hold – and there will be other dips to buy into on the way up.

Other stocks on YOUR watch list – the earliest I would nibble is when the McClellan Index falls below 0 (zero)

Not adding to any major positions until markets become oversold again.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

The Holy Grail of Fuel Cells?

The Terminator, WalMart’s CEO & Colin Powell

Add the CEO of Google and you have one of the most hyped and perhaps revolutionary product launches in history was launched yesterday – The Bloom fuel cell box – Low cost clean energy whose primary ingredient is sand in now being used by some major US companies. Hard to tell the hype from reality, but if you missed 60 minutes on the Bloom energy box the 3  links above will give you some more information.  Seems like a $3,000 clean energy box in your home will produce electricity at about 1/2 the rate currently charged.  For all its faults America still has the greatest innovators on the globe.

Shooting Shadow Banks

With a clenched jaw President Obama stated about the shadow financial institutions on January 21st – “If these folks want a fight, it’s a fight I’m ready to have,” In front of the Business Round Table all that tough talk turned to jello.  Paul Volker & Elizabeth Warren seem to be left out on a limb that is being cut off. Enlightening editorial in New Republic by Peter Boone & Simon Johnson

Health Care Summit Today

Obama’s six hour health care summit is being held today. Dylan Ratigan (MSNBC Show) pointed out that insurance companies in 4 states plan to raise premiums over 20% this year.  For many the Democrats have sold out to the insurance industry and Republican’s simply want to do nothing to prevent Democrats from getting any credit.  Both parties are dominated by lobbyists. Ratigan also has a piece on the Bloom Box yesterday.

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!

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

The Terminator, WalMart’s CEO & Colin Powell

Add the CEO of Google and you have one of the most hyped and perhaps revolutionary product launches in history was launched yesterday – The Bloom fuel cell box – Low cost clean energy whose primary ingredient is sand in now being used by some major US companies. Hard to tell the hype from reality, but if you missed 60 minutes on the Bloom energy box the 3  links above will give you some more information.  Seems like a $3,000 box in your home will produce electricity at about 1/2 the rate currently charged.  For all its faults America still has the greatest innovators on the globe.

Shooting Shadow Banks

With a clenched jaw President Obama stated about the shadow financial institutions on January 21st – “If these folks want a fight, it’s a fight I’m ready to have,” In front of the Business Round Table all that tough talk turned to jello.

Technicals, Fundamentals & Analysis

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

Markets rose and volume fell.  Up days on lighter volume has been the norm for months.  Roughly 80% of the rally days have seen a DECREASE in volume.  This is NOT good in the long term for stocks. About 80% of the previous days losses were made up.

The US shrugged off the bad consumer confidence news two days ago  and financials led stocks higher. (See above) Obama has flipped flopped on getting tougher regulations for shadow institutions so many times I’ve lost count. Bottom Line – nothing’s been done in since he took office. In fact dropping mark to market accounting has made major shadow banks less transparent. Short term this is a boon for stocks, but longer term it just means without transparency or any regulations other financial bubbles will inevitably form.

Significant Indexes

• McClellan Index rose to +36.20. We are once again approaching oversold territory.  This looks like a second leg up into an oversold position – greater than +60

Positions

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

Will be lightening up when/if positions reach oversold.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

The Best Editorial of 2010

Elizabeth Warren in the WSJ

Here’s The WSJ editorial link- in case my link does not work – here’s the  http://online.wsj.com/article/SB10001424052748703630404575053514188773400.html

Below is the full editorial

“Wall Street’s Race To The Bottom”

By ELIZABETH WARREN

Banking is based on trust. The banks get our paychecks and hold our savings; they know where we spend our money and they keep it private. If we don’t trust them, the whole system breaks down. Yet for years, Wall Street CEOs have thrown away customer trust like so much worthless trash.

Banks and brokers have sold deceptive mortgages for more than a decade. Financial wizards made billions by packaging and repackaging those loans into securities. And federal regulators played the role of lookout at a bank robbery, holding back anyone who tried to stop the massive looting from middle-class families. When they weren’t selling deceptive mortgages, Wall Street invented new credit card tricks and clever overdraft fees.

In October 2008, when all the risks accumulated and the economy went into a tailspin, Wall Street CEOs squandered what little trust was left when they accepted taxpayer bailouts. As the economy stabilized and it seemed like we would change the rules that got us into this crisis—including the rules that let big banks trick their customers for so many years—it looked like things might come out all right.

Now, a year later, President Obama’s proposals for reform are bottled up in the Senate. The same Wall Street CEOs who brought the economy to its knees have spent more than a year and hundreds of millions of dollars furiously lobbying Washington to kill the president’s proposal for a Consumer Financial Protection Agency (CFPA).

Within the thousands of pages of print in the “Restoring American Financial Stability Act” now before the Senate, the consumer agency is the only proposal that would help families directly. Even those most concerned about the role of personal responsibility concede that it is hard for families to make smart decisions and to compare products when the paperwork on mortgages, credit cards and even checking accounts has morphed into reams of incomprehensible legalese.

The consumer agency is a watchdog that would root out gimmicks and traps and slim down paperwork, giving families a fighting chance to hang on to some of their money. So far, Wall Street CEOs seem determined to stop any kind of watchdog. They seem to think that they can run their businesses forever without our trust. This is a bad calculation.

It’s a bad calculation because shareholders suffer enormously from the long-term cost of the boom-and- bust cycles that accompany a poorly regulated market. J.P. Morgan CEO Jamie Dimon recently explained this brave new world, saying that crises should be expected “every five to seven years.”

He is wrong. New laws that came out of the Great Depression ended 150 years of boom-and-bust cycles and gave us 50 years with virtually no financial meltdowns. The stability ended as we dismantled those laws and failed to replace them with new laws that reflected modern business practices.

The reputations of Wall Street’s most storied institutions are evaporating as the lack of meaningful consumer rules has set off a race to the bottom to develop new ways to trick customers. Wall Street executives explain privately that they cannot get rid of fine print, deceptive pricing, and buried tricks unilaterally without losing market share.

Citigroup learned this the hard way in 2007, when it decided to clean up its credit card just a little bit by eliminating universal default—the trick that allowed it to raise rates retroactively, even for consumers that did nothing wrong. Citi’s reform resulted in lower revenues and no new customers, triggering an embarrassing public reversal.

Citi explained sheepishly that credit cards were now so complicated that customers couldn’t tell when a company offered something a little better. So Citi went back to something a little worse. Without a watchdog in place, the big banks just keep slinging out uglier and uglier products.

With their reputations in tatters, the CEOs have decided to go on the offensive in Washington. They might have had some thoughtful suggestions for how to better shape a consumer agency. Instead, they have unleashed lobbyists who are determined to do anything to kill the consumer agency.

The latest lie is that the CFPA is “big government.” The CEOs all know that the current regulatory structure, which they support, is big government at its worst: bureaucratic, unaccountable and ineffective. Thjavascript:;e CFPA will consolidate seven separate bureaucracies, cut down on paperwork, and promote understandable consumer products. In the process, it will stabilize the industry, rebuild confidence in the securitization market, and leave more money in the pockets of families. Complaining about short, readable contracts and efforts to slim down bureaucracy only further diminishes the banks’ credibility.

This generation of Wall Street CEOs could be the ones to forfeit America’s trust. When the history of the Great Recession is written, they can be singled out as the bonus babies who were so short-sighted that they put the economy at risk and contributed to the destruction of their own companies. Or they can acknowledge how Americans’ trust has been lost and take the first steps to earn it back.

Ms. Warren is a law professor at Harvard and is currently the chair of the TARP Congressional Oversight Panel.

Please, Take this editorial and let it multiply. Email it to all your friends, Post it on your Facebook page, use Twitter or whatever kind of social media network to give Warren’s contents a larger audience. Opposition to this is going to far larger than the obvious Shadow Banks & their lobbyists , but from within the White House to the wealthy right wing olliarghs who are threatend by individuathat dare to speak out like Elizabeth Warren. Warren is already headlining on the Huffington post and here.

The usual of Investors411 will return tomorrow – I’m spending the rest of the AM spreading Warren’s message

Barr

HMS Titanic

Sipping White Wine

Every year major capitalist leaders from around the world get together at Davos Switzerland and to sample the world’s best wines. This banquet usually sings the praises of globalization and unfettered free markets. But the tone decidedly changed.  France’s President Sarkozy took the lead. What’s unique was wealthy wine sippers went after banks (David Ignatius editorial) in arguably the banking capital of the world – Switzerland. Populism (going after the too big to fail banks and using YOUR tax dollars to bail them out) was popular.

Bottom Line – Volker (who goes in front of Senate Banking committee today) & Obama have both spoken out against the too big to fail shadow banks. The Supreme court has given them added power (see past updates). Remember – for something to get done it has to pass the Senate and Chris Dodd (D – CT) is the chair of the Senate finance committee.  He’s the guy who approved the HUGE bonuses for Wall Street Shadow Banks.

Betraying a Nation

Thanks to Yankee Bob for filling in and bringing to light some credible and different ways of fixing our deficit problem.

If we are on the  sinking economic Titanic and the passengers are running from side to side frantically looking for an answer –  the real question is what is the crew (political leaders) doing about their boat. Even an idiot realizes you cant keep cutting taxes and increasing weapons, social security, medicare/medicaid, which combined with the increasing debt make up 70+% of the budget.

Senators (D – ND) Kent Conrad and (R – NH) Judd Gregg worked for 2 years to form a bipartisan commission to deal with the sacred budget cows that both parties have. Two weeks ago it came to a vote in the Senate and even sponsors of the Bill like (R) John McCain switched sides to vote NO .  In all 22 Democrats , 23 Republicans , 1 Independent were too afraid to vote for this bill.  It failed to win the necessary 60 votes to break a filibuster. (53 yes to 46 no) Here’s a David Broder editorial and a list of the cowards who “Betrayed America. “

Obama promised to form a Presidential Commission to look into this, but it lacks the power of a Senate commission.

Future Wars

We supposedly want China’s support in backing harsh sanctions against Iran .  So The US (Obama) goes ahead with selling $6.4 billion dollars worth of weapons to Taiwan.  China want to have a reconciliation with Taiwan and wants the island to be part of China. China embargo’s  Think we will ever get China to join us with harsher sanctions on Iran?

Like the giant alien plant Seymour in Little Shop of Horrors – the Military Industrial Complex in the USA keeps crying FEED ME

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!

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.

US markets rallied significantly in decreased below average volume. Volume did NOT confirm the rally. Only the NASDQ had volume that was even average.  Yesterday’s trading was an oversold bounce.  Technically, so many traders/investors had sold conditions were oversold (see McCellan Oscillator below) and we ran out of sellers.

Volume, our #1 technical forecasting tool, has indicated a major reversal is potentially underway. Three+ big volume combined with major declines shows major players heading for exits in the last 2+ weeks.

The major event of this week will be the Monthly jobs report at the end of the week. Earnings season is basically over.

Significant indexes

• McClellan Index at -53.52 =  Yesterday we rebounded from over -90 .  We are just below -60 or oversold levels. If everything eles is equal both  long term investors and even short term traders should buy when markets are oversold and sell when they are overbought +60 .
• BDI – This chart shows the Baltic Dry Index (scroll down) , a measure of shipping costs, Has broken through a major month long  support level at @ 3000 and is falling. Yesterday the BDI closed at  2745.= Bearish – especially for China. More on this tomorrow)
  

Fearless Forecast (for week) The US jobs report is critical for Americans, but not Wall Street. Wall Street can grow on profits from abroad. In fact, earnings reports which are getting better each quarter, are mostly improving on growth from emerging markets. China, the #1 emerging market has moved to slow growth and prevent a bubble – this has slowed their economy and stocks over the last month. However, the FXI has rebounded over the last few trading sessions in strong volume = Bullish The BDI is showing the exact opposite of a rebound, but an economy that’s slowing.= Bearish

So we have conflicting signals on China’s growth story. We also know from past experience that US which is still the economic leader worldwide (this position has diminish for a decade and continues to do so) can move significantly higher in weak volume. We saw this form Aug to the end of last year.

Best read of tea leaves – since we are technically oversold we should have an up week . There looks to be no major meltdown in the near future – only a question of will there be a further correction. Technically oversold positions should improve in the short term.

Positions

The  Positions Section (also at top of blog) has the latest buys and sells (Usually updated over weekends – will try to update last few weeks today) – These are positions I actually own

SELLING & BUYING

ETF Watch List

Current owned positions

• FXI (6% of portfolio) China – major technical breakdown of “head & shoulders trading pattern. Bought at @40 Now at @40
  
• EWZ (10% or portfolio) Brazil – Between 50 & 200 day moving average, but in correction. Bought at @ 52 & 59. Now at @67
  
• MOO - (10% of portfolio) Agriculture stocks – Moved below 50 day MA. Bought at 42 Now at@ 42
  
• IMAX – (2% of portfolio) – 3D movie theaters and future TV network. (Will keep adding on each dip) Now at 13.50

Since we are closer to -60 on the McClellan this should be a time to BUY rather than SELL 2010 is NOT going to be the kind of major bullish year 2009 was, but if we add when conditions are oversold you’ll do a whole lot better in the long run. The more oversold the better.

Traders should be able to do well today & early this week because of oversold positions.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Poster from 1880

Your Comments

The Day Democracy Died – or the Corporate takeover of America – has received more of YOUR comments (7 public and 4 personal) than any other editorial. We the People , in the USA,  has become We the Corporation. Check out all the insightful public comments (scroll down). Most are listed on the right side of blog.

Fundamentally Democracy has changed in the USA. Investments are taxed at 15% and working class Americans are taxed at

• $8350 to 33,950 = 15%
• $33,950 to 82,250 = 25%
• $82,250 to 171,550 = 28%
• 171,550 to 372,950 = 33%
• above 372,950 = 35%

Bottom line here is that our tax structure encourages investment/gambling on corporations for a living rather than working for a living. People like me are spending more and more time investing/gambling , in part because of the lower tax rates rather than working.

Bottom Line – This adds to the destruction of the work ethic in America . It also make the wealthy who own most stocks, (trust fund children, hedge fund managers, those in the ultra upper class) wealthier. Again the corporations win and working Americans loose.

Even Investors411 is kind of a Dr. Jekyll & Mr Hyde by offering investment/gambling advice while at the same time recognizing that we are all (as one of you put it) on the Titanic (perhaps a better name would be the Good Ship Democracy) rushing from one side to the other.

There is a quantum shift in that investment advice below

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!

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.

US stocks got toasted in HUGE volume – AGAIN – Technically – It’s starting to look like a market that is going elliptical to the downside  or a climax sell off. Four reasons were given for stocks big drop this week.

1. China – China was going to tighten credit and therefore growth would slow.  The BDI which measures the flow of goods, specially China imports shows no signs of collapsing  (see below)
2. Obama will go after shadow banks . If successful this would mean to big to fail firms like Goldman Sachs will be broken up into several pieces.  All the shadow banks can now (Supreme Court decision) spend whatever they want (including your tax dollars and the trillions that the Fed is loaning them at 0%) to prevent this.  It’s an election year and within the Obama administration Bernanke, Geithner & Larry Summers are solidly behind the too big to fail banks. Summers even helped to write the legislation that created shadow banks.
3. Bernanke will not get reappointed – Bernanke was one of the arsonist who brought the world to edge of an economic meltdown and one of the firemen to bail it out. If Bernake’s appointment goes down so will stocks. The uncertainty created by a new Fed chair would hurt stocks. But according to most reports Bernanke has won needed support over weekend .
4. There is no V shaped recovery – My best read of the tea leaves is they are right as far as the economy/jobs are concerned. But earnings reports are showing a lot more  big companies with international exposure are beating earnings on the top and bottom lines.

Relevant indexes

• McClellan Index ($NYMO) at -79.33 = significantly oversold .  Well beyond the  @-60 or oversold level.
• BDI -  The BDI/China has come down from highs in mid November. The Baltic Dry Sea Index has leveled off over the last month and started up the last two days.

Two events, outside of earnings which have been rather  good, significantly impact stocks - The Bernanke appointment (Tuesday) and Obama’s State of the Union (Wednesday)

Long term Outlook has changed to NEUTRAL because some key technical levels were broken in big volume.

Positions

The  Positions Section (also at top of blog) has the latest buys and sells (Usually updated over weekends)

These are positions I actually own

I’ve set up two charts. Put them on a split screen and compare. Both are 18 month charts McClellan Oscillator & the S&P 500 Notice that only 4 times in the last 18 month has the McClellan dropped below 80.  Each time it rebounded. It did reach @120 – 3 times  The Oct. 2008 meltdown, The March lows after the Obama election and a 6+% November correction .  3 times the McClellan has reached 80 and rebounded. Once it reached 100.

Bottom Line – chances are good we are going to see some sort of rebound this week. US markets are oversold and could go lower, but this looks like a good place to add 10 to 20% .  If McClellan goes lower (past 100) I’d add more. Fundamentally -  the situation is no where near as bad as it as at the beginning of 2009.  Working class American’s are going to suffer – but stocks with International exposure to emerging markets are going to flourish.

Everybody else is selling, now we start to buy.

SELLING & BUYING

More on exact buys and Sells on Monday.

See POSITIONS (scroll down) for details on this and what’s under consideration for 2010.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

1/21/2010

The Day Democracy Died

We the People , in the USA,  just became We the Corporation . In a real sense all campaign finance reform has been virtually abolished . The US Supreme Court in a partisan 5-4 decision gave corporations and their lobbyist (or any entity) the permission to spend whatever they want on any election . Any candidate who dares stand against any wealthy special interest can be threatened and overwhelmed by money in an election. For more read the lead NYT editorial The Court’s Blow To Democracy

It may take a few years for the real impact to be felt. Here are s ome examples

• Locally – Developers and corporations will be far more able to buy town and state politicians who appoint the local zoning boards and make the laws. If they want to put a strip mall next to your home and crush the value of the houses in your neighborhood they can.  Businesses on the local and state level will get to pay less taxes and YOU will have to pay more.
• Big Shadow Banks – YOU bailed out the big banks for their mistakes and they got HUGE bonuses. Forget Obama’s declaration to fight the Shadow Banks. Goldman Sachs (4.3 billion in profit last 1/4) and the other shadow banks know can throw billions at politicians that oppose any taxpayer bailout. The bailout era may have  just begun .
• Military Industrial Complex – Any weapons company knows it needs a war and fear mongering to grow profits.  Now they can spend whatever they want. The criteria for choosing a weapon will also change from its effectiveness to whichever company has the most money to intimidate a politician. If a poll doesn’t support a war/weapons system they can overwhelm him/her in a reelection with money.
• Monopoly s – The biggest winners are the biggest companies. In every industry the most powerful company rules. It will be far easier forcing smaller competitors out of business once the giant corporations own local state and national politicians. Example EXXON – The biggest corporate entity will have the most money and therefore own the most politicians. Each competitor will get shoved aside or gobbled up starting with small business and ending with their major competitors.
• Freedom -  No other functioning democracy allows the legal corporate buying of politicians . People have the power in these democracies. The corporate board rooms in the USA will be the oligarchy where decisions are made on everything from taxation to your freedom if you dare to challenge their power.
• Taxpayer – The taxpayer has been thrown under the bus.  As corporate taxes fall either deficits will grow or you will be forced to pay the difference.

There will be some corporations and individuals (perhaps Google & folks like Warren Buffett) that will work for the betterment of the world. But greed/profit is the bottom line for corporations. Your $25 contribution or work for a candidate can be overwhelmed by Exxon’s or Shadow Bank’s  $2.5 billion contribution. Our constitution centuries ago was  created for We the People – now its changed to We the Corporations. Remember yesterday 1/21/2010. If there is no change – Democracy as we know it has died.

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!

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.

US stocks got toasted in HUGE volume.

Obama threw down the gauntlet at the shadow banks and stated he never wanted to see an institution that was too big to fail. "Never again will the American taxpayer be held hostage against these banks that are too big to fail."

However, the Shadow Banks now have the power (see above) & enormous amounts of money (lots of it your tax dollars) to defeat any meaningful reforms.

• McClellan Index at -49.56 = Almost significantly oversold.  Only 10 points till  @-60 or oversold.
  

Sorry, just too upset about Supreme Court decision to even think about stocks.  However, obviously, investing in the biggest corporations, in the long term will make the most money.

Positions

The  Positions Section (also at top of blog) has the latest buys and sells (Usually updated over weekends)

These are positions I actually own

SELLING & BUYING

See POSITIONS (scroll down) for details on this and what’s under consideration for 2010.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Paul Volker

Shadow Banks – Shake & Break?

The WSJ is reporting that former Fed chair Paul Volker (like Elizabeth Warren one of the good guys/gals in the Obama administration) has finally got Obama’s attention. Perhaps it was the loss of the Senate seat in MA that helped. “Obama on Thursday is expected to propose new limits on the size and risk taken by the country’s biggest banks.”

This should have happened almost a year ago, and we will have to wait to see if this is just political spin or if Obama is serious. Economist Simon Johnson asks all the right questions

How to know if something serious is going to happen – shadow banks stocks will fall.

Author Simon Johnson is the former Chief Economist of the International Monetary Fund, an MIT Professor and author of a must read - The Quiet Coup (referenced in earlier Investors411) This article is about history repeating itself. Financial oligarchies have crushed many developing countries and arguable the IMF helped break those oligarchy. He believes “recovery will fail unless we break the financial oligarchy that is blocking essential reform. “

Remember Iraq

A withdrawal was another one of Obama’s “change we can believe in promises.” Virtually nothing’s happened. A poll in the distinguished Foreign Policy magazine states that Arab publics say that ending the US military presence in Iraq is the single most important thing the US could do to improve its relations with that region.

“What they [Arabs] saw as US atrocities in Iraq motivated many of the terrorists active after 2003″

Bottom Line – You want to reduce the number of people threatening terrorist attacks on the USA – Keep your promise, stop nation building and get out of IRAQ. What ever happened to elections that were supposed to happen there?

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!

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.

Stocks staged a major fall (below 1%) in increased, above average volume. Volume, our #1 confirmation factor did again confirm the move lower. 3 of the last six trading days have seen significant falls in increased above average volume. While the numbers on the downside could have been larger, this is cause for concern.  It shows institutional investors leaving or selling stocks and stocks go no where without the big boys and girls.

Markets did recover about 30%+ of the losses at the end of the day.

• McClellan Index at -17.72 = A little bit oversold.  There’s a long way to go till we reach @-60 or oversold or @ +60 or overbought. Notice a clear trend of lower highs and lower lows on chart. = Bearish pattern

IBM & INTC have both had better than expected earnings results and are down (not much – a few %) This is not a good sign for stocks, especially in technology.  It looks like you’ll need a grand slam earnings report to move higher

US Stocks have been flip flopping between up and down days, but volume has been with the bears.

China , who has led the world out of the recession looks to be in a pull back or correction. Down about 10+% . China could correct some more. Odds are US will follow China and some sort of correction is starting in USA. Not logical to see the country leading the world out of recession in a pull back and the US not follow.

Positions

The  Positions Section (also at top of blog) has the latest buys and sells (Usually updated over weekends)

These are positions I actually own

SELLING & BUYING

ETF Watch List

Ideally, you’d like to McClellan index below zero (the further the better) and these all would be better buys. The closer to -60 the more you think about buying and the closer to +60 the more you think about selling.

Strategy – going to hold tight till conditions reach overbought or oversold.

Charts set to 2 years – click on ticker symbols.

• EWZ – Brazil (16% of portfolio) – Reaching a critical inflection point. This chart is either near a low point in forming a base or after an outstanding run of over 100% about to take a hit. Perhaps, like China its time to lighten up.
• MOO – Agriculture (10% of portfolio) – Latest buy had a strong upside run, pulled back a bit and is moving sideways.
• FXI – China (Reduced to 6% of portfolio) – Over the last month or two we’ve been taking profits on FXI. (Down from 24% of portfolio to 6% ) Lots of volume when stock moves down and now FXI has established three lower highs and lower lows over the last three months.
• see Positions section of blog for some considered ETF alternatives

Again – Waiting for McClellan Oscillator to reach oversold or overbought positions before making a major move.

Investors411 opened a small positions in ENOC (2% of portfolio) Bought at 35.95. Of all the stocks on our watch list this one was holding its own on a big down day.  More Later.

See POSITIONS (scroll down) for details on this and what’s under consideration for 2010.

Long Term Outlook = CAUTIOUSLY BULLISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

The Scream

“The Scream” – by Edvard Munch

Understandably, many of you are frustrated with the direction our country is heading in . You’ve watched again as another economic bubble of unregulated capitalism burst. Last year – two bubbles – housing & finance. The collapse of Lehmann Brothers and the financial meltdown showed the world we needed some rules to govern unregulated markets.

It’s obvious that relative to the world and especially Asia (China) that the US star is falling and theirs is rising. You thought finally your fellow American’s would get it.

The health care/public option failure is especially frustrating because some good ideas came close to passing. (See Bob’s comments onside of blog – Why was there no mass organized demonstrations for a public health care plan? and earlier comments) You realize that a 5 to 10% increase in health care each year is going accelerate the already growing gap between the rich and poor in the USA.

Is Bob right? – Perhaps in America the class struggle between the rich and those that have less is over.  The rich (symbolically – shadow bankers) have won a round or two this year. It can get depressing and make you want to scream.

Certainly in China it is hopeful that you see one generation move from slave labor in rice paddies to becoming a computer programmer.  But, admittedly here the flow seems in the opposite direction.

Sometimes you win and sometimes you loose. The bottom line is three other old adages “what doesn’t kill you makes you stronger.” You learn your lesson, adapt and move ahead.  The second adage is “it could be worse “ Yea it could have been a lot worse -  think President Palin. Lastly “think globally and act locally” The key word here is to act on what you believe in. Sometimes that seed you plant takes time to grow

So  scream or don’t, but keep fighting for what you believe in &

Happy Hanukah

Post script – I’m sure Bob will keep on trucking.

KISS & STOCKS

Keep It Simple Stupid

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals, Fundamentals & Analysis

Running out of Oxygen – US & most world markets have been moving higher in weak, below average volume .  We’ve move up again over the last 4 days and inched out new closing highs for major US markets (all but the Russell 2000 index).

We are in moderately overbought territory (see below). Translation – we are staring to run out of buyers.

The inverse relationship between the dollar and stocks has broken down somewhat over the last two weeks. But its still there.

FEARLESS WEEKLY FORECAST – Up to flat week . But be careful we are entering overbought territory (see below) and if rally continues I’ll be taking profits rather than adding to stocks.

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 a fell a  -49 points Friday and closed at 3530. Over the last week the BDI dropped rapidly and the decline eased on Friday.  Since Mid November highs the BDI (see chart) has established a clear downward trend =   bearish signal

What it means-Since the low of Oct 2008 technically the long term chart is = Bullish. However we are now in a month long correction. Mid term trend = Bearish The BDI is far more useful as a long term indicator of not only world trade, but specifically China and growing emerging markets.

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The Dollar is currently the #1 forecasting tool (now weakening)

$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 was fell yesterday -0.23% . Anything close to or over +/- 0.50 is significant  The dollar closed at $76.35 . Technically have broken up through the 50 day moving average resistance level and then failed to break out through the Oct/Nov high around $76,82 resistance level.  In technical terms we have created a “double top.”  The $76.82 level is now a very important line in the sand.

The whole dynamic  here seems to have changed – We now, at least for the short term, have a rising dollar

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

There’s been a dramatic change in the last 4 trading sessions. We broke out of the range (see below) and are close to  overbought/sell positions . The index closed at +40.17 This is an  Overbought Position and we are getting close to a +60 dramatically overbought  or sell signal.

From past updates – It’s spilled over a little bit, but the McClellan index has moved between +25 & -25 .  There has been no clear buy or sell signal for over a month.

Oversold conditions (@ -60) = buy, Overbought positions (@+60) = sell The closer we get to +/- 60 the better our chances of making money with a shorter term buy/sell signal

Bottom Line – Time to start thinking about taking profits, especially into any continued rally.

Positions

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

(again a little behind on latest moves)

We’ve had, and volume has confirmed, a quantum shift in markets. This may be temporary and it may be long term, but it necessitates major changes in positions. – looking for dollar to hold or add to gains . – This happened or was confirmed yesterday . Will wait to buy some ETF’s and stocks when McClellan Index says we are approaching overbought (@+60)

Recommended ETF’s and Trades

SELLING & BUYING

Your Comments - (See “Monitor’s” comments on side of blog – About a week  ago Investors411 sold its positions in GLD. DGP, AMZN & NVS ) – Not interested in opening any new positions right now Waiting for a clear signal from MCellan Index to commit additional capital or sell existing positions.

Right now, it sure looks like we are reaching overbought positions.  If we rally into the end of this week I’d take some more profits

Start small & Build your position – Buy the dip.

Long Term Outlook = CAUTIOUSLY BULLISH

The Second Maine Militia

Second Maine Militia leaders from Time Magazine

There are three excellent comments that you should read to the right. Let’s focus on Popeye’s reference to the forming of the Second Maine Militia . – They open their yearly meeting by blasting fake TV with smiley faces and phony slogans painted on them with AK 47’s and old cannons. Article from Time magazine  LINK

They get it.  They share the view that the US government has lost its moral authority. The problem is not right vs. left, Democrats vs. Republican , but “up vs. down.” Money quote – both political parties have “ degenerated” …“into whores for wealth and arbiters of empire.”

Something the Maine 2nd militia would be up in arms about is how Tim Geithner as NY Fed chair (now Obama’s Sec. of Treasury) sold out the taxpayers by over compensating the shadow banks (or in Maine Second Militia terms “whores for wealth”) in the AIG bailout. Lead story in NYT business section LINK

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)

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals, Fundamentals & Analysis

KISS = Keep It Simple Stupid – The dollar rules

Dollar broke down through its $75.00 support level and the benchmark S&P 500 broke out to new yearly highs.

Volume our usual #1 confirmation factor was up, but still below average . Volume, therefore, did NOT confirm the price move. In fact over the long term the rise in stocks and decline in volume almost always signals a major reversal. But, for the last few months the Dollar rules and little else matters.

Bernanke spoke yesterday and overall he was very negative on the US economy. This is bad for Main Street and Jobs. But good for Wall Street because interest rates will remain low for a long time (Lots more on this, but limited time this AM)

——–

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 is @ 1+% 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 )

The BDI rose a  significant +109 points yesterday and closed at 4220. Up 13 days in a row . The BDI’s growth did slow down a little as it approaches its major resistance level at 4291 . (This years high)  The BDI has rallied about 2000 points since late September. =  Bullish for stocks & world trade right now. Especially good for our positions in FXI & EWZ

——-

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 was down a  significant  -0.47% yesterday. The dollar closed at $74.88 . The $75 support level has fallen . If the dollar closes below $75 today it will confirm the breakdown

Which ever side the Dollar breaks out through will set the momentum for it and the opposite will happen for US ( and most world) equities.

CAUTION – The first breakout (up or down) is often false. 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 +35.50 . This indicates stocks are overbought and The McC rose +28.62 yesterday  If we get another rally this big stocks will be clearly overbought and its definitely time for long term investors to take some profits.  No one should be adding to long positions now. Traders and shorter term investors should be considering taking profits sooner.

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

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.

Traders (short term plays) These are not ETFs, but individual stocks

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

On Education

Amish schoolhouse in Lancaster County, Pennsylvania in 1941. (from Wikipedia)

Imagine if your were president/dictator of USA. What would you do with education? I would give teachers massive tax cut/eliminate taxes on the first $50,000 they earn and raise taxes on the top 1% of individuals in the country to pay for it. (see yesteday’s Tom Friedman editorial)

Waiting for Financial Reform

Monitor has some excellent comments (see comments section on right side of blog). The long term picture for the USA is certainly one of decline relative to the rest of the world. A fall that is going to hit Main Street harder than anyone else.  We built a huge deficit under the Bush administration & created the worst financial crisis since the Great Depression.

But, we are still waiting for some kind of financial reform.  Add to this we are still spending trillions nation building overseas and stimulus, the usual cure for a recession, is puling us further into debt.  No wonder volume is NOT growing as stocks advance and the dollar  falls. People are loosing confidence in the USA.

One of the  most troubling in all of this is where is the financial reform? Obama was all about “change we can believe in” and aside from a few minor adjustments, where’s the change?  Where’s the transparency? Where’s the accountability? Where are the new laws to prevent corruption?

The reforms that fixed Wall Street after the great Depression were removed and capitalism was left without checks and balances. Look what happened – A massive financial meltdown.  Author Ron Chernow concludes his editorial in today’s NYT  entitled “Everyman’s Financial Meltdown.” as follows ” [we] still await a new season of financial reform.”

More Pay Cuts for Shadow Banks

From yesterday – Obama administration is forcing pay cuts on top executives of 7 bailout firms. Good first step. Now we get step two. Fed is proposing review of pay at 28 of the largest shadow banks . LINK Two steps in the right direction, but we need a whole lot more.

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)

• Brown = repeat statements
• Green = usually bullish statements
• Red = Usually bearish statements

Technicals, Fundamentals & Analysis

This is a US stock market dominated by professionals and traders .  We had another significant rally in weaker volume. The Dow was close to even in volume. Historically volume has always been the #1 confirmation factor of an equity move in price.

Oil prices fell LINK to chart -0.22% to $81.19 . Obviously oil prices above $80 is going to hurt ma and pa consumer in any recovery.  Sure looks like some entity or group is manipulating oil prices. Up 9 of last 11 days and going parabolic (up too far too fast) Oil prices like stocks usually move inversely to the price of the dollar.

The BDI rose significantly again = Bearish for stocks stocksandand world trade.

Reading the Tea Leaves – from yesterday -  There is no specific fundamental(s) that you can point to that says yea that’s the reason stocks tanked in big time volume at in the last hour of trading.  Obviously “the Pro’s” know something us common investors do not. Earnings season has been much better than expected with companies beating on both TOP and bottom line. The dollar fell. The BDI is rising.  Stocks should be rising . Perhaps yesterday’s rally was a delayed reaction to the overall drop in the dollar, rise in the BDI and some better than expected earnings reports.

However, BE CAUTIOUS volume has in no way confirmed the move higher. If you look at the beginning of the bull run (March April and May)(check out weekly charts of a major US index) there was huge volume behind the move higher. You expect some slower volume in the summer, but volume has not returned to the markets.

Best guess is for rally today.

——–

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 is @ 30% 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 )

The BDI rose a significant +84 points yesterday and closed at 3001. A higher high price on its chart pattern has been confirmed and it sure looks like a bullish run could be starting. =  Bullish for stocks & world trade right now

——-

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 -.09% The dollar closed at $75.05 .  Perhaps yesterday’s rally was a delayed reaction to the significant 0.55% decline in the dollar the day before-the two day total drop is -0.64% Bullish for stocks

Last year’s low was around $71,(March 08 ) so there is a long way to go before the major and very crucial support level is reached . The dollar does have a support level around $74.00( a high from about a year ago – see long term chart)

The falling dollar is getting a lot of PR. A lot of this is politics and fear mongering. However the dropping dollar does show a growing weakness in America economically and the potential for higher inflation. The real test for the dollar lies in the March 2008 lows around $71+

Positions

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

Trades made this week are updated at the end of the week. -  Sold 50% of position in EWZ and all of EWY. – This sure looks like - a big mistake – Should have been adding instead of subtracting – especially EWZ – Still no one ever went broke taking profits .

Monitor’s comments are right on (see comments section of blog)-Investing outside the USA in Emerging Markets (especially China, & Brazil) are much better in the long run - My problem is one of timing. We can’t get a 5 to 10% dip to invest. Investors 411 should have much larger positions emerging markets.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!