Fight of the Century in Economics

Keynes vs Hayek

Solutions to our current economic crisis set to a music video. These two long dead nobel prize winning economists are the leaders of two major economic theories/solutions.

How this “Fight of the Century” plays out is going to dramatically impact YOUR life.

One significant point is the whole problem reached its apex because financial markets in the USA were unregulated.

However, both sides make excellent points in offering solutions. Some look at either side with Osama Been Forgotten religiosity.  Others with pure greed. Keep an open mind and enjoy.

After viewing – If you want more see site of producers Econostories.tv

Football Players vs Teachers

Collective Bargaining  Question –

Why is it that many Republicans want to obliterate the collective bargaining rights of Teachers, Cops, Firefighters, and Unions, yet they say absolutely nothing about the NFL players who are collectively bargain for their rights?

{Thanks to Harry G, a frequent reader/contributor for this concept)

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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 - 6 years of beating benchmark S&P 500

• Broken record – Another low volume melt up induced by the Fed’s injections of liquidity into stocks.
• While individual earnings reports do impact each stock the High Frequency Traders and their super computers sill dominate the market by making up 70+% of all trades.
• That USA GDP slowdown prediction that Bernanke announced negatively impacted world wide stock markets overnight.
• Simple equation is falling dollar good for US stocks/exporters and bad for foreign stocks/exporters.
• “Officials are unfazed over dollar slide” WSJ
• The 2008 financial meltdown created a worldwide problem, especially for debtor nations. Spain, because of its size, is perhaps the greatest problem. Unemployment 21.3% and rising inflation at 3.5%.

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Shorter Term Forecasting Indexes

There are hundreds of forecasting tools, – These two tools have worked

When they stop working Investors411 will use other Indexes

• The Dollar (USD) [Any daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] Down a significant -0.54 yesterday. Another a three year low. Clear longer and shorter term bearish trend. For US stocks = Bullish
• McClellan Index - (MO) [The very rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks .] Rose to+ 40.01.  Getting up there but still = Neutral

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Reading The Tea Leaves

What to watch today – Forget stocks and watch the dollar

• UUP - (Tracking ETF for dollar) Remember - Usually the dollar is a contrarian indicator for stocks. Any major fall may give temporary help to US stocks, but a major breakdown also signal major structural problems with the USA

I know the Fed said it wasn’t worried about the dollar. (See comments yesterday on Bernanke’s press conference) But, the downside momentum has picked up over the last couple days and reached significant levels yesterday. Remember we are the world’s fiat currency and our currency is getting devalued.

• The good – helps US stocks, exporters, commodities and especially silver/gold.
• The bad - Hurts foreign countries & raises commodity prices.
• The ugly - Possible trade war – second great depression.

We have not reached crisis levels, but the direction is bad. Many see a huge storm coming and as a hedge are buying silver/gold

SLV is a juggernaut – It completely obliterated a climax sell off, moved 6% higher two days ago and marginally higher yesterday.

COMEX Silver is the official price of silver. Almost the same as SLV.  $50 is the key breakout level. If that level comes down and shorts are forced to cover, we could see another melt up.

Fear of the future is the fundamental driving this trade. You see this in US consumer confidence numbers and a recent gallop poll that show most Americans think we are in a depression/recession. Link below

55% of Americans see USA in Recession/Depression

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Look for Paul R’s enlightened views on stocks ing the comment section of blog

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Positions

See ”POSITION“ section of blog (at top of page) for lists of potential stocks & ETF’s including ”YOUR Stock List.”

• Would buy more silver/gold on dip. -
• The stock/sectors to be in – is those companies that export or make their money abroad. This is because the dollar is getting devalued.

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

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Jobs, Jobs, Jobs

Ever since the 2008 meltdown Investors411 has stated financial and economic conditions are “far far far far far bigger than first imagined.” This statement that has been made many times and is still bolded in the position section of the blog.

Poll after poll (except among Tea Party supporters) have said “To Hell with the Deficit, Its Job, Jobs, Jobs.“ See yesterday’s Investors411 for  a list of historians and economists who make the same case less colorful language.

Immediate Help

• Extend unemployment benefits its “the human thing to do.” Republican Billionaire Mort Zukerman
• Extend unemployment because (the average American unemployment check was under $300 a week in 2009) it will stimulate the economy. These people will SPEND the money and we all benefit because money flows.
• Republican’s know that the longer they can delay a vote on this the less money will flow and consequently the more people unemployment will grow before the November elections. Every day they delay = the more votes they get in November, because they can blame Obama for unemployment.
• It’s certainly hypocritical to endorse the Bush tax cuts on the wealthy. Next vote for unnessesary war funding outside the budget for over 10 years. Then play politics because our own American families of former workers are going hungry.

Longer Term Help

• Infrastructure projects get you the most bang for the buck according to Mort Zukerman (who I usually don’t agree with) and most economists.
• We need an Independent Infrastructure Bank Not one where a powerful Senator like Democrat Harry Reid can take $350 million for a high speed train from LA to his home state of (Los Vegas)Nevada.

Bottom Line – Andy Grove, Intel’s CEO had it right – Globalization has created a major “scaling” problem in the USA. Unless we somehow change that direction the ultimate result is going to be very negative economically for the USA.

KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Technicals, Fundamentals & Analysis

The High Frequency/Black Box traders (that are focused on the here and now) pushed the markets higher in weak trading. This has been the typical headline for many moons in what’s been a falling market since April. – Lower price highs and lower lows.

IBM was the earnings report of most interest and its down @-4% in pre market trading = Bearish

APPL – Both Monitor and Paul R have warned about today’s earnings report at close.

YOU have pretty much reached consensus that holding a stock, especially in a declining economic environment, is highly risky before its earning report. If you are an insane lover of risk (short term trader) and AAPL continues to drop before earnings – it does take some of the downside risk away.

Ruptured oil well leaking again and possible leaks on oil on ocean floor related to BP oil spill. Best site for this is The Oil Drum = Bearish

Significant Indexes-

• McClellan Oscillator (MO) rose to +21.91 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. = NEUTRAL
• US Dollar –  The dollar Friday was basically flat +0.04% [Anything over +/- @0.50 is significant.] The dollar is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, have used the inverse relationship of the dollar as a key part of their trading system. Earning have trumped this indicator for now & we have consolidated for last two days. = NEUTRAL
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China.) BDI is in free fall from a high of @4200 to 1700 yesterday. This is a huge -60% drop 8 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI rose for the first time in 8 weeks the BDI rose Friday & +0.70% yesterday. At long last the BDI finding a bottom - a bullish sign, but too early to tell.Fundamentally the -60% drop is very BEARISH

Reading Tea Leaves-

Don’t think the negative fundamentals of the BDI (Trade and China) & Europe have been fully integrated into stock prices yet. Sure fells like we are going to have a negative day. But, with Black boxes in control (almost everyone else has fled to safer investments of bonds and treasuries) – you never know.

Positions

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

Updated over weekends Investors411 holds ONE position at this time

From Yesterday – SH – The ETF that shorts the S&P 500 was bought at 51.45. It’s up over 3% now. 1/2 will be sold at 3% profit and a stop/loss has been put in place at what it was bought for. 1/2 of SH was sold for 53.02 for +3% profit.  Letting the rest ride and will sell when conditions on MO near oversold.

No other positions long or short are contemplated in immediate future because MO is neutral. Sorry, there is little to do but sit tight,  be happy you’re almost all in cash, and wait till we get oversold or overbought.

One exception is GLD or DGL (@200% GLD). Its dipping and if it falls to its 200 DMA – would consider buying on fundamentals.

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Jesus’ Colt 45

Louisiana Governor Republican Bobby Jindal just signed into law that it was legal to carry guns into church. My how religion has changed in the USA.

Deficits

What to do about the deficit? The Center for Economic Progress and Research using non partisan Congressional Budget Office data has come up with some concepts and their impact on the deficit. Thanks to Sherwehe for the site recommendation and Jsovjani for the below insightful  comments on this data

“Very interesting; fin. spec tax raises the most. My question is impact on jobs. However, things I want, like means testing ss and medicare are not included. Gas tax interesting, but I do not trust gov’t to use it for deficit reduction. History has not proven that they would keep their promises. I think trust in gov’t  is major issue to reform. Till then,  spend less (personally) and maybe buy gold. I am not hopeful in healing US till maybe a real depression and massive public riots. Does sound very negative, doesn’t it. I’m very concerned.”

Check out the site and you can see dozens of different possibilities

Jobs Now…Deficits Soon

Like Andy Grove, Matt Miller in the WaPo has some definitive solutions. Miller has a relatively coherent vision but admittedly it would be very hard to accomplish what he calls for politically. Here’s his main point.

That means cutting payroll and corporate taxes now — and offsetting this with phased-in tax hikes on dirty energy and consumption, to take effect only once jobs and growth are back on track.

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

Mantra for week - Fundamentals rule. Old fashion fundamental earnings analysis dominates as earnings season kicks off big time next week. ”Double dip recession” has become an investment mantra starting in Europe and now echos worldwide.

Old Wall Street Axiom - The market can remain irrational longer than you can remain solvent

Yesterday stocks staged a mega rally on virtually no news and on well below (only slightly increased) average volume. Irrational, to anyone who believes fundamentals matter. The Black Boxes (giant institutions that speed trade using algorithms & make up to 80% of the trades) made these seemingly irrational trades yesterday.

Yes, the US markets were oversold and due for the predictable rebound (see Tuesday’s Investors TF&A section) But what happens is Black Boxes magnify what should have been a more mellow rally. Almost no investors returned from the sidelines or you would have seen volume spike higher. That left the Black Boxes on their own.

What’s this all means – We have to adapt to what’s happening & adjust how we make both long term investments and short term trades. In discussing Black Box trades on CNBC (the financial channel) they said that 99 stocks yesterday made up 50.1% of all trades. Also Black Box institutions were using Sector and Index ETF’s as one of their primary trades.

• Everything happens at hyper speed
• Everything is more technically based
• Moves are exaggerated both up and down
• Lots of the old rules that governed the markets are not functioning because of the hyper speed.

In the long run fundamentals are going to have their say. The BDI cannot keep falling 4 & 5% each day without consequences. The cost of shipping goods falling 52% worldwide in almost 7 weeks should be sending off at least some alarms. = Bearish

Earnings Season starts next week.

Perhaps the most important leading sector was financial stocks yesterday XLF (ETF for financials) up +4.33%. Mega shadow banks JPM up +5.01% & BAC +4.62% Perhaps a message on how weak financial reform is in the USA.

Significant Indexes -

• McClellan Oscillator (MO) rose a very significantly to -1.45 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works..= Now squarely in the middle or NEUTRAL
• US Dollar –  The dollar fell -0.32% Friday [Anything over +/- @0.50 is significant.]  Right now is important  to stocks – Dollar up = stocks down and visa versa. The Black Box traders, that make up to 80% of all trades, have used the inverse relationship of the dollar as a key part of their trading system. For some reason they have changed and the dollar is now = Less Relevant
• BDI - The  Baltic Dry Index (Measures cost of shipping – Higher costs good = more being shipped = Bullish. Also good proxy of China) BDI is in free fall from a high of @4200 to  2018 yesterday. This is a huge -52% drop in 7 weeks.  Often a leading indicator for stocks. Here’s a 3 year chart of BDI for context. The BDI fell a massive and increased -5.13% yesterday. Rate of decline increased as it broke through its support level. = BEARISH

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own - Updated over weekends – Investors411 holds one position at this time. (see below)

Short Term Traders – I opened a 2% of portfolio position in SDS near the close yesterday. SDS is an ETF that double shorts the S&P 500. Price 35.40.  The enormous size of the rally made me hesitate.  A better entry would be in a rally today.

Investors – Keep powder dry and wait for a clear signal from MO. Perhaps we should have gone long when the MO got not quite to -60 (oversold territory), but -54. There are no absolutes in defining oversold. This market is far too wild and Black Box dominated. Better safe than sorry.

Long Term Outlook =CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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Obama, Obama, Obama

• The Obama administration is responsible for us still being in Afghanistan & Iraq. He is the commander in chief (see yesterday’s Investors411).
• His administration is also responsible for the weak financial reform coming out of congress. All Obama had to do it to throw strong vocal support Kafman/Brown, Volker amendment, Lincoln’s derivative bill for them to pass.
• BP, is responsible for the spill, as are a decade of lax rules and enforcers. But its long past time Obama, the commander in chief, did more than talk tough and blame BP. Yankee Bob has editorial on how expensive fossil fuels really are.

Solutions, Solution, Solutions

• John Sovjani in comments sections comes up with some innovative fiscal solutions in comments section of blog A gas tax and legalizing/taxing pot are among his choices.
• Bob Sadinski’s (AKA Yankee Bob) editorial focus is to change more rapidly to alternative energy because of the real environmental costs of fossil fuels. (see link above)

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

Stocks roared out of the gate, but fell in the PM as those huge institutions with those giant super computers all sold.  The translation here is – the bulk of all trading is being made by institutions with complex trading algorithm. They take hold of US markets, usually after 2:00PM and determine direction. That direction was down into close = Bearish

Somehow the rumor/news got out that China was considering taking $ out of the Euro. The announcement  was an absolutely dumb move if you’re the Chinese and are doing this. Probably some large entity that is short the Euro or long the dollar created or contributed to this. Markets still very sensitive to negative European news. China has denied this. = Bearish

The McClellan Oscillator sent out a strong bullish signal yesterday. From Investopedia – “Conversely, when a bear market is still declining, but a smaller amount of stocks are declining, an end to the bear market may be near” Yesterday the financial channels (Bloomberg & CNBC reported a lack of breath and volume behind the PM decline)= Bullish

We’ve not had a bear market, but @ a 13% correction. One technical sign that it is coming to an end does NOT make it so. But the MO has been below 60 for a long time and due for a technical correction or a short run higher.

Fundamentals haven’t changed! But we are long overdue for the McClellan Oscillator to move above -60. A technical bounce.

Futures are up in US and European markets higher. = Bullish

Significant Indexes

• McClellan Oscillator rose to -64.99. [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is still OVERSOLD territory, but we are now out of WAY oversold territory. How the MO works. Yesterday was one of those strange days where the markets went lower but MO went up.= Bullish.
• US Dollar –  The dollar rose  a significant +0.62% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. This broke its major resistance level and the dollar is now trading at year + long high. Foe stocks (especially US stocks) =  Bearish

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own

Sold last 1/2 of SDS at 35.50 near market close. There was a +5% gain on 1/2 and a 0% gain on 1/2.

Traders – Bought 1% IMAX at 16.70 & DGIT at 42.26 near market close. Reasoning – These stocks were rallying into the close, markets were falling, Monitor (see comments section of blog announced DGIT and SNDK had made new year long highs ) and these two stocks are clearly out performing well over 98% of the market even though they did not hold onto their breakouts. DGIT & IMAX rallied into close as markets fell.

Still long 2%IMAX, 1% ESRX, 2% DGIT and 2% VCI.

I hope IMAX, ESRX DGIT & VCI turn into long term gains, but fundamentally I seriously doubt it. If lucky will take profits (sell 1/2) on any gain of @5% with DGIT. Also will sell 1/2 VCI (dropped over 4% yesterday – should have sold 1/2 when stock was up over 5%) & IMAX in major rally.

Still waiting for dip to buy EUO. If markets rally strongly today.

Traders Investors411 also bought FAS at open and sold it when it fell back to price it was bought for. (actually lost less than 0.4%)  Caution this is a very volatile (3X financials) stock.

Traders – Trading strategy – Investors411 is taking @5 % profit on any recently purchased position and letting the rest ride. Investors is then putting a stop/sell order on the price it was bought for.  In volatile markets the only thing to do is make short term trades. Will sell 1/2 of  IMAX, VCI, and/or DGIT if criteria is approached at near open. Selling into rally

Investors – Wait for trend to establish itself.

NB – Friday’s Investors411 will be minimal and published early.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

The Best & Worst of Investors411-March

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Psychologist Kahneman & Pandemic expert Brilliant

Economics, Politics – Editorials

The Best

1. The Israeli/American nobel prize winning father of behavioral economics Daniel Kahneman video on how one memory of a longer term experience can impact YOUR happiness and pain. (Thanks to one of you who discovered this valuable presentation) LINK
2. Perhaps the world’s most renowned epidemiologist Dr Larry Brilliant video His case for “Informed Optimism” is outstanding and different from the 3/22 video LINK. His case for how poverty causes worldwide epidemics, from Small Pox to Ebola, and those that are doing something about it impacts everyone.
3. The Cleveland Clinic’s Dr. Cosgrove’s interview in Fortune magazine brought new insight into the health car debate. Of course health care is going to cost more as the huge baby boomer demographic gets older and technology simply gets better at treating illness. However the root causes of American’s self indulgent problem is “Obesity, Smoking,  & lack of exercise” LINK

The Worst

1. In general – I sensationalize. From headlines like “Baby Killer” to “The Black Widows” I do this first to attract your attention
2. Stereotyping one side in a debate is just plain over the top. My excuse – sometimes you just get sooooo angry that emotions overwhelm logic.
3. Too much time is spent on pointing out what’s broken and not enough on how to fix it. Although long term readers, of Investors 411 should notice that”s changed over the years. There’s a lot more HOPE or SOLUTIONS (Kahneman, Brilliant, & Cosgrove) but there’s still more to go.

Stocks

The Best

1. The March 5th upgrade to Cautiously Bullish -US Markets have gone from negative to over a 5% gain when they open tomorrow.
2. YOUR Stock List – It’s time consuming to produce but offers a wealth of ideas. Lead by SHOO and IMAX many have had solid runs higher this month.
3. (these are from past months) Introduction of McCellan Oscillator (it works on broad markets, but nothing works forever and its certainly not 100%) and IMAX (recognition of 3D technologies potential)

The Worst

1. Prediction – Obamacare’s passage was going to hurt the US  stock market. !00% wrong. People’s mouth(Right wing investment community) were in one place, but there money was in another. If anything Obamacare juiced the markets, because the rally blinked for a 1/2 hour then continued.
2. Reluctance to be more fully invested. For longer term investors still think this is good. Nothing’s been fixed financially, the problem has been underestimated & hidden, and there are more shoes to drop. However for riskier investors who have the time, discipline, and understanding to be in and out of a stock/ETF within a day, week, or month(s) its a mistake.