Investors 411 Blog

by Barr Jozwicki
May 14, 2009

Market Updates – The American Worker

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , ,

What’s Up? – Not the stock market; Financials fall –  financials flooding markets with  more shares to raise capital; First in,hopefully, a series of guest editorialist: This one by Scott Herwehe “ Is this a financial crisis or is this a crisis of an unsustainable economic model?” The American Worker.

American Worker by Jeff Kubina.American Worker, by Michael Florin Dente, 1990. Photo flickr.com

Is This a Financial Crisis or Is This a

Crisis of an Unsustainable Economic Model?

By Scott Herwehe

(highlighting mine)

 From approximately 1820 to 1970  worker productivity increased in America and wages increased for most American workers as well. These increased wages were won through a vibrant labor movement that battled and fought for higher wages and better work conditions.

From 1945 to 1970 the average American enjoyed greater wealth than any other time in American history meaning the distribution of wealth was more equitable than any other time period. In fact, the bottom half of American workers made more significant gains than the top half.

Realizing the gains of the labor movement of the 1930′s the owners of production began looking at ways to increase profit and productivity. Two major ways that this was accomplished was outsourcing ( this was accomplished through polices that were undemocratic such as trade polices and the breakdown of Bretton Woods and also see Operation Bootstrap) and increased reliance on the secondary labor force which is workers such as immigrants who have fewer rights than an American citizen.

A massive propaganda campaign was made against unions and we have seen a steady decline in union membership as well as policies beginning with Reagan that have decreased union power and workers rights.( Remember we are the only country in the industrial world where striking workers can be permanently replaced).  

So  around 1970 avg. American workers wages began to level off and productivity continued to increase. Americans were working more hours and more people from a family were joining the workforce. More mothers and children of the family were joining the workforce. So Americans were working harder but real wages were stagnating.  The continued rise of productivity and stagnant wages created huge profits for the owners of capital. With more wealth led to a financialization of our economy where we started producing and making less stuff and instead designed ways to make money off of money.

The only problem was that the gains of the financialization of the economy only went to a small minority of people. Accroding to the World Bank it went to the top 5 %.  A massive redistribution of wealth began to emerge where more and more wealth became concentrated toward the top few.  This created a problem for the owners of production though.  Obviously if wages stagnate or decrease than the workers consumption slows. There needed to be new ways to maintain low wages and continue our consumer based economy.

The answer was credit. We became a nation of borrowers and new and ingenious ways to make money were designed.  This obviously is an oversimplified explanation. There are other policies and factors at play but what is stated is important to know. Can we continue this economic model of working more and more for less and less? Can we continue to borrow more than we can afford?  Can we continue using up massive amounts of resources to keep consuming and buying things that we don’t want or need? We use almost 30% of the worlds resources and have 5 % of the worlds population.

Our economic model is unsustainable. We do need change. Real change. Obama seems content on maintaining the institutions and players that got us into this mess. To be fare to Obama he really didn’t promise us a lot. During his campaign if you ignored the rehtoric and looked at his actual stances on policies than you know he is a centerest democrat which thirty or fourty years ago might even mean Republican. ( Nixon even pushed for nationalize health care.) He is a stark contrast to Bush and a rush back to the center feels very good after an administration that was so far to the far right.

Change and progress in American history has only come when people come together, organize, and fight for it. Power is never freely given to others. We can’t hope for change. We can’t be Obama’s army waiting for orders. We must give the orders after all he works for us.  We have to hold him and our elected officials to the fire. Throughout our nations history American workers have overcome far greater challenges in much worse circumstances. As a country we need to look back on the lessons of the past and create an economic model that works for all Americans and not just a few.

Scott is “addicted” to Investors411 blog and often post’s comments. He searching for anew teaching job in California. 

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Index Percentage % Volume
Dow -2.18 down
NASDQ -3.01 down
S&P500 -2.69 flat
Russell2000 -4.72 -


Technicals & Fundamentals

Major market had a major meltdown yesterday. Volume again did not rise and therefore did NOT confirm the move lower. Third down day in a row. Often cumulative lower volume can become a factor over time.

 877 on the  benchmark S&P 500  is the support level to watch. The SPX closed at @ 884.

XLF - The ETF that tracks financials (mostly shadow banks ) fell big time -5.08 in average volume. Obviously, the shadow’s are still leading the markets.

If Shadow Banks go up – so will stocks. If Shadows go down so will stocks – The mantra of the markets for the past two months continues.

Reading The Tea Leaves – Why Markets Are Falling

Obviously, technically, bulls have come too far too fast. There another significant reason that involves our broken economic model (see Scott’s editorial above) and our over reliance on credit.

Many Shadow Banks need to raise cash because they are insolvent. So while the markets are high they are selling “secondaries” or issuing more stock to make $ and pay down debt. The other institutions need to raise the cash because the shadow banks are NOT lending. So they too are selling new shares.

All of this new stocks sucks up the limited amount of investors willing to buy. It’s a supply and demand problem. Now that markets have gone up 30 to 35% there’s a stampede of companies creating new shares. This is going to force stocks lower.

So far volume is NOT confirming the move lower and no major technical support levels have been broken. So too early to call a reversal in even the short term trend. This could all end today.

WTIC charts “Light Crude Oil”.(see chart). Oil prices again crested over $60. Prices fell -1.24% yesterday and are further deteriorating in pre US market trading.

Most likely senerio for week -  Consolidation or profit taking. Let Shadow banks be your guide.

From Yesterday – There is at least a short term dip coming. Investors411 has already (Friday) dumped positions in financials and techs.   Yesterday we temporarily sold EWZ (Brazil)

NB change to CAUTIOUSLY BEARISH if S&P 500 closes below 877

Long Term Outlook = NEUTRAL

See Changes in STRATEGY, POSITIONS, & OVERVIEW sections of blog

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

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March 24, 2009

Market Update – Masters of the Universe

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , , ,

Below is your very own collection of photos of the men who have privatized the profits and socialized the risk.  The Masters of the Universe who have rescued the dishonest and  greedy banks, kept the financial system afloat,  and created an explosive rally on Wall Street by moving in the shadows and stripping away financial transparency. Of course that’s just how they helped create the financial meltdown in the first place.

The Masters of the Universe

 

Timothy Geithner Lawrence Summers  

Henry Paulson

(above photos – Tim Geithner, Larry Summers, Hank Paulson)

“To the Moon Alice”

was Ralph Kramdon’s (John Herbert “Jackie” Gleason Jr.) famous line.  That’s just where the stock market is now going. See technicals and fundamentals below.

Masters of the Universe

was , of course, was the term author Tom Wolfe used in to describe all  the greed, arrogance, and shadow deals that personified Wall Street in the 1980′s. Since Obama’s took office his boys (Summer’s & Geithner), like Paulson before them, have become the personification of Wolf’s term.

Nobel Prize winner Paul Krugman  in an editorial entitled “Zombie Financial Ideas” states “ Every plan we’ve heard from Treasury amounts to the same thing — an attempt to socialize the losses while privatizing the gains.”

Arianna Huffington In her editorial pleads with Obama to take the “steering wheel out  of Geithner’s hands.”  She chronicles the war within the Obama administration between Axelrod and Geithner/Summers over AIG, Wall Street bonuses and just who is going to pay to fix the worldwide financial problem. Right now the fixer sure looks like YOU (the taxpayer) your children and your chldren’s children. 

John Bogel (legendary founder of Vanguard) - This AM on CNBC – The solution gets the government back in the shadow banking business

The solution, brings the world’s financial system back from the brink and ignites a Wall Street rally lead by the financials that scammed the world.  Probably later rather than sooner ordinary folks are going to realize how big the bill will be. 

A whole lot more on this later and since we’re all in this together you can lead the conversation by  submitting YOUR editorial/comments at the bottom of the blog.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Stocks

-

Index Percentage % Volume
Dow +6.84% flat
NASDQ +6.76% down
S&P500 +7.08% down
Russell2000 +8.40% -

-

Technicals & Fundamentals

XLF (ETF) the beaten up financial sector (institutions full of toxic,over leveraged debt) continues to lead this rally – up an enormous +16.4% yesterday. 

Big rally, again with little volume. Volume was above average. Volume, the #1 confirmation factor did not confirm the rally.  This signals that the market is full for traders and the long term investors are sitting on the sidelines.

Still Critical to all this in that major major 741 support level on the S&P 500. The SPX (see chart at side of blog) ended the day at 822.  Technically the SPX broke through two significant resistance levels (the 50 day moving average & the 804 Jan. low).

Reading the Tea Leaves - Exactly the same as early last week - Allowing for less transparent accounting is fundamentally going to help those corrupt banks and ripple positively through out  the markets. As mentioned before we’ve recently had +20 and +28% rallies and the current bear market rally has reached over 21% on the benchmark S&P 500  

Bottom Line - Again the same as last week. Ride the wave   Psychologically, the most likely senerio is a dip after a large gain that greedy traders (caution there is a big difference between traders and long term investors) will buy into. Volume did NOT confirmed yesterday rally. 

Fundamentally three factors have acted like dropping nukes on the bear’s forest. Spring has sprung and the bombed out bears seem to be moving back to their cage and hibernation. 

  1. The Fed flooding the markets with cash
  2. The growing political will to remove mark to market accounting
  3. The Masters of the Universe running Obama’s economic policy

Long Term Outlook = CAUTIOUSLY BEARISH

See Changes in STRATEGY, POSITIONS, & OVERVIEW sections of blog 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

 



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March 13, 2009

Market Updates – Opened a Can of Whup Ass

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , , ,

The Bulls retake the mother of all support/resistance levels. Are the Bailout Banks lying? Why Pakistan’s lawyers matter to you. Obama’s gets earmarked. Why you should date and not marry stocks and who got clobbered last night in the Jim Cramer (CNBC/financial channel) vs. Jon Stewart (comedy central) Showdown.

Jim Cramer, Jon Stewart
CNBC Photo/Giovanni Rufino; Kevin Fitzsimons/Comedy Central
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`

Opening a Can of Whup Ass


Jim Cramer and the financial channel got roasted, toasted and devoured last night by Jon Stewart.  Even Cramer on his 6:00 PM EST Mad Money show fessed up to the whuping that eviscerated financial reporting on CNBC.  The #1 financial channel has for years been little more than the head cheerleader of the unregulated capitalism and debt.   For more see E news story or video at Comedy Central
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`

Are Bailout Banks Lying? 

(See comment section comments by Robert H)

The old joke applies – How do you know a banker’s lying? -His/Her lips are moving
Answer – Yes and No.  It all depends on the accounting method. These bailout banks are borrowing money from the taxpayers and Fed for nothing and making a killing every time they loan the money out.  However, most have huge amounts of growing over leverage toxic assets that they do not want counted on the books. By standard mark to market accounting most major banks, like Lehman Brother, and AIG are insolvent.
 Looks like Congress (major hearing yesterday on this) will “relax” mark to market accounting. Full story from Financial Times
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`

Pakistan’s Lawyers March

`

Afghan/Pakistan is the center of Islamic terrorism. It has been that way for over a decade. Many brave lawyers are marching from all over Pakistan to protest the government not reinstating the Supreme Court that was dismissed under the dictatorship. Aljazeera reports on the long march for justice.
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`

Obama get Earmarked

`

Barack blew it when he approved a budget that contained almost 2% earmarks.  OK some of these earmarks are relevant, but the focus was suppose to be on creating jobs jobs, jobs then energy, health care and education, not congressional members pet projects. Story from MN Star Tribune.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

-

Index Percentage % Volume
Dow +3.46% down
NASDQ +3.97% up
S&P500 +4.07% down
Russell2000 +6.50% -

-

Technicals & Fundamentals

US and many world markets rallied again.  This time volume did NOT confirm the rally.

The Mother of All Resistance/Support Levels Falls Again -

Benchmark S&P 500 area @ 741 was retaken by the bulls. SPX closed at 752. (see Investos411 posts for end of Feb for more on this critical  technical support level) Remember its called support on the way down and resistance on the way up.

This is very significant , especially in the long term.  We broke down through the 2003 support level for about two weeks. When you think in terms of months or years the last two weeks is just a crack.

The longer we can trade above 741 the better it is for the bulls. If we can hold above this level for a week, the long term Outlook will be upgraded to Cautiously Bearish

Why You Should Date and Not Marry Stock Markets

One word – Voilitilaty.  

What’s happened is an oversold market rally. We’ve had two rallies that have gone up @20% since October. This one is a little over 1/2 way to that 20%.  The falling volume yesterday is a technical reason to worry.

But short term bullish signs are abundant -

  1. GE’s bond rating was cut yet GE was up 12%. Major companies and markets moving higher on bad news is very bullish. 
  2. Even more important is the willingness of congress to drop Mark to Market rules (see above). XLF the financial sector ETF (up 10+% yesterday) is on fire because banks will NOT have to show or mark to market their toxic assets. 
  3. The breaking of the benchmark S&P 500 – 741 resistance/support level

CAUTION: All the old problems still exist.  Technically ,retesting the bottom (an ominous 666 on the SPX) is more likely than not.

But right now ride the wave. Two days ago Investors411 suggested it was time to “nibble” again (for investors with large cash positions)  

Best Guess – flat day and rally continues next week. But, if volume continues to fall duck and cover.

Ben Bernanke will be on TV show 60 Minutes this weekend

 

Long Term Outlook = BEARS RULE

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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March 12, 2009

Market Updates – Mr Ponzi

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , ,

If it weren’t for Mr Ponzi we’d now be calling it Madoff schemes instead of Ponzi schemes. The mantra for decades has been – leave “free markets” to regulate themselves. What a colossal mistake. From  the Madoff fraud to the AIG scam we, our children, and our grandchildren are going to be paying for this mistake for a long long time.

  

Charles Ponzi

 

Mr Ponzi

Major news networks this AM (EST) are following Bernie Madoff on his way to court apparently for a guilty plea to 11 counts of fraud and money laundering. Huge media contingent & cable  outlets carrying this live. The Madoff case has absolutely destroyed the reputation of the SEC as well as the savings of thousands.

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BusinessWeek – Resource

This magazine/blog has always been a great source on business news. While any business magazine has an obvious slant, it does almost constantly give the other side.  Example: Bob Kuttner often writes for them. Their blog has come up with with a way to track and share business topics on the web. Today for example you can find 429 new articles on Obama’s stimulus plan or 106 on behavior targeting. Its on the top right of their home page.

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Market Manipulation

Jim Cramer, the popular CNBC (financial channel) host of Mad Money has openly admitted to market manipulation in a 2006 interview. In fact he brags about it. See video. If he did it then…

One major reason Investor’s 411 advises investments in Exchange Traded Funds is they invest in large market baskets of stocks. These market baskets, because of their size are difficult to manipulate. Hedge funds and other major players can easily manipulate individual stocks – the less liquid the stock the more easy it is to manipulate.

If you watch or use CNBC (the major financial network) as a source (I often have it on as background) please take what they say with a grain block of salt.

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The Rich Get Poorer.

Who lost the least money? Forbes has come out with its list of the worlds richest people. Gates and Buffett have switched positions and Mr. Softy’s founder is now #1. The complete list here

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Accounting Systems

A huge debate is raging on how to account for money – Mark to Market.  Those who want a “freer” system that allows for more flexibility think current values are unfair because people/investors are panicked. They want to change or eliminate the system. These folks believe if we suspend Mark to Market it will calm the markets. 

The other side says take away transparency of Mark to Market and the cheater’s will flourish again. You’d get “fantasy” accounting.  This would also protect the bad banks, but it would punish the good banks who played by the rules. Hearings in front of Congress today on Mark to Market.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

-

Index Percentage % Volume
Dow +0.06% down
NASDQ +0.98% down
S&P500 +0.24% down
Russell2000 -0.39% -

-

Technicals & Fundamentals

US and many world markets consolidated gains of Tuesday or traded flat. The NASDQ (often thought of as a proxy for tech) stocks did gain almost 1%. Volume  dropped. This is to be expected after a huge gain. The NASDQ continues to outperforming other major indexes.

On the upside the first major technical resistance level is S&P 741. Remember this was the big support level on the way down.  The SPX (see chart at the side of blog) is now at 721. So we have about 3% wiggle room before serious resistance is encountered.  If prices do not rise or have the momentum to test this level within the next few days, then we’re in trouble.

Short term – oversold indicators are pointing to a rally. 741 is the line in the sand.

For a longer term look at a prospective oversold bear market rally see yesterday’s Investors 411.

Bottom Line for Long term Investors - Best advise – this is a market you should be dating and not married to. (see Postions section of blog)

 

Long Term Outlook = BEARS RULE

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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March 11, 2009

Market Updates – Transforming Capitalism

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , ,

A quick sharp technical bear market rally exploded Tuesday. Investor411 cautioned yesterday  -”Warning to all those who are short stocks/sectors.  We are long overdue for an oversold technical rally.  A bear market rally could see a quick explosion higher in a short period of time as shorts rush to cover.”  

Breaking News from the Business World

(first some fun - I do not know the original author, but thanks for the email)

  • 1. The US has made a new weapon that destroys people but keeps the building standing. Its called the stock market.
  • 2. Do you have any idea how cheap stocks are?   Wall Street is now being called Wal-Mart Street.
  • 3. The difference between a pigeon and an investment banker. The pigeon can still make a deposit on a BMW
  • 4. What’s the difference between a guy who lost everything in Las Vegas and an investment banker?   A tie!
  • 5. The problem with investment bank balance sheet is that on the left side nothing’s right and on the right side nothing’s left.
  • 6. I want to warn people from Nigeria.  if you get any emails from Washington asking for money, it’s a scam. Don’t fall for it 
  • 7. What worries me most about the credit crunch, is that if one of my checks is returned stamped ‘insufficient funds’.  I  won’t know whether that refers to mine or the bank’s 

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A Letter to Obama

Business columnist Bob Kuttner has again hit the nail on the head for those of us who are worried that we are hearing only one message from Larry Summers and Tim Geithner on our economic problems. What going to be done with the bad assets and the 19 major US financial institutions that “controll 2/3 to 3/4 of the total (good and bad) assets out there.”(Geithner) Check out Kuttner’s “White House Confidential.”

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Transforming Capitalism

Charlie Rose conducts some of the best interviews.  Here’s Charlie with Tim Geithner.  It’s long (54 minutes) but if you want t make up your own mind about Summer’s protegee listen to the interview. Discussed in the interview is the “Stress Test” for the 19 largest banks that the government proposes is critical to you, the economy, and stocks. 

The bottom line question, as stated many times before, is who pays and how we propose to fix this mess?

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

-

Index Percentage % Volume
Dow +5.80% up
NASDQ +7.07% up
S&P500 +6.37% up
Russell2000 +7.13% -

-

Technicals & Fundamentals

From Yesterday’s Investors411 - Warning to all those who are short stocks/sectors.  We are long overdue for an oversold technical rally.  A bear market rally could see a quick explosion higher in a short period of time as shorts rush to cover.

 A big hunk of traders who had  taken a short position over the last month(lots in those ETF’s market baskets of short positions like SDS) rushed to sell their shorts yesterday in this years mother of all technical rallies.  This could continue this morning since over the last three weeks a lot of traders took out short positions. While their was a few pieces of good news,there was nothing significant enough to warent a 5 to 7% rally.

Volume was huge on the benchmark S&P 500 and Dow.  This indicates that the rally should have some legs.

Reading the Tea Leaves - Right now, this is a classic bear market rally – Fast, quick and it will tear your heart out.  It was also perhaps the most predicted oversold bounce in years. You can only go down so many days in a row –  More shorts will cover their positions will cover today and markets could move higher.  

You could see another 5 to 7% added on technically before fundamentals kick in.  At that point, belief in the steps that the government has taken will quickly (by the end of the year) turn the recession around will have to take hold.

Technically, the  majority of the time the old lows get tested.  This is called a double bottom.  So in the next week, month or three chances are the lows will be retested (Dow 6469 low, Dow now at 6926) To make a higher high on the Dow we have to get above 9088 (See chart at right of blog) 9088 was the high created just a little over 2 months ago.  That’s a 30% to 35% gain. There is another resistance level just above 8,000. (8144)

Bottom Line for Long term InvestorsBest advise – this is a market you should be dating and not married to.  Sorry the old buy it and hold forever is just not working.  If you have a major cash position you could nibble a little.

But remember chances are the lows will get re tested.  When/if the Dow makes it up to 8,000 (see positions section of blog) it will probably be a good idea to protect any investment. Right now this looks like a bear market rally.  

Let’s see how the stock market reacts to bad news over the next week or two. If it can handle the bad new and still move higher, then there is some hope. 

 

Long Term Outlook = BEARS RULE

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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March 9, 2009

Market Updates – Deer in the Headlights (2)

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , ,

Deer in the Headlight

Remember the Deer in the headlight warning two weeks ago ? We’ve gone over the short term problems that have caused the “Great Recession” But the deeper long term problems also need to be addressed  You can LINK to Part  One here

deer_in_headlights.jpg

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Long Term Structural Problem 

(part 2)

What Made us Strong

Back after WW 2 President Eisenhower (from Wikipedia) led a major stimulus program that transformed Americans. He continued FDR’s New Deal programs, He massively expanded Health Education and Welfare departments, created a Interstate highway system, developed a GI bill to help returning vets own homes, and  the civil rights movement began.  Economically, only one member of a household usually worked, and a fortunate America whose infrastructure was not devastated by war flourished.

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The Decline

What happened is that the rich grew richer and the working class lost in its struggle to catch up and stay solvent.  Wages got hit in the 70′s “by a double whammy of globalization and technology.” Women went to work to keep up with the Jones. But this was not enough. In the 80′s to fix an over reliance on welfare we changed to a tax and government system that rewarded the wealthy and began to strip away the very regulations that were put in place to prevent the Great Depression.

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The Fall

The rich got richer. Other industrial countries provided health care for their citizens that not only helped their economic status and health, but gave their businesses a competitive advantage over ours who had to pay for health care. Both members of families struggled and were encouraged to go further into debt (credit card, college, mortgages etc) just to hold on.  The bubble burst with the fall of housing prices and the over leveraged greed of financial companies. Debt expoded.

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Solutions

All this reveals the fundamental economic flaws of the economy and the huge gap between the rich and the working classes of out economy.  While Obama has made some mistakes, he has fundamentally and structurally set us back on the correct path. Economist and former Labor Sec. Robert Reich has an excellent editorial on this The following and an above quote ate from his piece -

we have “failed to address — widening inequality, sagging median incomes, a broken healthcare system, crumbling infrastructure and global warming — are that much larger now, making the current crisis all the worse.”

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

-

Index Percentage % Volume
Dow +0,49% up
NASDQ -0.44% ?
S&P500 +0.12% down
Russell2000 +0.46% -

-

Technicals & Fundamentals

Friday markets consolidated after Thursday’s big fall. (Sorry could not clearly read volume chart on Dow)  Last week saw a massive 6 to 8% drop on the major US indexes and lots of bigger falls abroad.  You’s think, because markets are sooooooo over sold hat technically we would have a least a small bounce higher.

Let’s take a look at perhaps the best two indicators of a bottom in a bear market – The VIX and the Put/Call ratio.

From Yesterday  - The VIX (today’s quote) is out measure of fear for the benchmark S&P 500. Back in November it peaked at @90 interday and 81.48 as a closing high. it  need real fear to wash out nervous investors and  50 is a long way from 80.  Translation, the VIX is usually a reliable indicator in bear markets = More downside to follow.” Friday the VIX closed down 1.67 to 49.33.  Translation – The level of fear is not as nearly as great as it was in November when markets rallied for a few months.

The Put/Call ratio chart This is one difficult chart to understand.  But the bottom line is watch the close when it gets above 1.00 it shows as many traders are betting the market will go down than up.  This is usually considered by many analysts as the point where markets turn or a point when too many folks are throwing in the towel and you can get some quick rallies as traders rush to cover shorts. So focus on the closing number.  We are close to that level at 0.87.  But a sustainable Put/Call above 1.00 usually means a reversal.

The VIX is a bit better indicator because it focuses longer term.

Long Term Outlook = BEARS RULE

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

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March 6, 2009

Market Updates – Don’t Laugh at Chicken Little

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , ,

 

All three major US news  networks led with stories on the economy and the falling stocks market. Obama in his first month is caught like Bush was in the last six months of his administration between a rock and a hard place. Whose going to pay to make up for the trillions in massive over leveraged toxic debt created by unregulated financial institutions? – YOU or Wall Street.

 

Joe Stigiltz

Nobel Prize winning economist Joe Stigiltz guesstimates (“no one really knows’) there is at least $2 to 3 trillion dollars of debt out there and this figure grows every time a mortgage goes under.  Stigiltz points out that “ If our government were playing by the rules–which require shutting down banks with inadequate capital–many, if not most, banks would go out of business. But because faulty accounting practices don’t force banks to mark down all their assets to current market prices, they may nominally meet capital requirements–at least for a while.”

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What Makes it Worse.

Under Bush our national debt soared from $5.7 to $10 trillion dollars and we all know how phony the $10 trillion is because it excluded unfunded liabilities,wars, unfunded mandates and used the social security tax to count against the deficit. No wonder Bush is  hiding. Stigiltz reminds us that “Argentina, Chile and Indonesia spent 40 percent or more of their GDP to bail out their banks.”

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CNBC Goes Ballistic 

The major financial channel,CNBC, is throwing the mother of all hissy fits because they want YOU the taxpayer to pay for what they did. Comedy Centeral’s Jon Stewart absolutely eviscerated CNBC’s, who cheerled us right into this financial crisis. Scroll down on this LINK for the video. Pass it onto any of your friends who watch this channel.

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Here’s the Deal

Wall Street is going to continue to implode, led by the financial sector till YOU cough up the money, to fix it.  Bush administration promised to get rid of the toxic assets (TARP) but we got a poorly constructed bank bailout instead. Obama is trying to come up with some compromise as the anger/frustration grows. Wall Street is in meltdown mode because many  or perhaps most banks/financials are insolvent (unless you allow for crooked accounting)

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But it Gets Worse

The damage that began here has spread to the rest of the world and especially Europe. Particularly impacted are all those counties that used to be part of the Soviet Union who embraced American capitalism and credit default swaps. Most of these countries are in a financial meltdown far worse than the USA. Unlike China and the USA, they don’t even have a stimulus package to offer some support to their working class.

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Solutions

You’ll have to read Joe Stigiltz editorial, A Bank Bailout That Works  -he’s clearly with the working class Americans

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Index Percentage % Volume
Dow -4.09% down
NASDQ -4.00% flat
S&P500 -4.25% flat
Russell2000 -5.88% -

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Technicals & Fundamentals

We’re back at new decade long lows for the 3 major indexes and the Russell 2000 is close.  As mention once the mother of all support levels fell on the benchmark S&P 500 it is like blowing up a huge whole in a wall and the enemy (bears) are flooding though the gap.

Our best technical hope is for a capitulation where everyone throws in the towel. This will be a day (several) of huge declines in huge volume.  Fear will have to explode.  

The VIX is out measure of fear for the benchmark S&P 500. Back in November it peaked at @90 interday and 81.48 as a closing high. Yesterday it closed at 50.41 and its declining.  You need real fear to wash out nervous investors and  50 is a long way from 80.  Translation, the VIX is usually a reliable indicator in bear markets = More downside to follow

From Yesterday -”The monthly jobless report is big news (announced Friday) and its going to be hard to see stocks move higher today in front of the jobs report.  In this case traders (there are very few investors left) may sell the rumor (worse than expected jobs report) and buy the news (an in line with expectations jobs report)  This could extend Wednesday’s bullish reversal. I’m trying to be optimistic.”

Jobs Number

651,000 jobs lost in February (as estimated) Dec revised up to 681,000 and January up to  655,000. Jobless rate 8.1%Ugly ugly ugly Because of revisions – Double digit unemployment likely.

Reading The Tea Leaves – Both technicals & fundamentals (see Stigiltz stuff above) show winter for the stock markets or money being taken from your back pocket to pay for their mistakes is far from over. Protect any long stock positions.

Long Term Outlook BEARS RULE

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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March 3, 2009

Market Updates – Behavioral Economics

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , ,

Bear Face Photo

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Behavioral Economics 

 Making money in the markets is all about realizing what the stampeding bulls and bears are going to do before they do. Yesterday, the fact that we had to bail out AIG again was not “built into the market.”  The bears, in this case, said “Again, more money for AIG“  and groweled. They did not realize how bad the situation really was and all stocks suffered in a bear stampede. “Again” was not built into investors considerations.

Investors411 has brought you the news from across the pond that the Bank of Scotland has transparently admitted to $722 billion in troubled assets (see yesterday’s blog). We invented credit default swaps and other insurance scams in our deregulated unsupervised supposed “free markets” It’s perfectly reasonable to assume that the bulls and bears don’t yet realize just how large the losses are for any institution that traded these toxic assets. 

As investors wake up to the fact that the hidden losses of almost every company trading toxic debt are bigger than they imagined, stocks are falling. Bank of America, Citigroup, Wells Fargo and at least dozen other major and many minor institution are probably just as bad off as Bank of Scotland.

So far we’ve given AIG $180 billion and the Bank of England has backed over $400 billion in “troubled assets” or toxic debt (see yesterday’s blog) for the Bank of Scotland.  The investing bulls and bears do not seem to get it. There’s a lot more bailouts to come.

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Why All Stocks Suffer 

If the banking system collapses or continues to implode loans do not get made. If loans stop so does most commerce. So everything from mom and pop companies to a outperforming tech giant like IBM suffers.

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Why All Countries Suffer

Lehman Brothers collapsed and its debt rippled throughout the financial institutions across the world. Countries like Iceland and Latvia are in meltdown politically and economically in part from the Lehman collapse and in part from using the same insurance scams Lehman used.

A whole mess of developing countries bought into this supposed “free market” system.  Cut taxes, cut the regulators, cut government, cut enforcement, cut rules and just let wealthy capitalist do whatever they want.  The system will regulate itself. Baloney! Simply put they stole your money, your future and your kids future. Now those countries who fell for this baloney are living a nightmare.  Almost all of their market have collapsed far more than the 55% drop in the USA.  Remember The Great Depression led toWorld War 2.

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On The Right Recovery Track?

If we learn from history and stop believing in the people who dug us into this economic nightmare we will be on the right track. Yes, Obama has crafted an economic plan that moves us forward. But unfortunately is may not yet be bold/big enough to dig us out and its going to need at least a couple of years to get off the ground. Why? –  Because the economic hole we dug is so very very deep. 

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Index Percentage % Volume
Dow -4.24% down
NASDQ -3.99% flat
S&P500 -4.66% down
Russell2000 -5.45% -

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Technicals & Fundamentals

Rally Ho ?- We had at some sort of capitulation or climax sell off over the last two days. Both the significantly higher volume and the significant price drop (6%+ for major indexes) indicate this.  This means, at least for a while everyone whose going to sell already has.  Today traders with short positions should get forced to cover them and stock should get a technical bounce. 

This was NOT a major capitulation the volume and the loss would have to have been greater. Also, the VIX which measures the amount of fear in the benchmark S&P is not nearly as high as it was in November. Therefore, the level of panic is not as great. See chart

The benchmark S&P 500 closed almost directly on 700 and is 41 points away from its significant resistance level at 741.(see chart on right)  The first step in any budding rally is to get past the broken support level. 

If we do not get some kind of snapback, short covering rally today anyone long stocks is in more deep do do.

 

Long Term Outlook BEARS RULE

 

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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March 2, 2009

Market Updates – Stiff Upper Lip

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , , , , , , , ,

 

 

A Stiff Upper Lip 

You’ve got to admire the Brit’s for their stiff upper lip. Across the pond they’re in a lot more trouble than we are from England to the Ukraine. Most of the emerging democracies of Eastern Europe bought into what they thought was the American dream. It turned into an over leveraged toxic asset bubble with banks/countries wobbling on the cliff of insolvency nightmare.  

But at least the Brits  have some degree of transparency. Here almost everything  except the amount of bailout and stimulus funds is a deep dark secret. Take the deeply troubled Bank of Scotland now all but completely nationalized by the Bank of England.

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Transparency

The Royal Bank of Scotland has put admitted to  $722 billion of “troubled assets” of over leveraged toxic debt and are trying to wind down those liabilities. This loss is staggering England with about 1/5th the gross GDP of the USA.  But, they are dealing with the problem in the open.  We don’t even know the staggering amount of over leveraged debt of AIG, GE, GM or any of our major/minor banks.  The only thing we do know is the near meltdown of the financial system when Lehman Brothers went belly up and its toxic debt brought the entire worldwide banking system to its knees.

Unfortunately we also know this problem is going to get worse. Because more defaults are on the way,  unemployment is growing, home prices declining, and esoteric mortgages will soon start charging higher rates of reurn.

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Obama Pass/Fail

Let’s give the guy credit for a transparent budget. He’s getting some excellent reviews because he stopped hiding many items like the Iraq war as part of the overall budget. 

But on the other hand he’s getting clobbered with his rosy economic assessment of the future. Whose he kidding? The US GDP will be -1.2% this year and +3.2% next year. A consensus of Economists believes otherwise as Peter Goodman in NYT point out. (Many thanks to one of you who emailed me this article)

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“Geithner’s Folly”

Our new Sec. of Treasury has come up with something called a “stress test” for big banks.  Let’s get real. The vast majority of these toxic institutions invented the stuff that the Bank of Scotland has already admitted to. Big banks are broken. Wake up and smell the coffee – Geithner “is asking the wrong question. The question he is posing is: how can the government save Citigroup? The right question is: how can the government rebuild the banking system?”  Bob Kuttner, columnist for BusinessWeek, Boston Globe and co founder of the American Prospect on no matter how good the rescue plan is it doesn’t matter a lick if you don’t fix the banks.

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Index Percentage % Volume
Dow -1.66% huge
NASDQ -0.98% up
S&P500 -2.36% huge
Russell2000 -1.00% -

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Technicals & Fundamentals

Just about every front page is covering the biggest ever quarterly loss - $62 billion by AIG. 

From Friday“The Ugly news” would be - “The SPX ends closing  a bit below 741.  This would just establish a lower low (see chart on right side of blog) and further entrench the bears rule chart pattern.”  

The SPX ended up at 735 (A bit below its mother of all support barriers) and technically this along with no climax selloff  shows there’s more down side to come. Perhaps today we may see a climax selling panic today and a chance to nibble. To have a “climax” sell off you need both a big fall and big volume.

Big news of the week is the employment numbers for February come out Friday. 

Reading the Tea Leaves – How many Danger Will Robinson Danger Danger signals can there be?   – Hope you protected any long investments.

 

Long Term Outlook BEARS RULE

 

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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February 27, 2009

Market Updates – Danger Will Robinson Danger Danger

Author: Barr Jozwicki - Categories: Market Update - Tags: , , , , , ,

 

Index Percentage % Volume
Dow -1.22% down
NASDQ -2.38% down
S&P500 -1.58% down
Russell2000 -2.11% -

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News

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Citi Group/Government Deal

The NYT has announced that our government is taking over 30 to 40% of mega bank Citi Group’s common shares in exchange for giving up preferred shares. Translation –  If Citi goes bankrupt YOU basically go from from first to last in line as a debt holder. Great for Citi because preferred shares were a liability and they are up to their necks in liabilities (credit default swaps etc) What was used to sweeten the pot for taxpayers (you)?

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AIG, Fannie & Freddie 

You do have a majority stake of preferred shares in these mega companies. Judging from the stock price and their need for additional capital infusion the deal has not turned out as well as expected. 

What is nationalization? When you own 10 times the stock of the next largest shareholder you pretty much can run the company or is nationalization owning 50%+ of a company?

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The Black Hole

The obvious black whole is the growing amount of unfunded liabilities. As more people default on mortgages the greater the pressure on banks. As quoted earlier in Time magazine Citigroup’s unfunded liabilities vs assets ratio from 2009 to 2010 will shrink from 7.7% to 3.8%.  This would make Citi one very sick sick bank. It’s already in the hospital and got IV’s pushing green paper into it.

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The Bottom Line

There is fodder for more than dozen editorials here. But the major point is that this financial crisis is “far, far, far, far, far, far bigger” than most folks realize. Right now we are running a virtual banking system hiding its liabilities and bankruptcies.  The world’s financial system is on life support and if the financial system collapses there will be blood. Remember what happened when tiny Lehman Brothers collapsed.   An enlightening editorial  in Financial Time on – Time To Expose Financial Collateral Debt Obligations

 

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Technicals & Fundamentals

Here we go again. The Benchmark S&P 500 closed at 752 just above its 750 support level.  Don’t look at 750 as an exact number because we are comparing it to a 2002/2003 low. The 2008/2009 low has been 741/742. As stated before this is the mother of all support battles.  When major  support falls usually creates a flood of selling.

The fact that we have to buy more share of Citigroup to keep it afloat is going to be very negative for all major financials and therefore most stocks.  By buying more shares of common stock we dilute the existing shares of stocks. 

Therefore, It’s time to bring out the old Lost in Space Robot who protected young Will Robinson by shouting “Danger Will Robinson Danger Danger”

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 The Bad news - We could get a nasty break of a major technical support.

The Good news – If we do get a climax sell off (big volume fall) its an opportunity to nibble. 

The Ugly news – The SPX ends closing  a bit below 741.  This would just establish a lower low (see chart on right side of blog) and further entrench the bears rule chart pattern.

 

Long Term Outlook BEARS RULE

 

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

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