Behavioral Economics

Nobel Prize winner Daniel Kahneman is “widely regarded as world’s most influential psychologist” who is also the father of Behavioral Economics. “The Riddle of Experience vs. Memory.” is a very powerful & worthwhile video presentation on understanding why/how your perception of happiness and pain are impacted by memory vs. experience.  The Q&A at the end is especially significant.

From stocks to politics reality is one thing but how you experience that realty determines your action. Investors411 has reference Kahnenman in the past and will in the future.

Millions in America are addicted to pompous windbags screaming and ranting. Kahneman has scientific and logical insight into something that might actually help make you HAPPIER.

Make Markets Be Markets

In less than 18 days we handed out almost $800 billion to financial shadow institutions. In 18 months of the Bush & Obama administrations we have done nothing to fix the problem. The Roosevelt Institute featured a conference on financial reform with perhaps our best hope for some sort of protection Elizabeth Warren as one of the feature speakers.  Lots of other significant personalities attended

Health Care’s Last Stand

Here today’s NYT Editorial on health care – “Congressional Democrats can either move forward legislation to fix this country’s broken health care system or throw away a once-in-a-generation opportunity.”

Many of you over the past year have posted comments on this. Including the last one from Popeye (a public option supporter) who thinks “we are kicking a dead horse”

Personally, this legislation does not “fix” health care – it is way too watered down. But, the NYT is right – you will see no significant reform for a generation if it does not pass.

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!

Index	Percentage	Volume
Dow	-0.09%	down
NASDQ	-0.00%	down
S&P 500	+0.04%	down
Russell 2000-	+0.15%	-

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. (No changes this weekend)

Another day that saw stocks rally and fold at the end of the day. Investors are selling into the rallies because the general market conditions are oversold. = Bears taking over.

The big data point is tomorrows jobless number.

Investors clamored to buy Greek debt. Good news for Greece and European Union. But this problem is far from over.

Overbought markets can be very sensitive to bad news.

Significant Indexes

• McClellan Oscillator fell to +54.74 yesterday We are now just below +60 or Overbought territory. Still time to seriously consider selling into any rallies.

Positions

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

• recently bought (added to) EWZ (Brazil) was sold at 72.00 Sold the shares bought on 2/11 for 65.75 Still holding onto shares bought last year at 59.5.  @+6% profit
  
• IMAX – Sold 1/2 the shares when it hit stop/loss order at 13.4.  @+6% gain. Wish I had sold earlier into the rally as I suggested.

Investors411 has sold the rest of TYH. & 1/2 of MOO, EWZ & IMAX. Will sell more positions if McClellan rises significantly. Plan to buy if it drops. Will probably buy some at $NYMO (McClellan Oscillator) reaches zero.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

A Big Wet Kiss

A Big Wet KISS – No in this case a BWK does not mean what you think

KISS = Keep It Simple Stupid – Investors411 is going to spend the rest of the week Keeping it as simple as possible. If you’ve followed Investors411 for a while you know that the blog outperforms the benchmark S&P 500 Stock Index because it follows a series of mega trends and invests accordingly. See OVERVIEW section at top of blog.

The No Brainer simple mega trend it the case of the two above magazine covers for potential investors is SEX sells

When I was 20 something I loved the artwork, fantasy and heroics of comic books. So I bought some for 10 cents and put them away in plastic cases. Last year as a Bar Mitzvah gift we gave one Conan the Barbarian and one Iron Man comic worth a total of @ $1000.00 to a grandson. - A 5000% profit if my math is right.

So today I’ll buy and save Newsweek Covers of Sarah Palin.

First, in a brown paper bag I’m going to take it to Town Government tonight, I’ll take the Newsweek and show it to some of my fellow officials. Hopefully testosterone crowd has not already bought up all the copies of Newsweek to put under their mattresses.

Palin is going to whine cry and blame others for the picture she posed for.  She plays this "why’s everybody always picking on me" victim better than anyone else on the planet.  The obsessed media will juice this and a few years from now I’ll have a magazine/cover worth a lot more than most investments. If American’s buy her glitter and elect her President I’ll make a fortune.

Bottom Line – The Trend is simple and works = sex sells, Does anyone have old copies of the Washingtonian?

KISS & STOCKS

For those of you whose eyes gloss over in the stock section I’ve tried to KISS it today, but I left a little in for those who want the deeper analysis

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	+0.29%	down
NASDQ	+0.27%	down
S&P500	+0.09%	down
Russell2000	-0.09%	-

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

Technicals = Looking at pretty pictures of charts and finding patterns. Investors and Traders are animals who tend to run in herds moved by fear and greed.  We collectively form habits – After the first few time stopping at a red light becomes a habit. The same happens to most traders

Fundamentals = All the figures that show if a planet, country, sector or stock is growing or shrinking. In this case its growing or shrinking economically. The most important of fundamentals are mega trends.

Bottom Line – Technicals and fundamentals are useful when predicting what will happen. Investors411 uses them to predict the future – At the end of each day’s blog there is the Long Term Outlook. That show the general predicted longer term (3 to 6 months) outlook for the market

One important distinction to realize when looking at stocks . - Almost everyone else (especially those who invest or trade the big money) knows more than you or me.

• They have an army of computers and techies doing far more in depth analysis than we do.
• Also, they cheat – sometimes legally and sometime illegally.

The advantage we have is in KISS (Keep It Simple Stupid) and by using technicals we can follow what this big herd of sharks  are doing. Because they have so much money its hard to hide what they are doing.

Now going to get a bit more technical

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

——–

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  very significant +161 points yesterday and closed at 4381. Up 14 days in a row . Technically it broke out through its major resistance level 4291 (this year’s high)  The BDI has rallied about 2200 points since late September. =  Bullish for stocks & world trade right now. Especially good for our positions in FXI & EWZ

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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 rose a  significant  +0.56% yesterday. The dollar closed at $75.3 0. This is back above the major $75.00 support level. The dollar rose significantly (above 0.50%) and so did stocks (just a little) This is a rare disconnect. The dollar and stocks almost 90% of the time have been moving in opposite directions. The fact that stocks were able to have a small rally and break the trend is in the short term  BULLISH

CAUTION – The first breakout (up or down) is often false. This happened yesterday 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 +22.63 . This indicates stocks are overbought and The McC fell  -34.41% yesterday. Not sure if this data from Stockcharts is correct

If we get another big rally the McC 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.

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 – Folks who buy and want to hold for months/years.

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 -  Folks who day trade or are in and out of stocks within a month or two

AMZN & NVS positions are on hold right now.

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

Al Frankin’s Rape Legislation

30 old white Republican men voted NO on Senator Al Frankin’s legislation “that would have required defense contractors to allow their employees access to US courts in cases of rape or sexual assault” The case of Jamie Lee Jones who was gang raped by fellow Halliburton/KBR employees in Iraq and then held prisoner in a trailer sparked this legislation.

To protect Hallibuton these senators had to side against American rape victims. The 30 old white Republicans (including McCain) “might want to rethink your allegiances.” (Jon Stewart ) LINK to his devastating video and story on this

Trickle Down Economics/Health Care

Trickle Down economics started with Ronald Reagan and it has sure worked in making America’s rich richer and disintegrating the middle class. Two editorials by Robert Reich and Frank Herbert t deal with this. (Herbert fails to lay at least some of the blame on Obama.)

• Safety Nets for the Rich LINK
• Why Obama Has to do What Letterman Did: Refuse to Pay Hush Money LINK

To Big To Fail

NYT award winning financial columnist Andrew Sorkin’s book Too Big to Fail has an interesting excerpt in Vanity Fair LINK entitled Wall Street’s Near Death Experience. Yes these same guys brought us to the brink, but the excerpt is enlightening. Also in NYT is The Race to Save Lehmann LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Index	Percentage %	Volume
Dow	-0.67%	up
NASDQ	-0,76%	up
S&P500	-0.81%	down
Russell2000	-1.15%	-

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 and Fundamentals

US Markets broke out to new yearly+ highs in weak volume.  All that money on the sidelines is staying there. Technicals – Volume in no way confirming the price move higher – However, volume, as a #1 confirmation factor, is getting trumped by the ever sinking dollar.

From yesterday – The FED and the US government is not going to stop shoveling cash at the market as long as unemployment is so high. US companies are not hiring and will first hire abroad where labor is cheaper and growth faster.  So the cash shoveling will continue and Wall Street, once over bought situation is corrected, will continue to rise and the dollar fall. Two major points

• The rally is based on the dollar falling
• As long as unemployment grows there is no reason to stop the Fed from stimulating the economy

Therefore high unemployment numbers inversely benefit Wall Street stock prices.  The more we stimulate the economy (0% interest rate loans from to bailouts) the lower the dollar falls. The more we simply print money the  lower the dollar falls and the more profit American base companies make because their goods cost less abroad. (see below for more)

Apple has grand slam earnings report. Flood of earnings this AM. CA T (big equipment maker) also a grand slam.

Both the BD I and the Dollar are bullish for stocks

——–

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 @ 37% 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 +38 points Friday and closed at 2766. A higher high price on its chart pattern has been confirmed =  Bullish for stocks & world trade right now

——-

$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 -0.37 % The dollar closed at $75.37 . We have developed a support now resistance (it’s called support on the way down and resistance on the way up) level just below $76 . The dollar closed below its support level. = Bullish for stocks

NB -

• Earnings will probably trump the dollar as the #1 influencing factor for the nest two weeks. But the falling dollar is the main driver of stocks right now and we have a long way to go till we hit last year’s $71 low.
• A slow decline in the dollar = good a rapid decline = bad .
  

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.

Therefore, The dollar can drop much lower and stocks rise much higher till support levels are reached

Positions

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

Review of Positions (Part 2) (more on stocks tomorrow)

SPX or SSO – This is where you park money instead of cash. Only downside here is it takes 3 days to get to use this $ to make a trade. More aggressive traders can use SSO Longer term investors use SPX (This ETF does 2x what the S&P 500 does) Recommendation Buy the Dips till the dollar drops to near $72 .

NVS, AAPL, CSCO, MVIS, GS , & JPM are all stocks that have been recommended for traders to buy on dips. Would add CAT to that list

EWZ – Up way too far too fast.  Trader s should lighten up on this ETF

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Off on another trip, back Monda y

Stocks

Alcoa (comodities) had a good earnings report last night – All our major investments should do well.

Editorial

From Dylan Ratigan – He is a former host who quit the financial news channel CNBC and now has his own AM show on MSNBC.  His Editorial entitled "Corporate Communism" is well worth the read – Link

His point is the almost total lack of competition (capitalism) is both the health care and banking systems in the US.  To him these are really communist systems because they lack competition and we should call them by their correct name - communist banking and heath care systems .

We should all stand for rules based capitalism and not a system that promotes a privileged "communist" system

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

Just Stocks

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

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

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

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

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

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

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

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

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

Positions

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

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Obama in the Matrix – Everyone is taking shots at Barack/Neo, but…. Military budget gets announced to fearful Americans fighting the Evil Empire. The two, Two Cows – understanding AIG and Market to Market accounting with humor. They are back – after 101 years of trying – will they succeed?

photo from About.com: political humor

Obama in the Matrix

Obama is being totally dissed by the right that wants him to fail. Even lefties like Nobel Prize winners like Krugman  &  Stigletz as well as this blog are taking some shots at his administration. But his poll numbers remain high and USA Today headlines Obama’s trip to Europe as a “Success”

Military Budget

Today’s the day the Pentagon budget gets announced.

Lots of us hoped our paranoid country that spends what the entire rest of the world does on weapons would cut back just a wee bit this year. But alas our 3% of the population has to be armed and ready to fight the rest of the world. You thought only the NY Yankees were the Evil Empire, but to fearful Americans the rest of the world is still the Evil Empire. Well, Obama is giving the Pentagon less than they asked for, but more than last year. Another record budget story

The Two Cows

photo from Clusterstock

John Carney  has some easy to understand, humorous ways to comprehend, both the Mark to Market and AIG using two cows. You can spend hours reading different editorials, like me, and still have a zillion questions, or simply skim his two, two cow stories. 

101 Years

Finally – Spring is in the air and that means the professional game of baseball that started in 1870 will be filling dozens of stadiums with thousands of excited fans. The dreaded evil empire, the New York Yankees, will once again take on the forces of good – the beloved Boston Red Sox.

The major Major league baseball story is about the team that will field nine players as they have for the last 101 years without winning a world series – The Chicago Cubs.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Market Updates – The Fork in the Road

 

Index	Percentage %	Volume
Dow	-3.41%	down
NASDQ	-3.71%	down
S&P500	-3.47%	down
Russell2000	-3.99%	-

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News

-

 

The Stories/News not Covered in Depth Today

• Long Term Structural Analysis (part 2) The How and Why the imbalance of wealth between the rich and poor in the USA caused the “Great Recession,” and why we need to address this problem.
• AIG – The mother of all Insurance companies is again near collapse. If the collapse of the much smaller Lehman Brothers sparked the financial crisis and sent 400+ billion dollars of over leveraged debt throughout the world, imagine the collapse of AIG.
• GE – The mother of all conglomerates is now trading below $10 because of its financial units over leveraged positions. Sure looks like a death spiral similar to auto industry.
• Banks – “How Stressed is Your Bank” from Time magazine. The real problem s not now, but what happens when the bad/toxic debt grows in 2010 and beyond
• The latest wisdom from Nobel Prize winning Princeton economist Paul Krugman  ”Banking on the Brink” or multi time Pulitzer Prize winner Tom Friedman “Start Up the Risk Takers.”
• Obama speaks to nation tonight

Today’s editorial is on the technical fork in the road.  Just at the mention of the word technical your eyes may glaze over, but - 

We are at one of those turning points in the history of the US Stock market and perhaps the world.  

See stock section below.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

-

The Fork in the Road

Who knows why looking at chart patterns usually works as a forecast of future events. Perhaps its because we are creatures of habit or perhaps its because so many analysts simply believe technical analysis works. One item of technical analysis that works better than others is the more time that occurs the more accurate the predictability and significance the pattern becomes.

The benchmark S&P 500 is at one of those critical forks in the road and so are world economies.

1970 to 2009 Chart of the S&P 500 below

(sorry for the overlap)

Here’s the Fork on the benchmark S&P 500 – Notice just like the price peaks in 2000 & 2008 at about 1500+, there are two vallies around 750 in 2002/2003 and today.20002/ 2003 was the result of the tech bubble bursting and the uncertainty behind 911. Today, two economic bubbles have recently burst – housing and credit. The critical support level for the S&P 500 is around 750. Since November the rapid fall of the S&P 500 (as well as the other major US indexes) has leveled off at @750 like in 2003.

The good news – The fact that we’ve held onto 750 since November shows strong support. (note – this chart is a bit distorted but it gives a rough approximation)

The bad news – The rate of decline falling to from 1500 is faster than 2000 to 2003, and yesterday the S&P 500 closed just below 750 at 743. If support at 750 fails we could really see some additional significant stock meltdown.

The Dow has already broken down though its 2002/2003 lows but the NASDQ and Russell 2000 are doing a bit better than our benchmark.

This is the mother of all technical trading pattern battles  

Long Term Outlook = BEARS RULE

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

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

Index	Percentage %	Volume
Dow	+0.04%	down
NASDQ	-0.18%	down
S&P500	-0,10%	down
Russell2000	-1.33%	-

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News

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Nationalization

It’s here. The concept of nationalization has come out of the closet and now even Bernanke and Greenspan are using the term.  Worries over nationalization have caused a meltdown in stocks, but it seems to be better choice than the systemic chaos of bankruptcies or the taxpayers continuing to to be the major shovel throwing money at the problem.

Now the big boys  Bernanke and Greenspan are  using the N word. At Investors411 (see archives) you watched this significant trend develop from a whisper to a market mover that will significantly change our governments response to the financial crisis.

Learning lessons from India

India has been terrorized by multiple terrorist attacks that have originated from inside Pakistan. Yet they have not gone to war with them unlike the Bush administration who went to war with a country that had nothing to do with WMD’s or 911. The significant Muslim population of India has rejected the Mumbai terrorists. For more see Tom Friedman’s editorial – No Way, No How, Not Here.

Helping Mortgage Holders

Finally a plan to keep the rate of foreclosures from growing. All he Paulson TARP plan did was shovel money at banks. Obama has announced a plan to help possibly 9 million threatened homeowners.  The ripple effect of not helping would bring down a lot more financial institutions and further devalue home across America. Many comments on this are like those on the stimulus plan – while significant it is not enough – NYT editorial

Israel Elections

The vast majority of elections analysts see the right wing gaining power in Israel. To most Israeli’s and Americans the war against Hamas had a far better outcome than the war against Hezbollah. Of course there are many worldwide angered by both wars. While the centrists  did barely win the most seats in Israel’s parliament the  divided right wing parties picked up a substantial majority. 

Bottom Line – The peace process has become a whole lot harder

Stanford, Another Madoff

Another this time smaller $8 billion dollar Ponzi scheme has come to light.  Seems investors thought nothing of  investing in 10% to 14% yielding CD’s controlled by the Stanford Group. Mr S is on the lamb.  

Bottom Line - Once again the understaffed, incompetent SEC is caught with its pants down. When all you had under Bush (really since Reagan) was cut cut cut government and don’t you dare dare dare regulate free markets – Stanford/Madoff and an over leveraged financial catastrophy is the result.

 

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

 

Short Term Outlook

Major US markets took a breather yesterday. Foreign markets have rebounded somewhat overnight. CNBC, the most popular financial channel (they are right wing cheer leaders corporations) has a decent morning compilation of how markets are setting up for the day.

Momentum is still with the bears.

Long Term Outlook = Bears Rule

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See STRATEGY POSITIONS & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!