Warren Buffett – “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” NYT 11-26-06.

Warren Buffett

Obama Caves Into Wealthy

Several of you mentioned yesterday Obama’s tax cut “compromise that extend tax cuts for the wealthiest Americans – The compromise part was unemployment benefits were extended as part of this. (see comments section of blog.)

The Good –

• Extending tax cuts for working class Americans making less than 200k is stimulative. These folks spend the $ rapidly and the economy flows
• Extending unemployment benefits is even a bigger stimulus because this money is injected even faster into the economy
• Both these factors create jobs and we desperately need jobs base to grow.

The Bad –

• It does nothing to address to address the systemic problem of good jobs leaving the USA by globalized companies hiring everything from engineers to software developers in emerging markets.
• Its a major victory for the growing wealthy oligarchy that is perpetuating class warfare on working Americans.

The Ugly – Who gets to compound their wealth for two more years.

• 4 million taxpayers who earn mid to upper 6 figure salaries
• The less than 1% who earn over a million dollars a year.
• Estates over $5 million dollars
• Hedge fund managers and other black box traders who pay 15% in taxes yet earn millions/billions

There are an obvious loosely tied together wealthy oligarchy of greed based individuals and major institutions in the USA who are seeking greater power and wealth at the expense of their fellow Americans. Most stay in the shadows and dominate politicians who need their money to get elected. They won a massive victory yesterday.

My ideal compromise – Would have been to tax everyone over the first $200 or $400k of earned income and give 1/2 that money as an additional tax break to American workers and 1/2 toward reducing the deficit.

There are many rich folks who realize that they too can profit if the American working class prospers because we BUY the goods that wealthy people take part in producing. I’m not calling for a radical change just movement toward a more balanced playing field.

Thanks to JIM J for his chart showing 16 different metrics showing wealth/income over decades moving DRAMATICALLY from middle class to very wealthy in the USA.

STOCKS

Investors411 tries to keep it basic.

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

Big volume and rally fizzled. Much of the volume involved rebalancing involving Citigroup that traded about 3.3 billion share and was up 3.82%. Reference  - the NTSE trade about $7.5 billion shares yesterday.  A lot of yesterday’s gains were due to this single stock.

Reading The Tea Leaves -

Mea Culpa – I’ve made a rookie mistake – One of  Investors 411 mantra over years has been if a stock or index gets too over extended from its 50 day moving average its time to sell.

Three of the ETF I’ve recently purchased are/were over extended.(see charts) This is easily demonstrated by just looking at the charts. A recent example of this in the comments section was covered by when IMAX & DECK got over extended. So even though UWM was up yesterday I cut back on holdings. The same for UCO & today will do the same for DGP I announced these sells in the comments section of the blog.

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The rise in the T bills has taken a bite out of the lower interest rate/weaker dollar trade that has fueled this market.  Best read of the tea leaves is that this is a temorary move. Today is the confirmation day of yesterday’s 10 year T bill explosion higher.

This shows investors moving into T bonds. Usually this means they move out of stocks to go into bonds.

Positions

Plan to sell 1/2 of DGP near open. and put a 3% trailing loss on the rest. Both will end up in the red.  Will put a 3% trailing stop on #3 UMW position today.

Plan to buy back in after consolidation of perhaps a few days. Also the 10 year T bill settles has to down.

YSL is in for some lumps of T bill rally continues.

A Banana Republic?

Let’s look at signs to see if America is turning into a Banana Republic? No not the store. Back a few decades ago a Banana Republic used to stand for a country where a rich oligarchy ruled through a kleptocratic government.

• The wealthy investor class cheer as stock indexes reach or close near New highs for the year while as our employment rate flounders close to 10%
• The real disaster for working class Americans is the not only the 9.8% unemployment rate, but the depth and breath of the employment picture

• Globalization & a oligarchy driven media hatred for lower  working class Americans who struggle to survive, both costing  job loss and salary cuts.
• A US stock markets whose trades are NOT based on a companies valuation, but Trades made by the oligarchy based on finding market discrepancies (arbitrage) These oligarchs (BB/HFT and hedge funds) have only a 15% tax rate for managing their wealth
• We have a country that values REAL WORK less than an oligarchy of managed wealth because we tax workers far more than those who make money off the wealth. (15%)
• A country that doesn’t punish those responsible or fixes the financial fraud that causes  the worst worldwide recession since the great depression.
• Politicians who are elected with the oligarchs money voting to extend tax cut to the wealthy that if given to the working class would = a $500 per family.
• Politicians who are elected with the oligarchs money voting to extend tax cut to the wealthy that would triple the amount we spend on medial research. [For entire list LINK to NYT here]

Somehow my best read of the tea leaves is all that wealth is NOT trickling down to working class Americans.

“Trickle down” was a term first used by the President Reagan and later called “Voodoo Economics” by Bush Sr..  Is the wealth tricking down or are American politicians  simply recognizing that they get elected by the massive amount of media ownership and political contributions of our wealthy oligarchy?

Barr

Congressman Alan Grayson

War is Making YOU Poor

There are many ways Americans can cut deficits to make the future more solvent for our children. One presented by Democratic congressman from FD Alan Grayson (short video) Here’s some major point from The War is Making YOU Poor Act

• We spend 1/2 the world’s entire military budget
• NATO allies #2 in military spending – Are we going to war with them?
• Distant third China. War with them would devastate our economy and theirs
• Keep $549 billion in yearly pentagon budget & eliminate the $159 Billion for Iraq & Afghanistan.
• Video (link above) has great chart & more complete explanation – so check it out.

How he would spend $

• No taxes on the first $ $35,000 for every American
• No taxes on first $70,000 per couple
• Plus $16 billion a year to reduce deficit.
• Moderate and low income people spend that tax break money and this would stimulate our economy generating both jobs and further taxes.

So you might spend it differently. But the main point is clear – The War is Making YOU Poor

Sign up to be on Grayson’s newsletter list.

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

At the open stocks on all major indexes reached lower lows than even the “flash” mistake trading meltdown a couple weeks back. This achieved a lower interday low for stocks. We already have had a lower closing low. The pattern now is lower lows and lower highs. Until that breaks = Bearish

From yesterday - The only silver lining to the up coming storm, is McClellan is oversold and when we get down below -135 we could have another oversold bounce. A 2 to 3% Dow fall in big volume could put us in -120 to -135 territory.

The above happened at the open. In the afternoon the giant institutions with their giant algorithm computers bought into a very oversold market. We rallied  about 200+ points on the Dow to close near even in increased volume. = Bullish

Markets moved higher despite poor global news = Bullish

Analysis – Would expect oversold bounce to continue today. If you are a trader as opposed to investors you could make some short term profits long.

Significant Indexes

• McClellan Oscillator was flat for the third day in a row. Now at -90.45.  [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO)LINK. - This is OVERSOLD territory. = Bullish.
• US Dollar – Uncertainty reigned as the dollar had a massive range from a new high to almost below Monday’s open. The dollar rose +0.27% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Yesterday = Mildly Bearish

Positions

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

Yesterday close to open Sold 1/2 position in ESRX at 99.51.& 1/2 position in SDS at 37.21.

Traders & Investors – Reasoning – ERSX was just plain fear on my part of overall bear market. Not a good reason to trade because it was holding up well despite early meltdown. SDS had mad a 5% profit. Because of the extreme volatility and oversold nature of current market I plan to take 5 to 7% profits on 1/2 of all trades and let the rest ride.  This, is because uncertainty/volatility is a clear pattern in the current market.

Looking for dip to buy EUO It’s rallied in weak volume the last few days. May sell SDS (short ETF)

Investors – Until we technically get out of the woods and break the newly established downward pattern only those who love risk should buy. Would suggest the Financial area ETF’s –  XLF.

Traders - UYG & FAS (@2X & 3x what XLF does) Financial reform has basically failed and these institutions should continue to exist in the unregulated, over leveraged, shadows of Casino capitalism. Therefore, make profits while they will make privatized profits while your FDIC insurance subsidizes or protects them from any losses.

Apologies - ran out of time to do YOUR stock list. See past comments from Paul R & Monitor Both have made some excellent suggestions in past few days. YOUR stock list is holding up quite well. While major indexes are below their 200DMA’s almost all of the stocks on YOUR Stock List have not reached that big a breakdown.

They both have good ideas that traders can take advantage of in a rally today. YOUR stock list also has good concepts. to pick from.

NB – I’m trying to make a clear distinction between short term Traders who are comfortable holding a stock/ETF less than a week and longer term Investors whose goal it is to hold positions for months and hopefully years.  Everything Investors411 mentions in Positions section is hopefully a long term position

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Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

I took these two f lame throwing, anti big bank/financials photos from website CommonDreams

2010 Economic and Stock Forecasts

To make an overall forecast let’s look at the past decade and year & the mega trends So here’s the Good, the Bad, the Ugly Almost all the Bad emanates or is focused on the USA

The Bad

• Free Markets are NOT self correcting – This lesson has been taken to heart by many (see the good – yesterday’s Investors411 ), especially those outside the USA. Unfortunately , all you have to do is watch any of the cable business channels, read the WSJ, IBD or most business publications  to realize that they are fighting tooth and nail against any regulations and continue to have us (the taxpayers) pay for their greed. Even a new Consumer Protection Agency is being blocked by Republicans. Both parties are almost entirely owned/influenced/bought off by business lobbyists and their money.
  
• The Deficit -  Time magazine called it the Decade from Hell One reason is the HUGE deficits that started to build when Bush won in 2000. Frontline’s $10 Trillion and Counting chronicles how the deficit grew – cutting taxes, expanding  wars, huge spending programs etc. Once Obama got in office he added to the deficit to stimulate inherited stagnant growth. This only made the deficit worse. Add to this our love of credit and you have the potential for another decade that may be worse .
  
• Growth of Hate and Fear Mongering – "You’re either with us or Against Us" – The growth of hate goes far beyond the fact that we have far more violent crimes than any other industrialized democracy. We are taught to stereotype and hate everything – Europeans & Canadians (socialists), Mexican’s (illegal’s) Arab’s (terrorists) Russian’s (a threat) Chinese & Saudi’s (owning America) liberals (weak tree huggers) education (elitists) science (anti religion or anti business) and the list goes on and on. Hate and fear sells everything from products to politics and its growing.
• No Economic Progress – Nobel Prize winner Paul Krugman calls the last decade The Big Zero – No job growth (globalization a big factor), the Dow dropped from 11,000 to 8,500 under Bush, plus more in his editorial. The Dow has rebounded under Obama. However, that’s because Obama has kept the same  tax cuts, deregulation, expanding wars, and this time perhaps necessary spending  as the cornerstone of his economics. Another bubble is building . If your in the upper 1 or 2% economically this was the decade from heaven, but if you’re a working American you’re in a hell of a hole. It’s going to be a long time before we dig out.

Coming up - The Ugly – However, you can see why Investors411 has beat the US stock market Indexes for the past 5+ years by investing primarily outside the USA . (See below for this year’s results) Apologies – I did leave out 911 which was a horrific event and other acts of terrorism.

Coming up tomorrow the Ugly

YOUR Comments

• The Cynic comments on a very funny political Jib Jab video
• Stewart on Republicans. His comments are worth of entire editorial
• D on a web site that locates community banks. So get off your (skinnier ?) butts and out of those banks that caused the financial meltdown. (see yesterday’s updates)
  

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 most major US indexes

Technicals, Fundamentals & Analysis

Most Sections of blog have been revised (or are under construction for 2010) See Positions , Strategy , and Overview for changes

Significant rally in increased and a bit above average volume. A clear across the board day where some new money flowed into US markets.  Strongest bullish sign in several months . It would have been better if volume was larger.

• McClellan Index at +24.74 = A bit overbought. This means we have some wiggle room for US stocks to move higher before they reach +60 or overbought territory.
• The Dollar fell a significant -0.56% The inverse relationship helped stocks move higher .
• The Baltic Dry Index has moved up since 12/24 - Short term bullish , especially for China.
  

Right now this certainly looks like a market that has "wiggle room" to move higher into Friday’s monthly jobs report. The BDI is moving up and the dollar dropping should give bulls some additional ammo

Positions

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

These are positions I actually own

SELLING & BUYING

Results for 2009 . + 35.5% See POSITIONS (scroll down) for details

Monitor (see comments on right side of blog) was right @ 60% of gains came from two positions in China (FXI ) and Brazil (EWZ )

It now looks like it was a big mistake to sell UWM last week. Oh well, nobody goes broke taking a profit, even a tiny +2%

Check out some of YOUR recommended stock picks made over the last  2 week. Some have broken out big time and/or moved significantly higher Use the calender at top of blog.

Short term traders (not longer term investors) may want to go long (something like EDC, TYH or ROM )  until Friday’s job’s report. See POSITIONS

Long Term Outlook = CAUTIOUSLY BULLISH

Investors411 record – 4 1/2 years of beating benchmark S&P 500

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"That Big Sucking Sound"

Some of you might not be old enough to remember Ross Perot’s famous line about globalization (in this specific case it was about a treaty called NAFTA) "That big sucking sound " was jobs getting sucked outside the USA.

Globalization is a multi edged sword. For more on the good, bad and ugly of globalization see Investors411 here Globalization helps developing countries (think China, India , etc.) explode in job growth, but it sucks jobs out of the USA at all but the very top levels of American business.

One of the biggest economic lies you are constantly overwhelmed with is – Cut taxes on private business and this will mean more jobs .  This is a pure Bulls__t . The jobs go overseas . Everything is outsourced and practically all that remains is the tip top upper management.

It’s "Shocking" just how little jobs growth in the USA was created by the private sector over the last decade. Michael Mandel , the Chief economist for BusinessWeek chronicles private sector jobs growth over the last 10 years here

Some rough quotes

Private sector job growth rose by 1.1% in the last decade…the worst decade for private job growth since the Great Depression…a lost decade for the American economy…big job growth in health care (mainly government funded) , education, and government…this growth was funded by growing trade and government deficits…Its just horrible, just horrible… private industry is just not a jobs creator… and manufacturing is in free fall… an unalloyed bad.

Needed to be done according to Mandel – Innovate, help keep manufacturing jobs, take a step back and look at what  globalization means to us.

Take a look at a country like Germany that protects and builds it’s manufacturing/export sector. Germany is seeing the light at the end of the recession tunnel here.

• I nvestors411 can’t emphasize enough what a bad investment the USA is relative to counties like China and India because of globalization. This mega trend will continue until the dynamic of globalization change.
• This economic meltdown is not going to significantly recover in the USA until there are some dramatic changes in both financial institutions (see past Investors411) and how we look at globalization.
  

Many thanks to one of you who spent 30 minutes going over this with me yesterday

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

Investors411 record – 4 1/2 years of beating benchmark S&P 500

(see results for last 1/2 year – click  6/25 & scroll down)

Technicals and Fundamentals

Finally above average volume.  A major battle yesterday between bulls and bears . We hit the 875 support level of the benchmark S&P 500 and there was blood (volume) everywhere .  For a while the bears crashed through the barricade, but the bulls fought their way back and the index closed above 875 .

As predicted at the beginning of the week we are already challenging the major support level.

We did briefly establish a lower low, but the bulls held.  This is significant because of the volume.

Reading of the tea leaves – The longer we stay above 875 the better a chance of a rally has of getting started.

Huge bullish factor – No matter how you think this impacts the USA in the future. The Obama administration is NOT going to let any big banks fail. Also, they keep kicking the can down the road on any major fix of the problems that created the economic meltdown.

Earnings season around the corner.

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown.

The BDI has become the best of these three forecasting tools .

BDI - The Baltic Dry Index measures the flow of goods (world trade) . BDI fell for the 6th day in a row. However the rate of decline decreased slightly. After a 5 month rally the last six weeks have seen a decline where the BDI,technically, has had lower highs and lower lows.   We are currently establishing a lower low for price. WARNING -  The breakdown in trade is very significant to any worldwide recovery . BEARS RULE

The BDI is now the first chart I look at each day. – Globalization has greatly added to the interconnectedness of the world’s economies. It’s a worldwide recession, and if trade prices break down so will individual economies.

$USD - The Dollar was flat yesterday -0.07% The strong inverse correlation between the dollar and stocks has existed for many moons. Dollar up = markets down. Dollar closed at $80.66 and has been trading for  a month between @$81+yesterday= and $79+. So the dollar nearing the top of its consolidation range. Long term Bearish pattern for Dollar ( bullish for stocks ) We bounced off the lows in early June and are now in a consolidation pattern .

WTIC – Oil dropped a huge -4.43% yesterday, and 15% over last week+. (see chart) The 6 day fall has been significant and has NOT been accompanied by a significant rise in the dollar. (dollar works inversely to oil prices) What oil markets seem to be saying is demand is weak out there and the world’s economic picture is less bright than traders thought. The entire move higher for oil prices may have been manipulated. (see above WSJ article)

Therefore, Oil prices are no longer accurately acting as a decent tool in forecasting stock prices. Investors411 will keep an eye oil prices, but no longer use it as a forecasting tool for stocks. In fact, right now falling oil/gasoline prices are good for the overall economy, but bad for related companies (energy & alternative energy)

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Our Positions (For more see Positions section of Investors 411-scroll down)

I plan to buy back all recommended foreign ETF’s – just hopefully at a lower level. Perhaps when  S&P dips to support level @875. Perhaps lower. Wait on Brazil EWZ – too tied to oil prices

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING