Tom Friedman’s Dream/Nightmare

Sunday TF wrote an editorial LINK that opened with imagining President Obama in 2012 standing in Iraq under a banner “Mission Actually Accomplished .”

This is the dream of anyone who wants to build a 20th century colonial empire.  The person who should be standing ALONE under any banner in Iraq in 2012 or any future date is an Iraqi President.

• Britain got out of India – It wasn’t pretty but the end result is the world’s largest democracy in India and a fragile democracy in Pakistan.
• The US got out of Vietnam – Again it wasn’t pretty, but now Vietnam has one of the world’s fastest growing economies and even its own ETF – VNM . Like China there is one party rule, but millions are coming out of poverty into a growing middle class.

Our efforts to colonize the Muslim world have made the overall situation worse, cost trillions in dollars and who knows how many lives. Let the nightmare of colonialism go .  If there is a clear and present danger – act. Now we are on the verge of nation building in Afghanistan whose #1 economic product is opium not oil. It’s long past time for a change to a new strategy.

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

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

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

Technicals, Fundamentals & Analysis

Reading the Tea Leaves -  BE CAUTIOUS volume has in no way confirmed the move higher. If you look at the beginning of the bull run (March April and May)(check out weekly charts of a major US index) there was huge volume behind the move higher. You expect some slower volume in the summer, but volume has not returned to the markets. In fact there has been significantly more volume on downside days than upside days this month.  Our #1 confirmation factor of price moves is calling for – bears to rule

The Dollar (see below) The slow/moderate fall of the dollar is a trader’s dream . One danger for a fall in the dollar is the rise in oil prices. $100 dollar oil would negatively impact stocks.  As long as the dollar falls it holds up stocks. – Bullish for stocks

Bottom Line – Still CAUTIOUSLY BULLISH Long Term Outlook (see below) The dollar trend is the trump card that is firmly in place. Every big volume decline is trumped by the falling dollar that pushes US equities higher. The second major reason is the stimulus packages in emerging markets like China, India and Brazil have worked. China, especially, never entered recession and the growing middle classes here has led the world equities higher.

The drag is concentrated in the USA. Why – We already had a huge debt, our financial industry still has  huge phony unregulated profits, and we are/will be wasting trillions trying to nation build.

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Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

The BDI is @ 30% off its high (early June) Before that it gained almost over + 630% from its all time low of 663 in Dec. of 2008 (April 2009 high of 4291 )

The BDI rose a significant +42 points yesterday and closed at 3043. A higher high price on its chart pattern has been confirmed The BDI has been rising (with one bump) since late September. =  Bullish for stocks & world trade right now

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The Dollar is currently the #1 forecasting tool . It would be a wild guess to predict he daily moves of the dollar, but longer term fundamentals are clearly negative – the trend of a falling dollar should continue.

$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% The dollar closed at $75.47 . Bullish for stocks

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

Positions

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

Trades made this week are updated at the end of the week. -  Sold 50% of position in EWZ and all of EWY. – This sure looks like – a big mistake – Should have been adding instead of subtracting – especially EWZ – Still no one ever went broke taking profits. - Sorry – Did not update Positions section.

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

For Traders (not long term Investors )

NVS - One of the 2 stocks owned (the other is CSCO). This is a swine flu play. Obama has declared a national swine flu emergency and NVS’s vaccine is not due to be distributed till mid December.  NVS is going to have too little too late. Taking profits today. (You could also sell 50% and put in a stop/sell order)

EWZ – Yes it was a mistake to sell 9% of this. Buying it back.  Will add to both FXI (China) and EWZ this week  A falling dollar is just an additional fundamental reason to own these areas. Other reasons have been listed over and over again.

Traders – Three major tech stocks leading the charge – Hope CSCO joins them when it reports earnings.

• AAPL – cutting edge computers and telecom revolution (phone’s) moving into China.
• AMZN – Fabulous earnings report and forecast.
• GOOG – Internet adds is growing even in USA.
  

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

More Troops – Bad Bet

Nicholas Kristoff’ s editorial in today’s NYT on why more troops in Afghanistan is a bad bet. Investors411 praised the fact that we tripled aid to Pakistan.  Here’s Kristoff’s money quote.  “American policy makers were completely blindsided in recent weeks by outrage in Pakistan at the terms of our latest aid package — and if we can’t even hand out billions of dollars without triggering nationalistic resentment, don’t expect a benign reaction to tens of thousands of additional American troops. ”

Jobs Jobs Jobs

Investors411 has painted a bleak picture of long term job prospects for Americans over the last few month. When you add to this shadow banks are still in the shadows and foreclosure problem is at best stabilized you have a bleak picture for Main Street USA.  Perhaps those that have seen gains in their stock portfolio’s since the spring will spend and juice the economy. However, especially for older workers, as Abby Gold in the comments section points out, on Main Street its not a rosy picture.

Solutions – One specific help would be to extend something like the $8,000 homeowner credit for first time home buyers. 350,000 buyers took advantage of this program – it worked especially for lower priced homes. The ripple effect is those new home buyers have to furnish those homes. Two respected individuals have offered their solutions

• Mort Zuckerman (right of center – editor of US News & World mag.) in an editorial titled “The free market is not up to the job of creating work” suggests a “massive program(s)to restore stable jobs growth.” He suggests a National Jobs bank and allocating $65 billion toward it. LINK
• Tom Friedman (left of ccenter/pro business – NYT columnist) looks at the failures of America’s education system to keep up with the increasingly  globalized world.  Here’s the money quote – “While the subprime mortgage mess involved a huge ethical breakdown on Wall Street, it coincided with an education breakdown on Main Street — precisely when technology and open borders were enabling so many more people to compete with Americans for middle-class jobs. ” LINK

Pay Cuts on Bailed Out Companies

Obama administration is forcing pay cuts on top executives of 7 bailout firms. Good first step, but what about all those other shadow financial institutions who used the Fed or collected big time from AIG’s  bailout? Goldman Sachs & many others gets away without any claw backs in this. Huffington Post LINK or NYT LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

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

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

Technicals, Fundamentals & Analysis

This is a US stock market dominated by professionals and traders.  Some sort of programed trade kicked in the last hours and the pro’s left the building.  The volume way well above average and the fall from what was a rally was over 1%. Volume increased significantly in the last hour’s price collapse = Bears asserting dominance

The dollar fell significantly which almost always means US equities rally. This again = Bears asserting dominance

The dollar fell so overbought oil prices rose significantly LINK to chart +2.25 to $81.37 . Obviously oil prices above $80 is going to hurt ma and pa consumer in any recovery.  Sure looks like some entity or group is manipulating oil prices. Up 9 of last  10 days and going parabolic (up too far too fast)= Bears asserting dominance

The BDI rose (probably did not have time to react to swift fall in equities)

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

Stocks falling on good earnings news, a rising BDI and a falling dollar is a disconnect from what has been a historically a positive trend .  Think of this as a sign in the road saying WARNING SPEED BUMP AHEAD.

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Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

The BDI is @ 30% off its high (early June) Before that it gained almost over + 630% from its all time low of 663 in Dec. of 2008 (April 2009 high of 4291 )

The BDI rose a significant +85 points Friday and closed at 2917. A higher high price on its chart pattern has been confirmed and it sure looks like a bullish run could be starting. =  Bullish for stocks & world trade right now

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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 fell a significant -0.55 % The dollar closed at $75.12 . 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 is reached .

The dollar does have a support level around $74.00( a high from about a year ago – see long term chart)

Positions

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

Trades made this week are updated at the end of the week. -  Sold 50% of position in EWZ and all of EWY. Have no position in XLE. Also for TRADERS (not investors) strongly considering buying some companies listed yesterday that had outstanding earnings, but have fallen over last few days.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Afghanistan Bubble Building

Islamic Republic of Afghanistan جمهوری اسلامی افغانستان (Persian: Jomhūrī-ye Eslāmī-ye Afġānistān) د افغانستان اسلامي جمهوریت (Pashto: Da Afġānistān Islāmī Jomhoriyat)

So after adding 21,000 to the original 38,000 troops in Afghanistan the generals are calling for another 45,000 troops for Obama’s “necessary war.” This would be a unilateral increase of American troops. This unilateral increase would put over 100,000 troops in nation building Afghanistan for the next 5 to 10 years. Basically we will end up unilaterally increasing troops by almost 200%. How is any of this different than the unilateral Cheney/Bush military approach.

Have we learned nothing from the trillion(s) spent in Iraq. – A corrupt government, dominated by Shia’s who love Amadinejad & still have huge economic problems. Imagine Israel bombing a suspected Iranian nuclear plant. It not only would turn Iranian religious fanatics into terrorist bombers, but the Shia’s in Iraq would join them.

What happens next probably Pakistan, Yemen, the Sudan ? Frank Rich has a column on this “Obama on the Precipice” in the NYT LINK

China blowing by the USA

Tom Friedman had another column this weekend entitled “The New Sputnik” on China blowing by the USA in the creating of alternative energy. LINK

This is just another reason why the #1 investment choice of Investors411 continues to be FXI -The China ETF.

Blowing and Building Economic Bubbles

Both the WSJ and the major financial channel are cheerleading unregulated capitalism this AM. Why not, the Lehman Brothers collapse is a year behind us and taxpayers have bailout Wall Street. Happy days are here again and nothing substantive has been done to regulate or reform what got us into trouble in the first place. Economist Simon Johnson on “Was the G 20 Summit actually Dangerous” traces the lack of capital requirements for US financial institutions. LINK

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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

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

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

Technicals and Fundamentals

Volume declined and was below average. Technically, it looks like the bears are running out of momentum. In the very short term we are a bit oversold – so look for an early rally.

Big news for week is the jobs number fro the month of Sept. coming out Friday.

BDI seems to be turning higher = Bullish

Fearless Forecast – Took it on the chin last week as major US indexes fell. However September is turning out to be a pretty good month. The dollar is the over ridding factor in market direction. It would be good in the long run  if US markets stopped moving higher without some sort of more major retreat (5 to 10%) Constantly going higher feels too much like a bubble building.  Fearless forecast for the week is for the dollar to fall and markets to rise.

This rally is built on the falling dollar, means US goods (exports) will cost less abroad. Therefore for major US companies that sell overseas profits will grow.

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Significant forecasting tools/Indexes for stock markets

(Besides #1 Volume & #2 Reaction to News)

BDI - The Baltic Dry Index measures the flow of goods by price (world trade) .

2388 is support now resistance level/number to watch – Yesterday BDI +20 t o close at 2183. Short term Bullish for stocks

The BDI is @49% 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 ) A 50% retracement from highs is a major support level. Therefore some stabilization is understandable.

What this means – World trade is in trouble – lots of ships are sitting in ports empty.  To some degree, China has stopped buying raw materials and/or the US consumer is not buying as rapidly as earlier in the year. Braking a support level is significant, but 2183 (current level) is still a long way from the Dec. 2008 663 low. = Storm clouds gathering

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$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

The dollar fell -0.17% yesterday and closed at $76.78. After a major two day rally that created a higher price high (bullish) the dollar cooled off a bit.

Last year’s low was around $71, so there is a long way to go before the next major support level.

Positions

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

revised to reflect recent trades this weekend

Plan to add to EWZ (Brazil)

Also MVIS (a stock) NOT an ETF is technically looking like its small three day retreat makes it a possible buy.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Mid Year Review of Stock Positions

Scroll down to bottom of STOCK section

Iran Day 13

Iran Photo from Andrew Sullivan Blog

Violence continues. See previously recommended sources – Lede from NYT, Huffington Post, Andrew Sullivan & BBC for more. At 9:13 EST Nico Pitne y at Huffington Post has a video of the Supreme Leaders military firing on demonstrators here

What can you do to help the protesting Iranians? Tom Friedman has an interesting long term approach. Iran’s Green Revolution = America’s Green Revolution. you can read about it here

Obama Debate Rages on

The are you happy with Obama ? debate continues to rage in the comments section. More fireworks See posts by  "A Friend" and D.

Health Care

Going to spend a lot more time on this . Two important points for now .

• From D’s comments post - "if a private option is so bad why have none of the dozens of counties that have public heath care voted to change back to private health care?"
• Time magazine’s Michael Grunwald has an excellent article on Health Care costs here Why some major hospitals and areas charge less than others for comparable services. Example Mayo Clinic & Cleveland Clinic @40% less than UCLA Med Center and John Hopkins.
  

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

The volume was again below average. It hard to be sure about making a forecast when our #1 forecasting tool - volume – gives no indication of which way prices will flow .

Significant forecasting tools/Indexes for stock markets

Note - Repeated statements in brown

Right now, there are two indexes that are significantly influencing stocks in the USA & world. The US dollar in the short term and the BDI in the longer term

$USD – The Dollar rose +o.73% yesterday. Any move over 0.50 is significant. The strong inverse correlation between the dollar and stocks has existed for many moons. In the short term we are seeing some breakdown in the strong inverse correlation between the dollar and stocks. The best explanation for this is that the dollar is trading within a range and when it breaks out of that range (78+ to 81+ see yearly chart here ) this inverse correlation will again become  more apparent.

BDI - The Baltic Dry Index measures the flow of goods (world trade). 24 up days in a row, 6 down day in a row,  a 6 day rally and now a 4 day fall. Technically we failed to make a higher high and if/when we make a lower low it will be technically a very bearish sign .  Momentum is building to the downside.

If trade is diminishing through out the world then a worldwide recovery is in big trouble.

Reading the Tea Leaves

This market has moved too high to fast and is a technical rebound. As stated two weeks ago we may see a 5 to 10% technical fall or consolidation. This week fearless forecast – Another down to flat week. Look for the areas around 875 and 850 on the benchmark S&P 500 as support levels.  So far because of the lack of heavy volume this looks like an over bought correction and not a total meltdown that tests the old lows.

Investors411 has recommended buying some downside protection on any minor rally. A 5%+ position in -SDS – An ETF that is ultra short’s the S&P 500 -  Bought yesterday at @$57. This is probably not going to be a position that will be held for a long time.

Caution – The last time I was worried about a drop (Swine flu) I bought FXP (ultra short China) and got burned

Mid Year Review of Our Positions

Part #1-Part 2 tomorrow

I’ve rounded off some of the numbers and the first number is the % of the entire portfolio invested. You can learn more by going to "Positions" section on top of blog. Some position in the same ETF were added at different times, so they have different results.

All numbers are approximate All position are year to date or from when they were bought this year (This does not include some short term day or swing trades – If your interested in this send me a separate email)

Our benchmark S&P 500 is flat for the year

FXI -(China)

• 8% of portfolio, up 24% position open
• 8% of portfolio, up 37% position open
• 8% of portfolio, up 20% position open

FXP – (Ultra Short China)

• 5% of portfolio down 13% position closed

EWZ (Brazil)

• 6% of portfolio, up 26% position closed

GLD (Gold)

• 3% of portfolio up 13% position closed.
• 3% of portfolio down 4% position open
• 3% of portfolio up 9% position open

QLD (Ultra long NASDQ 100)

• 6% of portfolio up 16% position closed

XLF (Financials Stocks)

• 5% of portfolio up 23% position closed

IFN (India)

• 3% of portfolio up 1% position open

GEX (alternative energy)

• 3% of portfolio up 10% position closed
• 3% of portfolio up 3% position open

The Hedge (Equal amounts of QLD – ultra long NASDQ 100 & SDS ultra short S&P 500)

• 15% of portfolio up 1% position open

SDS

• 5% of portfolio up 1% position open

Analysis tomorrow – But obviously Investors411, as in past years, toasted of our benchmark S&P 500

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

WHAT’S UP? – Ballots over Bullets – Oprah, that’s right Oprah Winfrey – Healthcare vs. for profit illness care – Our Positions – The new Hedge is starting out with positive results – FXI, QLD, EWZ & IFN

Ballots Over Bullets

Tom Friedman has a Ballots Over Bullets editorial in today’s NYT. He echos what Investors411 has described as the results of Obama’s speech, and the relationship to the Lebanon elections. Like the economy, there are a few green shoots of hope in the Mid East. They may get crushed, but at least we’re not locked into the "you’re either with us or against us" mantra.

Oprah and HealthCare

Never thought you’d see Oprah Winfrey in Ivestors411. She is one hell of a business women. But Ophra also is setting a standard in health care. It may not be perfect, but what her show deals with is heath care and what we in the USA deal with is a for profit illness care .

Oprah promotes "wellness,  prevention, and alternative medicine" far more than our conservative, for profit medial establishment. Our mainstream medical establishment is addicted to drugs, surgery, and pills  like Cheney is addicted to bullets, hate and torture. There are alternatives that work.

Dr. Deepak Chopra , who I had the privilege of spending some time with decades ago, is now one of the loudest voices for change in the medical establishment. Take a look at his "Mainstream Medicine and the Oprah Factor"

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

Remember – Forecasting what markets will do is all about how potential investors feel about the  fundamental aspects of stocks and the economy. Technicals (looking at chart patterns) gives us some idea of where the traffic signals are. It all about predicting attitude.

NASDQ is again separated from the pack.  The distinction may look small, but over time is has and hopefully will continue (see our "hedge" position) to outperform.

Volume was below average. No confirmation of a price move.

Reading The Tea Leaves

• Oil prices now over $70 a barrel - WTIC
• The BDI (measures world trade) has fallen 5 days in a row
• Interest rates of 30 year fixed mortgages have risen over 0.50% in last month.
• Chrysler’s bankruptcy deal and possible GM’s could get bogged down in supreme court. = Way more unemployment and foreclosures

There is fundamental long term trouble brewing just under the surface. The above factors is they continue in the same direction combined could crush a budding economic recovery.

What’s moving this market is a falling dollar. Russia did/said something this AM to cause the dollar to fall further – So stocks and oil prices should move higher this AM.

Position s – (See positions section of blog for more)

• The Hedge – Q LD went up +1.68% and SDS went down -0.54 %. This means our latest and second largest position made +1.24% yesterday.
• FXI – China -1,25% yesterday.  #1 position has dramatically clobbered the benchmark SPX this year. This ETF is falling in decreased volume and a new buying opportunity is/may arise.
• Looking to buy  into IFN (India) EWZ (Brazil) on dips.
• Looking to buy back into QLD (a separate position from "the Hedge")

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTIN G !

WHAT’S UP – China leading world out of recession; Huge stimulus and Chinese banks loan package has dramatic positive short term impact on stocks; Shadow banks are winning in their tug of ear with Obama’s administration: Stress test results; Investors411 recommended positions have possibly best day ever!

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China

Chinese Banks are lending money - big time They were not nearly as over leveraged as American shadow banks and China. Their stimulus which is bigger per capita than the USA’s is also helping turning the Chinese economy. A second stimulus package is projected soon. Some outstanding growth stats announced yesterday. Some details on China’s stock’s explosion higher yesterday here and here

For more see 4/16 Investors411 blog on China or (recommended) Positions section of blog

Bottom Line – China is leading the rest of the world out of the recession. In the long run this much stimulus is going to be inflationary.

Shadow Banks

There’s the good, the bad and the ugly about shadow banks. But the the good is the fact that they are leadings stocks higher, It seems in the tug of war between increased governance  by our government and allowing US banks to continue to move in the shadows is moving in one direction –  the Shadow’s are winning, NYT story.

Stress Test

Shadow bank, Wells Fargo was thought to be one of the banks that failed the government’s “Stress Test” and it moves up +24% on the stock market.  Talk about moving higher on bad news = great for stocks.

“The U.S. is expected to direct about 10 of the 19 banks undergoing government stress tests to boost their capital, according to several people familiar with the matter”    Full WSJ story

Why Tom Friedman is Wrong (part 2)

Sorry Started this when my server/modem went crazy on me last Thursday. See his editorial “A Tortuous Compromise.” in which he invisions a decent wesern US democracy in Iraq. 

Imagine Rush Limbaugh and the far right coming together as “brothers” with Move On and the far left. Multiply that times 10 and add a mountain full of oil money/power to fight over and you have how the Shia feel about the Sunni’s in Iraq.

What happened is the Shia (60% of the population) kicked ass in a civil war over the Sunni’s (20% of the population and Saddam’s group) Add to this years/decades of mass killings. This is almost as bad as imagining Hamas and Israel coming together in one democratic love fest. 

STOCKS

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

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Technicals & Fundamentals

China (FXI =+8.95%) (see April 16th blog)and Financials (shadow banks) added high octane jet fuel to last week’s breakout.

S&P 500 turns positive for the year! SPX closes at 907 – First major technical resistance level at @ 940 (an old high and close to the 50 day moving average)

XLF - The ETF that tracks financials (mostly shadow banks )Broke out of its consolidation pattern and rose +10.14% in increased above average volume.  Therefore, volume confirmed a huge breakout. If you’re in recommended ETF’s that do 2x & 3x what the XLF day you did spectacular. (see positions)

The XFL had been consolidating between @ 9.4 & 11.3. XFL closed  above breakout levels at 11.73 .

A Wowie Zowie Rally!

Wow! Yesterday was a fabulous day for Investor’s 411 recommended Positions.

See Positions at top of blog. Most Investors411 recommended  positions did 2 to 4+ times better than US markets. Both China and Financials are recommended ETF’s (see positions) 

Even GEX (alternative energy) was up +9.95%.  Also Brazil (EWZ) was up +5.98%.

Reading the tea leaves - Obviously, would love see stock positions hold onto their gains and not rocket higher or lower. Moving too far too fast is reason for concern. Consolidation over a few weeks is best in the long term for bulls.  

Those shorter term traders should obviously book some profits soon. Why be greedy? There should be a whole lot of traders buying the first dip today.  Let’s see what happens after that.

Caution – Don’t get all caught up in this good news. There are massive economic problems out there in the USA and many foreign countries.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING !

Tom Friedman, over the years has, perhaps, been the most quoted columnist in Investor’s411. No one is always right, but he sets himself apart by innovation. (also, 3 Pulitzer’s and many best selling books) Friedman’s column yesterday on socializing the risk and privatizing the gains for finance and the environment pulls two diverse problems together. Also today- other economic editorials & executions for sexuality.

Friedman

There a lot of meat in his NYT editorial “The Price is Not Right” chew on some of it.

After illuminating “creative destruction” he concludes  “Destructive creation” has wounded both the Market and Mother Nature. Smart regulation and carbon taxation can heal both.

Other Editorials

(If you have an editorial or comment you’d like to share post it on the comment section of the blog – Thanks)

Here’s  diverse group of editorials

•  Rally is Built on Sand? FASB Can Help – by  Chris Ciavocco (Ciavocco vs Reilly below)
• Banks Demand Perfume for Rotting Balance Sheets - by David Reilly – Bloomberg
• How the Financial Crisis Is Shaping the Corporate Model – NYT
• Automakers and Banks: A Double Standard – by James Suroweicki – The New Yorker

Executions for Sexuality

Here’s a story American Corporate media will ignor

Ahmadinejad said there were no gays in Iran and his fellow Shia who now dominate Iraq are having a mass execution of 100 supposed “criminals” many of them for the “crime” of just being gay. This is the supposedly wonderful democratic government we created in Iraq that is killing “gays by the batch” (story) “20 criminals” in each batch.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Market Updates – The Fork in the Road

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News

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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

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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!

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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!

No Updates till Wednesday – Short vacation to somewhere warm.

Green Investments

You can make a positive return on your investment within a year on the following three item’s for your home
* Programable thermostat
* Power strips
* Compact fluorescent bulbs

For more details and why they are cost effective from Daily Green .

Green Stocks/ETF’s – GEX and PBW have been the two green ETF’s Updates has recommended in the past

Tom Friedman controversial editorial on Gaza

This editorial has created a lot of buzz because of its focus on collateral damage.

War is hell. We dropped atomic bombs on Japan to hasten the end of WW 2 and the Allies firebombed/obliterated Dresden Germany in order to hasten the end of WW 2. In both cases there was a huge loss of civilian life. Friedman believes, contrary to most, that Hezbollah actually lost its 2006 war with Israel because Israel inflicted so much damage on Hezbollah’s infrastructure. This is what Israel is now doing to Hamas.

LINK to editorial

Also in NYT is a depressing and different point of view on how the war is marginalizing moderate Palestinians. LINK

The Bottom Line – Always happens after the fighting stops. Do the fundamentalists gain or loose from the results.

Osama Been Forgotten Speaks

Osama for the first time in 8 months spoke. He issued an audio tape urging jihad against Israel. LINK

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Reacting Badly

Index % Change Volume

Dow -2.94% down
NASDQ -3.67% up
S&P500 -3.35% up
Russell2000 -4.35% –

Brown = same comments as yesterday.

US Market & Foreign Markets

Technicals – As predicted major indexes all have broken down through their support levels. This fall is being led by financial stocks. Volume slightly declined on the NASDQ, but up and above average on the other major indexes. As you know – Volume rising with prices falling is a bad combination for future prices.

XLF is the financial sector ETF Chart here . As the chart shows financials fell another -5.77% yesterday and XLF is close to its November low. Financials used to be the largest sector of the market and may no longer hold that distinction. But, they are certainly capable of leading all major indexes lower. Other banking indexes are approaching or have broken through November lows. Mega banks Bank of America and Citigroup are leading this deterioration. The problem is all their over leveraged debt. (credit default swaps)

Bad news is priced into markets, but as exemplified by the retail numbers published yesterday the bad news was worse than expected.

American stock indexes are technically oversold – you can only have so many down days in a row without some kind of bounce. However we have not had the big volume climax volume that usually shows capitulation by investors and indicates an end to stocks falling.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals – All the talk of passing the second 1/2 of the TARP ($350 billion) is focusing investor attention on the problems of the markets.

JP Morgan beat earnings expectations LINK . but unfortunately prices are slightly down on this good news. The big news this AM is the poor health of Apple’s chief Steve Jobs. Apple was down over 10% in post market trading yesterday. LINK

Nobel prize economist (Phelpes) on CNBC this morning is calling for TARP 2 and possibly Tarp 3. Another Nobel Prize winning economist (Spense from Stanford) on same show is echoing negatives. Mainstream economist do NOT see a recovery in 2009 that some investors still do.

The bottom line – Many thought bad news was built into market prices, but the news is coming out worse than expected. If good earnings (JPM) cannot lift a major financial stock price, stocks are still in trouble. Stocks are REACTING BADLEY Good news should mean prices move higher and bad news gets ignored/absorbed in bull markets

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’s economic team & his proposed stimulus package.

Earnings season begins this week. However, Citigroup remains the stock to watch. Citi reports on Friday.

Forecasting Future Trends

The following is a group of indexes that are all interrelated and strongly influence how stocks moves. At different times one index may be more influential than the other.

LIBOR – LIBOR is the rate banks charge each other. It price has fallen from 3.4% three months ago to about 1.09% (good news for stocks)

LIBOR chart (3 month)

Treasuries – T Bills yields show how fearful investors are. The lower the rate the more the fear. Short term yields – 3 month T bill was falt at 0.07% and longer term treasuries were basically fell 10 year fell to 2.19% (low yields show fearfull investors flooding to Treasuries instead of stocks – Bad news for stocks)

Treasury Bonds chart

Baltic Dry Index – Measures flow of goods between countries . Yesterday it rose another 1% yesterday. Almost 85% drop since June. (short term good news a 2, 4, 6, 2, 2, & 1% gains in last 6 days)

BDI chart

Short Term Outlook/Strategy

Reading the Tea Leaves-

PANIC STILL RULES the credit markets

Strategy – Shorting rallies to protect gains is working. (see below) Until we some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.

As predicted Support levels have broken for all major indexes. Dow at 8200 and has a minor support level at 8148 (see chart) and the psychological 8000 number. Oversold conditions exist (6 down days in a row). This could temper any downside move. However the short term momentum is still with the bears

Dow 8200 within 800 points of last years low. Long term investors who can handle risk better might want think about nibbling just a little in any further dip (Obviously the bigger the fall the better). The Obama administration should get a honeymoon and perhaps stocks will get the same. This would be Obama/stimulus rally part 3. However, you should also be prepared to add a short ETF in any rally. (see below)

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded and in Plum or crossed out

Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally phase 2 is underway . Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought. It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*5+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5+% Gold
GLD is the ETF for gold-

Chief Strategy – Buy the DIPS of trending sector – This is not your father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 9000 and huge uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing