We the People? or We the Wealthy People & The Giant Corporations.

Iraq

Still in chaos following elections almost 8 months ago. Pro Iranian Mullah Sadr has joined one side giving the side of former president and Sadr a clear advantage. Longest time any country has taken after election to form government.

We The Corporation

On Feb. 22 in a 5 to 4 vote the Supreme court  struck down federal regulations that restrict the amount of money corporations can put toward political advertising during elections.

• Now, any corporation can legally give millions to a candidate while YOU are restricted financially.
• What’s worse - Any millionaire can for a nominal fee form a dummy corporation by incorporating and directly give hidden money to a candidate or attack add group.

Money is the mother’s milk of politics and obviously this ruling puts both corporate power and individual wealth above the voice of we the people. Yes democracy has changed as both major parties have been lavished by corporate buying power. This holds especially true for what Tom Friedman termed the Tea Kettle Party.

History is full of wealthy oligarchies falling to people power. The 20th century is a great example of the rise of democracies. It is disheartening to see the world oldest running democracy move in the opposite direction.

Yet, at some point  in time people stop thinking  “about what happens one or two steps ahead” (from mathematician John Paulos – see blow) and wake up. Example – Tea Kettle platform (Tea Party) A tax cut for the wealthy, more foreign wars, and cutting taxes on huge corporations is going to decrease the deficit for our kids.

Warren Buffett says it best – “It’s class warfare, my class is winning, but they shouldn’t be.” Source for this & other Buffett quotes.

Firefighters and Homeowners

The comments section always has some of the best editorials and news. Paul R on the privatization of fire departments.

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KISS & Stocks (Keep It Simple Stupid)

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

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

Technicals, Fundamentals & Analysis

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

US Stock Markets -

Stocks fell primarily because of the rise in the dollar. (see below)

John P Hussman PhD is a mathematician who predicted the recession. He often comes up with some interesting mathematical models for what’s happening. His Oct. 3rd newsletter

His view -”To some extent, I view current market conditions as something of a “Ponzi game” in that valuations appear neither sustainable nor likely to produce acceptably high long-term returns, and speculators increasingly rely on finding a greater fool.”

Hussman Quotes mathematician John Paulos on human nature and stock markets - “people generally worry only about what happens one or two steps ahead and anticipate being able to get out before a collapse… In countless situations people prepare exclusively for near-term outcomes and don’t look very far ahead. They myopically discount the future at an absurdly steep rate.” Undoubtedly, we have periodically missed returns due to our aversion to risks that rely on the ability to find a “greater fool” in order to get out safely. But it is important to recognize that speculative risks are not a source of durable long-term returns.”

With the extremely light volume and the dominance of market manipulators (BB/HFT’s etc) Investors411  is taking the position that these guys have a pretty good call on what’s happening. Therefore, a cautious approach based on the MO, the dollar, the BDI and major support resistance levels seems prudent. (see below).

The one differing point of view with Hussman is that emerging market are increasing becoming stronger and are more able to fend for themselves. Therefore the US can catch a cold economically and stocks can still rise. Just hope we don’t get the flu or worse.

Earnings season starts Thursday with Alcoa reporting and bloom next week.

Significant Indexes

• The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] The dollar rose  +0.45% Monday.  We had the biggest rally in the dollar in over a month. Today will act a confirmation of the rally. We could see a reversal of the trend.  For stocks falling dollar trend is = Bullish
• The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China & emerging markets] Rose +1.06% Monday.  An 8 week bull run, then a two week fall. Now consolidating for last few sessions = Neutral
• McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.]   Fell to -7.92. Still lots of room to move higher or lower. Location= NEUTRAL

Reading Tea Leaves

From yesterday – “Hard to see any serious stock reversal with the dollar continuing to fall. The BB/HFT’s algorithms seem to be set to buy the dip.” - The dollar have its biggest single day rally in a month and this reversed stock market mo jo. A one day reversal is obviously NOT a trend.

Traders – The market manipulators have been “buying the dips”- like yesterday’s fall of the MO into negative territory. Those who are looking for a safer entry may wait till -20 on the MO or more.

Positions

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

(I do manage 6 accounts that have other positions)

• EWS (Singapore)  One of several foreign ETF’s that have broken out and starting to get over extended.
• USO (price of oil/commodity). Exploded through resistance level and nearing 5 month high. Part of this is tied to dollar falling.
• SSO (2x what S&P does)  Still held onto last 1/2 of SSO. But will place another 2% trailing stop loss today.

Traders – Will continue to use/ buy SSO & TYH on dips if MO falls to @-20. For concepts on individual stocks see Paul R.’s always enlightening comments on right side of blog.

Investors – EWS and USO are getting over extended from their base. I like to sell 1/2 the position and let the rest ride as long as I have @ a 10% profit.  Will buy back in at next dip. I am looking forward to building a larger position in both. Will add other foreign ETF’s along with UCO (@2x USO on bigger dips) See Positions section.

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

Poster from 1880

Your Comments

The Day Democracy Died – or the Corporate takeover of America – has received more of YOUR comments (7 public and 4 personal) than any other editorial. We the People , in the USA,  has become We the Corporation. Check out all the insightful public comments (scroll down). Most are listed on the right side of blog.

Fundamentally Democracy has changed in the USA. Investments are taxed at 15% and working class Americans are taxed at

• $8350 to 33,950 = 15%
• $33,950 to 82,250 = 25%
• $82,250 to 171,550 = 28%
• 171,550 to 372,950 = 33%
• above 372,950 = 35%

Bottom line here is that our tax structure encourages investment/gambling on corporations for a living rather than working for a living. People like me are spending more and more time investing/gambling , in part because of the lower tax rates rather than working.

Bottom Line – This adds to the destruction of the work ethic in America . It also make the wealthy who own most stocks, (trust fund children, hedge fund managers, those in the ultra upper class) wealthier. Again the corporations win and working Americans loose.

Even Investors411 is kind of a Dr. Jekyll & Mr Hyde by offering investment/gambling advice while at the same time recognizing that we are all (as one of you put it) on the Titanic (perhaps a better name would be the Good Ship Democracy) rushing from one side to the other.

There is a quantum shift in that investment advice below

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

See Positions , Strategy , and Overview for changes made over weekend.

US stocks got toasted in HUGE volume – AGAIN – Technically – It’s starting to look like a market that is going elliptical to the downside  or a climax sell off. Four reasons were given for stocks big drop this week.

1. China – China was going to tighten credit and therefore growth would slow.  The BDI which measures the flow of goods, specially China imports shows no signs of collapsing  (see below)
2. Obama will go after shadow banks . If successful this would mean to big to fail firms like Goldman Sachs will be broken up into several pieces.  All the shadow banks can now (Supreme Court decision) spend whatever they want (including your tax dollars and the trillions that the Fed is loaning them at 0%) to prevent this.  It’s an election year and within the Obama administration Bernanke, Geithner & Larry Summers are solidly behind the too big to fail banks. Summers even helped to write the legislation that created shadow banks.
3. Bernanke will not get reappointed – Bernanke was one of the arsonist who brought the world to edge of an economic meltdown and one of the firemen to bail it out. If Bernake’s appointment goes down so will stocks. The uncertainty created by a new Fed chair would hurt stocks. But according to most reports Bernanke has won needed support over weekend .
4. There is no V shaped recovery – My best read of the tea leaves is they are right as far as the economy/jobs are concerned. But earnings reports are showing a lot more  big companies with international exposure are beating earnings on the top and bottom lines.

Relevant indexes

• McClellan Index ($NYMO) at -79.33 = significantly oversold .  Well beyond the  @-60 or oversold level.
• BDI -  The BDI/China has come down from highs in mid November. The Baltic Dry Sea Index has leveled off over the last month and started up the last two days.

Two events, outside of earnings which have been rather  good, significantly impact stocks - The Bernanke appointment (Tuesday) and Obama’s State of the Union (Wednesday)

Long term Outlook has changed to NEUTRAL because some key technical levels were broken in big volume.

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

I’ve set up two charts. Put them on a split screen and compare. Both are 18 month charts McClellan Oscillator & the S&P 500 Notice that only 4 times in the last 18 month has the McClellan dropped below 80.  Each time it rebounded. It did reach @120 – 3 times  The Oct. 2008 meltdown, The March lows after the Obama election and a 6+% November correction .  3 times the McClellan has reached 80 and rebounded. Once it reached 100.

Bottom Line – chances are good we are going to see some sort of rebound this week. US markets are oversold and could go lower, but this looks like a good place to add 10 to 20% .  If McClellan goes lower (past 100) I’d add more. Fundamentally -  the situation is no where near as bad as it as at the beginning of 2009.  Working class American’s are going to suffer – but stocks with International exposure to emerging markets are going to flourish.

Everybody else is selling, now we start to buy.

SELLING & BUYING

More on exact buys and Sells on Monday.

See POSITIONS (scroll down) for details on this and what’s under consideration for 2010.

Long Term Outlook = NEUTRAL

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING