The Big Lie

Super Committee

Credit to the Tea Party for forcing the issue of deficit reduction to a head. It is a serious long term issue.

Virtually all news outlook say congress is deadlocked over what to cut and/or tax to further balance the budget. This can gets kicked down the road because no penalties come into effect till 2013 – after the election.

Unfortunately, because of the attention focused on the deficit, almost nothing has been done about the clear and present danger that our financial system has created.

  • $5 to 10 trillion in new loans or debt created by the financial meltdown
  • The loss of 8 million jobs.
  • The @20 to 25% decline in the #1 asset of middle class American’s – their homes
  • 6,000,000 foreclosures since 2007 with 4,000,00 in the works – Almost 1/2 of all mortgages under water.
  • A major European fiscal meltdown impacting the world.

Unfortunately the Tea Party and Republicans  have a NO COMPROMISE stand on cutting only areas like social security, education, medicare etc  that target the middle class, seniors and the poor.

Democrats are willing to compromise on these issues as long as wealthy Americans also share the burden. For every $3 in tax cuts you tax wealthiest Americans and mega corporations $1.

The above inspired by

  • Sunday’s blog on OWS
  • Matt Taibbi rebuttal to David Brooks


The Big Lie

“On either approach, [to deficit reduction] the poor and middle class would suffer grievously while the rich and powerful would win yet again”

From Columbia prof.  David Sachs –  LINK to his editorial

“The key to understanding the U.S. economy is to understand that we have two economies, not one. The economy of rich Americans is booming. Salaries are high. Profits are soaring. Luxury brands and upscale restaurants are packed. There is no recession.

The economy of the middle class and poor is in crisis. Poverty and near-poverty are spreading. Unemployment is rampant. Household incomes have been falling sharply. Millions of discouraged workers have dropped out of the labor force entirely. The poor work at minimum wages to provide services for the rich.”


“When Obama has one of his many $35,800-a-plate fundraising dinners, he doesn’t meet young people struggling to cover tuition payments…The big money on the Republican side is even worse.

The upshot is that both parties champion the 1 percent, the Republicans gleefully and the Democrats sheepishly.”

Sach’s editorial is full of cooberating  data



The reason lobbyists and the media for the 1% are in a jihad attacking the messenger of OWS is because they are so afraid of this message getting out – LINK to message/Short Video







From Friday

“The Whole Financial World is Skating on Thin Ice”

The Ice got a whole lot Thinner over weekend

Friday’s Warning from Investors411 -

“Like in the Wizard of Oz I don’t know how long the man(men) behind the curtain can keep holding our fundamentally flawed financial system together. Downside risk grows every day, because little is being done about fixing the root cause of our problems…If/When the ice breaks on the opaque, deregulated, & manipulated financial system great danger lies below.”

Friday market was basically flat. Technically, this confirmed the big drop on Thursday. = Bearish

Market Open is dominated by European trading, The DAX (Germany) is down 2.58 at 8:45 AM EST. Expect US markets to follow.

The single largest reason the US and most European markets were flat Friday is the ECB bought enough Italian and Spanish bonds to keep their rate of the 10 year bond below 7%.  The 7% level seems to be the tipping point number where Ireland, Portugal and Greece began their” controlled” default on their bonds.





Reading The Tea Leaves

Our #1 technical forecasting tool, the McCellan Oscillator fell to -40.38. 50DMA at +19.15 = Neutral/ Bullish

Repeat From Thursday However, if you read the MO like a chart it has just broken a support level and that’s Bearish

On Aug 8th the MO reached -141 the lowest its been ( I’m looking at a 3 year chart that includes the 2009 meltdown) That’s a hundred point drop.

So overall technical conclusion is -

there is a lot of wiggle room for markets to technically roast and toast before some sort of rebound occurs.

Repeat From Friday - Europe again dictates the open This makes holding stocks overnight very risky. If you can handle an event driven market where your stock/ETF/mutual fund jumps 2 +% up or down at the open then this market is for you.

Commodity prices fell like stones Thursday, for the most part held onto those losses. If commodities prices fall – stocks will follow.



Event Driven Put/Call Hedge Trade

[ Straddle or Combination Trade]

This trade depends on an earnings report [We could also use any expected announcement, like an upcoming FDA drug approval] and earnings season is over.  So very few trades present themselves like the GMCR that made 200% and the ANF that made 70%

Kudos to JSWho writes a column on puts and calls and announce in the comments section that he was shorting this weeks market by using calls on SDS. This looks like a very wise move to protect his long positions.




Hopefully Longer term positions.

We just cannot seem to get traction on any long term trend, besides volatility.

GLD - DGP is the more risky double long gold ETF. 1/2 position added at 173.85. Currently at 167.43. Placing stop at 165.20. Bummer – GLD fell to 166.60 and our stop was not hit. It will get hit if stocks open lower today and we might get a lot lower price.

USO - (2x oil prices ETF UCO riskier) This would be a replacement for SPY. Bought 1/2 position at 37.35. Currently at 38.23. Placing Stop at 37.35 Stop was hit and this position is closed = 0% gain

EUO (double short the Euro currency)  Will be buying EUO on the dip for the Investors411 portfolio. 1/2 position Bought at 18.60 Friday

Reasoning – Simple Europe has a lot of unsolved problems and this is going to hurt their currency.


Longer Term Outlook

3+ months


Investors411 has 5 different valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

Everything written in BROWN is a repeat from a previous day(s)




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