The Shock Doctrine: The Rise of Disaster Capitalism

Disaster Capitalism

The major news this AM is that the BP spill is twice as large as originally thought.

Giant financial/economic and in this case also environmental catastrophes are opportunities for great change. The bottom line in the BP disaster is just like the bottom line in the 2008 financial debacle. In great disaster comes great opportunity.

  • For the 2008 over leveraged casino capitalism disaster – We can change to a system where taxpayers no longer subsidize the risk and the giant shadow banks no longer have privatized gains
  • For the 2010 (another free market/casino capitalism) BP catastrophe we can make a significant change toward alternative fuels.

Disaster Capitalism is referenced in Naomi Klein’s The Shock Doctrine One example she uses is how Cheney/Bush used the 911 disaster to invade oil rich Iraq. This war had nothing to do with 911, but shows how far you can move American opinion when a disaster happens.

Quite simply Wall Street is taking over our democracy. We have members of congress who are willing to challenge this. (example the 3 Republicans & 30 Democrats who voted in Senate to break up the shadow banks), but we lack a Teddy Roosevelt in the White House who is willing to lead the charge.

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 +2.76% down
NASDQ +2.77% down
S&P 500 +2.95% down
Russell 2000 +3.48% -

Investors411 record – 5 years of beating benchmark S&P 500 and almost all major US indexes

Technicals, Fundamentals & Analysis

Yesterday stocks stopped dancing on the edge of the cliff. We had one of those, now typical, decreased volume mega rallies. = Bullish

Volume has lost its significance, and The Dollar has taken over as the single most important factor moving stocks. (see below) The dollar moved significantly lower and crossed a major resistance level. The trend higher has not changed, but a technical analyst will tell you its 5 day breakout to a new high has failed. (see chart) and the dollar has moved back into its consolidation pattern.

Fundamentally – Some auctions of treasury bonds in the European (PIIGS) countries turned out OK. Translation, like the USA the interest rates were not too high = there were buyers. A couple reasonable  auctions in the PIIGS’s  bond market [bond market is bigger than stocks, but not as big as currency] does not end the crisis, but it is a positive sign. = Bullish

Yep, as a couple of you mentioned in comments section there was short covering and some other decent fundamentals, but none significant enough to cause a huge rally

BP did recover @ 2/3 of yesterday’s loss. This indicates that traders have changed their mind about the solvency of BP. The roller coaster here is still in play. Good news reported is that BP is considering not giving part of its $10 billion dollar dividend. = Bullish

Futures are Flat = Moderately Bullish

Holding stocks over weekend = Moderately Bearish

Significant Indexes

  • McClellan Oscillator soared to +20.49 [+60 or above = Overbought = sell. -60 or below = Oversold = buy]. StockCharts has a better version of the McClellan chart ($NYMO) LINK. –  & Investopedia on –  How the MO works. We are a smidge oversold, but basically = NEUTRAL
  • US Dollar –  The dollar fell a Significant -0.91% [Anything over +/- @0.50 is significant.] Mantra - right now The Dollar Rules is very important. Dollar falling significantly = Stocks rise significantly= Bullish

Reading the Tea Leaves -  The more time an Index, Sector, or Stock keeps testing a support/resistance level the stronger it gets.  Each test pulls back a slingshot. We had 4 tests of the 1040 level on the benchmark SPX , so we pulled back that slingshot 4 times. What happens to arm the slingshot is traders buy more puts and calls each time we test a support/resistance. This is why we saw such a HUGE gain aided by the afterburners of the dollar’s fall.

Obviously, if you’ve been reading Investors411, today is the confirmation day of yesterday’s rally - Therefore important.

Longer term – right now we have a short term counter rally in a bearish mid term trend. The dollar is key to market direction and those moderately successful treasury bond auctions in Europe have stopped panic (for now). There are other debt shoes to drop, but its impossible to call where and when.

The chart to follow is the UUP [ETF for the dollar]

Positions

The  Positions Section = latest buys and sells  - These are positions I actually own – Updated over weekend.

Still holding very minor positions in VCI, ESRX & now UUP.  Was stopped out of SDS at 34.53 for 0% gain. 1/2 this position made +8% & 1/2 made +0%

Traders - High frequency traders and hedge funds dominate this market. Be careful.

China (its GDP, import, & export numbers) is the country to watch. BIDU is their AAPL [Both on YOUR Stock List] BIDU exploded +7.76% higher yesterday while AAPL was in line with major indexes – up +3.01%. BIDU, on a dip, seems like a decent but risky play.

The Beta play is back for now. If you do not understand “beta play” look it up in Investopedia & you should NOT be trading short term till you understand more. At the point you realize how much more everyone else knows than you/me, then think about short term trades.

Investors – We’ve had the first signs of the EURO stabilizing – Good treasury bond auctions abroad. The FXI EWZ(China & Brazil ETF’s) are still the best plays.  You could nibble a little on dip. However MO is +20 and it would be better to nibble at -20 and much better at -60 and best below -60.

Long Term Outlook = CAUTIOUSLY BEARISH

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

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