Friday, 30 January 2009

Go out and buy stocks?

Yay, let's all go out and buy stocks! The economy contracted 3.8% last quarter! Stocks are cheap, right? Wrong! These bonehead Wall Street fund managers don't realize that this time period is like no other. Their normal playbooks aren't going to work. This is going to be a prolonged Depression, and it will take more than 3 months to fix. The stock market is a cumulative representation of man's progress and last year it had one of the worst years ever! The stock market is saying that this is serious and you should plan accordingly.

U.S. Economy Shrinks at 3.8% Pace, Most in 27 Years, as Spending Crumbles

Jan. 30 (Bloomberg) -- The U.S. economy shrank the most since 1982 in the fourth quarter of last year as consumer spending recorded the worst slide in the postwar era, a trajectory that’s likely to continue in coming months.
The 3.8 percent annual pace of contraction in the final three months of last year was less than forecast, with a buildup of unsold goods cushioning the blow. Without the jump in inventories, the contraction would have been 5.1 percent, the Commerce Department said today in Washington...

“This is a severe, steep, broadly based recession” with “no quick fix,” Stephen Roach, chairman of Morgan Stanley Asia Ltd., said in a Bloomberg Television interview from Davos, Switzerland today.
Unemployment Climbs
Americans may pull back further as employers slash payrolls. Companies cut 524,000 workers in December, bringing total job cuts for last year to almost 2.6 million. The unemployment rate last month was 7.2 percent, up from 4.9 percent a year before...

“We are clearly operating in an unprecedented economic environment that requires us to make some extremely difficult decisions,” Chief Executive Officer Gregg Steinhafel said in a Jan. 27 statement...
“We are probably looking at the sharpest downturn that anyone working at our company has seen,” Chief Executive Officer Charles E. Bunch said in an interview Jan. 27. “The regions outside of North America, which had been really helping PPG in the first three quarters of last year, have sort of caught the disease that started here in the U.S. with the credit crisis...

Source:
Bloomberg
January 30, 2009

U.S. Economy Shrinks at 3.8% Pace, Most in 26 Years, as Spending Crumbles

Thursday, 29 January 2009

"Velocity of Money"

The velocity of money is the average frequency with which a unit of money is spent in a specific period of time. Velocity affects the amount of economic activity associated with a given money supply. When the period is understood, the velocity may be present as a pure number; otherwise it should be given as a pure number over time. In the equation of exchange, velocity of money is one of the key variables determining inflation.
If, for example, in a very small economy, a farmer and a mechanic, with just $50 between them, buy goods and services from each other in just three transactions over the course of a year


Mechanic buys $40 of
corn from farmer.
Farmer spends $50 on
tractor repair.
Mechanic spends $10 on
barn cats from farmer

then $100 changed hands in course of a year, even though there is only $50 in this little economy. That $100 level is possible because each dollar was spent an average of twice a year, which is to say that the velocity was 2 / yr.

Source:
Wikipedia
Link: http://en.wikipedia.org/wiki/Velocity_of_money

Quote of the Day

"A man learns nothing from winning. The act of losing, however, can elicit great wisdom. Not least of which is, uh, how much more enjoyable it is to win. The trick is not to make a habit of it."

Source:
A Good Year (movie)

Confirmed Rally?

Investor's Business Daily is now stating that we are in a confirmed rally. Their claim that no bull market starts without a follow through day is true. Yesterday's big upward push in the market was because of a bank plan and Fed optimism? If you are investing your money according to Obama's new plan and the clowns at the Fed., then you don't really undersand how the markets work. After the rally and optimism fades away over the next few weeks, I think the market will roll over and head to new lows. Make sure you have your portfolio prepared for another leg down in the market.

Tuesday, 27 January 2009

Commentary: Your source for news, commentary, and stock info

When will we get to the end?: I think we are 1/3 of the way to the end of the bear market. I am nowhere near as sanguine about the prospects for a recovery in the stock market and the economy anytime soon. You should read the book, Anatomy of the Bear: Lessons from Wall Street's Four Great Bottoms by Russell Napier, if you want to know how to spot major bottoms in the stock market. None of them (including the bear market we are in) are the same, but they all have similar characteristics, and some things are absolutely necessary before you see a turn around in the stock market or the economy. 1) Automobiles sales; At major bottoms, you have the pent-up demand for vehicles explode and auto sales start to rise. We are definitely, years away from that. 2) Vegas and Macau pick up; Gambling joints start to see increased volume. People begin to spend money and casinos are one of the first businesses to enjoy that. Definitely not there either. 3) Commodity prices begin to bottom (and typically, they bottom before the contraction ends); Oil and natural gas are still plummeting, although not as much lately. Also, I think they made a new world record. They went from raging bull market to growling bear market in the fastest time ever. 4) Price stability; Definitely don't have any of that; House prices: Down, Stocks: Down; Currencies: Down (except for the dollar); That's called deflation (more precisely, credit contraction). 5) Companies start hiring; This comes a little later after the stock market bottoms, but typically companies start to reopen closed factories and hire new workers. Not there again either. Companies are still laying off workers, and that should continue until the end of the year.

I think we know what happened to the myth that "Home prices go up forever"

Monday, 26 January 2009

What Really Moves Markets?

Click on the link, watch the video, and you might find out: http://www.socionomics.net/history/

The Hunt Brothers


A story about NOT being an "insider" and too much leverage.

Friday, 23 January 2009

Real Money


Gold hit $901.30 today. Gold trading at this level is very important on many levels. From a trading standpoint, it is attempting to break out and continue its 8 year long bull run. Gold was one of the few investments up in the year of 2008. Gold is real money and has been real money for thousands of years. G. Edward Griffin, author of The Creature from Jekyll Island, makes a great point when he says "If you lived in Ancient Rome and you had a 1 ounce gold coin at that time, you could have purchased a handcrafted belt, a very fine toga, and a pair of sandals. That was the price of 1 ounce of gold. Today, thousands of years later; if you've got a 1 ounce gold coin with no numismatic value ( just a plain old bullion coin; 1 ounce of gold), you can exchange that for Federal Reserve notes, immediately go into a men's store and buy a nice suit, a handcrafted belt, and a pair of shoes. The value of that gold has not changed, in terms of money, for thousands of years." Gold represents real money in society, so keeping an eye on the price of gold relative to paper currencies bears watching in this financial crisis. With central banks around the world in a race to 0% interest rates, no wonder the yellow metal is trying to break out.

Thursday, 22 January 2009

Trade With An Edge

"Trading with an edge is what separates the professionals from the amateurs. Ignore this and you will be eaten by those who don't."
Source: Curtis M. Faith: Way of the Turtle


This applies to investing as well. You have to have some kind of strategy or plan that gives you an advantage to making good decisions in the selection of investments or trades. Without it, you are gambling. Having an "edge" separates winners from losers. The stock market does not create wealth. It is a method of transfer. The majority of losers transfer their wealth to the minority of winners.

Think About It

Now, in a previous post I highlighted the fact that the Euro and Pound were plunging in relation to the dollar. These two currencies are two of the most heavily traded currencies, but their recent volatility is not confined to just those two. It applies to the entire currency markets. Currencies have been moving up and down like roller coaster rides. Now, imagine you are CEO of a major international company. You have to deal with tightening credits markets, a consumer who is retrenching, and wildly fluctuating currencies. It might give you nightmares as to what to do with your business in the next 12-24 months. So, what do you do? You cut back. You can't be certain of what will happen, so you decided to ride out the storm by saving what you have and spending less. Sounds like your everyday consumer.

Not a Joke





Nokia cuts their dividend and says their CEO says, "In recent weeks, the macroeconomic environment has deteriorated rapidly, with even weaker consumer confidence, unprecedented currency volatility and credit tightness continuing to impact the mobile communications industry”


Meanwhile, Microsoft "may announce its first companywide job cuts as the software maker trims costs amid slumping demand.", says a Bloomberg Article.

Now, if you think it's a joke that this is a deep recession. You would be wrong. Blue-chip companies with cash are laying off workers and seeing slowing demand for their products. When you see even the most profitable companies scaling back, it is time to pay attention.



Tuesday, 20 January 2009

Sick Currencies

These currency pairs are trading at this today, January 20, 2009.

United States dollar (USD) 1: British Pound (GBP) 1.395

United States dollar (USD) 1: Euro (EUR) 1.295
Why? Because the world is running out of "willing and creditworthy private borrowers." You can't print more money to solve the problem of too much credit. Saving and investment leads to prosperity not borrowing and spending.

Monday, 19 January 2009

Quote of the Day


"Be less curious about people and more curious about ideas." - Marie Curie

Friday, 16 January 2009

Commentary: Your source for news, commentary, and stock info

"Word of the Year"

The American Dialect Society made their "word of the year": BAILOUT. Think about that one.

http://thestar.com.my/lifestyle/story.asp?file=/2009/1/14/lifefocus/3001641&sec=lifefocus

The Bailout Game


Does anybody believe these guys?

“They need to do something dramatic,” -- Why? If we don't we could be in for the next Great Depression? What happens if we don't do something dramatic? It looks like we are heading that way whether they do something or not. History shows that intervention only makes it worse. (Smoot Hartley Act, every gov't program enacted during the 1930s)
A big new initiative “is going to be necessary,” -- Necessary? So, that you can save failing banks. Save the people who took stupid risks, and now give the bill to taxpaying citizens. So the financial institutions can hold the power structure in place and keep people spending money and getting into debt.
Fed Chairman
Ben S. Bernanke called for “a comprehensive plan to stabilize the financial system and restore normal flows of credit,” -- Uncle Ben, wants to stabilize things. What has he stabilized? Anything? What plan could he possibly have now, after 2 years. Do you think people in '29-'30 realized they were sliding into a Depression?
“Buying toxic assets from banks is a good thing because I think confidence comes back into the banking system when you are certain -- or more certain -- that you have no time bombs ticking,” -- Oh, it is good to take money away from savers (tax paying citizens) and give it to spenders. (Greedy banksters). Yeah, confidence is really going to come back then.
“We must act with urgency to stabilize and repair the financial system,” -- Yeah, urgency and repair. The problem is that the financial system is broken. You have to get people to keep playing games at the casino, the problem is no one wants to play anymore. We don't want to spend, we just want to keep what we have.
“Doing something sooner rather than later to instill confidence is important.” -- Yeah, just keep doing things, and doing things. Eventually something has to work, right? The way capitalism works is that the market clears itself of the excesses. You start over and rebuild. By "doing something", you don't let the market funciton. People don't know how to plan. How long are you going to keep "doing something"?

These quotes are from a another Bloomberg article today. Does anybody believe these statements? How long are we going to hear them?

Financials in crisis!

Today was huge news. I am going to put in quotes from a Bloomberg Article today. "Citigroup posted an $8.29 billion fourth-quarter loss, completing its worst year, as the credit crisis eroded mortgage-bond prices and customers missed more loan payments. The stock rose after the company announced plans to split in two." These guys have lost billions of dollars for the last year. They lost $9.8 bil in Q4 '07, $5.1 bil in Q1 '08, $2.4 bil in Q2 '08, $2.8 bil in Q3 '08, and now just announced they lost another $8.29 bil in Q4 '08. What does that tell you? It should tell you that they are incompetent at running a bank and took huge risks. “It looks like a kitchen-sink quarter,” said Peter Sorrentino, who helps manage $16 billion at Huntington Asset Advisors Inc. in Cincinnati, including Citigroup shares. “Sweep it all in there and get this behind us.” Not likely. More pollyanna talk from another bogus fund manager who probably lost his clients money last year. They are all hoping this is the last of it. You can hear it in his comments, "Sweep it all in there". They just want it swept under the rug, and we will all go back to normal. It's not going to happen. The world markets are rallying on the news that the Fed will "do whatever it takes" to shore up the financial system. These guys are clueless. It is amazing people haven't realized that yet. Their actions should be showing people that they have no idea what to do to prevent the next Great Depression. Instead, because of the brain washing of the populous, people are made to believe they need these guys because they are the only ones who can save the financial system. THEY HAVE NO IDEA WHAT TO DO.

Thursday, 15 January 2009

Commentary: Your source for news, commentary, and stock info

464

464. That is how many days we are into the current bear market. Not a lot of people focus on time. People focus on large price declines and valuations to determine the end of a bear market, but time is left out of their analysis. An important part of markets is the human element. Psychologically and emotionally, it takes people a good amount of time to recover from a devastating bear market. I think it a very important aspect to consider. I put up the previous post to show the current economic contraction to previous ones. At present we are tied for 4th place in the last century. Consider this: The top 3 longest economic contractions (July '81-Nov. '82, Nov. '73-Mar. '75, Aug. '29-Mar. '33) each lasted 16 months, 16 months, and 43 months respectively. From their respective bull market peaks to their bear market bottoms, the bear market lengths in number of days was 469 days, 697 days, and 1,039 days. If you think the current bear market is going to be as brutal or worse than 1929-1933 (which I do), then we are nowhere near the end.

Just Nasty!!!


Wednesday, 14 January 2009

Learn to invest: Your source for investment or investments, stock, stock market, and stocks info

The 5 Asset Classes: (1) Stocks, (2) Bonds, (3) Commodities, (4) Currencies, and (5) Real Estate. That's it. These are the only 5 places to invest your money. There is nothing else. Anything else is just a derivative of one of the 5. So, with that being said, where to invest my money in 2009. Stocks? Nah, man. You are not going to get anything there except more of the same in 2009. Why? Because we are experiencing asset deflation not seen since the early 1930s, and it should continue for awhile longer. If you want to get involved in stocks, it should be on the short side. Many of these companies will go to zero, or close to it. When we get there it might be a good decision, but for now it is not to be touched. Bonds? Only if you want to become part of the sheeple stampede, going into treasuries thinking that the government will save them. People are actually paying the government to hold their money for them because they are scared of every other investment class. Wrong move again. Treasuries have been a super bull market since 1982. The return now is less than zero. So you lose again. You will also lose due to the massive money printing not just in the U.S. but worldwide. U.S. treasuries are going to be a massive short when everybody comes out of them. Maybe not this year or the next, because I expect treasuries to be artificially high because the Fed is propping the market up to keep U.S. interest rates low. How long can they do this? I can guarantee you it is not infinite; so when they stop and the sheeple do too, say hello to much higher interest rates, and bond market turmoil, in which case being short them will make you money. Commodities? These are interesting. They are not a buy now, but they will be before the end of the economic downturn. So far we are in the 13th month of this recession. Only 3 recessions have lasted longer than the current one, and my bet is that this one will either be 2nd or 1st all time (beating the contraction from 1929-1933). And if you look at history, commodities go up 200 to 300 percent after they hit bottom. Why? Because demand gets pent-up and supplies dwindle. In this current economic cycle (which is extraordinary, this time period will be written about for centuries. The fallout from the biggest credit bubble in the history of the world), commodities are getting crushed. But the commodity cycle which started in 1998 or 2000, which ever time period you choose, is not over. Commodity bull markets tend to last 16-18 years. So, if anything we are halfway. Oil is going to be a monster bull market, the fact that people are bearish on oil now; saying that the economic downturn will cut demand is only true in the short term. The long term fundamentals don't support oil staying below $40 forever. The entire developing world depends on oil for economic growth. So if any country wants to grow after the New Millennium Depression, they are going to need oil. You might have to wait another year or two, but I think oil is going to make a multi-year low very soon. Currencies? Wow, don't even get me started on this one. How is it that the US government is $11 trillion in debt (actually $53 trillion, if you add in other liabilities) and the dollar goes up? That's because this deflationary bust is so great that dollars actually gain purchasing power from all the deleveraging and liquidation going on. Hold onto your U.S. dollars for a little while, but after that get rid of them. The currency is going to be toilet paper. The Euro, Pound, Swiss Franc aren't any good either. They are all fiat money backed by nothing. And there is nothing to stop these government's from printing money to pay their obligations. So forget them, you will just have to keep switching from one currency to another to preserve your purchasing power. (i.e. wealth) Real Estate? I don't even need to say anything about it. NO. So there you have it. The 5 asset classes to invest in and all of them are horrific investments right now. This has only happened a few times in history, and we are living in it now. The best thing is to let this deflationary bust play out, and buy all of these asset classes of your choosing when they hit rock bottom. I think the DOW is going to 3,000 and the S&P 500 is going to 300, so stock won't be long term buys until then. Oil will hit a major low pretty soon after all this dumping. It will be a screaming buy. The only currency I like is NONE of them. But if I had to choose one, it would probably be one of the Asian currencies, because they are the only ones with money (i.e. actually wealth, natural resources, labor, trade surplus). Bonds are a horrific investment if you want to put your money with governments. The only bonds to buy are corporate bonds, and only if you are an expert in this field, which I am not. Why? This is based on the premise that not every company in the world will go bankrupt. Maybe some will survive, and they will be able to pay attractive interest rates. Especially because rates are going up. Real Estate has already come down a lot, and will come down even more. There are a lot of people saying it is time to buy real estate, they are wrong. Go look at a chart of real estate prices. The chart is plummeting straight down. Wait until you start to see prices make a long, sustainable base before buying real estate.

Commentary: Your source for news, commentary, and stock info

3 Things for 2009: 2009 is just beginning, and today's early decline is what investors and traders should expect more of this year (i.e. Declining Markets). Now, declining markets get a bad wrap, and the main reason they do is because most people don't understand or even take the time to learn how to profit from falling markets.They are like tennis players with a strong forehand (long only) and no backhand to speak of (going short). Every tennis expert knows to dominate on the court takes skills in both areas. But when it comes to trading and investing, most people put their focus only in buying. And with a bear market like we have today, having only a long only bias will get you killed.One of the reasons many people have that bias in the first place is because they watch all these financial shows and listen to so-called gurus thinking that they will somehow unlock the key to riches by watching or listening to these people. Only hard work, study and discipline will actually unlock the key to riches in the stock market.My advice today is to 1) LEARN HOW TO READ CHARTS. They will tell you what is happening well before the media tells you. I spend about 10 hours a day looking and studying charts, and once you start to do the same thing you will start to recognize patterns and these patterns will recur over and over again. From being able to spot these patterns you will be able to develop a strategy that may help you win in the markets. 2) LEARN HOW TO SHORT - So that you can take advantage of falling markets while everyone else is panicking and crying about how much money they lost last year. And even more watching their 401ks or pension accounts go down the drain. Take control of your own financial well-being and be responsible for yourself. 3) STOP WATCHING FINANCIAL TV AND GURUS - Take the time to learn how the stock market works. There are plenty of good books. Read the recommended books on the left to get started. Financial TV and gurus have no accountability and they won't be there to tell you when to sell; most likely, after telling you how great a buy something was.

Tuesday, 13 January 2009

Hiatus

I have been on a serious hiatus from the world in my financial dungeon, but I am ready to come out with some thoughts and views on the world and the financial markets. I am going to do this blog differently than before. Initially, i wanted to do it as a tool that people could use to learn from. I will still have education stuff like that, but I want share more ideas and topics about the world and markets to the blog site. Since the last time I posted, a lot of things have happened in the financial markets. I have a lot to say about what has happened and what will happen in the future. And in actuality, it is too much to post in my first blog since I am back. I will just let my thoughts and ideas spew out on the screen as I go through them all.

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