Tuesday, 31 March 2009

Nothing Much...

Still, I don't have much to talk about because not that much is happening that I think is important. The mainstream media is focuses everyday on the automakers, bailouts, federal reserve, and whatever else reasons they give for the market going up and down on a daily basis. But it doesn't matter much if you think about it seriously. Price is the only thing that matters. Is the price of that house, stock, gold, or oil barrel going up or down? That's really what matters. All the fundamental reasons or theories are just opinions. I can tell you what those markets are going to do BEFORE the fundamental reason comes out; (well after the fact), explaining the move. How? Because a chart tells you everything you need to know about a market at that moment in time. House prices? Going down so more. Why? Go look at a chart of home median home values and tell me the trend of the chart. Stocks? Near-term up. We have had a big rally, that I don't believe is finished yet. Gold? Going up much higher. Why? It's been going up for the last 8 years. No reason to believe otherwise until the trend changes. Oil? Sideways to up. Catastrophic fall must be retraced. It's that simple. You have to establish your own view of which way the market is going to go, then you figure out how to get on board.

Thursday, 26 March 2009

Did You Know?

"There are 75 million houses in America. Twenty four million don’t have a mortgage. Of those 51 million homeowners with a mortgage, approximately 15 million are underwater. "
by James Quinn
March 24, 2009

Chart Perusal: Your source for charts on the stock market and economy

U.S. Economy Shrank 6.3% in Fourth Quarter as Profits Fell Most Since 1953

Well, it shouldn't surprise anyone that U.S. GDP contracted more than estimated. The economists, government, and media have been underestimating this contraction for the past 17 months. But apparently it contracted more than estimated. Before you start listening to economists, government, and mainstream media you should have a look at their track record of predicting things. If you do your research, I think you will find that it isn't very good. In fact, it's terrible. "Current events form future trends." If you start waiting for other people to tell you things, you will always be late getting the information and it will probably be distorted. For example, in January 2008 the market plunged -6.12% and was the worst January EVER in the entire existence of the U.S. stock market. It doesn't take a genius to figure out that maybe 2008 wouldn't be so good for the stock market and the economy. Now, we have Bernanke and Obama telling us that the recession will end this year and that the economy is going to turn around. This is coming from people who didn’t even realize the crisis was coming. Well, I would like to see some concrete evidence rather than just sanguine cheerleading. Excerpts from the Bloomberg article today are below.

"The U.S. economy shrank in the fourth quarter more than previously estimated, leading to the biggest plunge in corporate earnings in a half century and underscoring why companies are slashing payrolls this year..."

"The economy has lost more than 1.2 million jobs this year as companies trim costs and rebuild profits..."

"Consumer spending, which accounts for about 70 percent of the economy, fell at a 4.3 percent pace last quarter, marking the first back-to-back decreases in excess of 3 percent since record-keeping began in 1947...."

"The World Trade Organization this week predicted global trade will decline by 9 percent this year, the most since World War II. Worldwide industrial production this year may fall by as much as 15 percent and the global economy is likely to shrink for the first time since World War II, the World Bank said on March 9..."

Link: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=acMfR.4T_Nfc

Wednesday, 25 March 2009

U.K. Gilts Slump After First Failed Bond Auction Since 1995

What does that mean? It means investors are losing their appetite for UK debt. It's not a surprise since every government in the world is running the printing pressing, and literally trying to out do each other. The private and quasi-government banking cartels can print as much money as they want and load up on debt but the question remains, "Who is going to buy your debt?" What country in the world is going to buy the ever expanding debt of the U.S.A., U.K., Spain, Italy, Germany, Mexico or Switzerland? Is Jamaica going to buy it? How about Sierra Leone, they gonna buy it? Or maybe even Laos? You have a global semi-coordinated devaluation of every paper currency in the world. (Which essentially makes it worth-less in the future.)

Tuesday, 24 March 2009

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

The Big Takeover: I haven't had much to say over the past week and a half because there just isn't much that interests me right now, as it relates to the market. It seems the market has made an intermediate bottom, and it's going to continue to rally. The advance of the past 10 days has just a powerful move upward, with no meaningful retracement. That to me indicates an aggressive stance by hedge funds, mutual funds, banks, and large speculators because who else can stop the market from going down? So for now, the intermediate trend has changed from down to up, but the primary trend remains down. What you need to understand is that it's possible to make money in a depression if you follow the tape. And when the tape says to go LONG, you go LONG, regardless of the fundamentals. Are there any good fundamental reasons to buy stocks now? Not really. And the ones you bulls think are good reasons ( i.e. low P/E ratios, higher dividend yield, etc.) are nowhere near where levels where major lows have occurred in the market in the past 100 years. We have more to go on the downside before we get there. I read this article from Rollingstone titled "The Big Takeover: The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution". If you want to know what's really taking place, it's worth a read. I will put some excerpts below and the link.

"It's over — we're officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far...."

"The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations..."

"In its simplest form, a CDS is just a bet on an outcome. Say Bank A writes a million-dollar mortgage to the Pope for a town house in the West Village. Bank A wants to hedge its mortgage risk in case the Pope can't make his monthly payments, so it buys CDS protection from Bank B, wherein it agrees to pay Bank B a premium of $1,000 a month for five years. In return, Bank B agrees to pay Bank A the full million-dollar value of the Pope's mortgage if he defaults. In theory, Bank A is covered if the Pope goes on a meth binge and loses his job."

"There's this notion that the regulators couldn't do anything to stop AIG," says a government official who was present during the bailout. "That's bullshit. What you have to understand is that these regulators have ultimate power. They can send you a letter and say, 'You don't exist anymore,' and that's basically that. They don't even really need due process. The OTS could have said, 'We're going to pull your charter; we're going to pull your license; we're going to sue you.' And getting sued by your primary regulator is the kiss of death...."

Link: http://www.rollingstone.com/politics/story/26793903/the_big_takeover/4

Wednesday, 18 March 2009

FOMC Meeting

I don't know what's going on today, but it's necessary to pay attention to what is happening because "current events form future trends." The FOMC released its statement today at 2:15 EST and a lot of markets skyrocketed. The stock market shot up, gold blasted off, oil exploded (although belated), treasuries got a bid up, and the dollar plummeted against other currencies. Essentially, you had 3 of the 5 major asset classes explode up. From a human psychology standpoint, there was a lot of emotion in these markets today. I don't know what this means yet, but today could be a sign of future trends in the market.

Friday, 13 March 2009

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

New Rally Just Beginning?

Well, Investor's Business Daily has now confirmed that we are in a market rally. That is probably their 5th or 6th confirmed rally declaration since the peak in October 2007. So, I don't think we should pay much attention to what they are saying. It's true that no new bull market has ever started without a reversal day and a consequent "follow-through day". But a bear market like this one deserves to be treated with caution when you get bullish signals that usually work. Because of extreme pessimism levels and an intense desire to sell each rally attempt fools people into thinking that "the bottom is in". I am skeptical of this current rally that we are in, which probably makes it more likely that it will last longer than I think. I was hoping and still am that we make one more new low, and then I can be confident that an intermediate low has been established. If we don't make a new low, I expect this rally to last several months. However, the "endgame" is lower lows in all the major indices over the next two years. Stocks have been bashed, people's pensions have been damaged severely, and confidence is low, but TIME is an important element. The rapid destruction of stock values and confidence will take time to repair, so it is unreasonable to assume that all the world's ills will be resolved in a few months just because the stock market went up for a few months. I contend that 514 days from top (October 9, 2007) to bottom (March 6, 2009) is not enough, in terms of duration, for the bear market to be over. Play the bounce, but realize it will be fleeting.

Thursday, 12 March 2009

Quote of the Day

"Business cycles end in recessions, but credit cycles end in depression."
- Larry Jeddeloh

Bloomberg TV interview
March 12, 2009

Job Losses

You tell me if this looks like your run-of-the-mill recession?! (And this was on February 6, 2009. Wake up.)

Wednesday, 11 March 2009

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

Lots of Debate: There was a lot of debate about whether yesterday's surge in the market was the start of something real or just another bear market rally. Arguing about whether it was or whether it wasn't is immaterial. People need to be thinking about their strategies and their views of the future movements in the market. People should only concern themselves (in my opinion) with trying to catch the major movements in the market (i.e. Trend-Following) because that's where the money is made. If people think the market is due for a rally, then they should be preparing themselves for that. If people think the market is going to plummet some more, then they should have a plan for that, too. But arguing about it is a waste of time. In the end, only one group (i.e. bulls or bears) will be right about the direction of the market.

Tuesday, 10 March 2009

Seismic shift

I think we are all witnessing (as we live through this depression) a seismic shift in the consumption habits of people in the U.S.. Also, i don't think it applies just to the U.S.. It is global in scale. The Fed and the U.S. government do not realize that they have been powerless in stopping deflation up to this point. Bernanke says he is re-capitalizing the banks by giving them credit. CREDIT is not capital. Capital comes from savings (i.e Capital formation). Because of this huge contraction in credit people have had to change their ways (e.g. the chart above). But i think the change we are experiencing now is one that will be burned into the pysche of anyone who has been a victim of this credit bubble implosion. You can see from the chart that consumtion in the U.S. has been rising steadily since the late 60s. I think this party has come to an end, and I say that purely from a technical standpoint. If this was a stock chart, I would say that it is peaking and I would be looking to short it because the next move is much lower. So, that means U.S. consumer buying foreign goods on credit is going to decrease. People in the U.S. have already realized this and have started to save. I think the trend we are going to see, is more saving and less spending.

Friday, 6 March 2009

How do we feel? Hmmmm.

Consumer confidence is at all-time lows. Not a surprise with all the devastation in the economy and markets that has taken place. Consumer confidence is just another barometer for social mood. The social mood has turned negative and pessimistic. The latest poll conducted by the American Association of Individual Investors survey was 70.27 percent bearish and only 18.92% bullish. These are record levels of pessimism. People are now waking up to the fact that things in the economy are not good, and the future does not look to bright either. The media and pundits will try to give statiscal numbers like consumer confidence and investor polls a significant meaning. These numbers in actuality are really not all that important. How does it help you make an investment decision? Does it tell you the best time to get out of the market? Does it tell you the best time to get into the market? Does it tell you how much money to put towards particular investments? The answer to all these questions is emphatically, No! So who cares what the consumer confidence number is? Therein lies the question. The answer is that these statistical measures are a gauge of sentiment. Period. They are important because they tell you how the market is feeling and gives you a sense of what the "herd" is thinking and feeling. The human element is crucial to market understanding. When everyone is ebullient and sanguine, it is time to be cautious because a turn down in the markets may be around the corner. And when everyone is fearful and glum, it is time to hopeful because a turn the other way may be on the horizon. In essence, separating yourself from the herd will allow you to spot opportunities in the market well before others realize what has happened.

Chart Perusal: Your source for charts on the stock market and economy

A picture is worth more than ....

I found this great graphic yesterday from businessweek.com. The saying goes, "A picture is worth more than a thousand words." This graphic explains my thoughts on comparing the biggest bear markets in the last century. Because of the massive credit bubble that is collapsing worldwide I think we will see the current bear market mimic (in magnitude) something like the 1929-32 slide.

Tuesday, 3 March 2009

Monday, 2 March 2009

That's a real print!

Below 7,000....That's horrible. Also, what people don't seem to realize that as the DJIA gets small in number; the big triple digit days are actually bigger in percentage which actually makes it more devastating. But people need to re-adjust to the new reality. The DJIA will not trade above 14,198.10 for a loooooooooooooooooong time.

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

It's Ugly Out There

So far today, it's been ugly!!! The bear market is growling viciously today. People who are holding long positions are getting decimated, and I am sorry to say,"It's going to continue." The number of pundits saying it was a bottom in November just look foolish right now. The severity of this bear is like nothing anything of these so-called Wall Street veterans have seen before. That's because this is a Supercycle degree bear market (look it up). And a bear market of this degree is followed by depression (period!). With that said, there will be large countertrend rallies within this bear market. The rallies are designed into fooling people to get back in, only for the rally to fail, and the market plunges to new lows. I think the Dow Jones will end this bear market in the 2500-3000 range (maybe lower, if it is really bad). But between now and then, I think we will see some countertrend rallies that only the nimble should participate in. We have been going down since October 10, 2007 (511 days including today), and the market has declined over 50%. This an unprecedented fall in the stock market, but this current decline is getting long in tooth, and we will see a significant bounce in the next 4-8 weeks. To be a a successful investor/trader you inherently have to be a contrarian. While everyone else is jumping out of windows, panicking, and selling their stocks, you have to be able to go against the crowd and calmly buy them up. And when they rise and get to overvalued levels and everybody is trying to buy them hand-over-fist, you have to sell them all the want. It's that simple. (But people don't like simple.)