Socialism is the system where incompetent people with political power run rough shod over free enterprise and competition.

Market forces June 25

While billionaire Warren Buffett and business partner Charlie Munger can’t predict how stocks will perform in 2009, they’re certain “that the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond.” Buffett said the consequences of the U.S. housing bubble are now “reverberating through every corner of our economy.”

The Standard & Poor’s 500 Index will probably gain in three-quarters of the next 44 years, just as it did in the period since Buffett took over Berkshire Hathaway Inc. in 1965, he said to his company’s shareholders.

Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982, the Commerce Department said yesterday in Washington.

Yesterday started with a bull trap and a short squeeze for timid hedge funds to wring out both the arrogant bulls and the timid bears. Again it was on low volume which means the market could easily plummet to new lows just the opposite we saw in the low volume bear market rally we experienced this spring.

The Federal Reserve sought to hide its involvement in Bank of America Corp's acquisition of Merrill Lynch as Merrill's financial condition worsened, the top Republican on the House Oversight and Government Reform Committee said on Wednesday. The Fed "engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," Representative Darrell Issa said in a statement released to Reuters. This is obvious from testimony and documentaries broadcast last week. When CEO Lewis spoke up, democrat-socialists across the nation were given marching orders to vote to throw out Lewis with their union and state pension plan proxies. We told here how the Democrat CT. treasurer was part of that socialist power play when it happened.

Bernacke knows nothing! Yet he and a chorus of Democrat-Socialists conspired to destroy CEO Lewis of BOA and everyone knows it except for Mad Money's Cramer of the GE/MSNBC/Pravda/KGB conglomerate. The GE/MSNBC/Pravda/KGB conglomerate is a self-serving and anti free enterprise monopoly and by far the biggest beneficiary of US government contracts. GE uses its substantial MSNBC propaganda machine clout to undermine critical USA defense programs by undermining important defense products that do not profit GE. They lobby against the Lockheed stealth Raptor F22, the Boeing C17, the Lockheed JSF and other defense systems for which the GE/MSNBC/Pravda/KGB conglomerate has limited profit potential. The GE/MSNBC/Pravda/KGB conglomerate is well known to have lousy arrogant management and would have been broken up if it were not for the fact that MSNBC protects GE and does such a good job destroying capable people and competitive US defense programs. But that is the definition of socialism. Socialism is the system where incompetent people with political power run rough shod over free enterprise and their competition. It is business management by political slimy slugs and arrogant lice. I'm sorry if I am beginning to sound like a Brit., but the British do have a good vocabulary for describing socialist leaders.

Market Outlook

The very light market volume on market advances indicates the market has not stopped going south. We gave you a countdown and it has been six business days since we predicted the bear market rally had ended. Now is the time to begin to cherry pick into the market as individual stocks give up their recent bear market rally gains.

The herd of hedge funds likes to follow the lead analyst's sell recommendation with few exceptions because the lead analyst did such a good job on the up side. So they get out en masse and the stock plummets to near its old low. That is the time to cherry pick back into the market. There is greater than a 50% chance that companies with better management will disappoint the analysts first because they tend to be more honest. They get clobbered for refusing to make the rosy forecasts the Key analyst needs to have the market prove the key analyst is correct. So the first stocks to fall are the great stock buys when the hedge funds finishing dumping on them and the key analyst thinks their management has been sufficiently punished for refusing to lie.

Once the avalanche begins it rumbles through most of the rest of the market providing investors with a continuous stream of buying opportunities. Remember to buy after the stock goes down, not now just because we have a buying opportunity. We should be able to buy stocks after at least a 50% retracement of their recent advance. If a stock rose 30% in the last rally we should be able to buy it 10% to 25% lower than its recent high. We plan to give a count down again to the time when it would be wise to start selling and taking profits cherry picking out of the market.

Bonds will be a very bad investment when inflation kicks in this year.

The world is becoming politically and economically unstable under President Obama similar to the world in the 1930s. We continue to have zero confidence in all socialist economies. The risk of enormous investment/currency losses in emerging economies is now high.

The dollar is strong now because the US printing press money is being absorbed by the America’s bank deleveraging process. But when that ends and American wealth falls under heavy democrat-socialist Obama taxation next year the dollar will likely fall.

American socialists are not just interested in redistributing American wealth to other Americans. No, they are international socialists and plan to distribute America’s wealth around the world. The Al Gore environmental farce is part of the socialist world wealth redistribution plan. Internationalist socialism is another name for failed communism. "Cap and trade" will prove to be the biggest con job of this decade. We can hardly wait for them to trade the derivatives of the hoax. The Waxman-Markey cap and trade bill will prolong and exacerbate the recession and stifle any chance of a quicker economic recovery. It will squeeze state budgets, make US businesses less competitive, and is estimated to have a price tag of $175 per American household per year.

Last night most Asian markets were up with China up 0.1%, Japan up 2.1%, and India down -0.5%.

Most European markets are down sharply today in a range of -0.7% to -1.4% half way through their session.

US futures are flat lined at the start today.

We are cherry picking in now and very very slowly so, for what we expect to be about two months.

Over the next two months we expect to see a stock market sell-off of about 26% as investors realize this Obama crisis of socialism will get deeper and will last at least another one or two years. But we expect to see a divergence in commodities vs. the stock market as the adverse effects of the FED inflationary policy kicks in later this year. That may be the low point this year.