Health care stocks have sky rocketed because investors think the Obama health care bill is dead. But that bill will rise again in congress in about a month. Then Obama welfare healthcare will not only be more expensive; it will destroy the current healthcare industry in America and stocks prices will react.
Market forces July 28
Summer is the prime house buying time for families because they can enroll in the new school system. So sales and prices normally go up in June and July. Therefore you are supposed to compare year to year changes for each month for the truth (seasonally adjusted). GE/MSNBC/Pravda compared month to month and said the gain was real. Then they lied and said that the correct way was the wrong way. So in reality the economic news continues to be grim but GE/MSNBC/Pravda lie and spin the news just as they lie and spin the news about the Obama administration.
Fannie and Ginnie May continue to provide the don't tell/don't ask fraudulent bad loans that the Senate Banking Committee (Rangel and Dodd) forced down the bank's throats that is the corrupt government practice that raise mortgage investment risks from under 1% to over 5% and broke all the world banks. With a 1% risk level a 20:1 bank leverage has 400% safety margin. With 5% risk a 20:1 bank leverage means financial collapse. Wall Street and the banks created cheap derivative mortgage products that did not consider the socialist entitlement that welfare recipients now have to houses. Reports are that those don't ask if they don't tell loans are still being made to unqualified mortgage applicants.
Therefore while a correction is in order, we have resumed the drunken binge of 2005 and we have a bubble already starting in this bear market. So we expect frequent and large market swings. However if you look at the data carefully you will see that the traders are selective and hit fewer stocks but much harder such that the index averages do not change as much. They are doing it by index sectors. Psychologically rotating index sector sell-offs hurt the long-term investor who is often devastated and sells at the wrong time. Right now it is the insiders vs. the investors and the insiders are winning.
But don't think you can profit by buying their funds. Those hedge fund managers report large gains but then take all the extra money for their own bonuses. You the shareholder get close to nothing. We need to understand what they do. It creates an investment opportunity to investors who can ignore GE/MSNBC/Pravda/Goerbels lies and use trending to buy in at the bottom just before the hedge funds switch from shorting a sector to buying the sector.
Market Outlook
The recent rally has the market in a highly overbought position again. We expect U.S. stocks to continue with slides that represent buying opportunities and then wild optimistic appreciation (as we have just had) that can be times to take profits. We think investors will do better if they trend sectors now and buy after the hedge funds attack a sector not when optimistic investors push it to new highs. That seems to be what the funds are doing.
Health care stocks are presently being pumped by GE/MSNBC/Pravda/Goerbels so that we take as a warning that hedge fund shorting of that sector will soon begin. Jim Cramer is a hedge fund stooge so he is good to watch as long as you know the roll he plays.
Last night Asian markets were down sharply: China down 5%, Hong Kong down 2.4%, Japan up 0.2%, and India down 1%.
Today most European markets are undecided in a range of -1% to +1% half way through their session.
US futures indicate about a -0.5% USA market opening this morning.
We will continue cherry picking into and out of the market. We expect the decline will be the typical rotation with sharp drops in some individual stocks while other stocks flatten out or rise and then decline so the change in the market indices will be much smaller. It will be as though time was compressed and hence investing will require more trading skill. We watch the sectors carefully because hedge funds seem to deflate one sector at a time and then let investors pump them back into overbought territory. They can do that best during the kind of rallies we see in this sideways market.
The new socialist administration destroys every free market sector they touch. Why is it that congress and federal employees would get better health care than what they give the rest of us? They are going to entitle another 40 million people who pay little in taxes. Why don’t they get to use your congressman's doctors and plan instead? Entitlements are already bankrupting social security and Medicare.
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