The world markets are generally in positive territory again today. Typically the market moves in waves of buying and selling. Traders concentrate on the daily ripples and institutional money managers focus on three years or longer but continually turn over their portfolio once or twice during the year because there are many sectors and they are always rotating. In the past I did some rotating about every three months when stocks hit relative highs that met my original targets. The Re-spiral method I have tested for two years and now use tends to work for major moves in once a year and out once a year when I go into more cash or short positions. So since I am now in the market I would not be surprised to see a sell signal some time in 2009 only because statistically that is what tends to happen. However the method does not predict such an event at this time and with the new “President Obama” the honeymoon with the analysts and newly polyannerized press the stock market could go right up all year long.
The housing implosion could be solved by mid year causing hundreds of $billions in upward revisions to bank assets with tens of $billions in profits immediately. Because Obama has already attracted such wealthy (though perhaps addle minded) patrons as Soros and Warren Buffet we can expect even more international wealth to be attracted back to the stock markets. We can expect the dollar to start off weak favoring investment abroad but later there would be long term profits from relative improvements in American exports. So we would want to rotate into more domestic investments before the dollar started to strengthen again. Ideally the dollar would be weak well into summer to bring tourism to America in 2009.
Therefore in 2009, even if the stock market moves up all year we expect the need to at least rotate investments over the year. Currently we favor high dividend stocks with safe balance sheets (cash and little debt). Those are a mix of US and foreign at this moment. Also Asian and Pacific stock ETFs (excluding Japan) still look oversold and in an upturn at this time.
At a minimum we should be diversified over five sectors... but that implies about $20,000 minimum. Less than that implies risk which increases toward 100% as a portfolio approaches $2000 because $2000 is where some brokers begin to annoy their customers because they in general do not like the small investor. Above $100,000 the expense side gets appreciably smaller and by the time your portfolio hits $500,000 they roll out the red carpet for you.
The last week or two of the year is usually bullish because the market makers want to put more money to work and show some great stocks in their portfolio. So these low volume good days are no guarantee 2009 will start off good. But I do indeed expect a good start in January. Most of the analysts favored Obama and so we should not fault analysts for their emotional and irrational negativism in the last days of the Bush administration. They want President Bush to look as bad as possible so that Obama will look that much better. But when Obama becomes president in twenty days you are going to think the campaign has begun again. The analysts will be falling all over themselves to say good things about the American economy to make the new “President Obama” look more infallible than the Pope. Don’t be surprised if international leaders including the Pope come to Washington for an audience and perhaps a blessing from “President Obama”. The stock market should shoot up at least 100 days until the first setback.
Have a very prosperous new year.
Wednesday, December 31, 2008
Tuesday, December 30, 2008
President elect Obama's economic Gatorade. Analysts should do some analysis from time to time.
CNBC analysts should do some analysis from time to time.
CNBC analysts are predicting the USA markets will bottom before Asian markets. Jim Cramer said the Asian markets still have a way to go before they bottom. Someone on CNBC later last night said that the market still has to fall 90% from where it is today before it is the bottom… and he said it with a straight face.
Someone needs to wake them up. The following Asian markets bottomed at the end of October 2008.
http://finance.yahoo.com/echarts?s=%5EHSI#symbol=%5EHSI;range=1y
http://finance.yahoo.com/echarts?s=000001.SS#chart1:symbol=000001.ss;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
Even Japan looks like it bottomed back then.
Japan
http://finance.yahoo.com/echarts?s=%5EN225#symbol=%5EN225;range=1y
No one can predict the future and another war or a terrorist attack could put the world in a tailspin. But the extreme negative attitude of almost all the stock advisors is usually a sign that we bottomed.
Jim Cramer said we need to see the selling panic when prices decline rapidly and everyone is selling before we have a bottom. I would ask Jim what does he think happened in October 2008.
Jim Cramer said we need to see low volume at a bottom because everyone who would or could sell was sold out. I would ask Jim what does he think is the cause of the low market volume for the past few weeks?
It is possible that in six months we will be up 30% and then down 20% so we may almost be flat as happened in the 1970's. That was because Jimmy Carter gave America a new economy called stagflation. That could happen with the Obama policies too. But if that is the type of policy we see we should have time to sell everything before the policy takes effect.
Personally I see president elect Obama as giving the money to the private sector not state and federal bureaucracies and hence he is planning a private sector stimulation package not socialization. Countries with inflation print the money to pay their federal workers, police, and the military needed to maintain their proletariat socialist dictatorships. The bureaucrats then spend the money and buy everything so the stores are bare. By the time the private sector has the money inflation has wiped out its value.
But president elect Obama indicates the stimulation packages will go to individuals, private vendors, and private contractors not to our government bureaucracy. So we should jolt ourselves back into prosperity with Obama's economic Gatorade.
CNBC analysts are predicting the USA markets will bottom before Asian markets. Jim Cramer said the Asian markets still have a way to go before they bottom. Someone on CNBC later last night said that the market still has to fall 90% from where it is today before it is the bottom… and he said it with a straight face.
Someone needs to wake them up. The following Asian markets bottomed at the end of October 2008.
http://finance.yahoo.com/echarts?s=%5EHSI#symbol=%5EHSI;range=1y
http://finance.yahoo.com/echarts?s=000001.SS#chart1:symbol=000001.ss;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
Even Japan looks like it bottomed back then.
Japan
http://finance.yahoo.com/echarts?s=%5EN225#symbol=%5EN225;range=1y
No one can predict the future and another war or a terrorist attack could put the world in a tailspin. But the extreme negative attitude of almost all the stock advisors is usually a sign that we bottomed.
Jim Cramer said we need to see the selling panic when prices decline rapidly and everyone is selling before we have a bottom. I would ask Jim what does he think happened in October 2008.
Jim Cramer said we need to see low volume at a bottom because everyone who would or could sell was sold out. I would ask Jim what does he think is the cause of the low market volume for the past few weeks?
It is possible that in six months we will be up 30% and then down 20% so we may almost be flat as happened in the 1970's. That was because Jimmy Carter gave America a new economy called stagflation. That could happen with the Obama policies too. But if that is the type of policy we see we should have time to sell everything before the policy takes effect.
Personally I see president elect Obama as giving the money to the private sector not state and federal bureaucracies and hence he is planning a private sector stimulation package not socialization. Countries with inflation print the money to pay their federal workers, police, and the military needed to maintain their proletariat socialist dictatorships. The bureaucrats then spend the money and buy everything so the stores are bare. By the time the private sector has the money inflation has wiped out its value.
But president elect Obama indicates the stimulation packages will go to individuals, private vendors, and private contractors not to our government bureaucracy. So we should jolt ourselves back into prosperity with Obama's economic Gatorade.
Monday, December 29, 2008
2009 looking better all the time
MasterCard use was down 8% in December. MasterCard started a new finance charge policy and moved due dates forward limiting some users to just one week to pay without a $50 late charge. So people try new cards with no annual fees, 2% direct rewards and a two week due date. But the bad-news-analysts are using MasterCard today to say sales are down. That is not true, it is MC that is losing business this holiday season not stores at least in New England. But it is good that the market is not listening to the bad-news-analysts like Mad Money and Fast Money all who failed to detect the market bottom in November. They want to frighten stockholders so that they can create a new bottom so they can say how smart they are. But American and Asian markets are now completing their third ascending market bottom and European markets are completing their second ascending market bottom. Asian markets are up 0% to 1% today and European markets are currently up 1% to 2% and American market futures are up slightly again.
The real good news is that the bad-news-analysts have lowered retail sales expectations so the market will respond even better when the truth comes out. Last year when we all should have sold out the Pollyanna-analysts were saying retail sales were up when we were telling the truth that the malls were relatively empty. We were right and they were wrong last year by about the same magnitude as they are wrong this year. This year we are seeing shopping malls filled more than last year but not as crowded as two years ago and we are seeing mail orders flat to slightly rising. So we expect a slight improvement in retail sales this December relative to 2007 and that will be great news for the market because the market expects a loss now.
We expect the next administration will give the average taxpayer several thousand dollars in 2009 to stimulate the economy. We expect it will be at least four times the stimulation the economy got in 2008 plus we expect the administration to postpone the expiration of the tax breaks the rich were getting under president Bush so they will be happy too. The stock market has discounted expectations that the new administration will tax investors heavily and put federal sin taxes on gasoline, fuel oil, big cars and big houses. It now appears that will not happen soon. The collapse in fuel prices will put a hold on left wing nonsense and there is evidence that President Elect Obama will unfetter the nuclear energy industry so that nuclear energy will come on line when oil shortages begin in ten years. We can expect the new administration to leave American oil in the ground until it appreciates more and remains high in price.
We saw poor sales at specific stores such as Home Depot, Lowes, AnnTaylor, Talbots and Sears and a few electronics stores. On the other hand discount stores were packed.
Talk show "experts" are saying, "Probably 50,000 American stores could close in the spring without any effect on consumer choice." Retail profit margins would then improve considerably. But construction will stay in the doldrums and it will be very tough for Home Depot. Confusing payment notices intermingled the long term interest free and short term credit. Customers do not like finance charges that result from the confusion on amounts and dates due. It may be the new bank policy but it could damage them as it is evidently damaging MasterCard with reported 8% reduced card usage in December. At worst, national sales are currently reported only down about 2%.
We expect the first week of January, and the month of January to set the stage for an advance in the stock market in 2009.
Since we expect the economy to turn up in 2009 we expect the stock market to end higher than it leaves 2008. At some point in 2009 we expect the market to be up 30% to 40% from the low in 2008.
But if the market had a high of 100 in 2007 and lost 40% to hit a low of 60 in 2008 then a 40% rise from 60 gets the market back to only 84. That is why people will switch from cash back into the market. They will see a 40% profit even if the market it is at 84 (or down 16% from the 2007 high).
The people who bought in at the low in 2008 will see 66% profit when the market recovers to the 2007 level. That is 66% more profit than the average gains from investing in equities because that just gets us back to where we started.
The real good news is that the bad-news-analysts have lowered retail sales expectations so the market will respond even better when the truth comes out. Last year when we all should have sold out the Pollyanna-analysts were saying retail sales were up when we were telling the truth that the malls were relatively empty. We were right and they were wrong last year by about the same magnitude as they are wrong this year. This year we are seeing shopping malls filled more than last year but not as crowded as two years ago and we are seeing mail orders flat to slightly rising. So we expect a slight improvement in retail sales this December relative to 2007 and that will be great news for the market because the market expects a loss now.
We expect the next administration will give the average taxpayer several thousand dollars in 2009 to stimulate the economy. We expect it will be at least four times the stimulation the economy got in 2008 plus we expect the administration to postpone the expiration of the tax breaks the rich were getting under president Bush so they will be happy too. The stock market has discounted expectations that the new administration will tax investors heavily and put federal sin taxes on gasoline, fuel oil, big cars and big houses. It now appears that will not happen soon. The collapse in fuel prices will put a hold on left wing nonsense and there is evidence that President Elect Obama will unfetter the nuclear energy industry so that nuclear energy will come on line when oil shortages begin in ten years. We can expect the new administration to leave American oil in the ground until it appreciates more and remains high in price.
We saw poor sales at specific stores such as Home Depot, Lowes, AnnTaylor, Talbots and Sears and a few electronics stores. On the other hand discount stores were packed.
Talk show "experts" are saying, "Probably 50,000 American stores could close in the spring without any effect on consumer choice." Retail profit margins would then improve considerably. But construction will stay in the doldrums and it will be very tough for Home Depot. Confusing payment notices intermingled the long term interest free and short term credit. Customers do not like finance charges that result from the confusion on amounts and dates due. It may be the new bank policy but it could damage them as it is evidently damaging MasterCard with reported 8% reduced card usage in December. At worst, national sales are currently reported only down about 2%.
We expect the first week of January, and the month of January to set the stage for an advance in the stock market in 2009.
Since we expect the economy to turn up in 2009 we expect the stock market to end higher than it leaves 2008. At some point in 2009 we expect the market to be up 30% to 40% from the low in 2008.
But if the market had a high of 100 in 2007 and lost 40% to hit a low of 60 in 2008 then a 40% rise from 60 gets the market back to only 84. That is why people will switch from cash back into the market. They will see a 40% profit even if the market it is at 84 (or down 16% from the 2007 high).
The people who bought in at the low in 2008 will see 66% profit when the market recovers to the 2007 level. That is 66% more profit than the average gains from investing in equities because that just gets us back to where we started.
Wednesday, December 24, 2008
What we need is courage and common sense not the greed of geckos
But Jim Paulsen however says we need more Greed.
"Strategist Jim Paulsen at Wells Capital Management said "we need people wanting to step and buy cheap assets. Greed and value are starting to entice buyers, and I think that is a good sign that maybe we're at the front end of the end of this thing." The secret for January, Paulsen says, is to help unfreeze the panic in the healthy economic players who have jobs and businesses; to persuade them that "it's O.K. to go out and spend some money again. It might be O.K. to hire again. It might be O.K. to buy a car."
Jim Cramer said Goldman Sachs December 16 conference call outlined the bleak crises we are in. Analysts like Jim Cramer have started bashing the market again because they see now that they missed the bottom and they look bad. They would like the markets to drop again so that they can tell investors to get in and claim they called the bottom. Rapid deleveraging had put pressure on the markets. The Goldman Sacks December 16 conference call on the global economic crisis says the higher risks today are driving Goldman to better risk management. We listened to it and it was an example of good prognostics and it drove GS up14.35% that day. You can listen to it at:
http://www2.goldmansachs.com/our-firm/investors/presentations/current/2008-fourth-quarter-results.html
One of the problems is that the deal makers are not doing stock swaps because they can’t take any taxpayer money that way. They want to do deals with taxpayer money now so they can walk away wealthy and not have to actually merge two companies and make it work. But that will change as the market continues to improve.
The banks like GS are leveraged 8.8 to 1 and cannot afford to loan money to Geckos because due to leverage they lose equity 8.8 times as fast as the Wall Street geckos like Madoff and the company, Cerberus, fleece investors.
Daimler Benz still owns 20% of Chrysler. The only thing Cerberus has going for it now is it contributed $millions to Republican candidates and nothing to the Democrats. (You can confirm this yourself) But billions in taxpayer aid could change all that. The perception of Wall Street corruption will only grow if the new president extends the loans next year and then Cerberus starts a similar payoff for the Democrats using taxpayer money.
We said that it was first the failure of the Bush administration to comprehend the moral hazard of loose "consequence free" financial oversight and secondly the slamming of the economy by democrat candidates that caused the current crisis of confidence that brought down the most leveraged and most corrupt American financial institutions. As the situation worsened financial markets demanded more collateral on capital exchanges and that caused the cash crisis. Now as the market bottoms and then reverses direction, the perceived risk will begin to decline and the cash crisis will turn into a flood of cash liquidity. That is when investors, corporations, and funds will flood the stock market with cash to buy up stocks which are now the best buying opportunity we have seen since before the Regan administration which gave us the longest growth period in American history.
Corporations are actually sitting on the side lines loaded with cash right now. This is the best opportunity they have ever had to buy back their stock without increasing their debt.
Yesterday US volume was again historically low and the market declined. That is much better than record low volume and a market advance. What it illustrates is the highly volatile shorting has subsided and shorting is becoming high risk at this point.
All Jim Cramer’s and other analyst’s efforts to induce another market low so that they can give a belated buy recommendation... has been to no avail so far.
Today Asian and European markets are net down slightly indicating international selling is also subsiding. The US futures show little selling pressure as well.
Again we recommend you listen to the up-beat Goldman Sachs report yourself to see why their stock jumped more than 14% that day when the analysts such as Jim Cramer tried to paint that conference call as a doomsday call. The dooms day analysts all feel very badly now that they missed calling the first and then missed the double market bottom call and so they want to induce a triple bottom if possible.
Fat chance they have.
"Strategist Jim Paulsen at Wells Capital Management said "we need people wanting to step and buy cheap assets. Greed and value are starting to entice buyers, and I think that is a good sign that maybe we're at the front end of the end of this thing." The secret for January, Paulsen says, is to help unfreeze the panic in the healthy economic players who have jobs and businesses; to persuade them that "it's O.K. to go out and spend some money again. It might be O.K. to hire again. It might be O.K. to buy a car."
Jim Cramer said Goldman Sachs December 16 conference call outlined the bleak crises we are in. Analysts like Jim Cramer have started bashing the market again because they see now that they missed the bottom and they look bad. They would like the markets to drop again so that they can tell investors to get in and claim they called the bottom. Rapid deleveraging had put pressure on the markets. The Goldman Sacks December 16 conference call on the global economic crisis says the higher risks today are driving Goldman to better risk management. We listened to it and it was an example of good prognostics and it drove GS up14.35% that day. You can listen to it at:
http://www2.goldmansachs.com/our-firm/investors/presentations/current/2008-fourth-quarter-results.html
One of the problems is that the deal makers are not doing stock swaps because they can’t take any taxpayer money that way. They want to do deals with taxpayer money now so they can walk away wealthy and not have to actually merge two companies and make it work. But that will change as the market continues to improve.
The banks like GS are leveraged 8.8 to 1 and cannot afford to loan money to Geckos because due to leverage they lose equity 8.8 times as fast as the Wall Street geckos like Madoff and the company, Cerberus, fleece investors.
Daimler Benz still owns 20% of Chrysler. The only thing Cerberus has going for it now is it contributed $millions to Republican candidates and nothing to the Democrats. (You can confirm this yourself) But billions in taxpayer aid could change all that. The perception of Wall Street corruption will only grow if the new president extends the loans next year and then Cerberus starts a similar payoff for the Democrats using taxpayer money.
We said that it was first the failure of the Bush administration to comprehend the moral hazard of loose "consequence free" financial oversight and secondly the slamming of the economy by democrat candidates that caused the current crisis of confidence that brought down the most leveraged and most corrupt American financial institutions. As the situation worsened financial markets demanded more collateral on capital exchanges and that caused the cash crisis. Now as the market bottoms and then reverses direction, the perceived risk will begin to decline and the cash crisis will turn into a flood of cash liquidity. That is when investors, corporations, and funds will flood the stock market with cash to buy up stocks which are now the best buying opportunity we have seen since before the Regan administration which gave us the longest growth period in American history.
Corporations are actually sitting on the side lines loaded with cash right now. This is the best opportunity they have ever had to buy back their stock without increasing their debt.
Yesterday US volume was again historically low and the market declined. That is much better than record low volume and a market advance. What it illustrates is the highly volatile shorting has subsided and shorting is becoming high risk at this point.
All Jim Cramer’s and other analyst’s efforts to induce another market low so that they can give a belated buy recommendation... has been to no avail so far.
Today Asian and European markets are net down slightly indicating international selling is also subsiding. The US futures show little selling pressure as well.
Again we recommend you listen to the up-beat Goldman Sachs report yourself to see why their stock jumped more than 14% that day when the analysts such as Jim Cramer tried to paint that conference call as a doomsday call. The dooms day analysts all feel very badly now that they missed calling the first and then missed the double market bottom call and so they want to induce a triple bottom if possible.
Fat chance they have.
Tuesday, December 23, 2008
January shaping up to be a good month for investors too.
Selling in Asia precipitated by the smaller than anticipated moves to stimulate the economy of China. But given the higher volatility of Asian markets the three-month trends are normal and are on a path to recovery. European markets are up modestly as are the USA market futures.
We can expect the European contraction to be more severe than most of Asia because they are trying to keep their currency stronger as Japan has done. This is because Germany now dominates the European economics, and Germany and Japan share a propensity for austerity even to the degree that it causes them economic pain. If all economies acted in unison there would be smaller imbalances and fewer currencies attacks from traders but it also results in greater economic volatility because everyone has peak demand at the same time and then commodity price collapses at the same time. Longer periods of expansion tend to exacerbate the alignment of economies. But if the USA and China were 180 degrees out phase commodities would not have such great swings because demand would be more uniform. That would help the developing world grow. But with the financial credit system currently in locked step, going against the trend as Germany and Japan tend to do is better for the world economy but very difficult and costly.
December 22 had very low market volume on the price decline. That is actually a good trend. We want advances driven by high volume and declines on low volume because that indicates money, overall, are flowing into the market. The USA market three-month trend is ascending but the parabolic SAR trend lines have been hit so there is now an increased probability of consolidation and possibly a small decline. The MACD for each market is still positive but is declining.
Last year at this time we pointed out that we could see retail sales were way down in New England because parking lots were partially empty at mid day. We were advising that the economy was headed to a recession. But the Wall Street analysts were telling the public the opposite. They wanted the public to buy when the market was beginning to collapse. We said the January retail sales reports would show that Wall Street was not telling the public the truth.
This year we see in New England that sales are better than last year but Wall Street has shorted the market and you are now hearing them falsely declaring that retail sales are down the season.
So take heart, because we can expect January reports will be better news and will help the advance into the next year. Already the Thanksgiving sales were reported up a modest 3% while Wall Street short sellers had declared it a disaster. Wall Street short sellers do not want investors to profit they want to profit themselves and for more than a year the profitable hedge funds have been shorting the markets so they profit by driving down stock prices. This trend in the USA has been reversing since October but they still want to panic the markets so they can cover their shorts profitably. Eventually the short sellers will panic and that is when the market will advance rapidly. We see January as likely a very good month for investors. And while we are still consolidating, December has recovered about 10% for investors. But we believe there can be another 20% to 30% recovery from these 10% higher current levels before another consolidation period. That conclusion is based on an evolving recession not the financial panic short sellers and politicians had been proclaiming since June-July of 2008 when Senator Schumer of New York caused the first run on and American bank located in LA. Such election year rhetoric was out of control and caused panic and crisis.
We can expect the European contraction to be more severe than most of Asia because they are trying to keep their currency stronger as Japan has done. This is because Germany now dominates the European economics, and Germany and Japan share a propensity for austerity even to the degree that it causes them economic pain. If all economies acted in unison there would be smaller imbalances and fewer currencies attacks from traders but it also results in greater economic volatility because everyone has peak demand at the same time and then commodity price collapses at the same time. Longer periods of expansion tend to exacerbate the alignment of economies. But if the USA and China were 180 degrees out phase commodities would not have such great swings because demand would be more uniform. That would help the developing world grow. But with the financial credit system currently in locked step, going against the trend as Germany and Japan tend to do is better for the world economy but very difficult and costly.
December 22 had very low market volume on the price decline. That is actually a good trend. We want advances driven by high volume and declines on low volume because that indicates money, overall, are flowing into the market. The USA market three-month trend is ascending but the parabolic SAR trend lines have been hit so there is now an increased probability of consolidation and possibly a small decline. The MACD for each market is still positive but is declining.
Last year at this time we pointed out that we could see retail sales were way down in New England because parking lots were partially empty at mid day. We were advising that the economy was headed to a recession. But the Wall Street analysts were telling the public the opposite. They wanted the public to buy when the market was beginning to collapse. We said the January retail sales reports would show that Wall Street was not telling the public the truth.
This year we see in New England that sales are better than last year but Wall Street has shorted the market and you are now hearing them falsely declaring that retail sales are down the season.
So take heart, because we can expect January reports will be better news and will help the advance into the next year. Already the Thanksgiving sales were reported up a modest 3% while Wall Street short sellers had declared it a disaster. Wall Street short sellers do not want investors to profit they want to profit themselves and for more than a year the profitable hedge funds have been shorting the markets so they profit by driving down stock prices. This trend in the USA has been reversing since October but they still want to panic the markets so they can cover their shorts profitably. Eventually the short sellers will panic and that is when the market will advance rapidly. We see January as likely a very good month for investors. And while we are still consolidating, December has recovered about 10% for investors. But we believe there can be another 20% to 30% recovery from these 10% higher current levels before another consolidation period. That conclusion is based on an evolving recession not the financial panic short sellers and politicians had been proclaiming since June-July of 2008 when Senator Schumer of New York caused the first run on and American bank located in LA. Such election year rhetoric was out of control and caused panic and crisis.
Monday, December 22, 2008
Sentiment is that the market is now ready to rally
Stock markets posted their first two-week gain in three months as the Federal Reserve reduced interest rates to a record low. Japan is up sharply after following the USA and reducing rates and making Japan's production more profitable. Other Asian and European markets are down slightly as investors in those countries wait for stimulation packages for their economies. US market futures are mixed with the markets at their 20 day moving average line which means oversold if the market has reversed and is bullish on a recovery in 2009.
Treasuries climbed for the seventh week so the Federal Reserve decided it was time for American taxpayers to cash in. So the FED cut its benchmark rate to as low as zero and said it would buy long-term debt, possibly including Treasuries, to lower borrowing costs and spur growth. Basically taxpayers can now pay zero interest for the USA stimulation package which is funded by the cash hoarders, many of whom are the prime cause of the recession.
President George W. Bush granted the emergency loans to General Motors Corp. This will provide the auto industry with the time needed to restructure and downsize so that they emerge profitably as the recession ends in 2009. Toyota, the world's leading auto manufacturer could go bankrupt if Japan does not provide liquidity so Japan lowered rates too and is planning to provide loans.
Sentiment is building that the market will rally into the end of this year and into 2009. Some market professionals are bullish in light of recent rallies because stocks usually rally at year’s end as Funds buy to reduce cash and beef up portfolios selecting stocks that are performing. Low volume during the holidays also makes it easier for the funds to move prices higher with less cash and thus raise performance and show due diligence.
Robert Pavlik of Oaktree Asset Management said he has seen "a reduction in the overall selling pressure." Pavlik also said he’s also optimistic because of the amount of cash on the sidelines and the "large number of reluctant and underperforming portfolio managers" that could turn more optimistic if they start to see stocks rally. Short selling is slowing and in Brazil it has returned to low 2007 levels.
James Paulsen of Wells Capital Management agreed, and said that a comparison of this current downturn with four previous market panics [1903, 1907, 1920 and 1973-74] shows that things might not be so bad. Paulsen said that each time, the markets recovered to their pre-crisis peak levels "within about 12 to 18 months of reaching their respective bear market lows." He said "it implies the S&P 500 should more than double from its 752.44 low established in November by May 2010." (Assuming we were correct and November 2008 was our major buying opportunity). We are not looking that far ahead. We are looking for half that in the first half of 2009.
But what should we be buying now?
Jonathan Garner, strategist for Morgan Stanley agrees with us and said that emerging-market stocks are a better buy than those of more developed regions because their economies will rebound more quickly from the global slowdown. Garner heads the global emerging-markets strategy team. He said, "Emerging markets were the last to drop and will pull out the fastest." "It’s very encouraging that since the end of October the tendency to outperform has re-asserted itself," he said. MSCI Inc.’s index of emerging-market stocks beat the developed-market gauge from the start of last year’s fourth quarter, to August. The emerging-market index fell as recessions in the U.S. and Western Europe dragged down growth in China, Brazil and Russia. Since October, emerging-market stocks outperformed again, a trend Garner says will continue next year.
James Cramer agrees with another strategy we recommend and is advising investors to load up on high dividend stocks that have good balance sheets and can sustain their dividends. Then no matter what happens they give the best possible return during a recession due to the cash they generate that they distribute as dividends.
Warren Buffet and Jim Rogers were buying and recommending stocks and commodities for two month already.
Scandal smolders.
Emanuel and Obama have remained silent about what, if anything, Emanuel knew of the governor's alleged efforts to peddle Obama's vacant Senate seat to the highest bidder. The friendly rapport Blagojevich and Emanuel had over the years has suddenly become a troubling liability for Emanuel and the new president he will serve as chief of staff. Any hint of scandal for Emanuel tarnishes any promise of political leadership free of scandal and corruption at a time when politicians are swimming in cash being borrowed from America's future. The taped conversations reveal Blagojevich telling others to float his idea by Emanuel of forming a nonprofit that he hoped would, with Obama's help, receive millions of dollars that the governor and others could tap later. They already have one that has been responsible for pervasive voter registration fraud. Stealing money from Americans is bad enough but Americans can get pretty upset when their votes are stolen so the newly elected can steal even more and corrupt even more. Probably Obama should have Emanuel resign now.
"We're not going to end corruption in Illinois by arrests and indictments alone," the prosecutor said. "What's going to make the difference is when people who are approached to 'pay to play' first say no, and, second, report it."
Treasuries climbed for the seventh week so the Federal Reserve decided it was time for American taxpayers to cash in. So the FED cut its benchmark rate to as low as zero and said it would buy long-term debt, possibly including Treasuries, to lower borrowing costs and spur growth. Basically taxpayers can now pay zero interest for the USA stimulation package which is funded by the cash hoarders, many of whom are the prime cause of the recession.
President George W. Bush granted the emergency loans to General Motors Corp. This will provide the auto industry with the time needed to restructure and downsize so that they emerge profitably as the recession ends in 2009. Toyota, the world's leading auto manufacturer could go bankrupt if Japan does not provide liquidity so Japan lowered rates too and is planning to provide loans.
Sentiment is building that the market will rally into the end of this year and into 2009. Some market professionals are bullish in light of recent rallies because stocks usually rally at year’s end as Funds buy to reduce cash and beef up portfolios selecting stocks that are performing. Low volume during the holidays also makes it easier for the funds to move prices higher with less cash and thus raise performance and show due diligence.
Robert Pavlik of Oaktree Asset Management said he has seen "a reduction in the overall selling pressure." Pavlik also said he’s also optimistic because of the amount of cash on the sidelines and the "large number of reluctant and underperforming portfolio managers" that could turn more optimistic if they start to see stocks rally. Short selling is slowing and in Brazil it has returned to low 2007 levels.
James Paulsen of Wells Capital Management agreed, and said that a comparison of this current downturn with four previous market panics [1903, 1907, 1920 and 1973-74] shows that things might not be so bad. Paulsen said that each time, the markets recovered to their pre-crisis peak levels "within about 12 to 18 months of reaching their respective bear market lows." He said "it implies the S&P 500 should more than double from its 752.44 low established in November by May 2010." (Assuming we were correct and November 2008 was our major buying opportunity). We are not looking that far ahead. We are looking for half that in the first half of 2009.
But what should we be buying now?
Jonathan Garner, strategist for Morgan Stanley agrees with us and said that emerging-market stocks are a better buy than those of more developed regions because their economies will rebound more quickly from the global slowdown. Garner heads the global emerging-markets strategy team. He said, "Emerging markets were the last to drop and will pull out the fastest." "It’s very encouraging that since the end of October the tendency to outperform has re-asserted itself," he said. MSCI Inc.’s index of emerging-market stocks beat the developed-market gauge from the start of last year’s fourth quarter, to August. The emerging-market index fell as recessions in the U.S. and Western Europe dragged down growth in China, Brazil and Russia. Since October, emerging-market stocks outperformed again, a trend Garner says will continue next year.
James Cramer agrees with another strategy we recommend and is advising investors to load up on high dividend stocks that have good balance sheets and can sustain their dividends. Then no matter what happens they give the best possible return during a recession due to the cash they generate that they distribute as dividends.
Warren Buffet and Jim Rogers were buying and recommending stocks and commodities for two month already.
Scandal smolders.
Emanuel and Obama have remained silent about what, if anything, Emanuel knew of the governor's alleged efforts to peddle Obama's vacant Senate seat to the highest bidder. The friendly rapport Blagojevich and Emanuel had over the years has suddenly become a troubling liability for Emanuel and the new president he will serve as chief of staff. Any hint of scandal for Emanuel tarnishes any promise of political leadership free of scandal and corruption at a time when politicians are swimming in cash being borrowed from America's future. The taped conversations reveal Blagojevich telling others to float his idea by Emanuel of forming a nonprofit that he hoped would, with Obama's help, receive millions of dollars that the governor and others could tap later. They already have one that has been responsible for pervasive voter registration fraud. Stealing money from Americans is bad enough but Americans can get pretty upset when their votes are stolen so the newly elected can steal even more and corrupt even more. Probably Obama should have Emanuel resign now.
"We're not going to end corruption in Illinois by arrests and indictments alone," the prosecutor said. "What's going to make the difference is when people who are approached to 'pay to play' first say no, and, second, report it."
Friday, December 19, 2008
Consolidation for upside breakout
Sorry to be late; the blog did not like my internet settings this AM
We are starting to see less short selling which is a sign that the hedge funds are moving to a lower proportion of shorted stocks.
One of the oldest and easiest-to-interpret indicators in the stock market is market breadth often called the advance/decline line. It measures how broad or how narrow a rally or a decline is. It works by measuring market breadth versus the underlying market price index. So for the S&P 500 price index, we compare the cumulative advance-decline line to the S&P 500. If we look at a long-term chart of the two together, we see that in October 2007, there was a negative divergence where the S&P price index made a higher high in August, but the cumulative advance-decline line (breadth) made a lower high which is a sign of weakness just before the tremendous market drop.
Since that time, we have been in a bear market, and S&P breadth index has basically kept pace with the S&P price index, as they rallied together and dropped together. However, since the November 20 low in the S&P 500, there has been a slight change in this pattern. If we look at the short-term chart of this indicator and the S&P together we now find that during the decline of the week ending December 6, breadth was outperforming the index another indication that the price was bottoming out. The S&P price index has since just caught up with breadth, but breadth have been holding steady, keeping pace with it. This is one of the positive signs we’ve seen in the market since it made the highs of October 2007.
Our "Respiral" method which combines Parabolic SAR and MACD indices to call windows of buying and selling opportunities got us in cherry picking between Nov 6 and Dec 5, 2008.
Out June20-Nov 2, 2007
In Feb 27-April 4, 2008
Out May 28--June 12, 2008
In Nov 6-Dec 5, 2008
Asian (excluding Japan) ETFs, and high dividend return stocks with low debt and high cash positions are what we consider to be the safer investments to be in at this time.
The FED is doing everything possible to get people out of cash since hoarding cash (especially by banks) is what has caused the velocity of money to drop close to zero. The FED knows that it does not matter how much credit or cash they make available because when the velocity of money is zero or negative investment and consumer spending is zero.
Money in circulation = M (money available) X V (the velocity of money).
So the FED is now working on getting the velocity of money into positive territory be attacking the value of cash by dropping inflation adjusted interest rates into negative territory.
As stated above, the "Breadth" indicator is a measure of how broad or narrow a rally is, and this recent action suggests that the rally is broadening, which tends to be bullish for the market. And the FED is trying to put a negative interest penalty on people holding cash so that they buy now and stabilize real estate and equities. But the two most resent SEC chairmen have been greedy and incompetent and have allowed Madoff crooks and short seller market manipulators to fleece the pensions of honest Americans.
Let's face it, President Bush lacked the mental capacity or inclination to understand what was going on under the nose of his administration. President Bush lacked the kind of ethical standards necessary to declare that corporate, real estate and Wall Street greed and dishonesty was a moral hazard. President elect Obama promises to do better and Americans want to give Obama the chance now. And so far Obama has been acting like a capitalist and an evangelical so he may work out as well as President Clinton did and ignore socialist Soros and the far left.
On a much shorter-term basis, the market may be overbought. Typically, such an overbought reading will lead to a pullback followed by a renewed rally. If this market hadn’t been so volatile of late, we’d expect a pullback, after a 20% rise, along the lines of 3% to 10%. However, lately this market has been volatile and often in the course of a few days it can correct completely. Presently the market is up about 0.5% this week with one day to go.
Asia is mixed but down overall about 0.5% today. Europe is mixed and down about 0.75% at this time. The American market futures are mixed and indicate a slightly higher open for the market today. But options are coming into play today and it could swing more positive today.
Based on the improvement in breadth as discussed above, and this overbought situation we believe a pull back at this time would be smaller like March 2007 than December 2007 overbought situation. We do not chase rallies when we are this overbought. Let the short sellers get deeper into margin debt now so that we can look forward to an even bigger rally thereafter followed by a short-squeeze of historic proportions. We will assess the health of the market on a daily basis.
We are starting to see less short selling which is a sign that the hedge funds are moving to a lower proportion of shorted stocks.
One of the oldest and easiest-to-interpret indicators in the stock market is market breadth often called the advance/decline line. It measures how broad or how narrow a rally or a decline is. It works by measuring market breadth versus the underlying market price index. So for the S&P 500 price index, we compare the cumulative advance-decline line to the S&P 500. If we look at a long-term chart of the two together, we see that in October 2007, there was a negative divergence where the S&P price index made a higher high in August, but the cumulative advance-decline line (breadth) made a lower high which is a sign of weakness just before the tremendous market drop.
Since that time, we have been in a bear market, and S&P breadth index has basically kept pace with the S&P price index, as they rallied together and dropped together. However, since the November 20 low in the S&P 500, there has been a slight change in this pattern. If we look at the short-term chart of this indicator and the S&P together we now find that during the decline of the week ending December 6, breadth was outperforming the index another indication that the price was bottoming out. The S&P price index has since just caught up with breadth, but breadth have been holding steady, keeping pace with it. This is one of the positive signs we’ve seen in the market since it made the highs of October 2007.
Our "Respiral" method which combines Parabolic SAR and MACD indices to call windows of buying and selling opportunities got us in cherry picking between Nov 6 and Dec 5, 2008.
Out June20-Nov 2, 2007
In Feb 27-April 4, 2008
Out May 28--June 12, 2008
In Nov 6-Dec 5, 2008
Asian (excluding Japan) ETFs, and high dividend return stocks with low debt and high cash positions are what we consider to be the safer investments to be in at this time.
The FED is doing everything possible to get people out of cash since hoarding cash (especially by banks) is what has caused the velocity of money to drop close to zero. The FED knows that it does not matter how much credit or cash they make available because when the velocity of money is zero or negative investment and consumer spending is zero.
Money in circulation = M (money available) X V (the velocity of money).
So the FED is now working on getting the velocity of money into positive territory be attacking the value of cash by dropping inflation adjusted interest rates into negative territory.
As stated above, the "Breadth" indicator is a measure of how broad or narrow a rally is, and this recent action suggests that the rally is broadening, which tends to be bullish for the market. And the FED is trying to put a negative interest penalty on people holding cash so that they buy now and stabilize real estate and equities. But the two most resent SEC chairmen have been greedy and incompetent and have allowed Madoff crooks and short seller market manipulators to fleece the pensions of honest Americans.
Let's face it, President Bush lacked the mental capacity or inclination to understand what was going on under the nose of his administration. President Bush lacked the kind of ethical standards necessary to declare that corporate, real estate and Wall Street greed and dishonesty was a moral hazard. President elect Obama promises to do better and Americans want to give Obama the chance now. And so far Obama has been acting like a capitalist and an evangelical so he may work out as well as President Clinton did and ignore socialist Soros and the far left.
On a much shorter-term basis, the market may be overbought. Typically, such an overbought reading will lead to a pullback followed by a renewed rally. If this market hadn’t been so volatile of late, we’d expect a pullback, after a 20% rise, along the lines of 3% to 10%. However, lately this market has been volatile and often in the course of a few days it can correct completely. Presently the market is up about 0.5% this week with one day to go.
Asia is mixed but down overall about 0.5% today. Europe is mixed and down about 0.75% at this time. The American market futures are mixed and indicate a slightly higher open for the market today. But options are coming into play today and it could swing more positive today.
Based on the improvement in breadth as discussed above, and this overbought situation we believe a pull back at this time would be smaller like March 2007 than December 2007 overbought situation. We do not chase rallies when we are this overbought. Let the short sellers get deeper into margin debt now so that we can look forward to an even bigger rally thereafter followed by a short-squeeze of historic proportions. We will assess the health of the market on a daily basis.
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