Monday, March 30, 2009

Market setback: Gov't pulls back offer of more bailout for Auto's

Yesterday the government said they were NOT going to bail out GM as they had not done enough according to news reports. This story caused the Futures to be down in Asia and this morning the stock market opened down 200 within 10 minutes of the open, causing both the Dow and S&P to drop below the 50 day Moving averages and the S&P to go below the 800 level.

What effect this story is going to have on the market this week is unknown. But as I said a little over a week ago, any news will move this market dramatically in either direction. The market can recover from this depending on the story later on today by President Obama. But right now we don't have the details of the governments position other than GM's Wagoner has resigned and Chrysler is being asked to merge with Fiat. Stay tuned.

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Sunday, March 29, 2009

My 1000th Blog posting!

Well it has been a while since I started blogging. It was back on May 11th, 2005 when I posted my first Blog. Now, 1,000 posts later, I pause to reflect why I started doing this. It was only 4 months after President Bush began his 2nd term, when I was fed up of all the bickering in the Congress and in the Country. My first post reflected this and I will repost it again, below. But first, I wish to thank all of my readers for inspiring me to continue in this endeavor and to let you know, you have helped me make this a better blog. I started exclusively focusing on politics, but now I have added a focus on the economy and particularly the stock market.

It has always been a hobby of mine, since I was 14 years old. My father would come home from the Sweat Shop he sewed mens suits and topcoats and got paid. He didn't get a pay per hour, as many do today. He only got paid for the number of completed garments (hence, piecework) he sewed. If he didn't feel up to working hard on any given day, his pay reflected that. When Dad got home, he was tired, but he always brought home a newspaper, which I browsed through while he napped before dinner. I had noticed pages of entries of company names and numbers, which I didn't understand. But after Dad explained it to me, I decided I would pretend I had money and purchase a company's stock and would put the price in a little notebook and track it each day. I can remember one of the first companies stock I imaginarily purchased was IBM. Interesting that 12 years later I would take a job at IBM. I have followed stocks and read over 100 books on investing since then. Much of what I have learned I have learned from actually trading. The costly mistakes I have made have made me a better investor. It took me almost 8 years to realize I was off 180 degrees in my timing to buy or sell stocks. This turned out to be the most important lesson I would learn.

Boiling this lesson down to something easy, here's what I learned. When the crowd is buying with a frenzy, try to sell as it gets extreme, while many are still buying, and try to Buy when everyone is throwing in the towel and selling, near the final gasp of selling.Watching Volume helps determine this point beter than price alone. It is counterintuitive and difficult to do but I found it was worth the effort. Over the past 10 years two such times come to mind. First when the market was rising so rapidly in 2000 on the Nasdaq, I was writing a newsletter which many readers here received. I had told everyone to go to cash 2 months before the big Tech bubble burst. I did and some others did and we were spared the drop. The second time was after 9/11, where I had told friends and family that when the market opened there was going to be a great panic to sell. I said wait and let it happen and then start buying back . Both moves were my best market calls and made me some good profits or saved big losses.

Back to the reason for this post. I can't believe I have written 1,000 blog posts. Hooray! Yippee. I can't believe I have had now over 38,000 Visitors and they have read over 62,000 pages of my Blog. Write a comment since you took the time to read this.

My first post on May 11th 2005 was titled, "JUDICIAL NOMINATIONS: Do common people care?" In closing here is a copy of that first post and a link to it to read the comments I received on it.

May 11, 2005

JUDICIAL NOMINATIONS: Do common people care?

I am amazed that most people are too busy to know what is going on in the Senate currently regarding the issue of ending the filibuster for Judicial nominations. I am more amazed at how both Republican and Democratic Senators are so entrenched in their positions. It is apparent to me that when Senators can no longer work together from both sides of the aisle, it is time to consider voting out all incumbents, Republican and Democrats alike and return the Senate back to caring about the people's business rather than pursuing zealous ideological positions that separate and divide us, rather than bring us together. The President and Vice President contribute to this divisiveness in spite of the President claiming to work to bring us together. All this when we are in a war, where our young men and women are constantly in harms way, attempting to help foster a democracy in Afghanistan and Iraq, based upon our notion of democracy. I am ashamed as a citizen and angry at the lack of compromise in the Senate. However, I don't believe in compromise when the stakes are as high as they are now. Ending the filibuster will affect lifetime appointments of Judges with a more extreme viewpoint of a minority and harm this democracy. We need more centrists in governing our republic. Someone must heal this division before it is too late. Even if the Republicans are successful in suspending the Rules on filibustering for Judicial nominations, it is a slippery slope. When the Democrats regain the majority, as they certainly will again, when the shoe is on the other foot for Republicans, they won't be so happy they are on the receiving end of this action.

The real question is, do common people care enough to voice their views in a voice that can be heard around the world? I think not and that is most troubling to me. If we lose this true democracy, it will be all our fault, those for ending the filibuster, those against it, and those indifferent or too busy to act. Whether you are for this or against it, get involved and email or phone your Senators and let them know how you feel about this.

Link to the original, click on this: JUDICIAL NOMINATIONS.

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Saturday, March 28, 2009

Market outlook for week of March 30th, 2009

This past week both the Dow and S&P 500 climbed over and stayed above the 50 day Moving average. It was the first time in over a year when we had positive gains for 2 consecutive weeks. It sure felt good after weathering the drops of the past year. The chart above shows the Put to Call ratio since January of 2008 to close of the market yesterday. You can readily see we are moving to a lower range on this index. (If you click on the chart it will get larger.) We have not been over 1.00 on this ratio recently, March 5th to be exact. Yesterday's close was 0.92, replicating Thursday's close. The VIX Index closed at $41.04 and while I don't have a chart on this for your viewing, this Index has also come off its highs as well. This Index was as high as the $70's and $80's back last fall and we are now near the lows since early January of $38-$39.

So what's ahead for the week of March 30th? I am overall still optimistic on the market. Many see this as a Bear Market rally and can't see the Dow and S&P 500 going much higher. While I agree that this is still a Bear Market rally, I do believe we can go as high as 9,000 on the Dow before we pull way back again. This means a Buy and Hold strategy is not your best strategy. Trading is the only way to take advantage of the big market swings, which are inevitable. Hopefully when we look back after next week's close we will be above 8,000 and less than 8,500. The quarter ends on March 31st and we will shortly be reviewing earnings reports for a clue on how business is really doing. Stay tuned!

Let's take a look at several trades recently to summarize most of my trades. Starting with the loss, I sold TZA the ETF Ultra Short for a 17% loss. This was painful but remember I had TNA to offset some of this loss, but a loss is a loss. I sold Ford for a 45% profit. I sold Apple for a 16% gain. Apple gained far more since I sold it at $97/share and is now at $106.85/share. I sold some TNA shares for a 17% profit. I am still holding on to many more shares of TNA, some of which are under water. I still have my shares of Citigroup, which I purchased at $1.70/share and additionally at $2.41/share. Current price of Citi is $2.62/share.

I am hopeful this coming week of staying above the 50 day Moving average, but as I have cautioned before, if you are trading, pay attention as this market can go in either direction very quickly. One indicator next week will be the Unemployment rate and we already know it won't be good. But it is a look backwards and any moderation which shows the rate slowing may spur the market up. If the trend looks like it is accelerating, watch for a selloff. Good luck!

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Thursday, March 26, 2009

Take this Mini Poll: When you think recession will end?

Only 5 days left to participate in this month's Mini poll on how long the recession will last. If you haven't voted this month, please do. Just look to the right at the menu under the clock to participate.

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Market Outlook: Thursday March 25th and beyond (UPDATE)

Well we closed up for the day yesterday. A battle is going on between the Bulls and the Bears. Yesterday the Bulls won but it was touch and go for most of the day. We are in no mans land on the Dow and S&P 500 because it has not been determined if we are going up or going down yet, even though we closed up yesterday and back up over 800 on the S&P. The Put to Call ratio closed up yesterday to 0.86 from 0.76 on Tuesday and 0.70 on Monday.

Market is opening up but I tell you we can still go in any direction because the trend is not clear as I write this. The Weekly Jobless claims came in at 652,000 while the number of people getting weekly benefits rose to 5.5 Million recipients.

We still don't know if the banks will sell toxic assets and we won't for at least a month. So many are still in limbo as Geithner's toxic asset plan is based upon bank participation.

The auction yesterday for Treasury's did not go as well as hoped. This caused the market to drop mid-day. So skepticism remains strong and we have a less than enthusiastic investors which makes for a tight range on the Indexes. It looks like we will stay here for a while but as we approach the end of the quarter watch investors buy some bank stocks to dress up their portfolios because they moved up nicely from their lows and they want to show those having accounts with them that they owned those stocks during the quarter. It's all a game for show and after the end of the quarter they can and often sell some of these shares bought at quarters end.

I think a wise strategy is to have some cash right now and not be fully invested. When the trend becomes more clear then changes can be made to either buy stocks or raise more cash. But that's where I am currently.


The Dow and the S&P 500 are clearly above the 50 day and now 60 day Moving average. The Dow is now at 7,839 and the S&P 500 is at 824.


I decided to sell my TZA at a loss today for $48.50. That was a big loss of $10/share. However my TNA shares remaining and SSO shares have made the loss in TZA as an insurance policy worth it.

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Wednesday, March 25, 2009

What's going on in the economy? Durable Factory orders up in February. (UPDATE)

For the first time in a long time Factory Orders were up in February and many are trying to figure out if it is a real move showing we have bottomed. Well, I can tell you first hand it is real for the following reason. Every Monday and Tuesday for the past 3 months I have been counting the number of trucks I see on the highways on the way to my clients. I wrote about this on my Blog a while ago. I have been telling select friends over the past 4 weeks I have seen a doubling of trucks on these same highways and that I believe orders had to be going up as business activity was increasing. In the beginning I saw no Construction trucks but now I do see some although not many. Most trucks are moving goods from suppliers as their names are often on the sides of the trucks.

Will this trend continue? I don't know but it has both Monday and Tuesday this week. We will take all the good news we can. Maybe when we along with others bought a new refrigerator a month and a half ago helped create an order for a new one.:) May the force be with us!

The market reaction at the open is up 77 on the Dow, wiping out half of yesterday's losses. You see there is the start of good news just like President Obama said. Now let's pass his budget so we continue to implement those things we voted for him to change!


I checked and saw that the Put to Call ratio has not closed now over 1.00 since March 5th, so we have settled in a lower range and more normal looking at the history since 2001. The Put to Call ratio closed yesterday at 0.76

Also wanted to update you all, I added shares of the triple play FAS again late yesterday and early morning after the open. This Banking Index triple play was in a range of $20-$30/share back only 4 months ago and if the market recovers back to 9,000 on the Dow led by Banking stocks, this will return 3-5 times your money. It is risky so be very careful about your risk tolerance. My average price now is about $6.50/share.

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Tuesday, March 24, 2009

Market outlook: Down at the open but more favorable going forward.(UPDATE)

I said I would like to be wrong on my market call yesterday and I was. It seems the market embraced Geithner's toxic asset plan for the banks after all. And while this did break the downtrend line on the Dow and the market may go higher, there are enough skeptics out there saying the plan won't work because banks may not sell these toxic assets. So the market will be driven even more on news of what Bank CEO's are saying and going to do than anything else right now.

I was asked by a friend if I would buy into the Bank Index FAS after this market rise. The answer is yes as it has been beaten up quite a bit and with patience these should rise. However I would buy it on a market pullback, accumulating shares as it went down in price. For the buy and hold crowd, this has good potential over time of yielding good returns. However you might also want to pick a few banks individually as well and look as to whether they are paying any dividends which may sweeten the pot.

I am still holding the shares of TZA I purchased for $58.50 and did not sell them in the sharp pullback yesterday, as the ETF got crushed. But my salvation was that I still owned far more shares of TNA which surged up unprecedentedly yesterday to more than offset the losses from TZA. While there will be profit taking at the open watch the market continue to move up since we are headed to go over the 8,000 level on the Dow. Citigroup should help that rise as well. I still own the stock.

UPDATE: 4:30pm PST
I purchased the Direxion triple play on the Bank index, symbol FAS, today for $6.20/share average price. The market ended down 115 on the Dow but after yesterday's significant gain, many expected some profit taking. President Obama speaks tonight and we will see if any news materializes from his Press Conference.

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Sunday, March 22, 2009

Market outlook for week of March 23rd (UPDATE Monday rally))

Well Friday had me scrambling as Options expiration occurred Friday on what was called Quadruple Witching Day. I was hoping for a rise up on Friday but it wasn't to be had. We did finish 2 full weeks up on the Dow, S&P 50 and Nasdaq but as you can see from the chart above I believe now we will have a better than 50% chance of pulling back and retesting the lows. I would like to be wrong here as we would all make more money. But this rally stalled in my mind and the news of the AIG bonuses added a negative tone to the news. President Obama is trying to reassert his focus on his agenda but the AIG sidetracked it and it is going to be difficult to reagin positive momentum as many are finding bonus issues with J.P. Morgan and other Banks as well and this will keep the story front and center for a while.

The Dow ended the week at 7,278, the S&P 500 at 768 and both indexes could not get over and stay above their 40 day Moving average. They got above it on Wednesday but pulled back. The Nasdaq closed at 1,457 and closed just above its 40 day Moving Average but just barely and I expect it to pullback below it as well. We must go above the red downtrend line to start this move up and we made an unsuccessful attempt at that, on Friday.

This is why I am seeing the possibility of a retest. This last leg up from the lows may be setting up a double bottom or a "W" pattern and if that is true we have about a month or two before we move up from this range of 6,440 to 7,600. This is why I ventured in to buy the ETF Ultra Short, TZA, again and take some profits. I don't know what is going to really happen and neither does anyone else for that matter. It's all an educated guess based upon a host of facts one puts together to tell a story, first to oneself, and then to others. I try to get a better record than just a 50/50 flip of a coin. You be the judge as to how I'm doing. It's all here for you to see and comment on if you so choose. I'm just happy you took the time to come here and read this. So thanks and hope you are not disappointed.

UPDATE: 4:45am PST March 23rd.

Today Futures are up significantly on the expectation of Treasury Secretary Tim Geithner's plan for toxic assets the banks have. The Dow is up over 200 in premartket and European stocks are all up. But remember this, much is riding on this plan and the market could be down 300-400 today, if the plan is not accepted by Wall Street. Watch to see if we have a significant breakout above the Red downtrend line today. It could be a barn burner in either direction.

To break the downtrend line we would have to cross above 8,000 on the Dow and over 805 on the S&P 500.


The market has rallied on the Geithner plan and the Dow is up 308 points to 7.595 while the S&P500 gas crossed over 800 to 802. So far so good.

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Take the poll: How long will the recession last?

There is only 9 days left before I summarize the data from the mini poll to the right of this post. I will summarize the data and compare it to December, January and February's summary. So if you haven't yet taken the poll please do. Thanks and return here on April 2nd for the summary posting. I believe you will find the data interesting. So far this month one person has skewed the data voting 5 times for the Mid 2009 and if you vote more than once in a month, only one of your votes will count. You can see how the summary data becomes lopsided. Adjusting for the repeated votes leaves this summary going into the final 9 days of the month:

2009 27%
2010 23%
2011 5%
2012 5%
Much longer 14%
Depression 32%

So if you haven't voted please do. Thanks!

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Friday, March 20, 2009

Trades made today: Taking profits and preserving capital the game.

I wanted to alert my readers of several moves I am making today. I sold my Ford at $2.73/share. I sold my shares of SSO which I had purchased at $17.48 and $21,57 for $19.55/share. I purchased shares of the ETF Ultra Short TZA for $58.52/share and sold some of my TNA shares at $17.57/share. I still hold TNA but have hedged against a market reversal, as I see the rally stalling today. It truly may be running out of steam propelled from good news. Yesterday's AIG fiasco, regarding bonuses paid to those who created the problem for AIG requiring government bailout funds, may have taken its toll on this leg up. I continue to hold Citigroup.

Taking profits and preserving capital in this crazy market is always wise.

UPDATE: 9:00am

The Ford round trip netted me a profit of 43.7%

The SSO round trip on those shares were a wash. No profit and no loss.

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Markets and politics: Where are we going?

A review of yesterday shows the VIX closed at 43.68, showing the increased volatility I expected because of the approaching Options expiration today. The Fed took major action to buy back long term debt which caused an unprecedented increase of $60/ounce in Gold. The Put to Call ratio closed at 0.77 on Thursday, up from Wednesday's 0.65 closing level.

I think all in all it was a good thing the market pulled back yesterday because we were rising on a very rapid rate. Today I expect more volatility and while I can't predict today's market move, even though Futures are pointing for the market to be up today, I see the market continuing with this rally into next week and eventually over the Dow 8,000 level and the S&P 500 over 800 as well. The Dow closed yesterday at 7,400 after hitting a high during the day of 7,548 and the S&P 500 closed at 784 after reaching a high of 803 for the day. I believe this rally will end somewhere between 8,000 and 9,000 which is the range of where it has been previously. Because we went to the lows of 6,500 on the Dow I expect the rally to end between 8,000 and 8,500 and most likely not go higher until we have gone back and retested the lows.

Congressional action is the main unknown right now. The latest focus of their intellectual capital is on the AIG bonuses and outrage the voters have shown on this matter. They were caught, along with Tim Geithner, with their pants down, as in calculating which position they should take, they thought it better not to be sued over breach of contract for not paying the bonuses, than to pay them. They were all wrong. Mistake made, lesson learned and now, like adults, they all should get on with the issues on better oversight banking and insurance regulations, improving the economy, helping stabilize the banking system, managing healthcare costs, a better Energy policy which includes more Wind and Solar, as we surely have some whopper problems to solve as a country.

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Thursday, March 19, 2009

The message of the AIG story being lost

The issue around AIG bonuses is a relatively small one. There are several facts being lost here. First, it has been the Democrats who have tried to stop big bonuses for any company needing funds from the government. It has been the Republicans who have been outraged that the Democrats are doing this. Yes, there was a problem because Treasury Secretary, Tim Geithner, decided that it was better to pay these bonuses rather than face a possible lawsuit from recipients of those bonuses.

So what is important here is that huge bonus payments to companies receiving Government funds will stop going forward. You can thank Democrats, not Republicans. They want to blame Geithner and Sen, Chris Dodd for this embarrassment be we know their hearts have been in the right place where the Republicans have been hypocritical as they have supported these people getting their bonuses and not interfering with the Free Enterprise system.

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Market outlook: More of the same!

Have you been enjoying the market rise this week. Well get ready for more of the same. I know, you don't really believe it or are just anxious the market will just drop like a rock. That is how the psychology has been affected by continued daily dropping of the Dow and S&P 500. It can make you be afraid fro a very long time. And on any market pullback it can reenforce those fears. That is why many of us are saying we have changed a generation of investors. Some may never venture back into the market again in their lifetime. They have been decimated. They don't have extra cash sitting on the sidelines to put back into the market at this time.

So here wee are with Futures today pointing up. The VIX Index closed at 40.06 yesterday. One surprise was that the Fed has been buying long term Treasury debt and this has created concern about the value of the dollar. Hence Gold is up this morning over $60/ounce to $948, a real surprise move.

Citigroup has really taken off. As I posted I bought more shares at $2.41/share and watched the price sore yesterday hitting a high of $3.30 but closing at $3.08, but in pre-market it has jumped again to a high of $3.65 and currently is at $3.49/share. From my original purchase price of $1.70/share the stock is up over 100% and rising.

Ford is also doing well. It closed yesterday at $2.47 and in pre-market it is currently at $2.74. My purchase price for this stock is $1.90 so this is up now 44%. It will continue to rise to over $3.25 in my opinion.

And lastly both ETF's TNA and SSO have come back strongly and should continue to move up. Don't forget that Options Expiration is tomorrow and anything can happen. Today volatility should increase as possibly shorts start covering ever stronger as we approach 810 on the S&P, which is a major resistance level. Good luck! Oh, and if you haven't voted in my Mini poll, please do as it is on the right menu margin.

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Tuesday, March 17, 2009

Pre-Market outlook March 18th: Cautious (UPDATE)

It's a good feeling to be able to guess correctly the markets direction over a number of days. I wanted people to see their 401K's and retirement accounts grow a little as it has been painful for many. The Dow closed today within a few points of 7,400 and the S&P 500 closed at 778. The VIX Index closed at 40, which a long way from the 50 level we had experienced for such a long time. The Put to Call ratio closed yesterday at 0.78 or just slightly down from 0.80 level on Monday. Gold ended the day yesterday at $916/ounce and in pre-market is at 902.

The news of the day yesterday was the level of bipartisanship surrounding the outrage of the bonuses to the AIG employees from the Division who were responsible for the collapse of AIG and required subsequent bailout by taxpayers. These contracts for these bonuses were in place during the Bush Administration and were known about apparently by former Treasury Secretary Hank Paulson, according to news reports. But the outrage from both sides of the aisle enjoined Democrats and Republicans for the first time since President Obama took office. Many are speculating that Tim Geithner, Treasury Secretary, may have his own job at risk for not stopping these bonuses from being paid. We shall see.

Again, the news seems to be favorable enough, or not negative, to continue with this uptrend. However, we are now approaching the final few days before Friday's Options Expiration and anything can happen in Options week. Yesterday I purchased additional shares of Citigroup to add to my original position which I bought at $1.73/share. Today's purchase was made at $2.41/share.

The Futures point down this morning as the CPI Index came in at up 0.4%, which was higher than expected and may foretell of a rise in inflation. Also, today is day 2 of the FOMC meeting of the Federal Reserve and investors are nervous as to what they may say later today. My guess is that the market will open down and stay down most of the day. Having said that I am hoping for a reversal in the final hour or so to have an up day.

UPDATE: 8:15am

Dow has been down all morning from -135 to -89 points where it is now. The Dow seems to keep trying to climb back up and over the 7.300 level. However, Citigroup has surged today making my purchase at $2.41/share yesterday look brilliant as it has hit a high of $3.30 and currently is sitting at $3.19/share. I predict this stock is going to go to $5/share or higher, if the market continues its climb back to over 8,000. This also is worth mentioning. I had to sell my Apple shares at $96.35/share and it was a difficult decision as the stock was still going up. Today the stock is at $100/share so I left $3.70/share on the table when I sold it or a 3.5% potential gain. But I used the money to buy Citigroup and today alone it is up over 25% and 30% from my purchase at $2.41/share. The moral of this story is this. Be willing to move a portion of your money to a faster or more rapid growing stock you have researched or discussed with your financial advisor. It opens more opportunities for you but also adds more risk. I saw Citi with less risk than most other stocks, including Apple, because the government is backing Citi and owns about 40% of the company. The government is making money on Citi right now, why shouldn't you!

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Market Outlook for March 17th: Up!

It may be a Happy St. Patrick's Day today, indeed, as it looks like we are headed back up today, after having a slightly down day yesterday. Futures are pointing up because the Housing Starts data showed a good positive surprise this morning. The actual number of Housing Starts was 583,000 which is up 22.2% from last month, which was down 14.7% from December's data. We held the gains from the previous week even though there was a pullback yesterday. We are still over 740 closing yesterday at 754 on the S&P 500. The Dow closed at 7,217 but did go over 7,300 during the session yesterday and then pulled back steadily to the close.

Yesterday I sold some Apple shares to raise some cash and take my profit on the stock. My average price for the stock was $83.50 and the shares I sold for $96.35 for a 15.4% gain. I had also sold some of my TNA shares yesterday that I had purchased at $11.20/share for $15.65/share. That was a 39.7% profit. I still own 90% of my TNA shares. But now I have some cash to buy anything on a market pullback.

This week is Options Expiration on Friday and expect some volatility on Thursday as well. It is difficult to say which direction the market will go by Friday but I still believe the news has been favorable and to me the odds point to going higher. As long as the news infers that we may have bottomed in some major indicators, unemployment claims will still be negative for a while. It might be the most lagging of indicators to watch. I would look at the price of Gold. If Gold can get back below 900 watch the market move up more strongly. Gold is at 916 in pre-market. The low closing last week was 905. We were as low as 820 in January and I can see Gold pulling back significantly to these levels if news continues good.

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Saturday, March 14, 2009

Market Outlook for the week of March 16th, 2009 (UPDATE)

Well I got the action right this past week for a change. Shear luck. But the real difficulty is predicting this next week. Let's take a look at a number of data points to glean some prognosticative abilities. The Dow ended the week over 7,200 to close at 7,224 on 4 consecutive days of very strong volume. The S&P500 ended the week over the critical 740 resistance level, closing at 756. Both Indexes closed over their 20 day Moving averages, but just barely.

The VIX Index closed at 42.36 after hitting an intraday low of 40.03 and it hasn't been at this level since the end of January. It remains below the 20, 40 and 60 day Moving average. The Put to Call ratio ended the week at 0.71. Click on the Chart above to see the trend from January 2008 to close on Friday. You will notice most recently the trend is down. When the Put to call ratio is low it is a sell signal and when it is at the highs it is a Buy signal but what is high and what is low is all relative. As I mentioned on an earlier post, back in the year 2000 I would use the Put to Call to time trades. But back then the lows on the Put to Cal ratio were as low as 0.3-0,4 and often signaled to me to sell. They were just a bit outside 2 standard deviations limits from the rest of the data. And on the opposite side I would recommend Buying at the 1.25-1.35 level. You can play with data yourselves by clicking on this CBOE link and selecting "CBOE Total Exchange Volume and Put/Call Ratios". The data goes back to 2003 to now on a daily basis.

The Candlestick pattern of the Dow on Friday was a Doji which shows a struggle between the Bulls and Bears for direction. It also implies a possible change in direction. And one last point about the chart pattern and where we are. We had reached a new bottom in the market a little over a week ago when the Dow hit a new low of 6,440 and the S&P hit a new low of 666. We have not retested those levels and therefore most likely will need a retest to insure we made a bottom.

So if I were a betting man, and of course you know I am, considering all this data, if we get any bad news this coming week we most likely will reverse this movement up. If on the other hand there is some surprise good news this week, the market will continue to rise. Eventually we will drop back and retest the lows. So this is at best a trade, not a Buy and Hold. The only decision you must make is when to sell to look in a gain and how long to ride this up. Technically we could go to 8,000 or above before we come back down to ground and retest. So take a measure of your fortitude and your level of risk taking, as you will be tested this next week to make a decision.

Ford closed at $2.19 on strong volume, but also closed Friday with a Doji candlestick pattern. It is up $0.30/share from my purchase or 15.8%. Apple closed at $95.93 also with a Doji pattern and is up over $12/share from my purchase or 14.5%.

The ETF's SSO and TNA recovered some of their devastating losses this past week. TNA closed at $15.07 also with a Doji Candlestick pattern. I had purchased TNA at $23.36 although I have added to my position with shares at $11.35/share to bring the average price down. SSO closed at $18.08 also with a Doji Candlestick pattern. I had purchased these shares at $21.57/share so I am underwater on both of these investments. But I still am holding them. My strategy will be that when I think the market is about to turn, I will purchase TZA to hedge the gains I have made back on TNA and SSO. My signal will be triggered by looking at the Volume as it will indicate the timing.

I don't know if this is too much detail for you on how I think about decisions regarding the stock market. Let me know by making a comment. I can post less and just tell you my conclusion or I can share the details of my decision making. The default position is this, if I don't receive comments, I will just post less details. Thanks for stopping by.

UPDATE: Monday Pre-Market

The Futures show the Indexes going up today, continuing the gains of last week. The Nikkei was up in overnight trading and the CAC, DAX and FTSE indexes in Europe. Last night on 60 Minutes, Fed Chairman Ben Bernanke gave the first ever interview on the program to explain the financial crisis and how the Fed stood ready to do whatever is necessary to maintain the Banking system. It was a very good interview and showed the man was from a small town and understood what it was like being from the Middle Class. He should be commended for taking this unprecedented step to help average Americans gain confidence in the government and the Financial system. This should be good news to the markets.

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Thursday, March 12, 2009

Market outlook for March 13th: More of the same!

I know, no one believes the rally just as I predicted but it is true. In overnight trading the Nikkei is up over 350 points at 10:00pm PST. The Put to Call ratio settled in and closed at 0.71 today. The VIX has also dropped and closed at 41.18 and the Dow closed up today to 7,170 and the S&P 500 closed over the critical 740 resistance level closing at 751. Both the Dow and S&P closed over their 20 day Moving average. This was a very good day. TNA was up about 18% today, closing at $14.50, while SSO closed at $17.79. Ford closed at $2.10 and Apple closed at $96.35/share. The best thing about today were the skeptics. Most believe this will end shortly and no one believes we are headed to over 8,000. A close friend, Tom, asked me today, whether I thought this rally will settle down and regress in a week or so, or slowly advance over the next few months? My answer was this, "I ams not a prophet. Just enjoy the ride. I like the steadiness of it (the rally). Most say it isn't for real (and my guess are sitting on the sidelines). That is why I like it as it may prove them all wrong."

Friday is "Friday the 13th" and while it is usually a superstitious time, I am hoping we prove it wrong. I could expect a slight pullback going into the weekend but you must be impressed at the Volume these past 3 days. If the market does pull back tomorrow, I would use the pullback to add to positions in financials and the stocks and ETF's I have been pursuing. Happy Friday.

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Market update March 12, 2009

The Market has been relatively cam and quiet the past few days and today seems a repeat. Lots of data out today. Here's some of it:

Jobless Claims came in at 654,000, an increase over the last report but only by 9,000. Expectations were 644,000 jobs lost so definitely a close prediction. And it is good news the rate isn't increasing significantly, but rather may be leveling off as well. Retail Sales were down 0.1%. Business Inventories were down 1.1% in January compared to being down 1.6%. So maybe this is starting to level off and sales are closer aligned to inventories. This is also a good sign.

The Dow currently is up about 30 points after opening lower. The Dow seems to be having some difficulty getting and staying over 7,000. If we are going to go higher we must close and stay over 7,000. Right now it proving to be resistant. But maybe we will have 3 days of positive market action. Gold is up over $900 and did so yesterday and continues today. Oil is at $44/barrel.

The VIX Index continues to drop and is currently at 43.21. The Put to Call ratio closed yesterday at 0.75 and still high by yearly comparisons but relatively low given the past 3-4 months of exceptionally high numbers around 1.47. If the market returns to some sense of normalcy the number should be below 0.40 for market sell signals I use to use in 2001 to tell folks to sell.

And one last item on my holdings. I still own all of my purchases in TNA, SSO, AAPL, F, etc. and have no plans to sell.

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Wednesday, March 11, 2009

Pre-Market March 11th 2009: Quiet but up

Market looks quiet this morning but the trend and Dow futures point up. One surprise this morning is that the 3 Month LIBOR rate has been creeping up from a 1.09% to now at 1.33%. Hopefully this will not go higher as it can freeze credit more if it does.

Put to Call ratio yesterday closed at 0.73 and on Monday it closed at 0.74. The VIX Index closed yesterday at 44.37 which is substantially lower than the latest highs in the mid 50's. Markets in Germany and France, while the UK FTSE is down slightly. The Nikkei rallied last night, rallying for a gain of 321 points and closing at 7,376. Gold is up only about $2/ounce in pre-market and is just below $900. All in all, I believe the markets will still rise and the rally continue the rest of this week.

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Tuesday, March 10, 2009

Market Rally: Will it continue this week?

That is the big question at the end of today's trading. The Dow went up 379 points to close at 6,926. The S&P 500 went up 43 points top close at 719. This is was especially good as many had seen the S&P needed to get up over 700 again. The key level for the S&P this week would be to go over 740, as many shorts would get rid of their shorts very quickly. They haven't been nervous in a while. The ETF Ultra Short triple play, TZA lost over 20% today, while another ETF triple play of the Small Caps, symbol TNA, gained over 20%.

The Volume was very good and a number of stocks went back above their 20 and 40 day moving averages all in one day. I think the rally will continue just because it has been long awaited and many do not want to sell into it until they have gotten back some of their losses. I would not sell into this rally too soon. The Dow could go all the way above not just 7,000 but 8,000 as well.

Gold dropped again today, down 22 points closing below $900 to finish at $896. This is very bullish for stocks. I also have noticed an increase in trucks on the highways the past 2-3 weeks here in the Bay area. This has been a good sign although the sample size is quite small and not representative of the economy in general. But it was a hopeful sign. I will be traveling to Las Vegas tomorrow and I will see first hand how Vegas is fairing. I expect to see some there watching the NCAA March Madness basketball tournament on the jumbo screens.

Rep. Barney Frank today said he believes the SEC along with Congress would reinstitute the Uptick rule. And Fed Chairman Bernanke today said he believed the recession would be over in the second half of 2009.

All in all it was a terrific day to help my portfolio and I expect it to continue. Don't be disheartened if it drops during some time tomorrow. This rally has legs and I do not believe you will be disappointed!

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Sunday, March 08, 2009

Tax Rates by Country: Don't complain about America!

The last post raised more questions for me as there was a missing piece. That piece was this: How does the United States rank in terms of Individual tax rates compared to the rest of the world. So here's the data:

Mean Income Tax Rate in the year 2005 as a % of Income by Country (These are in ascending order of tax burden)

Korea 17%
Mexico 19%
New Zealand 20%
Ireland 26%
Japan 28%
Australia 28%
Iceland 29%
United States 29%
Switzerland 29%
Canada 32%
United Kingdom 34%
Luxembourg 36%
Portugal 36%
Norway 37%
Slovak Republic 38%
Netherlands 39%
Greece 39%
Spain 39%
Denmark 41%
Turkey 43%
Poland 44%
Czech Republic 44%
Finland 45%
Italy 46%
Austria 48%
Sweden 48%
Hungary 49%
France 50%
Germany 52%
Belgium 55%

So when we hear complaints about how much people are paying in taxes, suggest they move to a more favorable country like Japan, Korea, Mexico, New Zealand, Australia and Iceland, or stop complaining!

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Is Obama unreasonable taxing the wealthiest? Look at tax rate data from 1920 and you decide

Much has been said about the tax rate and proposed taxing of the wealthy by the Obama Administration. Republicans believe the answer is always to lower taxes and that they are paying too much. I find it useful to look at the actual data so here is a Table by year and the highest tax rate for the top earners.

1920 73% 1921 73% 1922 58% 1923 43% 1924 46% 1925 25% 1926 25% 1927 25% 1928 25% 1929 24%
1930 25% 1931 25% 1932 63% 1933 63% 1934 63% 1935 63% 1936 79% 1937 79% 1938 79% 1939 79%
1940 81% 1941 81% 1942 88% 1943 88% 1944 94% 1945 94% 1946 86% 1947 86% 1948 82% 1949 82%
1950 84% 1951 91% 1952 92% 1953 92% 1954 91% 1955 91% 1956 91% 1957 91% 1958 91% 1959 91%
1960 91% 1961 91% 1962 91% 1963 91% 1964 77% 1965 70% 1966 70% 1967 70% 1968 75% 1969 77%
1970 72% 1971 70% 1972 70% 1973 70% 1974 70% 1975 70% 1976 70% 1977 70% 1978 70% 1979 70%
1980 70% 1981 69% 1982 50% 1983 50% 1984 50% 1985 50% 1986 50% 1987 39% 1988 28% 1989 28%
1990 28% 1991 31% 1992 31% 1993 40% 1994 40% 1995 40% 1996 40% 1997 40% 1998 40% 1999 40%
2000 40% 2001 39% 2002 39% 2003 35% 2004 35% 2005 35% 2006 35% 2007 35% 2008 35%

The data below looks at who was President during the year and the highest tax rate at the beginning of their Administration and what it was at the end of their Administration.

• Herbert Hoover 1929-1933 (Year of Stock market crash and Great Depression) Republican, 24%-63%
• Franklin Roosevelt 1933-1945 Democrat 63%-94%
• Harry Truman 1945-1953 Democrat 94%-92%
• President Eisenhower 1953 to 1961 Republican 92%-91%
• John Kennedy 1961-1963 Democrat 91%-91%
• Lyndon Johnson 1963-1969 Democrat 91%-77%
• Richard Nixon 1969-1974 Republican 77%-70%
• Gerald Ford 1974-1977 Republican 70%-70%
• Jimmy Carter 1977-1981 Democrat 70%-69%
• Ronald Reagan 1981-1989 Republican 69%-28%
• George H. Bush 1989-1993 (Gulf War 1) Republican 28%-40%
• Bill Clinton 1993-2001 Democrat 40%-39%
• George W. Bush 2001-2009 (9/11 then attack on Afghanistan & Iraq invasion) Republican 39%-35%
• Barack Obama 2009- Democrat

So as we listen to the screams and hysteria of Republicans complaining President Obama is asking the highest earners to pay more taxes as they did during Reagan's term, the Republicans are worrying the tax rate for them will go from 35% to 69%. But if you look back during the years of the 1929 stock market crash and Great Depression it went from 29% to 63% as it was necessary to pay for FDR's New Deal and the World War ll. You can see from the National Debt Graph above that it started moving under Reagan and then took off again under Bush. Click on the Graph to enlarge it. I don't know about you but the mid 40's to the 60's were good years for me and my family. Many could support a family with only 1 family member working. Now it takes 2 and many still can't make it.

So when the Republicans complain about their taxes, point them here to the data and tell them their game is over. President Obama is trying to restore the Middle Class to America and jobs and that is what made America strong. It wasn't from the tax cuts on the wealthiest among us. When the Middle Class rises all other boats do too. Oh, and one last point, you have heard of Ponzi schemes referenced recently in the Madoff scandal. Well Charles Ponzi, was arrested for using this scheme back in 1910. He was an Italian immigrant who was notorious for using other people's money. By the way the tax rate back then was only 7%. So you see no matter how much money these guys make through legal or other means they always want more. Greed has been in the air a very long time. That is why government regulation is so important.

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Thanks! To the many visitors, I appreciate you.

I wanted to give a special thanks to all those who have visited this site. Yesterday a couple of milestones were reached. First I have had 37,000 Visitors to the site now and they have accessed over 61,000 pages. Thanks for coming here and I hope you return again soon. Consider subscribing to my feeds by clicking on the Orange icon located under my Mini poll on the right margin. If you do you will be notified when I add a new post or update any content.

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Saturday, March 07, 2009

Market Outlook: The realities of any stock market recovery

Many are looking for a rally in the stock market but when you look at the mechanics of that it is surprising. I have been asking investors I know if they knew the market was going to make a major rally in the coming 4-8 weeks, would they be buying stocks now. They answered with the following responses:

- I don't have any extra cash to put to work
- I won't trust any rally
- I am done with the market and have cashed out. I am ruined!
- The small investor doesn't have a chance
- I have no money but I am not selling. Waiting for the market to go back where it was and then I am getting out

These are very interesting comments because they point to the fact that the only ones to get us out of the depths of this market collapse will be the major players such as Retirement Funds, Institutional Investors and the Investment Banking community or Wall Street, as it is known. Let's look at the practical difficulty here.

For a moment let's see what it would take just to get back to 10,000 on the Dow. We sit here at about 6,500 currently so we have dropped about 35% from 10,000. To get back to 10,000 from 6,500 we will need to go up 53.8%.

So one thing we can count on for sure is much less Volume of trading based upon the above comments from the average investor. Secondly, we know many funds, Institutional Holders, Hedge Funds and Retirement funds have been decimated in value as well. They have had to sell stocks to raise cash to cover anything they bought on Margin. So they have less dry powder to invest than they had 6 months ago. So to get back to a surging market is at best going to be difficult. And because Volume will be less than before, it will be easier to manipulate the stock with whatever the big players want to do. Many still would like to get out of the market and so will sell into any rally, minimizing the rise in the market.

I think I can say this with confidence, those who are waiting for a recovery, will have a much longer time to wait than they are planning right now. If that is true, then raising cash is in the end the best way to get there as a small investor because you may need to be more flexible and move to stocks having greater moves than the ones you currently own. I don't know which sectors are going to eventually lead us out of this so looking at the data when the market begins to recover will be your best bet. Some sectors are less affected now such as drug manufacturers and healthcare but no one knows what sector will begin the march up. I have heard on CNBC a number of experts say it will be the Financials since they got us here. But now it is difficult to see which banks will be around and which will not. So be prepared for a long wait and make the moves to get yourself ready and in position to take advantage of any genuine market move up.

While these comments may make you feel more depressed, it is better to look reality in the face and adjust strategies. Talk to your professional advisor and get as prepared as you can. If you have a job, you are in better shape than over 15% of our population. Be compassionate to others less fortunate, as your circumstances dictate. Try being more positive and supported of President Obama and what he is trying to do to get it right for all of us. Don't accept the divisive comments by ideology driven Republicans who have one answer for everything, tax cuts.

"Blessed are the peacemakers; for they shall be called the children of God." Matthew 5:9

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Thursday, March 05, 2009

Market outlook for March 6 and the week ahead

Friends, the more we think things couldn't get worse they do. Today the Dow hit a new low closing at 6,594 and the S&P 500 closed at 682. I have been looking at where we are and the mood of Wall Street and Main Street. Too much bad news surrounding the banks and the entire banking system. There are many stories I could place in this post but all it would do is to scare you even more than you already are. If we were united to overcome these problems I would feel better but unfortunately we continue to be divided by the Republicans wanting to see President Obama and his Administration fail. The problem with that approach is that it is taking down all of America at the same time.

I am no prophet and I can't really predict what will happen here. I still have a view that for every reaction there is an equal and opposite reaction. I believe in a world of abundance when others see scarcity, hope when others see despair. Think for a moment how must those who lived through the Great Depression were feeling for a number of years. It didn't affect everyone but enough so that you couldn't hide from it. Here we are facing an environment where assets are dropping at an alarming rate. There is one way to stop it if you are invested in stocks; sell all of them. You may have lost any chance to regain losses but you will preserve what you currently have. If you do that, my belief is that you are exchanging fear for the illusion of comfort as you will have dollars that are depreciating in value and that is nothing you can do anything about. You could convert your cash into precious metals like Gold or Silver, but have you ever tried to buy groceries with them?

No my friends, I think you need to have enough cash to live for at least 6 months to a year and you should weather this downturn. If you don't do your best to accumulate it through working more hours if possible, getting a second job part time or selling some assets. We will rebound, but when we do, many will be skeptics and will watch the markets rise while staying in cash. If you own some stocks and the market does rise, you should benefit. It will turn when some larger investors believe the market is really going up and greed will drive it further.

If the stress of the markets is getting to you, don't look at it for a while. Take a break from watching it, go on a short trip, do something good for yourself and settle down. I wish you the best.

UPDATE 5:30am PST March 6th
Jobs report came out a minute ago. First remember that this is a look backwards over the past month and doesn't necessarily predict the future. So the Unemployment rate for February was 8.1% versus 7.6% for January. February Non Farm Payroll was down 651,000 jobs. Previous months Non Farm payrolls were revised downward. Worst data since 1982.

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Tuesday, March 03, 2009

Market outlook for March 3rd, 2009: Calmer

In pre-market today, it appears that World markets are calmer after the big slide yesterday. Our Dow lost about 300 points and it closed at 6,763 while the S&P 500 closed at 700. Both Indexes closed at the lows for the day or very close to it. The Put to Call ratio closed at 1.07 yesterday and while high it did not go high enough to warrant a Buy signal as we have had a number of days at or slightly above this level. From a Candlestick pattern, the Dow's action yesterday did not create an "inverted hammer" pattern, as I had hoped. Here's a definition of an Inverted Hammer: A one day bullish reversal pattern. In a downtrend, the open is lower, then it trades higher, but closes near its open, therefore looking like an inverted lollipop. So I am not confident we will actually reverse the downtrend today however any moderation will be welcome and a relief.

The major effect on markets today will be testimony by Fed Chairman Bernanke and Treasury Secretary Geithner in Congress. It can go either way based upon Geithner's previous poor showing. My guess is there will be increased volatility as he speaks.

Also, on CNBC this morning, Larry Lindsey, former Bush Administration National Economic advisor said this morning that the Obama Budget is a "World Game Changer" and a "Downpayment on becoming a Welfare State". He said foreign governments will not want to buy our debt and that can cause our currency to devalue. How do those comments sooth your nerves. It troubles me a lot they are saying things like this.

Futures in Europe are mixed with the German DAX and France's CAC up slightly with the British FTSE down. At 5:45am PST, the Dow Futures show a Dow up about 90 points at the open.

We are in limbo land at these levels on the Dow. If we could climb back up over 7,200 on the Dow in the next few days we may prevent going lower to 6,200 on the Dow. But events are not encouraging that will happen.

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Monday, March 02, 2009

February Mini Poll results on length of recession

Here is a summary of the Mini Poll data for February as compared to January & December.

First the question.
How long do you believe this recession will last?

December data for December,then January and finally February data:
Mid 2009 4%, 17%, 10%
End 2009 35%, 25%, 24%
Mid 2010 15%, 13%, 12%
End 2010 15%, 10%, 4%
Mid 2011 12%, 17%, 10%
End 2011 8%, 0%, 10%
Mid 2012 0%, 0%, 2%
End 2012 0%, 0%, 2%
Much Longer than the choices you have provided 0%, 0%, 10%
We are going to be in a Depression 12%, 19%, 18%

If I summarize by Year:
2009 39%, 42%, 34%
2010 30%, 23%, 16%
2011 20%, 17%, 20%
2012 0%, 0%, 4%
Depression 12%, 19%, 18%

Sample size for December was 26 and for January 48 votes and for February 51 votes.

The largest change in the data showed that many now believe that we will go longer than 2012 as we have gone from 0% to now 10% and many have now given up on ending this mid 2009.

Now February had a number of people voting more than once during the month and most voted for the End of 2009. If I take those out the data changes dramatically. Here's how it changes:

Timeframe Number of Votes and %
Mid 2009 2, 5%
End 2009 7, 17%
Mid 2010 5, 12%
End 2010 2, 5%
Mid 2011 5, 12%
End 2011 4, 9%
Mid 2012 1, 2%
End 2012 1, 2%
Much longer 5, 12%
Depression 9, 22%

If I summarize this scrubbed data by Year:
2009 39%, 42%, 22%
2010 30%, 23%, 17%
2011 20%, 17%, 21%
2012 0%, 0%, 4%
Depression 12%, 19%, 22%

This is a significant change over the raw data presented at the beginning of this post, especially as to the % of people believing we are headed for a Depression. It shows a steady increase in those who feel we are headed for a Depression and a significant reduction in those seeing it ending in 2009

I have cleared the data accumulated from the Mini poll so feel free anytime this month to enter again when you believe the recession will end. We can all see how the results change over time. I wish more would vote as with a bigger sample size it would become more statistically relevant but I am appreciative for those of you who do vote so thanks!

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Market outlook for March 1st, 2009: Scary!

Things couldn't be in a worse position at the open today. Futures show the Dow at 6,901 and the S&P is at 715 at 4:00am PST. European stock markets are also in a bad place with the CAC down 3.7%, the German DAX down 3.3% and the British FTSE down 4.4%. My friends this is very bad news as we are most certainly headed down to test the next support level of 6,200 on the Dow. and if we break that level it is down to 4,000.

I am reminded how much this is not just a U.S. problem, it is a Global problem. AIG, the world's largest insurer lost $61 Billion and needed more money from the government (hence the taxpayers) over the weekend. The gov't has added another $30 Billion to it's original investment. This is the 4th investment given to AIG.

If you ask me what you should do, I have no idea. But the best I can say is to preserve capital. This will be very painful, if it isn't already. Sorry for the negative outlook.

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