Sunday, October 31, 2010

Economic indicators for the week of Nov. 1st

This will be a very busy week, indeed. Most likely the most important piece of news this week will not be Initial Jobless Claims, or CPI or Home Sales. One of the most important piece of news will be on Wednesday when the Fed meets and decides how much Quantitative Easing (QE2) the Fed will chose to initiate. Many expect about $200-400 Billion dollars. Many say this won't help enough, as it is too little an amount. Expect a market reaction when the Fed does announce their intentions along with their Interest rate decision. But even this is not the most important information of the week. Below is a list of Indicators being released and the day and time of the announcements.

The Unemployment rate for October will be released on Friday, as will Pending Home Sales. But the most important information released this week will be the Election results. That we will know most likely by Wednesday, not Tuesday as many races are very tight.

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Saturday, October 30, 2010

Market comments for the week

I did not write much this week and you might be wondering why. Some thought because the market hasn't gone down that I didn't want to post but they would have been wrong with that assumption. The real reason was that there wasn't any real news or market change to post. A week ago on Oct. 22nd, the Dow closed at 11,132 and the S&P500 closed at 1183. Yesterday, the Dow closed at 11,118 and the S&P500 closed at 1183 again. You see you could have been on vacation and not missed a thing.

Let's take a look at the charts of the Dow and S&P500 below. You will see clearly we went nowhere and it appears one of two things are happening. The Bull's story goes something like this: We are building a firm base here to go higher after the election. The Bear's story on the other hand goes like this: We are hitting strong resistance at these levels and are unable to break above them. But after the election when it is obvious as to the results, the market will drop on the news (Buy on the rumor and Sell on the news). You can see the horizontal resistance lines in both charts. To me the 200 day averages will be key going forward if there is any correction. If we break below them, the markets will have a meaningful correction. Without a break below that level, the market manipulators are still smoking something because this rally is not warranted in this economy.

I am in the camp of selling on the news and I'll tell you why. This election cycle is no mystery. The Democrats will lose the House but it won't be a complete wipeout of 100 seats, but more like 55, and the Senate will remain in Democratic hands with a slim majority. All the surveys point to this outcome, so the bets have been made and the wager will be collected after it is official on Wednesday. So, no real news yet to move the market this past week. Next week will be a different story as market direction may be more clear. Personally I have been waiting for a major correction so long now I am almost getting tired of saying it. This has been a long extensive run up in the Bear market rally.

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Wednesday, October 27, 2010

Market comments for Oct. 27th

The market mover this morning was the Durable Goods orders-ex Transportation, as it came in at -0.8% against an expected +0.5%. The MBA Mortgage Applications was a better number coming in at +3.2% versus last reading of -10.2%, so this at least number was in the right direction.

With that the market opened down and the Dow now stands down -66 points to 11108, and the S&P is at 1179. Time will tell whether the market has a negative day or if it rallies again in the last 1/2 hour, as it usually does.

There is one other hedge which may be going on this morning. Yesterday, political commentator and poll survey expert, Charlie Cook, lowered his expectation for a Republican sweep in this election next week, which could have something to do with this move down. If Republicans don't sweep and only win a slight majority in the House, the Democrats will call it a victory and it may help them with Obama's agenda. That terrifies Wall Street as they do not want any more reforms restricting their options in this Casino called the stock market. Vegas Casino's didn't like regulations either but the government stepped in and regulated how much they can take from us in a rigged game now with rules. The same should be true for Wall St. They will take some of our money but hopefully not all of it.

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Monday, October 25, 2010

Market comments for Oct. 25th

Are we all excited today to see that the G-20 ended their Finance Ministers session agreeing to "try" no to do harm to each other? Traders seems thrilled today as the Dow is up about 65 points at this hour and going above the 11.200 level I said we would get to back in mid September and it may even go to the 52 week high of 11,258 before the elections.

However, I caution all you believers that this is a real Bull market Rally that Friday was the lowest Volume day since last December. When can you remember an October where Volume was so low? I can't! The Volume has disappeared this month and the Volatility Index is hitting lower lows each day, it seems, although today it is up a bit. About 10 days ago it was as low as 18. From a historic perspective, it has been much lower over the past 10 years. It was as low as 10 from about 2005-2007 and signaled the quiet before the storm which followed. In 2008 it soared to 90. So we are by no means at the lows on the VIX. But there seems to be a quiet before this election and many analysts believe that the election is already baked into the market and most likely it will selloff just when the news is in on the results. You know, it's that old "buy on the rumor and sell on the news, game.

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Sunday, October 24, 2010

G-20 meeting: Effect on markets, Gold and currencies

As most of you know, the past few days has seen the G-20 meeting convene of Finance Ministers and their pronouncements that they would pledge to avoid weakening their currencies to boost exports and to let markets increasingly set foreign-exchange values.. Hopefully that means of the U.S. Dollar as well, as we seem to be on a tare to drop the value of the dollar, as fast as we can. In advance of any stock market trading this week, I thought a few charts were in order. I noticed that the on the last 3 trading days in anticipation of this meeting, there has been a slight shift upward on the ratio of the Dow/Gold ratio, as is seen in the chart below. Whether this is a reversal in trend or not is too early to say, but I will be watching it closely next week.

Now see if you can tell what has caused this movement up. Is it because the Dow has moved up or because Gold has dropped? This is important because Gold is tied to all currency valuations and is reported here in terms of U.S. Dollars. Below are the 2 charts in question.

You know there has been a lot of pressure put on China to raise the value of its currency, the Yuan, as they have kept their currency relatively low for many years. It has risen less than 2% in the past year, while Japans currency, the Yen, has been forcefully dropped by the Japanese recently as a counter to the dollar dropping. You can see from the chart below how the value of the Yen has been rising against the U.S. Dollar going back many years.

So let's assume you have a constant currency value as is the case of China and an ever steady Yuan, in this equation where currency is in the numerator and the price of Gold in the denominator, you can see that the resulting ratio goes lower and lower.

It is difficult to compete with people who get paid less than a dollar a day. Most of the world is finding out just how difficult it is. And yet, we all knew this much before the economies of the world went Global. Remember we too had someone, Ross Perot, who warned us of the giant sucking sound of jobs leaving the U.S. but the business leaders in this country thought somehow they could sell more goods in these foreign lands or at least get cheap labor to build their products here, rather than hire U.S. workers. That began the end of the Middle Class in America. We are all now suffering as citizens because of this folly. Business people do not have real concern for the common person. Their concern is totally based on Profits. That is why the Healthcare system in this country is so messed up save but a few Not for Profit endeavors which struggle every day to survive.

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Friday, October 22, 2010

Is anything going to change after the election? Yes! Let me tell you.

So it is a foregone conclusion that the Democrats are going to lose the majority in the House of Representatives, but most likely will not lose the majority in the Senate. What does this mean to us and what effect that will have on legislation? I’ll tell you.

You see Republicans and Tea Party advocates believe they will reign in government spending and shrink the size of government, as a result of their victory, and that is what they are selling voters, as to why they should be elected. In fact, that will be far from the reality of what will happen after the election. Let me paint a real possibility of what is possible after this election.

First, there will be a lame duck Congress, as many Democrats will lose their seats, but, and this is the real interesting bit of news, they will feel they have one last chance to pass legislation before Republicans take control in January after they are sworn in. As of October 5th, here is a headline worth your attention: “Frustrated House still waiting for Senate action on 420 bills. Do you think that this fact is irrelevant because they lost the majority? Think again!

You see these bills are awaiting approval by the Senate, which still will be controlled by the Senate and that will still be controlled by the Democrats if projections hold for them holding on to the majority in the Senate.

Do you have any idea what those Bills contain? Let me give you a small sample:
- At the top of the list was the June 2009 cap-and-trade energy and climate bill, which passed the House by a slim margin but never made it to the Senate floor.
- Measures to audit the claims fund set up by BP after the Gulf oil spill and legislation to increase screening for diabetes.
- House leaders drew a line in the sand on holding a House vote on tax cuts set to expire at the end of the year, saying the Senate would have to act first. When the Senate decided to punt the issue until after the elections, the House followed suit, despite protests from liberal members who wanted to cast their vote to extend middle-class tax cuts before they left for the campaign trail.

- The ‘Paycheck Fairness Act’ (H.R. 12) that was one of the first pieces of legislation approved in the House when the new Congress convened in 2009. It won by a vote of 256 to 163. According to sponsor Rep. Rose DeLauro, D-Conn., it will help promote pay equity for women.
But with the post-election lame duck session packed with priorities, like debating the so-called Bush tax cuts, many of the bills passed in the House will simply disappear into the history books. They don’t carry over from one Congress to another and sponsors of these hundreds of measures must introduce them once again. So there will be a lot of pressure to get some of these passed in the Lame duck session between November and January.

If after the election, the Democrats in the Senate have the courage, and this would clearly take courage, they could change the “Filibuster” Senate rule to allow for 56, 55 or as low as 53 votes to move some legislation. The Republicans threatened to do this when they were in power, under the George W. Bush Administration and Senator Bill Frist was the majority leader in the Senate. Also, I believe I had heard that Reid has also considered this move.

So this will be an interesting 3 months ahead. I would expect some new tactics to be used in the Senate to overcome the gridlock. And don’t forget, if Harry Reid gets reelected he won’t be worrying much about what Republicans think, as this most likely will be his last Senate term as he would then be 77 years old when up for reelection. Interesting times indeed!

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Thursday, October 21, 2010

Thoughts about the market, the economy and not all stimulus projects are equal.

The Dow has hit 11,200 this morning and is within 58 points of its 52 week high. I had said this rally would go to the 11,200 level in mid September and that prediction has be validated.

Where from here is the big question? I believe that before the election the Bulls want to drive the Dow and the S&P 500 above their 52 week highs. Then we will have the election and the finality of what the political implications will become evident. Will it be gridlock or will something get done to turn this economy around and solve the unemployment problem. The Country needs real jobs and I personally think it would be a great time for infrastructure repairs and a time for some great National project, like an East-West Speed Railroad system, so we didn't need to take an airplane or car to go coast to coast in a more efficient green way.

I have always wanted to take a high speed rail train across the country, as I experienced abroad. Amtrak just doesn't do it. That would be a project I could get behind. How about you? There is a project to build a High Speed Rail train from LA to San Francisco, which many would use, if it becomes a reality, but I am afraid I will be too old by the time it is completed. The Federal government has given $2.25 Billion of the $8 Billion allocated under the American Recovery and ReInvestment Act (ARRA) to this project. The project must be complete and operational by the Fall of 2017 for CA to get the Funds. The four sections eligible for stimulus funding are: Los Angeles to Anaheim, San Francisco to San Jose, Merced to Fresno and Fresno to Bakersfield. However, in order to accomplish the goals set out in the stimulus program, the Authority believes it is clear the funding must not be spread among the four sections, but rather concentrated in one of them.

I have attached a map below of the proposed route for any Californians who haven't seen it. Additional information may be obtained by going to this link at The California High Speed Rail Plan.

If we could start the branches for a National High Speed Rail system, we could then join the pieces to form a national network. This endeavor would add such a wonderful treasure to our country as we are at the beginning of the 21st Century. President Eisenhower left a generational legacy with the InterState Highway system. It is hard to conceive what our country would have been like had Ike not foreseen this project when he did. It is an invaluable treasure for our transportation needs and so too would a High Speed Rail system be, which was designed for a more green, efficient way to cross this great land. I would like to see this in my lifetime, wouldn't you?

The lesson of this ramble is that not all stimulus is equal. Some stimulus have real long lasting benefits, if you can think beyond today. Can you? This is why voting is so important. If you vote you can make an impact and if you don't vote, you have left the decisions about your future to someone who only cares about themselves. The Tea Party and the Republicans have declared no more spending! Reign in Government, is their cry. To me that means no solutions to our current problems. The Democrats want some stimulus targeted for this type of project and other Green solutions. Did you know that freight rail systems get 436 miles on a gallon of gas? Vote and vote wisely this election. Elections have consequences! Your future depends on it as well as that of your children. It really is an important election.

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Market comments for Oct. 21st

The data released this morning regarding Initial Jobless Claims showed that things stayed about the same with one notable exception, a correction on last week's data which was significantly worse than we were told last week. Initial Jobless Claims for week ending 10/16 were 452K, compared to expectations of 455K. However the prior week's data was revised upwards from 462K, which set the market on a downer, to an even worse revision to 475K. Continuing Claims came in at 4.441 Million Claims against a prior week's data of 4.445 Million which was revised upward from 4.399 Million. All in all the numbers have not changed much and we seem to be stuck here. But the markets have taken this as "good news" and so the market is rising again at the open. The Nasdaq, Dow and S&P are all up at the open. The Dow is up about 40 points while the Nasdaq is up about 10 points 5 minutes into trading.

The Philly Fed data is released later as is Leading indicators and I will update the data here.

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Tuesday, October 19, 2010

Reflections of the stock market crash of 1987

It has been called Black Monday, that day in 1987 when stock markets around the world tumbled in a very short time. I was walking with a friend from back east who had come here for his birthday, Oct. 19th and we were visiting Carmel and Monterey when we heard the news that the stock market was tanking. In memory of that day I have a chart of the drop that day. Do you remember where you were that day? That was some Birthday celebration for my friend. Happy Birthday today ma Lad.

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Market comments for Oct. 19th

Today's economic data was released on Housing Starts and Building Permits, after the earnings data from IBM and Apple had already driven the markets down after hours yesterday on disappointing forward expectations by both companies. Today's data isn't important to offset this decline nor add much to it because it isn't as important as other numbers being released later this week on Initial Jobless Claims. Housing Starts data released this morning for September came in at 610K, compared to an expectation of 579K. Last month's data was revised upwards from 598K Starts to 608K Starts. Building Permits for September were down to 539K Permits versus an expectation of 565K. August's data was revised from 569K to 571K Permits.

If you haven't read my post from Saturday on Fundamental Analysis versus Technical Analysis be sure to do so as it explains much of what is going on in the market discord between both type of analysis and the conclusions each draws.

A special Birthday wish to my friend in Massachusetts this morning. He and I were in Carmel many years ago on the day back in the 1987 when the market crashed. We survived that one but not sure if we will on the next one. A very Happy Birthday, Lad.

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Monday, October 18, 2010

Economic Indicators for the week of Oct. 18th, 2010 (UPDATE)

Below is a list of the Economic Indicators to be released this week, along with what the expectations are for each indicator. In addition I have posted Corporations which will be releasing their earnings data for the past quarter. I will update each economic indicator here during the week as the data is released. I will not be updating the earnings information.

UPDATE: 6:25am PST

Industrial Production for September was down -0.2%, while expectations were for an increase of +0.2%. Also, Capacity Utilization for September was 74.7%, while expectations were for 74.8%. These are not in the right direction if you were looking for support of a recovery. Hmmm, that must mean the market will go up today, not down, since the market does opposite of what the economic data. suggests.

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Sunday, October 17, 2010

Michigan Sentiment Index historic chart and does it mean a slip into a Double-Dip recession?

I thought I would go back and look at the data released on Friday concerning the Michigan Sentiment number and how it looks on a chart. Here in chart from is the Univ. of Michigan Consumer Sentiment index plotted back to 1998, by Haver Analytics.

The last few points is what has many concerned for a Double Dip recession. The level we are at now is the same as it was just when they say the recession ended, as is noted in the grey bar from 2008 to mid 2009. It was mid 2009 (June 30th) when the stock market was at 8,447 and Gold was at $934/ounce, and the Dow Gold ratio was 9.0. Today the Dow is at 11,062 while Gold is at $1367.50/ounce and the Dow Gold ratio is at 8.1 and heading lower. So the Dow had risen 2615 points or 31% since June 30th 2009 while Gold has risen 46.4%. Still think you made any real money which you can buy more Food/Products/assets with? I am expecting that the Michigan Sentiment number will drop after the election for next month and signal a returned concern to a double dip recession. It certainly will set the stage for a slow Christmas shopping season, no matter what you hear to the contrary. Bah, humbug!

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Saturday, October 16, 2010

The war between Fundamental Analysis and Technical Analysis is being played out in the stock market. What is it telling us now?

I have been thinking about this post for a while. It was triggered by friends who see the stock market in diametrically opposed positions. It appears to look like a Bull versus Bear argument but it's really not. It is the difference between those who use Fundamental Analysis and those who use Technical analysis to make decisions about market direction and trading decisions and whether to Buy, Hold or Sell. In order to get at this problem, I must first explain the difference between both analysis techniques. For that I will use the 4th Edition book by Martin Pring titled, Technical Analysis Explained. It is considered the bible for those interested in Technical Analysis. I will not make this too lengthly, but it is important to lay this foundation before I get into where the market is going to go and why the opposing positions have the positions they do. I will conclude with a number of charts and some support for the idea that while the disparity will continue between these two positions, one position is going to lead the way into the future as it is doing right now behind the scenes.

Ok, here we go. "Technical Analysis in nothing more than a tool", says Martin Pring. But a very good tool I might add. "Technical Analysis is based on the assumption that people will continue to make the same mistakes they have made in the past." According to, "At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements. By looking at the balance sheet, cash flow statement and income statement, a fundamental analyst tries to determine a company's value. In financial terms, an analyst attempts to measure a company's intrinsic value. If the price of a stock trades below its intrinsic value, it's a good investment.

Technical traders, on the other hand, believe there is no reason to analyze a company's fundamentals because these are all accounted for in the stock's price. Technicians believe that all the information they need about a stock can be found in its charts.

So currently the argument, for those using Fundamental Analysis, goes something like this. The S&P 500, based on historic terms is trading at about 21 times trailing price-earnings ratio and therefore is cheap as an investment today. That compares to the historical average of 16.4 since 1881 and is at the top end of the range pre-2000. The S&P 500 is expensive on a long-term basis, but and this is the big but, inexpensive compared to the past ten years. (Source: Prieur du Plessis)

Technical Analysts say, "Look at the charts! We are ready to drop significantly!" What do they base that argument on? A Head and Shoulder chart pattern. Let's take a look at several charts and explanations of the Head and Should pattern from several sources. The first chart shows a Head and Shoulder pattern looking at Oil prices back in time with an explanation on how to read the chart information.

This second chart shows a classic head and Shoulder pattern on a usual uptrend similar to the latest market movement this past few years.

This 3rd chart depicts more closely, the current market trend of the past 20 or so years and how to determine how far it should drop, and shows the neckline to measure the amount of the expected drop.

And the last 2 charts show the Dow and S&P 500 for the past 30 years and the big Head and Shoulder pattern we are starring at as Technical Analysts. It explains why many from this camp are very worried about the future.

One other very important relevant piece of information, High Frequency Trading now controls about 70% of the market volume traded in a single day (Source, 60 Minutes broadcast of Oct. 10th). It has also been determined by the SEC, that the single one day crash on May 6th where the market dropped over 600 points in 15 minutes was caused by the High Frequency trades made. It was caused by an algorithm (a set of rules to be followed in calculations and problem solving by a computer). Since May 6th, the SEC has instituted trading curbs, which stop the trading in any security which drops 10% in a short amount of time. Since the trading curbs have been in place a number of times the market has had to be stopped because of similar algorithms by other firms had glitches. The market is not being run by the individual investor, it is being run right now by computers, which were set up by humans, who tend to repeat the same mistakes, as I stated in the beginning of this piece. This is why I like Technical Analysis. You know we humans are going to panic at some point in the very near future. What will be the trigger is anyone's guess. But I think any rational person would agree we are going to panic and we are all just waiting like deer frozen in the headlights.

It has been painful staying on the short side of this market recently, but it will pass. I wish it weren't so, but I am worried many are going to feel some really bad pain and they are going to say it was unforeseen. The Fed will be the first to use that excuse when it happens. Just watch!

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Friday, October 15, 2010

Market comments for Oct. 15th, 2010

The big news today for me was Univ. of Michigan's Consumer Confidence number. It came in at 67.9 vs. 68.2 for September. So it is clearly lower. Market Expectations were for it to come in at 68.5. Other data released was CPI, which came in at +0.1% and Core CPI which came in at 0%. That is one of the reasons there will not be an increase in Social Security checks in 2011, there is no inflation according to these numbers which have been steady near zero, for most of the year.

Retail Sales improved +0.6% for September, was due to large purchase items they say. Expectations were for them to be 0.2%. Well it wasn't me that bought a large ticket item, just a small cute poodle. :)

Not much to crow about today for the Bulls as the market has dropped somewhat. The Dow is down about 25 points at the time of this post.

And as a Public Service announcement, today all late filers must file taxes which are due for State and Federal taxes. They must be postmarked with today's date in order to avoid late penalties.

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Thursday, October 14, 2010

Market comments for Oct. 14th, 2010

Data released this morning shows that Initial Jobless Claims were higher at 462,000. Expectations were of 450,000. Last week the numbers reported were only 450,000, so this spike is in the wrong direction. However, as usual, they adjusted the prior week's data up from 445,000 to 449,000. Continuing Claims came in at 4.399 Million vs 4.511 Million the prior week. But the 4 week moving average is up to 459,000. When you really think about it, Americans are losing jobs to the tune of greater than 450,000 a week and have been doing so for a very long time! How sad for American workers and their families. This is not a good report for President Obama going into the elections in a few weeks.

On another note, the PPI came in at +0.4%. This was the same data as reported for August. The Core PPI, year over year increase, is up only 1.6%. The Trade deficit came in at -$46 Billion versus -$43 Billion last month. Expectations were for improvement to being down to -$40 Billion, so this too was in the wrong direction. With China's currency resisting world pressure to appreciate because they have an unfair advantage I believe they will continue to defy the world and will keep their currency as low as they can. Why not, they are in the drivers seat and they know it. Even if the whole world dropped their currencies they couldn't get it low enough to match where China's currency is because their population works for under a $1 a day. We just can't compete with them nor can anyone else.

Foreclosures reached a record 100,000 last month, and the background story, which emerged a week ago, was that an investigation of Banks and their foreclosure process is being conducted. Bank of America had stopped all foreclosure processes in 50 States pending an investigation by them.

Futures are close to unchanged or slightly lower after the release of the data.

It is now clear that with the sizable debt this country has, that the way we are dealing with it is to devalue our currency so that the value is half of what it was so we can pay the debt off in cheaper dollars to China, who holds our debt, as does Japan. That is why Japan is trying to lower its currency as well so they get paid eventually relatively equivalent dollars and why China will not inflate its currency. The major world powers are in a Currency war right now. This game is going to end very badly as wealth is being transfered out of the United States.

But we are all happy now because the stock market appears to be rising, right?! How naive the American public is. That is the price we all pay for a poor education of our kids who someday grow up and are fooled by the talking heads in Washington and vote against one's own personal interest.. Education is the one answer to get this country back on track and we haven't even begun to get serious about improving education yet. That is why we get the Government we deserve.

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Wednesday, October 13, 2010

Market comments for Oct. 13th

September Import and Export prices were disclosed a minute ago. Import prices fell -0.6% while Export prices went up +0.3%. In August Import prices were +0.5% while Export prices were up +0.3%. The Futures market has the Dow up about 80 points this morning even before the news. After the news the Dow futures dropped a bit and is now up 68 points.

I was looking at the charts and noticed that the S&P 500 still has room to go up. It is my guess that it could go as high as 1250 before the reversal of the trend comes in to play. It closed yesterday at 1169, so that could still yield a 7% gain form here. Then it will be downhill, as the final head and shoulder pattern of this indicator has been formed. So it appears the conditions are ripe for the final phase of this Bear market rally is about to end. Most likely the timing will be after the election but it could start to unfold even before that. There will be a 3 month period where even if the Democrats lose the majority in the House of Representatives that it would be in Republicans interest to drive the market down while Democrats are still in control. The Republicans could then show how they came in and saved the day in January, when they are sworn in to their new seats, replacing Democrats and Speaker Pelosi. The only problem with this picture is that when the big boys start to sell there is no one to buy the stocks because all will be doing the same thing.

The Dow is within 180 points of the 11,200 level where I said that I had thought the top of this rally was. This is close to the 52 week high of the Dow which went to 11,258 previously.

I got a chart last night from Weiss Research and it was very interesting as you can see below. The number of Bulls is now close to extreme which is often an indicator of a trend reversal is in order. We shall see if this plays out as predicted.

Also of significance today is that Apple stock, symbol AAPL, went over $300/share and in pre-market is at $301,08, up $2.54/share.

And on a special note I am thrilled, along with the people of Chile, for the successful rescuing of its Miners. God bless them all and I hope for them to manage the psychological aftermath now with al the attention they will get. Chile did this rescue right!

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Saturday, October 09, 2010

Fiscal responsibility: Where did we go wrong, President Obama or President Bush?

As I was thinking about what to post today, I went back over the years in posts and found one back on January 13, 2007, which I thought might be appropriate to post again today. I wrote this post much before the Sub Prime problem was even a word in our vocabulary. It was about President Bush and the legacy he was going to leave our country. I know many are disappointed with President Obama right now. They see that we still have massive problems which still remain unresolved and new problems which have finally gotten the attention of the American people this past year. But in reflection, I thought this reminder of where we were, back in January 2007, might be a useful comparison to today. Remember, President Barack Obama had not even declared his run for the Presidency until a full month after this original post on Feb. 13, 2007. So here is a reposting of that post and very timely as we have less than 30 days before we vote.

The title is:
Bush's experience taught him only one thing- How to be a failure and disappointment!

The only thing this President seems to have learned from his past is how to create bankruptcy conditions.

1) He bankrupt his Oil company. From the lessons learned he started in his Presidency to create the same for the Nation by the following:

2) His is bankrupting our Country with debt
3) He has bankrupt our Military - both equipment wise and manpower strength
4) He has bankrupt our Freedoms with such actions as eavesdropping on phone conversations of any American without FISA Court approval, signing statements which defy laws he has signed into law and other Unconstitutional acts.
5) He has bankrupt our Trust in oversight with a Republican led Congress that turned their head away at his choices, while they held their noses from the stench.
6) He has bankrupt our Trust in a fair Judicial system, by appointing Justices that will approve of his antics and rewrite history as far as settled law.
7) He has bankrupt the Vision for millions of people around the world who thought of the USA as a place of Hope and replaced that Vision as a country of arrogance and spite for our friends as well as our enemies.
8) He has bankrupt the use of Diplomacy, as no country believes him nor trusts him anymore. We are mostly alone in the world now. Colin Powell's speech will go down in history as how the US distorted truth for the self interest of a few of its leaders; the President and the Vice President.
9) He has bankrupt our willingness to be eager for the words of our President, when he gives a speech or an address, to the Nation. We are weary of his lies and twisted truth to us.
10) He has bankrupt and shattered the idea of our President being a Statesman because of his intellect and pursuit of noble causes to help the poor of the world and in stopping wars and promoting peace in the world.

Need I go on! Shame, shame, shame Mr. President. We need a “Tough Love” intervention called IMPEACHMENT.

I am told that Donald Trump has disclosed he is considering running for President against President Obama in 2012. I told a close friend of mine this morning, we don't need another President who has experience with Personal Bankruptcy again. We need someone like Mayor Bloomberg of NY who has done quite well for himself and has great business acumen in helping to solve our country's problems. Now there is someone I could really get behind and vote for. He proved his metal to me in this mosque controversy near Ground Zero. He is one class act. Mr. Mayor, are you listening?

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Friday, October 08, 2010

What's it going to take to get out of our economic funk? It's contrary to what you think!

We are all concerned about the economy and the stock market. The talking heads on CNBC and other networks like Bloomberg are asking questions like these: Will the Fed's Quantitative Easing work this time when it didn't seem to work last time? What's it going to take to get more confidence back to Consumers? Will the individual investor return to the stock market or have we lost a generation of investors? I have given these questions some serious thought and with my background of understanding people and the psychology that drives them, there are answers which will seem contrary to what the experts in the Fed and the markets are currently providing. Here are some of my answers to these questions.

For confidence to come back, the stock market must go down and have a retest of the lows! It is the only way where people will be convinced that the market is reflecting the economy. Without the drop, which by the way had been predicted by me incorrectly for the past 6-9 months, people believe the markets are being manipulated (which they are) and therefore an unsafe place to invest or to make money. It is the very avoidance of market turmoil, which has driven the lack of confidence in the connection of Wall St. to Main St. I am not saying it won't scare people, but they will feel relieved if there were a successful test of the lows and that there is the all clear sign with respect to investing in the market and the economy. The economy needs a spark right now and the Fed can't provide it. It has shot its wad already and it failed. The government isn't responsible for creating jobs, it's the Private sector. The Private sector won't until the mood of the Consumer is more optimistic and they are spending somewhat more than they have been.

I am afraid without the market drop, hordes of people will stay in a funk, things will remain depressed and many will feel there is no hope of recovering. The world needs the boldness and courage of the American people to lead the world out of this mess. The answer is NOT to try and protect the stock market but to allow it to reflect reality. We need the stock market to fall and retest the lows successfully so that we can reset the psychology of the public.

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Thursday, October 07, 2010

Market comments for Oct. 7th

Initial Jobless Claims were down 11,000 to 445K Claims for the week of Oct. 2nd. Expectations were for 450K. Continuing Claims were at 4.462 Million vs. an expectation of 4.450 Million. So the numbers were basically in line with what folks expected and basically unchanged for the past several months at this level of around 450K. This, while not good made the market Futures jump because it wasn't worse. That's a sad state of affairs isn't it.

Everyone waits now for tomorrow's Unemployment rate for SEPT. Will the number be the same and stay at 9.7% or will it tick up to 9.8%? Will this number drive the markets up or down? Give me a break. It isn't good for sure, and one I know would ask, "But is it Bad?" There is no real difference in the numbers, unless you are one of those unemployed. It is bad for America.

Two year notes hit a record low and 10 year Treasuries are now yielding 2.39%. The dollar continues to drop while many work today to make some dollars, even though their purchasing power is less today than yesterday. Gold hit another new high today at $1360/ounce.

European markets are up as are Dow and S&P Futures. We should cross over 11,000 today and are now closer to the 11,200 market top I had predicted back on Sept 21st. This rise in the market is confounding many, who don't understand the relationship of stock market assets in equities and the drop in the dollar and the rise in Gold. There is no real net change in the purchasing power, but it makes people feel better. That's the play right now. Hard assets like commodities are rising because no one wants to hold paper, except those in retirement who are finding it more difficult to survive.

I do eventually see Home prices will rise as these are also hard assets and the price of these assets will have to gain and prices rise before foreign buyers invade us to buy Commercial jewels across the U.S.

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Wednesday, October 06, 2010

Housing Prices from 1970 to 2009 in the US vs. California as compared to Gold prices. Oct. 6th

ADP released their payroll numbers this morning for September and they were very disappointing because they reported a loss of 39,000 jobs. This was the first month in the past seven that there was an overall loss of jobs. Expectations were of a gain of 20,000 jobs for September. They said that they now expect the Unemployment rate to be 10% by yearend.

Also in the news this morning was the MBA Mortgage Applications number. It was down -0.2%.

Tomorrow, Initial Jobless Claims will be announced and based upon the ADP report we can expect disappointing numbers here as well. You know what that means? The stock market most likely will ignore the news! We don't want the American Public to feel depressed now do we. It's all about managing their psychology in the biggest experimental psychological game in our lifetime. You feeling better yet?

OK, I have put together several charts you might find unique. I looked up Nominal Housing Prices from 1970 to 2009 on a national basis and also compared California's Housing prices. In addition I calculated the Nominal Housing Prices for US and California versus the price of Gold to come up with a Housing/Gold ratio. Here are the charts below. The first is a comparison of California versus the US. They tracked closely with California always higher but during the peak time, California surged while the drop was even more severe than US overall.

The next chart shows the Housing to Gold ratio:

So comparing how Gold has risen and Housing prices have dropped, it looks as though the real value of Homes has diminished significantly in the past 3 years.

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Tuesday, October 05, 2010

Market commentary Oct. 5th (UPDATE)

There has been little news to comment on with respect to Economic data released this week. Yesterday, Factory Orders for August came in down -0.5%, compared to +0.5% in July. July's data was revised up from +0.1% to +0.5%, so the orders are down.

The stock market closed down yesterday, with the Dow closing down -79 points. Again, within a half hour of the close, it was down -95 points but then the Volume surged in the last 15 minutes to end the day only -79 points. Volume spiked about 30-40 million shares in the final 15 minutes. Now the Futures market today is up +70 points on the Dow. So it appears that the Bulls are recouping yesterday's loss.

The charts look the same. On all indexes they are completing the right shoulder of a Head and Shoulders pattern, so until it does, this market will stay up and still may go to the high of 11,200 on the Dow, as I predicted on Sept. 21st.

The big news of the week will be Thursday with Initial Jobless Claims and Consumer Credit and on Friday with the Unemployment report for the month of September. Also on Friday, Hourly Earnings, Wholesale Inventories for Aug. and Non Farm Payrolls.


The ISM Services data for Sept. was released and came in at 53.2, while expectations were for 51.0. The prior month data was 51.5.

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Saturday, October 02, 2010

What's going on in the stock market? Market comments on Oct. 2nd.

It's time for charts, plenty of them. I have been looking at where we are regarding the U.S. stock market lately and comparing it to a number of other indicators such as, the price of Gold, the Nikkei 225 stock market index, the U.S. Dollar and the Japanese Yen. All this to get a better picture of the real value of our assets and the implications for the future. I have also been compiling charts on 10 year Treasuries vs. the S&P 500, because all of these measures do have a connection to each other and therefore paint a truer picture of reality.

The average person has no clue as to what is going on. They are too busy using Facebook, Twitter or other Social Media, they don't watch the News either. They work, play, connect and as long as they have some money in their checking accounts, they are happy, sort of. But the country is changing all around them and so far only some have been upset. Those upset have been labeled as crazy Tea Baggers, and while many don't really understand the data, they know what is happening is not only bad, but it is also making them furious. So let's take a look at the charts and see what is going on.

The first set of charts below are of the price of Gold in U.S. Dollars and in Japanese Yen over a 5 year period. The charts show that during this period, the price of Gold went up 172.7% in U.S. Dollars but went up only 107.5% in Japanese Yen. This doesn't mean you could have made a bigger profit if you bought Gold here vs. what someone in Japan made. It means that our currency has devalued much more than Japan's. Or to put it another way, your ability to buy goods and services are being diminished when this happens. If prices of goods and services remain the same here in the U.S. over the 5 years, then this means that the real value of these goods is declining relative to the rest of the world. Japanese Consumers could buy the same goods and services for much less Yen over the same period, than what we must pay. It means our Homes values are dropping more than what is apparent by looking at the current price realtors list homes at. If you add in the depreciation of the currency, the drop is staggering.

The second set of charts below are of the Nikkei 225 vs the Dow and the S&P 500 over a 2 year period. You can see from both of these charts that the spread between the Nikkei and Dow has been widening to its greatest disparity over the 2 year period. The same is true for the S&P 500. Of particular interest is the Sept. 1st point of the Nikkei which was at the lowest point since May 2009. These Indexes have tracked over many years, but lately (since May of 2010) the spread has been widening. Notice that the spread is wider between the Nikkei and the Dow than the Nikkei and the S&P. I have said that the Dow is much more easily manipulated as there are only 30 stocks in the Dow Index.

To show how these 2 indexes have tracked over a longer period I have included 30 year charts on each index. You might want to know why I have selected the Nikkei Index and wanted to show the comparison to our Dow and S&P. It is because Japan has had several decades of similar financial troubles with their economy and tried many of the actions we have tried and continue to try to get out of our biggest recession since the Great Depression of the 1930's. Japan's time has been called the "Lost Decades". So here are the charts, complements of the web site, "Interactive Mathematics". I am going to post their charts below here and also their commentary, which I found illuminating.

Here is chart of the DJIA up to the end of August 2010.

In the late 1980s, Japan had explosive growth in sharemarket prices, similar to the DJIA in the late 1990s. The euphoria in Japan was driven by healthy export growth, but especially by a housing and construction boom. The real estate bubble burst in the early 1990s and the Japan market started to plunge. Japan has been in and out of recession ever since, and the latest stock meltdown from late 2007 has seen the value of the Japanese stock market return to values last seen in early 2003, and before that, in 1983.

Investors who were in the market during the 1980s did very well, but since then, many people have lost a lot of money.

The main stock market index in Japan is the Nikkei 225, which is an index of the top 225 companies in Japan, something like the DJIA in the USA.

The graph of the Nikkei 225 from 1967 to end August 2010 is as follows:

The early part of this chart is quite similar to the exponential rise of the DJIA and it is interesting that both stock bubbles were in part fuelled by real estate bubbles. If the DJIA unwinds over the next 20 years in a similar fashion to the Nikkei, we might see a return to values last seen in the 1980s.

In this next graph, I have superimposed the DJIA (in dark red with red scales) and the Nikkei (in dark blue with black scales). The period from 1970 to the peak in 2007 for the DJIA has a remarkably similar shape to the runup for the Nikkei from 1977 to its peak in Dec 1989.

The wipeout that followed the peaks is also very similar. The Dow's low of near 7500 in Oct 08 corresponds to the Nikkei's low of around 20000 in late 1990.

Since its peak, the Nikkei has basically been on a downward spiral.

Here's an exponential decay model for the Nikkei, from its peak at end 1989 to the end of August 2010. (Note the negative in the exponential term):

Many commentators are saying that the Japanese did not address the issues regarding bank disclosures early enough in the 1990s and that's why their economy has never really recovered. However, the US Federal Reserve has already reached 0% interest rates (like the Japanese did) and have nowhere else to go now except for stimulus packages (like the Japanese have been trying, with little success, for 20 years.)

So are we headed like Japan? I don't know, but many of the actions the Fed has taken is similar and this comparison has not been lost on commentators. The comparison continues to be made. So when you see the indexes diverging to extremes, we could be facing a snap back in our Dow shortly.

It is important to continue to look at charts as they do show what is truly going on. Lastly I will show the Fed's action in managing 10 year Treasury yields through "Quantitative Easing" or QE 2, as it has been referred to. This chart clearly shows that the Dow has lost its tracking to this index and most likely is because of Fed intervention.

In summary, people are unaware of what has happened to their wealth. It has been the biggest transfer of wealth in the history of our country. It is the fault of the Fed and people like Larry Summers, Hank Paulson and others in dealing with these issues in the methods they have chosen to use to resolve them. None will work. In fact, they have made things worse as now the stock market has no real connection and tracking to the real economy. It is being manipulated by Institutional Investors who rely on market gains for their bonuses. It is irrelevant to them that the real intrinsic value of our currency has been declining rapidly. They figure they make so much money, even if it is depreciated in value they are making it up in Volume. Sad, sad days. And if you think a change in the mid term election is going to fix this, you are sadly mistaken. We need a complete mindset change to fix these problems and we aren't conscious enough as a society. Unfortunately change most often happens at the lower levels of consciousness. That is where our society is right now.

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Friday, October 01, 2010

Market comments for Oct. 1st (UPDATE)

Personal Income data and Personal Spending data have been released this morning. For Personal Income the data came in at +0.5% while expectations were for +0.3%. For Personal Spending, the data came in at +0.4%, while expectations were for +0.3%. Both of these data are backwards looking as they are for August, not September.

Univ. of Michigan Consumer Sentiment for September comes out after the market is open at 6:55am PST. Also at that time to be released is Construction Spending, ISM Index. Auto Sales and Truck Sales data will be released at 11:00am PST. All this data will be updated later today as they become available.

So far that's a nice jump in Personal Income and Spending. Futures are pointed up with the Dow up 55 points and the S&P up 6 points.

UPDATE: 7:05am PST

The ISM index came in at 54.4, which was lower than the expected 55.0 number. This is a September number. Construction Spending was up +0.4%, which is much more than the -0.7% expected number. The University of Michigan Consumer Sentiment Final number for Sept. came in better than expected at 68.2 vs. an expected 67.0 reading. The ISM index is more optimistic than what people are feeling. The growth is not showing real growth enough to have a recovery but may not be as bad to cause a double dip.

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