Market comments for March 17th, St. Patricks Day! UPDATE

I am sorry to say but it appears tonight that the trading tomorrow will not result in a day in the Green, for St. Patrick's day. As it looks tonight, the Nikkei 225 has opened down about 350 points and our markets on Wednesday were accelerating down near the close. As the charts of the S&P 500 and the Dow show, the trend down is gaining speed and suggests more movement down before we get a bounce up.


It is clear to me that we have broken well below previous support levels and by extending previous lows you can see where the next level of support is and they are much lower. For the Dow, it means we most likely are going down to 11,400 and for the S&P 500 we most likely will go down and test the 1160 level. The Put to Call ratio at 7:00am PST this morning was at 1.99 but closed for the day at 1.17, which is still the lowest it has been in some time.

Today the Dow closed at 11,613 and the S&P 500 closed at 1256. When we go down to these levels many are going to wonder if we are on our way to test the 11,000 level on the Dow. The answer is yes, we are going below 11,000 and then we will test the 10,000 level, so be prepared for more losses if you haven't headed my warnings from previous posts. Notice that in the past 5-6 trading days we have wiped out 2 months of gains. That's how quick we can go down.

The data on Initial Jobless Claims will be out at 5:30am PST on March 17th as will Continuing Claims.

In the meantime, please send a contribution to the Red Cross effort to help Japan. It will make you feel good and you will be doing something really good for people who are suffering.

UPDATE: 5:55am PST

Dow Futures are now up 107 in pre-market so now it is anyone's guess where the market will close today. Maybe we will have a bounce up as the Bulls predict, but the data on Initial Jobless Claims came in at 385K, while expectations were for 380K. Surprisingly, the CPI for February came in at +0.5% and that is an annual inflation rate of 6%. That is not a good reading. That was before Oil rose significantly and suggests that March's CPI will be higher.

If we do get a bounce up today, plan it to be still a lower high than before. As I have repeatedly said, we will have lower highs and lower lows. Stay tuned! Happy St. Patrick's Day!

Preparation for Uncertainty: What the future holds!

As you read this post, I hope it will change how you see the world and how you act going forward, as it relates to your financial situation and, therefore, your plans for your future. I have analyzed the stock market drop from the high of 14,280 to the close of markets yesterday Oct. 10th. I also looked at the historical data for the Dow from 1984 with its spectacular rise starting in 1995, dropping in 2000 after the Dot.com bust, rising again from that bottom after Sept. 11, 2001 and rising to its high ending in the Fall of 2007. Here's what the future looks like to me. It isn't cast in stone, but there are enough unique conditions that it is going to have a dramatic affect on how we live, and how we accumulate wealth to secure our future.

The first conclusion I have made is that the market trend in the Dow from 1988 to 1995 will be the dominant trend in markets, after bottoming soon at a Dow of about 7,200 to 7,400. What this means to you is that the Dow will NOT return to its high of 14,000 till the year 2030. That's right 2030! This is unfathomable for most Americans to even consider. Can things change to arrive there sooner? Yes, but built into this view is a continually rising Dow. We know that there will be setbacks during that period. But there will be an end to the excesses that got us into this trouble in the first place, and a generation who won't forget what has happened in their lifetimes. Sorry for that gloomy outlook, but read on, as there is hope.

The rate of growth in the Dow between 1985 and 1995 was about double, when it went from about 2,000 to 4,000 points. From 1996 to 2000, the Dow's rate of growth was from 4,000 to 12,000, or a tripling. In effect, from the year 2000 to now, the Dow rose to 14,000, but since has dropped to 8,451 at the close yesterday. That is a drop from the high of 5,500 points, or almost 40%, with still more losses ahead. So the time for triple growth in a short timeframe is almost out of the question.

In summary here's what has occurred with the Dow:
1985-1995 10 years = Doubling of the Dow
1996-2000 5 years = Tripling of the Dow in half the time of the previous 10 years

The slope of the trend line is a predictor of the future trend, until events change. Using this simple fact, if one were to follow the trend of the Dow from 1988, the intersection of that trend line would be around 7,400 on the Dow. That is why I have repeatedly said the Dow will go down to 7,400. We still have about 1,000 points to go if we bottom now, OR, if we just stay at 8,500 level for the period of about a year or so, the trend line will cross at 8,500 and then the Dow will start to rise again. But it will be at a very slow rate compared to what we have grown accustomed to in the past 15 years. This will change our lives and our notions of reality in financial terms. This will affect our savings habits and our spending habits as a country. That is why most experts say we are headed for a deep recession, and some 60%, believe a Depression. Whether we go into a Depression will depend on whether we have learned the lessons we needed to, not at a country leadership level, but rather at the individual person and family level.

Prediction:
2008-2018 Between 7-10 years there will be only a 20% gain in the Dow.

Here are some lessons to learn:
Lesson #1. Live within our means.
Only make purchases when we have the money/cash to pay for them. This means not using Credit Cards unless we can pay the total balance off within 30 days. This means ensuring that we have enough cash set aside to manage any unexpected expenses or for emergencies.

Lesson #2. Save 10% of our income.
Live in a house/apartment where our payments and our home expenses allow us to put aside 10% of our income weekly. This will be used to help save for college for our children, large purchases like a new car or investing in renewable energy sources for our homes. If we can't do this then we are living beyond our means, and may need to increase our income, for example, by taking on another job. Don't expect any money saved will yield high returns any longer, as they won't. See if it is possible to work some days from home. Look at other job possibilities as well.

The days of buying on credit are over. Yes, they will still send us credit cards, but we will need to realize we have been addicted to credit and need to break the "habit".

Investing for the long term will take on new meaning. Buy and hold strategies are gone for now for a long time. Trading will be the name of the game. Investing in Large Caps will not help us realize our financial goals. Small caps are where we have a chance to make some real gains. Large Caps will be merging with other Large Cap companies. Mergers and Acquisitions will be the significant activity over the next 5 years. Layoffs will increase and Small Businesses will be in a state of flux, but creative entrepreneurs will lead us out of this mess. Small is the future and the change to local communities will be where the action is. Video Conferencing will be the preferred method of contact instead of travel. Airlines will be consolidated with some major names going bankrupt, and new names emerging from around the world and serving our air travel. Innovation in Green alternative energy sources will be the space where we emerge as a country and regain our lead in the world.

The gap between the rich and the poor has widened so much over the past 25 years that many on the lowest rungs of society have been forgotten about, and the Middle Class has been nearly decimated. According to a International Tribune article, data from 2007, the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.

We will have to relearn to be more compassionate for those who have less, who need a helping hand. Families will, out of necessity, come closer together. It will be both scary and exciting times, but we will emerge stronger and hopefully less arrogant as a people. This time we live in has some great potential for the significant advancement and evolution of human consciousness across the planet.

As Barack has written, do we dare have "The Audacity of Hope"! Let's pray we do. I do!

Solar Power in California

Those that read my Blog know that I had converted my home to Solar Electric Power about 6 years ago. My county in California is active in support of more Solar in California and my State Representative has sponsored a Bill requesting support for more help in passage of the Bill. Here's some background from EnvironmentCalifornia.org you might find interesting if you are a California resident.

The Solar Water Heating and Efficiency Act of 2007 (AB 1470), authored by Assemblymember Jared Huffman (Marin), has passed two committees in the state Assembly over the past two weeks. The bill would create the nation's largest rebate program for solar water heating technologies, helping to lower energy bills, reduce global warming pollution and expand California's solar power market.

Solar hot water systems are one of most promising technologies available today. The systems can be located directly on the roof of a home or business, just like solar electric panels. They capture heat from the sun to heat water to reduce gas bills by up to 50 percent.

AB 1470 would create a statewide rebate program to grow a mainstream market for solar hot water systems, building 200,000 rooftop systems within 10 years. The typical cost of a solar hot water system is between $4,000 and $6,000. With a rebate from the state, and continuation of a federal tax credit, such systems could become cost effective from day-one if financed through a home loan or could pay for themselves within 8 to 10 years.

Despite opposition from Sempra, one of California's largest natural gas corporations, a majority of two key committees in the state Legislature voted in favor of AB 1470.

The first committee vote came on April 16th in Assembly Utilities & Commerce Committee. The assemblymembers voting in favor of the bill were: Hector De La Torre (LA), Karen Bass (LA), Mike Davis (LA), Dave Jones (Sacramento), Laura Richardson (Long Beach), Bill Author Jared Huffman (Marin) and Cameron Smyth (Santa Clarita).

The second committee vote happened on April 23rd in Assembly Natural Resources Committee. The assembly members voting in favor of the bill were: Loni Hancock (Berkeley), Patty Berg (Eureka), Julia Brownley (Santa Monica), John Laird* (Santa Cruz), Lori Saldana* (San Diego), and Lois Wolk* (Davis). The starred members are co-authors.

Please help us build support for solar power by asking a friend or family member to e-mail his or her assemblymember in support of AB 1470.

To take action, click on the link below or paste it into your Web browser:

EnvironmentCalifornia.org

I have been fortunate that with the exception of a one month period when I had my panels off, I have not had to pay for any electricity in 6 years. The only electric bill I receive is about $100-$160/year for fees the Pacific Gas & Electric charge me for being hooked up to the electric Grid so we can send our excess electricity back for all to use. It was one of our best decisions to go Solar as there are additional benefits not cited. First, your roof stays cooler in the summer because the panels block the rays of the sun. This keeps our upstairs cooler requiring less air conditioning. The roof should last longer too as the sun's rays aren't beating all day on the roof. And thirdly, they value in appreciation of your house is also a plus. The City of San Francisco, which in the summer is well known for its fog, is considering purchasing all its power from alternative energy sources that are Green, thus saving on Middle Eastern oil needs. Say what you like about San Francisco being so Left of Center politically, they are often leading the country for the betterment of society. Recently the City banned plastic bags from grocery stores as these bags will not decompose in dumps and will be around for many lifetimes.

Think Green and act Locally.