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Bullish signs? Not according to Warren Buffett!
Based on the drop in oil and commodity prices, we can assume the CPI (inflation) numbers will begin to show less inflation. Right? I would be real quick to make that assumption.
Inflationary pressures give corporations an opportunity, and excuse to raise prices. The old adage of passing higher costs on to the consumer rings true. But, once inflation subsides, price hikes remain, and corporate profits soar.
This is why dollar cost averaging into the stock market during periods of market termoil makes sense. Sure, it would be easier to wait until the "all clear" signal is blown, but also blown are our chances to make the big bucks when the market begins to rally.
Through the years I have heard financial gurus say that they are willing to give up the first 20-30% on the upside to make sure the market has reversed its downward trend. I am not willing to give up that kind of profit. I, on the other hand, I want to dollar cost average in at various downside targets, and participate on all of the upside when the market turns.
The big news last week was the release of Warren Buffett's quarter investment holdings. In the period that ended 06/30/2008, Mr. Buffett only purchased one stock, NRG Energy Inc. (NRG), added to two others, IngersollRand (IR), and SanofiAventis (SNY). Since the latest bottom in the market didn't occur until after the reporting period, we don't know what he picked up (if anything) in July.
Since Mr. Buffett gets preferential treatment from the SEC in regards to reporting some of his positions, no one knows what he has done (bought more or sold) with his Conoco-Phillips (COP) position. This would have been nice to know now that oil prices are falling.
It's August, and many senior traders are still on vacation. After Labor Day, the markets could get much more interesting. With oil and commodities falling will they switch investment tactics- such as buy the financials, and short oil? We will see. Could a new trend be developing?
Here are our Top 10 ETF's for the week of August 18th:
1) DBA: Powershares DB Agriculture Fund- .323
2) EWZ: Brazil Index- .310
3) SLX: Market Vectors Steel Index Fund- .293
4) FXF: Currency Shares Swiss Franc Trust- .250
5) EEB: Claymore ETF BNY BRIC- .225
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) DUG: Ultrashort Oil & Gas Proshares- Not Rated
8) PGJ: PS Golden Dragon China Fund- .112
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Here are our Top 10 Fidelity Sector Funds for August 2008
1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance
NEW BUYS:
None
NEW SELLS:
None
Honorable Mention (Holds):
None
The Week in Review:
The U.S. New World Order gang is mad at Russia for taking military action in Georgia. Subconsciously they must be saying, "hey, only we can do things like that!". I wonder if the U.S. response would have been different if oil and a pipeline wasn't involved?
Could the politicians be upset that British Petroleum (BP) owns 30% of the BTC pipeline that runs from Azerbaijan through Georgia, and into a terminal on the Mediterranean Sea? I would think so since BP said the pipeline will remain shut indefinitely.
Today's focus is on Tropical Storm "Fay". I don't know what all the fuss is about. Fay will not come anywhere near the oil platforms in the Gulf. It has however interrupted the slant drilling the Chinese are doing off the coast of Cuba.
Last week, five major banks agreed to buy back billions of dollars in auction-rate securities as part of a settlement with regulators.
The economic lies reported to the American public is finally being confirmed. In particular, the so called "benign CPI number" came in hotter than a firecracker. Consumer prices rose 0.8% in July, the fastest rate in 17 years. In addition, import prices are up 21.6% from July 2007.
The calls of a housing bottom earlier this year also turned out to be a fib. According to the National Association of Realtors, existing home sales (single family and condos) fell 16% to a 10-year low. Oddly, sales of foreclosures and short sales accounted for one-third of all existing home sales.
If oil prices continue to decline, the economy has a good chance of rebounding. I think that $75-$85/ barrel oil would reignite the economy pretty rapidly.
Continue reading "Dynamic Growth: August 18, 2008- Briefing" »
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
Oil prices rose slightly this morning to $114/bbl after the EIA reported declines in its latest fuel inventories. Given this news, and the conflict between Georgia and Russia, we have to ask why isn't the reaction more bullish for oil?
1) The U.S. dollar continues to gain strength versus the Euro, Yen and British pound. The latest news from the European Central Bank suggests the next move in rates in Europe will be to cut. The slowdown in the European economy is making Jean-Claude Trichet re-think his strategy.
2) The Georgian/ Russian situation will cool down. The executive branch of the US government was up in arms over Russia's military actions in Georgia. Were they upset over military action and the killing of hundreds of citizens? No way! They were upset over a potential ramifications of the global oil supply. It so happens that the second longest oil pipeline in the world (Baku-Tbilisi-Ceyhan (BTC) pipeline) carries oil from Azerbaijan, through Georgia and Turkey to a terminal on the Mediterranean Sea.
If there was no potential oil disruptions in the region, we probably wouldn't hear a peep out of the executive branch.
3) China will continue to have reduced oil demand until the end of the Olympic games. See, to put their best face forward China is trying to reign in their incredible pollution (smog) problem by ordering 45 percent of Beijing's 3.29 million cars off the roads. In addition, several industrial plants around Beijing have temporarily shutdown.
4) Some demand destruction has taken place in the US as consumers continue to adjust what they drive, and when they drive.
5) Don't forget the election year magic that I keep referring to. Politicians like to pullout all the stops before an important election. Yes, this includes getting their friends to help push oil prices lower.
As we get closer to the end of Olympics and November elections, I'll be re-visiting the oil trade.
The Rest of the Story
Don't you find it odd that the rally in the financials ended yesterday, just as the SEC ban on a certain kind of short-selling expired.
The ban on short-selling took effect July 21 to prevent stock manipulation. I guess its ok to continue the manipulation again. Free markets? What a joke!
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
The stock market came under pressure today after JP Morgan said it would write down mortgage-backed assets totaling $1.5 billion. In addition, Goldman Sachs fell after analysts said a slowing economy would hamper earnings.
The dollar rose to a 5 1/2 month high against the Euro leading to a further drop in oil prices. In addition, Russia called off military operations in Georgia.
On the subject of the Georgia-Russian situation, I had to laugh when our fearless leaders told Russia to halt their "aggression", and leave Georgia alone. Even the NWO's presidential mouthpieces, John McCain, and Barack Obama called for a cease-fire.
Isn't it amazing that in the rest of the world the press knows that Georgia initiated the violence that killed Russian peace-keepers and hundreds of civilians in South Ossetia. By the way, the Russian peace-keepers were in the country with the permission of the Georgian government.
And if our idiotic politicians want to debated initiating violence, and fighting a war that has no defined enemy, they should look no further than Iraq and Afghanistan. At least in Russia's case Georgia violated its agreement with Russia by attacking South Ossetia, and killed Russian peace-keepers in the process.
What's really strange is the Russians claim that the war in Georgia was orchestrated by the US. As I dug into the situation a little I found that the U.S. government was involved.
Keeping an eye on Wall Street is tough enough, but when you have to keep an eye on Washington too, things can get exhausting.
As we head closer to the election, I have a prediction to make. If Barrack Obama is elected president, he will not end the war in Iraq, and our troops will remain. So, I believe those voting for Obama thinking he will end the war will be very disappointed. I will not waste my time predicting what John McCain will do. I think that is obvious.
Oh, by the way, Congressman Ron Paul said he believes that House Congressional Resolution 362 paves the way for a military strike against Iran. Paul said,
“The frightening thing is they say they are taking no options off the table, even nuclear first strike,” “That is my sense because the Democratic leaders in the House are proposing no resistance whatsoever, “We saw this when a supplemental bill came up and the president asked for $107 billion for the war, the Democrat leadership gave them $162 billion.
“It is still totally bewildering to me when I see men and women in the Congress that I know and like doing this just to get along. Most of them will say ‘I agree with you on all you say but the Iranians are bad people and they might attack us some day. . . . I hear members of Congress saying if we could only nuke them.’”
Stay tuned a the oil trade during September-October time frame. I beginning to warm up to the idea.
The financial media can lose you a lot of money. In mid to late 2007 they were touting the "Goldilocks" economy, and a few short months ago you were hearing how Gold was going to $1600 an ounce, Brazil, Russia, India, and China were going to dominate the world, and oil was going to $200/bbl.
In 2005 I told you the real estate market would collapse. In 2006, I told you the U.S. economy was going to go into a tailspin. In 2007, we went heavily into cash. And in 2008, I said the stock market was headed for a nasty fall, we sold oil at its highs, and that solutions to the current financial crisis would eventually appear.
Watching the interventionists over the years, I was convinced oil prices were going to fall as we got closer to the November presidential elections. I base my predictions on the assumption that capitalism in the modern financial ERA is run by organized groups that change the rules of the game for their own political and monetary gain.
In November, an unsuspecting electorate will choose between two candidates that follow the rules of the game that have been predetermined by these organized groups.
Our job is not to change the status quo. This we cannot do. Our job is to predict what they will do next.
Those of us who seek financial independence are in a constant battle with the financial interests of Wall Street bankers and their corporate friends whose purpose is to bog us down with debt, and to maintain their economic power over the little guy.
If you understand the rules of the game, use some common sense, you can side-step a lot of land mines. I will do my best to help.
Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
Here are our Top 10 ETF's for the week of August 12th:
1) DBA: Powershares DB Agriculture Fund- .255
2) EWZ: Brazil Index- .295
3) SLX: Market Vectors Steel Index Fund- .285
4) FXF: Currency Shares Swiss Franc Trust- .250
5) EEB: Claymore ETF BNY BRIC- .234
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) DUG: Ultrashort Oil & Gas Proshares- Not Rated
8) PGJ: PS Golden Dragon China Fund- .112
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Here are our Top 10 Fidelity Sector Funds for August 2008
1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance
NEW BUYS:
None
NEW SELLS:
None
Honorable Mention (Holds):
None
The Week in Review:
Over the past 30 days the big story has been the drop in oil and commodity prices. I am not sure if the drop in oil is for real, or manufactured because of the election and the Olympics in Beijing. Right now, I have my doubts that oil prices are dropping due to sustainable demand destruction. Here are a few thoughts on the subject;
1) The drop in oil prices could be due to fears a democratic candidate would aggressively pursue new alternatives for energy over the long term. These alternatives would be wind, solar, nuclear, and fuel cell technology.
2) The drop in oil prices could be due to temporary measures taken by the Chinese to reduce industrial pollution by 70% during the Olympics. If this is the main reason for falling oil prices, we need to view the sell-off as a correction, and not a longer term trend.
3) The drop in oil prices could be due to temporary measures taken by the interventionists prior to an important presidential election.
4) Here in the U.S., we are being told that the drop in oil prices is due to "demand destruction". While I believe consumers are using less gasoline, I don't buy this as the real reason for falling oil prices.
Here is what I believe. Oil is a product that can control the lives of large masses of people.
Henry Kissinger has been quoted saying;
"Control the oil and you control entire nations; control the food and you control the people."
Oddly, the world is experiencing higher oil prices, and worldwide food shortages. Makes you think, doesn't it?
Every 10-15 we have an oil crisis that ratchets up the price of gasoline to a new level. When oil and gas prices shoot up to a new level that creates a panic, eventually prices settle in at a new and higher level that consumers can afford.
Recently gas prices hit over $4.00/ gallon which was viewed as extreme. If gas prices eventually settle in at $2.50/ gallon, consumers would see this as welcomed relief, and the oil gang would achieve their goal of higher levels for the price gas.
If oil prices drop to a price (but at a higher level) that becomes affordable for consumers, all the alternative energy solutions will be abandoned as they were in the past. But, if the growth in China and India are for real, and China revives their massive growth after the Olympics, then oil and commodity prices are heading higher.
For now, enjoy the rally. We will have a clearer view on the markets after the Olympics and the November elections.
Continue reading "Dynamic Growth: August 12, 2008 Briefing" »
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
All of the views from our cat-bird seat tells me the U.S. has been in recession since late 2007. Since many of the economic numbers jammed down our throats insults our intelligence, we go by what is happening to the everyday person on the street. In short, now that the "big hat, no cattle" consumer can no longer spend home equity money on things they do not need, the U.S. economic slowdown is beginning to affect the rest of the world economies.
GDP growth in the second quarter came as a result of the one-time Federal income tax rebates, but the quarterly unemployment rate continues to rise, As it stands, the unemployment rate is now at 5.7%, and is projected to rise to 6.1% by the end of the year.
The good news is the stock market will anticipate an economic recovery 3-6 months before the recession ends. By mid-2009, I anticipate a recovery will occur if energy prices continue to decline. If not, the economic downturn will be much more painful since the Feds next move will be to raise interest rates to protect the dollar, and drive energy prices lower. My hope is energy prices will lead to a recovery, and the Fed will not have to force the issue.
Yesterday's Fed meeting was a waste of time. Everyone knew rates were going to remain unchanged, and the policy statement was consistent with the comments Bernanke made in his Monetary Policy Report testimony in July.
On the oil front, its amazing to see how much perception can change in less than a month. Over the July 4th holiday, consumers were being raped at the pumps because of some concocted excuse (supply/demand, Iran, Nigeria, or anything else they could concoct). Today, and even a day ago when a tropical storm was heading toward the shipping ports in Houston, oil prices were dropping like a rock. Currently, oil prices are down almost $30/bbl in about 23 days.
The thing that really disappoints me is how much we little people are manipulated and led around by our noses. We have a wonderful country with millions of wonderful people, but just like the movie "Mr. Smith Goes to Washington (1939)", we are held hostage by politicians who do not serve our best interests.
If you haven't seen the movie- here it is- Movie
I don't like to be Pollyanna when it comes money, and I am concerned that the recent drop in oil prices is due in part to election year manipulation. The other (temporary?) factor driving prices lower is the Chinese governments order to reduce industrial pollution by 70% before the Olympics. The steps they have taken are extreme, and ordering 45 percent of Beijing's 3.29 million cars off the roads to cure the pollution problem has to be looked at as temporary.
Once the Olympics and election are over, we will see if the drop in oil prices were prearranged, a ploy, a con job, or for real.
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
Don't you love "election year magic?".
Oil and commodity prices are falling, and today the SEC has extended its emergency order prohibiting naked short selling until August 12th. The stocks protected from naked short selling are as follows;
BNPQF- BNP PARIBAS
BNPQY- BNP PARIBAS ADR
BAC- Bank of America
BCS- Barclays
C- Citigroup
CS- Credit Suisse
DSECY- DAIWA SECURITIES
DB- Deutsche Bank
AZ- Allianz
GS- Goldman Sachs
RBS- Royal Bank of Scotland
HBC- HSBC Holdings
BSI- Blue Square Israel
JPM- JPMorgan Chase
LEH- Lehman Brothers
MER- Merrill Lynch
MFG- Mizuho Financial
MS- Morgan Stanley
UBS- UBS
FRE- Freddie Mac
FNM- Fannie Mae
I'm just curious. What qualifications must a stock have to be placed on this protected list by the SEC? Why isn't naked short selling outlawed across the board? Why does the SEC have to extend an order for an illegal action if naked short selling is truly illegal?
If oil and commodity prices continue to fall, and are falling for reasons other than election year manipulation, the Fed will not have to worry about the inflation problem for much longer. If energy prices stay down after the election, the Fed will not have to be in any hurry to hike interest rates. This would be great news for us, and the stock market.
Our oil and gas short has worked beautifully. We added the (DUG) Ultrashort Oil & Gas Proshares to the DG portfolio on May 23 at $27.85/ share. The fund is trading near $39.00 giving us an unrealized gain of 40% or $11.15 points on the upside.
For those of you who follow my picks on Tipstraders.com, for some reason the website sold my DUG position without me knowing about it. I plan to hold the DUG shares into September unless I feel oil prices are set to rise again.
Here is a rundown of our other holding in the ETF portfolio;
DBA: Powershares DB Agriculture Fund-
Cost Basis: $34.77/ 1-24-08
Cur.Px: $34.26
EWZ: Brazil Index-
Cost Basis: $65.01/ 11-19-07
Cur.Px: $76.00
SLX: Market Vectors Steel Index-
Cost Basis: $77.38/ 11-25-07
Cur.Px: $80.87
FXF: Currency Shares Swiss Franc-
Cost Basis: $89.69/ 1-7-08
Cur.Px: $94.82
EEB: Claymore ETF BNY BRIC-
Cost Basis: $50.16/ 10-8-07
Cur.Px: $43.80
DDM: Ultra Dow 30 Proshares-
Cost Basis: $58.09/ 7-7-08
Cur.Px: $61.80
DUG: Ultrashort Oil & Gas Proshares-
Cost Basis: $27.85/ 5-23-08
Cur.Px: $39.00
PGJ: PS Golden Dragon China-
Cost Basis: $21.31/1-3-07
Cur.Px: $24.32
KBE: KBW Bank ETF-
Cost Basis: $42.50/ 2-11-08
Cur.Px: $33.66
IYF: iShares Dow Jones US Financial Sector-
Cost Basis: $89.31/ 1-24-08
Cur.Px: $73.51
Today, a barrel of Light Sweet Crude is trading at 119.90 (-2.84 from Monday) and the dollar rose to a six-week high against the euro.
The Fed is expected to leave interest rates at 2.00 percent as the economy continues to show extreme weakness.
Yesterday's markets were soft on economic news that showed the largest jump in consumer inflation since 2005. Oil prices dropped despite news of a Tropical Storm in the Gulf of Mexico. This is great news for the economy, but what happens after the election is any body's guess.
I have been in and out of town quite a bit lately, and I need a break from the constant grind of daily "journal" posts. Besides, there isn't a whole lot more to add when it comes to the big picture. Often I feel like I am repeating myself, so a break is warranted.
Not much has changed, so I will reiterate the following;
1) Oil prices are declining in part due to the "election year magic" that I have referred to in the past.
2) Inflation is out of control due to high energy and commodity prices.
3) The U.S. is in a recession, but due to skewed reporting numbers (as is the case with the reporting of the inflation data), the economic powers are not ready to officially ready to declare the obvious.
4) Oil and commodity prices are also declining because the Chinese government ordered the provinces surrounding Beijing to cut the smog caused by industrial pollution by 70%. This dress rehearsal for the 2008 Olympics is to put a more positive spin on China's environmental issues. The Chinese government has ordered 40 factories to shut down from July 25 to Sept. 20, and has taken steps to remove 45 percent of the city's 3.29 million cars off the roads to cure the pollution problem.
The big question going forward is what will happen after September 20th. Oil prices go higher? Commodity prices rebound?
5) The Fed will probably begin raising interest rates in 2009 which tells me we are only half way through our "W" shaped recovery. The first leg down came as a result of an over leveraged consumer, bad debt, bad loans, and a credit crisis caused by an enormous real estate bubble.
Now that the GSE bill has been passed, and is ready for the President to sign, the bleeding in the financial sector will finally come to an end.
The next, and final leg down for the economy and the stock market will happen when the Fed raises interest rates to fight inflation.
6) As third world economies enjoy greater prosperity, the U.S. economy has secretly been destroyed by "financial terrorism". The free trade agreements have destroyed the American work force, and has allowed corporate executives to pay themselves millions of dollars.
Cheaper labor has meant greater profits for corporations, but has not lowered prices for most consumers.
7) A lowered standard of living in the U.S. has evolved as manufacturing jobs have been outsourced, but now, US companies are now engaged in outsourcing product development projects, R&D, and other high paying jobs such as engineering services.
Where does it stop? It doesn't.
Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
Here are our Top 10 ETF's for the week of August 4th:
1) DBA: Powershares DB Agriculture Fund- .366
2) EWZ: Brazil Index- .341
3) SLX: Market Vectors Steel Index Fund- .336
4) FXF: Currency Shares Swiss Franc Trust- .286
5) EEB: Claymore ETF BNY BRIC- .273
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) DUG: Ultrashort Oil & Gas Proshares- Not Rated
8) PGJ: PS Golden Dragon China Fund- .112
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Here are our Top 10 Fidelity Sector Funds for August 2008
1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance
NEW BUYS:
None
NEW SELLS:
None
Honorable Mention (Holds):
None
The Week in Review:
Despite the rally in the financials, many TV personalities on the financial channels continue to tell us to stay away. When everyone seems to be of the same opinion, I tend to look at the opposing side.
Obviously the trouble in the financial sector isn’t over yet, but going forward the sector is about to report favorable comparisons versus previous quarters in the months ahead. The key to success in a beaten down sector is to own the cream of the crop. Eventually, when things stabilize, the cream rises to the top.
Last week the economic news was not pretty. The unemployment numbers released last week hit a four-year high, putting the jobless rate at 5.7%. The economy lost 51,000 jobs in July, fewer than the 72,000 lost jobs economists polled by Reuters.
The economy has now lost 463,000 jobs since January, and July was the first time since May 2002 that the economy lost jobs for seven straight months.
The Fed’s latest Beige Book report showed that inflation remains a huge problem. The Fed is in a tough spot between fighting commodity inflation and dealing with weakening economy. We will know more about the Fed's response after the election.
If oil prices continue to fall after the November elections, inflationary pressures will subside. If the drop in oil prices was manufactured, and begin to rise after the election, the Fed may have no choice but to hike interest rates. If this happens, I believe we will see the final leg down in the "W" shaped recovery which can send the DJIA to 10,000 or slightly below.
Continue reading "Dynamic Growth: August 4, 2008 Briefing" »
Last week marked an important inflection point for the financials (Maybe oil too). There will be many bumps on the road to recovery, even a few more scary moments. But, starting now, and over the next few years, the healing process will finally begin.
There are many reasons for the rally in the financials. First, the Securities and Exchange Commission (SEC) declared war on some big security firms and the hedge fund industry by limiting “naked” short selling of select financials. Secondly, the SEC announced plans to investigate individuals who may be spreading rumors to manipulate stock prices. Thirdly, a government rescue of Fannie, Freddie, and millions of sub par mortgages. And finally, Wells Fargo announced better-than-expected earnings, hiked their dividend by 10%, and Bank of America maintained their dividend and is buying back $3.75 billion in stock.
Last week, the economy began to receive some good news from falling oil prices, but the stock market still does not believe the sell-off is for real. If the oil bubble truly broke its uptrend, and continues to aggressively adjust the prices consumers are paying at the pump, then hold on to your seat belts for a dramatic blast-off in the stock market.
Oil demand in China is slowing as the Chinese government prepares for the 2008 Olympics in Beijing, the provinces surrounding the city were ordered to cut the smog caused by industrial pollution by 70%. They are taking drastic steps to get the problem under control by ordering 40 factories to shut down from July 25 to Sept. 20.
In addition, the government in Beijing took 300,000 high-emission cars off its roads on July 1, banning them until Sept 20. On July 20th, private cars can only be driven on alternate days according to odd or even license plate numbers. The Chinese government hopes to take 45 percent of the city's 3.29 million cars off the roads to cure the pollution problem.
When you couple China's drop in oil demand with the demand destruction that has taken place here in the U.S., oil prices can drop pretty dramatically over the next 7-8 weeks.
Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
Here are our Top 10 ETF's for the week of July 28th:
1) DBA: Powershares DB Agriculture Fund- .359
2) EWZ: Brazil Index- .338
3) SLX: Market Vectors Steel Index Fund- .335
4) FXF: Currency Shares Swiss Franc Trust- .342
5) EEB: Claymore ETF BNY BRIC- .289
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) DUG: Ultrashort Oil & Gas Proshares- Not Rated
8) PGJ: PS Golden Dragon China Fund- .112
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Here are our Top 10 Fidelity Sector Funds for August 2008
1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance
NEW BUYS:
None
NEW SELLS:
None
Honorable Mention (Holds):
None
For the Week:
-Gold closed at $936.90/oz -21.10 for the week. Last week gold closed at $958.00, and was trading at $960.60 two weeks ago.
-The Commodities CRB Index closed at 412.22, down from 427.17 last week, and down from 461.43 two weeks ago.
-Crude Oil closed at $123.26/bbl down from $129.47 last week, and down from $145.66 two weeks ago..
We need to see $75-$85/ barrel oil in the weeks ahead to get the economy back on track. Oil has remained above $100 for eighteen consecutive weeks.
-The U.S. Dollar closed at 72.85 up from 72.21 last week, and up from 71.94 two weeks ago.
Some believe the rate cuts have come to an end, and the dollar is attempting to rally. A strong rally in the dollar will help drive energy prices lower.
We raised our allocations last week by 5% across the board when the DJIA dropped below our 11,300 target. Going forward, the next 5% increase will come at DJIA 10,600 for Aggressive, and Moderately Aggressive portfolios, but Moderate, Moderately Conservative, and Conservative investors are not advised to get fully invested unless the DJIA breaks below the 10,000 mark.
Our current asset allocation is as follows;
75% Equities: (Normally 95%) Aggressive
65% Equities: (Normally 80%) Moderately Aggressive
55% Equities: (Normally 60%) Moderate
35% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
Oil prices are dropping, the financials are stabilizing, and the market is rallying. All things considered, traders should have a lot of fun in the short term.
Having lived through the 1970's, and been an investor since 1974, I can tell you my gut is saying this is not a buy and hold market.
The recovery we are witnessing marks the half way point of a "W" shaped recovery. The first leg down came as a result of an over leveraged consumer, bad debt, bad loans, and a credit crisis caused by an enormous real estate bubble.
Now that the GSE bill has been passed, and is ready for the President to sign, the bleeding in the financial sector will finally come to an end.
The next, and final leg down for the economy and the stock market will happen when the Fed raises interest rates to fight inflation. This tightening cycle will help shore up the dollar, and bring energy and commodities prices down sharply. The big question is how high will rates have to go before the Fed achieves its goal of reigning in inflation.
After the November elections (mid 2009), the Fed will probably begin raising interest rates. Before they do, I would suggest holding a decent amount of cash on the sidelines to buy stocks and bonds during the final stage of this market downturn.
So, do I believe the bear market is over? No, and as Yogi Berra said, "It Ain't Over Til It's Over".
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
Just a few minutes ago, Bank of America's board authorized buying back $3.75 billion over the next 12 to 18 months. In addition, the board declared its regular 64 cents per share quarterly dividend.
I'm not very smart, but this sure sounds like good news to me.
The other small tidbit on the table is the housing bill which is expected to be passed today, and be signed by President Bush next week. The bill will put the finishing touches on the bailout of Fannie Mae and Freddie Mac.
As I have been saying all a long, the government had to come to the rescue of the financials and housing market sooner rather than later. It was only a matter of time. Clearly, it will take time for the financials to regain their footing, but 2-3 years from now I expect this beaten down sector to lead the stock market higher.
Bank of America's bold move today may very well market the beginning of the healing process for the financials. The move may not be straight up, and there will be bumps along the way, but I am convinced that BAC will be buying stock at bargain prices when we look back two years from now.
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
If you haven't seen the movie, "My Big Fat Greek Wedding", do yourself a favor and go rent it. If you are of Mediterranean descent, you can probably relate. I grew up in a traditional Armenian family, so I particularly enjoyed many of the scenes depicting family exchanges.
One quote from the movie that I heard a lot growing up was, when the Greek father Gus said to his wife and daughter, nobody listen to me!
In my 20 years in the business, I am convinced the stock market isn't for everyone. When the markets are flying high, everyone wants a piece of the action. But, when times get tough, and the markets get volatile, the men are separated from the boys rather quickly.
Today, the financials were flying high on short covering, and oil prices resumed their decline. We have said several times that the solutions to our financial woes would eventually appear. They are not only appearing, they are appearing rapidly.
After several high-profile earnings disappointments in the financial sector, stocks bucked conventional wisdom and headed higher. Investors who get their advice from the TV set probably sold financials at the bottom only to watch them double in price in one week.
The solutions to the financial crisis were clearly coming. And despite the obvious, investors panicked anyway.
Treasury Secretary Paulson proposed a plan to rescue Fannie Mae and Freddie Mac. The SEC announced that short sellers of financial stocks would have to play by the rules and no longer be allowed to participate in "naked" or uncovered shorting. The obviousness in all of this is the financial sector is too important to the nation, and some kind of bailout or intervention was going to occur.
A government rescue has happened in the past, so why should we think this time would be any different?
Now that the government has stepped up to the plate, and tremendous amount of pressure will subside in the financial sector. In addition, we said the interventionists would do all they could to rescue the dollar and drive energy prices down. Well, low and behold, look whats happening.
As gas prices come down, consumers will have more of their income to spend on credit cards, lines of credit, and car payments. This will take even more pressure off the financial sector. In addition, lower energy prices will help deflate the inflation problem which will improve the numbers in the Consumer Price Index for August and September.
Going forward, the only concern I have is what energy prices will do after the 2008 presidential elections. The ploy of dropping oil prices before an important election is nothing new. Before the 2004 Presidential election, energy prices mysteriously declined (with help from the Saudis). After the election was over, energy prices reached new highs.
I call these election year moves, magic! It is amazing to watch what happens to the markets during the second half of a presidential election year. Over the past 100 years, the DJIA has gained an average of 9.7% during the second half of a presidential election year.
I will be watching the energy stocks very closely for clues of accumulation in September and October. If I see that falling oil prices were just an election year ploy, I will make some quick changes to the DG portfolios.
Today, Oil prices dropped by nearly $3 per barrel as Tropical Storm Dolly steered clear from oil refineries in the Gulf of Mexico. In addition, the dollar rallied again versus the Euro.
For now, let's enjoy the rally, and the election year magic. It looks as if the current crisis has taken a dramatic turn for the better.
Call it whatever you wish (Oversold bounce, short covering rally, or market bottom), but the rally in the financials and the sell-off in oil was quite impressive. With a tropical storm stirring around in the Caribbean, traders made take that as a opportunity to trade the oil markets higher for the week. If this happens, the stock market will digest last weeks gains, and traders will take some short term profits.
The storm every will be watching is TC Dolly which is expected to cross the Yucatan Peninsula, and enter the Gulf of Mexico over the next 24-36 hours. It is expected to gain strength, but steer clear of the U.S., and make landfall just south of the Texas border.
This week, our favorite financial ETF's and Funds had nice gains. In addition, our oil & gas short, the Ultra Dow 30 Proshares ETF (DUG) gained 16.2% for the week.
To take advantage of a potential market rebound, we added the Ultra Dow30 ProShares (DDM) double bull fund which also gained +8.81% for the week.
Our financial picks gained nicely as well;
KBE: KBW Bank ETF- +26.1% for the week.
IYF: iShares Dow Jones US Financial Sector- +15.32% for the week.
FSRBX: Banking- +21.27% for the week.
FSVLX: Home Finance- + 20.41% for the week.
Please keep in mind that all our investments in the financials are longer term (2-3 years) contrarian plays, so we will be very patient with these investments.
Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
Here are our Top 10 ETF's for the week of July 21st:
1) DBA: Powershares DB Agriculture Fund- .359
2) EWZ: Brazil Index- .347
3) SLX: Market Vectors Steel Index Fund- .343
4) FXF: Currency Shares Swiss Franc Trust- .330
5) EEB: Claymore ETF BNY BRIC- .289
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) DUG: Ultrashort Oil & Gas Proshares- Not Rated
8) PGJ: PS Golden Dragon China Fund- .148
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Here are our Top 10 Fidelity Sector Funds for July 2008
1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance
NEW BUYS:
None
NEW SELLS:
None
Honorable Mention (Holds):
None
The Week in Review:
After dropping below 11,000 this week for the first time in two years, the DJIA rallied 764.61 points from Tuesday's low to close at 11.496.57. While the "final" low how may not have been reached for the overall market, it looks as if a panic bottom may have been made in the financials.
The bad news is lows like to be retested. So, sometime in the August-September time frame, I am expecting a re-test of last Tuesday's lows.
As the market re-tests its lows, I am expecting that momentum investors will get sliced and diced as the sector rotation model begins to shift its focus away from early contraction investments (energy and commodities), and into late contraction investments such as financials and consumer cyclicals.
Continue reading "Dynamic Growth: July 21, 2008 Briefing" »
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
It's really no secret if you stop and think about it. What greater tool can a small group of people have to control the masses than oil? There really isn't one, is there?
Magically, and almost on cue oil prices began to cave, and the closer we get to the election oil prices will probably continue to fall. Giving up this manipulative and powerful tool by way of alternative energy seems very remote. If the citizens of the U.S., and people around the globe had to no longer rely on oil for everyday use, total control of the masses would end. I just don't believe the powers behind the curtain will allow this to happen.
I believe the solutions to energy independence are quite simple. Assuming two cars per family- an electric car for in-town use, and a fuel efficient gas powered car for long trips, makes a lot of sense to me. Converting every coal, oil, and natural gas power plant to nuclear also makes a lot of sense. Unless I am way off base, I believe this would cut our nations oil consumption by 50-70%. Will it happen? I don't think so. We have had plenty of opportunities in the past, and oil prices "magically" decline prior to full implementation.
And, what about a high speed rail system? Why are some European nations light years ahead of us technologically? Since I believe I am wasting my breathe, I think I'll stop right here.
This morning I saw where Wachovia immediately gave it's new CEO, Robert Steel 1,990,090 shares of stock with the whopping cost basis of 0. This means at current prices Mr. Steel picks up around $25,871,170.
Sure, Steel has some great incentives to get the stock price back to its old highs. Even if the stock reaches $40/ share over the next 2-3 years, Steel will pocket around $79 million. Is this unbelievable or what?
Disclosure: I own some Wachovia stock
Yesterday, the DJIA jumped 207 points after Oil prices fell for a third straight day to close below $130 for the first time since June 5th. The Financials rebounded after JPMorgan reported better than expected earnings.
Today's action is a little more subdued after Google and Microsoft posted disappointing earnings.
On the positive side, Citigroup posted better-than-expected second quarter results, and the stock is trading just below $20, up $1.50 on the day.
For now, let's hope the behind the scenes guys keep adjusting the price oil on the downside. If they do, we will have a lot a fun in the weeks ahead.
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
Stocks rose sharply today as crude oil prices continued to drop, and the news coming out of the financial sector is not as dire as short sellers and stock manipulators want you to believe.
Yesterday's rally was ignited when Wells Fargo announced better-than-expected earnings, and increased its dividend to boot. Today, JP Morgan, Huntington Bank and Comerica also reported results that beat projections.
Initial jobless claims for the week ended July 12 were reported up 366,000 v. estimated 380,000 and last week's revised 348,000. June housing starts were reported up +11.5% v. expected 1.5% decline. On the other hand, the July Philly Fed index, a measure of mid-Atlantic factory activity, in lower than expected.
The summer and election year rally is now underway. As long as oil prices continue to fall (as I expect they will) stock prices will continue to climb. Lower oil prices are great for the economy, particularly consumer discretionary and financial stocks.
The Rest of the Story
Brokerage firms are at it again. This morning a team of 10 regulators raided the securities headquarters in of Wachovia in St. Louis (formerly A.G. Edwards) on the companies sales and marketing of auction-rate securities to clients.
Subpoenas were handed down after hundreds of investors complained they couldn't access their money.
Folks, lets make this simple. If you absolutely must deal with a brokerage firm, don't let them sell you anything other than a stock, (real) bond, mutual fund, or cd.
Lawmakers Want to Crush Short Sellers & Hedge Funds
On Wednesday, legislation was introduced by Rep. Gary Ackerman (D-NY) that would reinstate a depression -era rule on short selling that was changed in mid-2007. The old rule said that short sellers could only short on an uptick (the uptick rule). This prevented short sellers from selling as the price of a stock was falling.
By reinstating the old rule, short sellers can only short if a buyer order proceeds an order to short. Why the rule was changed in 2007 is another one of those strange occurrences that took place under the Bush appointed SEC.
SEC Launches Stock Manipulation Probe
All I have to say is, "what took so long?". Today, the SEC said it would "immediately" launch a probe into the spreading of false information to manipulate stock prices. Huh, I guess some popular investment TV shows will need to be shut down.
As Gene Simmons (KISS) said in his book;
"People will hold you up for money, but those same people, if they were loaded (rich), might not resort to holding a gun in front of your face".
I wonder if he was describing Wall Street?
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
You heard it here first, and now it is official. Federal Reserve Chairman Ben Bernake said, and I quote, that "Dollar intervention may be justified in Disorderly Times."
In my Monday, July 14th "Journal" post, I said;
Going forward the news continues to assume the Fed is out of bullets, they're pushing on a string, and all the negatives that come with this kind of talk. Yes, the Fed made be close to being out of conventional type bullets, but this is when bullets are replaced with intervention.
The biggest problem facing the economy and consumers is the high price of energy. Unless the powers in control want to drive the U.S. economy into the ground, the must use other means to turn the economy around. What can they do? Intervention!
Over the next few months, I believe intervention will include;
1) Supporting the dollar and forcing shorts to cover. I believe the G-8 will help the dollars woes, and countries with stronger currencies will begin helping the U.S. by aggressively buying the greenback. In turn, the dollar will rally, shorts will cover, and energy prices will fall.
I don't claim to be a genius, but the only common sense move for the Fed at this point an time is to support the dollar through intrevention, force shorts to cover, and drive energy prices down.
Here are some of Bernanke's comments from MarketWatch.
Crude oil prices dropped as much as $6.00/bbl today on Bernanke's support for the dollar and after the government reported that U.S. crude and gasoline inventories rose much more than expected.
We have been saying for several weeks that all the pieces were in place to drive oil prices lower.
1) Supporting the dollar and forcing shorts to cover. I believe the G-8 will help the dollars woes, and countries with stronger currencies will begin helping the U.S. by aggressively buying the greenback.
2) Demand destruction- According to the Federal Highway Administration, "Americans drove 22 billion fewer miles from November through April than during the same period in 2006-07, the biggest such drop since the Iranian revolution led to gasoline supply shortages in 1979-80."-
3) Americans are trading in SUV's and lower mileage vehicles for more fuel efficient ones.
4) Oil purchases for our nations Strategic Petroleum Reserves (SPR) have been temporarily halted.
5) Election year magic! Over the past 100 years, the DJIA has gained an average of 9.7% during the second half of a presidential election year.
Has the magic just begun?
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
Here are the issues of the day;
-Oil prices are tanking,
-the government (Bush, Paulsen & Bernanke) is coming up with solutions to the financial crisis,
-former major league pitcher and current US Senator Jim Bunning throws a high hard one under Fed Chariman Bernanke's chin,
-and Meridith Whitney needs to shut up.
Oil
Crude oil prices were down as much as $10/bbl in intra day trading today on fears of a weakening US economy. The truth of the matter is the economy was already weak, so the excuse for the sell-off is rather lame.
In reality, the demand destruction for oil has begun. The much awaited refinery in India is just now coming on-line, additions to the (SPR) Strategic Petroleum Reserves have been put on hold, and intervention to shore up the dollar, and get the shorts to cover oil and currencies seems to be underway.
I saw an ad for alternative energy investments by T. Boone Pickens. In most cases ads that promote crisis and panic, or euphoria and optimism usually occurs at the top or bottom of an investment cycle. T. Boone is not only drinking from the energy crisis punch bowl, but he stands to profit from a major shift to alternatives as well.
Government Solutions
On July 13th Treasury Secretary Henry Paulson asked Congress for authority to buy equity stakes in Fannie Mae and Freddie Mac. Today, President Bush asked lawmakers to quickly pass legislation to help both companies (not a bailout) weather the financial storm. And finally, SEC chairman Chris Cox is focusing on the nacked short selling in commodities, and oil.
The government plan would temporarily provide capital to both companies by way of Treasury credit lines, and buying stock. This is pissing off short sellers like Hedge fund manager William Ackman who appeared as a guest on CNBC this morning. I find it amazing that CNBC allows people like Ackman to come on CNBC to talk his book (investment positions that make him money), and sway viewers to act on his opinions when he clearly stands to profit from it.
Jim Bunning Throws a High Hard One
Former major league pitcher, hall of famer, and current US Senator Jim Bunning (KY) threw a high hard one under the chin of Fed chariman Bernanke on Capitol Hill today. I don't expect the media to cover this verbal brush back pitch, but they should. You know the drill when it comes to the media, they only focus on things they want you to know instead of the things you should know.
Bunning blasted Bernanke's monetary easing, and blamed him for the decline of the dollar, rising oil prices and rising inflation. Being a professional baseball player is one thing, but to be a star during his era (1955-1971) took toughness and guts. In my opinion, even at age 77, Bunning hasn't lost a thing.
Bunning never has been gutless. Senator Robert Byrd one day said Bunning "isn't really a Senator, he's just a baseball player". Bunning responded back by saying, "Oh, yeah, Robert Byrd? I guess I should have been a Klansman instead. And, you there, Ted Kennedy, well, I'll let you off since you're still sick. No need to drive off that bridge just now..."
As Bunning blasted Bernanke, other sissified senators on the committee made light of his criticism. I would have liked to use another word other than sissified to describe these other gutless senators, but I think you get the point.
Bunning has been an outspoken critic for quite sometime. Here is his statement to the Senate Banking Committee on the Federal Reserve Monetary Policy Report. You better read it here because I doubt if the press will ever let you see it.
Meridith Whitney Needs to Shut up
As I continue to listen to the remarks from Meridith Whitney on the banking and credit crisis I thought, "these issues are nothing new, and these CDO's, SIV's, have been on the books of banks for many years'. Where was Meridith during the real estate boom when banks were forced to make sub prime loans because of governmental pressure?
Anyone can see a problem when a problem exists, but exploiting a problem and the piling on after the fact makes you look smart in the short run, but an opportunist in the long run.
The cat is already out of the bag. If Meridith wants to look like a hero, she should begin focusing on the solutions not seen rather than the problems that are obvious to all. It's time to shut up and focus on a solution. Unless I am mistaken, wealth in the market is made by buying low and selling high.
In my opinion, the capitulation in the financials is well underway.
The scare of the week was the rumors of Fannie (FNM) and Freddie's (FRE) demise, Indymac's (IMB) implosion, while the sad news of the week was the takeover of Anheuser-Busch (BUD) by a clearly inferior competitor.
The Anheuser-Busch takeover was more about a weak dollar being dominated by a stronger one (The Euro), and not a merger of equals. How sad.
Going forward the news continues to assume the Fed is out of bullets, they're pushing on a string, and all the negatives that come with this kind of talk. Yes, the Fed made be close to being out of conventional type bullets, but this is when bullets are replaced with intervention.
The biggest problem facing the economy and consumers is the high price of energy. Unless the powers in control want to drive the U.S. economy into the ground, the must use other means to turn the economy around. What can they do? Intervention!
Over the next few months, I believe intervention will include;
1) Supporting the dollar and forcing shorts to cover. I believe the G-8 will help the dollars woes, and countries with stronger currencies will begin helping the U.S. by aggressively buying the greenback. In turn, the dollar will rally, shorts will cover, and energy prices will fall.
2) The Energy bubble is subject to demand destruction, but traders have been reluctant to pull the trigger since this sector is one of the few profits remain.
Geopolitical risks (Iran) keep traders hoping for more, but unless my contrarian compass is way off, the bubble in oil is following the same path as the NASDAQ in 2000, and the real estate market in 2003-2004.
Sure, I understand supply and demand, and I understand (but am wary of) the growth in China and India, but I also understand demand destruction. According to the Federal Highway Administration, "Americans drove 22 billion fewer miles from November through April than during the same period in 2006-07, the biggest such drop since the Iranian revolution led to gasoline supply shortages in 1979-80."- USA Today.
Not only are Americans driving fewer miles, they are making other changes as well;
a) Trading in SUV's and lower milage vehicles for more fuel efficient ones.
b) Heating Oil users are finally making the move to alternatives- Associated Press/ Kiplinger.
In short, demand destruction has begun. In addition, a much awaited refinery in India is just now coming on-line- ABC News.
Last week I reported that over the past 100 years, the DJIA has gained an average of 9.7% during the second half of a presidential election year. Oil prices began falling sharply but quickly reversed course and soared higher after rumors of an Israeli-U.S. attack on Iran halted the the fall.
I believe the continuation of the sell-off will resume in the days and weeks ahead.
Dynamic Growth: ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
Here are our Top 10 ETF's for the week of July 14th:
1) SLX: Market Vectors Steel Index Fund- .437
2) DBA: Powershares DB Agriculture Fund- .418
3) EWZ: Brazil Index- .391
4) FXF: Currency Shares Swiss Franc Trust- .337
5) EEB: Claymore ETF BNY BRIC- .325
6) DDM: Ultra Dow 30 Proshares ETF- Not Rated
7) DUG: Ultrashort Oil & Gas Proshares- Not Rated
8) PGJ: PS Golden Dragon China Fund- .139
9) KBE: KBW Bank ETF- Not Rated
10) IYF: iShares Dow Jones US Financial Sector- Not Rated
Here are our Top 10 Fidelity Sector Funds for July 2008
1) FSCHX: Chemicals
2) FSMEX: Medical Equipment
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FWRLX- Wireless
9) FSRBX: Banking
10) FSVLX: Home Finance
NEW BUYS:
None
NEW SELLS:
None
Honorable Mention (Holds):
None
The Week in Review:
Last week, T. Boone Pickens announced a plan to cut the nation's dependence on imported oil by -38% in 10 years, and add billions more to his pocketbook if the U.S. converts to his investments in wind and natural gas.
Pickens said "This is not about Republicans vs. Democrats, "This is about saving our country from the ruination of spending $700 billion a year on oil imports. Ninety days after the oil hits our shores, it's all burned up, and we've got nothing to show for it. But they (foreign oil producers) still have our money. It's killing our economy."
Like I have said in the past, Wind, Solar, Natural Gas, and Nuclear are not new solutions. They are old solutions that have been foiled in years past by dramatic declines in oil prices after an initial crisis. This time may be different, but history show it never is.
Last Week:
The DJIA dropped -1.67% to 11101, and the S&P 500 fell -1.85% to 1239.49. The biggest hit of the week came from the financials which fell -6.02% on fears of Fannie (FNM) and Freddie's (FRE) demise.
Even market expert Dennis Gartman called the sell-off in the financials ridiculously overdone. Gartman also said he is short crude oil.
Ladenburg Thalman analyst Dick Bove thinks that select bank stocks are once in a lifetime buys. He said, "While the banking and brokerage industries are in trouble and have made terrible mistakes, they are still functioning, it is unlikely that the investors and media who are pounding on these companies are about to take their money away from the banks and brokers and put it in a jar in the backyard."
There were some signs of a mini panic last week as the Market Volatility Index (VIX) climbed a to 27.49 from 24.80. During the last trading bottom on March 14th, the VIX hit above 31.
The first week of the Q2-08 earnings season started last week, and a total of 422 companies reported earnings fell 22% versus Q2-07 results that showed an increase of 13%.
The National Association of Realtors reported that pending home sales fell 4.7% in May.
Import prices rose 2.6% as a falling dollar continues to add to inflationary pressures. Import oil prices have risen an average 8.5% annualized over the last four months.
Continue reading "Dynamic Growth: July 14, 2008 Briefing" »
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
Like many, I have an occasional beer. One or maybe two a week is enough for me. When I heard the news that Anheuser-Busch was the target of takeover by a Belgian-Brazilian company named InBev, I thought "Who in the heck is InBev?".
As I looked into InBev, I had a hard time believing that the makers of this Belgian urine had enough muscle to even consider buying an American icon like Anheuser-Busch. Then it hit me, our currency has been debased so severely that converting Euros into U.S. dollars makes paying $70 per share for BUD cheap.
Consider this. A few years ago 1 Euro was worth about .93 cents U.S. Today, 1 Euro is worth $1.59 U.S. The Belgians know that the currency difference severely undervalues the Anheuser-Busch shares.
Folks, this is what happens when a bought-and-paid-for US government is allowed to debase our currency, and no one is held accountable. Our politicians have allowed greedy and unpatriotic corporate executives and Wall Streeters to export U.S. jobs to boost their bottom lines. As a result, the US economy is destroying the dollar’s role as the world's reserve currency.
Our once great currency has lost a great deal of its purchasing power against oil, gold, and other currencies. As a result, the prices we pay for everything here at home has gone through the roof.
If our politicians, corporate executives, and Wall Streeters were citizens of any other country, they would have been executed for treason.
Oil prices spiked again this morning on the prospects of an Israeli-U.S. attack on Iran. Our involvement in Israeli-Arab conflicts has turned the Arab world against us, and makes us prone to more terrorist attacks here at home.
An attack on Iran would be pure madness. As I watched the video of Iran's missile test, I was reminded of Sadam's scud missiles which were basically ineffective. If Iran decided to launch a strike on Israel, Iran would be completely destroyed in less than 24 hours. But, as a result of the Iranian test, you and I have to pay more for energy, and watch the stock market continue to drop. It's madness.
As it currently stands, we still have not had a high volume capitulation in the stock market. We are extremely oversold, but I don't think we can rally until oil prices decline.
For now, "Who in the heck is InBev?"
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
You know the daily drill by now. Energy prices have come down, but they're still too high. The government still has done nothing to help the credit crisis. Consumers are hurting. Corporate earnings are declining. Israeli and Muslim issues continue to demand our undivided attention, and the list goes on and on.
Later this summer, and maybe into the fall, we may get the final washout in the stock market which can provide the necessary springboard for a new bull market. The first step in doing so will be a change in the accounting laws that demands that holders of mortgage to price those assets at their current market values. Since there is no market for these assets, banks are forced to write these down, and in turn are seeking new capital. Why something hasn't been done already is beyond my comprehension.
The housing problem has been well advertised, but no one is taking into account that approximately a third of homeowners don't have a mortgage, and the majority of consumers that were issued mortgages have them locked in at fixed-rates.
Clearly, energy prices have been manipulated, and speculators have gotten away with murder. The Cheney administration has done nothing to help the situation. And why should they, they are oil people.
Today, I received an e-mail from the airlines in which they said;
Speculators in these markets are increasingly buying and selling commodities such as oil to sell again, rather than to use. As largely unregulated speculators pocket billions of dollars at your expense, the price of commodities has increased out of proportion to marketplace demands.
As speculators continue to dominate the market, the volume of oil traded “on paper” has been as high as 22 times greater than the volume of oil consumed. As prices rise, institutional investors have become active traders, turning commodities into just another asset class. This has caused severe market imbalance and upset the natural relationship between supply and demand. As a result, legitimate customers such as trucking companies, airlines, and consumers have been forced to purchase oil at unnecessarily higher prices. This has dramatically raised costs, resulting in needlessly high prices for American consumers and businesses.
Over the last 20 years, commodities markets have become increasingly less regulated. Today, as many as 90 percent of all commodities trades occur outside of the traditional marketplace exchanges. In these so-called “Swaps trades”, parties secretly buy and sell commodities with absolutely no one watching. This means speculators can manipulate oil prices and corner the market without anyone knowing.
As oil prices were reaching new highs, the executive branch of our government has done nothing to curb the immoral trading in energy. In fact, they have helped the price of oil rise by using tax dollars to purchase oil for the nations Strategic Petroleum Reserves (SPR).
Nothing positive will happen to the economy or the stock market until oil prices come down, and come down dramatically. I feel the decline has already begun, and will accelerate into the 2008 presidential election.
The free market has turned into a windfall for those who turn the screws on us, "the little people".
"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
T. Boone Pickens was on CNBC this morning with an energy plan that calls for cars to be converted from burning gasoline to natural gas. Can you imagine the fireworks show we will see if two cars burning natural gas collide?
Once again, old solutions to the energy crisis keep appearing. During the energy crisis of the 1970's Alternative Fueled Vehicles (AFVs) came in vogue. Studies conducted in the 1970s promised alternatives to counteract soaring fuel costs and oil shortages. Magically, the drop of gasoline prices in the 1980s put an end to the alternative craze.
I say craze because energy scares are nothing new. Our business leaders, with the help of Wall Street bankers created the current energy shortage when they began to build up the economies of Chinese and India by shipping U.S. jobs overseas.
In short, electric, natural gas, and fuel cell vehicles are nothing new. Either are any of the solutions that call for alternatives such as wind, solar, and nuclear.
Our Fearless Leaders Created the Energy Crisis
Outsourcing labor to China and India has lead to a manufacturing boom in both countries. If we didn't send U.S. jobs to China and India, there would be no new found prosperity in either country. As a result, there would be no energy crisis, no commodity inflation, and no new demand for raw materials materials.
Our lost jobs have lead to a building boom in Asia, and as a result, the Chinese and Indians are demanding raw materials and commodities to grow their infrastructures. This outsourcing has lead to new found wealth which in turn demands more energy and raw materials.
"If Wall Street hates a stock, buy it"- Martin Sosnoff
CMO's (Collateralized Mortgage Obligation), CDO's (Collateralized Debt Obligation), and SIV's (Structured Investment Vehicle) has created havoc in the market place, and massive losses for the banks. Most of these losses have come as a result of the GAAP accounting laws, which calls for these products to be repriced at their current market values, and currently there is no market for these products.
As a result, any bank or financial institution holding these products have had to write down or write off these products at a loss. These real or artificial write downs are the reason banks are looking to raise new capital.
If the GAAP accounting laws are changed, and banks are allowed to value these securities at maturity, the financial crisis as we know it will end. In addition, banks will be allowed to add some of the written down assets back to their balance sheets.
Also in the works is the Senate Banking Committee plan which would provide relief to people who are at risk of losing their homes. Once the details are worked out, it is estimated that the foreclosure of 500,000 homes can be avoided.
Continue reading "Bird's Eye View: Tuesday, July 8, 2008- We Created the Energy Crisis by Shipping U.S. jobs to China & India" »
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