3/28/2009 - Stock Market Review

Searching for a bottom with a light powered by hope.

The Nasdaq has now recouped all of its losses for the year while the Dow and the S&P still flirt with double digit losses. Not surprising. The Nasdaq is not encumbered with financial stocks or big industrial dinosaurs. Plus, the Nasdaq is home to technology which is inherently driven by hope. So, as the bear market drags on, hope occasionally springs forth with ebullient rallies that suggest the light at the end of the tunnel is approaching and we are yet to hear a diesel train horn. Let's just buy stocks until we do.

Maybe Obama is right. If he is, then Bush was right. If so, then so too was Greenspan. Logically, then so too is Geithner and Bernanke. They all are cut from the same cloth. Or should I say, they subscribe to the same school of the Monetary Printing Press Can Save All Of Us. The Fed is busy dumping dollars into the economy like at no time in our history. Greenspan started it. Bernanke is following through. Obama endorses it. And oddly, all the Obama supporters that wanted 'change' have gotten nothing but the same. This is not a political statement. This is just an observation. While Obama likes to think that 'we inherited a mess', citizens must understand and remember that 'we' were in the Congress that helped to create the 'mess' through ignorance and stupidity. Now, that same ignorance and stupidity is given the confidence of the citizens to solve the problems resulting from ignorance and stupidity. Printing money is not the solution. Capitalism is.

A small grocery chain in the Carolinas announced their declaration of bankruptcy this past week. No, they are not going out of business. No, they are not firing a bunch of people. They are going to continue to operate while reorganizing under bankruptcy protection. Many companies have done this over time and some very large and very vital to our economy companies like airlines have taken this path. It makes one wonder, then, why we allow bankers like the Federal Reserve to take over and run our country under very different rules. The new government has imposed a 'too big to fail' rule that really amounts to 'how does it impact us' as a central bank rule in determining which companies are actually allowed to declare bankruptcy. The little grocery chain with less than 300 stores doesn't really affect the Fed so they can go bankrupt or go completely out of business and the Fed doesn't care. AIG, the big insurer, however, could dent the Fed's balance sheet and poop where the Fed runs their '3 - Card Monty' con game and that is not allowed. It's the derivatives, you know. They have to be saved. All of the big banks fall into this category. All of the big insurance companies fall into this category. This is pick and choose time. This is not capitalism. While the citizens of the country whine about having their money stolen by the bankers in charge who then reward leaders of 'too big to fail' companies for slamming their companies into the brick wall of failure, they are far too ignorant to challenge the culprits of such decisions. Certainly our new government cannot allow their cherished friends of AIG to wallow in the cavernous cesspool of bankruptcy with peons of the grocery business. This is the new 'elitism'. This is the 'change' that so many 'maroons' (in the words of Bugs Bunny) voted for. And so, the stock market pitches and rolls with every news release of governmental interventionism.

Meanwhile, the world is grumbling about such antics and instances of outrageous unfairness. Saving big bankrupt companies is far more expensive than allowing capitalism to work freely. Under bankruptcy, the companies could and mostly would continue to operate while restructuring debt. They would cut costs and likely have to do away with corporate jets, multi-million dollar executive office renovations, and multi-million dollar bonuses for incompetent executives. However, since the new government celebrates and condones this corporate operational behavior (it's more efficient for the executives to fly around in their corporate jets - especially if they are paid for by the tax payer), they will continue on as incompetently and inefficiently as they have in running their companies into the ground as they did in the first place. Only now, we, the tax payers, will be called upon to subsidize their incompetence and boorishly selfishly and indulgent elitism. We will keep them afloat even if the business models don't work. Welcome to 'change'.

But the rest of the world knows this comes at a price that even they will be charged. The only way to do this is to print money. Lots of it. Of course, our bean counters will argue that we really aren't 'printing' money. To a degree, they are right. Only 4% or so of US currency is actually physical money. The rest is 'electronic'. This is done by debits and credits created by the Federal Reserve. The Chinese in particular are voicing debate as to whether we now need an international currency given that our printing maniacs are going to destroy the value of the multiple trillion dollar stash of US Treasuries and cash that they now hold. If this idea takes hold, the Chinese can then begin an orderly sell-off of our garbage paper and then our inflation rate will 'zimbabwe-ize'. But I do feel sorry for Mr. Obama. He is so delusional that he still thinks the US is a rich nation. He thinks we should all have health care. He thinks the new 'tent cities' of homeless people that are popping up all over the US are disgraceful for a rich nation. Poor thing. The US is not a rich nation. Rich nations don't borrow trillions of dollars every month just to pay the bills. Lenders will soon refuse. The average American is making less money as a percentage of living costs and of course, the pathological lying machine we call 'government' will never acknowledge this with a truthful inflation gauge. But the rest of the world knows what we are doing. 

As you can see from the chart above, the Dow is still moving higher and it is still greatly impacted by the beginning and end of every day. The chart is a 5-day 30-minute candlestick bar chart. Of course, it helped this week with a 200-point one-hour rally at the end of Wednesday courtesy of the PPT. I count this as a PPT rally because the 1) the Dow was falling, 2) It happened after 3PM, and 3) the rally was at a pace of over 200 points per hour. So be it. It looks like Bernanke would like to get his index over the 8000 mark to try and prove the chartists of the world wrong. Well, he has a printing press and I think he will do it. We also have to remember that our government did not want investors to get a terrible first quarter portfolio statement following such a miserable year in 2008. So, we got a terrific PPT on March 10 followed by the Fed announcement on March 18 that if our friends in China were to balk at buying our Treasury debt, then the Fed would step in with a trillion. That's just what the market wanted to hear. Rally on my friend. Just remember, this is another bear market rally and just another con game by our Fed. Treasury Secretary Geithner announced at the same time that the Treasury wanted to solicit the help of the private sector to buy up all the toxic illiquid assets on the banks' balance sheets. Really! Yes, that's their plan. I don't know if he was smoking crack when he came up with the idea but he did get it from former Treasury Secretary Paulson. I'll bet you just can't wait to buy some of those 'toxic illiquid assets' that the banks haven't been able to sell to anyone at any price in the past year. If you want a piece of the action, just get in the line labeled, 'Suckers'.

Peace and fortune.

Chart courtesy of StockCharts.com 

Stock Market Review - Week Ending 3/21/09

Thank You Sir - May I Have Another Trillion!

As you can see by the chart to the right, the Dow had yet another 'Fed Interventionist Week'. Wednesday was the day the Fed announced the injection of yet another trillion into the economy in the form of Treasury bond buybacks and collateralized mortgage securities purchases. Added to the trillions already devoted to the cause of Dow Jones Industrial Average support, my unofficial count has us north of $10 trillion pledged so far. Coming next week, Treasury Secretary Geithner unveils his plan to welcome private investors into the 'toxic asset' ownership club. Gee, with an entire country drowning in bad debt, what we really need is more bad debt. Have aliens secretly captured this guy and scooped his brains out with ladle? I am aware that this process has already been done on the average American as they still support the actions of newly elected fleece team. It is sad to see the destruction of America right before our profoundly stupid eyes.

What people don't realize is a trillion dollar injection by the Fed is not a trillion dollars. It is really 10 trillion dollars. They buy the bonds from lenders who currently own the bonds who then lend with the power of nine. The lenders loan 90% of the new cash and then 90% of that new cash and so on until the injection has reproduced exponentially. Zimbabwe has already tried this tactic. It didn't work. 

Why won't it work now? Who will take on the loans? I don't know if Bernanke ever reads a newspaper or not but apparently he doesn't understand that America is broke. We already have all the debt that we need to drown ourselves with, thank you very much. Nevertheless, I think there are two things going on here. One, the printing press has begun to put pressure on our Treasury bond yields resulting in higher interest rates. The recession has lessened our appetite for goods from China who in turn, have less of a need to balance their trade with US bond purchases. In turn, our rates rise and our recession gets worse and we buy less Chinese made stuff and so on. The US has wanted the Chinese to let their currency float higher but they won't because that hurts their exports. Latest figures show their exports are falling at a 25% clip. So, our Fed has taken the bold move to buy down our Treasuries themselves. This should weaken our dollar which in turn strengthens the Chinese currency in relative terms. However, our leaders have never understood that the Chinese peg their currency to ours so if we just put our own economic house in order, things would take care of themselves. But, that won't happen. We prefer the artificialness of intervention, injection, lying about everything, and complete governmental control of everything including executive pay. So, Bernanke now thinks he can manipulate currencies around the world while he is at the core destroying America's economic system.

Secondly, buying Treasuries is an attack on the banks. With the Fed Funds rate at zero, the banks can borrow at zero and buy Treasuries yielding 2 or 3 percent and make money all day with no risk whatsoever. Why should they ever loan a dime to anyone and take on risk? So, the solution is to bring the yields of Treasuries back down. As I have said in the past few years, sometimes stupid works for you. We will soon have mortgage rates at 3% and the Fed will subsidize the whole program. Ain't stupid great? Of course, it seems incestuous and ridiculous that the same body that issues the Treasury bonds to pump 'stimulus' money into the economy is at the same time buying them back. Let history show the truth.

So for the week, the Dow gained a tad on the one-hour fed-induced rally from Wednesday. The simple truth is that the market knows the economy and the markets are only going to be strangled by a fumbling government who knows nothing about anything except cheating on their taxes and screwing the American public. If we cannot push beyond 7500 in the first few days of next week, we will be talking about holding on to 6000 in a week or so. Ignorant people vote for ignorant leaders. We can't print our way out of our demise. Nor can we spend our way out. And worse, we can't lie our way out. The previous White House Occupant (the WHO) tried all of this on a grand scale and the current WHO came to power on a pledge of change. I don't see any change nor did I expect any. Engaging more than one brain cell at a time will lead one to this conclusion. The market will always right itself if it is left alone. This market won't be. Keep your shorts in your top drawer. You will need them shortly!

Stock charts courtesy of StockCharts.com

Stock Market Review - 3/13/09

Wow! Check out the beginning of a bear market rally that started promptly on Monday morning of this week. The chart, here, is the Dow year-to-date and you can see the nice reversal off the lows of the year with clearly stronger volume. Nice job, PPT! All the bulls see the obvious double top in all the major indices and they are all rushing frantically into all asset classes to turn the markets higher. Maybe we are getting a playable rally. Maybe we are getting a real turn in direction. Maybe for the first time ever, printing gobs of money really works. If so, it is obvious that central banks should constantly flood the economies of the world with freshly printed money and simultaneously buy down bonds to keep interest rates low. Maybe that is the secret. Maybe Bernanke and company are on to something.

Maybe. Maybe the central banks are simply following the lead of Zimbabwe. They flooded their market with money and their stock market responded by bulling higher. It may be because stock markets reflect real inflation but who cares? The market went up. Isn't that all the whining American public wants? We used to build wealth in the US through manufacturing but now all we have left is our investment portfolios. The truth is, they can be saved. The stock market can be saved. Like Zimbabwe, we can print money and flood the streets with ink. That makes the stock market go up. But, so too will the cost of living. Extra dollars devalues the currency and in turn, prices of everything we buy goes up. Our government will continue to deny this, of course, and they will continue to put out benign inflation numbers. But this weekend I ordered a take-out meal from a local restaurant from a menu that I had at home. The price on the menu for the dish that I ordered was $5.99. I was charged $7.65. How much? Are prices rising that fast? Let me calculate that percentage increase to see what my inflation rate is at the moment. Well, as it turns out, that is only a tenth of a percent increase. How can that be? Oh, wait a minute. My calculator was issued by the US Government Department of Commerce. Let me get my pencil and paper in on this. Oh, there we go. That is a price increase of 28%. Whew! We not only have inflation - we have massive inflation. And that tsunami is just getting started.

Well, I hope all the bankers and insurers are happy that the government is saving them with a flood of ink. They are drowning the rest of us in the process. It is curious, however, that Treasury Secretary Geithner recently said he needed a couple more trillion in savior dollars for the banks but yet Citigroup said they are now making a profit. Bank of America said they don't need anymore bailout money. Well, at least until they need to 'buy' another company. Then of course, they will no doubt do it with 'bailout' money. Oh, I'm sorry. The new administration likes to call this 'rescue' money. 

So, the stock market rallied this week on the good news from the banks. Of course, the economic news continues to be rather depression-ish. Now we have to decide if we want to play the bear market rally or not. I think we have to watch the dollar very closely. It is showing signs of rolling over. This process will accelerate as the countries of the world follow our lead and lower interest rates to zero while 'stimulating' their banks. At some point, no one's money will be worth a share of AIG's stock. It's funny but when someone 'gives' you something without an expectation of return, there is in turn no obligation of collateral on the receiver. Usually, this means the gift is rather useless to the giver. Money is the same way. Money with no or very little interest coupon signals its uselessness. It has very little value. The issuer receives very little or nothing in return. The receiver has very little incentive to return given money. For an economy to be truly strong, the currency of that economy has to carry real value. At some point, we must understand that the current trajectory of monetary printing worldwide will eventually destroy the value of all of our assets. In particular, our intangible assets like stock portfolios will experience the brunt of this devaluation. Oh well, at least the banks will have plenty of money! Enjoy the rally while it lasts. Weeeee........

Stock charts courtesy StockCharts.com

3/7/2009 - Stock Market Review

Another week - down another 5% or so on the Dow. It would have been a 7% loss if not for yet another heroic last thirty minutes of the day rally orchestrated no doubt by the PPT. Of course, you can see by the chart below that the first thirty minutes of the trading day and the last thirty minutes of the trading day have become the most important and most manipulated. So what's new? Volume is still not excessive and fear in the market is a non-issue. It seems that investors have reached a level of resignation or perhaps, they patiently await an Obama trampoline. It is almost like one of those trust exercises where you fall backwards and trust your mates to catch you. Well, with the Dow down over 20% for the year, investors are waiting and hoping.

Not us. Our growth portfolio is solidly in the black this year and with a little more help from the idiots that run our country, I expect a fantastic year going forward. For investors with skill, things are getting easier. The absurdity of the current economic philosophy will result in a stock market that will be burned to the ground. The idiotic notion that we can somehow mute the effects of exponentially margined borrowing over the past few years in a moronic attempt to boost economic decay by printing money like a drunkened Zimbabwean banker is simplistically preposterous. This strategy has never worked anywhere in the world and will not work now. All it does is send us all down the same rat hole as the Ponzi scheme losers find themselves in at the moment. The stock market is sensing this. So too is the bond market. Yields on the US Treasury bonds are dancing higher as the year progresses while prices of stocks are dancing like a blind man on banana peels. Meanwhile, the idiots in Washington continue to paralyze commerce further by imposing more socialized proposals and governmental interventionism. They even called in the National Guard to nationalize the rice production plants. Oh, wait a minute. That was Venezuela. Oh well, at least we can see where we are headed. The stock market does not like this sort of stupidity.

Speaking of stupidity, I read this past week that Bank of America still has five corporate jets. If you are an idiot, this fact probably doesn't bother you too much. You go along with the company line that this provides more efficient transportation for the executives. Well, duh! It would be more efficient for me to have my own corporate jet too but I don't have one. You know why? BECAUSE I CAN'T AFFORD ONE AND I DON'T EXPECT CITIZENS OF THE UNITED STATES TO BUY ME ONE!!!!! Taxpayers just gave BofA untold billions that they used to buy Merrill Lynch. Why didn't we tell them to sell the jets first? Because we are idiots lead around by the likes of pilfering nitwits like the Pelosi's and Frank's of the world. We don't have any fight in us. We think it is our right for the Dow to go up and make us rich and if a bank needs to take over another company to facilitate that process, then it is okay for us taxpayers to foot the bill. Not me. This whole process of bowing to the banks is infuriating me to the point that I may have to go out and buy a new keyboard because I am hitting these keys so hard right now this thing will be broken before I'm through! Oh, by the way - could all of you collect $140 and send it to me so I can get a new one? Isn't this the way things work nowadays? Shouldn't the taxpayers pay for everything that anybody wants?

So now we are waiting for a bottom in the markets. This is like falling down a flight of steps and every time our head hits a step, we want to think that is the 'bottom'. What then? Do we rebound back to the top? What propelled the Dow to its high of 14,000? Unbridled capitalism and unfettered regulation. What course is the current administration moving towards? Bridled capitalism and fettered regulation. Sure, things got ridiculous in the zealous attempt to super stoke GDP with the invention of derivatives but in true capitalism, there is going to be a loser. The people that played this game should now lose. Period. But no, enter the new socialism. Or, as I like to call it, the new Stupidism. Bailing out the Ponzi scheme players is supposedly in all of our best interests. If I am going to be required to bailout bad loans through cramdowns, bailouts, stimulus, 'recovery packages', or whatever, then every loan that is written should come across my desk for approval. Not Bernie Frank of Chris Dodd!!!!! We all think we can send this garbage to Frannie and Freddie Mac. Who do you think they are? They are us. We own them!! Courtesy of Hank Paulson and Ben Bernanke, they bought us a company that loses, as of their last bailout request, about $25 billion a quarter!! Are you mad yet??? You want to know what is in my best interest? I WANT THE GOVERNMENT TO GET OUT OF MY LIFE AND LEAVE ME ALONE!!!! 

What do we do? We fight. That's what we do. This is war. Our government is coming for everything we have. We must understand this and we must use our intellect. We must understand that the stock market will only flourish under capitalism and what we have now is the opposite. Where will the stock market head? Down the staircase hitting our collective heads on every step. Why is our growth portfolio up so far this year? We short the market. This is not a recommendation nor a suggestion. This is a brutal market and shorting is a brutal way to try and make money. It should only be attempted by skillful investors and skillful portfolio managers. If it was easy, everybody would do it. Just look at the chart below. You can see that the last half hour of the day belongs to someone with a big printing press and no risk of a loss. Shorting is fighting our government. Even our new White House Occupant (WHO), Mr. Obama, was out this past week telling us to buy stocks. He referred to the 'profits to earnings ratio' (whatever that is) as a sign that stocks were now cheap. Great. We are getting investment advice from an attorney. I wonder if he ever had any investment license? An investment course? A job working for an investment company? I wonder if he reads my newsletter, Barry's Bulls? I wonder if he read my book? I know I haven't seen him at any of my lectures. I went to a New Year's Eve party one time when I was younger and the guy throwing the party ran out of beer at about 10:30 PM. Everyone started to leave. The host implored everyone to stick around for the dropping of the ball a midnight. I wonder if he knew that's not why everyone was there in the first place? Capitalism is the punch bowl from which affluence drinks!

Chart courtesy StockCharts.com

Dow - five days week ending 3/7/09 thiry minute bars.