Saturday, February 28, 2009

2/28/09 - Weekly Stock Market Review

The Dow closed February of 2009 at 7062. That's just a smidge over 7000 but now over 400 points below the double-top mid-point of 7500. Uh-oh! The bulls are running out of pasture. The Dow is now down some 20% for the year already! Ouch! Not our portfolios, though. We have already turned positive in one and we are very close to doing so in others. Why? Well, we are not Madoff or Stanford so I will be happy to explain.

My opinion of the market has not changed since two or three years ago. We are in the 'Mother of Bear Markets' and the bear will not cease just because all the folks on the cartoon network want to proclaim 'a bottom'. The bottom is where the bottom always resides. All the stupid people have to lose all their stupid money. There. Now you know what the real bottom looks like. This is a brutal market. Our best weapon has to be the brutal truth. If you can't handle it, don't play. Stay in a CD. You will soon understand the effects of inflation and eventually, our new government may decide that your CD is their CD. Welcome to the new era! That goes without saying. This is not a market for the average American who has de-evolutionized into a profoundly ignorant dope seduced by illusionary riches that can be driven, lived in, margined, mortgaged multiple times, bought with plastic, and finally repossessed. The majority of American citizens elected a new man to serve with the title of President based on a misguided idea that 'change' was good. Change can be either good or bad. What a profoundly ignorant public does not understand is 'change' and 'progress' can be two entirely different things. For instance, I can lament my current situation if I have been recently laid off. To garner an income, I can turn to crime and become a robber. First, that would be morally wrong and second, it will only lead to incarceration and destruction. But, it would be 'change'. Or, I could dust myself off, perhaps retrain myself, and seek other gainful employment. That would be progress and change. Unfortunately, America has been dumbed down to something below the lowest common denominator because I'm sure most people can't count past ten (using their fingers), much less even fathom a fraction. Just look at the people that we elect to represent us in government. Could there possibly be a stupider bunch of people on the planet?

The past two years in the stock market have been historic in that the 'market' has been hi-jacked. It has been captured. In my book, Navigating the Mind Fields of Investing Money, I wrote in 2006 that 'investing was dead and the market was no more'. The governments have taken them over in an attempt to cover up their cataclysmic bungling of economies of the world. Globalization has been a difficult adjustment for economic experts much less, the governments that participate. So in 2006, Hank Paulson and the Plunge Protection Team completely took over the US stock markets with manipulative efforts to keep it growing to the sky. That can happen if you have a good root system but our root system was rotten. It was fertilized by the miracles of margin known as derivatives. The derivatives world allowed a Ponzi scheme to develop in which lenders could invent and create 'capital' from which they could lend and invent more 'capital'. In truth, the newly invented 'capital' was nothing more than sheets of paper with very big numbers written on them. The Ponzi scheme that we call our economy has begun to dissolve now that the holders of said 'capital' have realized the scam for what it is. Yes, the subprime real estate paper has been an instigator of economic desolution but everyone was a player at some point. 

For years, our government has been nothing more than a pathological lying economic happy news propaganda machine devoted to nothing but cheering the stock market higher. They feed it everything it needed. They changed accounting to move decimal points in any direction necessary for positive results. They changed equations that measured things like inflation to make it look there was none when there was. They promoted the Commerce Department that has become nothing more than a laughable bunch of pretty number reporters devoid of reality. Yet, our government has been clever. They knew all along that if they could keep the stock market going up, the dumb people of the land would never question a decimal nor a derivative. And the beauty is that every dope on the planet could be a stock market investor with instantaneous skills of a pro. None of us had to know anything. We could just open an account and the market would reward us. Only, our government leaders have been manipulating the markets higher with freshly printed money, exponential margin created from derivatives, and soothing news of the government acting as a trampoline to catch and rebound any falling portfolio.

The Dow peaked at over 14000 in October of 2007 and investors have been tricked by past governmental intervention efforts into believing that every dip was 'a bottom'. Where was Bernanke? Where was Paulson? Where was Bush? Where was the Commerce Department? Where was the cartoon network where every dope investor gets their 'expertise'? All of the con men in the world tried to keep the market up but at the end of the day, the stock market needs true fundamentals. We don't have them and the market remains very over-valued at the present. Even after falling 50% from the highs, I think the Dow could easily fall another 50% this year and still be over-valued. No one can save us now. Paulson is gone. Bernanke has shot all rounds in his holster by lowering the Fed Funds rate to zero. And now we have a new President.

Socialization and federalization are for the weak-minded and anti-capitalists. Obama favors this kind of government because these are his people. However, knowing that the market was missing the fundamentals to progress, I have been in the camp of the short sellers. Last year was a difficult year. Both long and short oil was down. Long and short real estate was down. Long financials were way down and short financials were about flat. Nothing worked due to all the massive government intervention. I knew that Mr. Obama would make things easier for the short-sellers. My faith has been in, 'Obama - But for a completely different reason'. Everyone else can extoll 'change' or whatever. I'm a capitalist and I look for opportunity. The idiocy of our new government will run the nation into the ground and take the stock market with it. So be it. It is time to short. Only a few will be rewarded. The rest will perish. Choose your side wisely. 

Let's take a look at a one-week chart of the Dow. You can see the hard selling on Monday and the quick recovery on Tuesday. Fed Chairman Bernanke told the stupid people that the Fed was not going to 'nationalize' Citigroup or any other bank. So, the market rallied. Of course, the same guy told the same stupid Congressional committee that the Fed would have to take a 'substantially larger ownership' in some banks. He knows that he is dealing with the idiots in Congress so he can tell them anything as long as he puts a stick of cotton candy in their sticky little hands and they will sit and be happy as they are dumb. No one raised a question. Rally time! But then, reality is a beast and the market resumed its downward spiral. 7000 is the next stop. I wouldn't be surprised if we don't dip to the mid-6000 range and then experience a decent bear market rally. As we go into next week, we must digest the newest GDP fourth quarter number of minus 6%. As an investor, you must remember that stupid can work for you. The idiots that run government will make the stock market into one of their casualties of the war they are promoting against all of us. 

Stock chart courtesy of StockCharts .com

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