31 May 2009

30 MAY 2009, Saturday


  1. Long Term 40 Year Cycle.

27 May 2009

27 MAY 2009, Wednesday



  1. Update from 7 MAY 2009 post regarding the Federal Reserve's Quantitative Easing plan. Above is a chart of the 10 year US Treasury Note's interest rate. Ben Bernanke tried to force the market down when he announced his grand "Quantitative Easing" experiment. And now he has found that markets will do whatever they are going to do despite someone's wishes. Ouch...rates are going up. We're experiencing a sharp rise in interest rates despite all efforts of the government to hold them down. People are no longer willing to buy the debt of the US at stupidly low interest rate levels. Congratulations to Congress and President Obama...we are now hostages due to our excessive spending! The bank (ie, China) is going to demand higher rates from the US to fund the operation of our federal government. In simple terms, they no longer trust us and are demanding higher rates. This isn't good...especially in a time when we are trying to spend our way out of troubles and establish new entitlements (ie, universal health care) at the same time. This may be the canary in the coal mine scenario. What they can't borrow...they will get via taxes. Make no mistake...taxes will go up for everyone...EVERYONE! We've already seen tobacco tax hikes, soon alcohol tax hikes and...heck...why not a national sales tax! Feels like FDR is back at the helm (review 15 MAY 2009 post). Hey! I've got a novel idea. Why not repeal all the bullshirt spending just authorized by Congress and do a real live budget scrub to eliminate nonsense programs and curtail spending to relieve the US's reliance on foreign lenders. Sorry, there I go again trying to think out of the box we're in.
  2. 30 year mortgage rates jump 28% in one day from 5.1% to 6.5%. That can't be good for "stabilization of the housing market". Ouch and double ouch! Click to read more.
  3. It seems that the "Pain Train" is at the station and loading...when it leaves I don't know...but this has my attention and concern since the housing market is the supposed key to economic recovery. "All aboard for the next leg down"???
  4. One more thing...North Korea is up to it's usual nonsense. Time to: 1) tell Russia to screw off and deploy the missile shield everywhere to protect us and our allies and 2) equip South Korea and Japan with bombers and nuclear bombs. Perhaps then China and Russia will use their influence to get North Korea to knock the nonsense off...until then the US is being played like a cheap fiddle.
  5. Rant over...Steve, OUT!

24 May 2009

24 MAY 2009, Sunday


  1. Memorial Day Weekend! Remember.
  2. Below is an interesting chart of the Dow Jones Industrial Average from the 1937 peak through the 1942 lows. The situations then and now seem similar...big credit contraction resulting in big economic contraction and the government spending wildly to slow it down. But it takes time to work through that credit contraction...consumers need to repair their balance sheets. Once they do, they will start spending again and the business earnings outlook will be much more solid...enough to have a sustained "buy and hold" type of bull market. Until that time, the chart gives you an idea of the wild ride the next few years may be like (the 1973-1978 stock market had similar erratic swings). To read more on the similarities of the market action...
  3. Now that I've got your attention...there is money to be made in there but not via buy and hold for life. That doesn't come back until after the SP500 Price to Earnings (P/E) ratio gets below 10 and we're nowhere near that (currently in the 20's). Back to the point, during that 5 year period, there were 7 moves of 20% or better (4 bears and 3 bulls). So, for the mutual fund folks, perhaps you should lean more toward buy and hold for 3-6 months to capture a 15% or so move, eject / run to a money market fund and wait for the next swing. For those able and interested, perhaps even try to catch a down move via Inverse (Bear) ETF's (can be done in IRA's too since it is a stock purchase). So, take some time to think about how you would operate in such an environment and then, if you like, let me know what you're thinking via email or the comments section below.
  4. In this environment, it is more important to try to sidestep part of a down move and then get back in for another upmove...that's how your money will be made. In, out, in, out...repeat. Minimizing losses is the most important part of investing because the gains take care of themselves. This topic was discussed in 23 APR 2009 entry with a good chart to demonstrate the principal. So, if you see some 20% move in 3-6 months...you should start thinking...is it possible that it's gone too far too fast? Go back and look at that chart some and you'll see what I mean.
  5. OK, so where are we now? First and foremost, I don't see any stable, roaring stock markets for a while. The chart, in my opinion shows a best case scenario for the next few years...believe it or not. Best case meaning that buy and holders will get violently "roller coastered" up and down for a few years but at least they won't go much lower than what they already saw in March when the SP500 set it's low at the all too spooky value of 666. The worst case, logically, would result in another down move well below the March lows...I tilt more toward this scenario as we approach the next 4 Year Cycle Low in 2010.
  6. I've been trading this market...trading...and have not been holding anything overnight because it is behaving like a completely insane beast. We've had a huge, fast move up and it's either taking a breather or rolling over. (Like I said 2 weeks ago in the email, in my opinion, no investors should be putting new money to work in stocks until the next solid down move.) What I'm hoping for is the breather and one more short, sharp upward surge to 1020 in the SP500 but of course it may not happen. By the way, on that chart, the breather would put us in the summer 1938 down move. Wish that I may, there is no road map to follow so I, as a trader, will dash back and forth like a scared squirrel in the middle of the road until the market decides which way it wants to go from here. Recently, I've been leaning on the sell side and profiting so while it works, I'll stick with it until it doesn't...but still hoping for one more brief up move once the current corrective action ends.
  7. Investors should be considering: 1) whether they want to lighten up, 2) at what price they would lighten up if it went up, 3) at what price they would lighten up if it went down, and 4) if you did lighten up, what would be your price / or conditions to re-enter. Then you just sit back and let the market come to you. It is so much easier with a plan ahead of time instead of being forced to react in an emotional manner.

18 May 2009

18 May 2009, Monday


  1. Perspective...always useful.
  2. Would someone please tell Congress and the President not to rob defense for their pet projects! We've got to remember that the current enemy is not the one you prepare for...it's the future enemy...and China is not a little cute and cuddly panda!
  3. New Highs New Lows discussion.

15 MAY 2009, Friday

Know the past...and recognize when you are seeing re-runs...

Franklin Delanor Roosevelt is popularly regarded as the man who saved democratic capitalism with vigorous governmental intervention. But a distinction must be drawn between FDR the brilliant politician who prepared the nation for World War II and kept Britain afloat after the defeat of France, and FDR the economic illiterate.

In the 1930s, the conventional wisdom was that capitalism had failed. FDR apparently never challenged that assumption. But the failure of government – not the free market – created the Great Depression. The economic collapse could have been avoided.In many cases, FDR’s policies deepened the depression and created needless hardship for those he sought to help.Here’s how:

Tax Hikes - FDR nearly tripled the tax burden between 1933 and 1940, boosting excise, income, inheritance, corporate, and dividend taxes and slapping a tax on “excess profits.” The highest individual tax rate soared to 79%. High taxes sucked money out of the private sector, smothered entrepreneurship and killed incentives to work and invest. By contrast, Treasury Secretary Andrew Mellon helped spark an economic boom in the 1920s by backing a plan to slash the top individual tax rate to 25% from 73%.

High Employment Costs - The New Deal raised the cost of employment, making it expensive to hire new workers and contributing to the nation’s high unemployment rate. The National Industrial Recovery Act and the Davis-Bacon Act mandated artificially high wages, further crimping private employment. The new minimum wage cut demand for unskilled workers. The new Social Security tax raised compensation costs. Compulsory union membership often fostered violent tactics – and the goal wasn’t increased efficiency or innovative products to grab market share. The WPA and other government agencies “created” jobs, but at great cost – private sector employment was lower in 1940 than it was in 1929.

Brutalizing Business - FDR railed against “economic royalists” and “privileged princes” who sought to establish an “industrial dictatorship” and a “new despotism.” Roosevelt issued about 3,700 executive orders, many limiting business activity, and let lose a plague of anti-trust lawyers on American industry. New securities laws made it difficult to raise capital.

Treasury Secretary, Henry Morgenthau, angry at the Keynesian spenders, confided to his diary May 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot."

13 May 2009

12 MAY 2009, Tuesday


  1. "Crisis You Can Believe In!" Social Security & MediScare are rapidly losing ground. So, what does Washington DC do? Start an entirely new program (Universal Healthcare) that will divert available funds from these 2 legacy programs. GENIUS!!! Uugghh!

08 May 2009

8 MAY 2009, Friday


  1. Grim Statistics...The official unemployment rate is 8.9% and rising sharply. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6. It reflects how unemployment feels to the average Joe on the street. U-6 is 15.8%. (U-6 statistic was created under the Clinton administration to allow a better appearance by subtracting out the "discouraged unemployed" from U-3, the official unemployment rate. Neat trickery huh?)

07 May 2009

7 MAY 2009, Thursday


  1. Above is a chart of the 10 year US Treasury Note's interest rate. Ben Bernanke tried to force the market down when he announced his grand "quantitative Easing" experiment. And now he has found that markets will do whatever they are going to do despite someone's wishes. Ouch...rates are going up.
  2. Potential Elliot Wave projections from Afraid to Trade.
  3. Possible direction change.

06 May 2009

5 MAY 2009, Tuesday



  1. Well I guess I was the dunce afterall...The Obama administration unveiled an expansion of its $75 billion foreclosure prevention plan yesterday, providing new subsidies to mortgage lenders and investors. The plan as first announced in February applied only to primary mortgages. Now, lenders will be eligible for payments when they modify the terms of a second mortgage, including a home-equity line. Under the new plan, lenders would receive $500 for modifying the second mortgage, plus $250 a year for three years if the loan remains current. The borrower would be eligible for $250 a year for five years to lower their principal balance. The borrower could have the interest rate lowered to 1 percent, depending on the type of loan, with the government sharing the cost of the rate reduction and also the reduction in principal.
  2. Soooo...as if the taxpayers (me, my kids and my grandkids) weren't getting screwed bad enough by helping pay for some idiot's mortgage. Now, we have to help pay for their 2nd mortgage that they took out on a house they couldn't afford so they could buy all the crap they felt entitled to because they were Americans, damn it, and had to keep up with the Jones's? Oh, and we get to pay the lender for modifying the loan he shouldn't have made in the first place. So, yup, taxpayer pays...and it will be through money the government doesn't have and will have to be borrowed upon which there will be interest that the taxpayer will have to pay too.
  3. If this forking bullshirt wasn't so sad, I'd laugh. Instead, I've learned that I've been the complete and utter fool my entire life...Welcome to Bizzaro World!


02 May 2009

2 MAY 2009, Saturday




  1. Better visualization of monthly returns...1950 - 2008 in the first chart overall, monthly returns during secular bear markets in the second chart and monthly returns since 1999 to current in the third.
  2. As you can see the monthly seasonal pattern still holds (certain months better than others) even when the months are negative.
  3. Historical GDP comparisons .


01 May 2009

1 MAY 2009, Friday




  1. How Swine Flu started... :)
  2. President Obama's $100 million budget cuts...a brief visualization.
  3. FDIC reports the Friday Bank Closures...I stopped reporting these awhile ago because it was becoming a regular onesie, twosies event. However, for the past few weeks, they're starting to report 3-4 each Friday.
  4. 666 & 888? Today's intraday high of 888 puts this rally in second place for all time greatest bear market rallies in history. Only the bounce out of the 29 crash was greater (not on scatter graph). How ironic would it be if the rally started at 666 and ended at 888? Retrace to 777 then rally to 999 to end this upswing??? The 999 would be a 50% gain from 666. Amusing.