30 APR 2009, Thursday

1. Market bottoms during Presidential Terms usually occur early so they're more favorable toward election times.
   

29 APR 2009, Wednesday

1. Just how has the "sell in May" thought specifically done since 1989...which was largely a pretty bullish period...until recently.

28 APR 2009, Tuesday

1. Interesting Chart of the Morning: There is reason for some concern about the Swine Flu scare. Mexico is a lot closer than Asia was when the SARS flu scare hit in 2002. As the chart shows the SARS scare aborted the new bull market that had begun a couple months earlier, with the S&P dropping back almost to its previous bear market low. And here's some info on the Spanish Flu of 1918.


2. Now, having said all that...some perspective. One thing in the "conspiracist" that bothers me is...believe it or not...that this may being hyped up by the politicians of the world to distract the masses from the current fiscal issues (ie, looting of the banking system). Huh? It may be a red herring to get you to shift your gaze away from what is really going on. Fact is that, in the US, over 36,000 people die annually from the flu...or 1.2% of the population (check the stats from CDC). That is the equivalent of killing all the active duty Coasties out there every year! Hard to imagine those numbers but let's put this swine flu thing into perspective. So far, only 70 people have died in Mexico City from this. Reminder, Mexico City is the second most densely populated city in the world with a population of 18.1 million. So, not to belittle it, but if 70 people died in one of the world's largest "petrie dishes" imagined, that is still only 4/100's of a percent. Let's keep this in perspective folks...does it seem like the masses are being played by fear? So, is over reaction based upon fear called for? I don't think so. Of course, reasonable precautions are always called for.
3. More history on other flu breakouts: The 1918-19 pandemic killed 500,000 in the U.S. and as many as 50 million worldwide. In 1957-58 the “Asian Flu” pandemic caused 70,000 deaths in the U.S. In 1968-69 the big scare was the Hong Kong flu pandemic. It ended after causing 34,000 deaths in the U.S. The SARS flu epidemic in 2003 created similar fears, but only 10,000 people worldwide were infected, and fewer than 1,000 died. I have great confidence that the current Swine flu will also be met with successful efforts to keep it under control.


4. Stress Test...my ass! Leak this morning is that Citibank and Bank of America need billions more. What? What happened to their "record" profits reported just a week or so ago. Hit the link to read on.


5. Da Boyz are turning on one another...and Italy seizes assets of JP Morgan over potential fraud?!! Perhaps, there may be some enforcement of the law afterall...finally???


6. "The Quiet Coup": Simon Johnson, a professor at MIT’s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008. EXCELLENT READ! See what the IMF would currently be saying to the US.


7. Now on to some lighter stuff...humorous insights into market psychology...


8. The 5 Stages of Grief: Giraffe vs Quicksand. Or what the bulls were feeling then and what the bears are feeling now.


9. Bear Trap! What the bears are going through now with this straight line advance.

27 APR 2009, Monday

1. CNNMoney.com's bailout tracker...Oh boy, am I a geek...but this list details all the programs the government has created to attempt to resolve our current fiscal concerns. First time that I've seen a document that corrals them all. Holy tax dollars, Batman!


2. It's frustrating, but we are wasting trillions of dollars that could bring enormous relief of suffering, knowledge, productivity, and innovation. So where is that money going? It's being used to defend bondholders of mismanaged financials, and nobody cares because hey, at least the stock market is rallying.


3. I remain convinced that mortgage losses will begin to creep higher later this year, surging in mid-2010, remain high through 2011, and finally peak in early 2012. To believe that we are through with this crisis or the associated losses is to completely ignore the overhang of mortgage resets that still remain from the final years of the housing bubble...a long slog ahead. Want proof? Here it is!

26 APR 2009, Sunday

1. As you'll see in the paragraphs below, I wouldn't be buying (ie, putting new money to work) at these levels. As per my previous email to you folks (and the videos included there...13 APR 2009), the SP500 can still go up some but it has gotten stretched for now. So, back to wait & watch mode. But I've got to believe that upcoming solid multi-week downswings become of more interest simply due to: 1) extent of price damage and 2) time length of this bear market to date. Just have to watch how it shapes up. So far, in this bear market, every down swing has gone lower than the previous downswing and that pattern will first weaken and eventually end...it will! As we move forward, during solid multi-week downswings ahead, investment opportunities may begin to become safer than what has been seen thus far. Now, on to some points as to why I wouldn't be buying at these levels.
2. Beware Insider Selling! Company leaders are selling 8 times as much stock as they are buying. The current level of insider buying is the lowest in 17 years. If this was the beginning of a new bull market, you'd think they'd be buying stock hand over fist especially at these distressed levels compared to 2007/2008. No? This may be a classic case of “watch what they do, not what they say . . . ” Here's some charts on it.
3. "Things that make me go Hmm...": Is the market about to get another wedgie? Dunno...but I'm aware of it having happened multiple times since way back into 2007 (Nov 08 to Jan 09 can be considered a sloppy one). Just look at it...the 2-3 month rising wedge pattern has been fatal everytime. The rising wedge is basically indicative of "Da Boyz" pumping it up really fast, which gets the little guy all excited to buy...then all of a sudden the up move becomes very choppy / labored rising only slightly as "Da Boyz" sell into the now buying little guys. Once the buying by the little guys is spent, down she goes for the next leg. Just the way the game has been played this past 2 years now as you can see...and DEFINITELY demonstrates why rising markets can be traps.
4. SEASONAL WARNING: Be careful out there! Especially, as we approach the poor investment time of year (May - September). Ever hear of "Sell in May and go away"? It's an old Wall Street saying that is based somewhat in fact. Don't believe it? I posted monthly results in a previous post (3 APR 2009, Friday). Go to the blog archives in the side bar and click on it to check out the historical monthly results. This is especially a good warning as we just happen to be going into this timeframe in an overbought manner...and with a possible wedgie coming on top of that?
5. You're really not missing anything folks. Do you honestly believe that with things as bad as they are, that the economy is going to turn on a dime? It just doesn't work that way. (Look at prior blog posts). Things aren't going down as fast as they were...but they are still going down. We've yet to truly stabilize. You're not missing anything! So, please, don't get anxious about all the "buy, buy, buy" you're hearing on television or the bullshirt recent "record bank earnings" which were all accounting gimmicks (or why would they need bailing out). The investment public is being played / enticed by "Da Boyz" because they need "bagholders". Remember, it appears the insiders are selling at the very least and there is also a rising wedge forming...looks like selling to me.
6. I'll leave you with this thought that, perhaps, will help you understand better...a car salesman only gets paid when he sells you a car, a real estate agent only gets paid when he sells you a house, and a stock broker only gets paid when he sells you some stocks. Do you honestly think that anyone of those salesman will ever tell you that it's not a good time to buy what they are selling??? Ever? Is it your interests that they have in mind? For real? Answer those questions and I think you have just taken one great big giant step toward understanding the markets...buy at wholesale not retail!
7. "So, what do I look for Steve? When do I know that we're hitting a better area for buys?" Glad you asked! In the side bar, click the SP500 2 Yr Daily & the SP500 3 Yr Weekly charts. Look at them. Look for the price lows of the swings. Then compare those points to the indicators in the bottom panels. Hopefully, that helps some. If not, drop an email or call. Simple enough.

23 APR 2009, Thursday

1. OK...that 2010 Camaro is something huh? Mix of the old Camaro and the new Mustang.
2. It's all in the math...or why you must spend more time avoiding losses than worrying about gains. Experienced investors understand the concept that a 50% loss requires a 100% gain to break even. But a chart gives us a clearer picture of the exponential relationship between a percent loss and the gain required for a full recovery.

22 APR 2009, Wednesday

1. ...and this may be it. Bloomberg reports: “Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators." NOTE: these are not Sub-prime or alt-A — they are Prime, the highest quality borrowers possible. This can not be good...is it just the tip of the iceberg or is it due to the foreclosure moratorium that was recently lifted after the last 6 months and now the backlog is coming due? Maybe this explains why the actng CEO of Freddie Mac was found dead in his home today...heart attack, suicide, or was he going public with something? Why suicide when the company has already failed, been nationalized and has the government backing it....what could get worse than that? Things get stranger by the day.

20 APR 2009, Monday

1. Above is an overlay of the current market compared to the 1929 Bear Market. It shows more ouch to come. Doesn't mean it has to go that way. Just interesting.
2. Interesting...this link will show you the current market overlayed upon every bear market in history. Some show more ouch...many don't.
   

19 APR 2009, Sunday

1. Potential market paths: Saw this at Slope of Hope blog and I tend to agree with the negative outlook once this upside swing completes toward the SP500 mid 900's to the low 1,000. But he does point out the possibility of a bottom similar to the 2002-2003 bottom area. Possible...Ms. Market will have to show me and I will merely follow her as I always do...like a stalker. To fight her is crazy...you can only follow and survive. Markets can run higher (or lower) than you think for longer than you think possible when they get "emotional" (ie, fear or greed). So, don’t try to outsmart the market. Just take what it gives you and do the best you can with the data you have at the time.
2. Thomas Paine returns....
3. The scatter chart below shows historical bear market rallies (the 50% rally after the 1929 crash was excluded). As you can see, this rally is pretty stretched. At Friday's high, this was the third largest bear market rally in history. Many of the sentiment indicators are now at or above levels last seen at the May 2008 and January 2009 tops. Breadth in just about every sector, especially tech, is stretched higher than it was at the October 2007 top. This indicates that it is not necessarily a safe time to be buying.
4. 4 Year Cycle Low info...

14 APR 2009, Tuesday

1. Folks, if you've wondered why I'm so negative...the first picture should allow you to draw some conclusions. Put simply, credit expansion has limits. When those limits are exceeded, it all goes into reverse for awhile as previous debts are paid down or defaulted through bankruptcy. Only after the weak debt is purged from the system, can the machinery of capitalism begin to function cleanly again. That, like it or not, is the way it works...lessons from the past.
2. And the second picture shows the impact to GDP of each dollar of debt. You can see that it's not having the impact it once did. Why? Because there is just too much debt. When will we get a negative return for each dollar of debt? Dunno. But that is when we are officially a banana republic.

13 APR 2009, Monday

1. Thoughts...Initially, I was going to apologize because it seems that many of the posts have become politically oriented. But after some long thinking and review this weekend I've come to the conclusion that there is indeed a solid reason. Upon review, I found that the posts aren't political. They are in fact identifying just how deep the government is involved in the economy and "free" markets right now. It's just unprecedented...but this is the sandbox we have to play in right now or we just take our ball and go home for awhile. Frankly, it sucks. Although we're rallying now, my fear is that this isn't going to end well.
2. What Exactly Is Going On and Why Won't It Work: Saw this...it was well written and pointed...things to think about.
3. OK...so what if, down the road a bit, things look like they are going to go really sour? How do I defend myself? Don't break up your IRA/401(k)! Make the move within the IRA/401(k). Get the list of choices (NOW! While you have the time and are able to think and plan clearly). Then, you'll be prepared to switch from stock mutual funds into the safest alternatives you can find. The first choice would be a Treasury-only money market fund, but unfortunately 401(k)s don't give you that choice. The second choice is a government-only money market fund. Your third choice is a standard money market fund. It's time to avoid long term bond funds as well because interest rates are more likely to rise than fall from these levels and that hurts these funds. Another course of action for those that are able to purchase stocks, yes purchase, is to consider Inverse ETF's. Inverse ETF's are designed to go up in value the same amount that its tracked index goes down. And you can even purchase these in IRA's if you have a stock brokerage you are working through. Anyone curious about these can drop me an email or call...I'd rather not shotgun unusable information to folks that aren't interested.
4. Chart Update: Two videos below (5 minutes each)...Long Term Chart (Monthly & Weekly) and Short Term (Daily)...NOTE: Calls regarding time estimates of turns are guesses...prices determine turns.
5. Long Term
6. Short Term

10 APR 2009, Friday

1. Direxionshares 3x leveraged ETF Insanity: One example...Financial index is down 14% for the year. It's bullish 3x ETF is down 68% when one might think it would be down 42%. And it's bearish 3x ETF is down...yes, down...65% when one might think it would be up 42%. It's all because of the way they are calculated daily on a percent change basis which is then compounded. Crazy stuff! These are trading vehicles not buy and hold material. (UPDATE 12 JUN...from Bespoke) .......... (More discussion on 3x ETF's)
2. Leveraged ETF performance during the MAR-APR rally.
3. Interesting...3 points to ponder when investing in the current climate.
4. Why ETFs Beat Mutual Funds By A Mile
5. ETFs For Every Investor!
6. Inverse or Bear ETF's.
7. ETFs for US Treasury Bills.
8. ETF's for Bonds...Treasury and Corporate.
9. Inverse Interest Rate ETF's.
10. ETF's for Gold.
11. ETF's are good...ETN's are not so good. Ultimately, you must read the prospectus of any fund you elect to operate in.
12. Dollar Cost Averaging sample (effective 11 AUG 2009). Interesting!
13. ETFs for Inflation — or Deflation

9 APR 2009, Thursday

1. Cap and Trade? C'mon! Call it what it is...a Carbon Tax! Plain and simple folks. Be aware that if Cap & Trade is passed it will result in an average $163 per month increase in costs per household. So, enjoy your $13 per week tax reduction from Obama & Congress...or you'd be better off saving it to pay for this silly Global Warming tax. By the way, has anyone noticed that this has been the coolest and longest winter in many years? Hmm...paging Mr. Gore...Mr. Gore?...Gee, it seems that he's nowhere to be found.


2. Code Pink protests Washington's Bailout Mania: I'm not a fan of Code Pink because they always seem to protest for stupid causes but I tip my hat to them for protesting the current taxpayer rape job that has been going on for far too long now.

8 APR 2009, Wednesday

1. The S&P 500 and Dow are way off their lows. Nonetheless, we've seen big upward swings in this bear market only to see them crushed later on. This rally is one of the biggest yet. But so far, the onus is on the bulls to prove it's real.
   According to The Big Picture blog, the only times we have ever seen the stock market surge close to this much in such a short time frame were:
   December 1929
   June 1931
   August 1932
   May 1933
   July 1938
   September 1982
   Only September 1982 and May 1933 saw the beginnings of new bull markets.
2. ENERGY INDEPENDENCE FOR US IS POSSIBLE...WHY ISN'T CONGRESS PURSUING THIS??? 3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation—25 Times More Than 1995 Estimate
3. VIX Breaks Below 40!!! About flipping time.
   

5 APR 2009, Sunday

1. GREAT INTERVIEW DISCUSSING THE WHOLE MESS: The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout.
2. Stuff like this just confirms my thoughts that this was the "Biggest Bank Heist in History"... and we didn't even get a toaster in the deal. Uugghhh!

3 APR 2009, Friday

1. Classic cartoon from 1930's seems eerily similar to current times.
2. Economic downturn speeding Social Security's demise. HEY!!! CON-gress and O-Bomb-A, want to tackle a crisis that's provable (ie, I can clearly prove that people get older), ...TACKLE THE TICKING TIME BOMBS CALLED SOCIAL SECURITY AND MEDI-SCARE NOW! And quit diverting limited resources (money, time and effort) toward a theory such as global warming.

Monthly Seasonality

First, if you look at the data from this millennium (since 2000), April is the leading average % return for the S&P 500 Index at +1.46% average gain (see the below table). This is far stronger than any other month in that time frame -- and the second strongest month is May at +0.88%. So the Spring has been an outperforming season in general. The months that had the highest chance of being positive were August, followed by a May/October/November/December tie, so April has not been the highest in terms of a positive return (it is 55%).




That is a fairly small sample size, so we looked back all the way to 1950 on the S&P 500 Index data. Note on the chart below that April is the 3rd strongest month, with an average return of 1.37% and a 67.8% chance of being positive. November and December, which are commonly discussed as historically "strong" months for the market, are the biggest gainers on average. Data compiled from Yahoo Finance and excerpts taken from BigTrends.com.

There are many market axioms concerning seasonality and months, such as "Sell in May and go away", "Up January equals Up Year", "Crashes occur in September/October/November", "Summers are slow and bad for technology stocks" etc. Some of these expressions are proven true while others may be violated in any given year. The data above indicates that "April Showers brings Bullish Flowers" may become a future cliche, albeit a tongue-in-cheek one. Of course nothing is guaranteed (for example none of the months are up more than 75% of the time since 1950), but it's always good to have some historical statistical data in your favor when analyzing the market and risk/reward ratios.