Market Always Knows Best

January 30, 2009

Have you ever wondered why a stock rallied after reporting their worst earnings ever? Have you ever seen a stock drop like a rock after reporting blockbuster earnings? I’m sure the answer to both of these questions is a simple, yes. This happens endlessly in the market on a daily basis. By now you are asking why does that happen? The answer is the market always knows and is never wrong. Recently Apple Computer has been under pressure and the stock price was declining on a daily basis. The rumor on Wall Street was that the CEO Steve Jobs was very ill and that was the reason for the decline. Then Steve Jobs released a statement saying he had a hormone imbalance condition that could be easily treated and cured shortly. Upon that press release the Apple Computer stock price jumped higher for a day. The very next day AAPL began to decline again. What was the market sensing about AAPL if the CEO Steve Jobs was going to be fine? How did the market know a week later that Steve Jobs would be taking a medical leave of absence and make a statement that his condition was worst than originally stated. Perhaps it is the insiders that know and the news trickles down to the street. I personally do not know the absolute answer for this, however, I do know that the market knows and it shows in the charts.

Have you ever noticed that stocks always seem to get multiple upgrades and downgrades at all time highs and all time lows? It seems like the brokerage firms are trying to out bid each other with a higher or lower upgrade or downgrade. I recall when Google was trading at $700 a share and brokerage firms were stumbling over each other upgrading the stock to $1000 to $2000 a share. Are they popping it to drop it? Perhaps they really believe it is going to that price and simply just don’t understand the laws of supply and demand.The same goes for stocks that have been pounded into the ground. Countless times I have seen stocks get downgraded at 52 week lows. Then a short time after the downgrade the stock rallies off the lows and becomes in favor again. Are the institutions banging them to buy them, which is trader lingo for buying a downgrade. In 2005 I recall Frontier Oil getting downgraded by multiple firms at a low. That low turned out to be a wonderful buying opportunity as the stock doubled within a few months.

In June 2005 the cover of Time magazine had a cartoon portrayal picture of a man hugging and kissing his home. At this time the housing boom was at the peak and everyone that had a pulse wanted to get into the house flipping business. As we all know now this was nothing more than a game of musical chairs and eventually would come to an end. As it turned out this would be the start of the worst financial crisis since the 1929 Great Depression.

It still amazes me to this very day that most people have very little interest in understanding the mechanics of the markets. So few in the public understand market sentiment. I really should say so few even in the financial world understand market sentiment and the market mechanics. Just take a look at Bear Stearns, Lehman Brothers, Merrill Lynch, Wachovia, Washington Mutual, Indy Mac Bank, Countrywide Financial, Citi Bank, Goldman Sachs, and countless others.

Most people have a retirement account and have lost 10 years worth of savings in one year and many have lost even more. Take the time to learn the market mechanics. Perhaps a simple magazine cover could have prevented many from losing a good chunk of their net worth.

The Obama Effect… Will It Help?

January 24, 2009

By on January 24th, 2009
I still remember hearing about this charismatic up and coming politician named Barack Obama years ago. An African American man who could speak like few in the past and charm the pants off the public. I liken his speaking talent and charisma to Bill Clinton who was able to slide through many a “sticky” situation and come out one of the most popular presidents ever. Granted, he presided over one of the greatest expansion and wealth building economies in history as well. Many will debate whether or not the economic expansion was his doing or possibly a result of Reaganomics years before. In any case, President Obama has the power to raise us up, make us want to be better, makes us want to unite. He has already put a stop to the pay raises in the White House, gone huge lengths to reduce the bipartisan politics. The American public is tired of the rich getting richer and politicians that disagree not on a basis of their own beliefs but because they are on opposite sides and thus must. This is uplifting for me to see and I truly hope it continues.

Barack Obama is facing one of the worst economic situations since the Great Depression. There is no real doubt in my mind it could be that bad should action not be taken. Action has been taken. The printing of trillions of dollars as the bailouts flow like water under a bridge. A small trickle now the gushing Mississippi. The big question to me is, when do we, the United States public have to pay the piper. As of now, banks are not lending even with the bailouts, however, that will change in time. When they do start lending, it is imperative that the Federal Reserve clamp down on the excess money and quickly. Ben Bernanke spoke about this over a weak ago and admitted they have pumped trillions into the economy. However, he noted that inflation would remain muted due to the lack of bank lending and the commodity collapse. I agree with this. Near term you will see inflation stay low but only until banks begin to lend. At this point it is imperative that the Federal Reserve be ahead of the curve and start raising rates to restrict and pull back the excess money. In addition, I believe it will take much, much more. If not? Hyper inflation will be here in full force.

When has the Federal Reserve actually shown they are ahead of the curve? Never, in my opinion. This is what worries me so much. Believe it or not I don’t even fully blame them for never being ahead of the curve. Why? Because while the Federal Reserve is supposed to be independent from the government, rhetoric and politics, they always get caught up in it. Do not think the president does not have the Chairman of the Federal Reserve on speed dial.

Knowing this, I have little faith that within a few years, we will face an even worse situation. Hyper inflation. Dear readers, think about this. Most Americans have already lost half their value in their pension and other retirement vehicles not to mention half the value in their houses. So let us say someone had one million in retirement savings. It is now worth five-hundred-thousand-dollars after the stock market collapse. That amount of retirement savings could buy… let us say, half a million apples. Hyper inflation hits and all of a sudden that amount of money can only buy a quarter million apples or less. So within the span of 5 years you have cut the retirement savings in real terms by three quarters. From one million to just one quarter of a million dollars. That is scary. Of course there are countless other problems as well. States are running billion dollar deficits. California may have to file bankruptcy…that is if the government does not bail them out too. Pension are under funded and let us face it, what tax revenue will the government get in the next few years? Sales taxes are slumping as consumers are not spending, unemployment is rising which means no tax on income and everyone has huge losses from the last year in their portfolios. I just do not see an easy fix unfortunately.

I am for Obama. He is the right man to lead us through this mess because he is uniting the country and the world. This is a global issue and we need the world for once on our side. The mess we have dug ourselves will cause more problems down the road I fear. We need a leader who is able to inspire us and keep us together as we find out the hard way there is no quick fix. Yes, near term his stimulus package will have an impact but all these stimulus packages are really just creating more dollars. The more dollars there are the less each one is worth. Simple economics here. Supply and demand.

There are ways to protect against hyper inflation. The end game and the only way to help the United States clean up this mess maybe a new currency even… However, that is for another time.

So I say lead us forward President Obama, I am behind you. But just in case all this does not work? I am preparing myself for hyper inflation!

Market Technical Education and Guidance 01-20-09

January 20, 2009

Weekend Technical Analysis Update January 19th-23rd, 2009

January 19, 2009 highlights the key chart patters on a pure technical analysis basis as they always avoid the Wall Street hype. They note key earnings to look forward to this week like AAPL and GOOG and also discuss the upcoming economic news on the horizon. They analyze the intra day 10, 60 along with the daily charts. Come join the Research Center @ to get their premium info that can make YOU money and keep you from being one of those average investors, newbies, beginners, sheep they always talk about!

Daily Technical Analysis Video 01-16-09

January 16, 2009 looks at the wild swings in the intra day market on various time frames to educate their followers on whether or not the market looks bullish or bearish from a purely technical standpoint. They keep their followers focussed on the charts and avoid all the Wall Street hype and dishonesty. They discuss the market, the technicals and continue to be dead on accurate in analyzing the markets over the last two years. Enjoy and come join the Research Center at to educate yourself in technical analysis and get their accurate market guidance without the Wall Street hype.

January 16, 2009

401K’ nockout!!! Down for the Count?

January 16, 2009

2008 will go down in history as the worst year on record for individual retirement account performances. Most 401k retirement plans and IRAs were down 40% on average for the year. Many retirement accounts that were heavily weighted in international funds performed even worse. Most international funds finished down more than 70% for the year and a majority of energy funds finished down 50% for the year. Just take a moment… Realize the market erased all the gains that were created in the last 10 years in one year.

Why didn’t Wall Street warn anyone that the market was going down? It still amazes me to this very day that major Wall Street firms upgrade and downgrade stocks and sectors, but they could not save themselves. Bear Stearns, Lehman Brothers, Merrill Lynch, Wachovia, Washington Mutual, and countless other financial institutions have failed in this debacle. Why didn’t they downgrade themselves to an under perform or sell rating? The reason is simple and it’s Wall Streets dirty little secret. They simply have no clue about the markets and really don’t know anything but selling their services. They only have one bias and that is the greed bias. Most of the mutual funds are structured to charge fees and tell the investor to average in or dollar cost average for the long term. What about the baby boomer’s that are planning on retiring this year and next? How can someone make up a 40% loss that occurred in a single year? In fact, the only mutual funds that were positive in 2008 were bear funds or the Madoff Fund. These are funds that invest on the market going down instead of up. It is what traders call short selling. Unfortunately, most 401k investors have never shorted a stock and don’t even know that this type of investing is even possible. Then again, why should they? Wall Street mutual funds still generate their fees regardless of what the market does. Can you imagine paying someone to lose ten years worth of your savings? It happened all last year. Then Wall Street says, don’t worry you are in it for the long term. What about the baby boomer’s who don’t have a long time to wait? What happens if this lasts until 2015 or longer? These are questions people need to ask themselves.

Oh, I forgot the new stimulus plan is going to bail everyone out. This will be the third stimulus plan since President Bush’s first term and it will just cause this country more debt. It looks like the first two stimulus plans worked out really well. Don’t forget the bailouts of AIG, Citi Bank, the automakers and countless other financial institution that are using the TARP. Who is paying for all these bailouts anyway? Isn’t it the taxpayer who is going to pay? What is going to happen to the U.S. Dollar as it becomes so diluted? What happens to the current retired individual’s purchasing power? What happens to the baby boomer that was planning on retiring? Again, these are the questions people need to ask themselves.

The stock market is now back to the same levels as it was in 1997. Are housing prices back at 1997 levels? Are food prices back at 1997 levels? Are gold prices back at 1997 levels? Are energy prices back at 1997 levels? You get the picture. The answer to all these questions is a simple NO! If I hear one more time that the markets are out of the woods and the new President is going to fix this mess I have news for you, not anytime soon!

The beauty of the American financial system was the fact that the market could go into a recession. Believe it or not recessions are healthy. They allow the system to clean out by getting rid of the excesses. Yes, times are tough for many during recessions. However, it allows the markets to get a fresh start and resolve the problems until the next overheated mania. It is called peaks and troughs. The problem today is simply an excessive peak after an 18 year bull market(1982-2000) that was never allowed to have a correct recession. The market moves in extremes like a pendulum that moves from one side to the other and takes time to find the mid point. In the 1990’s the market moved to new all time highs as the dot coms and anything technology was being bought by the public. In the year 2001 the tech bubble burst and the 9-11 tragedy took place. The economy was going through as tough recession and then Fed Chairman Greenspan lowered the fed funds rates to 1% sparking the next bubble, this time in housing. The housing bubble is much bigger than the prior tech bubble due to the fact that most investors and traders could only borrow 50% from their broker to buy stocks(Reg T). In the housing market borrowers where in many cases allowed to borrow more than the price of the home. In many cases 125% loan to value. Also, many borrowers were not even qualified to own a credit card let alone a home. Can this problem be solved with another stimulus check? Of course not. What about the rising unemployment? Oh, I forgot the government is going to rebuild the roads in the country. That didn’t work in the 1930’s and it’s not going to work now.

This crisis will take time to resolve itself. The more government intervention, the longer it will take. We believe that a first quarter or even first half rally is very possible. However, the second half is likely to be very tough. How can doing more of the same be any good. You can only patch up a flat tire so many times before it rides on the rim of the wheel and rips the tire in half. This tire(economy) appears to be on it’s last tread.


Hello world!

January 16, 2009

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