Search results matching tag 'CNBC'

Russia Joins China in Push for New Global Currency to Replace the Dollar

IanWyatt — Wed, 03 Jun 2009 13:39:00 GMT

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June 3, 2009

*****Global Currency

*****When Big Money Plays Defense

Fellow Investor,

Russia is grumbling. Seems they are not happy that rising debt, slow growth and record Treasury bond sales are dragging the U.S. dollar down. In fact, Russian president Medvedev is calling for some kind of global currency to replace the U.S dollar as the world’s reserve currency. (Sound familiar? Like he’s taking a page from the Chinese?)

In an interview with CNBC on Monday he said, “We need some kind of universal means of payment, which could create the basis of a future international financial system…”

Of course, this is a horrible idea. As one analyst put it, “It took decades for the euro to be established. I can only imagine how long it would take for the BRIC countries to put together a currency.”

*****It’s an investing truism that the financials always lead the stock market. Recall that it was bullish comments from Citigroup that kicked off this rally back in early march. And I’m sure nobody needs reminding that it was the financials that kicked off the worst bear market in 80 years.

When the S&P 500 and the Nasdaq blew through their 200-day moving averages on Monday, the financials were out in front. But today, even though the major indices finished with slight gains, many financials finished in the red.

American Express (NYSE:AXP) dropped nearly 5%. JP Morgan (NYSE:JPM) lost 4.46%. Wells Fargo (NYSE:WFC) lost 4% and Citigroup (NYSE:C) lost 4.88%.

Bank of America (NYSE:BAC) is about the only major financial stock to finish in the green, and that was a 1.7% gain. In fact, the Financials SPDR (AMEX:XLF) failed to make a new recovery high along with the Nasdaq and S&P 500.

So what gives? Why have the financials underperformed, and why were they weak today?

*****One clue comes from the Healthcare Select SPDR (AMEX:XLV). As you may know, healthcare stocks are considered defensive stocks. That’s because their revenues are seen as being stable as healthcare is a necessary, as opposed to discretionary, expense.

In difficult markets, institutional investors will park their money in healthcare stocks as a way to maintain exposure, but lower risk.

If we compare the Healthcare SPDR XLV to the Financial SPDR XLF, we see an interesting divergence starting on May 8. Healthcare has been trending up since that date. And the Financial SPDR has been trending down. To me, this looks like sector rotation.

It appears that institutional investors are moving money out of aggressive financial investments and into defensive healthcare stocks. When the institutional investors start playing defense, individual investors should pay attention.

*****Technical analyst for TradeMaster Daily Stock Alerts, Jason Cimpl, thinks the rally has about another week before we start seeing some downside. And for good measure, he recommended that his readers take their 29% profits on Fushi Copperweld (Nasdaq:FSIN). This trade took less than 3 weeks. Nice job, Jason.

Jason is still holding the two stocks you may have learned about from the TradeMaster video I included in yesterday’s Daily Profit. In case you entered either trade, you should know that Jason has recommended a stop loss for FXI at $35.15 and UNG at $12.60. If you missed the video, you can check it out HERE.

*****As you know, Wednesday is usually Newsletter Advisors Weekly. In the spirit of summer I’m giving my friends in the investment advisory world a break this week, so there won’t be any interview today. If it’s sunny and nice where you are, be sure to get out and enjoy the weather; before you know it, the dog days of summer will be upon us.

Feel free to write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

Meredith Whitney on CitiGroup (NYSE:C) -- Read if you've got shares in Citi

IanWyatt — Fri, 20 Feb 2009 21:28:00 GMT

*****Whitney Speaks Again

*****Market Trends

*****Rant of the Year

Fellow Investor,

More depressing forecasts for the big banks from the best big bank analyst out there, Meredith Whitney. You may recall it was Whitney who forecast the dividend cut at Citigroup (NYSE:C) back in October 2007. That was three months before Citigroup actually cut its dividend. Whitney should also be credited as one of the few analysts to see the financial meltdown coming.

She still doesn't like Citigroup and would be a seller at current levels.

In an interview on CNBC yesterday she said, "Most of the big banks would be lucky to break even or earn a little bit of money this year. I don't think any of the banks that I cover will continue to pay their existing dividends."

*****Mutual fund giant picked a bad time to double down on Citigroup. Apparently a few different fund managers thought it would be a good idea to add 104 million shares of Citigroup at a roughly average price of $10 and change a share. Bloomberg reports that Fidelity is down $874 million on this round of purchases.

Throw in previous holdings and the losses are well over a billion.

If you've ever heard the expression "Don't try to catch a falling knife," this is what it means. I don't think it's so much about trying to bottom fish for quality stocks. I think it's more about assuming that one knows more than the market.

There are always clues and hints in the stock market... Sometimes they're subtle (like Meredith Whitney predicting a dividend cut), sometimes they're obvious (like Citigroup actually cutting its dividend). It's the investor who seeks to derive meaning from the signs (as opposed to imposing meaning on the signs) that has the most success.

*****One thing that never ceases to surprise me is how long it takes for trends to manifest in the consciousness of investors. The government is selling Treasuries like there's no tomorrow. Next week, a record $94 billion in short- and medium-term notes hit the block. The old record, $78 billion, was set just a month ago.

There can be no doubt that this is ultimately inflationary. And we got a taste of that from a larger-than-expected jump in the producer-price index Thursday morning. Eventually, investors will demand higher yields for Treasuries, which will really light a fire under inflation.

But despite that, long bonds still trade near record prices. I tell you, I feel better about my short Treasury bond position in my Recovery Portfolio every day.

*****Two more things, and I'm done for the week. First, last night's video conference went really well. My analyst Jason Cimpl gave out a stock that you shouldn't miss. It's a healthcare tech stock that's got nearly 25% of its market and growing.

There's a replay online HERE if you missed it.

Finally, in case you missed it, here's a LINK to the phenomenal video clip from CNBC's Rick Santelli that everyone's talking about today. He's got a great solution for stimulus spending. This is something we'll discuss for sure. Email your comments to editor@247investor.com.

Have a great weekend.

Best regards,

Ian Wyatt
Daily Profit

P.S. Just breaking: Gold broke $1,000 today. I was going to wait until Monday to share my new Gold Rush report with 5 great stocks in the gold mining sector, but this thing is too hot, so please see this link for more information on which gold stocks to buy.

Monday Weekly Strategy

RichardSchwartz — Mon, 22 Dec 2008 14:37:00 GMT

Richard Schwartz's

PRINCIPLES OF THE STOCK MARKET

A learning, teaching, always evolving stock market letter and advisory service

Eighteenth Consecutive Year of Publication; Letter #1; September 18^th, 1990

Post Office Box 1236 · New Paltz, New York 12561 - U.S. A. · (845) 255-6894

E-mail address: RichardStk@aol.com

Subscription · One-Year Morning E-Mail Delivery · $150.00

Monday, December 22^nd, 2008: So here it is, last letter ‘till Monday, January 5^th, as Lucy & I fly off to the white sand, warm blue waters of the Caribbean, maybe on a last hurrah (if the economy keeps sliding). I’m taking Cycles of American History & Rethinking the Great Depression books. Our routine is: Go to the beach, play backgammon, read & go out to dinner. Day after day. Warm our bones & work on new tans.

THE BIG PICTURE

Friday I saw John Bogle, who has been on Wall Street for 50 years and who created the first index fund, the Vanguard 500 Index Fund back in 1975, say investment bankers and bankers generally owe the country a huge apology (which I doubt we ever get). Their imprudent speculations and greed for massive fees from too complex speculations led to today’s financial sector problems, problems which have now fed out to the real economy hurting innocent, hard working, everyday Americans. Mr. Bogle says greed has even spread out to our whole economy, that we’ve morphed into in a “me first” society and it’s something we have to seriously take a look at. Thus capitalism, allowing markets to work unfettered of regulation and based on trust and trusting, has now been “deeply discredited.” Even the underpinnings of capitalism have changed radically. We’re no longer an ownership society whereby individual stockholders used to select and then hold 92% of all common shares; institutions 8%. Now institutions control 75% of shares through huge sums entrusted to them by others and have not invested prudently. Again, because of the incredible fees they got for investing. Mr. Bogle says they sure wouldn’t manage their own monies so recklessly. These institutions were supposed to be wiser than individuals but, again, it’s not their money. Supporting Mr. Bogle’s view is the revelation that 29 of the 30 largest losers in the Bernie Madoff Ponzi scheme scandal were institutions whereby just one of these fund of fund companies was paid $160 million in 2007 alone for recommending the Madoff “hedge fund.” In other words, where was the fiduciary responsibility, the prudency, the probity expected when we entrust institutions to manage 75% of our investments? Schwartz View: Regular readers know I’ve been distressed and pounding the table about a number of these societal issues for years. About capitalism running amuck, culminating its 30-year trend toward widening the gap between it and its counterpart, democracy, with President Bush’s skewed one way Texas twang policy saying the be all and end all is that “bidness is bidness” and thus stifling regulation. And about society becoming so uncivilized, we ended up booing our own hometown, beloved sports teams! So while no one wants to live through what may come next in the economy, I have to say America has finally woken up, albeit after the nightmare it usually takes to precipitate major change, and that we are now started down a long and arduous path, but one finally pointed in the right direction again. As one example, we’ve even started to SAVE once again; amazing! So, for myself, I guess sort of a contrary indicator in recent years, I’m becoming more optimistic and bullish on our future. Finally! “Go America Go!”

THE ECONOMY

It became apparent that the US economy was suddenly falling-off-a-cliff right after Lehman Brothers became the one firm chosen NOT to be bailed out by the Federal Reserve and US Treasury Department. (Looked back upon as a colossal mistake in strategy I’ve read.) Lehman’s bankruptcy rippled out far and wide and led directly to losses in some money market funds, a “breaking of the buck,” and thus then to a total loss of confidence. Now, by all accounts, the economy is in total free fall. This sudden screeching halt in US business activity has caused the same in our global trading partners and most everywhere I look is now in corresponding economic free fall. You extrapolate it for yourselves from here. One view I’m pondering is that many times sharp declines lead to the second leg of a V-move, back up, and we’re overdue. Maybe stocks, with their recent unwillingness to keep going lower on bad news, means Mr. Market (the consensus of large investors) sees some end out there to the economic free fall. Still, we’d have to see some economic revival to expect a sustained V snapback in stocks. For now, I see 2009 providing a steady stream of bad news every time we look up. Just like in the second year of the last Papa Bear bear market, back in 1974, a continuing stream of bad news back then ultimately overwhelmed all attempts to rally until the final months of that year. Schwartz View: The consensus I’m hearing is that this sudden, fall-off-the-cliff global economic contraction is NOT going to lead to a repeat of the depression-spawned 1930s starting with its four-year long period of contraction followed by its anemic recovery, a.k.a. the Great Depression. I hate to follow any consensus especially when this one’s been so wrong for so long. But my own history look backs and studies by Federal Reserve Bank Chairman Ben Bernanke, an expert on what went wrong in the 1930s, turning a recession into a depression, show that we raised taxes, cut spending and blocked global trade, just the wrong policies. So I sure don’t expect any exact repeat of those failed policies. Leading me to think out of the box and that maybe today’s Fed policy of battling a deflationary depression is also implementing incorrect strategy. How about worrying against runaway inflation spawning from all the money the US and now the world has and is still throwing at this economic slump? Just the problems we worried about in the early 1930s but didn’t occur. You know the old saying, people fight the wrong war, the old war, because that’s what’s still fresh in their minds. Thus, summing up, maybe we can’t expect much creativeness from the Fed pointing in the less obvious direction of battling inflation since they are entrusted with getting us through hard times. They will naturally, after learning certain lessons from the 1930s well, not break much new ground. One reason being that if their policies didn’t work, they would be heavily criticized for experimenting. Thus while everyone pooh-poohs an inflation problem, I still worry about one. Seems like the consensus, which may be correct, among the minority expecting and talking about an inflation problem, doesn’t expect one until 2010 at the earliest. Keeps me thinking about that quote I printed here back on Friday, December 5^th, from Sir John Templeton: “It’s impossible to produce a superior performance unless you do something different from the majority.”

THE STOCK MARKET

Maybe we’ve started off on a new, lasting stock market rally as many now say. Maybe the November 20^th closing low and November 21^st intraday low did end this bear market or at least this phase of it and start us up and on a new mini bull market. But I don’t think we can determine that from these final days of stock market trading this year. This jig jag, saw-tooth modest rally we’ve had in December – the Dow remains down -2.8% this month, but up +13.6% from its closing low on November 20^th – still looks like just a time killer rally to me after stocks fell -6% in September, -14% in October and another -5% in November. So while I’m off on my annual winter beach vacation, I’m leaving my managed portfolios hedged with a slight long bias, still with my modest overall about 20% or less market exposure which I’ve carried since late last year. You remember late last year? At least as a lesson learned for the future, if for no other reason. After the stock market rallied back from its original car wreck in July, in what amounted to a head fake, false move, dead cat bounce and pretty obvious sucker’s rally, and a failed break out to new highs by the Dow and S&P (while the rest of the stock market refused to confirm).

Anyway, last week I ended the letter by noting that psychologically we should rally since bad news couldn’t drive prices down in recent days. Technically we had what could prove to be two months of base building everywhere I looked on the charts (but bases which could easily prove false). Fundamentally we even finally had low enough market valuations, like P/E ratios, to support a rally as well. But how about a catalyst? Well, let me offer up: (1) much lower gasoline prices which keeps our wallets and purses fuller and healthier, and (2) the good feelings anyone watching our president-elect making non-partisan, non-political, non-ideological selections for his cabinet, should feel. There may be a wellspring of good feeling, a sort of honeymoon psychological effect on investors, business, consumers and most all of us as we hope our new president can perform miracles. Schwartz View: Unfortunately no one man is going to remake America overnight. So, while keeping an open mind and watching all unfolding developments, for now I’ll back history which says this “worst financial crisis since the Great Depression” has to lead to an extended Papa Bear market, one which lasts at least a couple of years. Not just for one year, where we stand today.

PORTFOLIO STRATEGY

I hate to follow or even agree with some of what I’m hearing about going forward strategy, especially if such is espoused by those who were so wrong all this year. I’m speaking specifically about Bob Doll, now at BlackRock as their “Trillion Dollar” fund manager. I don’t want to pick on anyone but since he’s been leading the charge forward as stock markets collapse and getting all the face time doing such, I guess I have to. I start off very skeptical because my belief is that these big money managers are not going to get on TV and recommend anything before they and their clients get first crack at their thinking, ideas and recommendations and position themselves accordingly. I already wrote awhile back many old stock market books talk extensively about how big money always used to try to sucker the little investors. The age old technical Wall Street term “distribution” implied big guys needed little guys to unload their big positions on to when they foresaw a bear market ahead and thus put on a bullish face. It took much time to unload huge positions these large investors stockpiled so much frenzied excitement about the stock market had to be built up as big money sold. What better way today than Bob Doll coming on CNBC ubiquitously and always saying we are now in a bottoming process. He said that back in March and those who followed him are much the worst after the October panic crash. Anyway, that’s all secondary, although supporting, my main point. My main point is that Mr. Doll now says next year is going to be a good one for those taking on risk, not for those playing it safe. Again sounds good to me, at least at first blush. We all know what goes down the most generally can bounce tremendously when psychology changes. But do we really want to buy really risky investments in just the early part of the second year of a big, bad bear market? I say no. Bear markets of this size and scope historically have taken a lot longer than one year to work through.

Net, net, probably Mr. Doll will be proven correct about taking on risk, if one doesn’t factor in any time period. I’d guess risky asset classes will move fast when this bear market ultimately does end but do I really believe its going to end soon? No. And if we do have a 2009 mini bull market, say because stocks have fallen so much, then I’m not going to count on Bob and other institutional investors to tell me and us exactly when to get back out. No, starting off next year next week, I’d suggest still playing our cards close to the vest. Yes, play modestly for a continuing rally but look at it for now as just a bear market rally.

Happy Holidays & Happy New Year!

Richard

"No One Can Time The Stock Market"

RichardSchwartz — Tue, 11 Nov 2008 14:18:00 GMT

TECHNICAL VIEW. The Principle of Technical Analysis. I don’t want to jinx myself but I can’t keep quiet. Not after hearing the usual Wall Street mantra again this morning. That is, that no one can time the stock market so it’s always best to ride out its ups and downs. I mean this type of misleading & confusing information is one big reason why I started this stock market letter back some 18 years ago. Part of my motivation, to quote myself, was to “unveil the mystery surrounding the stock market.” I saw numerous misstatements and unfounded general beliefs which I just thought were plain wrong being foisted on the investing public, not large institutional investors but aimed at individual investors. After working as a stockbroker/financial consultant for 15 years, I realized that Wall Street kept nurturing the stock market’s mystery. Why? For Wall Street’s best interest. Why pay a stockbroker or brokerage firm big bucks if individuals could understood for themselves the market? No, only if individuals felt (and kept feeling) overwhelmed by the market’s workings would there be a need for advisors and a way to charge big fees.

Anyway, I don’t want to get off track. I just want to comment on the one line of reasoning which we’ve all heard repeated so often that most now take it as fact. That is that no one can call the tops or bottoms of bull and bear markets. We hear it from about 50% of the mutual fund managers, market strategists and others every time they come on TV. Many begin with something like: “Since no one can call a bottom, …” Not only does this perpetuate the need for market advisors it also justifies the roller coaster performance of these money managers. Hey, it takes the pressure off them, right? As long as they are doing about as well or as poorly as the overall stock market, then they are doing their jobs well. At least that’s the thinking.

But then what about all the traders out there? Why did hedge funds start then? If no one can time the market what about this whole cadre of people trying to outperform the market? And what about those fabulously successful speculators we hear about? Some do time the market correctly is my answer.

Schwartz View: I’m sure many others did as well so I’m speaking just for myself now. After studying the stock market for 35 years, all facets from timing to investment themes and much, much more, I was able to correctly identify last year’s market collapse as the beginning of a bear market pretty early on. In spite of those who say no one can do such a thing. And I stepped up, following my own reasoning and got Lucy’s 401k or 403b or whatever it is into 100% cash. Right before we went away on our annual Christmas beach vacation last year. And thus kept her retirement account from falling about in half! With my managed accounts, I followed generally the same path, figuring my top priority was protecting our downsides because the market was turning bearish. Since then I’ve been able to keep mostly to the sidelines, watching this bear market unfold, gather steam and keep on rolling. This in spite of hearing the “Trillion Dollar Man,” BlackRock’s Bob Doll, incorrectly call a bottom in March, Mad Man Cramer call a bottom in July and other bullish, skin-in-the-game advisors come on CNBC and say they are buying, that a bottom is near or building a bottom is a process and you’d better get in now “…since no one can call the bottom.” Well, the bear market continues and we keep seeing further and deeper declines. My sense, as I’ve been writing for months now, is that this bear market will last for at least two years or until at least next October simply because what’s hit us is the worst mess since the Great Depression of the 1930s. So why wouldn’t this bear market last at least as long as the last Papa Bear market, the two year long drop in 1973-1974?

Bottom line, while I don’t expect to call the bear market bottom before it arrives or to the day (except in hindsight) I believe with the tools, skill sets and experience I’ve now got, after studying the market’s primary trend, history, psychology, value, technicals, etc. for decades, I should be able to identify the bottom reasonably well. Part of my overall game plan entails trading most possible rallies so when one does prove to be the real thing, I’m in with at least one foot near the start. Then, as I see prices rising, I should be able to get in more heavily. Bottom line, I believe anyone who’s willing to put in the time and effort should be able to quickly identity tops and bottoms in the stock market, totally counter to what we always hear. Oh, one last point. Be careful of the fear that these always 100% invested advisors love to leave you with (just like dentists do). That is the mantra that if you miss the first days of a new bull market, you’re in trouble. Sure the first days up are normally exciting and big. But bottoms generally are retested, providing the sharp-eyed observer more than one reentry point. And bull markets run for years not just for a couple of days. So don’t worry, be happy, if you’re now 50% or more in cash on the sidelines. Just stay tuned here. Because one way to indeed miss the bottom is to lose interest in stocks during a long bear market. Go ahead, lose interest if you’re 100% invested now because you’re already in a bind. But don’t lose interest if you’ve played out this hand fundamentally correct. If you’re saved yourself a bundle by already going against the Wall Street mantra of staying invested “because no one can time the market,” then stay in touch with stocks for your reentry point. One good and easy way to do so is by just reading this letter each day. It’s only a couple pages long, doesn’t take much time to read, you’ll learn something new most of the time AND you’ll be aware pretty quickly, & ready to profit, when this market turns up.

September 2008 Investment Strategy

RichardSchwartz — Tue, 02 Sep 2008 13:27:00 GMT

Richard Schwartz's

PRINCIPLES OF THE STOCK MARKET

A learning, teaching, always evolving stock market letter and advisory service

Seventeenth Consecutive Year of Publication; Letter #1; September 18^th, 1990

Post Office Box 1236 · New Paltz, New York 12561 - U.S. A. · (845) 255-6894

E-mail address: Richardstk@aol.com

Subscription · One-Year Morning E-Mail Delivery · $150.00

Tuesday, September 2^nd, 2008: Had lovely, blue sky, humidity down weather to wind up the summer and the long Labor Day weekend. Indeed, the weather is supposed to stay gorgeous the early part of this week here as well. But don’t mention the grand weather to Lucy since it’s back to school for her today!

THE BIG PICTURE

Last week I wrote about the necessity of staying positive during a downbeat economy and stock market. Staying upbeat right when there’s near term problems and long term concern that America is losing status in the pecking order of the new, globalized world we live in. Hey, America has long encouraged the rest of the globe to go capitalistic and got a massive, all-encompassing global push in that capitalistic direction after so much economic rot was discovered in the Soviet Union sphere after the Berlin Wall came down. Countries switched and let the marketplace work and, voila, the world started moving forward, growing and getting wealthier. So now, with so much new global competition around and thriving, America has to respond in kind by redoubling our efforts to efficientize, modernize and improve our own financial, economic, social, and especially our dysfunctional political system(s). In other words, take our fundamentally solid, well-working capitalistic system and adjust it to today’s new globalized marketplace. Make some fundamentally sound and foresighted long range decisions about energy, education, health, finance, politics, etc. and then exhibit sacrifice and discipline. Again, all while seeing the glass half full.

Schwartz View: That’s why I’m dismayed by hearing friends, including one back from Iraq duty, tell me it really doesn’t matter who gets elected as the next president of the United States. Their rationale? It doesn’t matter since nothing will change anyway. Maybe my generation and the one coming immediately after us is just too jaded. But, from longtime trafficking in the stock market, the one thing I’ve found we can bet on consistently is change. Change does happen. So, I’d say we have to have hope. We have to believe that our votes will prove meaningful. And the youth of America, not being so long disappointed and denied, frustrated and jaded like their elders, us, have responded to this upcoming presidential election. Grass roots efforts by thousands of inspired youth and the ready adoption of the Internet for fundraising from the masses is how Barack Obama overcame sure bet Hillary Clinton to get the Democrat’s nomination in the first place. So I say re: politics, energy use, etc., just like in the stock market, we need to keep upbeat that positive change is out there just over the horizon. So buck up. The realistic investor can forecast hard times ahead and yet get up each day, plaster a smile on his and her face and still believe that better times are out there, knowing that just like the daily cycle, it’s darkest right before dawn … arrives.

Schwartz Reading Recommendations: For those of you who are interested in Big Picture investing, by that I mean not the nuts and bolts of everyday stock trading, charting, etc. but, say financial planning, etc. I’d like to add former Fed chief Alan Greenspan’s tomb of the 20^th century, The Age of Turbulence, to my recommending reading list. It offers up a wonderful history of America growing wealthy, explains how decisions at the Fed are made and gives forward looking guidance to the world ahead. Also let me add the even newer book, THE POST-AMERICAN WORLD (2008) by Fareed Zakaria, which after I got over my provincial American bias, was wonderful in explaining the world’s likely scenario going forward. a world of shared power with extra kudos to author Zakaria in how he gets into the heads of the Chinese and Indians, explaining how they think, operate and their cultures. Interestingly, India with its long-established democracy, and Indians in their outlook on life, are extremely close to how Americans think. Again these books are for those of you interested in longer range financial planning and the like.

THE ECONOMY

Dell Computer’s report last Friday that the US technology spending slump has spread to Western Europe and some Asian countries just confirms all the other evidence showing up that today’s world, economically and financially is very closely intertwined, not decoupled as the Wall Street argument goes. Of course, this intertwined relationship and what that means isn’t that easy to define, it’s gray, not black or white. But for the near term, negative economic ripples sent streaming outward last year when the US subprime mortgage market imploded are now being sighted and felt in other parts of the globe. How severe these global ripples get, these so-called 3^rd-order effects, as economists like to term them, remains to be seen. Bulls say they will prove minor; bears like me say they will prove more severe; only time will provide the answers.

Still, right now, everywhere one looks negative ripples sent outward from the US tsunami in collateralized asset-backed investments are starting to show up. One major problematic ripple in the US and globally is the effect being felt by banks and their business. It isn’t, can’t be “:business as usual” any more. Banks’ fortunes – with huge paper losses and their opaque, illiquid, very leveraged and still deteriorating loans on the books – are now directly tied to US house prices. As house prices fall, the value of these locked in bank investments keep tumbling as well. Leading to write-offs. It’s all a negative domino effect. The lingering loss of confidence leads to a continuing reluctance to make loans, thus to lower stock prices and thus also to a growing need for banks and other financials to repair their balance sheets by raising more and more capital. Which in turn dilutes earnings and the vicious cycle continues.

Schwartz View: My ongoing view is that this widespread consumer, business and investor loss of confidence, combined with the first bout of problematic inflation and a weakening US and now global economy is not some short term event. That we’re now in a downward spiral that will take much time to bottom out and reverse. We’re, bottom line, in an economic event and economic changes just can’t move along anywhere near as fast as stock market participants would like them to. Thus, we see frustration by strategists, money managers and all the bulls out there to find and call a bear market bottom way too early. I believe investors have to exhibit extreme patience for the foreseeable future.

THE STOCK MARKET

Impatient investors keep fishing for a bottom, thus causing the periodic “flashy-splashy” big rallies we get, like last Thursday’s +2% move up. These big one and two day moves up are actually symptoms and signs of a stock market still on the way down, actually now firmly controlled by the grizzly bear, if you believe a recent report by Merrill Lynch after they studied all the ups and downs of the just completed full stock market cycle, starting with the bear market running from 2000 to 2002 and the following bull market running from 2002 to 2007. Big pops happen in bear markets but then get completely washed away over time. Certainly during these bear markets stocks can also cobble together rallies which last for weeks or even months at a time, such as two-month rally we put in from mid-March to mid-May this year. Or the rally we are now experiencing; so far six weeks long and still alive and kicking although very saw tooth in nature. Obviously, nothing ever goes in just one direction. That’s especially so in the stock market whereby prices normally shoot out to extremes, up or down, and then need to balance themselves off.

Right now that’s where I see us. Stocks balancing off upwards after a downward movement that dropped too far, too fast. Actually that’s normal in any extended, economically-catalyzed bear market, investors losing confidence periodically, then regaining their nerve, then losing it again. Again, deteriorating economic trend(s) causing some major decline in stock prices just can’t cycle through its phases anywhere near fast enough to please myopic, very rapidly moving stock market players. So we get quick moves down, then bounces up or sideways movements to get time & price back in sync. Then it repeats again.

Schwartz View: These bounces are when and where traders try to make their profits during multi-year bear markets. Most traders early on realize it’s a lot easier and more profitable in the long run to always stay bullish, thick or thin, bull or bear market. Thus the extreme bullishness shown by a very experienced NYSE floor trader when interviewed late last week by CNBC. His time frame is so much different than the rest of us, he can be very bullish right now, right in the midst of a firmly entrenched bear market.

PORTFOLIO STRATEGY

Net, net this six-week rally may last for another month or even two but I wouldn’t get too attached to it. In fact today, let’s hope the market goes up a whole heck of a lot. I plan to book some profits. The first trading day after Labor Day is normally a seasonally strong day but then September can go south very fast and has proven to be the worst overall month of the year on average. Plus August was our first monthly advance in four months for many key indices so I’d like to take advantage of this normal “rally in a downtrend” and lighten up on some short term trading positions established back in July or early August. And suggest readers do the same, review everything else you now hold as well to see if any sectors are now timely to get out of. Again, to take advantage of this recent bear market rally. For example, please review the technology sector after Dell’s news last week warning it sees spreading, global tech weakness now.

Schwartz View: With big players coming back to work this week and with oil resuming its steep decline, we may extend this recent rally. Rallies can last upwards of three months in bear markets and since this one started on July 15^th, the best case scenario says it can run through October 15^th. Still, best I can deduce, all we’ve been doing this summer is killing time before the next round of bearish news hits. So I would continue to book trading profits as you go, sort of imitating the always in traders on the NYSE floor.

Have a grand week!

Monday Weekly Overview Sample Letter

RichardSchwartz — Mon, 28 Jul 2008 13:19:00 GMT

Richard Schwartz's

PRINCIPLES OF THE STOCK MARKET

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Seventeenth Consecutive Year of Publication; Letter #1; September 18^th, 1990

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Monday, July 28^th, 2008: Your New Paltz, NY SUNFLOWER update: A few sunflowers have popped but I noticed the farmer’s market has alternated its plantings so any time you visit you should see some. Just spectacular!

THE BIG PICTURE

Looks like one potential US and global leader gets it. Presumptive Democratic nominee Barack Obama, to shore up his lack of experience on the global stage, embarked on a global tour last week. And was again able to put his finger on the pulse of the world and his audience, exhibiting his knowledge of history and this particular critical point in time speaking at the historic Brandenburg Gate in Berlin. While he didn’t rock star the crowd, fine with me, it was good to see he continues his role as alienate no one, moderator showing again he understands all sides of issues and is committed to leading by example. While not denigrating any political party, say our Republicans, or country, say Old Europe. Thus there is hope that America will soon embark on a new direction, one of getting things done by bringing all parties together and then making logical and effective, not ideological, decisions, forgoing our previous path of fostering divisiveness in the world, between our two political parties and among the American people ourselves.

Schwartz View: Enough said. I always get negative feedback when treading in political waters. I do like presumptive Republican presidential nominee and American hero John McCain quite a lot but just feel we have to drastically change policies going forward, not follow a similar path. America needs to get it’s act together quickly as all long range forecasters have reached consensus, saying we’re on a downward slide, financially, politically, economically, socially. We just need to start cohesively tackling our problems.

THE ECONOMY

Numerous economists last week admitted that the US economy is weakening. Among them Brian Bethune of Global Insight, James O’Sullivan at UBS and Moody’s John Lonski. So, in spite of the US not posting two straight quarters of negative GDP growth, the old and easy definition of a recession, and one not used any longer by the National Bureau of Economic Research which calls and dates recessions but problematically many months late -- remember in today’s new globalized world we need to learn new economic relationships! -- it looks like a recession is here. And in my view is going to stay with us for quite some time. That’s because America has been moneying-over all near term problems for many, many years, thus postponing the always needed recessionary cleansing and efficientizing of the US economy, while we’ve also avoiding developing and implementing solutions to our long term ills, like our increasing oil dependency, our underfunded government pension plans, Social Security and former Fed head Alan Greenspan’s #1 concern, Medicare. America does have a bad habit of avoiding problems until they reach crisis state. Maybe that’s because our representative democracy has become so dysfunctional here in the US. I would suggest we start fixing things right there in Washington by first getting rid of lobbying which skews everything toward those with the money to get their voices heard. Even corporate America, who now realizes it’s entrapped by this self-perpetuating system, would like nothing better than to see lobbying go away as big business now has to carry and fund a large and increasingly onerous lobbying budget.

Schwartz View: All I’ve read recently has been about how there are so many inefficiencies corrupting our inherently great economic and social framework that it’s a wonder anything can get done. Such as the US having 600,000 lawyers while Japan has 15,000 (those figures were about 10 years back but obviously haven’t changed for the better). And all the broken marriages and unwed mothers costing America a fortune as well. It’s almost funny, after encouraging the rest of the world to move to free markets for decades, when the Soviet Union collapsed and showed the economic rot hidden there, the world finally started followed our recommendations. And economic success followed suit but that led to tremendous and widespread global competition, so it’s vital we get our own act together as soon as possible, to just keep up. Thus the silver lining to this current economic slowdown, a slowdown that isn’t responding to our normal response of throwing money at it, is that crisis is when change really does occur in America

THE STOCK MARKET

Stocks have again gotten ahead of themselves on the downside although not as much out of whack as at the first bottom back in mid-March. Figuring the Dow Industrials and S&P 500’s previous bull market tops were set back last October, after nine months of a bear market or at the recent July 15^th lows, we are down on average about 2.5% per month versus the historic average bear market monthly decline of 2%. So we could easily see a backing and filling trading range here and now or even a modest rally, the two normal ways bear markets correct themselves. Much government intervention has come together to force down the price of oil and thus commodities in general, prop up housing and consumer spending, keep the financial system from breaking down completely and holding interest rates way below the rate of inflation. So all this government stimulus has to go somewhere just as previous stimulus found places to bubble up. Plus new government props and controls historically have been able to put a temporary fix in place.

Still, over a period of time the stock market reflects the economy and things aren’t really getting any better there, despite Q2 GDP growth out this Thursday going to again be positive. In point of fact, the economy is continuing to get worse if one looks under the surface at signals like credit spreads, a rough definition being the difference in yield between US government bonds and non-US government guaranteed bonds, which remain wide. Or if we factor in historic trends which show that economic downturns tend to surface hidden problems which end up feeding on themselves. Today’s continuing wide credit spreads mean at some point MBIA & Ambac and Fannie & Freddie, the other 17 big financials which have also been taken off the allowed short selling list & all the other financials who’ve lost billions of dollars aren’t going to be able to hide things any longer and are going to have to really own up. So stocks remain iffy for now. And with the rug pulled out from under the remaining stock leadership in the stock market over the last two weeks, out from under energy, the energy complex and other commodities, any market rallies are going to be just technically based, say from an oversold position or short sellers being forced to cover. Sure, a rally may then feed on itself and last longer than bears think, but should ultimately roll over as data worsens.

Schwartz View: Technically then, we could be embarking on a summer rally and if so sharp traders with the courage to risk their monies in the propped up financials may be able to scalp the stock market. And other pockets of strength should or may show up (hopefully in the health sector as that is now my focus with my few longs) normally searched out and propelled along by momentum players.

PORTFOLIO STRATEGY

LONG TERM PORTFOLIO STRATEGY continues to be hunkering down until this big storm passes. I expect that to be longer than most government and Wall Street economists and market strategists believe or at least publicly state. Publicly state because we all know that bearish Wal Street analysts and economists ultimately get fired and that in the aftermath of the dot.com bubble bursting, we got some theretofore hidden insight into what analysts really think. I see widely-followed, economist Nouriel Roubini, formerly holding various high level economic advisory positions in government, believes the US and European economies are now sinking as last Friday he said Wall Street was in spin mode and that financial institutions are “… manipulating at will their earnings, and analysts [are] falling for this supreme baloney.”

NEAR TERM PORTFOLIO STRATEGY depends more on whether this two-week, fledgling rally proves it has legs or not. I’m using as a key gauge whether the Dow and S&P are able to close above their last Wednesday’s closing highs, Dow 11,632.40 and S&P 1282.19. If these key indices close higher, then we will have the definition of a new up trend in place, a series of higher lows and higher highs. Strategy then will be to favor the long side but with say with no more than 50% at most market exposure. Planning on a modest summer rally for a month or two, with strategy being trying to scalp some short term profits.

AS FOR INCOME INVESTORS, we’ve all gotten used to our income fixes after 25 years of income investing being easy during a bull market in bonds, meaning just riding the trend toward lower and lower long term rates, I know it’s a struggle for you all today. My best suggestion is to watch for weakness in income sectors, say in utilities, royalty trusts and even REITs, then strike. Only move in and in a small manner AFTER a sector has just been blasted. This gives you some profit buffer as primary extended downtrends many times have sharp sell offs after disillusioned investors finally give up hope and sell, right before they rally. This can get you in at unusually good prices, at least for the near and intermediate term.

INCOME IDEAS. Thus I would currently search through the utility sector as the Dow Utility Index has just fallen a sharp -8% over the last two weeks. Or take another look at my previous July 11^th, 2008 two energy income recommendation Cross Timber Royalty Trust (CRT) and San Juan Basin Royalty Trust (SJT), both haven tumbled hard with crude. Both go ex-dividend tomorrow, meaning today’s the last day to get in to collect the substantial August dividend (both pay monthly). Or finally, revisit my other income recommendation, back on July 10^th, 2008, of two large European pharmas, GlaxoSmithKline PLC (GSK) AstraZeneca PLC (AZN) paying moderate dividend yields of 4.4% and 5.8% respectively. You need to buy GSK today to be entitled to this quarter’s dividend and buy AZN soon before it goes ex-dividend (not declared yet but last year it went ex on August 8^th). Good income investing!

Have a great week!

Two Technicals: 1. Why No Capitulation; 2. How Inflation Returns

RichardSchwartz — Wed, 16 Jul 2008 16:40:00 GMT

TECHNICAL VIEW. The Principle of History. Two historical technical observations today:

1. Capitulation: Where the Heck is It? CNBC keeps interviewing floor traders and reporting from the New York Stock Exchange that everyone there is anxiously looking for that big bout of capitulation, selling, to end this latest market decline. But their wishes aren’t coming true. Guess they haven’t read my stock market letter as a study of the price action after the Bank Panic of 1907 , the most similar comparison to today’s credit crisis I could find, showed no capitulation back then. The reason and explanation was that since investors were so darn bearish, they shorted any and all rallies and thus stocks never got “quite out of hand” or saw that one day of massive selling or capitulation today’s traders want to see. Schwartz View: Similar to market crashes, we have to get blindsided to get capitulation. Or the problems and pressures have to get extremely severe with no light at the end of the tunnel. Today, we sure aren’t getting blindsided and numerous remedies are being floated and tried left and right, like economic stimulus packages, Fed rate cuts, Treasury announcements, yesterday’s SEC pronouncement about short selling, etc. Again, let me point out, it’s sort of ironic that we all preach free market capitalism when times are good but when times turn bad, we all scream for the government to bail us out.

2. The Return of Inflation. This commodity inflation -- rising prices in metals, oil and now food -- is the first bout of rising inflation we’ve seen since the early 1980s when then Fed chair Paul Volker jacked interest rates up through the roof and led the US into recession but in so doing also broke the back of multi-decade, out of control inflation. As my regular readers know, widely-followed big picture guru Jim Rogers says commodities are going to keep running up in price for approximately the next ten years, that a commodity bull market is in full force. And I don’t disagree. But let me add my alpha to the picture. My studies have shown that many, maybe most times, when any new trend begins it begins with a big burst. Then we get a large pullback in the early states of this new trend (whatever the time frame the new trend is, days, weeks, years, decades). Then after this large pullback, say because there remains many disbelievers who can’t quite believe things have changed, or because these quick gains need to be consolidated, or because the trend is moving too fast and has outrun itself, the new trend becomes more steady and reliable. Check back to the bull market which started in 1982, this pattern applies. Or think a bit about this new bear market. How stocks dropped last year in July and August when the subprime news first broke and then had a big bounce (to slight new highs) before the new down trend reasserted itself. Schwartz View: So it makes sense that inflation and this commodity bull are due for a big correction downward before reasserting themselves for the next few years.