Search results matching tag 'Principles of the Stock Market'

Tiger Woods Effect on the Stock Market

RichardSchwartz — Tue, 15 Dec 2009 15:52:00 GMT

Richard Schwartz's

PRINCIPLES OF THE STOCK MARKET

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Monday, December 14^th, 2009:

MONDAY WEEKLY OVERVIEW

THE BIG PICTURE

Tiger Wood’s secret life being tabloided is still playing out. If the ultimate effect is his golf fans feeling unfairly disadvantaged, then just add that on to the same shafted feeling after our US government bailed out the rich, powerful, overpaid, connected & entrenched, who were infected with “Big Money Fever.” With the result, 8 million little guys taking the fall, ripping up if not totally ruining their lives and their families. Same feeling for Tiger fans if Tiger is forced to stop golf. Yep, the latest is that Tiger is quitting golf, taking an indefinite leave. His followers - I’m one - have to think: “Hey, WE didn’t do anything wrong! But now we lose the enjoyment and pleasure of watching Tiger play winning golf? We lose the chance of seeing history? Not fair! Again, we didn’t do anything wrong. Someone else did & yet we get screwed?”

If this psychological scenario above does unfold and people react irrationally that may be what revives this currently tuckered out bear market. Or spawns a new bear market. (Doesn’t matter which.) Everyone, all the investment professionals, think they have the public investor all figured out. But I’ve been convinced, after delving more and more into Elliott Wave doyen and socionomics inventor Robert Prechter Jr.’s writings, that crowd mood swings, the public and Mr. Market’s (the consensus of institutional investors), may come before big stock market swings, even cause them. Both value investing and contrarian investing, as two examples, use extreme market sentiment as or as an important part of their very foundations.

Still, the devil remains in the details. How things actually work out. How people take the Tiger news (along with all other news). Are we today at, I mean just passed, some optimistic peak? Mr. Prechter seems to think so, recommending selling in August & then to sell short, double leveraged, in November. Assessing myself, I didn’t note this optimistic peak. Lots of individual stock charts remain in steady uptrends, not spiking up. Of course any top arriving here or soon doesn’t have to be quite as optimistic as investors were at the likely tippy top peak of March 2000 or the October 2007 likely secondary peak. Most trends, because of a natural diminishment of momentum weaken as they lengthen before they reverse path.

Again, the Tiger Wood’s effect, because he’s been such an icon, global role model and the only golfer who doubles golf’s TV ratings when he plays, who draws in celebrity watchers and casual golf watchers alike, may prove very important to public psychology and in turn to stocks. So, for now, the saga continues as Tiger announces he’s giving up golf. It’s either golf or me may be the at-home conversation. Or maybe wife Elin says or feels: “You broke my heart, I’m never going to trust you again. The only thing I can do to hurt you as badly as you hurt me is to take away your golf. Take away your lifetime goals of beating Jack Nicklaus’s 18 majors record and thus being acknowledged as the greatest golfer ever. That’s the only thing I can hurt you with. To not let you break the record. So it’s me or golf!” Obviously, that path would make Tiger end up hating his wife. And make his army of golf worshipers hate her too, because we’ve all got our emotional skins in the game now, we desperately want Tiger to break Jack’s record, whatever his family life. That’s how I feel anyway. But that’s not fair either, not fair to Elin, who is the really betrayed party. Schwartz View: Having had my own personal apple cart and my son’s Brian upset too, my sense is that Tiger should move on and get divorced. There’s no point in (Elin) reconciling with someone (Tiger) who has once treated you so dastardly. If someone betrays you, all important trust is lost. I feel for Elin but she should just move on too. Tiger isn’t ready for marriage. Whether he’s taught some (military) lesson or not.

THE ECONOMY

“I think this Christmas season will be better than last year, not because it’ll be particularly good, but because last year was especially tough,” says Gregorio Izquierdo, head of research at the Institute of Economic Research in Madrid. From a larger perspective I see this observation “… better because last year was so tough.” applying right across the board, almost everywhere, particularly here in the US.

Extrapolating, after this normal, only and always to be expected market and economic bounce is over, I expect more global economies to deteriorate as shown by the recent revelations from Dubai and Spain and other countries too, all of whom really pushed the easy credit envelope for all it was worth during the easy money boom years. Sort of like the example here in US residential housing under former Federal Reserve Fed head Alan Greenspan and his “no ask, no tell” policies regarding bubbles and financial regulation.

I expect this newly admitted weakness, starting first in weaker, fringe countries, to spread out to other larger and more critically important countries next year. WWI history shows an assignation in Bosnia, far from the world’s economic epicenter, rapidly spread outward. So I don’t see why today’s debt problems in the Baltic States can’t spread to Scandinavia where most of Eastern Europe’s loans are held; Swedbank for example, being the largest lender in Latvia. Or remember just back to the 1997 Asian Contagion. Since Thailand’s currency was pegged to the US dollar, its currency defense drained Thailand’s reserves and forced a devaluation. Which led to foreign investment withdrawal which quickly spread to other countries. Just like last September’s run on America’s investment banks domino-ed. Schwartz View: I expect something similar in 2010, leading to a resumption of what Wall Street likes to call “risk avoidance.”

THE STOCK MARKET

There are just a few remaining bears standing today. A tiny # as identified by sentiment indicators like Investor’s Intelligence and by my reading of everything financial, stock market and economy wise. That’s because stocks have been rising for nine months now, retracing over 50% of total bear market losses in the Dow Industrials & Nasdaq Composite measures and almost 50% in the professional’s benchmark, the S&P 500. S&P’s 50% retracement comes in at 1121 which we almost touched back on December 4^th at 1119.13 intraday. Obviously the S&P is the laggard because is has lots of banks in the index. So where next? Below are some pros and cons about whether this rally is a new bull market & continues. Or not.

New Bull Market

The surge off the March bottom seems too powerful to be some sluggish Elliott Wave A-B-C bear market correction upward. Schwartz View: Just my inexpert opinion.
Richard Russell, the longest running stock market letter writer, wrote once that a bull market’s “diabolical objective is to advance as far as possible without any people getting in.”. Schwartz View: Sure feels like that in this “most hated” bull move up. By the way, I found this quote in big bear Bob Prechter’s writings although I’ve noted similar statements elsewhere for years. My point? Mr. Prechter is ignoring Russell’s quote. Why? Because of Mr. Prechter’s bearish bias?
Long time market guru Joe Granville says we’re in a new bull market. Schwartz View: Another veteran who I greatly respect. I have to admit we are experiencing the normal bull market phases.
Short term bull markets of multiyear duration have interspersed long term, multiyear bear markets in the past. Schwartz View: Like during the Visit of the Three Bears (from 1966-1974).
History shows “cry wolf” depression calls have been followed by amazing rallies. Think back after Black Monday, October 19^th, 1987. Or after the 1957 market collapse when Russia launched Sputnik I. Both proved head fake bear market signals. Schwartz View: My notes say the public sold hysterically for two weeks in October 1957 after the Sputnik, October 4^th launch.
This rally is following the step by step bull market phase guidelines offered up by Dow Theory almost perfectly. Schwartz View: Google Dow Theory and check for yourself. More to come.
The most common Fibonacci retracement after a big market plunge is 61.8%, which means Dow 11,246 and S&P 1229 are next up. Schwartz View: Odds seem high we get to these price levels.

Bear Market Rally

Elliott Wave squiggle reader Bob Prechter adamantly says this is just a big bear market rally. Schwartz View: He’s the expert, not me. History though shows he can be wrong, big time.
Common sense alone tells me the aftermath of “the worse credit crisis since the Great Depression” doesn’t get over in a year and a half. Schwartz View: The system has much debt to work thru!
Wall Street strategists are unanimous in expecting US stocks to rally in 2010. Schwartz View: That’s real scary! I see it as proof the credit MANIA still rules. Plus “keep my job” analysis.
I see “termite packs” all around us. Eating away at usual supports like housing, commercial real estate, private equity & hedge funds, state finances, credit creation, and much more.
Still way, way too much debt outstanding which needs to be restructured or defaulted away.
If we do get economic recovery, the Fed will have to raise interest rates. Schwartz View: Thus, we’re now in a Catch 22 position, darned if we recover economically and darned if we don’t.

SCHWARTZ SUMMARY. My intuition says we tack on another about +10% move up to the 61.8% in both the Dow and S&P. But my conviction isn’t strong enough to dive head first into the investment waters, not with Fibonacci expert Mr. Prechter saying we could top our anytime and for no reason.

PORTFOLIO STRATEGY

Essentially, I’m just sitting here, waiting for the Christmas rally to kick in, with some long positions in the Dow Industrials and the US dollar, both positions being larger than my 5% normal size. In the bullish Dow position I have between 15% - 20% allotments in accounts. I figure the Dow should be the last man standing, normally the case as market breadth-narrows, foreshadowing the end of an uptrend. Then, on the bearish side, I’m long the US dollar, 10% or 12% positions depending on the accounts. In both trades, I’ve used today’s modern specific sector funds with 2x beta (the position is doubled). Long the US dollar is my foot in the water trade for when the bear market returns in full force though right now I’m benefiting from both, last week’s dollar rally and the Dow rallying as well because the path of least resistance in the stock market remains up. I’ve sort of backdoor replaced my downside-biased hedge of being long the Dow and short the Russell 2000 with being long the Dow and long the greenback. I lifted the short side leg a day after it became apparent that my hedge had become crowded, that too many market professionals had caught on & set up similar positions. According to my time-developed Schwartz Rule: MOVE EARLY! So that left me with a sneaky way of getting long the Dow. At some point though I’ll have to make another stand, jettisoning the long Dow trade or dumping my long dollar trade, but for last week anyway, both rose. Schwartz View: For now my strategy isn’t going anywhere fast but I figure if I’m right about the bear’s return, I’m saving clients and readers’ financial health. If I’m wrong I’m not losing money.

Have a good week!

BUY CLEAN GREEN! BEST INVESTMENT THEME FOR DECADES

RichardSchwartz — Thu, 01 Oct 2009 13:24:00 GMT

CLEAN, GREEN UPDATE. THE NEXT BIG THING IS HERE & WORKING WELL!

For a FREE week of PRINCIPLES OF THE STOCK MARKET, email me at RichardStk@aol.com

Starting back in December 2006, I started writing about the next BIG THING. And have updated it for you continuously ever since. Happily I started on this theme right before the 2007 boom in solar stocks. Since I eat my own cooking, so to speak, I was able to capture some doubles and more in companies like First Solar (FSLR), Suntech Power (STP) and a couple others. Hope you were too. That solar boom is over, for the moment -- a good time to nibble, with today’s oversupply of solar but other subsectors of the greater clean green energy universe are now having their day in the sun (pun intended). “Smart grid” stocks, those that help reduce, measure and regulate power usage have recently been hot and I’ve long recommended EnerNOC (ENOC) and Comverge (COMV). Disclaimer! I own small portions of both but can and do change positions without notice. And that’s even before America really starts to modernize our national power grid. Wind and natural gas stocks have been doing well now as have battery and other storage technology after General Motors threw out that figure of over 200 miles per gallon coming with their Chevy Volt. I did publish a decently all-encompassing list back on June 6th, 2008, right in the midst of the 17-month downtrend and asked you to “print, keep handy and archive” it for future use. Last Wednesday, I listed a few additional technology companies which have one foot in clean green and before that, on September 18^th, I posted a winnowed down list of my December 2006 list of about 80 clean green companies outperforming for possible near term trades. And of course a couple times recently I’ve again recommended that new clean green global mutual fund that Steve Leuthold and crew are now offering, which I recommended to you just back in July, that’s Leuthold Clean Green Tech (symbol LGCTX).

I CONTINUE TO BELIEVE THIS IS SHOULD BE #1 THEME FOR LONG TERM INVESTORS and thus let me pound the table again today (even though it’s not Friday when I’ve gotten in the habit of giving you YOUR CLEAN GREEN WEEKEND UPDATE; I’m a man of routine my friends say.). Just want to point out that holding a bunch of clean green stocks is still working well. What I’m finding is that some good news item seems to pop every few days about one of the stocks in my own IRA portfolio, almost totally composed of small lots of lots of clean green companies, and/or also for many of those stocks on my larger shopping list of clean green. My IRA is up over +30% this year and I’m only 50% invested! (Note! I’d be much less invested if this was my fund management money. Like monies that are designated to only go into sector funds or that only can be moved around minimally or that has no clean green choices, again like the money management I do for others.) Anyway, whether it be wind, geothermal, energy storage, battery technology, fuel cells, etc. etc, whatever, there are lots of clean green niches, I’d buy ‘em all and cover all bases. Yesterday one US wind company got a big contract from a Chinese firm and popped +10% (in a ragged stock market), that’s happened numerous times as China pushes clean green too. Back a week ago a reader sent me an email that three of his very low priced clean greens were all up nicely that day when he checked. I hold one of them so I won’t mention that name but two others I used to hold, not right now but maybe I’ll buy them back on weakness down the road, were Medis Tech (symbol MDTL) up +24% and Hydrogenics (HYGS) up +13%. Schwartz View: Bottom line, pull out my original shopping list of clean green, which I’ve run in various and updated forms numerous times over the last couple of years, review it and then buy small amounts of lots of clean green stocks. That way when a breakthrough occurs, wherever you’ll benefit while the rising tide carries all ships (almost all) over time. That was my original game plan for all of us and remains so and continues working nicely. By the way I’d buy BEFORE the scheduled December Copenhagen global conference. The rationale again is the world is going clean green because it has to. We all know that. Going clean green creates new jobs which we desperately need, cuts down on oil money somehow finding its way into terrorists hands and respects and protects Mother Earth. And when we forget we have to go green for a brief moment, some report about global warming comes out and reminds us.. China knows it, Europe knows it and America, our scientists, our government, our businesses (who wants rules in place so they can move forward with capital spending plans), our venture capitalists know it and our everyday Americans know it. All except for the pure unadulterated capitalists holdout contingent who won’t admit such because in their blindered view “it hurts business.” Let me say again: There is a critical mass for going Code Green and a critical mass means there’s no stopping it, maybe something, some event, can hold it back for a time, but there’s no stopping it.

THIS IS THE #1 BEST INVESTMENT THEME FOR THE NEXT COUPLE OF DECADES!

Come on, get on board!

Ending Wars Adds To Deflation Pressures & Ends Bull Runs

RichardSchwartz — Thu, 24 Sep 2009 13:52:00 GMT

GLOBAL VIEW. OK, HERE’S THE REAL BIG NEWS! All the above is well and good but the key news was shown on the public broadcasting channel last night, on World Focus which runs at 6 pm my time (the old BBC news, now Americanized as World Focus). I purposely watched it last night to see how they covered President Obama’s big speech to the United Nations. You know with delegates from Iran, Russia, the Middle East and everyone there. He did ok, said the expected, set forth America’s agenda. No surprises. But the surprise was the word the Obama, after getting a general’s recommendation that we need more troops in Afghanistan, is considering some change of strategy. To me that could only mean, if he’s considering NOT sending more troops, he considering cutting back on the troops we have there now.

IN OTHER WORDS, GETTING OUT, ENDING THE WAR IN AFGHANISTAN!

Now if that is the case, markets and investors will have to adjust, and the sooner the better. Regular readers will remember that during the later part of the five year bull market run up from 2002 to 2007, I used to write that when we pulled our troops out of Iraq, that would likely spell big trouble for the economy. Slowing it down maybe into recession as the troops came back home and looked for jobs, and thus in turn very likely could be the end point to that bull market. (Of course things do change and while we never did pull troops out of Iraq, we instead got hit by that unexpected ‘Black Swan’ event, the subprime implosion.) Anyway, back then I cited the historical fact that when a cease fire in Viet Nam was announced, in January 1973, the bull run of the previous 2 ½ years (coincidentally?) ended. Basically I’d say because ended the war was deflationary. This is generally the case. After WWII ended there was big fear of a recession as well. Well, in today’s case I imagine the outcome after pulling out of Afghanistan would be similar. When we stop spending money on ammunition and equipment, on troop salaries, on military logistics, etc., etc., etc., that will also lead to a big deflationary economic slowdown, just what we don’t need right now.

Of course, President Obama has to think about more than just the economy, he has to think about the safety of the American people, the safety of our troops and overall for what’s best for the country. Plus, in switching his attention to the war against terror, he might just be buying into the growing feeling that the credit crisis and recession are winding down, buying into the Fed’s SPIN (or the truth) about the economy, so he can look elsewhere and feel that another deflationary force won’t hurt us now. Remember VP Biden said the incoming administration didn’t realize how bad the economic situation was when they first came in office so that might again be the case. Schwartz View: No announcements have been made on what decisions President Obama will make concerning Afghanistan. Right now it’s all Schwartz speculation (and many times I’m early in spotting something new, I think because I read so much.) The administration may just be testing the waters about how a change of strategy would be received. President Obama might indeed follow the military’s recommendation and just send more troops there. But I doubt it, logic says Afghanistan is unconquerable. And with a new US president we could have a new US strategy.

Good Time To Sell. Following this train of thought, I have to say today or soon is another logically good time to take more money off the table. Ending wars generally lead to deflationary results and the first market participants that pick up on this trend will benefit the most. Again, a ‘first mover’s’ advantage. Plus please remember the many years in development SCHWARTZ RULE: "MOVE EARLY!" That applies to buying or selling.

NET, NET, I’D REVIEW PORTFOLIOS & FIND AREAS TO DO SOME MORE SELLING!!!

IBD 100 'New Names': Using Sir John Templeton's Approach

RichardSchwartz — Tue, 15 Sep 2009 13:17:00 GMT

IBD 100 ‘NEW NAMES.’ Only three new names hit the latest weekly (September 14^th, 2009), computer-generated IBD 100 list of “leading growth companies,” those companies showing good fundamentals, having some institutional sponsorship, producing solid earnings growth and outperforming the average stock. Three new names is about the norm. And Investor’s Business Daily(IBD) in its commentary, is pretty calmed down and happy now that its list is acting normally, leading the general stock market, writing this week that: “Whenever leading stocks post the best gains, it’s a sign of health for the market and its leaders.” When this list lags, it worries IBD and until recently it had been lagging for many months now.

New Names Mkt IBD Industry

Price Cap Rank Rank Business Line

ECPG Encore Capital 16.47 378m 72 45 Resale of unsecured, discounted loans

CNSL Consolidated Comm. 15.26 451m 88 152 Local phone service in TX/IL

WLT Walter Energy 61.86 3240m 99 48 Goal miner/degasifies coal beds

Schwartz View: My continuing strong suggestion for growth investors searching for big winners is to research in depth all ‘new name’ companies when they first show up on the IBD 100 list. I believe this one approach alone could pretty consistently make you handsome profits. (My opinion is arrived at after trying out as many stock market approaches as I could unearth searching full time for over 20 years.) Many of these companies go on to become ‘ten baggers’ over time and you’re finding them, when they first appear on this list, before the crowd, and thus if you do follow through and finding out exactly why they are in fashion, you can be a ‘first mover’ in buying them. Plus your research -- so easy in today’s world of the Internet -- clues you in to many, not so incidental, trends in the economy providing you insight into the Big Picture as well. Again, because companies appear on this list for some reason, “your mission, if you decide to accept it,” is to find out EXACTLY why. One way to manage this approach, once you satisfy yourself about just why a company hit this list, is to use the Sir John Templeton approach, buy a small amount of each stock and put it away for some time. Remember Mr. Templeton bought 100 shares of all NYSE traded depressed stocks trading under $1 a share during WWII. A few years later he had quadrupled his money. His missive to us future generations is that some won’t work out, some will trade sideways but the big winners will provide you with a handsome overall profit. Thanks Sir John Templeton!

Let’s see, this week a cursory look tells me that Encore Capital seems to be in a sweet spot. There’s a ton of bad loans floating around today so business is there for the company which comes up with a way to profit. As for Consolidated Communications, I’m not sure why a company in a very low ranked sector (IBD rank 157 of 197) and a local phone service provider made the list. Maybe a takeover? Your job, again, is to find out why and if you’re satisfied there’s big potential, buy a few shares. Finally Walter Energy, a coal coking company, maybe made the list as coal companies surge as natural gas rebounds on speculation of increased steel output from China. I’m not sure I buy into that as a good enough reason but again there may be some hidden, deeper reason which in depth research will unearth. Net, net, if you find solid reasons for these and/or any ‘new name’ stocks, one fundamentally solid market approach would be to buy a small equal dollar amount of each. Then put ‘em away. Yes, ‘buy & hold,’ exactly the approach most advisors today are saying doesn’t work anymore. Remember, take the road less traveled in your stock market approaches and you’ll generally come out on top. Ask Mr. Buffett and others of his ilk.

WHAT HAPPENED TO GOLD?

RichardSchwartz — Fri, 28 Aug 2009 13:35:00 GMT

GOLD’S GONE SOMNOLENT. Written August 28, 2009. The price of gold has gone so quiet, I post it on my wall charts each morning and then forget about it. So let me bring up, and verbally visulize for you, a longer range chart for perspective.

REVIEWING. Ok, looking way, way back I see gold blowing its top in the 1979 to 1980 time period. And it took some 20 YEARS to get it bottomed out and moving up again. (Which reinforces my writing on Wednesday, pointing out how respected market writer John Hussman says busts which result from a change, and change, the underlying fundamentals take a heck of a long time to come back into favor– in gold’s 1979-80 case disinflation and oversupply took over from ever rising inflation, even, at the tail end, runaway inflation.)

TODAY. But back to the present. Gold finally began a new bull market about 2000. And has risen back to its old 1980 top of about $1000 an ounce after eight years before going flat in March 2008. Since then not much at all. The price peaked at $1032 and retreated to $682 but generally has traded between $850 and $975. Sort of waiting, waiting, waiting. Likely to see what really lies ahead after the turmoil of the last two years. Was the commodity spike in 2007 just the first leg up in a inflationary bull market? Or was the collapse in commodities in 2008 the beginning of a new cycle of deflation? As of today we still don’t know. Most feel rising inflation is inevitable as soon as the economy really recovers and thus money velocity speeds up from its current very, very lackluster pace (because of lingering FEAR). Whilst contrarian Elliott Wave guru Bob Prechter, contrarian economist A. Gary Shilling and a few others expect last year’s collapse to morph into full fledged deflation. Mr. Prechter says deflation lies ahead because of a coming debt implosion which leads to bankruptcies galore, something which the Fed can’t stop.

Schwartz View: Right now I side with Mr. Prechter and thus remain very cautious on stocks and am monitoring renewed investor optimism slowly coming back all over the globe as stocks rise and the economic statistics improve. I remain skeptical of the stats because I look around and see a world of total SPIN and a still deeply entrenched MANIA all around me in spite of the recent credit freeze up and resulting recession. Very near term then, while we wait for more long term definitive evidence, I assume the price of gold depends a lot on the next Federal Reserve FOMC interest rate meeting scheduled for September 22-23. If they decide to extend their various programs like buying US Treasury and other government debt, gold may break out above $1000. If not, no. As a trader I would thus buy below $900 if it drops there in the meantime. Longer term, there also remains an open question whether gold could be the one commodity exception, that it would hold up if the economy falls into deflation. It just might as gold has long been looked upon as real money and a store of value in a world gone mad. Hard to say because from July 2008 to November 2008 gold fell with the stock market but before and since, during the bear market and now during the five month mini bull market, gold has at times moved with the stock market and at times against it.

Watch One Particular Stock Market Guru!

RichardSchwartz — Fri, 14 Aug 2009 13:36:00 GMT

AN HISTORIC GURU VIEW. Written Friday morning, August 14^th, 2009.

Being in and around the stock market for the last 35 years -- I can’t believe it’s been that long! -- I’ve seen market gurus burn hot and cold. In my early years I was in more of a daze, doing ancillary brokerage jobs rather than following the stock market closely, just trying to figure out the whole brokerage industry. What a stock broker did, etc. Did I want to be one? Would I be recommending my own stuff? And again not being in New York city, the epicenter of finance, I was on the outside looking in. Even today that’s ones largest hurdle. So anyone wanting into the business I’d advise going where the action is, New York or another financial center like London. If not New York or London are not for you, find a big firm, say a big mutual fund family and get to its headquarters, be it in Boston or Singapore, etc. Anyway, back to point.

Granville & More. I’ve seen Joe Granville burn hot (and drop his pants to show stock quotes on his boxers and walk on water on a hidden board) and turn ice cold in popularity and heard about Jim Dines. I used to follow that curly haired woman guru, yes, that image is bringing her name back, Elaine Garzarelli. For many years I read Richard Russell, one of the deans of newsletter writers and whom I modeled my own letter after, took sample letters to numerous letter writers including Ned Davis, Dan Sullivan, Harry Schultz, Norman Fosback, Lou Navellier, .Marty Zweig, Stan Weinstein and unearthed Ted Warren’s one book (one of my favorites) and read everything I could find. I like William O’Neal’s approach and regular readers know I use and recommend his paper and its IBD 100 list. Having an economics background I gravitated to Ed Hyman’s work and read a number of economist A. Gary Shilling’s books. And read John Naisbitt’s Megatrends series with his long range projections. I’ve read and studied all the Dow theorists from Dow to Hamilton to Rhea to E. George Schaefer to Russell. I continue to read many new guys too, Alexander Elder, “Trader Vic” Sperandeo and on and on. Etc., etc. etc. Many unknown letter writers too. I really could throw a ton of names around if I sat down and reviewed my stock market library and mine and other’s old market letters. So I’ve seen many gurus come and go and burn hot and cold. But one who I continue to admire and track is Bob Prechter of Elliott Wave fame who was the #1 guru way back when. He was a major market mover like Joe Granville. While he uses charts -- which Wall Street loves to disdain, I think that’s mainstream Wall Street spinning a veil and case on the public to justify their big bucks, they all surreptitiously use ‘em -- Mr. Prechter also is now ties market swings to societal mood changes (which makes good sense to me). And is in the process of attempting to add and formalize to current investment analysis the concept of tying stock market trends to mood shifts. “Go for it Bob!”

SCHWARTZ RECOMMENDATION: TRACK MR. PRECHTER GOING FORWARD!

Anyway, I have to strongly recommend keeping one eye peeled on what Mr. Prechter is advising right now. Especially now! I’ve related the histories of Granville and Dines going terribly wrong in this letter, getting stubbornly bearish right at major market bottoms, so I realize the danger now for Prechter in remaining so adamantly bearish but I can’t fault his analysis, what he’s saying and my 35 years in the business tells me to not pooh-pooh his foresight. After reading everyone I can and adding in own my market intuition formed over those 35 years in and around the stock market, I’d say he’s on track. So I’m with him and the other bears, Jim Rogers, Marc Faber, Gary Shilling, the Comstock guys and others out there, still recommending extreme caution going forward. Remember us outsiders were bearish but correct at the July through October 2007 bull market peak while most of those bullish today were also bullish back then and missed that major top completely. Amazing! I mean even after the subprime disaster unfolding ahead became plain in August 2007 and on the head fake rally to new highs in October 2007 they remained Pollyannaishly [sic] blinded. (And no, for all you individual investor skeptics out there about Mr. Prechter’s work, and I know there’s a lot by reading the responses and comments now added at the end of most all Internet carried research, no I’m not a shill for Prechter. Never met, emailed or corresponded with him at all.)

So, yes, play this rally which will likely run longer than most bears think, but stay near the exit; somehow!

For a FREE sample of my daily, emailed stock market letter and advisory, email me at RichardStk@aol.com.

Stocks Have Risen When The Economy Is Down

RichardSchwartz — Mon, 03 Aug 2009 14:49:00 GMT

THE BIG PICTURE

The key thought: History shows the economy can be bad and the stock market good! Understanding that one idea is key to making a logical decision about the stock market here. I tried to get this across at Elizabeth’s 9^th birthday party to the family Saturday. The stock market is climbing its “wall of worry.”

THE SITUATION. My stock market and economic history studies of the Great Depression of the 1930s convinced me that stock market can rise while the underlying economy remains in a very weak condition. Because it’s happened before. In the 1930s depression, even while US unemployment remained at horrific, double digit levels for the whole decade and with few safety nets in place to help destitute Americans and with great ongoing divisiveness between political parties, the stock market posted a five year bull market run up, from 1932 to 1937. So, yes, there can exist a great disparity between the stock market and the economy. This confounding, confusing conundrum can exist as long as the economy is not sinking and/or when the economy stabilizes, no matter at whatever low level of economy activity. I believe that’s because the US capitalistic economy is essentially revitalizing and self-healing. Helped today, because over our history our capitalistic system has grown so large and diverse. In other words, first because Americans, with our continued open borders to any nationality, are a breed of extremely ingenious risk takers and thus will find ways to survive and prosper if allowed to do so. If, from time to time, when capitalism gets in a bind, it gets jumpstarted. Or gets the table reset when it knocked awry. Secondly, because today, there just are so many different industries, businesses, ideas, innovations in all parts and regions of America. Just meaning that while construction and manufacturing are down, maybe technology and the media are up. Or while Michigan is down, Tennessee is up. Or while big business suffers, smaller businesses spring up. I’m too provincial to see all this metamorphosis first hand and thus explain this concept more completely but what I see today is an America in downsizing mode, say moving to a rightsizing scale, but not in total collapse mode. Just like China, America in our own way is using this crisis, individuals one by one, businesses one by one, even the government is adjusting, although not totally because the government is itself the ultimate safety net when any major crisis hits. Our government, we’ve learned from past crises, is the rarely needed (thank goodness!) jump start provider, booster or table setter. Thus today America is using this financial crisis to rid our economic system of the bloat, the fat, all the long built up excesses, our bad behaviors and habits, particularly our overspending, even the corruption which always builds up during “unfettered capitalism,” seemingly prosperous but under the surface unhealthy, unsustainable times. Exactly why economists look at recessions as normal, healthy and needed cleansing events and why throwing money at any and all past downturns in recent decades led to this larger than life recent disastrous event. Schwartz View: My conclusion thus -- to get back to my opening statement that stock markets can rise while our economy is down and dirty, weak and lackluster and in substantial downsizing mode -- is that what investors mainly have to fear today is indeed fear itself. That fear partially coming from not being able to understand how the stock market can rise as we read about and see big economic trouble all around us. As I see it that’s investor’s biggest bugaboo now. We all know or should know that, as William O’Neil, founder of Investor’s Business Daily has always stressed, that success favors the optimist. Now I don’t mean the Pollyannas, I won’t besmirch the many of this ilk whom get be angry, they got their comeuppances by getting blindsided and riding the stock market down for 17 straight months between October 2007 and March 2009. But today, since we’ve moved past the bankruptcy risk, at least for the time being, no guarantees about future shocks knocking not us back down, we should overcome our fears and our misunderstanding of the economy and stock market relationship and again participate in the stock market to the extent of our own financial goals and objectives and how we’ve performed over the last two, years, during the bear market since mid-2007. To reiterate since this concept is so darn important, the hardest move to make is to buy stocks after this financial earthquake and while we see all the resulting damage around us. In other words, to separate the stock market from the economy. It’s very difficult for us investment professionals as well because every day we watch the stock market closely and/or read every update about each remaining financial problem. We all need to overcome our fears to make money during this full cycle. Easier said than done!

THE ECONOMY

The economy is so large and varied now that even with the shock and resulting dead stoppage of economic activity for many months, we’ve been able to stabilize the economy. Thanks to our government learning from our past travails and understanding its role. President Bush gets much credit but he’s gone now and thus last Friday I heard the first words uttered about an “Obama Miracle.” Pulling totally out of this massive slump is another thing and may take much time yet although we could post some surprisingly great numbers in coming months. Inventory rebuilding looks good statistically and allowing home foreclosures provides changes of ownership from the overextended to new risk takers. Still, over America’s 200+ year capitalistic history we’ve built a vibrant and reenergizing economic system so there’s always something good taking place somewhere and while the distressed and/or overbuilt areas of our economy right size the in fashion areas keep us moving forward. And our government has and is still performing admirably (sorry, I know many readers don’t agree with me), stabilizing our financial system and thus setting the stage to allow capitalism to provide us with future growth while at the same time realizing that any and all government intervention always adds additional drags on the economy and is trying hard to avoid such. While at the same time smartly tackling our long term deeply entrenched and ignored major issues and thus pointing America towards a more fundamentally sound future, remaining as one of the world’s leaders. Such as taking the lead in going green as the “clunkers for cash” program epitomizes. Americans really want to do their part and this program is providing one capitalistic way to do so. Getting polluting cars off the road while stimulating growth at the same time and in essence cutting back money supporting terrorism. I gotta love it! Schwartz View: So, we’re back on the right track in lots of ways and I’m delighted. But don’t get complacent. Please keep reading!

Please email me at RichardStk@aol.com for how the stock market will respond to the above analysis and whether, in the following THE STOCK MARKET and PORTFOLIO STRATEGY sections it’s time to buy the stock market today or not.

The Great Recession Unfolds This Way

RichardSchwartz — Tue, 28 Jul 2009 18:16:00 GMT

SCHWARTZ RECESSION CONCLUSION. Tuesday, July 28^th, 2009.

Ok, after much consideration, here’s my conclusion as to what unfolds going forward. The economy struggles through but survives the next few years. About 20% of Americans have a very, very difficult time out of work and out of hope but the other 80% make out all right. Similar to the 1930s when those with a job managed. Today the US economy is so deep and varied, meaning there is so much diversification, that there will be areas of growth and even prosperity along with much despair. The stock market, in its infinite wisdom and with its amazing discounting faculty, based on the government having prevented an all out total collapse, sees this and settles down. And this mini bull market lasts and lasts confounding the adamant bears. But somewhere along the line we get a recession within this Great Recession, just like hit America in the 1930s when we got a “depression within the depression” after a five year hiatus and stock market run up, which hit in 1937-1938 when the market crashed big time. This time it will be a recession within a recession because of all the safety nets put in place after and as a result of the Great Depression of the 1930s. What will cause this second down turn will be the other 80% of Americans retrenching. I mean the 80% of Americans who are monitoring today’s troubles but not being directly affected by today’s high and rising unemployment are continuing their current lifestyles, meaning continuing their current over spending habits without (m)any changes today. I see this going on all around me. People still working aren’t cutting back much, it’s only those rich and not so rich alike who have been struck head-on by today’s sudden economic downturn, who have been FORCED to cut back. The other 80% while being a bit more cautious are continuing their too abundant lifestyles. Myself I’m not exactly sure what will cause this second and more all-encompassing retrenchment but I believe it does lie ahead. Likely some “Black Swan” event, some unpredictable sudden shock. But the domino, rippling outward series of cutbacks now working their way through America will be partially to blame, having weakened the foundation. I must say driving through the village of New Paltz, NY this morning, probably the most vivacious and bustling town in the Catskills or mid-Hudson River valley region partially buoyed by its SUNY college, I saw more 'For Sale' and 'For Rent' and 'For Lease' signs than ever before in my ten year history living here. Ironically it’s the old paradox of thrift which may get us over time. Meaning savings is good for the individual but bad for the overall economy. For more, agree or disagree, email me at RichardStk@aol.com for a sample of my daily "learning, teaching, always evolving stock market letter and advisory service."

BUY CHINESE SOLAR

RichardSchwartz — Tue, 14 Apr 2009 13:20:00 GMT

GLOBAL VIEW. China’s Growing SOLAR Niche. China’s domestic-investor only stock market, the Shanghai Stock Exchange Composite continues to rise. Looks like Chinese investors are setting themselves up for more trouble after the Shanghai exchange rose some 514% from mid 2005 to October 2007, then fell -73% through October 2008. But before that next collapse happens, I see Chinese solar stocks as good buys here. Let’s review the larger picture first, then I’ll talk China and renewable energy.

Asia Bottomed Five Months Back? Remember ASIA in general hit its last bear market lows back last year. China, Hong Kong, India, Japan, Korea, Indonesia, Malaysia and the Philippines all last hit lows last October, along with some Latin American developing markets like Brazil and Chile. That’s six months ago thus way past the normal three weeks to three months counterswing rally time frame. So is Asia in a new mini bull market? Other regions of the world, meaning the US and CANADA and most all of EUROPE continued lower until just last month. So by my Principle of Relative Strength, which recommends always (almost) focusing on those countries, markets, individual stocks showing relative strength or outperformance, Asia in general is the area for us to concentrate our attention on today. I previously wrote last Wednesday and Thursday how well known Bob Prechter, Jr. and his Elliott Wave International advisory service says parts of Asia are now in a big bear market RALLY phase in the cycle. Like an A wave back up which can be powerful, long lasting and sizable. And I also pointed out how “hot” and well known, Swiss investor Marc Faber is now saying buy Asia on any “setbacks” (there hasn’t really been any). And I ended last Wednesday’s report with a buy recommendation on India, offering up as one way to trade or invest, the India Fund (symbol IFN) which closed Wednesday at 18.25. IFN closed yesterday at 20.69. So in general Asia is where the best action is now. Plus regular readers will remember even before that, back on February 10^th, I recommended investing in Chinese agricultural and offered up a list of stocks which you could choose from (I bought one of the 13 stocks listed; did you buy any?). Plus a few days prior to that, I went to great effort and posted the whole 100 stocks separated by industry sector on the USX China Index for you to print out, keep and go shopping from.

China In A Sweet Spot. That’s because the Chinese government, with it’s unique, command-style quasi-free marketplace, blending capitalism and government management still has great and speedy influence. They can rapidly decide on a, any, direction for the country and quickly move down that path. Not like us here in America with our democracy. We take lots of time getting any bills passed (but when we do agree on a new law, we get better if not implementation). Of course, China still has to fight its widespread corruption and pay offs at every step forward so their implementation is harder. Still, perception is everything in the short term in the stock market so implementation problems aren’t a concern over the near term. And near term the Chinese government has just changed the laws to encourage solar (and other renewable energy like wind energy use). Back on March 26^th China “introduced a subsidy for solar projects of more than 50 kilowatts that could pave the way for increased sales of rooftop systems.” One analyst projected that this change could increase solar demand this year by 58 megawatts and 232 megawatts annually by 2012. This announcement moved Chinese solar stocks up the most ever in one day and the rally in Chinese solar is now in its third week and still looks solid. One London analyst said after the announcement that: “China has the potential to double the solar market, soak up the excess capacity that’s out there, and get manufacturers back on their expansion plans.” Another report said: “China is closing older coal-fired plants and implementing clean energy to fuel economic growth.” The government itself said its going to implement its “solar roofs program” to accelerate the application of solar energy. Schwartz View: Good for you China! Just lead by example, that’s the way to do it. Don’t worry about what other countries are doing. (What we should do here in America too regarding renewable energy.) A more recent announcement says China is writing a new renewable energy law and on that news solar and wind stocks jumped again. The essence is that China wants to increase renewable energy usage to 10% of total energy consumption by 2010 (from 7.5% in 2005). Go China Go!

BUY CHINESE SOLAR. Net, net, I recommend buying Chinese solar!

SOME CHINESE SOLAR STOCKS

Mkt Analyst Next

Symbol Company Name Price Cap Ratings EPS Business Line

STP Suntech Power Holdings 14.49 2170m 7-12-11 5/21/09 China’s largest solar manufacturer

YGE Yingli Green Energy 7.67 964m 7-6-2 5/15/09 PV modules and PV systems

LDK LDK Solar Company 8.04 928m 1-8-5 5/12/09 Multicrystalline solar wafers

JASO JA Solar Holdings 3.58 589m 6-7-4 5/11/09 Solar cells

TSL Trina Solar Ltd 13.21 388m 3-6-4 6/5/09 Solar-power products

SOLF Solarfun Power Holdings 4.73 252m 0-3-5 5/21/09 PV modules

Disclaimer! I own a small amount of Yingli Green Energy but can and do change positions without notice.

For a FREE week's sample of my complete daily letter, please email me at RichardStk@aol.com

Weekly Monday Overview

RichardSchwartz — Mon, 06 Apr 2009 13:17:00 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

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Monday, April 6^th, 2009: It’s Master’s week so I’m pumped up. It’s golf’s 1^st major of the year, tradition packed, for you non-golfers. Should be great with Tiger back, Phil Mickelson saying he’s playing the best golf of his life, Paddy Harrington going for his 3^rd major in a row and lots of up & comers. All I can say is wow! Even just watching this old southern flower nursery turned into a golf course in the spring, lavished with money for decades, may be worth the watching for any non-golfers out there. For me, it’s just heaven.

THE KEY QUESTION

Instead of discussing The Big Picture today, let’s focus on The Key Question. Since that’s what I keep pondering. Plus it has to be on every investor’s mind as well. “Could this rally be the start of a new bull market?” To intelligently answer -- as during every bear market rally -- necessitates rehashing all the available evidence. I can make a solid case for a cyclical bull market having just started and I can make an even more solid case that this is just a normal bounce in a Papa Bear market. Consider:

MINI BULL MARKET HAS STARTED

·        The economic stimulus is now starting to kick in which will stabilize and bounce the economy.

·        The monetary stimulus, lower interest rates, is also now kicking in and housing sales are increasing.

·        Inventories have been drawn down and need to be restocked which will pump up GDP growth near term.

·        The US and other governments have done everything possible to mitigate this downturn.

·        We now have more coordinated and get along global leadership than in many years.

·        The US economy has proven itself wonderfully resilient to shocks in recent decades.

·        Markets can counter-swing at any time for long periods, posting mini bull markets, versus primary trends.

·        Almost two years has passed since the beginning of the credit implosion back in July 2007.

·        Many independent market gurus think the March 2009 lows will last for a good while, months or longer.

·        The latest government bailout plan has more enthusiasts and support for it than previous plans.

·        Oil stopped falling back in December and is now on the rise possibility indicating growth rebounding.

·        We have recently had a number of better economic data reports from both retail and housing.

JUST A BEAR MARKET BOUNCE

·        The bear market hasn’t lasted long enough to discount all the problems that have come to light.

·        More problems, coming as bearish ripple effects and because of long lag times, are due to show up.

·        The bear market hasn’t fallen deeply enough to factor in the sudden massive shock to the global economy.

·        There hasn’t been enough overall selling or liquidation for a solid bottom. Stock and mutual fund liquidation haven’t reached previous classic big bear market bottom levels.

·        No solid bottom appears on the charts. We need a climatic sell off or a long low volume erosion to bottom.

·        Interest rates have to go up at some point, soon – either with and because of an economic rebound or from panic selling -- which normally depresses stock prices because of this new competitiveness from bonds.

·        The American consumer has suddenly stopped spending. This has slowed down business all over the world and finally exposed the global imbalances problems. Too much manufacturing in China and Asia and too much spending coming from America. Now those imbalances are being forced to readjust. Takes time.

·        The stock market is ignoring soaring unemployment. Yes, employment is a lagging indicator but continuing jobless claims isn’t. A new report just out says that in coming weeks and months, hundreds of thousands of jobless Americans will exhaust their unemployment benefits. Finally, 600,000 new job losses each month is going to add to weaker consumer spending, problems for local communities and cause negative ripple effects.

SCHWARTZ CONCLUSION: In review, we started this big bad bear market back in the year 2000. That was the peak of the last big bull market and thus the beginning of this big bear market. This is evidenced by the benchmark S&P 500 Double Topping in March 2000 and October 2007 and then subsequently and decisively breaking below October 2002’s previous decade-long lows by over 10% in March 2009. Showing that since 2000 and the ending of the Internet boom we’ve really been living on lower interest rates and big tax cuts, a false, “pump me up,” house of cards. Really not any wealth building going on, just paper shuffling to make things look great fueled by easy money credit creation. But now reality has set in. Thus, looking around, we see we’re almost nine years into a bear market which has been interspersed with one bull market, running for five years. So stocks were down almost two & a half years, up five years, now down about another one & a half years, sort of repeating The Visit of the Three Bears. In that infamous and extended bear market run of nine years, netting a -50% loss, there were two cyclical bull markets sprinkled in and surrounded and book-ended by the three bears, Baby, Mama and Papa.

My conclusion remains that this bear market is not over. But that the form and shape of it may get tricky going forward. Because the market has a history of posting cyclical or short term or mini bull markets on the way down when the bear gets ahead of itself. Which is why the stock market remains so fascinating!

THE ECONOMY

Well, the BUZZ has died down about how the economy is slowing its prior quick rate of descent. Guess because we’ve started seeing more bad economic data pop up or because the conversation has moved on. But some investors have decided an end to the economic collapse is out there, just over the horizon, so they are shifting into cyclical stocks now as a result. One can see this money rotating out of defensive sectors such as medical care, consumer staples and even gold. You know the concept, buying in advance of a recession’s end since history shows stocks rise roughly six months before the economy turns up. But if we indeed are stuck with a very mild even “anemic” economic recovery, as many figure, then stocks could also soon level off to mirror that trend as well. That is if the economic and earnings data don’t start sinking fast once again showing the economy is still sinking. For example, last Friday it was reported that the ISM Non-Manufacturing Index which now measures almost 90% of America’s economy - America now being a service oriented economy instead of a manufacturing economy - fell faster in March than in February somewhat debunking the idea that the economy has stabilized. Schwartz View: Yes, there is the possibility that economy-wise we are going to V- back up because sharp moves, in whatever areas of endeavor, are generally followed by responding sharp moves back up. We’re seeing that now in the stock market but after this bounce is over, I agree with the camp forecasting an anemic slow economic recovery.

THE STOCK MARKET

The stock market extended its rally to four straight weeks last week. We did see the first crack in this rally a week ago when the market fell sharply for two days. But then we quickly rebounded to new rally highs. That’s normal, the first crack being overcome but it does show this rally may be starting to struggle. We are getting closer to my minimum upside targets of Dow 8303 and S&P 1627, closing Friday at Dow 8017 and S&P 1621. And one can note trading volume has been slowing some, another sign of sluggishness. Or maybe cautiousness. Makes sense as we’re now moving into another corporate earnings reporting season starting tomorrow, the 1^st quarter January-March 2009 report kicking off after the close with Alcoa (AA), traditionally the first of the 30 Dow stocks to report. With the fall-off-the-cliff economy occurring early in last year’s fourth quarter, it only stands to reason that investors have to be wary of forthcoming earnings and thus wary of this rally as well. Schwartz View: It looks like the stock market has some more strength left in it so with stocks already having rallied beyond the 50% retracement level from their latest leg down, the early January peak, the teeter-totter phenomenon comes into play. Getting halfway up means it’s very likely to go all the way back up. Thus we kick off this week at roughly another key Fibonacci 61.8% price in both the Dow and S&P 500. That’s about 8088 and 838 respectively. If we break through those levels, then the next target is those January highs, Dow 9088 & S&P 944. Not guaranteed but increasingly likely.

PORTFOLIO STRATEGY

2009 may indeed prove to be the year to trade. If stocks fluctuate but go nowhere net, up or down, for many months ahead then it’s going to prove very frustrating for investors. In these times and they do happen, more often than the uninformed investor may realize, the best way to make profits is to: (1) trade individual stocks and (2) discipline yourself to continuously fade the market, buying on dips and selling on strength. Toward that end I’ve started incorporating the Commodity Channel Index (CCI) technical indicator into my work. Comes on most charting services like Bloomberg. Basically it shows deviations from the moving average, when stocks get too far overbought or oversold. Naturally you buy when a stock or index gets oversold. For more on the CCI I suggest getting Oliver Perez’s Swing Trading Tactics DVD or Alexander Elder’s book TRADING FOR A LIVING. Over the last month of rally for instance certain stocks have far outperformed the averages. And numerous tradable asset classes or market sectors like the US dollar and oil have been both up and down offering trading profits but no net profits for buy & holders.

Otherwise than scalping profits what should we do? For now favor the long side and the cyclicals. I like technology, renewable energy and natural resources. Move up a notch in your market exposure to about 30% if you haven’t already but continue to hedge your bets and don’t get out on a limb by going too long. Just subdue your ego, don’t think you know more than Mr. Market does and just go with the flow, modestly. Bottom line take what the market gives you, right now there are some trading opportunities but don’t get carried away. There’s lots more trouble to come but the path ahead is likely to get more tricky as well. So don’t fall into the camp that says “fool me once, shame on you, fool me twice shame on me.”

Have a good week!

Go Tiger Go!