Via TheStreet.com:
A few weeks prior to the markets hitting a generational low a year ago, I created a watch list that enabled me to better gauge the bottom.
Now, nearly 13 months later and with the S&P 500 almost 500 points higher, it is time to focus on a new checklist of some potential adverse developments that could contribute to a market top and a reversal of investors' good fortunes since March 2009.
1. Interest Rates: The yield on the 10-year U.S. note might climb to over 4% (now at 3.85%). A 4.00% to 4.25% yield would likely provide a tipping point for increased competition to equities and produce an interest (mortgage) rate headwind to the nascent housing recovery at a time when stock dividend yields have nearly halved and when a large phantom inventory of unsold homes is about to begin to enter the residential for-sale market.
2. Jobs / Economy: A more sluggish-than-expected expansion in new jobs and the weight of higher taxes in 2011 might translate to a downturn in consumer confidence, reduced business fixed investment and a more shallow domestic economic recovery in the second half of this year.
3. Retail: Cautious forward comp guidance in retail could reverse the February-March strength.
4. Europe: There could be growing signs of weakness in the European economies.
5. Credit: Over there, we might witness evidence of more sovereign (Spain?) crises, and, over here, we could see more U.S. municipal -- the universe is large! -- financial woes. Forced austerity measures would likely produce lower growth.
6. Credit (Part Deux): Credit spreads might widen.
7. Geopolitical: We could see a possible rise in geopolitical tensions or even another terrorist act on our shore.
8. Monetary Policy: We might have a less dovish Fed in words (jawboning) and in action (through an increase in the federal funds rate).
9. Tightening Abroad: It is likely that central banks around the world will begin to clench their monetary fist, especially in China.
10. Protectionism, Trade and Currency Wars: Things might get ugly, especially on the U.S. / China front.
11. Housing: A renewed leg down in home prices is possible as the spring selling season could fail to appear. (It hasn't gotten off to a great start.)
12. Sentiment: We could witness the birth of a 5x to 10x levered bullish ETF, a burst in bullish investor sentiment, an expansion in hedge fund net long positions, a further drawdown in mutual fund cash positions, a meaningful increase in retail mutual fund equity inflows and massive outflows out of Rydex bear funds.
13. Technical: Stocks could fail to respond to good news, suggesting that the sharp corporate profit recovery has been baked into prices. A breakdown in financials and/or transports could occur. Overseas markets might fail to make new highs, or we could see a further contraction in NYSE / Nasdaq exchange volume.
14. Deflation: Industrial commodity prices could weaken.
15. Speculation: We might see an increasingly speculative market for low-price issues.
16. Underwritings: The emergence of a record syndicate calendar is possible.
17. Wall Street: A substantial increase in Wall Street industry hirings could be announced.
18. Dr. Doom vs. the Sunshine Boys: Dr. Nouriel Roubini could see green shoots, causing bullish strategists and money managers to demonstrate even more swagger. Reminiscent of late 1998, a sell-side analyst (perhaps the new Henry Blodgett) might raise his 12-month Apple (AAPL) price target to $375 a share, leading another analyst to top that target and move to $400 a share a week later.
19. The Media: CNBC could throw another celebratory party. Time magazine might declare the death of the bear market on its cover or run a cover story offering a new bullish economic and/or stock market paradigm. Sir Larry Kudlow could have trouble finding a single bear to appear on CNBC's "The Kudlow Report." Record ratings might induce the management of CNBC to expand "Squawk Box" from three hours to four hours (6:00 a.m. to 10:00 a.m.) and add an additional anchor to join Joe, Becky and Carl.
20. Dougie: Maybe I turn bullish.
Friday, March 26, 2010
Wednesday, March 24, 2010
Does trader contribute to the society
Taipan Daily: Do Traders Add Value to Society?
by Justice Litle, Editorial Director, Taipan Publishing Group
A few days ago, an interesting note showed up in the Taipan Daily mailbag. Via e-mail, reader James K. wonders aloud whether traders add value to society. He isn’t sure that
they do.
Here is an excerpt:
Dropping a ton of money into a company, running it up, and then pulling out your winnings can't be much benefit to society as a whole. It's not company ownership, or intending to own a company, it's company manipulation to make the few rich and have others less astute pay their bill…
The charge seems to be that investing is a legitimate activity, whereas trading is not. (After all, who would challenge the need to invest?)
Speaking as a trader, your editor is clearly biased. But, given that caveat, there are two ways of looking at this question. The first requires stepping back and contemplating what “adding value to society” really means. The second requires asking what service the act of trading provides (i.e. what do traders get paid for).
The Truth About Gold
Don’t invest a cent until you read my report. It reveals an astonishing fact few gold investors know: you can actually… Buy Gold for $438 an ounce! Yes, gold sells above $1,200 per ounce. But I’ve discovered an easy way to buy it for only $438 an ounce. That’s 65% off --- Not bad for free information.
Get my full gold report now.
Not About the Job
The first important point, from this trader’s point of view, is that it’s not about the job. That is to say, what you do to make a living is not the best reflection of your social worth (or your impact on society as a whole).
So a trader isn’t out to save the world – or even change it for the better – with his day-to-day actions. This is more or less true. But what about someone in middle management at a shampoo company? Does apple-scented conditioner really make a difference to the well-being of the human race?
Or what about the person who bakes chocolate chip cookies, sells aluminum siding, or manufactures those little buttons that sit on top of baseball caps? Do those humdrum activities really “make a difference” in the long run?
It’s actually a trick question. There are very few jobs that “make a difference” with dramatic and obvious flair. If you happen to be an ER doctor, a nurse who specializes in prenatal care, or a bush pilot who delivers food and medical supplies to disaster zones, then your “value add” is obvious (and has a certain Hollywood quality to it). But the vast majority of jobs – probably 99% of them – aren’t like that.
This is why, assuming you make your living legally, the better measure is what you do with your time and energy, not how you earn your daily bread. The man (or woman) who adds value to society is a good neighbor… a part of the community… a supporter of charitable causes, a loving parent and friend and so on.
Society is bettered by law-abiding citizens – and sometimes law-breaking citizens, when the law is in error – living out their lives in positive ways. Unless you are Tony Soprano, it’s not so much about the job.
What Service Do Traders Provide?
One can further ask, “what service do traders provide?”
We know that investors, at least in theory, provide capital on a long-term basis so that healthy businesses can grow. This process of capital allocation – again in theory at least – is driven by constant assessment and re-assessment of which companies deserve more capital and which do not.
But traders, as it has been pointed out, do not stick around long enough to make a difference to the ultimate fortunes of a business. So what is the service they provide? What do traders really get paid to do?
Your editor can think of at least five different “services” that traders provide. They are:
* Liquidity
* Price Discovery
* Risk Transfer
* Counterbalance
* Entertainment
Liquidity
The first thing that traders do is add liquidity to the markets. Liquidity is a measure of how easy it is to buy and sell something, possibly in large quantities.
A stock like Exxon Mobil (XOM:NYSE), which routinely sees 20 million shares a day change hands, is extremely liquid. Most “pink sheet” stocks, which might only trade a few hundred shares a day, are not.
If there were no traders, markets would be far less liquid. This is because traders buy and sell much more frequently than investors do. An investor, who may only want to buy or sell on infrequent occasions, enjoys the peace of mind of knowing that, when he wants to make a transaction, there will almost certainly be someone on the other side willing to provide him a fair price. All things being equal, the person on the other side will often be a trader.
Market makers and floor traders were the original liquidity providers. Their frequent activity, and their willingness to buy and sell over and over again as large outside orders came in, helped to literally “make the market.” These days, floor traders are a dying breed and market makers are being replaced by high-powered computers. But the liquidity providing function is still there.
Price Discovery
What is the proper price of crude oil at this very moment? How about lumber? Treasury bonds? Microsoft shares?
The answer is, nobody knows for certain what the proper price should be. There are millions of complex variables swirling around the market place, and those variables are shifting and changing moment by moment.
The only way to determine the proper price, then, is for active market participants to “vote” on their best estimation of that price, over and again, through their buying and selling decisions. (It’s not a democracy though – rather than “one man, one vote,” it is more like “one dollar, one vote.” The large player who buys a million shares has more clout than the thousands of smaller players buying 100 shares each. )
Traders participate in the price discovery process by “voting” – with their own capital – on what the proper price of something should be. To the degree that the trader is correct, he or she is paid in proportion to the number of votes cast (i.e. shares or contracts bought and sold).
The trader’s shorter time frame doesn’t matter. Whether the holding period is three weeks or three days, the only way for the trader to get paid, in the long run, is to be more right than wrong in terms of contribution to the price discovery process. If you help nudge a market that much closer to its “correct” price – a price that is always changing – then you get paid.
And this constant process of price discovery is valuable because it allows non-investors and non-traders to know the price at which it makes sense to transact. The trucking company can know that spot gasoline is X dollars per gallon at such and such a time, that price being determined by an open and competitive market (with the help of trader inputs).
Risk Transfer
Another very important service traders provide, particularly in the commodities markets, is that of risk transfer.
Say that you are a wheat farmer with a very large crop out in the field. Your entire livelihood depends on this crop. If something happens to the crop – blight, drought or what have you – your farming operation could be wiped out. How do you address this risk?
Or say that you are a cereal manufacturer with high exposure to fluctuating grain prices. If the price of wheat or corn rises too high, your input costs will be too high and your cereal operation will go bankrupt. Again, how do you solve this dilemma?
The answer to both questions is, you find a speculator who is willing to take the unwanted risk off your hands. This is why futures markets were invented – so that suppliers and end users of commodities, like farmers and cereal manufacturers, could get shed of their unwanted risk and “transfer” it to someone else.
This process is known as hedging. When a cereal manufacturer buys grain futures contracts, those contracts act as a “hedge” against the risk of grain prices rising. If the cereal manufacturer has to pay an extra 5 million dollars in the cash market for physical grain, but those costs were offset by a 5 million dollar gain on the futures contracts, then the risk has been “offset,” or hedged.
The trader, of course, is only willing to take on someone else’s risk if there is an opportunity to make a profit. And that is why speculators (traders) are willing to step in and take the other side of the farmers’ and cereal manufacturers’ positions. Their trading provides a service in the form of voluntary risk transfer.
Counterbalance
Another important service traders provide is counterbalance. One need only recall the many bubbles of the past two decades to observe that investors sometimes lose their minds.
The idea of the sober, rational investor who never lets emotions get out of hand is a complete fiction. Sometimes investors get euphoric and bid prices up to the sky. At other times investors become manically depressed and send prices crashing to the depths.
At times like these, contrarian traders are like chiropractors. When the market gets out of whack, they help “adjust it” back to more rational levels by going against the herd.
In order to provide this service, though, it is necessary to stand back from the investing crowd – to focus on exploiting temporary aberrations in the market, as opposed to ignoring fluctuations and always investing for the long haul.
Short sellers – who are almost always traders – can even help provide stability in a falling market. This is because short sellers routinely “cover,” or buy back, their short positions at various levels during a down move. If things are ugly, this may be the only buying coming into the market at that time.
Without short sellers (and traders in general) counterbalancing the herd-like activities of investors, markets would spend more time shooting straight up and then plummeting straight down.
How Gov’t-Sponsored “pShares” Could Hand YOU 808% Gains Within the Next 12 Months
As the U.S. government continues to funnel money into an industry most folks have foolishly left for dead… little-known “pShares” are shooting up as much as 808%.
Here’s how to claim your share…
Entertainment
Last but not least, good traders are like the friendly locals in a poker room. They are there to play with those who choose to play. If a tourist (or other casual player) wants to come in and make a market wager, the locals are happy to oblige.
And who knows? The tourist may, in fact, walk away with some money. When this happens, the locals do not begrudge the tourist their winnings. They smile and look forward to playing again some other time. (At least the smart ones do.)
In other words, traders provide an entertainment service in the marketplace. For those who want to play – to compete with the hope of winning money – the trader says “I’m your huckleberry.”
And when an investor buys a share of some super hot growth stock with the hope of making a killing, this is just what the investor is doing – competing! The trader provides a service in taking the other side.
Of these five dynamics – liquidity, price discovery, risk transfer, counterbalance and entertainment – no single dynamic dominates. The mix will vary from trader to trader, depending on the style employed. But most, if not all of them, are active to some degree at all times.
So what do you think? Do traders provide a useful (or at least justifiable) service to the marketplace… or are we all just parasites? Inquiring trader minds want to know: justice@taipandaily.com.
Warm Regards,
JL
by Justice Litle, Editorial Director, Taipan Publishing Group
A few days ago, an interesting note showed up in the Taipan Daily mailbag. Via e-mail, reader James K. wonders aloud whether traders add value to society. He isn’t sure that
they do.
Here is an excerpt:
Dropping a ton of money into a company, running it up, and then pulling out your winnings can't be much benefit to society as a whole. It's not company ownership, or intending to own a company, it's company manipulation to make the few rich and have others less astute pay their bill…
The charge seems to be that investing is a legitimate activity, whereas trading is not. (After all, who would challenge the need to invest?)
Speaking as a trader, your editor is clearly biased. But, given that caveat, there are two ways of looking at this question. The first requires stepping back and contemplating what “adding value to society” really means. The second requires asking what service the act of trading provides (i.e. what do traders get paid for).
The Truth About Gold
Don’t invest a cent until you read my report. It reveals an astonishing fact few gold investors know: you can actually… Buy Gold for $438 an ounce! Yes, gold sells above $1,200 per ounce. But I’ve discovered an easy way to buy it for only $438 an ounce. That’s 65% off --- Not bad for free information.
Get my full gold report now.
Not About the Job
The first important point, from this trader’s point of view, is that it’s not about the job. That is to say, what you do to make a living is not the best reflection of your social worth (or your impact on society as a whole).
So a trader isn’t out to save the world – or even change it for the better – with his day-to-day actions. This is more or less true. But what about someone in middle management at a shampoo company? Does apple-scented conditioner really make a difference to the well-being of the human race?
Or what about the person who bakes chocolate chip cookies, sells aluminum siding, or manufactures those little buttons that sit on top of baseball caps? Do those humdrum activities really “make a difference” in the long run?
It’s actually a trick question. There are very few jobs that “make a difference” with dramatic and obvious flair. If you happen to be an ER doctor, a nurse who specializes in prenatal care, or a bush pilot who delivers food and medical supplies to disaster zones, then your “value add” is obvious (and has a certain Hollywood quality to it). But the vast majority of jobs – probably 99% of them – aren’t like that.
This is why, assuming you make your living legally, the better measure is what you do with your time and energy, not how you earn your daily bread. The man (or woman) who adds value to society is a good neighbor… a part of the community… a supporter of charitable causes, a loving parent and friend and so on.
Society is bettered by law-abiding citizens – and sometimes law-breaking citizens, when the law is in error – living out their lives in positive ways. Unless you are Tony Soprano, it’s not so much about the job.
What Service Do Traders Provide?
One can further ask, “what service do traders provide?”
We know that investors, at least in theory, provide capital on a long-term basis so that healthy businesses can grow. This process of capital allocation – again in theory at least – is driven by constant assessment and re-assessment of which companies deserve more capital and which do not.
But traders, as it has been pointed out, do not stick around long enough to make a difference to the ultimate fortunes of a business. So what is the service they provide? What do traders really get paid to do?
Your editor can think of at least five different “services” that traders provide. They are:
* Liquidity
* Price Discovery
* Risk Transfer
* Counterbalance
* Entertainment
Liquidity
The first thing that traders do is add liquidity to the markets. Liquidity is a measure of how easy it is to buy and sell something, possibly in large quantities.
A stock like Exxon Mobil (XOM:NYSE), which routinely sees 20 million shares a day change hands, is extremely liquid. Most “pink sheet” stocks, which might only trade a few hundred shares a day, are not.
If there were no traders, markets would be far less liquid. This is because traders buy and sell much more frequently than investors do. An investor, who may only want to buy or sell on infrequent occasions, enjoys the peace of mind of knowing that, when he wants to make a transaction, there will almost certainly be someone on the other side willing to provide him a fair price. All things being equal, the person on the other side will often be a trader.
Market makers and floor traders were the original liquidity providers. Their frequent activity, and their willingness to buy and sell over and over again as large outside orders came in, helped to literally “make the market.” These days, floor traders are a dying breed and market makers are being replaced by high-powered computers. But the liquidity providing function is still there.
Price Discovery
What is the proper price of crude oil at this very moment? How about lumber? Treasury bonds? Microsoft shares?
The answer is, nobody knows for certain what the proper price should be. There are millions of complex variables swirling around the market place, and those variables are shifting and changing moment by moment.
The only way to determine the proper price, then, is for active market participants to “vote” on their best estimation of that price, over and again, through their buying and selling decisions. (It’s not a democracy though – rather than “one man, one vote,” it is more like “one dollar, one vote.” The large player who buys a million shares has more clout than the thousands of smaller players buying 100 shares each. )
Traders participate in the price discovery process by “voting” – with their own capital – on what the proper price of something should be. To the degree that the trader is correct, he or she is paid in proportion to the number of votes cast (i.e. shares or contracts bought and sold).
The trader’s shorter time frame doesn’t matter. Whether the holding period is three weeks or three days, the only way for the trader to get paid, in the long run, is to be more right than wrong in terms of contribution to the price discovery process. If you help nudge a market that much closer to its “correct” price – a price that is always changing – then you get paid.
And this constant process of price discovery is valuable because it allows non-investors and non-traders to know the price at which it makes sense to transact. The trucking company can know that spot gasoline is X dollars per gallon at such and such a time, that price being determined by an open and competitive market (with the help of trader inputs).
Risk Transfer
Another very important service traders provide, particularly in the commodities markets, is that of risk transfer.
Say that you are a wheat farmer with a very large crop out in the field. Your entire livelihood depends on this crop. If something happens to the crop – blight, drought or what have you – your farming operation could be wiped out. How do you address this risk?
Or say that you are a cereal manufacturer with high exposure to fluctuating grain prices. If the price of wheat or corn rises too high, your input costs will be too high and your cereal operation will go bankrupt. Again, how do you solve this dilemma?
The answer to both questions is, you find a speculator who is willing to take the unwanted risk off your hands. This is why futures markets were invented – so that suppliers and end users of commodities, like farmers and cereal manufacturers, could get shed of their unwanted risk and “transfer” it to someone else.
This process is known as hedging. When a cereal manufacturer buys grain futures contracts, those contracts act as a “hedge” against the risk of grain prices rising. If the cereal manufacturer has to pay an extra 5 million dollars in the cash market for physical grain, but those costs were offset by a 5 million dollar gain on the futures contracts, then the risk has been “offset,” or hedged.
The trader, of course, is only willing to take on someone else’s risk if there is an opportunity to make a profit. And that is why speculators (traders) are willing to step in and take the other side of the farmers’ and cereal manufacturers’ positions. Their trading provides a service in the form of voluntary risk transfer.
Counterbalance
Another important service traders provide is counterbalance. One need only recall the many bubbles of the past two decades to observe that investors sometimes lose their minds.
The idea of the sober, rational investor who never lets emotions get out of hand is a complete fiction. Sometimes investors get euphoric and bid prices up to the sky. At other times investors become manically depressed and send prices crashing to the depths.
At times like these, contrarian traders are like chiropractors. When the market gets out of whack, they help “adjust it” back to more rational levels by going against the herd.
In order to provide this service, though, it is necessary to stand back from the investing crowd – to focus on exploiting temporary aberrations in the market, as opposed to ignoring fluctuations and always investing for the long haul.
Short sellers – who are almost always traders – can even help provide stability in a falling market. This is because short sellers routinely “cover,” or buy back, their short positions at various levels during a down move. If things are ugly, this may be the only buying coming into the market at that time.
Without short sellers (and traders in general) counterbalancing the herd-like activities of investors, markets would spend more time shooting straight up and then plummeting straight down.
How Gov’t-Sponsored “pShares” Could Hand YOU 808% Gains Within the Next 12 Months
As the U.S. government continues to funnel money into an industry most folks have foolishly left for dead… little-known “pShares” are shooting up as much as 808%.
Here’s how to claim your share…
Entertainment
Last but not least, good traders are like the friendly locals in a poker room. They are there to play with those who choose to play. If a tourist (or other casual player) wants to come in and make a market wager, the locals are happy to oblige.
And who knows? The tourist may, in fact, walk away with some money. When this happens, the locals do not begrudge the tourist their winnings. They smile and look forward to playing again some other time. (At least the smart ones do.)
In other words, traders provide an entertainment service in the marketplace. For those who want to play – to compete with the hope of winning money – the trader says “I’m your huckleberry.”
And when an investor buys a share of some super hot growth stock with the hope of making a killing, this is just what the investor is doing – competing! The trader provides a service in taking the other side.
Of these five dynamics – liquidity, price discovery, risk transfer, counterbalance and entertainment – no single dynamic dominates. The mix will vary from trader to trader, depending on the style employed. But most, if not all of them, are active to some degree at all times.
So what do you think? Do traders provide a useful (or at least justifiable) service to the marketplace… or are we all just parasites? Inquiring trader minds want to know: justice@taipandaily.com.
Warm Regards,
JL
Friday, March 19, 2010
Identifiy big swing in prices
The Oxen Report: Five Keys to Fundamental Day Trading
Identifying the Fundamentals
Stocks move under the influence various factors that we can use to identify stocks that are likely to move 3-5% in a single day. Even the best technicals seldom give you 5% upward (or downward) movements intraday alone, but combined with fundamental factors, we can find stocks that are likely to make these large daily moves.
To begin to seek that perfect stock or ETF, we first need to look for something that can propel a stock or, in the case ETFs, the represented sector. This 3-5% movement is not from the previous day’s close, but between the market’s open and close. We want to identify a stock that can be bought sometime in the morning to give us that significant movement by the end of the day. The first type of information that is prone to easily move stocks is earnings.
1. Earnings
There are multiple ways to play a company’s earnings. One of the most effective ways to invest based on earnings is after a company has already announced their earnings. We are looking for earnings that were surprising, especially ones that say something about a sector.
For example, if one company announces positive earnings because it had a large profit from a lawsuit, this information does not tell us much about the earnings potential of the sector in general. However, if an important company in a sector has positive earnings due to an increase in sales or because it saw higher demand than anticipated, this information is more telling of its sector as a whole, and the news may move many similarly situated stocks.
We like the sector-telling earnings because it suggests something about the sector is most likely bullish (or bearish). For example, if Burger King Holdings Inc. (BKC) reported earnings and noted that they were seeing increased demand for fast food because customers were cutting back on more expensive restaurants, this would suggest a general transferring of food money from high-end restaurants to fast food. This information should propel not only BKC, but also McDonald’s (MCD) and Wendys/Arbys Group (WEN). The positive earnings may benefit companies that are closely related to the reporting company. Typically, we do not want to invest for a single day-trade in the specific company that reported the earnings. The reporting company is likely to gap up the next morning and have less room to run due to the large jump up from the closing price.
Instead, we look for competitors that will profit from the good news. Take for example, J. Crew Group Inc. (JCG) and Gap Inc. (GPS). On May 28, 2009, J. Crew, in after hours, announced earnings that significantly exceeded estimates when it reported an earnings per share at 0.34 EPS. The street was estimating 0.11 EPS. This was seriously bullish news for JCG. The next day the stock jumped 26.4%. The stock gapped up so heavily that traders jumping on in the morning missed most of that movement. So, in the morning, the Oxen Group recommended Gap Inc., a close competitor of JCG, especially with their Banana Republic line. On the same day, GPS moved up almost 5%. The Oxen Group was able to get in at the beginning of the day while the stock was still at a low price, and then ride the wave upwards.
We find that earnings releases can be used to make gains on competitor companies because the competitors’ stock often reacts slower than that of the company releasing the earnings. We look for competitors that have similar product lines. The same is true in the reverse direction. If a company bombs estimates, many similar companies will be pulled down with it, providing us with a good shorting opportunity.
Additionally, extremely good earnings in an important company within a particular sector may suggest a day-trade with an ETF that models the sector. In the case of JCG, related retail ETFs are sparse and have low volume, not the best vehicles for trading. But with an energy or financial company, sector ETFs are heavily traded, and playing an ETF the same way we played Gap could be very profitable.
In summary, earnings can be a very solid fundamental bull or bear signals for a single day-trade. However, earnings do not come out everyday. Where else can one look when trying to identify a bullish or bearish fundamental trade for the next day?
2. Upgrades/Downgrades
Upgrades and downgrades are extremely powerful mechanisms that can propel a stock up or down significantly. Ratings can move a stock up or down anywhere from 1% to 10% depending on the rating company’s significance, the ratings change, and the company being rated. Moody’s, S&P, Credit Suisse, Goldman Sachs, Morgan Stanley, and Fitch are rating companies that are particularly significant. Smaller equity firms tend to have less impact on a stock’s next day movement. Upgrades and downgrades typically come in the morning or intraday. However, when they do come in the evening, they work in the same way as earnings - an upgrade can give rise to a sizable stock movement.
An upgrade or downgrade will have a strong effect on an entire sector if it has something to do with the broader picture. If a company gets downgraded because of risky investments or bad credit, it is not likely to bring down its competitors. However, if the downgrade is due to lower sales expectations, its competitors are more likely to trade down in sympathy.
For example, on Saturday, June 6, 2009, Torchmark Corp. (TMK), an insurance company, was downgraded by Fitch Ratings for bad investments as well as a sector wide decline in the ability for insurance companies to be profitable in this market. All the insurers ended in the red, most likely due to the questioning of insurance companies’ profitability in general. Obviously, a multitude of factors go into companies within a sector, but upgrades and downgrades can be very significant in predicting the movement of single stocks and sectors.
3. Foreign Markets
Another way to gage how well a stock may do the next day is to see what is going on in foreign markets. Typically, this will have the most impact on commodities, such as oil, and products that are sold overseas or overseas companies that have a PLC or ADR on the American stock exchange system.
For example, oil, oil and gas stocks, oil and gas ETFs, and anything that has to do with oil will be affected by changes in the price of oil. What the oil market is doing overseas can be a great fundamental predictor of what the oil sector will be doing when our markets open.
For example, if the oil inventories are skyrocketing in Asia, demand is down, and the price of oil plummets in the Hang Seng and Nikkei, this will have an effect on the NYMEX. In our globalized world, what happens in one country affects us all. If oil demand is dropping in China, any company connected to selling gas or pumping oil out of China will be impacted by the demand drop. The price of oil will be affected negatively, which will in turn negatively affect other oil companies, oil producers, and ETFs.
The same is true, in reverse. On June 1, 2009, The Oxen Group recommended Toyota Motors Corp. ADR (TM). The company, in Asia, had skyrocketed due to booming Prius sales in Japan that were significant in Japan’s extremely weak consumer economy. Therefore, if Japan was able to do well with the Prius, one might conclude that while the car may not have done as well in America, it was bullish news that would positively affect the ADR. It was not so directly bullish, however, that it would send the stock up 5-6% out of the gates, and we would never have a chance to buy in. The stock did gap up, moved back, we were able to get in and make 2% off the ADR for the day.
4. Financial News
News can come in many ways and can be fundamentally bullish or bearish. Often, big news stories comes out intraday and move stocks so quickly that the opportunity is gone by the time you see it. Though intraday opportunities may vanish as quickly as they arise, investors should be looking for news after hours that may be significant enough to help a stock or a sector, as a whole, the next day.
For example, one of my favorite pieces of news to use to invest is box office weekends. The company that owns the movie that wins the box office tends to have a very good day on the Monday after that weekend, especially if the movie’s success was extremely bullish and surprisingly. For example, on May 29-31 "Up" won the box office and it was the third largest revenue maker for a Disney-Pixar animated flick, coming in way above estimates. It sent the stock up a solid 4% on that Monday simply based on that fundamentally bullish news. On June 5-7, "Up" retained the top spot but the news was less significant. Disney ended June 8, 2009 without the 4% gain and finished sideways.
News has to be significant to truly propel a stock. However, if the news is too large and too visible, the stock may jump too fast to buy it at a good entry point.
One of the interesting ways to use news is with a sector ETF. For example, if on a given day, in after hours, three or four major financial companies have some bearish news, it may be a good time to buy into an inverse ETF that will move in the opposite direction to the financial sector in general.
In trading news, however, be careful. It does not always have the effect you expect.
5. Futures
The final key telling-signal of fundamental bullishness or bearishness is the futures market for the Dow, S&P, and Nasdaq. These markets open at 12 AM on trading days and trade until the start of the session. The futures markets can give an investor a general sense of market direction.
For example, suppose you are excited about Dryships Inc. (DRYS) because the shipping indexes are jumping up significantly in Asia. At the same time, though, the futures are significantly in the red for the coming trading day, due to a multitude of bearish news and earnings that were reported the afternoon and night before for the American market. This could really hinder DRYS’s movement the next day because the market is in the red.
In the reverse, futures can help you feel more confident that a stock with fundamentally bullish indicators could continue upwards when the market is looking healthy. Futures are a helpful indicator to determine if a stock will be a good or bad day trade; they’re definitely worth considering.
So, there you have it — the five fundamental indicators to help you identify the perfect day trade. There are a number of other indicators that go into any trade. Technicals are very relevant, the entry and exits are important. The fundamentals are the start of the ability for a stock to move up. The patterns that were identified in the piece should help you find and search out stocks that would be bullish.
Everyday, the Oxen Group chooses our Oxen Picks starting with the ideas above.
The final piece of advice to keep in your tool belt is to stay confident in your picks. If you have done the research and the evidence is there for the stock to move up, then you should feel confident that your ideas will work. If it does not work to perfection, it is okay because if you keep identifying fundamentals, it will work more often than not.
Identifying the Fundamentals
Stocks move under the influence various factors that we can use to identify stocks that are likely to move 3-5% in a single day. Even the best technicals seldom give you 5% upward (or downward) movements intraday alone, but combined with fundamental factors, we can find stocks that are likely to make these large daily moves.
To begin to seek that perfect stock or ETF, we first need to look for something that can propel a stock or, in the case ETFs, the represented sector. This 3-5% movement is not from the previous day’s close, but between the market’s open and close. We want to identify a stock that can be bought sometime in the morning to give us that significant movement by the end of the day. The first type of information that is prone to easily move stocks is earnings.
1. Earnings
There are multiple ways to play a company’s earnings. One of the most effective ways to invest based on earnings is after a company has already announced their earnings. We are looking for earnings that were surprising, especially ones that say something about a sector.
For example, if one company announces positive earnings because it had a large profit from a lawsuit, this information does not tell us much about the earnings potential of the sector in general. However, if an important company in a sector has positive earnings due to an increase in sales or because it saw higher demand than anticipated, this information is more telling of its sector as a whole, and the news may move many similarly situated stocks.
We like the sector-telling earnings because it suggests something about the sector is most likely bullish (or bearish). For example, if Burger King Holdings Inc. (BKC) reported earnings and noted that they were seeing increased demand for fast food because customers were cutting back on more expensive restaurants, this would suggest a general transferring of food money from high-end restaurants to fast food. This information should propel not only BKC, but also McDonald’s (MCD) and Wendys/Arbys Group (WEN). The positive earnings may benefit companies that are closely related to the reporting company. Typically, we do not want to invest for a single day-trade in the specific company that reported the earnings. The reporting company is likely to gap up the next morning and have less room to run due to the large jump up from the closing price.
Instead, we look for competitors that will profit from the good news. Take for example, J. Crew Group Inc. (JCG) and Gap Inc. (GPS). On May 28, 2009, J. Crew, in after hours, announced earnings that significantly exceeded estimates when it reported an earnings per share at 0.34 EPS. The street was estimating 0.11 EPS. This was seriously bullish news for JCG. The next day the stock jumped 26.4%. The stock gapped up so heavily that traders jumping on in the morning missed most of that movement. So, in the morning, the Oxen Group recommended Gap Inc., a close competitor of JCG, especially with their Banana Republic line. On the same day, GPS moved up almost 5%. The Oxen Group was able to get in at the beginning of the day while the stock was still at a low price, and then ride the wave upwards.
We find that earnings releases can be used to make gains on competitor companies because the competitors’ stock often reacts slower than that of the company releasing the earnings. We look for competitors that have similar product lines. The same is true in the reverse direction. If a company bombs estimates, many similar companies will be pulled down with it, providing us with a good shorting opportunity.
Additionally, extremely good earnings in an important company within a particular sector may suggest a day-trade with an ETF that models the sector. In the case of JCG, related retail ETFs are sparse and have low volume, not the best vehicles for trading. But with an energy or financial company, sector ETFs are heavily traded, and playing an ETF the same way we played Gap could be very profitable.
In summary, earnings can be a very solid fundamental bull or bear signals for a single day-trade. However, earnings do not come out everyday. Where else can one look when trying to identify a bullish or bearish fundamental trade for the next day?
2. Upgrades/Downgrades
Upgrades and downgrades are extremely powerful mechanisms that can propel a stock up or down significantly. Ratings can move a stock up or down anywhere from 1% to 10% depending on the rating company’s significance, the ratings change, and the company being rated. Moody’s, S&P, Credit Suisse, Goldman Sachs, Morgan Stanley, and Fitch are rating companies that are particularly significant. Smaller equity firms tend to have less impact on a stock’s next day movement. Upgrades and downgrades typically come in the morning or intraday. However, when they do come in the evening, they work in the same way as earnings - an upgrade can give rise to a sizable stock movement.
An upgrade or downgrade will have a strong effect on an entire sector if it has something to do with the broader picture. If a company gets downgraded because of risky investments or bad credit, it is not likely to bring down its competitors. However, if the downgrade is due to lower sales expectations, its competitors are more likely to trade down in sympathy.
For example, on Saturday, June 6, 2009, Torchmark Corp. (TMK), an insurance company, was downgraded by Fitch Ratings for bad investments as well as a sector wide decline in the ability for insurance companies to be profitable in this market. All the insurers ended in the red, most likely due to the questioning of insurance companies’ profitability in general. Obviously, a multitude of factors go into companies within a sector, but upgrades and downgrades can be very significant in predicting the movement of single stocks and sectors.
3. Foreign Markets
Another way to gage how well a stock may do the next day is to see what is going on in foreign markets. Typically, this will have the most impact on commodities, such as oil, and products that are sold overseas or overseas companies that have a PLC or ADR on the American stock exchange system.
For example, oil, oil and gas stocks, oil and gas ETFs, and anything that has to do with oil will be affected by changes in the price of oil. What the oil market is doing overseas can be a great fundamental predictor of what the oil sector will be doing when our markets open.
For example, if the oil inventories are skyrocketing in Asia, demand is down, and the price of oil plummets in the Hang Seng and Nikkei, this will have an effect on the NYMEX. In our globalized world, what happens in one country affects us all. If oil demand is dropping in China, any company connected to selling gas or pumping oil out of China will be impacted by the demand drop. The price of oil will be affected negatively, which will in turn negatively affect other oil companies, oil producers, and ETFs.
The same is true, in reverse. On June 1, 2009, The Oxen Group recommended Toyota Motors Corp. ADR (TM). The company, in Asia, had skyrocketed due to booming Prius sales in Japan that were significant in Japan’s extremely weak consumer economy. Therefore, if Japan was able to do well with the Prius, one might conclude that while the car may not have done as well in America, it was bullish news that would positively affect the ADR. It was not so directly bullish, however, that it would send the stock up 5-6% out of the gates, and we would never have a chance to buy in. The stock did gap up, moved back, we were able to get in and make 2% off the ADR for the day.
4. Financial News
News can come in many ways and can be fundamentally bullish or bearish. Often, big news stories comes out intraday and move stocks so quickly that the opportunity is gone by the time you see it. Though intraday opportunities may vanish as quickly as they arise, investors should be looking for news after hours that may be significant enough to help a stock or a sector, as a whole, the next day.
For example, one of my favorite pieces of news to use to invest is box office weekends. The company that owns the movie that wins the box office tends to have a very good day on the Monday after that weekend, especially if the movie’s success was extremely bullish and surprisingly. For example, on May 29-31 "Up" won the box office and it was the third largest revenue maker for a Disney-Pixar animated flick, coming in way above estimates. It sent the stock up a solid 4% on that Monday simply based on that fundamentally bullish news. On June 5-7, "Up" retained the top spot but the news was less significant. Disney ended June 8, 2009 without the 4% gain and finished sideways.
News has to be significant to truly propel a stock. However, if the news is too large and too visible, the stock may jump too fast to buy it at a good entry point.
One of the interesting ways to use news is with a sector ETF. For example, if on a given day, in after hours, three or four major financial companies have some bearish news, it may be a good time to buy into an inverse ETF that will move in the opposite direction to the financial sector in general.
In trading news, however, be careful. It does not always have the effect you expect.
5. Futures
The final key telling-signal of fundamental bullishness or bearishness is the futures market for the Dow, S&P, and Nasdaq. These markets open at 12 AM on trading days and trade until the start of the session. The futures markets can give an investor a general sense of market direction.
For example, suppose you are excited about Dryships Inc. (DRYS) because the shipping indexes are jumping up significantly in Asia. At the same time, though, the futures are significantly in the red for the coming trading day, due to a multitude of bearish news and earnings that were reported the afternoon and night before for the American market. This could really hinder DRYS’s movement the next day because the market is in the red.
In the reverse, futures can help you feel more confident that a stock with fundamentally bullish indicators could continue upwards when the market is looking healthy. Futures are a helpful indicator to determine if a stock will be a good or bad day trade; they’re definitely worth considering.
So, there you have it — the five fundamental indicators to help you identify the perfect day trade. There are a number of other indicators that go into any trade. Technicals are very relevant, the entry and exits are important. The fundamentals are the start of the ability for a stock to move up. The patterns that were identified in the piece should help you find and search out stocks that would be bullish.
Everyday, the Oxen Group chooses our Oxen Picks starting with the ideas above.
The final piece of advice to keep in your tool belt is to stay confident in your picks. If you have done the research and the evidence is there for the stock to move up, then you should feel confident that your ideas will work. If it does not work to perfection, it is okay because if you keep identifying fundamentals, it will work more often than not.
Thursday, March 18, 2010
Appreciating the Yuan
First, no country including US has the right to tell other countries to appreciate their currency. The era of ‘you’re either my puppet or my enemy’ is long past and Obama is still living in the past glory. He blames China for all our ills, as he cannot fix our problems.
Keeping the Yuan low actually helps US's consumers and US in buying wind turbines or HSRs from China at lower prices. Not to mention the huge loans from China. China does not want to withdraw the bad loans as they do not want to kill the goose that lays the golden eggs.
The major products of China and US are not the same, so there are no direct competitions. If we do not buy the products from China, most likely we'll buy same products from Mexico or India.
Until China builds up its local market for its growing middle class, I do not see Yuan will appreciate by more than 5% a year.
A strong China is good for the world including US! China is just one part of the global economy. The other players are research companies from the west and the US, oil from Middle East and Africa, and commodities from Australia, Brazil… Everyone benefits including the consumers in every country.
Lord Obama and his 'advisers' including Uncle Ben and Tiny Tim can do a lot of good if they looked longer-term (more than 4 years for re-election). To give generous welfare to buy votes and creating jobs for the lazy government servants are definitely not good for the country. Have we learned from California?
Throwing money on HSR is stupid and reckless without calculating basic return of the investment. China is successful with HSR due to its dense population, but not here.
Keeping the Yuan low actually helps US's consumers and US in buying wind turbines or HSRs from China at lower prices. Not to mention the huge loans from China. China does not want to withdraw the bad loans as they do not want to kill the goose that lays the golden eggs.
The major products of China and US are not the same, so there are no direct competitions. If we do not buy the products from China, most likely we'll buy same products from Mexico or India.
Until China builds up its local market for its growing middle class, I do not see Yuan will appreciate by more than 5% a year.
A strong China is good for the world including US! China is just one part of the global economy. The other players are research companies from the west and the US, oil from Middle East and Africa, and commodities from Australia, Brazil… Everyone benefits including the consumers in every country.
Lord Obama and his 'advisers' including Uncle Ben and Tiny Tim can do a lot of good if they looked longer-term (more than 4 years for re-election). To give generous welfare to buy votes and creating jobs for the lazy government servants are definitely not good for the country. Have we learned from California?
Throwing money on HSR is stupid and reckless without calculating basic return of the investment. China is successful with HSR due to its dense population, but not here.
Tuesday, March 16, 2010
Dividend growth stocks
Working to summarize the blog on this topic from http://seekingalpha.com/article/193345/comments?v=1268663941&source=tracking
------
I'm a swing trader, so I do not pay much attention on dividends. However, I feel there is a place in our portfolio and do not have to sell them (just pass them to our heirs). Here are some random thoughts.
----
From my own research via over 250 searches (one search is one screen) and over many simulations (one simulation running all 250 searches for a period), dividend-growth stocks are never in the top-performing 10% in all phases of the market cycle. Yes, dividend-growth stocks should indicate a company is successful, but also indicates the company does not know how to re-invest the money (debatable). One man's research.
Total Return = Stock Appreciation + Dividend - Taxes
The simulations may miss the dividend part, so I need to add about 2% for the return for these stocks.
Taxes are more complicated as long-term and short-term appreciations and dividends could be different. Your state residence and your tax bracket make a difference too. The winning stocks will have the cost basis step down to the day you die, so most likely it is a tax advantage.
----------
Diversify as most bank stocks belong to this group before the crash.
---------
Hints from another investor:
So my conclusions/summary so far is:
1) Can't guess the market's direction.
2) For the average guy like me who can't pick stocks or time market, over the long term Div Growth Stocks are the best place to be.
3) Preferably buy them when their evaluation vs others in sector and their sector vs other sector's evaluations are low (out of favor) and the collary, sell them when both evaluations are high (when they are darlings).
4) Diversify into several div growth stocks, (I'm Canadian but live in Houston and when retire will probably be in Canada with travel in Europe and Asia and thus should diversify out of US into several countries or in global companies).
5) When possible, avoid the big failures like GE & C.
(Any corrections appreciated)
------------
It is not hard to write a search on the stocks that increase dividend yield every year.
------
I'm a swing trader, so I do not pay much attention on dividends. However, I feel there is a place in our portfolio and do not have to sell them (just pass them to our heirs). Here are some random thoughts.
----
From my own research via over 250 searches (one search is one screen) and over many simulations (one simulation running all 250 searches for a period), dividend-growth stocks are never in the top-performing 10% in all phases of the market cycle. Yes, dividend-growth stocks should indicate a company is successful, but also indicates the company does not know how to re-invest the money (debatable). One man's research.
Total Return = Stock Appreciation + Dividend - Taxes
The simulations may miss the dividend part, so I need to add about 2% for the return for these stocks.
Taxes are more complicated as long-term and short-term appreciations and dividends could be different. Your state residence and your tax bracket make a difference too. The winning stocks will have the cost basis step down to the day you die, so most likely it is a tax advantage.
----------
Diversify as most bank stocks belong to this group before the crash.
---------
Hints from another investor:
So my conclusions/summary so far is:
1) Can't guess the market's direction.
2) For the average guy like me who can't pick stocks or time market, over the long term Div Growth Stocks are the best place to be.
3) Preferably buy them when their evaluation vs others in sector and their sector vs other sector's evaluations are low (out of favor) and the collary, sell them when both evaluations are high (when they are darlings).
4) Diversify into several div growth stocks, (I'm Canadian but live in Houston and when retire will probably be in Canada with travel in Europe and Asia and thus should diversify out of US into several countries or in global companies).
5) When possible, avoid the big failures like GE & C.
(Any corrections appreciated)
------------
It is not hard to write a search on the stocks that increase dividend yield every year.
Wednesday, March 3, 2010
Coming crisis
If history teaches us anything, it’s that when even ONE major government defaults on its debts, economic chaos follows. Unfortunately, it’s a lesson that few investors have learned.
The truth is, when investors even suspect that such a thing could happen, the economic damage can be crippling. The following crisis unfolds in four, quick steps:
FIRST, since a sovereign debt default would inevitably cause ALL bonds to crash, investors stampede for the bond market exits, dumping as much as they can as fast as they can.
SECOND, as the bond market reels, interest rates skyrocket and credit tightens. The rates on 30-year fixed-rate mortgages, auto loans and other long-term debts soar. Rates tied to short-term money markets — on credit cards and variable mortgages — follow.
THIRD, consumers — whose spending represents fully 70% of the economy — snap their pocketbooks shut.
FOURTH, corporate earnings and stock prices crater. As the economy hits the skids, unemployment soars.
Clearly, these events would be the coup de grâce to an economic recovery as fragile as this one is.
They would almost surely transform a Great Recession into a Great DOUBLE-DIP Recession ...
Plunging us into the second bear market in three years ...
Lighting the fuse on a second explosion in unemployment, and ...
Triggering a second surge in personal and corporate bankruptcies.
Indeed ...
This disturbing scenario is already
beginning to unfold before our very eyes —
not just in ONE major Western country,
but in TEN of them!
We’ve known for some time that Italy and Ireland are at risk for default — and just this week, we saw how investors’ fears have caused them to begin dumping British pounds and gilts (bonds) like there’s no tomorrow.
Plus, the soaring cost of Credit Default Swaps — “insurance policies” that protect investors against default — on the debt of Greece, Portugal, Romania, Lithuania, Latvia, Iceland and the Ukraine is a clear sign that investors believe they are also at elevated risk of default.
Put simply, it would only take ONE sovereign debt default to crush this anemic recovery ... but no fewer than TEN major Western countries are now at risk!
What’s more, no fewer than THREE powerful forecasting tools are confirming that a great bond market conflagration, stock market decline and double-dip recession are now on the horizon ...
CYCLICAL ANALYSIS CONFIRMS IT: The cycles identified by the Foundation for the Study of Cycles have accurately anticipated nearly every major shift in market direction ... in every major asset class ... in advance ... for 39 years.
* And now, as the Foundation’s Research Director, Richard Mogey and I demonstrated in Nine Shocking New Forecasts for 2010-2012, the current cyclical analysis is confirming that a major new decline in the economy is coming later this year.
* U.S. stocks will decline starting this year and continue falling in a zigzag pattern through 2012.
* The U.S. dollar index may continue to firm somewhat as the European debt crisis drives investors into dollar-denominated investments. But then the greenback will collapse until late 2011 as the U.S. sovereign debt crisis runs its course.
* Serving in its capacity as a global crisis hedge, gold will skyrocket FAR higher than $2,000 per ounce by the end of 2011.
* Crippled by soaring interest rates due to the U.S. debt crisis, our economy will suffer a devastating double-dip recession in 2011.
POLITICAL ANALYSIS CONFIRMS IT: If the rise of the Tea Party movement or the results of recent elections in Massachusetts mean anything at all, it’s that many Americans are fighting mad.
They’re fed up with Washington’s bailouts of failed bankers and CEOs ... skyrocketing federal deficits and debts ... out-of-control borrowing by the Treasury ... mindless money-printing by the Federal Reserve ... and now, the specter of higher taxes ahead.
The handwriting is on the wall: With midterm Congressional elections only seven, short months away, any politician who votes for more of the same is practically begging to be thrown out of office.
That means the days of Washington bailouts and stimulus are numbered. And that, in turn, means that the momentary economic stability which that spending bought will soon come to an end.
VOLATILITY ANALYSIS CONFIRMS IT: Right now, the volatility indicators professional traders rely on — in the bond market ... in currencies ... and more — are signaling that the economic stability and investment trends most investors have depended on for the last year or so are coming to an end.
The smart money is now beginning to bet on major directional shifts in all major asset classes — and on the recovery coming unraveling before our very eyes.
Our conclusion is clear:
Huge investment dangers
and enormous profit opportunities
directly ahead!
All of this promises both unprecedented dangers and unprecedented profit opportunities that few investors understand — in every single asset class, including gold, stocks, bonds, currencies and more.
In fact, it’s with precisely this scenario in mind that we created our Million-Dollar Rapid Growth Portfolio: To help you protect yourself and profit in the chaotic days ahead.
Since 1971, the time-honored, scientific research upon which the portfolio is based — from the Foundation for the Study of Cycles — has anticipated almost every major directional shift in stocks, gold, bonds, commodities and currencies.
And based on my analysis of the Foundation’s materials published long before each major market turn, I calculate that, when applied to a diversified portfolio, their research could have helped you ...
* Beat the S&P 500 four to one ...
* Enjoy 18 consecutive winning years since 1992 ...
* Multiply your money more than 25 times over since 1971 ...
* And turn $10,000 into more than $258,000 ... $100,000 into nearly $2.6 million ... or $1 million into more than $25.8 million ...
* In nearly every imaginable investing environment — even as investors who trusted Washington and Wall Street lost their shirts!
In fact, Dr. Weiss is so confident in this revolutionary approach to building the optimal growth portfolio, he’s putting his money where his mouth is, using this strategy to invest $1 million. And I am personally investing some of my funds as well.
The best part: The Weiss Million-Dollar Rapid Growth Portfolio gives you the opportunity to invest your money the way I invest mine, with one major exception:
You can actually beat us to the punch by getting two full business days’ notice before we buy or sell anything!
The sheer size and power of this great debt crisis make this the ideal time to begin trading
a rapid growth portfolio.
In fact, I’m already eyeing an ingenious trade that’s designed to profit BOTH when the euro collapses AND when gold prices explode! I’ll give you explicit instructions on precisely how to make this trade.
And in each Trading Alert I send you, I will ...
* Name the asset classes the Foundation’s signals have identified as having the richest profit potential now ...
* Reveal what percentage of our capital I’ll invest in each asset class ...
* Name the individual vehicles — the stocks and ETFs — I’m recommending in each asset class ...
* Give you the precise percentage of your money to invest in each vehicle.
The truth is, when investors even suspect that such a thing could happen, the economic damage can be crippling. The following crisis unfolds in four, quick steps:
FIRST, since a sovereign debt default would inevitably cause ALL bonds to crash, investors stampede for the bond market exits, dumping as much as they can as fast as they can.
SECOND, as the bond market reels, interest rates skyrocket and credit tightens. The rates on 30-year fixed-rate mortgages, auto loans and other long-term debts soar. Rates tied to short-term money markets — on credit cards and variable mortgages — follow.
THIRD, consumers — whose spending represents fully 70% of the economy — snap their pocketbooks shut.
FOURTH, corporate earnings and stock prices crater. As the economy hits the skids, unemployment soars.
Clearly, these events would be the coup de grâce to an economic recovery as fragile as this one is.
They would almost surely transform a Great Recession into a Great DOUBLE-DIP Recession ...
Plunging us into the second bear market in three years ...
Lighting the fuse on a second explosion in unemployment, and ...
Triggering a second surge in personal and corporate bankruptcies.
Indeed ...
This disturbing scenario is already
beginning to unfold before our very eyes —
not just in ONE major Western country,
but in TEN of them!
We’ve known for some time that Italy and Ireland are at risk for default — and just this week, we saw how investors’ fears have caused them to begin dumping British pounds and gilts (bonds) like there’s no tomorrow.
Plus, the soaring cost of Credit Default Swaps — “insurance policies” that protect investors against default — on the debt of Greece, Portugal, Romania, Lithuania, Latvia, Iceland and the Ukraine is a clear sign that investors believe they are also at elevated risk of default.
Put simply, it would only take ONE sovereign debt default to crush this anemic recovery ... but no fewer than TEN major Western countries are now at risk!
What’s more, no fewer than THREE powerful forecasting tools are confirming that a great bond market conflagration, stock market decline and double-dip recession are now on the horizon ...
CYCLICAL ANALYSIS CONFIRMS IT: The cycles identified by the Foundation for the Study of Cycles have accurately anticipated nearly every major shift in market direction ... in every major asset class ... in advance ... for 39 years.
* And now, as the Foundation’s Research Director, Richard Mogey and I demonstrated in Nine Shocking New Forecasts for 2010-2012, the current cyclical analysis is confirming that a major new decline in the economy is coming later this year.
* U.S. stocks will decline starting this year and continue falling in a zigzag pattern through 2012.
* The U.S. dollar index may continue to firm somewhat as the European debt crisis drives investors into dollar-denominated investments. But then the greenback will collapse until late 2011 as the U.S. sovereign debt crisis runs its course.
* Serving in its capacity as a global crisis hedge, gold will skyrocket FAR higher than $2,000 per ounce by the end of 2011.
* Crippled by soaring interest rates due to the U.S. debt crisis, our economy will suffer a devastating double-dip recession in 2011.
POLITICAL ANALYSIS CONFIRMS IT: If the rise of the Tea Party movement or the results of recent elections in Massachusetts mean anything at all, it’s that many Americans are fighting mad.
They’re fed up with Washington’s bailouts of failed bankers and CEOs ... skyrocketing federal deficits and debts ... out-of-control borrowing by the Treasury ... mindless money-printing by the Federal Reserve ... and now, the specter of higher taxes ahead.
The handwriting is on the wall: With midterm Congressional elections only seven, short months away, any politician who votes for more of the same is practically begging to be thrown out of office.
That means the days of Washington bailouts and stimulus are numbered. And that, in turn, means that the momentary economic stability which that spending bought will soon come to an end.
VOLATILITY ANALYSIS CONFIRMS IT: Right now, the volatility indicators professional traders rely on — in the bond market ... in currencies ... and more — are signaling that the economic stability and investment trends most investors have depended on for the last year or so are coming to an end.
The smart money is now beginning to bet on major directional shifts in all major asset classes — and on the recovery coming unraveling before our very eyes.
Our conclusion is clear:
Huge investment dangers
and enormous profit opportunities
directly ahead!
All of this promises both unprecedented dangers and unprecedented profit opportunities that few investors understand — in every single asset class, including gold, stocks, bonds, currencies and more.
In fact, it’s with precisely this scenario in mind that we created our Million-Dollar Rapid Growth Portfolio: To help you protect yourself and profit in the chaotic days ahead.
Since 1971, the time-honored, scientific research upon which the portfolio is based — from the Foundation for the Study of Cycles — has anticipated almost every major directional shift in stocks, gold, bonds, commodities and currencies.
And based on my analysis of the Foundation’s materials published long before each major market turn, I calculate that, when applied to a diversified portfolio, their research could have helped you ...
* Beat the S&P 500 four to one ...
* Enjoy 18 consecutive winning years since 1992 ...
* Multiply your money more than 25 times over since 1971 ...
* And turn $10,000 into more than $258,000 ... $100,000 into nearly $2.6 million ... or $1 million into more than $25.8 million ...
* In nearly every imaginable investing environment — even as investors who trusted Washington and Wall Street lost their shirts!
In fact, Dr. Weiss is so confident in this revolutionary approach to building the optimal growth portfolio, he’s putting his money where his mouth is, using this strategy to invest $1 million. And I am personally investing some of my funds as well.
The best part: The Weiss Million-Dollar Rapid Growth Portfolio gives you the opportunity to invest your money the way I invest mine, with one major exception:
You can actually beat us to the punch by getting two full business days’ notice before we buy or sell anything!
The sheer size and power of this great debt crisis make this the ideal time to begin trading
a rapid growth portfolio.
In fact, I’m already eyeing an ingenious trade that’s designed to profit BOTH when the euro collapses AND when gold prices explode! I’ll give you explicit instructions on precisely how to make this trade.
And in each Trading Alert I send you, I will ...
* Name the asset classes the Foundation’s signals have identified as having the richest profit potential now ...
* Reveal what percentage of our capital I’ll invest in each asset class ...
* Name the individual vehicles — the stocks and ETFs — I’m recommending in each asset class ...
* Give you the precise percentage of your money to invest in each vehicle.
Subscribe to:
Comments (Atom)