Today's Market
by Dr Invest


Call me stupid, but why is Bernake going to keep putting tax money into bonds? After almost a month of analysts lauding the miraculous recovery of the market, declaring stocks ridiculously cheap at today's prices, and inciting all the scaredy-cats to spend their fortunes on stocks, it was reported:

The Federal Reserve has moved closer to embarking on a new round of its controversial money-pumping after the central bank and its chairman Ben Bernanke highlighted a grim outlook for the U.S. economy. 

Bernanke on Wednesday opened the door a bit wider for the Fed to return to buying securities in the months ahead to buttress a weak recovery and keep inflation from slipping too far below its newly adopted 2-percent target.

The Fed's announcement that it was unlikely to raise interest rates until at least late 2014, more than a year beyond its previous guidance, immediately pushed down Treasury bond yields and Bernanke's comments to the media raised expectations of a further round of so-called quantitative easing, or QE3.

With core inflation now at 1.7 percent and Fed officials forecasting unemployment to stay above 8 percent this year, many analysts took Bernanke's comments to mean QE3 is all but inevitable.

Please, help me understand "GRIM OUTLOOK". Is this akin "a great time to buy stocks"? What would you say if your financial advisor called you into his office, saying: "Ted, there is a GRIM OUTLOOK for your investments in 2012, but let's leave your money right where it is at."?

Listen, I don't want anyone to use the word, GRIM in respect to my money, my health, or anything else. Just the threat of manipulating the market yet again, reveals a hidden secret: "Economic growth is not as strong as the media has touted.

If you are in the market right now and your investments are growing, stay in the market. If you are out of the market right now, don't get in. We could keep on a roll another month, but with only a little bad news from Europe, the market could slip into some serious losses.

IRRATIONAL MARKETS

For educational purposes, the market doesn't care what the analysts and economists say. The only determinate for the price of the market is the market itself. The market is flippant and unpredictable. Winning means "following where the market takes you". In a strong market, stocks consistenly move upward in price, more than they move downward. In in a weak market, stocks consistently move downward in price, more than they move upward. If the market is GRIM, you don't want to be in that market.

WHAT CAN YOU STOMACH?

It is better to be out of the market wishing you were in, rather than in the market wishing you were out. This wisdom is only appreciated if you have put yourself into a position where you are losing money because you bought stocks at the wrong time and your stocks are declining. Why take a risk now, when at the end of  2012, I could buy stocks at a cheaper price and still gain 12 to 15%? Given the weakness in this economy, I could sleep better knowing that my money was not at risk.

(note: the above article is for entertainment purposes only and not to be used in anyway as investment advice.)

Today's Market
by Dr Invest


I know I have some faithful readers who are waiting to hear some good news in the markets. And yes, there are some who are making some money right now, and they need to since they lost 20% to 30% in 2011. You have to remember that the market closed just about even in 2011 and with a CPI of 3% (inflation), the overall market would have been around negative 3%. When you consider that most finanical advisors miss the market by 15% to 20%, it is no wonder that 2011 shows some very strong losses in portfolios.

Today, there are a host of voices saying, "It just can't get any worse. We have hit the bottom. Buy while stocks are low. These are the same voices that lost 20% of your portfolio in 2011. They still haven't learned. ICI.ORG shows that more money has moved out of Mutual Funds than ever before. People, just like me, are sitting on cash. Wall Street is wondering why people are not thowing their money into stocks. Don't listen to their chiding. Smart money (institutional investors) hasn't started investing into stocks yet, you would be wise to stay out of the market at this time.

WARNINGS ON THE ECONOMY

Wednesday, the World Bank warned of a possible slump in global economic growth and urged developing countries to prepare for shocks that could be more severe than the 2008 crisis.  Buying stocks right now is akin to swiming with the Alligators. I think for now I will stay out. Here is a bit more of the World Bank's analysis:

Global growth could be hurt by a recession in Europe and a slowdown in India, Brazil and other developing countries, the Washington-based bank said. It said conditions might worsen if more European countries are unable to raise money in financial markets. "The global economy is entering into a new phase of uncertainty and danger," said the bank's chief economist, Justin Yifu Lin. "The risks of a global freezing up of capital markets as well as a global crisis similar to what happened in September 2008 are real."                  
Many governments are in a weaker position than they were to respond to the 2008 global crisis because their debts and budget deficits are bigger, Lin said at a news conference. In the event of a major crisis, "no country will be spared," Lin said. "The downturn is likely to be longer and deeper than the last one."  The bank's outlook in its "Global Economic Prospects" report issued twice a year adds to mounting gloom amid Europe's debt crisis and high U.S. unemployment.

Closing Thoughts

Although I want to give you "good news", there is little to give. Stay away from stocks right now and don't get suckered into investment vehicles that are most likely to decline.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)



               

Today's Market
by Dr Invest


The talking heads are tell us how wonderful the market is and how that now is the time to empty your savings account of all the cash you have been protecting from market losses, investing while stocks are so cheap. After all, according to them, stocks will never be cheaper and to invest now is to guarantee that in only a few months you will be sitting on barrels of cash.

How long will it take for you to understand that you are being fed misinformation by people who want to take your money. When you hear, "everybody is buying" you are compelled to invest your own money. When you hear, "the economy has turned around, get in now or lose out" you feel that you will lose an opportunity to get into the market early.

Here is the secret, the volume of buyers in the stock market is not very high. This means that institutional traders are largely out. It is the day traders and beginners who are in the market right now. The market is going to turn down and when it does, there are going to be a lot of portfolio's hurt.

I want this market to reverse and move into a bull market. I want to set up my portfolio and see 2012 return 10%, 12%, even 14%. I am just like you, I want to put my money to work. But there are a number facts that point to a declining market. This is why I didn't immediately buy stock at the first part of January. So please, don't take my advice, but do your own research.

Here is the list:

• http://webreprints.djreprints.com/2812531083596.pdf
• http://advisorperspectives.com/dshort/commentaries/Conference-Board-ECRI-Leading-Indicator-Smackdown.php
• http://advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php
• http://hussmanfunds.com/wmc/wmc120109.htm
• http://www.pring.com/assets/pdfs/Interplay.pdf
• http://www.mcoscillator.com/learning_center/weekly_chart/dji_oscillator_rising_index_signals_trouble/

A careful look at the above articles reveal one truth: When you work through the math and statistics, our economy is very weak and incapable of sustaining itself. At this time, it would be very risky to invest your portfolio into stocks. Of special interest is the article by Van Hoisington in Barron's Magazine which is first in this list. Mr. Hoisington gives a candid overview of the present market conditions.

I do like simple trades and long positions because your investment doesn't lie, you get a simple clear picture of your advances. More sophisticated methods of OPTIONS and SHORT SELLING can be used, but this blog is for the beginner. Sadly, even the professional trader can often get lost in the complications of his trading, losing track of his real gains and losses. Many times it is not until the end of the year that the trader discovers the real outcome of his complicated trading methods. My experience is that the more complicated your trades become, the greater likelihood you will lose money. Using ETFs is a simple way to diversify and play down trends, buy why? Often there is a greedy motive, but why be greedy if you can see an increase in your portfolio by 30% after holding cash for a year and reinvesting when the marke is in an uptrend? Too often, the greedy trader will attempt various methods of trading at a time when the market is most unpredictable. Listen, even the professionals have not been able to squeeze a profit from 2011. Losing 20% on most portfolios, the professionals were not able to time their trades or change their trading style to win gains in 2011.

It may take another two or three months for the recession to show it's face. I suggested in past blogs that March is the likely month, but it could be earlier or later. And then it may not happen at all because the market has the last word on what the market does. The market is irrational.

For me, I will be happy to wait until the time is right and I feel that a gain is possible. Understanding that most of the gains occur from November to January, I can wait for the incredibly hot stock market to return me gains at that time.

(note: The above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

By all means, go to yesterday's blog. I am waiting to see where the market is going in January. Two rules I mentioned were: If the first five days of January ends down, the year will end down. Second, if January ends down, it confirms that the year will end down.

Because of the over-all weakness in the market and recent months of volatility, the concern is that the swell of hope now in the market will collapse, leaving inexperienced investors holding the tab. In a previous blog, I mentioned an important guage that you can use to determine the trend of the market.

That guage is the PRICE OF COPPER. Day Traders utilize the price of copper to determine a down-trend or up-trend in the market.



Here is the problem, COPPER IS IN A DOWN-TREND. The above chart shows the S&P 500 in an small up-trend, while copper is in a down-trend. To me, this does not look good. I would see this as a pre-cursor to a market decline.

Rather than a negative view, I prefer to stay netural at this time and watch. Remember, it is always better to be out of the market, wishing you were in; rather than being in the market, wishing you were out.

So this is the dilemma of 2012, will the market break sharply upward, will the market break sharply downward, or will we continue to move pathetically side ways. Only the market knows, and it is not telling. Perhaps the next weeks will reveal what is hidden from our view.

(note: The above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest


A lot of people want to know what is going on in this head of mine in 2012. I don't feel the need to press into investments until the time is right, that one characteristc has paid off some great dividends for me.

What I am looking for a trend. Here are some rules worth remembering in JANUARY of each year. If you look at the performance of the first five trading days in January, since 1950, an incredibly accurate pattern emerges. January's first five trading days preceded full-year gains 86.8% of the time! If the first five trading days end up, the entire year will close up. If the first five trading days end down, the entire year will close down.

Second, if you look at the performance of the entire month of January, since 1950, another awesome pattern emerges that can really help your trading. The entire month of January has preceded full-year gains 88.5% of the time! If the entire month of January ends down, the entire year will close down. If the entire month of January ends up, the entire year will end up.

Perhaps you now know why I am not jumping into the market, after all, good times for the market still remains until MAY. (The trader's rule: Go away in May, come back another day.")  If January is down, then there is a large likelihood that bad times will gather until November. I don't want to get caught in bearish crush if I can avoid it.

Concerns for Bad Stock Weather

Look, if the sky is dark and lightning is flashing, it is not the time for a picnic. You can still take a picnic, but you have to be prepared for wind, rain, and the potential storm to come. Along with the storm will come confusion, anger, and the resulting depression. It is the reverse of the joy and enjoyment you had hoped for.

The market has reflected stormy weather since August. Eventhough we have seen an eratic rise in the DOW, it is not indicative of an up trend in the market. Bernake has already warned of a tepid market and the potential slide into a recession.

While the NEWS MEDIA have talked up the fabulous up trend in the market, the Federal Bank, today, sent a white paper to Congress asking that they take some specific steps to help the housing market.

The U.S. Federal Reserve on Wednesday called for more action to stabilize the nation's ailing housing market, warning that failure to do so could harm the broader economy. In a 26-page white paper sent to Congress, the Fed outlined several potential ways to stabilize the housing market, many of which are already under discussion or being implemented by the Obama administration and housing regulators.

Read more: http://www.nasdaq.com/aspx/company-news-story.aspx?storyid=201201041417dowjonesdjonline000559&title=feds-bernanke-tells-lawmakers-more-action-needed-to-fix-housing#ixzz1iYHgQadQ

Please help me to understand this. If the stock market is in such a rally in 2012, why would Bernake be requesting help from Congress to stabilize the nation's ailing house market? I am not being an extremist, but a realist. Housing is in NO WAY turning around; the EuroEconomy is teetering on the brink, the economy is at best tepid, and the economic boosts and temporary rise in employment  from the recent Christmas season will be forgotten at the reports of the further economic and employment declines.

Let me be clear, I am not on the gloom and doom page with certain economists and analysts. I see the U.S. economy as very resilient. Yes, cuts are necessary to reduce this nation's debt and some changes must be made to our tax structure to resume an orderly trend in the market.

But as I have already said, the stock market weather looks bad and I would rather stay inside. Should the skies clear and the sun shine again, I would be more interested in returning to equities until May.

Over the next few weeks, I will make some suggestions on an immediate investment course that should be less volatile than individual stocks and less volatile than individual bonds. I have already hinted that there are some ETF's that can be purchased like stocks, can utilize a STOP-SELLs, and can be easily sold.

Many finanical institutions will sell you and indiviual bond, which you will either hold to maturity or try to sell on the market. You will buy that bond with a 2%, 4%, or 6% return, but when the market heats up and inflation climbs, the new bonds will be sold at 8%, 10%, or 12%. What will you do with your bond then? Will you keep your bond, paying you 2%, when every one else has bonds returning 12%? To whom will you sell your bond? Here is what you will do, you will sell you bond to someone else, taking a loss on your 2% gain and taking another 4%, 6%, or 8% loss from the initial investment, so you can reinvest your money elsewhere.

If you have a Bond EFT like BND, you don't have to go to the bank to sell, if the bond moves down, you simply sell it at your on-line brokerage. Another feature is that the EFT bond contains many different bonds and so is diversified. A stock ETF like VTI, contains a cross section of U.S. stocks. This kind of diversity brings you better protection if the EFT is bought and sold carefully. This kind of investment is not difficult and can bring remarkable returns if you follow some basic rules. More later, but now is not the time to invest. Perhaps later, depending on the weather.

(note: The above article is for entertainment only and not to be used as investment advice.)

Today's Market
by Dr Invest

Many of you have wondered what was the final outcome of my Christmas trades. I started the trades in the first week of November, selling the last stock just before the New Year.

The tone of the market over the two month period was very volatile with broad swings up and down. Many traders LOST MONEY. At one time, ALL my stocks neared the 6% STOP-SELL. Had the market continued downward only ONE MORE DAY, I would have experienced a 6% loss across all my investments.

STOCKS

FDO - Family Dollar was SOLD with a 1.72% gain
DLTR - Dollar Tree was SOLD with a 4.93% gain
CATM - Cardtronics ATM was SOLD with a 12.98% gain
TRADING IN 2012

Here is my suggestion. STAY AWAY FROM THE MARKET. If the market shows some upward trend over the next two months, it could be a good time to re-enter the market. It is hard for some people to understand that there are just good times to be out of the market. By the end of February, there will be some good buying opportunities because of SEASONAL TRENDS. For instance, farmers plant... they use seed and fertilize. That means that seed companies and fertilizer companies will be a positive buy.

Over the next few weeks, I will be writing about some trading ideas. ETFs, when properly entered and properly sold can provide some very reasonable returns. Last year, a portfolio of TIP, BND, VNQ, and VTI, would have returned 10%. (try this on ETFreplay.com) And yes, I was invested TIP, BND, and VNQ throughout 2011. Use the backtesting on ETFreplay.com to test the return.

There is another trick, don't enter the ETF until it rises above its 200 day Simple Moving Average SMA. If the price of the EFT moves below the 200 day SMA, sell it. Earlier in the year VNQ sold, but TIP and BND never sold. (Remember, I ALWAYS USE A STOP-SELL when buying a stock.)

So over the next few weeks, we will cover this ETF investment play in detail. When I last looked at VTI, the price had not risen above the 200 day SMA. Be careful to not blindly buy a EFT, you need to understand what you are doing. Please feel free to ask me questions.

(note: For entertainment purposes only, not to be used as financial advice.)