Today's Market
by Dr Invest

We made it to the end of the week even though stocks are barely treading water. Bernanke finally showed his hand, saying that not simulus seems necessary in the near future. I am amazed that his statement was definitive.

What about our TIP and BND investment. Well, two weeks ago the bond portfolio position sat at .33% rising over the past 14 days to 1.95%. With the hope of stimulus out of the way some of the energy will come out of stocks and a bond position will be take by investors hoping to salvage their gains for 2012.

If you have been following the bond postion from May, you will most likely see a 1% gain over the next eight weeks and a 2% gain is possible. This would put our bond portfolio in a range of profit taking.

PROFIT TAKING

Profit taking is more of an art, than science. It is a judgement call based upon one's willingness to take risk. When you put your money into an investment, there are NO GUARANTEES. A war in Iran could erase all your profits within minutes. I encourage investors to use STOP-SELLS to limit losses in a market downturn. This works for ETF bonds, as well as for stocks.

The longer you expose your investment to risks, the greater the opportunity to have losses. Some investors might sell when they see a 3% gain, saying to themselves: "A certificate of deposit would have only paid me 2%." So removing their money from a possible loss makes sense. And advantage to this method is that once the investment has reached the predetermined percentage, the investor can sell making the target percentage. So for some investors 3, 5, or 8% is sufficent and they can remove their investment from further risks in that calendar year.

The disadvantage of this plan is that gains from each year are different so that in one calendar year, you might lose 10% and in the next calendar year, gain 30%.  Being in the market at the right time means signficant gains.  This is why my main method is to use a SMA...(simple moving average). This makes moving averages the primary indicator and my judgement a secondary indicator. Using the Ivy Portfolio Method, you only sell the investment if the price of the EFT moves below 217 day SMA. (Read carefully the Ivy Portfolio Method before making any investment. Don't make the investment if you don't understand how to read the chart showing you when to sell.){questions? drinvest@mail.com} The 217 day SMA shouldn't be the only indicator for selling an investement. (I'm talking about ETFs used in the Ivy Portolio Method) If the economic climate is worsening, don't ever lose money. Sell your investments, and then wait for stability to return into the economy. Stop-sells are excellent for protecting your investment, but let's say you bought TIP and it grew 3% and you used a 3% stop-sell. If TIP declined, at a 3% stop-sell you would make zero gains and still have to pay the brokerage fee for buying TIP and selling TIP. You could place a 2% stop-sell below the closing price and make 1% in gains. Why not place a 1% stop-sell on TIP, well the regular activity of day to day gains and losses would cause your investment to sell prematurely.

Obviously, if you had an annual gain for TIP of 9%, a stop-sell at 3% below the closing price would return 6% in gains. This is good, but judgement might push you to consider the economic climate and sell TIP at an 8% gain or even 9% gain before a downtrend triggered your Stop-sell. That 3% gain could represent a significant increase... like $3K more per $100K invested.

It is equally true that if the overall outlook for the economy is trending upward, a temporary decline in TIP would mean nothing and it would be worth the risk to wait for TIP to restrengthen.

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






 

Today's Market
by Dr Invest

We have been watching the performance of the bond portfolio of TIP and BND. Remember that seven trading days ago, our gain for TIP and BND was .33% and today our gain sits at 1.76%. This is a dramatic gain of  1.43% in our bond position over the past seven days.

Renewed hope for a stimulus for the U.S. could change the direction of the market, but for now stocks are moving lower while bonds move higher.

This is good for us, because we are wanting to see our exchange traded funds (ETFs) in TIP and BND continue a growth trend.

ABSORBING THE MARKET REALITIES

The human mind is a wonderful, yet faulty thing placed upon the shoulders of we humans. We tend to forget losses and remember gains. This genetic wiring needed to keep us hopeful while we patiently pursue game to put on the supper table. While this works well for the hunter/gatherer, it is counter-productive to someone trading stocks.

So here is how the human mind works...."Someone bought stocks in January and sold them in April, making 12%. Then they reinvested their entire portfolio into the market in June, making another 12%. That means a 24% gain is possible that some smart person out there made. If I could hire them, I wouldn't mind paying them 2% of my portfolio and walk away with 22% gains. Who knows how much they will make by the end of the year!" This is classic caveman thinking and has no basis of reality.

Here is the market reality for 2012. Choppy markets have caused professional investors to loose billions of dollars. John Paulson, fund manager for Paulson and Company has made billions for investors over the years. Here is what was recently written about him:

Many of Paulson & Co.'s investors hung with it last year despite an annus horribilis in which the company's flagship hedge fund lost 35 percent. But with returns continuing to sag amid a rising equities market, some of those investors are now jumping ship. Including Citigroup and Morgan Stanley.

Bank of America (BAC), another big investor of Paulson's, has recently expressed support for the fund company. But at a conference call scheduled for late Tuesday afternoon with financial advisors, Paulson representatives may face some sharp questions about performance and strategy.

These developments come at a difficult time for John Paulson, the former Bear Stearns banker who opened his eponymous hedge fund eighteen years ago.

Paulson has gone from managing more than $38 billion in assets at his company's peak to $19.5 billion today. And while a number of his funds are up this year - including the merger fund, which is up 3.6 percent, and the recovery fund, which is up 3.9 percent - his flagship funds, which consist of holdings that represent an array of different strategies, continue to suffer.

So far this year, Paulson's main flagship fund, known as Paulson Advantage, is down about 13 percent, according to people familiar with the matter, and its levered sibling, Paulson Advantage Plus, is down 18 percent. And while the so-called redemption window - the moment at which investors can pull back, or redeem, their capital from a hedge fund - varies for Paulson investors according to which fund they are in and when they invested, the protracted slump in the flagship funds is prompting hard looks at investor portfolios.  (CNBC financial reports)

I can't really be critical of a billionaire like John Paulson, but if he can't squeeze a gain out of the market for his investors, then who can? My understanding is that many funds have losses in spite of the perceived gains in the market. This means the only real way to discover your real losses is to take each bond, stock, and mutual fund, checking for the YEAR TO DATE gain or loss. This is time consuming, but the only way to see if your financial adviser is really delivering to you the right advice.

By doing your own detective work, you can determine the real market realities. It is likely that we will see a 12% drop in stocks before stocks rally again. To maximize the return on your portfolio you will need to stick to an investment method and not be dissuaded from it by negligence or laziness.

The 2012 rollercoaster ride will continue, so keep your stop-sells in place and don't lose money.

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

 

Today's Market
by Dr Invest

We have been watching the performance of the bond portfolio of TIP and BND. Remember that six trading days ago, our gain for TIP and BND was .33% and today our gain sits at 1.60%. This is a dramatic gain for our bond position. We are still off the 2.18% high for TIP and BND in July, but the next two months are not expected to be robust for stocks.

You will remember that when stocks drop, bonds rise. Stocks have been falling as the promised stimulus by Bernanke fails to materialize. With the DOW and S&P at all time highs for 2012, most economists have belatedly acknowledged that Bernanke will NOT stimulate the stock markets at this time. Discussions will ensue at the FED about the strength of the market and need for stimulus, but the general opinion is that economy is growing, although weakly.

I am guessing that the stock market would need to loose 12 to 14% before stimulus would be on the table. Then who could possibly guess what is in the mind of Bernanke. For now, we know that our investment position in TIP and BND is moving upward.

Draghi, the head of the European Central Bank has promised the purchase of bonds to insure that liquidity remains in the EURO, but the money for these purchases has to come from Germany. The German Supreme Court will rule on whether it is illegal to use the German people's money outside of the German Republic. I think you see the problem here. Draghi may profusely promise the purchase of bonds without the money to accomplish it. The Chinese economy is slowing. Greece wants more time to implement the austerity program. Italy and Spain are sliding deeper into recession both in need of an infusion of cash. Even France is moving toward its own recession. The promises by the European Central Bank seem empty but who knows what hope still lingers.

OUR OLD FRIEND DEBT

It is DEBT that is doing this to nations and individuals. We have borrowed from anticipated future gains to buy a lifestyle we want now. So for a season we appear rich and our business enterprises booming, but at some point we have to pay the debt back. It may take five-years, ten-years, or twenty-years before we can payoff our debt and begin to buy again. But before we can have more money to spend, we have to live within our means and aquire enough savings or wealth to purchase more things we desire.

The problem is that when people stop buying, factories stop building, empoyees are released from the workplace, the debt is not paid, the debtor cannot buy more because no one will offer him credit, the debtor cannot pay taxes because he has no job, goverment doesn't have money and has to let employees go, and so on and so on. This spiral downward is called recession or depression.

Here in the U.S., we have not paid off the debt. The FED has added liquidity, a way to keep enough money in the economy to maintain sectors of business and government. This method of stimulus doesn't always work very well. Although the liquidity keeps an economy limping along, the economy is moving forward on BORROWED FUNDS... yes, DEBT. The Central Bank is borrowing money against future profits. Since the liquidity is still in the market, it cancels any gains that the economy might have. This is why countries who have tried stimulus have remained in malaise years afterward as the gains/profits go to equalize the added liquidity/debt. (Look at Japan)

STRATEGY

We have been using the Ivy Portfolio investment strategy with Seasonal Charts. This will be our investment foundation. (See May blog to learn how to implement the Ivy Portfolio.) For the "amateur investor" we want to avoid speculation and high risk. This cautious approach can limit our gains, but the primary objective is "never lose money". This is why on every purchase we use a STOP-SELL and why we move the STOP-SELL behind the closing price.

The next buying opportunity will be at the end of October when I expect stocks to increase in value over the SEASONAL HOLIDAYS such as Halloween, Thanksgiving, Christmas, and New Years. We will also be looking at the potential benefits of political campaigns here in the U.S. infusing our economy with 6 billion plus in campaign funds. (as reported by Reuters)

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




 

Today's Market
by Dr Invest

More promises! First, Bernanke and then, Draghi reassure the markets that should signs of a weakness occur, they will be "johnnie-on-the-spot" with cash in hand. The Central banks are signaling, "let's keep doing business as usual". We will tell you that we are going to stimulate the market when we think it needs money and you just keep investing.

Doesn't this sound like a really good idea to you? I hope not. With your own investment money, you are paying to inflate stock prices that already have no basis in value. Who ever heard of stock prices rising 12% with economy in the negative. Eventhough the FED projects growth for 2012 at 2%, many economists are concluding that we have not reached real positive growth. The argument will continue, but even the FED acknowledges that at best our economy is weak.

Here is the report: Investor sentiment received a lift on Friday from U.S. Fed Chairman Ben Bernanke, who said the Fed has room to deliver additional monetary stimulus to boost the U.S. economy. This promise that "I got bullets in my gun." raised the DOW .77%. He didn't say he would use stimulus, but that if it was warranted he could use stimulus.

I suppose that we will see rise in the market, just as I had predicted a few day ago. And as I suggested, the promise of stimulus will contine to influence the market. For now, we continue to press forward into a market spurred higher by empty promises. Whether promises will return us to a bull market is questionable.

My guess is that we will begin a serious downturn in September, but who knows how powerful one little promise can be.

(Note:The above information is for entertainment purposes only and not to be used a investment advice.)

Today's Market
by Dr Invest

We have been watching the performance of the bond portfolio of
TIP and BND. Remember that Monday, our gain for TIP and BND was .33% and today our gain sits at  1.36%. This is a relief for a bond position that had declined over the past 30 days.

I don't know if renewed hopes for a stimulus will change this temporary rise in the bond portfolio, but for the past eight months stock prices have risen without real fundamentals in the market. Marc Faber commented today: When you look at the major economies, Europe, the U.S., China and the emerging markets that are dependent on China for growth, I only see weakness. "Europe is already in recession, Germany is still growing very, very slightly, but is likely to go into recession soon. Growth in the U.S. is also falling off. The U.S. economy has decelerated and I don't see much growth in the next six to 12 months. There's also little the Federal Reserve and other policy makers can do to turn the U.S. economy around. I think that if you look at the injection of liquidity and the intervention by the Federal Reserve and the Treasury with fiscal measures, it has already impoverished the U.S. economy. The deficit is $1.3 trillion and in my view, will go up. There is only 100% chance of a recession."

If you take Marc Faber as only being half right, the economic future is omnius. My estimation is that around 12 to 14% will come out of an inflated stock market with a rebound in stocks from the end of October to the first part of 2013. These are only estimations because the FED is making the rules and manipulating the market. Should Israel engage Iran in war it is "Game Over". Our already weak economy would slip over the cliff.

 

So I will continue to plan for investments that are most likely to produce gains and use stop-sells to limit losses. Although the magic total portfolio return from past years has been around 8% in the most recent years the estimated total portfolio return (TPR) sits at 4%. Unless we see inflation move into the market, a 2% return is probally the satisfacory TPR. (Am I really saying this?) 2013 could usher us into a recession, deflation, and then several years of outstanding returns.

 

For now, let's just set our goal to survive our present economic climate.

 

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

Today's Market
by Dr Invest

I have been watching TIP and BND to see if they will meet the expected gain. You will remember that both of these ETFs are part of our BOND PORTFOLIO where we have 1/3 of our total investment portfolio invested.

Since July, we have seen the stock index rise 6% with TIP and BND falling. Now, stocks are overbought and bonds oversold. Monday, our bond portfolio sat at a .33% gain, Tuesday our bond portfolio sat at .75% gain, and today we sit at a 1.08% gain. This is a far cry from the 2.18% gain we had in the bond portfolio in July but is a significant three day rebound.

Once again hopes are rising for a FED stimulus. The report from the Federal Reserve meeting reveal just how weak our economy remains and the old voices of unreason are chanting "the FED must stimulate".

Remember, 2012 is a year where the economic fundamentals have been weak but hopes for a Federal stimulus has elevated the prices for stocks no just once, but numerous times. Here we are again with a report that the FED discussed stimulating the economy, leading speculators to continue buying stocks.

Today, we learned that the Czech people are resisting the austerity program, unseating politicans who attempt to implement it. Like Greece, Italy, Spain, and France. EuroCountries are saying, we will not seriously deal with our debt, but lend us money. The German people will not continue to pay for the tab where not effort is made to resolve debt and Draghi and the European Central Bank will not be able to secure enough bonds to pay for all the debt.

Once the dominoes begin to fall, even the FED will struggle to keep our own economy from sliding further into decline. I can't say that the stock market is at the bring of a downturn, but an array of economic enemies have assembled theirselves of which any one of the enemies could put the fragile economy over the cliff.  For example, a little war between Israel and Iran will surely push the economy over the cliff.  Even the withdrawal of several countries from the EuroTribe would certainly push the economy over the cliff.

With the Federal Reserve changing the rules in the market, there is no "safe place". The goal of the FED is to get the money out of your bank and into the pocket of others. They are claiming that they want to put your money to work, so people will have jobs, and you will make TONS and TONS of MONEY.  What the FED fails to understand is that if you flood the market with investors money, it doesn't guarantee that people will buy all these goods. Look! If you have already bought stuff with borrowed money and cannot afford another loan, you will buy nothing but the basics for life. This is so simple, debt kills future earnings while you enjoy your present purchases. You buy a $80,000 car that is to be paid off in 8 years. Typically that takes you out of purchasing a car for 8 years. So for eight years, no money is coming into the auto sector from you. In theory, if every person in the U.S. bought a car and paid it off 8 years later, for that eight years, not one car would be purchased. This kind of debt wouldn't be good for the automobile industry. Now reality is not this simplistic, but unlimited investor money would not guarantee that any sector could be profitable.

The wealthy and many institutional investors are steering clear of the Stock market because the risk is too high. They understand the above ideas, and are reluctant pu5 money into a declining market over burden by debt.

The only cure is to REDUCE DEBT. It is not easy, but until the debt is extinquished, people will not have the excess funds needed for a healthy economy.

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



 

Today's Market
by Dr Invest

Our investment into TIP and BND rose from .33% yesterday to .45% today. Sadly, these numbers mean absolutely nothing when the U.S. Federal Reserve is competing in the purchase of Bonds. The Fed also, at will, can change the treasury yeilds which affect the value of TIP. (see: http://finance.yahoo.com/news/tips-etfs-hurt-rising-treasury-174748530.html) The bottomline, you really don't have any good defenses, but to invest where you are most likely to see a gain and hope the government doesn't manipulate the sector where you have invested. I am remaining hopeful that my bond investment will remain viable through 2012. Since I am using a trading method, "the ivy portfolio", I will wait until September 1st to determine my move in selling TIP or BND. I have moved my STOP-SELL 3% below the original purchase price of TIP and BND. I'm betting 3% that TIP and BND will rebound above 2%. At this point, in the face of the intervention by the fed, I would consider getting my 2% gain, selling TIP and BND and be happy with a 2% gain. We will keep an eye on the market for our opportunity.


David Kostin, Goldman Sachs chief U.S. equity strategist, in his latest note to clients as he pleads with them to take money out of stocks before they fall off the fiscal cliff. In the note, Kostin vehemently defends his year-end S&P 500 (^GSPC) target of 1250 despite the benchmark's recent rise to above 1400. The strategist still sees a 12 percent drop ahead, believing that Congress will fail to address the fiscal cliff before the election, and maybe even before the end of the year.

Again, the market is more confused than ever. Thinking back to the first of 2012, political confusion took the wind out of the stock market. Because I had stop-sells on my stocks, they automatically sold in January. Eventually, the politicians kicked the can down the road, but the fundamentals in the market in January looked poor. And the funamentals were poor because by the middle of April stocks began their plunge, falling 12% to the same level where the year began. Billions were lost by investors, but hopes of a new QE-3 provoked the stock market to rise to what is now 12% higher. Nothing has changed in the fundamentals and if anything, the fundamentals have worsened.

So here we sit, waiting for the hatchet to fall; and it will fall too!

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

Today's Market
by Dr Invest

I am always amazed at how greed moves the market. 2012 will be known that the stock market that was moved by the promise of another stimulus. Think for a moment, when did Bernanke stimulate the market in 2012. Yes, there were some ongoing bond purchases, but when did Bernanke initiate another stimulus package?

Investors were so devoted to the idea of another stimulus package that they continued bidding the market higher and higher until the harsh realities struck in May, even then the realities were short-lived as the ECB (European Central Bank) made their own promise of stimulus. When Draghi made the promise of unlimited bond purchases to keep the Eurotribe together, he forgot that France was on the verge of recession, that Spain was already in recession, that Greece had no intention of meeting the deadline to implement debt reduction and would ask for a one and a half year extension before meeting the deadline, and Oh, Italy is still swimming in its own debt debacle. Most importantly, Draghi forgot that ONLY THE GERMANS has the assets to pay for such a promise. Yesterday, the Germans reminded Greece that they MUST meet the deadline or they would not receive the remainder of the stimulus promised by the ECB.

The harsh reality is THE BOAT IS SINKING and Germany will not pay for all the deadbeat countries that do not try to rein-in their debt.

The economy has been slowing for months. There is the semblance of a rebounding economy because major corporations are sitting on cash and have reduced expenses and employees. But these companies are not hiring new employees, they are not expanding, and they are keeping their cash away from stocks. Institutional investors have been moving out of stocks into bond investments, while individual investors/stock traders have been buying low and selling high.

All of the fundamentals are pointing toward a decline in the stock market. With the stock market at a high for 2012, it is unlikely that Bernanke will quickly stimulate the market. In fact, the market needs a decline. Our bond investment in TIP and BND has been oversold and stocks appear to be overbought. This means we are ready for a regression to mean....a reversal of stock prices.

This is why I recommended NOT SELLING your TIP and BND investment at this time. Though I am showing a .33% gain for my investment at this time, I think that we will see TIP and BND return above the 2% gain noted in mid July. We should see a 6 to 8% return on TIP and BND by the end of the year, but nothing has been NORMAL about 2012. Still, a 2% gain is better than you can get from a Certificate of Deposit.

At the end of October, we will re-visit STOCK BUYING OPPORTUNITIES. I expect that the in-flow of money from political campains will infuse the economy with some new energy. Reuters suggested the number to be 6 Billion dollars to be spent on political campaigns in 2012. You can't put that much money into the economy without promoting some economic growth.

I would predict a decline in the stock market, losing 12 to 16% and then a rebound over the holiday seasons. (Halloween, Thanksgiving, Christmas, and New Years) Again, who can really predict the course of the market when the FED keeps changing the rules. In May, many investors suffered a 12% loss, getting out of the market from discouragement. In September and October, we may see another 12% decline and billions lost by individual investors. Of course, the traders will love the market swings, selling and taking the money offered up stupidly by individual investors.

The past few days have not swung up nor down. I would not be suprised by the market moving even higher, but I think the energy is quickly coming out of the market and the market is being setup for a decline.

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

Today's Market
by Dr Invest


Rumor has it that Soros and Paulsen have invested into gold EFTs. Though no response has come from their offices and they were unavailable for contact, this is likely a hedge against a coming market down turn.

Even though the stock market rose today, there is no real fundamentals to warrant further investing. It was with the suggestion that Merkel would support infusions of cash into the euro, that caused elated investors to put yet more money into stocks.

About gold.... although it has risen only a little, should the market take a sudden downturn, gold will be king once again. There are  a number of factors that could bring the downturn. Let's start with Iran and Israel. Any engagement in war between Israel and Iran would immediately crush the tepid stock markets. Second, world economies are slowing. When considering the already low GNP in the U.S. economy, a slow down will quickly push us into a recession.

Any of these scenarios will let gold rule just a bit longer. Most economists do not believe that gold will grow dramatically, but any where from 12% to 20% could be likely. Think with me for just a moment...individuals, banks and governments have bought gold and are holding gold. Gold is a commodity, but is useless as an investment vehicle unless some one exchanges cash for the gold. So you need an interested buyer and a seller. When individuals, banks, and governments begin selling, they will need hundreds of thousands of buyers for their gold. This is the dilema with commodities, gold prices go down when there are bunches of sellers who can't find buyers.

Soros and Paulsen are buying ETFs which can be quickly sold, providing immediate liquidity. Not so if you are holding physical gold. You must get your physical gold to a broker, he will charge you a finder's fee for selling your gold, and if the market is flush will desparate sellers, the broker will have to sell your gold at a discounted price.

Now if you are a LONG-TERM investor in gold, it really makes no difference whether you can sell your gold because one day, gold will eventually go up in value. The same can be said for real estate. Even though house prices are low now, one day they will go up. But buying something because it has always gone up in price is not always a good reason to make the investment. Natural gas will ...one day... go up in price. Most people wouldn't touch natural gas as an investment right now, but one day it will go up in price.

Lets look at another idea... you put 1/3 of your $300,000 portfolio in gold which has only returned negative -6.41% in 2012. 1/3 of your portfolio has been in stocks which have returned 12%. And 1/3 of your portfolio has been invested in bonds returning 6%. Where was the money best invested?

With the above portfolio, gold is becoming the least desireable investment. Even with a rise of 12% in gold prices for 2012, gold will only return 5.5%... which is less than bonds. Yet there are seminar after seminar of SALESMEN touting the benefits of gold.

I still think gold to be a great hedge against a recession and or inflation, but gold has not proven itself a worthwhile investment for these first seven months of 2012. I think we will see a sudden stock decline in the next two or three weeks and gold will rise as stock prices fall. This could provide new life for gold or simply provide a selling opportunity for banks and governments.

BOND PORTFOLIO

As discussed yesterday, TIP and BND continue to decline in the face of a rising stock market. There is no logic or reason for stock investments at this time. It is only the hope of stimulus that drives the prices in the stock market. Now is the time to sell TIP and BND if you want to make a profit. I am suggesting that you adjust your stop-sell to 3% below your original purchase price and wait for the decline in stocks that is almost certain to come in September. TIP and BND should regain their valuations. TIP is presently oversold and investors will be looking to fill their portfolio with TIP.  BND will also regain ground as further weakness is exposed in the stock market.

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

Today's Market
by Dr Invest

On solid rock I stand! DON'T SELL TIP OR BND YET! Let me be direct, recent speculation that stimulus would keep stocks high has hit TIP and BND hard. We are up .42% on the Bond Portfolio investment made from MAY until JULY. The foolishness of stocks rising when the fundamentals of the market are declining has hurt my position in TIP and BND. At this time, I am moving my stop-sell to 3% below my purchase price for TIP and BND in preparation that the price of TIP and BND will move lower before moving back to a gaining position. You will remember that when we purchased these ETFs, we set a stop-sell at 3% below the purchased price.

I  am expecting that by the first part of September, we will be seeing declining stock prices and the increase once again in the price of TIP and BND. For the past two days, stocks have been moving sideways if not slightly downward. There has been some good news, but the market's response to the good news has been overwhelmed by the reality that world economies are weakening.

This is really a decision time. If you want to capture some gains, then sell TIP and BND right now. I think the real gains will come toward the end of the month. Again, as I have explained, it is hard to out guess the Federal Reserve. The F.R. just simply becomes an annoyance to where the market is ultimately heading.

Today, TIP fell into the range of OVERSOLD. This means that investors will see opportunities for gains and will begin buying TIP again. Rather than selling, I would see temporarily adjusting the Stop-Sell for TIP and BND satisfactory until we move past this moment of guessing what the F.R. might do.

As mentioned in previous blogs, I suspect that the Federal Reserve will not stimulate until the prices of stocks have dropped dramatically, meaning 12 to 15%.

During this season, I will remain patient, knowing that 1/3 of my portfolio is positioned correctly. I will temporaily readjust my Stop-Sell and wait for the stock market to proceed toward a downtrend.

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

Charles Dickens - A Tale of Two Cities

Today's Market
by Dr Invest

I had thought some sense had returned to the market, but I was wrong! Bets on global central bank action to stimulate the economy have driven the S&P 500 up 10 percent since June 1. The headline today, "U.S. Stocks Rise Amid Speculation Fed to Act on Economy".

Those following solid principles in investing appear to be off-base and radical, while those who are speculating that the government must provide a stimulus because the future looks so bad, appear to be right in their perspectives. ALL REPORTS are showing that our economy and the world economy is slowing down, still traders are wildly buying stocks because they can only see the market continuing its climb even if only induced to do so by tax payer dollars. See: http://www.bloomberg.com/news/2012-08-10/u-s-stock-index-futures-decline-on-chinese-trade-data.html

In the face of the market telling us that all is well, we have to ask ourselves: "What am I going to do?". As I pointed out yesterday, some on wall street are excoriating the rich because they are not investing in stocks. I have to wonder, what do the rich know that I am ignorant of.

There is little to report today, excepting that our investment in TIP and BND did rise today, stopping the downward move in BOND ETFs over the past week. Eventhough our gains on TIP and BND sits around 1.41%, a little lower than the 2.14% earlier in the month, there is really no other investment opportunity at this time. 

Yes, we could play stock trader, but that is what the whole market is trying to do which will result some painful losses in the weeks ahead. We typically see a market trend downward in August and September and it is not likely that Bernanke will use his stimulus bullets while the market is at a high point. I predict that the market will need to fall some 15 to 20% before Bernanke will take action.

I still think that between August 15th and September 1st, we will begin to see the market slide. I am not planning on doing any further investing until the end of October. I think that we will be smarting then from a market downturn and we will likely see a firm rebound in stocks by the 1st of November.

It would be wise to recognize that with all the hopes for a stimulus, the market could continue to rise. I don't see a continued rally really happening, but 2012 has been a year of contradictions. I will hang on to the TIP and BND position knowing that even a 4% return will beat a CD at a less than 1% return.

I will also keep STOP-SELLS on all investments and limit my risks for a loss. Keep to the plan set in May, utilizing the Ivy Portfolio method. You will see the best results by keeping to a proven investment method.

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

 

Today's Market
by Dr Invest

The market continues it cocky and confident climb, pushing the prices of stocks higher and higher. It is a "trader's dream come true", especially in the light of promised rescues by the FED and ECB. Vanguard founder declared today, "Not investing in stocks a big mistake". The headline next to it  read, "Don't expect the Market Ralley to Last". One financial author headlined: "The rich holding cash - and that's not good." Not everybody can be right, somone is not seeing the true market condition and there is gonna be a slip on the banna peel.

It is true that the rich are holding cash. But did your ever ask yourself, "Why?" Why are the rich not investing? What do they know that you don't? Listen, there is a reason they are rich. What about major companies and corporations holding back trillions in cash? Why will they not invest? And what about the banks, flush with taxpayer's cash and client's cash from an over abundance of fees, why are they not lending money? What do all these companies and individuals have in common?

They know hype from truth. The economy is gutted and world banks and central banks cannot deliver what they promise. Not one person would invest into the market if they knew that they would lose 40% of their money in six months.

Never has the stock market grown so quickly where the fundamentals were so weak. The fundamentals point to world-wide recession, but stock prices point to a dramatic and vibrant economy. These two ideas conflict and one will be extinguished.

The John Hussman Report

If you care about your investments, please go to Hussman Funds and read this report. You will then understand why rich people are out of the stock market right now.  http://www.hussmanfunds.com/wmc/wmc120730.htm

Quote:

The enthusiasm of investors about central-bank interventions has reached a pitch that is already well-reflected in market prices, and a level of confidence that with little doubt, investors will ultimately regret. In the face of this enthusiasm, one almost wonders why nations across the world and throughout recorded history have ever had to deal with economic recessions or fluctuations in the financial markets. The current, widely-embraced message is that there is no such thing as an economic problem, and no such thing as risk. Bernanke, Draghi and other central bankers have finally figured it out, and now, as a result, economic recessions and market downturns never have to happen again. They just won’t allow it, printing more money will solve everything, and that’s all that any of us need to understand. And if it doesn’t solve everything, they can just keep doing more until it works, because there is no consequence to doing so, and all historical evidence to the contrary can finally, thankfully, be ignored. How could anyone ever have believed, at any point in history, that economics was any more complicated than that?

Concluding Thoughts

From my vantage point, I see the bridge out down the tracks. Now is not the time to throw more logs on the fire and get a full head of steam. This is the time to shutdown the boilers and wait for the bridge to be repaired. The bridge is DEBT and stimulating debt is not going to bring more prosperity.

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

THE BLIND, LEADING THE BLIND

Today's Market

by Dr Invest

I remember the parable of the "Blind, leading the blind", both will fall into the ditch. There is nothing that makes sense in this market.

It didn't make sense for the market to rise 3% on the hopes that the ECB and FED would stimulate the economy; it didn't make sense that a very marginal jobs report would send the DOW another 1.5% higher.

• Spanish Prime Minister Mariano Rajoy inched closer on Friday to asking for an EU bailout for his country, but said he needed first to know what conditions would be attached.
• Ratings agency Standard & Poor's on Friday downgraded a broad swath of Italian banks, citing worries that the recession in the euro zone's third-largest economy could mean mounting losses for the country's lenders.
• New Greek Prime Minister Antonis Samaras' big fear is the government will either fall apart, or run out of money (or both) before Christmas, which could precipitate an exit from the euro.
  If the Greeks fail to reach a deal with Germany and other lenders, or if they fail in the coming months to fulfil promised spending cuts and reforms in any renegotiated deal, then Greece's lenders could stop sending the bailout cheques, leaving the country's government and its banks bust.
• Since taking over as the central bank's president last November, Mario Draghi has already provided a trillion euros in rescue loans, propping up banks and in effect easing government borrowing costs, particularly in Spain and in his home country Italy. He has warned governments not to expect the ECB to do their jobs for them and has recently put the onus on them to get their finances in order. But if people start pulling their money out of the banks in Greece, Spain and other European countries, Mr Draghi probably stands ready to provide trillions more in rescue loans. The risk for him is he is playing a game of double or quits. The more money the ECB lends, the bigger the losses if a country were eventually to leave the eurozone. And if the entire eurozone broke up, those losses would have to be shouldered by governments, and that would make it a huge political issue, especially in Germany.
• The Federal Reserve, directed by Ben Bernanke, has two QEs (quantitative easing) to his credit that has shown limited success in stimulating the markets. QE-1 did pull the U.S. from the verge of financial collapse and a national economic panic. QE-2 failed miserably, excepting the bolstering of Wall Street and the appearance that the U.S. economy was growing, when it really wasn't. (more later) With only the rumor of another QE, Bernanke has been able to control the hope for a bear market. Twist was designed to get the investment of hardworking and honest people's money out of bonds and into stocks. Bernanke gets an "A+" on this strategy. On four occasions the rumored QE-3 has pushed the market into the stratosphere, with tragic investment losses for many investors.

What does this mean to us? There has been no need for a QE-3 when promises to stimulate the economy from Europe and the U.S. causes the markets to rocket. HERE IS THE TRUTH. There is not enough money to pay for all of the bad debt in EUROPE and the U.S.

Trillions was lost in our housing market, breaking BANKS and BROKERS. The U.S. TAXPAYER bought the bad debts, giving the BANKS and BROKERS to continue business as usual. Now the bad debt is repackaged and sold back to the TAXPAYER as an investment at a negative return.

Are you getting this? This is called the "bond bubble". One day, bond holders are going to say, "Forget this, I'm not buying bonds anymore! I'll keep my cash in a shoe!" Then the U.S. government will either have to eat the debt or pay a better yield.

It is the DEBT stupid! The government is in debt...they think, "If we spend money, we will make money!" People are the same way, they think..."If I spend money, I'll be wealthy!" No! You will only spend money now, that you won't have to spend later. When you absorb too much debt, you reach point on saturation and can't take on any more debt. That is when debt prison arises. Because you can't pay your debts, your credit worsens. From that time on, all credit comes at a higher price, think 12% or higher. When you want that managerial job, your employer is going to check your credit because it is an indicator of your truthfulness and honesty. When he sees a "low score" he will find someone who is better qualified for the position. The pay raise you had hoped would come seems to never arrive, while you struggle to pay only the interest you owe on your bills. (This is Greece, Spain, Ireland, Italy, and Portugal.)

A mediocre payroll report does not an economic reality make. A promise to "print money" by the FED and market speculation is not indicative of a "bull market". The smallest rumors of a war, the reality that neither Bernanke nor Draghi can stop a declining market, a hiccup in politics could push our economy over the edge and plunge us into a downturn not recently experienced.

When BILL GROSS, who runs PIMCO's $262 billion bond fund predicted that neither STOCKS or BONDS will show any meaningful returns in the years ahead, he was criticized mercilessly. In fact, Bill Gross thinks that investors have fallen under the spell of a "cult of equity" and the returns from stocks over the past century are akin to a Ponzi scheme. The only thing that Gross seems truly bullish on is the potential for central banks to attempt to revive the economy through inflation-creating loose monetary policy. And Gross is definitely bearish on that.

CONCLUSION

So what have we learned? The systems are turning. People are being told what they want to hear. There is a promise of great gains, with the only bonuses being earned by financial advisers and fund managers. Anyone telling the truth about the economy is punished. And markets are driven by RUMOR... the crowd mentality.

More now, than ever before, use you head. Make only carefully planned investments that are simple and clearly understood. Use a STOP-SELL on all investments. Don't lose money.

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