Today's Market
by Dr Invest

I want to tell you something that you already suspected. Yes, it is just a whisper, but your investment can rise or fall on that one whisper. The market is filled with secrecy and misinformation. If I manage 4 billion and have just purchased 200 million of XYZ stock, I want to get on CNBC and suggest that you buy XYZ stock. The price of XYZ stock will rise, I'll sell, and you will be left holding the stock.

If I am a politician, I don't want to cause world-wide panic in the markets by telling the truth. Instead, I will use well crafted words to describe the impending collapse of the financial markets. You can't always trust what you hear and little of what you see. Although illegal, some fund managers buy into a STOCK, causing a rise in the price, whereby others get on-board. The fund manager can then sell, reaping the profits of a stock that was bid-up in price. This is called, FRONT RUNNING. Check it out on Wikipedia. This is the accusation first leveled against Madoff, who ran a ponsi scheme.

Like everyone, I have some sense of intuition about the market, but you can't be profitable on intuition alone. Hoisington Management in Austin, Texas, manages only 4 billion dollars for pension funds, city governments, non profits, and institutional organizations..etc. I think it would be exciting to know what kind of ideas a company like Hoisington would have on the remainder of 2011 and into 2012. This kind of report would cost me thousands and there are many companies that charge thousands for this information. So, I'm doing you a favor by showing you this webpage. MARK this page, save it to favorites and then save it to your desktop. Here's the address: http://www.hoisingtonmgt.com/hoisington_economic_overview.html   I suggest that you read Dr Lacy Hunt and Van Hoisington's report before moving ahead in making immediate investments.

Potential Downgrade to U.S. Credit Rating

Moody's is now threatening a down grade for the U.S.  They say, "If the super-committee of Republicans and Democrats established to cut and reduce the U.S. debt fail to do so by $1.3 trillion by November 23rd, they too would have to downgrade the U.S. credit rating. This would certainly push the market over the edge with the past 20 days of upward trend rapidly falling. It looks a little like a SUCKER'S BULL MARKET.

The continuing problem that the U.S. is facing goes back to one simple fault: The U.S. spent more than it took in. The result is debt as the U.S. has never known. And if you think it is all the fault of one political party, you are wrong. Look at the chart below.



Instead of talking what caused the debt, we just want to make a note that it does exist and that it is owned by all the citizens of the U.S.

The Austrian economic school had it right. When you maintain low interest rates for far too long it creates as excessive credit boom that leads to the destruction of personal savings and malinvestment. Well, ladies and gentleman, here we are. Thirty years of excess has deteriorated economic growth, as increases in debt have destroyed economic growth by diverting personal savings away from productive investment.

The simple observation about human nature is: Why save when you can have all you have wanted now? With all the borrowed money floating in the market it is no wonder that the market didn't crash sooner. Below is the chart that shows the result of 30 years of excessive spending.



Instead of manipulating fiat currency by lowering interest rates and adding quantitative easings, with government purchases of bonds and bond twists, the real answer is less pleasing. WE NEED TO TAKE OUR MEDICINE! That medicine is PAYING OFF OUT DEBT and SAVING MONEY. Sadly, governments across the globe are financially under pinning their failing banks because to anything less would result in rioting in the streets. Though we don't want to hear the truth, the only solution is ten years of AUSTERITY. That is the word that we don't want to hear.

What the government can't understand is why no one is buying more when loans are offered at such ridiculously low rates. Most people can't even qualify for a loan and those who can qualify for a loan are smart enough not to take it. Just look at the personal savings rate in the above graph.

Both businesses and the individuals who can save are keeping their cash close at hand. Obama announced today his goal to change eligibility standards for the three-year-old Home Affordable Refinance Program to encourage new, lower-cost loans to more homeowners who owe more on their mortgages than their properties are worth. This as effective at pumping gas onto the fire to save the house. Instead of making the bar higher, don't have a bar. Rewrite the rules, but above all else, draw people further into debt. About that word, AUSTERITY, well according to our government, it doesn't exist.

WHAT TO DO?

I know that you are not reading this to hear about theorist or political figures. The facts point to a vibrant 20 days in the stock market. Under normal circumstances, I would not blink an eye. I would buy stocks in the face of an advancing market. The only things making me reluctant to buy stocks is the outcome of the E.U. and their stimmulation package for the failing banks and the possible down grade by Moody's of the U.S. credit.

The Holiday season typically brings an upturn in the market, but it doesn't always bring an uptrend. If you are a speculator, now is the time to add some stocks to your portfolio. I would see adding more stocks at this moment as fool-hearty. Why not wait another week to make sure this rally can stand on its own two feet? For now, my vote is to STAY OUT OF THE MARKET. And should you decide to enter the market, enter with caution and a STOP SELL to lessen your losses.

(Note:For entertainment purposes only, not to be used for making any finanical decisions.)

drinvest@mail.com