Today's Market

by Dr Invest

It's the election, stupid! There is no question that since the middle of October we have found ourselves in a falling market. You know the rules of investment: 1. never lose money, 2. remember 1., 3. never invest when the market is in a downtrend.

It is almost difficult to lose money when the market is in an uptrend and almost imposible to make money when the market is in a downtrend. (There are some exceptions to the above statement, but for the amatuer investor "Stay away from down markets".

I am interested in DOLLAR STORES and in the previous blog pointed to three great performers: DOL.TO, WMT, TGT. As we settle in for a longterm economy that is hovering slightly above recession, people will be looking for bargain prices. Walmart, Target, Dollar Stores, Sam's Club, and many other retail stores will be chosen because they offer brand name products at reduced prices.

Looking at the DOW JONES, the present gain of 5.87% doesn't look that impressive. Furthermore, it appears that in the first week of October there began a clear downtrend. These are usually indications that you need to steer clear of the market. (see the descending red lines) Some suggest that the downtrend began in the middle of September, but either way the evidence of a downtrend is clear.

AT THIS TIME, I AM WAITING UNTIL AFTER THE ELECTION TO PURCHASE STOCKS because of the market uncertainty.

RUMORS

Some economists believe that an Obama win could drive the stock market down further. Why you might ask? Obama has made it clear that he wants to tax money earned by corporations in other countries as well as taxing money that comes back into the U.S. from corporations. Japan taxes corporations at the highest tax rate in the world, the second highest tax rate on corporations is found in the United States. What is unique is that Obama's proposal would bring a double-tax on corporations; they would be taxed on money earned in a foreign country as well as taxed on money brought home to the U.S.

* Obama

Now this is only a rumour, but many conservative economists believe that major corporations would move their offices abroad, paying NO TAXES to the U.S. excepting on imported items. I can't tell you the time frame for such corporate moves, only that some executives have suggested the action as a way to keep from being double-taxed.

You will remember that Maryland decided to levy taxes on the rich and counted the billions that would roll into their coffers as all the millionaires coughed up the new taxes. The millionaires instead, voted with their feet and moved to other states. Maryland was left with  1.7 billion dollars in lost revenues. Hmm.. so much for that bright idea. Now the bright politicians sit on their hands as the millionaires march off to other states and weep at their dreams of what would have been. http://www.cnbc.com/id/48120446/In_Maryland_Higher_Taxes_Chase_Out_Rich_Study

Eduardo Saverin, the billionaire co-founder of Facebook, gave up his U.S. citizenship ahead of the social network's initial public offering in a move that would slash his tax bill. These are common themes that may have traction, even if just rumors right now.

*

Another rumor is that of American businessmen are closing down their companies because of Obama Care regulations which when fully enacted will enlarge the paperwork and increase the expense. Rather than continuing in business, these companies will simply close down. As I understand it, small communities will loose companies which hire anywhere from 10 to 300 employees. While these are small businesses would effect thousands of people.

 

*Romney

Many economists believe that Romney would be a plus for the market. He has promised to get rid of Bernanke and stop the stimmulus program immediately. This could be bad for gold investors, but good for the stock market. Also, his promise to seek a balanced budget and turn back the Obama Care may help reduce the nation's debt.

The problem is that many of the promises are almost impossible to keep because Congress would need to be on the same page, as well as our American Citizens. Hard and unpopular choices would need to be made and most economist believe that the general public just doesn't have the will to follow through with an austerity program. Finally, any austerity program would be sure to push the U.S. into a recession because austerity programs reduce the GDP. In all honesty, many economists already believe we are in a recession and the Bernake stimulus is simply cooking the books to make it appear we are still slowly growing. (See ECRI: http://www.businesscycle.com/)

With both candidates there are uncertainties and as long as politcians seek to hid their excess spending, we will continue to be in our present financial mess.

STOCKS

I bought TIP in May. (Go back to May blog to see the process.) My SEASONAL CHART showed May the key time to buy BONDS. I chose two ETFs (exchange traded funds) TIP and BND. 1/3 of my portfolio was dedicated to BONDS of which TIP and BND was purchased in equal shares. Today's return on TIP is 3.5% and on BND is .91%. The total return is 2.20% for 1/3 of our portfolio. Admittedly, this was not the outcome we had hoped for, but is remarkable considering we are competing with the Feds twist and stimulus plans. The most we can wish for is a 3% return by year's end for our bond fund. Anything over 3% would be icing on the cake.

SEASONAL CHARTS show that the end of October is a great entry point for STOCKS. There has been a reluctance to acquire a position in stocks because we are presently in a downtrend. When you combine this with the uncertainty of our presidential election, I have not felt an urgency to buy stocks.

OPPORTUNITIES

CATM or Cardtronics ATM has been a great performer, recording some remarkable growth. Growing 63% over the past two years, (the recent fall not included) there is no reason for anyone to abandon CATM because it fell slightly short of predicted growth.  The recent 12% drop puts CATM down 8.22% for 2012 and brings a real buying opportunity.

 

Here is how I would play this stock. I would place a STOP-BUY at $25.50; only if the stock turned up would the STOP be triggered to BUY Cardtronics. If people keep selling, I would keep my STOP-BUY at .50 behind the closing price. When people get tired of selling, CATM will return to $28 or even $31 per share. This error in judgement is likely computer sell off or traders taking profit. Do your own research on CATM. I think you will see this stock still has legs.

 

There are three stores of great interest to me. Regardless of where the economy goes, these stores will likely continue to grow and certainly will stay in business. Dollarama is a Canadian dollar store(DOL.TO), Walmart (WMT) needs no introduction, and certainly everyone knows the name Target (TGT) One need only look at the gains from these stores with DOL.TO returning 41%, WMT returning 21%, and TGT returning 24%. I see these as great buying opportunities both now and in the months to come. (Remember, always protect your profits with a STOP-SELL.)

I believe that you can take a position in all of these stocks right now, but when you BUY be sure to put a STOP-SELL behind your purchase just in case the market suddenly drops. Please, if you don't know what you are doing, ask me for help. !#%drinvest@mail.com remove the characters from the address.

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