Today's Market
by Dr Invest

Where will the market go? In front of a real market success are a series of hurdles. Will Greece evade its financial storm? Will Spain find relief for slip further into indebtedness? Will Italy find its financial footing? And how about our own looming financial cliff? Obama successfully navigated the political pitfalls, retaining his presidential position; but question now is will Obama show us the money, will he show us that he can turn the market around? I speculate that the ingenious ideas of taxing the rich and implementation of the rules and regulations surrounding Obama Care will continue to create negative economic outcomes.

Milton Friedman, Nobel prize winner in economics, talks about economic outcomes as government seeks to manipulate markets and tax to fund their agendas. I think some of the things said by Dr Friedman are so essential that I want to give you some links on www.youtube.com.

• Free Lunch Myth - https://www.youtube.com/watch?v=YmqoCHR14n8
• Robin Hood Myth - https://www.youtube.com/watch?v=5Wx5PYZIWcQ&feature=relmfu
• Myth of Social Security - https://www.youtube.com/watch?v=rCdgv7n9xCY&feature=relmfu
• Stimulus & Inflation - https://www.youtube.com/watch?v=6W_9I0nk8uI 

I encourage you to find every video you can on youtube with Milton Friedman and consider the principles in today's economy.   

A Look at My Investment Positions

All of my investment positions are slowly improving but we remain in a threatening market. Even should we make leap over the fiscal cliff, most economist believe that 2013 will slip into a recession. Go back and re-listen to Milton's Stimulus & Inflation on You Tube. We are drunk with stimulus and it take more and more stimulus to keep the economy high. Now that the market has considered that each month 40 billion will be used to stimulate the market, there is no further expectation of stimulus from the Federal Reserve. If the market sours, the stimulus will already be discounted. A market decline will be a market decline. Please note....a new bubble is being created in the housing market because the 40 billion monthly is being used to by mortgages. So what will happen when all this money being poured into the economy stops?

All I can do is hope that my positions continue to climb and that WMT (walmart) catches fire over the next two months. I am reluctant to move into stocks when I see people selling their stock positions. The fear is tax related... thank you Obama... so the very wealthy are selling their stocks to pay taxes at a lower capital gains rate before they rise to a higher rate after the end of the year.

This creates a kind of "perfect storm" in which there is a stock market bottleneck; everyone must sell their stocks by the end of the year. Even if this is only 25% that sell-off their stocks for a tax benefit before 2013, we are talking about billions of dollars exchanged. This will prove to be a very tricky situation. My recommendation is to prepare to make some gains, but also have STOP-SELLS on all your trades to protect yourself if there is a major market sell-off.

 Our gold position (IAU) was as low at 5.53% two weeks ago. It has regained some momentum. The gold position is a LONG-TERM position of 9 months to 12 months. I hope for a 20% gain or more. If the market turns sour in 2013, IAU could prove to be a valuable position.

WMT will report earnings this week. I think they will meet their earnings and WMT will be a hot stock to be holding. I hope for 6% or more from WMT before the end of the year.

BND has not performed well because of competition with the FED. Twist continues and diminishes the returns on bonds.

TIP has performed well but not as well as I had expected. I am hoping for a 6% return by the end of 2012, but even the Treasury Inflation Protected product is being influenced by government manipulation.

So I am prepared for the market to continue a solid uptrend over the next five years, but I am also prepared to sell everything immediately. This is a sad day in American economics when you can't depend on the market to act in predictable ways, instead; we are seeing volatile rises and falls, the gain of billions and the loss of billions. This odd contradiction remains in the market and will not resolve itself until politicians in the U.S. are committed to a "balanced budget" and the reduction of national debt. Though these actions may be painful over the short-term, these actions would bring prosperity to our children in the years ahead.

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






 

Today's Market
by Dr Invest

Ouch! That smarts! We continue in a downtrend and the problem in a downtrend is that you DON'T know where you will find the bottom. Once the market turns negative, it is hard to get investors on buy back in. Now previously Bernanke could promise a QE-3, but he is already doing the QE-3 and the Twist buy back. As you can see, he really has nothing now to promise. He is doing everything he can do... and if the market goes down it is inspite of Bernanke's best efforts.

As I sit here and watch the close of the Markets, they are hammered yet another day. Eventhough my losses are low, I'm wishing I was out of the market.

I recently purchase IAU (a gold trust ETF) and saw a decline of over 5%. Presently IAU sits 2.73% below my purchase price of IAU. Gold prices seem to be slowly climbing higher in this chilling market, rising 1.8% today.

I also purchase WMT (Walmart) on election day. WMT would be a great purchase at anytime and should perform well over the Christmas season. WMT lost .85% today, with my total loss at 1.45%. I had hoped that WMT would have moved the other way and I would have sitting on a 1.45% gain. I have WMT set to sell at 5% below the purchase price. (called a STOP-SELL) I have toyed with CATM, setting a STOP-BUY at $25.20 should CATM suddenly rise. CATM continues to decline some, not finding a clear bottom.

Anytime you add new positions, it will make your averages lower on percentage gained because you are adding more money invested to the gains already achieved. So apart from the red figures of recently acquired positions, the green positions have already performed adequately.

BREAKING RULES

Never buy stock in a downtrend. I should have followed the advice, but I had thought that we would have had a new president and a trending market. I was wrong! This is why you have rules. Where any market drops 3% over two days, even the best stocks will also drop in value. The WMT stock could have risen 1.45% or higher, but now I will pay for being impetuous. Down 1.45%, WMT may not begin it's recovery until Monday.

Typically when you have 1% downturn in the stock market or several days of 1% drops, the market will rebound. Likewise, when you have several days that the market turns up 1% each day you will see a RETURN TO THE MEAN. This means market prices drop after strong rises in price.

An EXCEPTION to the "return to the mean" is when entering a BULL MARKET or BEAR MARKET. A BEAR MARKET can continue for weeks, even months when market negativity arises. In this market, however artificial it is, the worst has already happened, so we hum along caught in some kind of weird economic malaise. It can't get much worse because the government is propping up the market, but it certainly can't get much better because the free market is manipulated.

Still, I want to be careful not to buy stocks where there is a LONG-TERM downtrend; and everything seems to point to a "stable market" that is coerced by the FED. Given no major economic impacts by wars or failing central banks, the stocks that have been returning profits are going to a rise in their price.

My expectation is that WMT will rebound on Monday and my other selected stocks could be purchased at that time. DOL.TO and DG are performing the best and both deserve a look.




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

Today's Market
by Dr Invest

Wuh? With the DOW JONES falling over 300 points, it is pretty clear how the economy feels about the continuation of the Obama presidency. We will be waiting for more responses, but so far many economists are wincing. Time will tell whether we are experiencing a real downturn or whether we will have the expected seasonal rally.

Here is today's returns on the EXPERIMENTAL $10K PORTFOLIO.

I have 1/3 of the total portfolio in BND and TIP, representing a BOND position. For caution's sake, we bought BND and TIP over a three month period. 10% of IAU, a gold ETF, was purchased as a hedge against Bernake's QE-3 buying program of $40 billion monthly. It is the belief that continued stimulus is equivelent to printing money and will devalue the dollar. The net result is that it will take more dollars to buy basic things. This means increased prices for food, rent, and gas. If you have your money in cash, the government will erode the value of what you hold. If Bernake inflates the dollar 20%, your present savings will buy 20% less. For example: You hold $100,000 in a interest bearing account at Hartford Bank. They pay you 1% annually, so you now hold $101,000 but the CONSUMER PRICE INDEX went up 10%. Groceries, rent, and gas all cost 10% than the previous year. You still hold $101,000 but its actual buying power is 10% less, so the actual VALUE of your $101,000 is only $91,000.

 

The actual value of the dollars you hold is being eroded by the ongoing printing policies of the FED. The average CPI hovers around 3% or less, but has risen into the double digits at various times in our history. Although our goverment has increased the money supply from time to time, there has never been the committment by the FED to the increasing of the money supply as we have today.

 

This is the major fear by economists, that the FED's keeping the interest rates at zero and years of increasing the money supply will result in uncontrolled inflation. A very contradictory term is STAGFLATION. Stagflation is where prices continue to climb, while economic growth remains low.

 

STOCKS

 

You will see that I purchased WMT (Walmart) in the above chart. The expectation is that WMT will rise in price over the Holiday Season. Having gained over 20% this year, WMT is a good candidate as an investment. WMT could return 6% to 8% by the end of 2012. On a day that the DOW lost 2.36% , a .86% loss in the value of WMT shows WMT's strength.

 

 

I have a STOP-BUY order for CATM set at $25.20. Should CATM show a real uptrend, it would hit the STOP-BUY and be purchased. I am also interested in DOL.TO and in the purchase of more gold in IAU. For now, I look for indications that the market will slide into a serious downtrend. My STOP-SELLS are in place to reduce my losses, but if my positions show gains, I will move the STOP-SELL just behind the closing price to maximize my returns. WMT has a STOP-SELL at 5% below the purchase price. Should WMT lose another 4.14%, I would smile and walk away. I am expecting an increase in WMT as Thanksgiving and Christmas loom on the horizon.

 

My gut feeling is that the real recession party will begin in 2013. My investment positions should improve as I remain in the market, but have already priced in my losses if the market continues downward. (If the market is indeed slipping into a deep recession, it will loose 20% or more. Even if I lose 5% on WMT now, I will repurchase WMT at a discounted price and regain the 5% lost plus a 15% to 20% gain.)

 

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

 



 

Today's Market
by Dr Invest

Yesterday, I blogged about CATM being oversold. Having fallen 12%, I wanted to sieze upon a buying opportunity. Early this morning, I placed a STOP-BUY on CATM. CATM opened at $25.00 and I set a STOP at $25.20 telling the broker to BUY when it reached that price. Now the purpose of not buying CATM immediately, was to give CATM room to fluxuate, and if buyers were really eager for the stock to move into an uptrend. This is good for an investor because emotions are removed and the buy is made on the rise of the price of the stock. If CATM had advanced 3% to 5% my STOP-BUY would have bought a position in CATM and I would have been sitting on a 2% to 3% gain. At noon, CATM had fallen to $24.81 closing at $24.06. Analysts consensus have recommended CATM as a STRONG BUY, suggesting a move in price from $25 to $32.75 within the next 12 months. This is a 31% gain which would be real plus in our current economy.

One stock I did purchase outright early this morning was WMT or Walmart, investing 10% of my portfolio into WMT. WMT is up .85% and I feel pretty confident about this position. You will remember that we need to invest 33.3% of our portfolio in STOCKS. I now have a 10% position in WMT and still need to invest 23% of my total portfolio in a STOCK POSITION.

Looking at our portfolio as presently positioned, the 1/3 invested in BONDS as illustrated by the orange is fully invested. BND has done poorly, but who can compete with the FED. TIP is a Treasury Inflation Proteced Security and performs best where there is an expectation of inflation. TIP has performed well and with certainty, the news reports our new president will be Obama. With the expectation of continued money printing and increasing government debt under the Obama presidency, gold will likely be a hot item tomorrow and TIP should continue to perform well even if BND doesn't.      I also purchased WMT (Walmart) and still have CATM on a STOP-BUY. TGT (Target) is another stock of interest. Both WMT and TGT stock have grown over 20% as of this date. Both should do well as we move through November and into December. I am waiting for a good entry point in the purchase of TGT. Today the market climbed over 1% and the markets will likely increase through the remainder of the week.

 

The gold ETF, IAU, climbed 1.89% today. Even with a gain of 1.89%, IAU may still be a real buy. Should BND continue to decline in price, I will sell BND. My gain to day for BND is .59%. You will remember our first rule in investing...don't loose money! So I don't want to ride BND into a loss. For specific information, my STOP-SELL is set to sell BND when it falls to .30% of its original price.

 

TROUBLE AHEAD?

 

Who can know what lies ahead. No one believes that we will have a lively and productive economy, instead; there is a belief that we will continue in the misery of financial doldrums dipping into the negative and rising into the positive and returning back to the negative again. This kind of pain will continue until a fiscal cliff, another unplanned war, a collapse of Eurozone country, or overwhelming debt pushes us back into recession.

 

Should we press onward into a recession, expect a 20% to 30% decline. You can control your losses by using a STOP-SELL. Unfortunately, you can't stay out of the market. If you are simply "holding cash" the government will devalue your dollars. You will need to be invested in such away, that your money can work for you and grow as the government prints more of its fiat currency.

 

Marc Faber, Jim Rogers, Lacy Hunt, John Hussman, and John Mauldin are just a few economists who suggest holding gold (not more than 20% of your portfolio), real estate (I suggest rental properties that generate income, unless you are in a depressed real estate market.), and commodity oriented stocks. For example, people have to buy food... K is Kellog Cereals at 8%, look at the long-term chart and you will see a consistent return. Another is DPS (Dr Pepper Bottling) that has returned 14% at this time. These stocks are not as flashy as a stock returning 20% or 30% but they are consistent longterm performers and can be solid investments. I have already mentioned the DOLLAR STORES, like FDO, DG, DLTR,WMT, DOL.TO and TGT.

 

Remember...don't loose money.... use a STOP-SELL to protect yourself against loss.

 

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

 

 

 

 

 



 

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.)

Today's Market
by Dr Invest

Today we want to look at where we are at in our positions and then define where we want to go. We are using tools readily available to any investor and without charge. Go to Yahoo.com and then investments. Go to CHARTS and select INTERACTIVE. I have started with one of my investments called BND. Then I select COMPARE on the chart and add TIP and IAU. I selected 6 MONTHS to see how these positions have performed since MAY when I entered TIP and BND.

Under COMPARE are also all the major indexes and I selected DOW, S&P, and Nasdeq.

This chart gives me a lot of information. First our range is from MAY, so don't get confused. The S&P is hovering slightly above 0 since May in gains. The other two indexes are doing worse with the DOW nearing negative 2% and NASDEQ moving above negative 2%. All the major indexes turned down in early October and have continued a downtrend since that time. Listen! YOU CAN'T SEE GAINS IN STOCKS WHILE THE MARKET IS IN A DOWNTREND. (The exception is inverse ETFs or shorting stocks. Shorting is challening for the novice investor and requires real experience to master your shorts. Hedging is a different idea involving taking two positions at the same time to protect a downside of a particular position. For example: I buy $100K of IBM stock. I am concerned that my IBM stock could loose value so I buy an OPTION to protect me against a downturn in the price of IBM stock. See you are already confused... so KISS is a better principle. KeepItSimpleStupid!)

Getting back to our chart, it shows that our position is working. We have navigated through some rough water with all the indexes turning down almost 9% from May to June and then climbing almost 13% by mid-September. Since September the fall from grace has been almost 6%. Now I am not being exact, but just glancing at my chart and generalizing over all the indexes. Generalizing is really all you need for this exercise. At a glance, we can see that TIP, BND, and IAU have turned up rising roughly 1% or more over the past week.

What is clear, is that STOCK INDEXES are not viable at this moment. A quick look at VEU (all world stock indexes) and VTI (All U.S. stock indexes) show a downward trend for the present. My interest will be in the DOLLAR STORES as individual stocks for the holiday season.

Again, we are looking for general ideas as we consider DOLLAR STORES for our investment into stocks. DLTR is the lowest because they are expanding their stores. Eventhough DLTR falls above negative 20%, it could be a sleeper...with more stores they could suddenly grow faster and bring the best gains. Personally, I see that  as speculation and wouldn't make DLTR my choice.

FDO falls below 0% since MAY and DG does little better. This leaves me with three probable selections of interest. Dollarama, a Canadian dollar store (DOL.TO), Walmart (WMT) and Target (TGT).  For stock positions, I will select these three stores DOL.TO, WMT, and TGT, taking 20% of my $10K portfolio dividing it equally between the three stocks. A stop-sell will be placed at 8% below the purchase price. Friday will not likely be the day to make the purchase because of the over 1% gain in the DOW. The market will probally settle down by the first part of next week.

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











 

Today's Market
by Dr Invest

We pray for those on the East Coast who will undergo Hurricane Sandy. I know that many lives will be traumatized and real losses will hurt those who are already hurting economically. So may God protect our friends on the East Coast.

Gary Shiller with Bloomberg wrote an article today from which I want to give you a few quotes. You can go to the article yourself and read it in its entirety at: http://www.bloomberg.com/news/2012-10-28/bargain-addicted-investors-ignore-perils-of-low-rates.html

Gary has come to a conclusion that I have already been expressing from this blog. So let's look at some of the key ideas:

The U.K. and the euro zone are in a recession, the U.S. economy is teetering, and a hard landing is unfolding in China. Softness in these three paramount economies is dragging down the rest of the world. So why do most investors seem totally unconcerned over the unfolding global contraction?
This is what I call the Grand Disconnect between weak and weakening economies worldwide, on one hand, and optimistic investors, on the other, who are hooked on massive monetary and fiscal stimulus programs.

Economies and financial markets have become so dependent on monetary and fiscal bailouts -- and investors so enamored of them -- that all seem to have forgotten the dire circumstances that continue to make these rescues necessary. Many market participants yearn for conditions that are so troubled that central banks and governments, be it in China, the U.S. orEurope, will be spurred to greater easing, with positive implications for stocks.

“Conditions are so bad that it’s good for my equity portfolio,” the thinking seems to be. This almost total reliance on monetary and fiscal stimulus, with little regard for fundamental economic performance --except to hope that growth will be weak enough to spur more government action -- is a new phenomenon. Until quite recently, there was strong faith in government action, but it was coupled with the belief that such measures would quickly re-establish robust economic growth.

Restoring Growth

I have often been asked what monetary or fiscal actions would rapidly restore economic growth, as if a magic bullet would bring back the salad days of the 1980s and 1990s. My reply was that no such cure existed. The immense monetary and fiscal stimulus in the U.S., including the $1 trillion-plus annual federal-government deficits, the $2.3 trillion in quantitative easing and about $1.5 trillion of excess bank reserves held by the Federal Reserve, probably made the economy and financial markets better off. Nevertheless, slow and now faltering global economic growth indicate that these huge efforts were more than offset by gigantic deleveraging in the private sector. The only thing that would restore normal global growth, I argued, was time -- the five to seven years it will take for deleveraging to be completed.

The search for a magic bullet seems to have been abandoned. The emphasis is now almost solely on the opiate of government stimulus, increasing quantities of which will probably be needed to keep investment addicts satisfied. The recent announcements of quantitative easing by the Fed and the European Central Bank have had a diminishing impact on the Standard and Poor’s 500 Index. And recent market actions suggest that QE3 may be a classic case of buy the rumor, sell the news.
What more can be done? The Fed’s commitment to purchase $40 billion in mortgage-backed securities a month is open-ended, and is scheduled to last until the unemployment rate, now at 7.8 percent, drops to the Fed target range of about 5 percent to 6 percent and there is robust job creation. That will probably take a number of years. Meanwhile, excess bank reserves will continue to increase.

So why did Fed Chairman Ben Bernanke push through the third round of quantitative easing? Sure, the Fed has a dual mandate to promote full employment as well as price stability, but QE3 on top of Operation Twist, QE2 and QE1 and all the Wall Street rescue measures the Fed took in 2008 have pushed the central bank deep into the realm of fiscal policy, compromising its fiercely defended independence. Also, the open-ended and unprecedented nature of QE3 might suggest that Bernanke has lost control.

Furthermore, the effectiveness of previous rounds of quantitative easing is questionable. Even though the Fed has bought $2.3 trillion of long-term securities, economic growth is marginal at best and unemployment remains very high. Of course, we will never know what would have happened had the Fed not acted. History isn’t a controlled experiment where you can change one baffle in the maze, run the rats through again and see if they take a different path.

I think I have provided enough of the article to affirm my own position. We are in a new era of  investment that has never existed before. We buy stocks by faith, expecting that the FED will provide enough stimulus to keep our stocks growing 12% per year. History proves that partnerships between the government and private enterprise ends poorly.

ENTERING A STOCK POSITION

With all the above bad news, it makes one want to find their own corner for a fetal position and thumb sucking. We really don't have time for that luxury right now because now is a key time to buy stocks if we are to see any gains at all for 2012.

Here are the rules:

1. Rule one, never loose money.
2. Rule two, remember rule one.
3. But to enter a position (buy stocks) is risky, so determine how much you are willing to lose.
4. Set a stop-sell on the amount you are willing to loose on each stock.
5. Move your stop-sell behind the daily closing price if the price of the stock is going up.

LOOKING AT THE SEASON

Below is a seasonal chart for ELECTION YEARS from 1944 until 2008. Six of those years fell below the average shown with the BLACK LINE. Eleven of those years rose above the average return for the S&P. So about 35% of the time the S&P fell below average and even then only 17% of the election years the S&P fell below zero. I am not going to go into deep detail here, but generally speaking you have a 64% chance for a gain, a 82% of not loosing anything, 17% chance of a loss.



There are so many factors that impact the market, that we can't just use one. The stimulus program does impact the outcome of these charts and when you consider that much of what you see in the market is artificial, it give one pause before entering a stock position.

MY FAVORITE THINGS

Let me be explicit. We are still in an economic crisis. Dollar Stores have performed well during the economic downturn and they continue to do so. See Bloomberg article:  http://www.bloomberg.com/news/2012-10-26/dollarama-outperforms-wal-mart-as-retail-stock-corporate-canada.html

So here are some of my favorite things to look at for short-term seasonal gains:

STOCK                       YTD PERFORMANCE
DOL.TO                                      41.53%                                     Dollarama (Canada)
DG                                               15.94%                                     Dollar General
FDO                                             14.27%                                     Family Dollar
DLTR                                           -3.31%    (about debt & expansion but longterm buying opportunity)
                                                                                                      Dollar Tree

WMT                                            24.50%                                    Walmart
TGT                                              25.04%                                    Target
                                     
PETM                                           31.33%                                    Pet Smart

Most of these stocks are based on consumer spending. I expect that consumer spending will be up this Christmas Season driving returns for some of these stocks even higher. All stocks will have stop-sells to avoid losses. Should the stop-sell be engaged, I won't even look back. The stock will have to prove that it can sustain profits before I will repurchase the stock.

OUR ETF STOCK POSITIONS

In theory our Ivy Portfolio calls for an investment into the overall stock index for the U.S. if the SMA falls below the closing price. An exceptions to this rule is:

• If the market is in a down trend

So look at my chart below for the VTI ETF. Since mid-September VTI has been in a down trend dropping from $75.50 to now at $72.28.

 

I am reluctant to enter a postion in VTI as long as it stays in a down trend.

 

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