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Key Market Indicators

Rate Type Month Last Change
Fed Funds Rate April .25 0.0
Unemployment March 6.7% --%
Rate Type Month Last Change
Inflation (average) March 1.4% +.04%
Gold (oz) April $1,303 +$10.00
 
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Merry Christmas!
Dec 24, 2011
It’s easy to get caught up in this time of year.  For many Americans, Christmas has an undeniable magic.  It’s different than every other time, more special, more optimistic. 

 

And for Wall Street too.  Santa Claus is known to have caused many a stock market rally during his legendary career – padding to the year-end bonuses for fund managers, brokers, and their firms - and 2011 can be added to his list.
 
The reason I haven’t blogged for a few days is, quite simply, there hasn’t been much to add since my last blog.  Even though 3rd quarter GDP was revised down to 1.8%, from 2.0%, nothing much has changed with the investment picuture.  To think recent stock market activity is an indication of better times ahead and therefore a time to buy is a great mistake.  Stocks run-up on light volume and Christmas spirit all the time.  It’s just fluff and window dressings.  Again, the Market has major systemic problems that will take some time to resolve. 
 
That said, nothing of great investment significance should happen until after the New Year celebration.  If it does I’ll alert you through social media.  But until then, forget about what the stock market is doing and enjoy the rest of your Holiday Season!
 
My very best to you and yours!
-dan
 
Here It Comes
Dec 20, 2011
The Dow Jones Industrial Average surged 337 points today, rising almost 3%.  When you look around you can find no good reason for the move.
 
It is true that unemployment rates dropped in 43 states.  But the move was ever so slight and accompanied by little job growth.  That couldn’t be the reason for today’s strong Dow performance.
 
Maybe it was the "good" news from Europe that Spain had another "successful" bond auction.  But who really cares about that?  More debt won’t solve the spending problem in worldwide central governance.  It’s solves nothing.  Europe is still in major distress.
 
Then there’s the US Bureau of Economic Analysis announcement that state personal income growth ranged from -.4% to +.6% and slowed to .1 percent, on average, for the third quarter of 2011.  Consumers continue to fall behind.*  Not exactly a Dow rally cry.
 
And then you stumble across these three Wall Street Journal headlines:
  • Higher Costs Weigh on General Mills Profits (earnings fell 28% on higher costs)
  • Sanderson Farms Posts Loss on Higher Feed Costs, Weak Market (marking their fourth straight quarter of loss, and citing a 74% increase in corn feeds)
  • ConAgra ProfitFalls on Hedging Losses (earnings fell 14%)
That’s an indication of major inflation from three large food companies.
 
As mentioned, the three greatest threats to an advancing stock market are:
  • The acknowledgment of a Recession
  • The Collapse of the Euro and/or several countries within the EuroZone, and last but not least…
  • The realization of Inflation
Based on the news reported above, a dramatic increase in PPI (Producer’s Price Index) should be expected in the 4th and 1st quarters.  Higher production costs ultimately translate into higher consumer prices – a.k.a. CPI (Consumer Price Index).  That’s called inflation.
 
Inflation will cause interest rates to rise.  That’s not good either.—But wait a minute, in a previous blog I recommended that the Federal Reserve ought to be raising interest rates.  Are higher interest rates good or bad?
 
That depends.  High interest rates driven by Federal Reserve action are desired tenfold over higher interest rates driven by inflation.  When inflation drives interest rates the Fed loses one of its most powerful monetary policy tolls.  It increases price uncertainty and inflation which can easily cause interest rates to run wild.
 
A hostile interest rate environment will inflict additional pressure on homeowners still struggling to hang onto their homes; it’ll raise the cost of operation for many businesses which adds further pressure to unemployment; and it also causes more inflation, as companies must increase prices to cover higher interest expenses.  All of this shrinks the market even more (recession), as consumers who are falling behind* have less money to spend on goods.
 
Like with the recession, Wall Street is living in a speculative la-la-land that disregards facts and obviousness.  They make believe inflation doesn’t exist unless CPI says so, and even then will contend that price inflation for food and energy don’t count.  As with the unemployment number, Wall Street will wake up some day, read the news, and hit the sell button fast and furiously.
 
That’s why you shouldn’t get sucked into moves like today, which are simply light volume Wall Street manipulations to cash in on their year-end bonuses.
 
Inflation is on the way – and it’s a game-changer!
 
Stay tuned…
Investor's Choice
Dec 16, 2011
If you’ve been reading my blogs regularly you know what "the market" is doing and why it’s doing it.  You know its problems and fixes.  And if you’ve read my book you know that governments control markets. 

 

Yesterday Fox News hosted the last Republican debate before Iowans cast the first votes to see who will square off against President Obama in next year’s election.  In my opinion, it was the best debate so far. 
 
The American market is stumbling, broken, and without direction.  In an ever increasing hostile world, the U.S. has world record debt and no confidence in a prosperous future.  This, of course, is a result of more than a decade of poor bad management.  That makes this votean extremely important one:  Domestic Policy is the most pressing matter before We the People in the coming 2012 election. 
 
Why? 
 
Because America can never gain standing in the world with a weak economy – and that’s what We really need to do right now – Gain Standing
 
Last night’s debate was revealing.  We now know for sure who is who on the Republic side of the aisle.  We can thank the Fox News hosts for that.  They went on offense and asked the questions skeptical independents wanted to hear.  I’m grateful that they did.
 
Yesterday Ron Paul said that he thought everyone on stage had an excellent chance to beat reigning heavy-weight champion Barack Obama.  I strongly disagree.  I don’t think any of them have much of shot.  That’s too bad – because for yet another time in American history change is what we need more than any thing.   
 
This is not a political blog, nor will it turn into one.  This space, my space, is reserved for market commentary and how it affects investment.  My approach is always driven by what is best for investment and the American Market.  I could care less about politics. 
 
That said, Ron Paul is the only one on last night’s stage who understands how the Market is built, what makes it move, and what needs to be done to fix it.  He understands enterprise and the appropriate role of government (he wants to shrink government and expand the free market) – and he knows the urgency corrective action must arrive.  To compare Ron Paul’s potential to any other Republican is to compare Easy Money to "the market" Average.  See how that looks below. 
 
 
 EasyMoney5yr-12-16-11
 
 
 
Congressman Ron Paul’s policies are pro-people and anti-government.  That’s good for business, investment, and markets.   That makes him the best bet for investors. 
 
Vote. 
 
Since Publication
Dec 15, 2011
The 15-51 Indicator was introduced on July 4th, 2011 via the publication of LOSE YOUR BROKER NOT YOUR MONEY.  Though the portfolio is new to the world, I’ve been watching it for more than five years.  Having completed its construction by July 2006, I know this portfolio’s personality as well as any person can know a portfolio.  I know how it’ll act under almost every market condition.  In fact, that’s probably the greatest benefit of the Lose Your Broker method – known behavior. 

 

So it’s no surprise to me that since publication the 15-51 Indicator has gained 5% while "the market" has lost 6%.  Here’s how that looks in chart form.
 
12-15-11
 
Superior 15-51 construction is the difference between making money and losing money.
 
That’s what you need to be successful investing.  Not the same old thing.  
   
Same Old, Same Old
Dec 14, 2011

The story of the day is that gold dropped 6%, ending below the $1,600 mark.  The Dow Jones Industrial Average also lost ground, ending at 11,828, and firmly on its way back to the midpoint and fair value (11,245.)   The 15-51 Indicator also moved lower, losing 1% of its value.  

 

Listen, it’s a sloppy market.  The primary cause of world protests and revolutions (inflation) is starting to threaten market activity.  Widespread incompetency of world central governance provides no assurance to traders -- who, on a day-to-day basis, have no clue how to value investments.  This confusion creates daily volatility and speculation. That’s how oil and gold can price correct along with stocks. 

 

A long term perspective, however, can always be counted on to provide a sober assessment.  Below is an updated five year chart.  

12-14-11

 

 

Gold started its magnificent run at the first signs of troubles during the "financial crisis."  Notice, however, that it didn’t run a straight line.  It goes up and then it goes down, and then it does it again.  After each price correction gold ends higher because central governors continue to weaken world currencies.  Gold is a currency hedge that is also used to back trade (and currencies) during poor economic conditions.  Today’s drop in price is nothing less than a short-term price correction created by traders that can't figure out where the best bet is.   

 

That's why stocks also corrected today.  This is to be expected, of course, as there’s still speculation about recession, the direction of unemployment, and how to rivive the disastrous housing market and comatose banking system.  Sloppy stock market volatility has no choice but to exist.  It’s really the same old story. 

 

Maintain focus and sharpen your plan. 

 

Let me know if you need help.

-dan

 

RedZone: A Trader's Delight
Dec 08, 2011

Today, in yet another hostile day on Wall Street, the Dow Jones Industrial Average once again ran away from 12,200 – a.k.a. the RedZone.  Up to this point the Dow is hanging onto a paltry 3.6% gain for the year.  The 15-51 strength indicator betters that by 313%, gaining 11.4% so far this year.  Here’s how the action looks.  

 
12-8-11chrt
 
 

Now, everyone knows that it’s impossible to "time the market" – the act of buying at the lowest and selling at the highest in any particular year.  But that’s not required to make money or be successful.  The cliché is: Buy Low and Sell High – that is, to make money.  And that’s easy to do in a volatile market like this one. 

Every time the Dow approaches the RedZone is gets scared and can’t hold it.  Anything above the action zone midpoint (11,245) is over-valued territory.  That’s the time to sell or short stocks.  Reason being, there’s simply no reason to go long on overvalued stocks in a broken market with an economy on a downward trend.  That’s the reason the Dow sells off once it gets to the RedZone.  It makes perfect sense.

That kind of volatility is a trader’s delight.  It makes it easy to make money.

Stay tuned...

 
I'm Just Sayin'
Dec 06, 2011
After a strong move upward on Thursday of last week, when the Dow Jones Industrial Average rose an impressive 490 points, momentum has virtually stopped, as the Dow inches towards a point in which it can’t hold – 12,200.
 
When you look around it’s easy to see that nothing has changed.  Europe is still a mess and close to another downgrade; the U.S. is sending mixed signals in response to it (first our Federal Reserve will help, then it won’t, then it might, then it will but not like this, that, or whatever); and politics is trumping solid monetary and fiscal policies.
 
Why should the stock market keep rising – and why should gold stop?
 
Interestingly enough, central governments around the world bought gold in droves during the third quarter of this year, investing in the precious metal at levels not seen since the last "financial crisis."  Governments do this to add value to their currency, which they’ve been printing like it grows on trees.  That, too, adds to the gold surge.
 
And who cares about this recent Dow move.  It’s just a blip on the radar screen.  The Market is still broken and until central governance fixes it average stock market returns will remain under flat-line conditions (therefore, not making money,) above-average portfolios will outperform them, and gold will continue to soar.  In other words, current trends will continue.

 

Chart12-6-11

  
As I’ve blogged prior, free market fixes are the only way to prosperity.  So long as the Market remains broken, volatility, speculation, and illogic will rule the day.  I caution you not to get sucked into the hype.  Everything is clear with a long-term view.
 
One more side note: the vast majority of all mutual funds fail to outperform the DJIA.  Your stock portfolio must outperform it in order to build long-term wealth.  That’s easy to do with the Lose Your Broker method and my patent-pending 15-51 portfolio builder.  Try it out and see for yourself.
 
You can do it!
 
I’m just sayin’…
 
See also:
No Mojo
Dec 02, 2011

It was only a couple of days ago that the stock market showed some real attitude, surging 400+ points ahead on nothing short of a pipedream.  That takes gumption.  It was followed by another stalemate yesterday.  And then there was today, which can be called nothing less than a gutless performance.

November unemployment was released today and the rate slipped to 8.6%.  Such a move, if legitimate, is more reason to rally than the irony that occurred just a few days ago.  If that upward turn had serious legs the Dow would have surged higher on this "strong" employment news.  But, once again, "the market" couldn’t get out of its own way. 

This proves that today’s unemployment move was indeed a slip and not a fall. 

First off, you’re splitting hairs between 9.0% and 8.6% unemployment -- and that’s coming from a bald man.  Such a move makes no difference unless followed by a series of similar moves.  Second, it was only yesterday that the Wall Street Journal reported that "Jobless Claims Climb Back Over 400,000" (by Jeffery Sparshot and Eric Morath).  In other words: jobless claims are up and the unemployment rate is down. 

How does that happen?

Workers get eliminated from reality.  In other words, those unemployed workers who have received the maximum benefits under law (99 weeks), and thus no longer are eligible to receive benefits, are no longer counted in the statistics – even though they’re still unemployed and still want work.  These people fall into a category known not to be unemployed, but rather "underemployed."

This, of course, is not to mention that many workers are hired for the holiday season in November. Many of these are full-time positions that will end after the retail industry conducts their year-end inventories as of January 31, 2012. This causes unemployment to fall temporarily – key word here: temporarily.

That’s why the stock market doesn’t have any mojo. 

Feel free to opine.

 

Talk soon,

dan- 

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