Crash Market Stocks - Financial Tips On Making Money In The Stock Market

Trading is remaining rather moderate to close out 2009. In fact, since September, we have remained rather flat in trading. In most circumstances, such resistance would lead me to believe that we are heading into an exhaust period in the rally, but such conclusions can't be drawn in our current trading environment. Whatever the case may be, much of 2010's success will depend on the moves of the government and on the transparency of the banks.

Those who have kept up with this blog will remember me discussing a big reason why a rebound in the markets were so necessary. In march, when we are that lows, bank's stock prices were at record numbers and their balance sheets looked as though most would not survive the summer. A large influx of capital was greatly needed, but investor's confidence was reduced to nothing. From there we saw the massive government spending and incentives that were put to market, which has helped jump start this aggressive rebound rally, which continues to go. Now we find ourselves at much stronger levels, especially for financials. Thus, banks are taking advantage of it.

Last week I discussed Citi's stock offering, which was going to assist in paying back TARP funds. Now, Wells Fargo is doing the exact same thing. At these stock levels, banks can afford to do it. However, just paying back government loaned capital, won't be enough to save these banks. They need more. The commercial debt that is due the next two years, is estimated to be 7 times greater than that of the residential "credit crunch" we saw hit the banks back in 2007. Thus, banks will need confidence to remain in markets for quite a while.

Other companies are taking advantage of inflated stock prices at this point by offering more shares to the public, hoping to build up more cash reserves in case of a second round of the recession. Lets be honest, we cannot go from being in one of the worst recessions in our country's history, to everything is fine. Markets have been damaged, fundamentals have been broken, and consumer confidence has been hit hard. All it takes is another scare to send markets spiraling once more. As of now, we are very vulnerable to just that.

Markets replenished about half of yesterday's losses today as wholesale inventory levels gave investors some confidence. 3M also saw some movement as Citigroup upgraded it to a buy. The market was able to fight its way out of the red with about an hour left of trading left, which as I have said before, can be very easy with such low holiday volume.

Citi is hoping to soon payback TARP funds and follow suit of other banks in hopes to relieve themselves of the strict employee payment limits the government has on banks who choose to accept their help. It amazes me how just months ago, almost all banks were under fire as the country wondered if there were any that could survive. Now, magically, after just a few months later, a few accounting changes later, and about 5000 points on the DOW later, everything is fine and dandy. I find it very hard to believe that banks are actually out of the woods. Sure, they have enjoyed a recovering stock price, but they continue to have billions worth of loans that will be on the chopping block in 2010 for both residential and commercial real estate.

So how will Citi come up with $20 billion so quickly to payback the government. You've got it, from you and I! Citi would like to payback the debt with a $20 billion stock offering that would open up to investors. Such a plan would have been useless back when the stock was under a $1. However, back at $3.86, this can easily be done. Some investors worry that the bank will have enough cash reserves after they pay the $20 billion back. If not, they just will continue not to issue loans as they currently are doing.

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McDonald's saw sales drop this quarter as they reported this week, which to me, is a bit scary. When we reach a point in this recession where McDonald's begins to see sales drop, watch out. McDonald's has been that light in the Dow, however, they too are now beginning to feel the heat of the recession. I mean, who can't afford a $1 McDouble?

Oil is continuing to struggle as inventory levels remain high. With this being the winter season and still oil is falling, I don't see it being much of a good 2010 for oil, especially when summer rolls along. There are many pitfalls that could easily hit the economy next year, and all it takes is that "black swan", to send us spiraling again. Happy Trading.

After several days of rather flat trading, markets finally made a move on Tuesday as the Dow closed down over 100 points. The close marked the biggest down day for markets since the end of November. Trading volume continues to be light, which has a tendency to bring volatility to markets.

Markets continue to act adversely to a rising dollar, which could prove as a rough beginning for 2010 as the dollar definitely has room to run. It's recent demise was mostly due to investors moving into riskier assets, as sentiment was strengthened. However, we are much too early for an inflationary state from our recent government splurge, so a strong dollar should be in the picture for 2010. Also as a result of the strengthening dollar is the dropping of gold. My GDX put options saw some good green today as commodities continued to struggle.

Many companies do not like to see the strengthening dollar as it can put a big burden on export profits. I plan to open up some positions in UUP as I feel the dollar should go for a bit of a run.

The government is looking at a legislative bill to stimulate the employment market that could use up to $200 billion of taxpayer's money. The money would most likely be used for roads, bridges, and infrastructure to help spur some employment. I do not see how better roads and bridges will assist in building up the economy. Sure, it will create jobs for some (for a time), however, the end product will just be a mound of gravel that has no net changing effect. Why not invest in companies who could then build their business, which in turn would allow them to hire more employees. Sometimes I feel that the government just spends money because they can.

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Like I've said before, I am not ruling out the very good possibility of markets taking a turn before the new year. Yes, volume will be light, which could bring some manipulation, but we are finding ourselves at very high support levels. Deflationary levels are still present and with a now rising dollar, these manifests should grow stronger. Happy Trading.

Markets opened up on fire Friday morning, after a much better than expected job report that came in for November. However, as a result, the dollar saw big gains, which as we have seen lately, caused for an adverse effect on overall trading, especially energy and commodities prices. Both gold and oil are traded down today as a result and most of the big gains which we saw when the market opened were given back by close.

The unemployment number came in almost too good to be true for economists. Just 11,000 jobs were estimated to be lost for November. Quite frankly, I am not that surprised. For the time being, we've seen a bit of stability back in the economy, and most businesses are not anxious to cut jobs in the middle of the holiday season. I expect December's number to be favorable as well. It will be very interesting to see what January and February brings, as I believe many companies will begin a new round of layoffs.

Gold really got hammered today (and even harder after hours). Lately, gold has been on a high. We may continue to see a push upward, but as soon as we see weakness in gold, it could come crashing hard. Foreign markets have been buying up gold quicker than they can get their hands on it, but that would stop as soon as the dollar found some strength. Oil would also most likely come down in price, in turn causing even more concern for deflation.

Manipulation still seems to be present. Even, with the 200+ point swings today, somehow, markets were able to close in the green. Like I've said before, during these low volume trading days, it can be a volatile storm.

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Options are becoming very cheap due to VIX levels dropping. I am finding prices for options very tempting. If indeed we see a next down leg, the VIX will be sure to spike, thus inflating option prices. Even 2011 options are reasonable at this point, which should not be a bad option. We could see this market take a turn for the worse even before year end. We are at very high support levels, and I believe this market can't handle it. The next few weeks should bring some fireworks. Happy Trading.

The government is beginning to take steps to slow spending, showing consumers that they do not plan nor want to be in the business of bailouts for much longer. I think most would agree that the continuation of government bailouts to businesses, will eventually lead us into a massive whole of debt and even more risks of inflation. The big question is will the government really have the courage to let go and allow the economy to walk on its own feet. My worry is that, lately, we have depended so greatly on government stimulus that if they were to cut off all bailouts, it would send us into another down spiral. Just as we saw with Cash for Clunkers, consumers have become very comfortable with subsidized purchases and as soon as they are gone, the consumers are also gone.

Financing terms for Fannie and Freddie debt were tightened this past week, showing that maybe some underwriting standards may start to get more conservative. The institutions are increasing the amount required for a down payment, as well as raising the minimum credit score for eligible borrowers. The changes were not too earth shattering, but show that steps are being made.

Secretary Geithner also announced that the $700 billion bailout fund will soon be not needed. The government plans to cut off the fund as soon as they can and are hoping that the economy will be able to move on without it. Unfortunately, I believe the only thing consumers have learned this past year is that, "when times get rough, don't worry, Uncle Sam will fix them." Who will step in to help grow the economy when the government leaves? I, personally, do not believe the government will be able to do all they plan to. For instance, putting stops to home buying incentives and loan purchasing would open up the doors to yet another housing crash. As such, we would see that trickle back into consumer spending, once again bringing down the entire economy.

For the time being deflation is being covered up by continual government spending, but trust me, it still exists. All economic signs are pointing to the existence of massive deflation, and as soon as this kicks in, I expect to see a lot of selling pressure in the markets. Oil and gold continue to see success, but I still believe their highs are coming down very soon. Gold will once again be a superstar in 2012-2013, but for now, I believe it has some retracing to do. I also see the dollar bouncing back as investors come back to safer investments. There are a lot of changes are economy currently faces, and I expect to see some major changes coming in the beginning of 2010. Happy Trading.

We have seen the finish of yet another wild "Black Friday" weekend. Retailers were hoping for a sign of light at the end of the tunnel with the weekend sales performance. Thus far, results were not as good as many were hoping for. Sales slightly increased as a whole, but the estimated spending per person was lower than last year. Also, when breaking down the numbers, most of the sales were found in the big ticket "door buster" items, and much less in the standard inventory. In fact, very little brand loyalty was found in this year's ambush, as consumers were clearly looking for the best bargains. Wal-Mart's Sanyo 50" flat screen for under $600, was one of the favorites of the weekend.

Black Friday (and most of December) is the glory days for retail. A weakening spending per consumer is not necessarily a good sign. Sure, fundamentally, it is better that consumers are spending less and saving more. However, for the sake of a stronger economic recovery, it has adverse effects.

I spent the early mornings of Black Friday in the major big box retailers. As always, there were a lot of people. However, I did notice the large amount of "Looky Lou's" that were present, who were not pulling out their credit cards. Also, it looked as though holiday gifts were the main purchases for this last Black Friday. Retailers are hoping that consumers did not get most or all of their holiday shopping done this past weekend, because many are expecting a very strong December to break even.

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We are entering into holiday volume at this point, which becomes very vulnerable to big market movers and manipulation. I expect to see (as we did last year) big moves in opening and closing minutes, with a fairly mellow mid day trading pattern. 2010 still bears some big pot holes for many companies, and will be a very trying year for many businesses. If the government begins to start letting things unfold naturally, we could be in for quite a shock. Happy Trading.

At this point, just from a general consensus I've taken, it seems that many clearly feel that the worst of the recession is behind us and we are beginning the roads to recovery. As I do not agree with that, there is one thing that is certain. Retailers around the country are hoping that Santa Clause packs his bag full of gifts, because for many, this holiday season could be the last chance for survival.

For many retailers, over 30% of their annual business is done in the next two months. It is the wonderful holiday season where everyone is in the spirit of giving...and buying. However, this year will be a unique year for the consumer and may not be the saving holiday season that many companies are hoping for. I have heard from several businesses that if holiday sales are not showing a strong rebound trend, most likely they will be closing the doors next year.

There are some goods. Banks have been very cooperative with consumers in regards to loan work outs. Even for those unable to work out their loan, they are most likely able to remain in their house from 6-24 months without a payment before the bank finally sends their notice to vacate. As a result, this may free up some extra disposable income for consumers looking spend.

Also, residential refinancing options still remain available for a rather aggressive rate. Many are taking advantage of refinancing their home and locking in a 5% or better 30 year loans, which frees up some cash.

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The problems are that we have seen a spike in the savings rate of consumers. Record jumps in the savings rate are continuing to take place as people are hoarding their money rather than wasteful spending. On top of that, credit has tightened up. Not only have maximum borrowing balances been significantly reduced, but credit card interest rates have spiked out the roof. Consumers are trying to minimizing the swiping of plastic, which is usually a big bulk of holiday spending.

Last year, the holiday season was a dreary one. For many businesses, another like it would force the doors to close. Sentiment remains the exact opposite to what was felt last year. Although our economic conditions seem worse at the time being, many people's perception of the future was a dark, dangerous one. Now, most seem to be chippy, believing that the worst is over and sunny days are ahead of us.

Retailers are the big gamble at this point and could reap some big returns depending which side wins out. If indeed this Christmas is a merry one, expect retailers like Best Buy, Nordstrom, Payless Shoes to go off. However, if sales come in at low levels, I would expect to see some big selling pressure on many of the big retailers. Black Friday will give us a good read of what to expect. I personally feel that Black Friday may not be that bad off, as many consumers have now become "discount shoppers. Happy Trading.

Markets sold off a bit on Thursday as initial jobless claims came in at around the same number it did the month before. Analysts were hoping for a continual downward trend to help boost up confidence in the employment market. However, small businesses are continuing to struggle to boost profits. Most have maxed out their ability to inventory and operating expenses. All that is left for them to cut is employee expense. It amazes me of how few of people restaurants and fast food chains have working their store at this point.

Surprisingly, tech came out with some disappointing numbers following the close of today's market. Both Dell and Intuit reported disappointing with Intuit reporting a very dismal forecast. As I have said before, it is going to be extremely more difficult for businesses to meet a legitimate expectation going into next year, as most expenses that can be cut have been already made at this point. Unless of course you continue to cut jobs, which will in turn continue to drag down the economy. Until now, tech has been the bright spot in all of this, but is now showing that indeed they are vulnerable as well.

Going deeper into the holiday season, we will definitely see volume trail off in to record lows. Thus, we once again have the market very vulnerable to manipulation. Unless a rather significant even takes place over the next month to shake things up, I do not see how bears will get the upper hand with such low volume. Plus, retailers tend to get a boost during the holiday season, which usually is their best part of the year.

The dollar showed some strength today as investors look for more conservative plays. As I've said before, the inverse relationship between the economy and the performance of the dollar still remains. I do see the dollar going for quite a ride, but that will most likely begin in 2010 in my opinion. With that, I see gold and energy prices pulling back to start the new year.

I worry that more and more are forgetting are vulnerability to a decaying market. We've had a bit of a mask placed over our eyes for the time being, but the pit still exists. I fear that if all information was made available to us regarding the current state of the banks, most would run for the hills. I hope that indeed, the damage will be minimal, but looking at what kind of action has taken place in this market the past 15 years, I don't see how that's possible. Happy Trading.

There are many people who feel that the residential dip has just about bottomed (or is now beginning to get better). However, there are several things that could cause for yet an even further dip in the housing market next year. The substantial drop in the residential market was one of the big factors that initially led us into this recession. For most people, their home is by far their largest investment and when the value of that investment almost gets cut in half in nearly 2 years, it has large psychological effects. In fact, I believe the recent uptick in consumer confidence had a lot to do with the little growth we've seen in home sales. However, here are a few reasons why we may not be out of the woods yet.

Tax Incentive Ending
There is no doubt that the $8,000 government tax credit for first time buyers has pushed people who would have ordinarily waited to buy in a year or so into buying now. A majority of the houses being sold involve buyers taking advantage of the credit. Incentives like these usually call for an "advance demand" in the product. As we saw in Cash for Clunkers, auto sales spiked during the months of the program. However, the following months after the program was discontinued produced record low sales, thus squeezing 3 months of demand into one. As of now, the tax incentive program has been extended into March, but the government has made it clear they will be looking to get out of the business of bailouts in 2010. We can expect a rather aggressive drop in demand if and when this program is discontinued and analysts are expecting the drop.

Increasing Loan Difficulty
One very big factor of why houses are continuing to sell is that many can still get a conforming loan. The government has been aggressively buying Freddie and Fannie conforming loans, which has helped banks to issue them. That coupled with the 0% interest rates has helped interest rates stay aggressively low. However, just as it is the case with the tax incentives, the government also is looking to significantly lower its amount of loan purchasing that it has been doing, forcing banks to begin taking on the risk by themselves. As we have seen with the commercial sector, those type of loans are almost non existent at this point and the terms are not favorable for the borrower. As interest rates begin to climb up and loans become harder to come by, be sure that we will see yet another dent in demand.

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Unemployment
It is clear that job losses continue to mount up. Sure, the rate of decline is slowing, however, we can expect to see continued job losses well into 2010. As a result, discretionary income will continue to diminish in the overall economy. Increasing energy prices only makes this worse. Unless consumer sentiment can dramatically shift next year, we will most likely see most consumers wait "on the sidelines" until greener pastures grow closer. Without the incentives, it does not give consumer much of a reason to buy.

Built Up Supply
Sure, recently we have seen a bit of an uptick in home sales. However, this does not make up for the massive inventory that awaits the chopping block in the coming years. Just in foreclosed homes alone, the current inventory would well last us for 3-4 years. Due to moratoriums and government holds on foreclosures, the delinquent homes have only been building up more and more. Also, banks have been "staffing up" to prepare in the disposition of the millions of homes that are in the pipeline. Eventually, these homes will be foreclosed on and be put to market. When they are sold, banks will price them to sell, whatever that price may be. With the amount of supply which could be on the market at once, we could see a rather dramatic drop in price once more.

Much of these reasons will depend on how the government chooses to manage these problems and if they continue to try and combat them. As for now, they have created a false supply and demand curve by limiting the supply (through moratoriums and government regulated loan modification) and artificially creating the demand (through stimulus and incentives). If they at some point decide to discontinue this and let nature take its course, we could see some very adverse effects. This in turn would effect the entire economy. Happy Trading.

Markets were right on cue today, as the Dow ended up triple digits again to open up the new week. Increasing energy and gold prices helped to lift markets, as well as some help from the Fed chairman. Bernanke addressed the economy today and discussed some of his outlook on the economy and some of the worries of investors. First of all, it looks like Bernanke will not be touching interest rates, until he sees a bit of a recovery in the employment sector. That could be well into 2010 or even 2011.

On the subject of the falling dollar, he did not seem to worried. He said that efforts of "promoting the recovery" would help in bringing back value to the dollar. Promote the recovery? Are we going to start seeing commercials about how we are recovering, so buy the dollar? In fact, I believe that has been the overall plan of the Fed in regards to all aspects of the company. Promote a recession is over. It is true that a big reason recessions linger and sink even deeper is because of the change of sentiment that comes to consumers. Once lending becomes tighter and business begins to fall, consumers feel they need to tighten up that budget and bunker up for the long haul. Such habits are good practices, but have a very adverse effect during a downward economy.

This time around, the government has been promoting that the storm has passed and that its OK to start spending again, in hopes that the consumer can help pull us out. Unfortunately, we have not been so easily convinced as retail sales continue to trail down (Pac Sun announced horrible earnings today after the close). However, it has been able to get markets at a much more attractive level for businesses, and banks have made a lot of money in the stock market (since they seem to be the only players right now). However, how sustainable is this recovery?

We are now reaching the point of a 50% re-tracement from recent lows as well as a 50% re-tracement in time from the previous high to low. Such would indicate the beginning of a new leg down, but recently technicals have been non significant. It is obvious that the Fed is hoping to combat deflation with continuing inflationary decisions. The big move in gold and energy, is a bit soon in my opinion and I believe they are in risk of a downfall. I do believe gold will run a bit longer, as foreign nations are buying it like candy, but it could have a very swift reversal.

As for now, I am waiting it out a bit, and considering a few tech options, as I feel they are holding up the best for the time being. Energy and gold are getting at new record levels and are becoming a bit too high for me to consider a wise investment. This should be a very interesting year end. Happy Trading.

Markets took a bit of a breather today as the Dow closed down just under 100 points after a week of rallying. At this point, it's hard to speculate much past profit taking as there was nothing too significant released today. However, government officials are now claiming that indeed they may not need all of the TARP money. Really? I find that hard to believe. Considering the trillions worth of delinquent debt for banks has just magically vanished, I am sure that money has been hard at work.

Secretary Geithner seems to think that the remaining unused TARP funds can be used to pay down government debt, considering that the Treasury expects a "significant" amount of repayments being made on behalf of the banks in the coming weeks. I am quite skeptical of financial institutions who were considered on the verge of collapse not more than 7 months ago, all of a sudden able to completely free themselves of monetary assistance. If so, you know there has been a lot of money made under the table the past few months.

I have discussed in other posts about my involvement in some penny stocks, as I like to put some strong risk/reward plays in my portfolio. One in particular has been on fire as of late that I thought I'd share with you. Imaging3 (IMGG) has soared from $.03 to $1.22 in just a couple of months. The company manufacturers a portable 3D medical imaging device that is to be used in hospitals and medical clinics. Lately, it has been released that the machine will become FDA approved, which has been a big cause of the recent jump. How much higher this stock will go, I have no idea. I thought it was done at $.60. I just thought I would let you know that it's been moving and I'm reaping rewards because of it. I actively invest other strategic IPO penny stocks, shooting for high returns. I am currently investing in a new Solar start up that has some pretty impressive technology. If you are interested in investment, email me and I will point you in the right direction. I see a lot of potential with this company.

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I don't see a big reversal quite yet unless a huge change of sentiment comes. There are several economic factors that currently exist that could ignite that change. In fact, we are dangerously flirting with an absolute crash of the dollar, which would be devastating for our economy. Not only would that put enormous amounts of pressure on the consumer, but it would also put an end to foreign nations buying our debt. At any rate, much of the economic noise of our economy is muted from government stimulus, but it has definitely not gone away. For me, patience will win out and big opportunities are ahead. Happy Trading.

Wall Street is continuing to see successes from a stimulus rich economy at this point as markets have remained green all throughout the week. However, despite the big returns we've seen the past several months in equity markets, Main Street consumers continue to suffer. When looking closer at the facts, it makes more sense why.

For the past two decades, our economy has thrived on economic "bubbles", which as we have seen, can temporarily create very strong growth. However, just as every "bubble" does, we usually end up seeing a burst (as we have with the Internet and tech bubble). You would think that we would have learned from our prior bubble mistakes about the consequences that can come from such mindless spending. However, this is not the case.

The government clearly took the bubble route when they decided to set record amounts of government spending, printing and stimulus. It is one thing to stimulate money going into consumer's pockets, but $3 billion for Cash for Clunkers, $24 billion for first home buyer's credit, $787 billion in American Recovery and Reinvestment Act, and $700 billion in TARP. With all the spending, we were able to rack up debt in the amount of 10% of our GDP, just in 2009! Not only that, but we are also BORROWING at more than six times the amount we borrowed last year. Fortunately, for the US Treasury, foreign nations still have found value in investing in the dollar. However, due to increasing large currency printing and spending, the dollar continues to get trampled on when compared to other major currencies. At this rate, you can expect foreign economies to quickly stop buying our debt.

What is really devastating in all of this, is the lack of money that is getting into consumer's hands. Sure, Goldman Sachs and other Wall Street banks are making a killing, borrowing the Fed's money at 0% and investing them in riskier assets. However, bank loans shrank at an annual rate of $931.3 billion in the 2nd quarter of this year. And listen to this scary fact: prior to the fall of Lehman Brothers, it took the Fed almost 14 years to double the monetary base (currency and reserves in the banks). After the recent Lehman fall, it has only taken the Fed 196 days to do the same (45 times the amount!)

When our government chose to take this route of recovery, it was the "quick-fix" band-aide choice that we've seen in times past. The only problem is (as we've seen), is that it eventually comes back to haunt us. In my opinion, it is for this reason we continue to see a climbing stock market, despite continuing weakening economic data. With this amount of government intervention, holding a strong short position at this point is just plain stupid.

Thus, I look to other means until these decisions catch up to us. Indeed, despite deflationary indicators, concerns are raised about the dollar. As a result, we have seen huge gains in commodities. Gold, oil, and agriculture are reaching new record highs as investors hedge up on the falling dollar. Even though, we have already seen huge gains from these sectors, we could continue to see them rise into the new year. I do still feel that eventually, the dollar will rebound strong, but at a 0% borrowing rate, a dollar recovery is difficult.

Our economy still remains on very thin ice. Just because the market continues to perform well, this does not mean our economy is driving that. As I always say, a market crash does not come when everyone is expecting it. At this point, I always am on my guard. Happy Trading.

Markets soared on Monday as investor's confidence got a boost from the weekend G20 meeting, which portrayed a strengthening of the global economy. A 200 point rally on 200M of trading leads me to believe that a small group of people are doing a lot of the buying.

With reading the headlines and sites nowadays, I almost feel like I am getting pitched on a multi-level marketing scam, when referring to the stock market. Analysts are proudly declaring the success of the market with firm recommendations saying "you can still get in, we've got a ways to go." Whether or not that is case, is still yet to be determined, but what makes me very cautious to partake of any such rally, is the fact that almost all of our recent successes are due to massive government stimulus and spending.

Last week, we saw our unemployment reached double digits (which in reality is much worse than 10.2%, when considering all consumers). Mom and pop businesses (which is usually considered the "salt of the earth", in regards to businesses) continue to rack up massive losses. In fact, it is very easy to see just how good businesses are doing by going into your local diner or cafe. Consumer spending remains considerably down. However, at this point, the government has manipulated the natural regression of GDP (which is historically 70% influenced by the consumer) by moving up numbers with massive amounts of government spending, stimulus, and rebates. The problem is that as markets continue to rise, investors will more and more begin to believe that a "natural recovery" is what is bringing back markets, which is absolutely not the case.

Last week, the FDIC approved banks not having to mark down depreciated assets to its current market value, as long as the loan "remains current." Now current will be defined in a variety of methods I am sure, but such a move is another huge cover up for banks. This goes to show investors that indeed opening up bank's books to the public to show the "true value" of their current assets would cause for most banks to be bankrupt. In my opinion, this is the cause of a continued 0% Fed interest rate, as well as government purchasing of mortgage debt. The government clearly knows that banks cannot absorb the true values of these losses. Inflating the stock market is also helping this process, however, at the expense of those investors buying into it.

Because we are still rather new into this downturn, effects of government intervention are quite delayed. As months continue to go on, our economy will more and more see effects of a mindless spending government. In my opinion, I compare this recent market bolstering to the construction of a building with a weak foundation. We are so concerned about the upward performance of the stock market, we have failed to evaluate the foundation of our economy and if we can sustain growth for the long term. Just as a building with a weak foundation would, I believe the stock market is waiting to come crashing down once more. However, with 200+ rally days like today, I continue to be watchful for the right time. On a good note, my 10.5% return with Lending Club remains in tact.

Thursday closed with a rampage of buying which once again pushed the Dow back over 10,000. Anticipation of what investors are hoping for a strong employment report helped bring some confidence in trading. This is just the reason why I sold out of my shorts last week.

As for the rally, I don't see this continuing into tomorrow. Most of today's run was in anticipation for tomorrow's number. Best case scenario is that we do get a favorable report and we go on with our day. However, if the number comes in worse, I would expect to see a rather strong sell off. Unemployment is the one sign that continues to bring down the overall sentiment of many investors, as people know what kind of impact jobless consumers have on an economy.

Even though it seems as if almost all retailers have been crushing earnings reports lately (Starbucks beat their expectations today after close), it is important to know that this is not the case. In fact, more than half of retailers have fell significantly short of expectations, not to mention that most retailers have suffered massive losses compared to the year prior.

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Being in real estate, I have done a lot of work with Starbucks and worked with a lot of clients who have Starbucks as a client. From a landlord perspective, Starbucks is a worry for most. They have closed down hundreds of locations, put a halt on development, and are trying to get out of hundreds of more leases. Their sales have significantly dropped, but due to their report being better than expected, the stock rises. This same principal is happening all throughout the market, which is why we are seeing almost a complete void of fundamentals in the market currently. This fact will change, but for the time being, it makes it a very dangerous field to trade on.

I expect a selling close tomorrow as I do feel that unemployment will be better than it has been, but still very depressing. Hundreds and thousands still losing their jobs give me know reason to cheer, or buy stock for that matter. The dollar held up reasonably well today, despite the rally, which leads me to believe it's almost time to pull the trigger. Happy Trading.

There continues to be an ongoing debate on the future of the dollar. In most cases, a decreasing value like we've seen in the dollar this past year (down about 13%), would be quite alarming for most countries, especially when considering our current economic crisis. However, government officials, at this point, remain not worried about the recent downfall of the dollar and feel that its recent move is due to the spike we saw last year during the peak of the economic turmoil.

One thing is for sure, there exists an almost perfect inverse relationship between the value of the dollar and the performance of the stock market (see graph below). Last year, when fears of massive bank failure was on investor's minds, the dollar spiked in value, it being the "safe investment" at the time. Bonds also found strength, as less riskier vehicles became appealing. However, due to the large bounce we've seen in markets recently, the exact opposite has occurred. Investors are returning to riskier investments and the dollar and bonds are getting left behind.

So far, the government is not too worried, because they are still able to sell their debt at this point. In addition to that, most smart economists know that are first big obstacle facing the US economy at this point is deflation, not inflation. Although inflation remains a critical concern for our economy, it is likely to not become a big problem until 2011-2012. A weakening dollar helps to mask a deflationary down spiral, which in most cases would spawn a dollar rally.


For the most part, government officials don't mind the weakening dollar, because as we see from the graph, the stock market capitalizes from it. At this point, a strong dollar would most likely have a negative effect on market indexes. I do not see the dollar weakening much further and quite frankly, using the currency as "bait" is down right risky. All it would take is a "black swan" event to send the dollar into a whirlwind.

The Treasury is finding less and less buyers for US debt and markets continue to see resistance at this point. Even today, following a push in markets for most of the day today, we saw a rather big sell off to close the day, having the Dow only close up 30 points. The Fed's statements today saying that the outlook is good is rubbish. If this is true, why do interest rates remain at 0%. They're job is to keep peace and order in the economy and unfortunately, at this point, the best way to do that is by smudging the facts.

CISCO reported a "favorable" earnings report today after close, however, they were still able to lose over a billion dollars in revenues compared to the prior year. But, as we have seen with many companies before, investors are not interested in that. Companies inability to turn around falling profits will eventually lead to their demise. An economist "expectations", will do nothing for them. That is why, for me, it is important to compare earnings on an annual basis to get the big picture of the company's performance.

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Markets are continuing to see a lot of resistance at this point and heading into unemployment numbers, that can't be good. Now I do feel like we will see better numbers than we have in times past, but the numbers will most likely remain very dismal. There is definitely more selling pressure now then there has been, and I expect to see the second crash hit markets very shortly. Happy Trading.

Black & Decker stock went soaring today after hours over 25%, when they released shorty after the markets closed that their rival company, Stanley Works, would be acquiring them. In an all stock merger, valued at $4.5 billion, Black & Decker CEO Nolan Archibald explained the reasoning saying, "The driving motivation of the transaction is the present value of the $350 million in annual cost synergies and the combined financial strength and product offerings of the merged companies."

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Slowly, but surely we will see more and more mergers and new acquisitions as we continue along this struggling economy. We are now several months into this recession, which for most businesses and consumers, has been a strong stress test on their reserves. Many people have been able to hold out for a year on emergency funds and expense cuts. But how about 2-4 years? I believe in 2010 we will see even more giants fall.

The US government will still be looking to issue more debt in the coming quarter, however less than they had originally anticipated. The Treasury will look to issue $276 billion in debt for the 4th quarter of 2009, which is considerably lower than their initial estimate of $486 billion they made in August. However, don't think this is the end of government debt. 2010 Q1's estimate remains at $478 billion. This cut to the budget gives Congress some time to approve an increase to the $12.1 trillion total borrowing cap that is placed on the Treasury. We are currently flirting very close to that ceiling.

We saw much more volatility in trading today, which is beginning to look a lot like fall of last year. As a result, options are beginning to look favorable once more. Last Friday's huge sell off, was one of the largest sell offs we've had in quite some time. In my opinion, we should see some very strong selling pressure in November, as year end pressures grow near. December is still yet to be determined, as many retailers are awaiting this hopeful "saving" holiday season to keep them alive for the next year. Unfortunately, 70% of our economy (the consumer) has taken a massive beating this past year. Thus, for me, not a good outlook on this year's holiday sales. Happy Trading.

As I expected in yesterday's post, markets received quite the boost from a "better than expected" Q3 GDP growth report of 3.5%, as experts were anticipating a 3.3% growth. As a result, the Dow closed up nearly 200 points. It was for this exact reason, I liquidated many of my short positions yesterday. I am hoping to have an opportunity to buy back into them tomorrow before close.

Also, just as I said yesterday, the reported GDP number was not that good when looking at it closely. Most people fail to look any further than that initial 3.5% number that is released. However, we can see from breaking it down, the economy is definitely not out of the recession.

First off, consumption. We can see that a large portion of the consumption boost from 3rd quarter was from the auto sector. That being said, we all know that the industry skied from almost zero activity to standing room only as the Government launched the "Cash fo Clunkers" program. Excluding the auto industry, GDP growth dramatically declines to an estimated 1.9% pace instead of 3.5%.

In addition to that, the residential industry contributed growth to GDP this past quarter for the first time since 2005. We can also link the recent activity in residential to the massive buying of Freddie and Fannie debt from the Government (also the $8,000 credit to first time buyers). The government has extended residential debt buying until at least March of 2010. From there, the government is "coming up with a plan" of what they are going to do with Freddie and Fannie in early 2010.

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It is with these factors (and others I mentioned in yesterday's post) that I measure this report with a grain of salt. Many said that this number proves that we are beginning to stand on our own two feet. I believe the exact opposite. Our economy is being held up by trillions worth of government spending. At this expense, we are merely able to hold our economy just out of water, nothing more. Eventually, in my opinion, the government parachute will burst, leaving us to really have try and stand on our own two feet. Those expecting a 2010 full recovery will be sorely disappointed. Unfortunately, mending our wounds will take several years and there will be many dips along the way. Happy Trading.

Due to some measured changes in consumer sentiment and other weakening economic data, markets have seen some opposition the past few days, which continued into today as the Dow closed down again over 100 points. With deflationary indicators strengthening, my gut tells me that we should indeed start to see a rather strong turn in the markets. However, there are still some lingering elements which keep me guarded at this point. I have seen some great results from my most recent positions, with my GDX put options performing very well, as well as my DRV and UUP longs. Here's a great video talking about reasons why there should be more weakness for gold in the near future. Click Here

Both consumer confidence and new home sales came in worse than expected, which is giving investors some doubts. Tomorrow, we have the big GDP report, which is a big factor that is holding me back at this point from taking more positions. The fact is, that most likely we will see a positive number for GDP tomorrow. Now remember, GDP is measured on a quarterly basis and is compared to the previous quarter. Year over year, we will most likely still remain negative, but we are sure to get a positive quarterly move. Here are some reasons why. Net imports is a subtracting factor of GDP. As of late, we have cut imports to record lows, due to the slamming of the dollar and other recessionary problems. This should give some boost to GDP. In addition to that, government spending pushes up GDP levels, which recently we have seen record amounts of. Such factors is bound to create a slight upward movement in GDP.

With this positive number, by all means, does not mean we are out of this recession. Many times in our history we have seen strengthening quarters only to be followed by even more weakening GDP numbers. There still exists plenty of economic factors that continue to show weakness as well as a massive deflation risk that is at the door. However, as for this number released tomorrow, I would highly expect media to have a field day with it. Many analysts have already been calling that we are out of the recession and they feel that tomorrow's number will prove that. Indeed, fundamentally, it will not, but you can be sure many investors will buy into it. For this reason, I am holding back on purchasing some more short positions as I see big potential for a rally tomorrow.

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The opportunity for me is at the door. The fundamental data, although delayed, is growing stronger and economic factors are growing weaker. I plan to take advantage of this next round and hopefully make some good returns from it. I want nothing more than for us to come out of this downturn stronger, but unfortunately, I don't see that happening for a while. I will keep you updated as well as put a new podcast up tomorrow. Happy Trading.

Seven more banks joined the failure list this past weekend, which puts our grand total to 106 just for the year. This is the most that the US has experienced since the Great Depression. There is no doubt that such a discouraging fact will have grave consequences for our economy for years to come. Luckily, the Government has somehow been able to convince consumers that all troubles are over. In fact, the biggest difference that we are seeing from now compared to the Great Depression is consumer sentiment. Mass bank failures brought serious doubt to consumers, which in turn spawned a "run on banks", forcing hundreds of banks to be closed down. Thanks to trillions of "off balance sheet" transactions from the Fed, most big banks have been able to maintain a disguise of profitability, which in turn, has helped consumers to maintain confidence, at least for now.

During the past year, I have repeatedly stated my opinion of the big paradigm shift that will most likely take place during this recession in regards to online shopping. For the younger generation, buying your flat screen TV online could be as easy as clicking the mouse for you. However, this has not been the case for the elders of our society. They still want to touch and feel the product before making the ultimate decision to buy it. They want to bargain a bit with the sales clerk and get them to throw in some bonus accessories. Many of them also love the golden seal of that "warranty" that they are given from the store.

Sure, it is a change to purchase something online rather than in a store, but many of the above listed benefits can apply online as well. Throughout this recession, consumers have taken a huge hit in their discretionary income. Thus, they have, for the most part, become bargain hunters. In most cases, there are no better bargains out there than online. I am amazed to see and hear of the amount of elderly people just now beginning to purchase goods online. Sure, you have to have the patience to wait a few days for shipping, but is it worth the wait if you save hundreds of dollars? I believe we are just cracking the shell of this enormously large market we call E-Commerce.

Amazon confirmed my beliefs of a rapid growing market, as they announced very strong earnings for the quarter. More impressively, was their outlook for the next quarter, which far surpassed expectations. In my opinion this is one market, that as the consumer continues to get beat on, could grow stronger.

Shopping online is a win win for both the consumer and the business. The business benefits from low overhead costs by not needing sales reps or the brick and mortar of a building, as well as no monthly rental and utility costs (except for web hosting costs). In return, the consumer benefits from a lower retail price as prices can be significantly lower while still reaching their same margins.

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In time, I see E-commerce only growing stronger. Every year, more and more people are getting online and staying on it longer. As this young generation grows older, I would expect more and more "brick and mortar" shopping to become obsolete. Amazon is one that looks strong for the long haul, even pending deflationary/inflationary pressures that are heading our way. Happy Trading.

All the talk these days seem to be focused around inflation as gold values continue to rise and the dollar continues to sink (at the moment). However, I have continually expressed my concern for an initial deflation problem to hit markets, prior to inflation. Sure inflation is a worry for me as well, due to massive government spending/printing, with huge tax revenue losses for the government, however I believe we really see the problem of inflation deep into 2010 and 2011.

Yesterday, we saw the PPI (Producer Price Index) once again show a negative reading. This number has been bouncing back and forth the past couple of months, but many analysts felt that the negative days were over. Well, not quite. PPI came in at a loss of .6 after having a 1.7 gain the prior month. Indeed, such a trend shows that deflation is not out of the woods and in fact is still a real concern. Markets keep behaving a bit unorthodox, but some things are harder to fight and cover up and deflation is one of those things.

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Markets are a bit higher today, thus far, however we are heading into redemptions season, which as we saw last year, can provide some serious selling pressure. The battle of "perceived favorable earnings" vs discouraging economic data continues. However, there becomes more and more obstacles for businesses in producing "favorable earnings." Happy Trading

Markets have yet again begun the week with solid buying, with the hope of solid earnings from Apple. Apple has a very strong history of knocking earnings expectations out of the park (they are also known for setting lower expectations than normal), so to see the big numbers from Apple is no big surprise. The company reported profits of $1.82 per share, which was a big leap from last year's $1.26 per share. The report is quite impressive, especially when considering the economic circumstances and still shows that Apple continues to be a leader and pioneer in consumer electronics (which is a big reason why I put them on my Top 2009 stocks list at the beginning of the year).

Earnings continue to be the driving force of market performance, which thus far, has once again perceived to be better than expected. However, with that, global economic indicators have not been so fortunate. Unemployment continues to be on the rise and continuing currency printing has brought the dollar to new lows. Market volume still remains critically low, which on rallying days like today is very abnormal. We are starting to reach the season in which last year weathered very difficult for the stock market. Year end seasons always provide a lot of pressure to big corporations for budget cuts, loss write-offs, and next year projections. Considering our current state, none of those factors can be too encouraging.

I continue to see no window of entry at the moment in the market, as insider trading continues to run rampant. I do believe that we are at or near the point of change and that it is only a matter of time before negative sentiment once again takes the stage in Wall Street. Happy Trading.

Perceived strong earnings from both Intel and JP Morgan today caused for markets to rally. The S&P has blown aggressively through that critical 1080 resistance and the Dow has penetrated that long awaited 10,000 mark. To many it looks as if Wall Street is back and our "crash" days are over. As I do acknowledge the impressive nature of this rebound and wish I could have taken more advantage of the rally, I still do feel we have several more beasts to slay for us to be considered "out of the woods." However, as of now, some key technical indicators have been broken, and if they are sustained, I will once again return to the sideline for a period. Until I see technicals and fundamentals align, I, personally, cannot declare an end to this recession. As always, these new levels need to sustain to become anything too significant, but for now there are no signs of slowing.

As such, I still see a lot of opportunity in shorting gold and longing the US dollar. Prices of consumer goods continues to decline. Despite what looks to be strong profits for the banks, where are all the loans? Loans are almost non-existent in the commercial sector and are becoming more difficult to obtain in the residential sector. For many banks, they now do not consider 1099 income (self employment) as normal income, thus making it very difficult to get a loan. Independent contractors around the country are finding a lot of difficulty, despite having money in the bank, to convince banks for a loan. In this type of environment, it makes business growth very difficult.

The S&P closed its sixth consecutive day in the green as, once again, we begin another week of buying. However, one problem is that today's trading volume was the lowest we've seen this year since January 2nd (the day after New Years). So on one hand, market levels are slowly pushing up, but on the other, less and less people are participating in it. I'll let you decide if that is good or bad.

The S&P is having a hard time penetrating and sustaining the 1070-1080 levels at this point. Last week, the S&P quickly retreated from it, as it did earlier today. I would imagine that if the market cannot penetrate these levels this time around, we should see a rather strong retreat, leaving us with a discouraging October. I am still waiting for the volume to return at this point, which in my mind, will bring even more aggressive selling.

My shares of DRV have stayed pretty status quo as of this point, as I still have a stop loss in case of a run up in the markets this week. However, if data continues to be grim, I would expect to see a pull back. Earnings is the topic of conversation this week, as they kick off tomorrow. Watch out for earnings, as they are the easiest data to manipulate. CPI is another big indicator to be on the look out for this week.

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I expect to see the dollar start to make a turn around shortly as gold begins to fall from its highs. Gold call options have significantly decreased in price, signaling investors feel that we have falling prices in the future. The market still remains very unstable and volatile, however, fundamental data remains right in line with my expectations. Happy Trading.

The next round of earnings for Q3 has begun and thus far investors have liked the results. I have discussed the earnings paradox in prior posts as the reported results can be very misleading when not looked into further. However, the recent trend has been: if it's better than expected, that's good enough for me. Unfortunately, even if the results ARE better than expected, companies are unsustainable if they continue to suffer profit losses, which most are.

Alcoa kicked off earnings with a favorable report which pushed markets up quite a bit. Mosaic was another company who gained favor in investor's eyes, despite suffering over a 60% loss to their revenues from a year prior. However, it still was BETTER THAN EXPECTED, so the stock rallied. Today, a handful of retailers set markets on fire by announcing favorable earnings, even though most of them still suffered losses compared to the prior year. Also, many analysts fail to keep in mind back to school shopping. Even though to most industries, the time of year means no net difference, to retail, it is one of their busiest times.

Luckily for Wall Street, not much significant economic data is being released this week, as the recent trend has shown economic indicators slowing down. Next week, we are not so lucky as there is a handful of reports that could definitely stir things up, one big one being CPI. In all this mess, I was able to find something worth buying. I picked several shares of DRV in my Zecco.com account before close as a I feel increased real estate woes should bring me some reward. With buying it, I set some strict stop losses in case of a nice Friday rally.

Bonds hit a wall today as $12 billion in 30-year bonds reach a 4.009% yield today. With the Fed obviously wanting to lessen the amount of US Treasury purchases, investors have become nervous. At the current levels, its hard to make sense at buying much anything. Insider trading remains critically high and big money is still remaining on the sidelines. We'll see what tomorrow brings. Happy Trading.

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Due to inflation worries, we have seen new highs for gold in recent trading. Today, gold reached the $1045 mark, which is a new high for the metal. An increase in gold is something I've seen happening, however, I believe it will become even higher in a year or two. Sure, massive government spending and new currency printing brings severe worry for inflation, but I believe this worry is a bit pre-mature. What makes me very nervous about inflation in the future, is that there is such a delay in DEFLATION at this point. No doubt, deflationary signals are here and increasing, but with the recent economic turmoil we have seen the past two years, a deflationary down spiral should have indeed come by now. Government bailouts have slowed this down spiral, but in my opinion, its full existence is inevitable.

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From this massive spending has come speculation of the value of the dollar, which has caused oil and gold to soar. However, in my opinion, our economy remains in deflationary state. Housing prices are continuing to fall, unemployment is on the rise, and production costs are lowering. The only "inflationary" signal we are seeing is massive government spending (which is spawning high gold prices and a low dollar value). History has shown that there is a "lag time" for inflation to begin following the initial influx of money.

GDX and GLD are funds that have performed very well the past few months, however, I believe they have temporarily peaked. I do see gold levels at $13-1400 at some point, but much further down the road, when we see the scary face of hyperinflation. Writing a put on GDX and GLD is becoming very tempting as is picking up shares of DRV or SRS. REITs are feeling more and more pressure as the lack of liquidity remains.

This last week marked the year anniversary of the passing of the TARP program, which has been the government slush fund to help bailout suffering companies and large banks. It is amazing to look back on the past year and just how far and wide those TARP funds have reached. These mixed with other government acronym funds have been the source for trillions and trillions of dollars that have been flushed into the market to help build a damn to try and stop the rapid declining economy. For a time, the damn seemed to hold strong, however, I believe we are about to reach the next round of this downturn.

Friday's unemployment report was very discouraging, as the actual result came in at a loss of 263K jobs after analysts were expecting a loss of 175k. The market reacted with slight selling as I believe the big loss was anticipated after the ADP estimate that came in worse than expected earlier in the week. Last week as a whole, spent most of the time in the red as investors are questioning just how quickly we will be climbing out of this hole.

So far on Monday, investors have been buying as financials are performing quite well. Goldman Sachs upgraded large banks (big surprise) to attractive from neutral, despite two more bank closures that took place this weekend. We are just about to hit the 100 mark for the year, which is the most since the Great Depression.

It will be very interesting to see if the market is able to rebound from last week's discouraging data and performance. This week is light with factoring economic data, so disappointing days will most likely be a minimum. However, pressure on retailers continues to build as unemployment is rising and consumer spending is falling and we are heading back into earnings season. I expect the holiday season will prove to be a "last battle" for many retailers hoping to take advantage of holiday cheer spending before handing over the keys.

Trading was all over the board today as investors were given mixed signals with the release of more economic data. To open the day, trading was mostly all selling as the Chicago PMI index came in well below analysts expectations. The market was hoping for a number of 52 to come in for September, however, actual results came in 46.1. Around midday, the Dow came back from being down over 100 points to positive territory as Final GDP numbers came in better than expected. However, in the end, we saw another day close in the red as the Dow finished 29 points lower.

We are now starting to see economic indicators begin to fall back on the "disappointing" side, which is becoming very discouraging for investors that believe we are out of this recession. What brought so much optimism back to Wall Street in recent months was that released data was beating market's low ball expectations. It is hard to make expectations lower from here on out, which means companies will need to start to perform to beat expectations. That doesn't seem to be happening much anytime soon. Also today, the ADP employment number came in far worse than analysts expected. The number came in at 254k loss in jobs compared to the 200k loss they were hoping for. That's a 25% difference. This set the tone for the unemployment number being released this Friday.

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As we grow closer to year end pressures, I expect selling pressure in Wall Street to increase. We've seen the shorts perform fairly well the past week, which is a good sign for those waiting for the short side. Deflationary pressures are continuing to mount up and government debt continues to rack up. Once again, all eyes will be on the banks for earnings to help push or pull the market. Goldman Sachs has been the front runner and will look to be the charging horse for banks on October 15th, when they release earnings. Although, numbers may still look good for the banks at the moment, there continues to be almost zero lending going on. This lack of lending has put a halt on many businesses and corporations around the country. Unfortunately, only time can help heal many of the wounds that exist in our current economic state. Happy Trading.