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

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.