Click Here to Download Seeds of Destruction Introduction Audio File. Over the past decade, Americans have had to endure a debilitating "triple-zero economy"—wage growth, jobs growth, and stock-market returns are all near zero. At least one zero is about to change for the very much better. We are on the verge of a new American bull market likely to rival that of the s. Even better, this new bull market has next to nothing to do with politics, government, or last week's election.
I don't make this forecast lightly. For the past five years, I've been a permabear. I started with a call to cash in Novemberjust before the bottom fell out of global equities.
After brief flings with a few bullish rallies, I once again issued a cash call in Februaryand I have adhered to that strategy. Today, however, I see America's next great bull market being driven by four powerful trends. AAPLBoeing BACaterpillar CATFord Motor FGeneral Motors GMand General Electric GE are becoming decoupled from the U.
It's the inevitable result of an ever-increasing share of the profits of these largely flagless corporations being earned in production and sales offshore, as they open factories and gain market share in emerging Asian, African, and Latin American markets. Add to this a sustained era of low wage growth in the U.
The big corporations will profit, even if the world's two biggest economic engines—the U. It lowers long-term interest rates through massive Fed purchases of long-term government bonds. Because the Fed pays for these new bonds by simply printing money, the result is an ongoing flood of new currency onto world markets; this is positive for equities.
In addition, the U. This is because when the Fed cuts interest rates in the U. Other countries have responded with their own styles of printing money and devaluing their currencies, to avoid loss of competitiveness. The only sensible thing for stock-market investors to do in this era of quantitative easing is to move out of bonds paying near-zero returns and into equities. Ironically, this extremely bullish macrotrend is likely to be around for years to come, because QE is likely to be a very ineffective policy tool.
Just a few years ago, many analysts were glumly looking at a supposed peak in proven petroleum reserves, which was colliding with the undeniably rapid growth in energy demand from emerging countries like China and India.
Bearish predictions of long gas lines and a rapid acceleration of energy prices that would cripple long-term global growth inevitably followed from this gloom-and-doom scenario.
Today, however, the technology-driven development of massive reserves of shale gas and oil sands holds the prospect of what once was unthinkable—North American energy independence. Even cost-effective development of arctic hydrocarbon reserves might become feasible. Simply put, we have the makings of another 30 to 50 years or more of cheap energy and attendant higher growth rates. OF COURSE, ANY NUMBER of geopolitical flash points could smother this baby bull in its crib: I do not, however, fear that the global economy will soon be shoved off the U.
With this most bitter of election seasons over, a Republican-led House of Representatives and a Democratic-led Senate have far more room to move toward the middle of the playing field for a compromise that should put our fiscal house in better order. As our politically divided nation heals, a new bull market should take root. As it does, the disgusted, disinterested, fearful, and cynical retail investors who have been on the sidelines for so long should come roaring back into the market, producing a bullish trend that should last for years.
Since February, I have called the market trend as a sideways pattern. This kind of trend dictates a move out of equities for the small active retail investors.
I reiterate that call now and see far more risk to the downside than reward to the upside. This is an ETF loyal readers will know that has taken its toll on my own portfolio over the last year because I failed to see the importance of periodic flights to dollar safety from Europe despite the weakening of the dollar.
But just as I kept nibbling at shorting the housing market pre and kept getting burned, I will continue to short the long bond as I see an eventual huge gain — just like the housing short. The central problem facing global stock markets are major structural imbalances across regions that prohibit a robust economic expansion that all parties can benefit from. In a nutshell, the U. China, for its part, remains far too export-dependent while Japan is simply over and only South Korea, Thailand, and the Philippines are likely to be resilient enough to prosper over the longer term.
From to now, however, we are averaging less than half that!!!!!!!! Yet most politicians and economists are in denial about this. They think what is happening is a short run cyclical phenomenon and keeps recommending stimulus — government spending if you are a Dem and tax cuts if you are a Rep. These two drags on our GDP growth equation account for most of the slow growth we are experiencing.
However, the reality is that the big multinational corporations like Apple, GE, GM, Caterpillar, Intel, and so on that benefit the most from offshoring are the same corporations that finance our political elections. These multinationals also either own our financial media or advertise heavily in the papers and on the networks. So both the electronic and paper media are reluctant to bite the hands that feed them. My view is that is borders on criminal for our politicians and pundits not to acknowledge the importance of trade reform in restoring American prosperity.
By that standard, most of Washington and much of the media should be locked up. The euro is about to collapse amidst a sovereign debt crisis likely to lead to the same kind of meltdown the U.
China is on the verge of a housing bubble collapse. A combination of rapidly rising inflation due to an artificially under-valued yuan and too much government stimulus is about to collide with falling export demand from the U.
This is an economic house of cards with enough jokers in the deck to warrant a short. To end, I will reprise the analysis I have been offering since February. In addition, consumer confidence is in the toilet. Ergo, this is a BEARISH signal. With the investment-led recovery faltering, we have no more ammunition from either a fiscal or monetary policy standpoint to re-stimulate the economy. On the monetary policy front, Helicopter Bernanke has turned the king over on the chess board — and is left with only a swollen balance sheet and a weakened dollar.
Despite a weak dollar, we still run large trade deficits in oil and with China.Two Methods that Analysts Use to Evaluate Stocks
With China, the problem is the fixed peg of the yuan to the dollar. As long as this peg endures, America will surrender almost a point of GDP growth annually to China at the costs of almost a million jobs we fail to create. This is BEARISH, too; and if there is anything that truly ticks me off both about well-coifed airheads like those on the Sunday Meet the Press type shows as well as my doctrinaire colleagues in the financial press it is the stupid and stubborn unwillingness to realize just how destructive this peg is.
It is essential that we not forget the contractionary effects on the U. Here in California, for example, revenues are falling far short of projections; and the state is likely to have to endure another round of what has already been very steep cuts.
Italy and soon Spain will have joined Greece and Ireland as the weak sisters on the continent; and all the euros and Eurobonds in the world are not going to save their sorry derriers. I predicted long ago on the Kudlow Report that the days of the euro are numbered; in truth, the best way for countries like Greece and Italy to rebound is to abandon the euro and devalue.
If the European union persists in enforcing a strategy of fiscal austerity instead of currency adjustments to restore vibrance in the European economy, they — and because America depends on exporting to Europe — and us are doomed to a much slower growth rate. BEARISH, BEARISH, and BEARISH. In Asia, at some point, the Chinese economy must stop its export-dependent levitation. A soft landing would entail the emergence of a robust consumer but policies are not being put into place to make this happen — with those policies being a yuan float coupled with increased health and pension benefits to loosen up savings for consumption.
Ergo, the hard landing scenario is more likely. This involves interest rate hikes and both monetary and fiscal tightening to fight a spiraling inflation. A likely result will be the collapse of several asset bubbles, including that in real estate — and no small amount of chaos in the land of unbridled mercantilism. A Dragonianly BEARISH signal.
If — or should I say when — China falters, so, too, will the economies of all of the commodity countries. While Brazil is the most vibrant of the four, as China goes, so goes these countries. Canada can fall on both the U. A final BEARISH signal. Always a Winner Strategies. Read it and Reap! In February, I issued a call to cash based on my reading of the fundamentals of the U.
In April, I reiterated that call; and with this newsletter I continue to see this as a poor time for retail investors to be in the market. Over the next two months, it would dip as low as and would then rebound to a top ofjust one point above the level of when I issued my cash call. Now, at the time of this writing, SPY has fallen to I note without pride that this call has been the most accurate of any analyst on Wall Street in — yet it has been largely ignored by my colleagues in the financial media.
This is most likely because of a strong bias in the media towards bullishness. Yes, I called that bubble collapse too as early as the later part of What I do is handicap the market trend based on macro fundamentals and a read of the technical conditions of the market. To be clear, from my paradigm, a sideways market indicates disagreement among market participants over the eventual trend of the economy. So what will determine whether we recede back down into a bear market and recessionary economy or bounce back?
Add this all up, and it is the same damn picture I saw in February, only worse. I only wonder why this is so damn obvious to me and seemingly so elusive to so many other analysts. So it is possible to have a U. That said, that kind of divergence is likely to be an unsustainable equilibrium over time because the U. As a final conclusion, the U. Consumption and government spending cannot provide the fuel to run our economic engine anymore.
Business investment continues to flee offshore; and our trade deficit is really and truly a vampire sucking the lifeblood out of our economy.
Until the politicians and Meet the Press type pundits in Washington and my financial press colleagues realize this, we will continue to have the wrong debate about what must be done and continue to give the wrong advice to investors.
And by the way, anybody who was surprised by the events of the last few weeks and the market turmoil needs to turn their press pass back in. A loyal reader asked me about TBT — the exchange traded fund to short the long bond.
As you may remember, I was very bullish on TBT last year; but it turned out to be one of my worst trades. The best thing to do when a trade goes the wrong way is to learn from it. In this case, TBT serves a dual function for me — as both a potential trade as well as a leading indicator of the business cycle.
The fact that TBT took a dive provided a very strong indication to me that the economy was slowing back down and the market would turn; that was partly the basis of my cash call back in February, which has turned out to be the right call.
Today, TBT remains a technical sell. The economy is softening. China continues to buy our bonds to manipulate its currency. QE2 from the Fed is not quite done. That trifecta keeps interest rates down and therefore TBT down near its week low. So I say stay in cash until a bullish market trend reasserts itself. And watch TBT as a very good leading indicator of any recovery — or Chinese yuan strengthening. In the last newsletter, I urged a move to cash.
In other words, the market has done a whole lot of nothing since that cash call — and a few days after my cash call, Investors Business Daily changed its bullish call to "market in correction. These are the times that it is really anybody's guess as to whether the bullish upward trend will reassert itself. On the bullish side, a number of indicators continue to point to a moderate investment led recovery.
On the other hand, a variety of factors suggest trouble with all three of the other elements of the GDP equation — consumption, government spending, and net exports. Consumers are plagued by continued high unemployment, weak home sales, and ongoing foreclosure problems.
On top of this, their budgets are being squeezed by higher gas, broader energy, and food prices. While our Marie Antoinette Federal Reserve does not recognize food and energy inflation as real inflation — apparently wanting us to eat cake as our bread and gas prices go up — such non-core inflation is likely to have an impact on consumers moving forward.
On the government spending front, the big news here besides the winding down of at least some of the federal stimulus is a coming contraction in state spending at some of the hardest hit states like Illinois and California.
Reduced government spending — whether it is at the government or state level — is contractionary from a macro perspective so we must anticipate this. Finally, on the net export front, Ben Bernanke's doing his best to trash the dollar and provide United States with a competitive beggar thy neighbor edge abroad.
However, China is doing an even better beggar thy neighbor job with it's protectionist and mercantilist policies; because the yuan is pegged to the dollar, no matter how low the dollar goes, our trade deficit with China merely increases. Meanwhile, a weak Europe is unlikely to buy a lot of American exports. On top of all this, there are geopolitical uncertainties. Will the Jasmine Revolution spread to more oil-producing pro-American countries like Saudi Arabia?
Will the Japanese nuclear disaster cripple the global supply chain or, worse, morph into a holocaust meltdown? And with nuclear power likely to share a smaller slice of the electricity generation pie worldwide, will higher electricity prices act as a contractionary force on the world economy? All these factors are being sorted out by a market now which is showing surprising strength in the face of high economic uncertainty and geopolitical turbulence.
This is not a market I yet want to play from a trend following perspective and therefore will continue to stay in cash till the bullish trend firmly reasserts itself.
In the meantime, I will continue to do what I always do which is to keep a significant fraction of my portfolio in noncyclical biotech stocks. Here's a list of some of my holdings.
I have been doing some short-term trading around Neoprobe NEOP with the goal of building a large position in this stock. I sold off most of my position when made my cash call back in February around four dollars and started rebuilding as a stock fell down towards three dollars. I like this one for longer-term. My longest term position is in LPTN, Lpath. This is a low volume stock with pretty big price swings but I'm just going to hold my position and wait and see how the clinical trials pan out.
My one "Roulette" biotech is the penny play Advaxis ADXS. PKa pink sheet stock recommended by one of my readers. I continue to do some short-term trading in TBT, which shorts the long bond.
My intention is to build a large position in TBT, but events like Portugal debt crisis in the Japanese earthquake can cause TBT to fall so you have to be careful trading this instrument. Over the long-term, however, I think it will be a home run. The good news as rolls along is that the economy is looking far better than it did six months ago.
This helps account for the undeniable bullish uptrend of the U. As this point, trading with the trend means being on the long side for the foreseeable future.
The first is Clinical Data CLDA. It has an important date with the FDA for the approval of its anti-depressant drug Vilazodone on January But even if Vilazodone gets approval, CLDA will still likely have to find a buyer among Big Pharma to really see a sustained stock price hike.
As for an update on some of my holds: Stellar SBOTF is a favorite long term hold — I like the promise of its technology. There are often typos in this newsletter and the culprit has to do with the fact that much of it is dictated using Dragon Naturally Speaking.
The accuracy rate is quite high, but some silly things do slip through. So if you see something that doesn't look quite right, trust the syntax and make your own internal correction.
I have continued with this process and not been particularly disappointed. While Investors Business Daily declared last week that the upward trend of the market has resumed, I still see it in a largely sideways pattern. It's just not worth the risk to be in the market. Despite some false optimism about the strength of the US recovery, the latest jobs report brought everyone back to earth.
Despite a short-term improvement in the European crisis, the long term suggests many troubles ahead for Spain, Portugal, and Italy while the euro zone itself is more likely to shrink than expand. China continues to boom, but the Chinese central bank continues to raise interest rates. If we've learned anything from the rational non-exuberance of Alan Greenspan here in the US, it is that rising interest rates will invariably choke off any recovery.
It would be high irony if China underwent the same kind of housing bubble collapse that the West did — it would likely make what happened in the West look like a stiff breeze compared to a hurricane.
My bottom line is that this is one of those times where it is just very difficult to make money. In such times, Wall Street looks more to me like a roulette wheel than a poker table.
During such times, I do not like to sit down and play as the House, e. I have the luxury of doing sitting on cash because, unlike professional money managers who are under constant pressure to continually deploy their capital, I only have to play when I want to. From this vantage point, it's not worth the few percentage points you might gain going into the New Year at the risk of losing substantially more. To put this another way, I prefer to make my money in bunches when the market trend is solid rather than get nicked and cut in any sideways markets.
The little money I do have in play right now remains primarily in some of my small cap biotech favorites. So far, my best trade has been Stellar Biotech. I see this as a long-term play so please don't pump this one on my behalf and then dump it. Do your research, see that it has a reasonable business strategy, and make your own decisions.
As for some other trading highlights, I took profits on my yen short and my long on IMAX, bailing on IMAX because of some concerns raised about their accounting practices that are likely overblown but still capable of battering the stock.
I also took some profits in TBT and then promptly reloaded a small position as it fell during this latest European crisis. I will add to this position if either it's swoons once again or develops a strong support level and begins to rise. I am also maintaining a small position in Beazer homes simply because I like it as a canary in the coal mine, a position that will alert me to any recovery in the housing market — a key ingredient of any broader economic recovery.
Lastly, I remain underwater with most of my rare earths positions, but these are small positions and I will hold them to see if this market develops. Have a great Christmas and Hanukkah! Unless there are important market moving events, I will see you in the New Year. I have begun to cash out of many of my positions and take profits in anticipation of a flat to down US market until the end of December. Both tax selling and the taking of profits coupled with uncertain outlooks in communist China and in the PIGG portion of Europe suggest less upside reward than an undeniably strong technical market trend might suggest at this point.
Better to be early than late is my motto. And speaking of early,I have begun to build a short position in the communist Chinese stock market using the exchange traded fund FXP. Just as I was a bit too early shorting the housing bubble, I may indeed be a bit early on cmt stock market China bubble.
However, here is what I'm seeing. First, as my early warning system, I maintain a watch list of 64 Chinese stocks listed on Market Edge. Over the past month, I've noticed a systematic deterioration in many of the stocks. Of the six with improving conditions, three of them are agricultural stocks. Second, from a fundamental perspective, economists within the Communist Party have come to a critical inflationary fork in the road.
One fork — the path of contractionary monetary policy, rising interest rates, and price controls — leads inevitably to a business cycle downturn. The other fork — allowing the Chinese currency to strengthen so as to reduce the price of food, commodities, energy, raw materials, and imported consumer and investment goods — leads to a far more stable transition to an economy less dependent on exports.
It is crystal clear that the Communist Party has chosen the wrong fork. The biggest danger of traveling along the rising interest rate path is to prick the speculative bubble otherwise known as real estate in China — all the while attracting a flood of speculative hot money flows. The bigger picture is that communist China cannot continue to experience export led growth catalyzed by American and European consumers. The American and European economies simply don't have the firepower to sustain communist China's growth.
The last thing I should say about investing in China is that it is far better to play the long side of the communist Chinese market by investing in peripheral plays like Australia, which provides China with many of its stock market during recession, and Germany which provides China with many of its capital goods. However, the main reason I don't like investing in communist Chinese stocks besides the fact that it is a ruthlessly totalitarian country whose political and military leaders are out to destroy America is that the vast majority of Chinese companies put creating jobs ahead of making money.
That doth not a robust return make. With the big macro picture out of the way, let's finish with a brief discussion of my trading strategies. The last letter I strongly recommended going long the yuan via CYB, short the long bond via TBT, and short the Japanese yen, YCS.
The TBT trade turned out the best — it went up six points, and I've taken my profits for now while I wait for the Irish crisis to subside. As I painfully learned during the last European crisis, a flight to the US dollar pushes down bond prices and boost yields — which is exactly the opposite direction TBT how to get lots of money on neopets it.
I'm also making some modest money on my yen bollinger bands cloud while I continue continue to hold CYB while I wait, perhaps like Godot, for that bright shiny day when the Communist Party figures out it is in China's best interest to let the yuan go up significantly.
In terms of the rest of my portfolio, I added two stocks to my short-term trading portfolio based solely on an interesting discussion in one of my MBA classes. The stocks are Imax IMAX and Clicksoftware CKSW.
Just be careful with Clicksoftware because it has a small float. In my short-term trading portfolio, I also bailed on COIN, which was a failed play on California's failed marijuana initiative and abandoned ship on DirecTV based on growing information that the Internet is becoming more and us stock market completes round trip of a substitute for cable than simply DirecTV.
My favorite little penny play and best performer continues to be Stellar Biotech SBOTF.
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Profit takers hit the stock fairly heavily for a couple of weeks but it's back trying to inch above a buck. This is a stock to accumulate and forget about for a few years and then likely be very happily surprised.
Since I got into the rare earth bonanza a bit late, my small positions in several stocks continue to be flat to down. I reiterate that this is a long-term building project. My small positions include ARAFF, GDLNF,GWMGF, and LYSCF. Finally, my dumb move of the fall quarter is opening up a small position in the uranium stock URZ recommended by a stock site called Ahead of the Herd — I promptly wound up significantly underwater. I still can't figure out whether I have been "pumped and dumped" or whether the site simply made a bad call.
If anybody has any information about this stock site, send me an e-mail and let me know whether it has helped you make money or lost money. Have a great Thanksgiving! And as the ultimate expression of patriotism, go out and buy a bunch of cheap Chinese stuff on Black how much money do nyc cab drivers make to put around your Christmas tree.
In real, dollar-adjusted terms, the market is closer to flat. A possible crash triggered by the weakening economy or a currency war is not out of the question.
You simply can't have one country lowering interest rates in another country raising interest rates when the two currencies are held together by a fixed peg.
Something has to give, and I think perhaps that Ben Bernanke is trying to force the Chinese to revalue the yuan because the Fed chairman knows that the White House and Congress don't have the backbone to do it — and the Fed chairman also knows that reducing the global imbalances between China and the US is critical to long-term recovery. From an investor's point of view, I see three related macroplays: Long the yuan via CYB, short the long bond forex trading amazon TBT, and short the Japanese yen, YCS.
I have all three positions. Once the yuan starts to rise, long bond yields must rise because the Chinese. Buying as many treasuries as they do now. This will cause a spike in TBT.
The yen is grossly over -valued because the yuan is grossly under valued — it must fall once the yuan starts to rise. I said to sell SV is NT after the pop because it might be hard to get a buyer for the company. I bought on drop. Right now, my favorite little penny play and best performer is Stellar Biotech SBOTF — it has almost doubled since I first noted it in the newsletter. Check my previous newsletters for more detail. My other highly risky penny play that is making a very nice move on low volume is LPTN.
If it breaches a buck, it should start to run nicely. Since I got into the rare earth bonanza a bit late, my small positions in several stocks are flat to down; but I'm not really worried because this is a long-term building project. So far, Work from home jobs in pune part time without investment have opened small positions in ARAFF, GDLNF,GWMGF, and LYSCF.
Only GWMGF is up. As previously noted, I purposely stayed away from Molycorp as it is way too expensive. I sold Hovanian for a small loss and reloaded with Beazer, which has better technicals — so that's my play on the housing sector, which I think is at a bottom. I dumped him my shares in DUSA, MDVN, and TEVA not because I have lost faith in it but simply because I wanted to deploy my cash elsewhere and I didn't see much upside in the near-term.
I also closed my position in QTWW on news that it was going to undergo a reverse stock split. I closed my short position in GameStop with a very nice little profit -- with the market trend robustly up, just don't want to be short now. I also opened a thumbhole stock savage mark ii in a penny stock called Converted Organics COIN.
It's got excellent technicals and came up on my Market Edge screen. It's a good long-term play on agriculture. The upward trend remains intact but there's some disquieting underlying technical deterioration that we must take note of. If this forecast holds true, unemployment will remain high, income will remain stagnant, and it is unlikely that consumption will help pull the economy up to full and steady growth.
It's a salacious little menage a trios we have goin gon: The Federal Reserve keeps short-term interest rates low and engages in quantitative easing to lower long-term interest rates and thereby turns on the monetary printing press. The increase in the money supply drives down the value of the dollar. Meanwhile, the Smart Money borrows money at low interest rates and buys stocks, with xm forex islamic heavy skew towards energy and commodity-based stocks which will hold their value through price appreciation as the dollar falls.
In other words, pierce this veil and you see that there's nothing really going on fundamentally to suggest a strengthening economy.
Rather, it is more a house of mirrors from the Federal Reserve. On that note, I used to think that Ben Bernanke was a very smart guy doing a very dumb thing by printing endless reams of money at the Federal Reserve. Maybe he is just Machiavelli. Smart or dumb, Ben Bernanke is playing a very risky game. Finally, I have to talk brag?
After lamenting several weeks ago that this has been one of my worst trades — so far — I also indicated that I wasn't really worried about being in the red and that I had adopted a modified "double down" strategy that has involved adding to the position every time TBT which shorts the long bond went down. Last week, that strategy finally paid off as TBT made a nice upward move and put the trade back into the green.
The move was all the more amazing in the light of repeated announcements by the Federal Reserve that it would engage in more quantitative easing, which should push long-term bond yields down and prices up and further push TBT down.
However, that didn't happen, and the reason I think goes back to the issue of the impact of a falling dollar on the inflation rate and an eventual bursting of the current bond market bubble.
So I continue to like the TBT trade. Let's see where it goes. I opened new positions in several rare earth stocks based on China's export restrictions on its supply — China is the OPEC of rare earths.
See my video about this at Bollinger bands cloud. This is strictly very high risk, penny stock stuff; and I run forex and trade settlement risk of buying late in the run so I am only buying small positions and will only add them as kamakshi forex goa trade moves in my favor.
So far, I have opened small positions in ARAFF, GWMGF, and LYSCF. I purposely stayed away from Molycorp as it is way too expensive. If any readers have any thoughts on the rare earths stock plays, I'd love to hear from you.
Stocks that I am long: I cashed out both DEPO and SNTA with very nice gains -- no news in the nearer midterm future to propel them much higher. I took a small loss in SOMX how can cheat in binary option brokers make money a bad trade where i got sucked into a parabolic move.
I also significantly trimmed my very large position in SNT — I still have faith in it but will only add back to this position as it moves up, which looks like it will take a long while. I haven't mentioned previously my long position in DTV.
This is kind of like a "Peter Lynch" play — the famous mutual fund manager who used to get his ideas from talking to his children about what they saw at the mall.
According to some analysts, the gains in the stock market re | OG13 SC Practice #50
I'm just seeing a lot of satellite dishes going up. The US market indices continue their upward trend last week as the Dow Jones industrial average broke above the binary operator overloading in c++, mark for the first time in over five months.
The carry trade game here is simply to borrow money from the Federal Reserve or Bank of Japan via low interest rates and invest in the stock market. In this carry trade, the dollar falls and the US markets go up but the net effect in real, dollar adjusted terms is negligible.
From this perspective, any price appreciation in the stock market is merely offsetting negative currency effects. This is hardly a bullish scenario. That's why while this may be a good market for short-term traders, it is a dangerous one for longer-term investors tempted to move cash off the sidelines.
What bugs me about all this is a Wall Street "patriotism" that equates the debasement of the currency and easy money with something it must be good for the country because it's good for the markets. All of this will continue until countries around the world confront China on its mercantilist and protectionist trade policies.
China's grossly undervalued and manipulated currency alone is driving the monetary policy not just of the United States but also most of the countries in Asia. A weak Chinese yuan forces Japan, South Korea, Taiwan, and all of China's major competitors in Asia to option profit loss graph excel to drive their currencies down.
Meanwhile, the commodity countries like Brazil and Australia are going bonkers because their currencies are bearing the lion's share of the burden of China's beggar thy neighbor currency regime through currency appreciations of their own — and result in export difficulties.
What I find really irritating as well is the rush of American journalists — Exhibit A is Fareed Zakaria's mindless apology for China in this week's Time magazine — to support Chinese mercantilism and protectionism. It's just plain arrogance and stupidity. If you get on enough TV shows and get asked your opinion enough, you start to believe you actually know something.
My guess, however, is that when the light weight Zakaria is on any TV set, they have to nail his shoes to the floor so he won't float away. Anyway, that's my rant for the week and I'm sticking to it. The sober analysis is that this is an upward trending market with a wall of worry that is primarily macro-based. Climb it with caution. Stocks that I am holding: I took a small loss in YRCW, which did a reverse stock split how to work from home and stay sane wiped out all the fun speculation on a penny stock.
I will add to TBT every time it drops a buck. As a final note, there are often typos in this newsletter and the culprit has to do with the fact that much of it is dictated using Dragon Naturally Speaking. You can see in this chart that the stock market is exactly at the spot it was back on January 20, You can also see that after the market surged off its lows in February of and peaked in April, it traded in a clear sideways pattern.
Now, again we find ourselves at the upper end of the range; and it is useful to ask the question: What will propel this market forward?
The answer must of course lay in improving economic fundamentals. So let's do a quick overview using my Always a Winner forecasting model. So we return to the eternal question posed by this newsletter: What are traders and investors supposed to do? At this point, short-term traders may well be able to take advantage of a continued uptrend; but if it turns out to be a sideways market trap as I fear, only tight stop losses and sound money management principles will save you from the kind of mini-gutting that many traders suffered in the month of August — again refer back to the chart of SPY and you will see exactly what I mean.
As for long-term buy-and-hold investors, if you have been simply putting your money on a set of speculations on secular trends that I presented in my video series for the Street. Those speculations, which I have done in conjunction with analysts Greg Autry and Jaysen Harris, included: Many of the biotech stocks — but not all — in my portfolio are based on the analysis of a former student of mine and contributor to my website — Andrew Vaino of Roth capital.
Three of the best calls on this biotech front that have appeared in this newsletter include: The only bad news I can report right now about my small cap biotech speculations is that, with the exception of SNT which has an important conference coming up, there are no short-term catalysts on the horizon likely to move any of the ones I'm currently holding — so they are true buy-and-holds.
Here's what's in my portfolio currently: CHTP I sold half of my position on the FDA news and I'm letting the according to some analysts the gains in the stock market reflect growing confidence half ride for a bit ; DEPO,DUSA,LPTN,MDVN,MITI,NRGX,SNT,SNTA.
I have also begun building a small position in a company called Stellar, which is a pink sheet penny stock which has an interesting story which I will share with you a future newsletter. Anybody who has any information on this company, please share with me. I will also be sharing more with you about SNT in the coming weeks as I continue how to win deals on binary options find this company frustratingly interesting.
The stock market continues to show technical improvement — even as the economy continues to exhibit fundamental deterioration. On the technical front, Market Edge has its Strength Indices showing improvement while its Momentum Index remains very strong. At the same time, 81 of the 91 Industry Groups followed by Market Edge are rated either strong or improving. This all adds up to a stock market that continues to inch up on weak volume. Trec earnest money contract texas the economic fundamentals do not yet support this early cyclical uptrend, I continue to think it may terry allen options trading be a sideways market trap.
Two things that caught my eye last week included an unexpected drop in Consumer Sentiment and a fallback to zero for the core inflation rate is measured by the CPI. Both are make money on ebay dropship signals.
On the other hand, the ECRI weekly leading index has stabilized and resumed a modest upward trend, which is bullish news. Of course, the big macro puzzle right now is why gold is hitting an all-time high even as deflation continues to loom is a real possibility.
My favorite explanation, which I have offered to you before, is that because of the large budget deficits both Europe and the United States are running, gold as slowly and quietly becoming the de facto reserve currency of the world.
On other macro notes, we had yet another round of sparring over Chinese currency manipulation, this last week on Capitol Hill. Timothy Geithner continues to maintain the untenable position the Chinese currency is grossly undervalued but that China is not a currency manipulator.
The only thing clear about the situation is that China continues to benefit from its undervalued currency and its economy booms while America goes bust.
The other big news that has important implications for the American economy on the currency question revolves around the manipulation of the Japanese yen by China through its large bond purchases in Japan.
These purchases are now forcing Japan to once again intervene in its currency market to weaken the yen — and thereby gain back some advantage against countries like America in China. Given the economic uncertainty, I continue to hold significant fraction of my portfolio in cash while focusing on small-cap biotech stocks for returns based on science rather than the economic cycle. Over the next week or so, one of those stocks — Chelsea Therapeutics — will have its day of reckoning with the FDA regarding the viability of its hypertension drug Droxidopa.
On CNBC, also said it was time to take your profits in Savient Pharmaceuticals as, after its FDA victory, it has now risen to fair value — and will only rise further if there is a bidding war over the company. While this is a possibility, it may be better to deploy capital elsewhere. On the other biotech fronts, LPTN saw a slight uptick in volume and price for a stock that is incredibly thinly traded. When I see such movement, it often means that something's going on within the company that may soon come to light.
Question for my readers: If any of you have any information about a penny stock called Savi Media SVMI please send me an e-mail. The company makes a valve which claims to provide significant fuel efficiency and environmental benefits. If true, this two cents stock should shoot to the Moon.
However, that clearly has not been the case. Anybody who can solve this SAVI mystery for me — is a fly-by-night pump and dump company or a misunderstood genius? Trust me, only the Big Money Computer Traders are making out like bandits in this kind of sideways environment. So in order to tempt me, SPY has to blow past with above average volume and broad sector support. In order to do that, the economy is going to have to show a lot more strength. Until then, cash is king.
Here are my two main exceptions: Apple remains a solid secular long — see my video for TheStreet. Here I am, back from a three-week hiatus. You may recall from my last newsletter prior to that hiatus I urged all my long term investors to stay in cash while possibly allocating some portion of their portfolio to biotechs.
So far, this seems to have been pretty good advice. The stock market had one of its worst months of August ever. Of course, over the past week or so, the market has been rallying so many of the talking heads are all a twitter about the arrival of a new bull market.
By the same token, if you bought the bottom on July 2, you would have been in great shape right up till August 9 — and then been gutted like a pig. Now you're up already five bucks and you think you're a genius.
But what makes you think that after another run-up, the market is just going to run right back down? Please keep in mind, I'm usually not this cynical about the market trend. Usually, it's pretty damn clear whether the economy is, as Bob Dylan might say, "busy being born" or "busy dying. I myself am not particularly in the double dip recession camp. When I see is what we've had over much of the last decade — slow GDP growth well below our potential output.
That will in turn mean persistent high employment and stagnant wage growth. How you get a bull market out of that — and the Dow at 20, — I really don't know. I wish I had better news, but we have to trade or invest the hand that we are dealt — or sit patiently on the sidelines in cash.
For traders, I myself am growing increasingly disenchanted with a long short strategy unless you have great skills at risk management and rapid trading. What happens in a sideways market with a hedge portfolio is that your shorts get stopped out when the market runs up, and your longs get stopped out when the market runs down.
All you wind up with is modest losses over a lot of stocks that add up to a big loss — plus a lot of transactions costs. So if you didn't make any money over the last couple months in your short-term trading strategy, I'd strongly advise you to hang your cleats and mouse up for a while until this market is easier to make money on. As for the long-term investor, I continue to recommend cash for now.
And by the way, I will send you a Special Report on my biotech picks this coming Wednesday based on a conversation I had one of the top biotech analyst in the world — Andrew Vaino of Roth capital. I did a segment last Friday on CNBC that talked about a few of the stocks Andrew is following, but a lot of the best stocks I could really talk about on TV because their small caps. Please buy this book right away, not because I need your royalty money, but because unless the boneheads in Washington change their policy tunes pretty damn quick, we are going to keep heading right down the tubes.
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling, or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The authors express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The authors may or may not have positions in the financial instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein.
Past performance does not guarantee future performance. Join Our Mailing List Email: Where They Will Be Fought and How They Can Be Won, Revised and Expanded Edition. Subscribe to the newsletter on an RSS feed! Link to my three courses in the Modern Scholar Series sponsored by Recorded Books. Courses include two on investing and one on China. PLATINUM STANDARD TRADING EDUCATION. The newsletters and blogging on this page are written for educational purposes only. Click Here to Download Seeds of Destruction Introduction Audio File Catch my stock market videos at The Street.
Now a bit of a closer look: A Dragonianly BEARISH signal 7. Market Pulse As loyal readers know, I have been on a bit of hiatus working on my new book with Greg Autry called Death by China. On that note, if you live in the Southern California area, we will have the book debut on June 7 at UC-Irvine. If you live on the East Coast, the debut will be on June 16 at the Washington Press Club. As I bit of history, I issued a cash call the week ending February 25, and reiterated that call in my last newsletter, which was for the week ending April 1, So I suppose you could have made a few bucks there.
What I try to do is determine the market trend based on both big picture macro fundamentals and confirming technical indicators — and loyal readers will know that I have done that with some significant success. In this case, after a solid move off the March lows ofI saw the market back in February settling into a longer term sideways and possible down pattern. Here is the macro backdrop that now continues to motivate my cash call: The fiscal and monetary stimuli in both Europe and the U.
However, that stimuli was not sufficient to bootstrap either consumers or exports up to the status of follow-through on the investment led recovery. The bearish factors in the U. In other words, in the U. The bearish factors for Europe include: Slow growth is the norm.
The bearish factors of Asia include: This is DUMB beyond belief. I do see the same kind of sub-par growth rates in the U. So I remain in cash — except of course for my various flings with biotech stocks.
Even here, I remain cautious. My one big position now is in Cytokinetics CYTK. I have always made my best money in periods where the trend has been strong — and such periods are getting rarer. So just be patient; and at some point, I hope I will have better news.
The newest member of my biotech portfolio is CYTK, Cytokinetics. This is the latest new listing from Andrew Vaino at Roth Capital, Wall Street's best biotech analyst. CYTK develops small molecules to improve muscle function for the purpose of treating heart failure and Lou Gehrig's disease. Its clinical data looks promising, it has a good chance of achieving "orphan drug" status which helps with regulatory and clinical barriers, Amgen is subsidizing the development costs so it has a great partner, and the shares appear significantly undervalued.
On the book front, my new book with Greg Autry entitled Death by China is now available for presale at Amazon. Get your order in early please! However, there are significant storm clouds on the fundamental horizon that suggest a significant market pullback.
The primary argument right now for a continued bull trend is that the U. First, we are already in the middle of a very nasty cost-push inflation squall. In addition, we are already in the middle of rising energy costs and with the turbulence in the Middle East, this is unlikely to abate. On top of this, I see a lot of the underlying bullish trend in the stock market attributable to robust surges in energy and commodity stocks.
In moving to cash, I know I am going a bit against the grain here as some leading economic indicators continue to point to an above trend recovery. So in such times, cashing out and sitting on the sidelines a bit is not a bad strategy.
As a final comment, in my last missive, I recommended buys on CLDA, EK, and FOLD. My biotech longs include: NEOP, LPTN, SBOTF, and SVNT. My two rare earth plays are GWMGF and GDLNF. Navarro's Trading Summary The little money I do have in play right now remains primarily in some of my small cap biotech favorites. Here's the lowdown on last week's action from Marketedge: So what does all this mean for traders and investors? For traders, there remain opportunities for short-term trading with the upward bullish trend — but be careful, as the technical indicators are suggesting softening.
For investors, despite the upward trend of the market, I remain nervous about fully deploying cash into this market. I also opened up a new position in FEED based simply on technical considerations — this is an agricultural play in China. CYB,DTV,DUSA,GTXO,HOV,LPTN,MDVN,NRGX,QTWW,SVMI,SNT,SBOTF,TEVA,VVUS Stocks I am short: Up Market Pulse The good news: SNTA, DEPO,DUSA,LPTN,NRGX,QTWW,SVMI,SNT,SBOTF,CYB,TBT,MITI, GME SHORT ,DTV,VVUS,HOV,TEVA,SOMX,MDVN Updates: Up According to Market Edge: The DJIA started the week with a Traders bought the dips throughout the week as the DJIA saw triple digit intra-day swings on both Tuesday and Thursday.
Despite several disappointing economic reports, traders kept a bullish outlook throughout the week.
For the period, the Dow lost 30 points You know my concerns. While September was as pleasurable as August was painful, there are still some major tests of technical resistance ahead before we can feel comfortable with the idea of an uptrend.
As always, we must look to economic fundamentals to handicap the markets next technical moves. This last week we had a minor drop in the ISM manufacturing index and the leveling off of the ECR I Weekly Leading Index.
Meanwhile, consumer sentiment offered a similarly uncertain picture. Based on what we continue to see from the economic data, this is a "watch and wait" period in which short-term traders can try to take advantage of the upward trend an buy-and-hold investors should remain mostly in cash on the sidelines. In the last newsletter, I trumpeted some of my recent calls in the biotech space — PBTH, CHTP, and SVNT were all double- or triple-digit winners.
Just to make sure that I don't get too full of myself, several readers absolutely hammered me for my short call on gold in mid July and my call to short the long bond in mid April.
I think it is worth talking about each of these trades because discussing the gold trade will help remind readers about the importance of managing your trades and taking profits while discussing the bond trade will both underscore the need to cut losses early and to understand from a macro point of view what drives bond prices and yields. At this point, a seasoned trader would've put up stop loss at at least the initial buying price, and such a stop loss would have been triggered as early as August 6 — no harm, no foul.
My point is simply that any stock that you buy whether because of your own research or by reviewing the research of others requires careful money management and risk assessment.
If you don't know how to use stop losses and trailing stops and set your stop losses near key levels of support, then you really have no business engaging in short-term trading at all. So my advice if you are losing money on trades that first went up but then went back down is to do some more research on trading techniques. In this regard, I can say without too much self-promotion that my book When the Market Moves, Will You Be Ready?
Is a pretty good manual on how to trade and manage both your risk and cash. My instrument of choice is an ETF called TBT.
Let's break this one down. My logic for shorting the long bond in April was simply this: What I didn't bargain for was the financial crisis in Europe that made the dollar a safe haven for global investors — and when I say the dollar, what I mean is that these investors bought a ton of US government bonds after exchanging euros for dollars.
This had the effect of both driving the dollar up and bond prices up. This is hardly the end of the story, however. The TBT trade has continued to grow worse as the economy has softened and Federal Reserve Chairman Ben Bernanke has pledged to engage in so-called quantitative easing to further stimulate the economy.
Quantitative easing is a way for the Federal Reserve to manipulate long bond yields by purchasing US government bonds which are being issued to finance the US government budget deficit. The net result of quantitative easing is to provide long bond holders with a hedge against the risk of falling bond prices. Yep, I haven't given up on this trade-- although I feel a little bit like the guy in the movie Tin Cup who kept trying to hit the ball over the water. My reasoning is that at some point bond prices are going to have to plummet and yields are going to have to skyrocket as an era of cheap money, huge deficits and a possible rising Chinese yuan put a bloody end to the bond market bubble and the Bernanke Bond Put.
So I have begun to rebuild a small position in TBT and I continue to add a little bit to it every time it drops another point. Call me crazy, but I have no doubt that this trade will eventually pay off big. It's simply a matter of time, and the difference between doubling down on an exchange traded fund like TBT and an actual stock of a company that is performing as badly as TBT is this: In contrast, with TBT, it's only as good or bad as it's macro environment —there are no dumb managers or bad products or anything else to worry about.
Because I just don't think interest rates will stay at record lows forever, I going to keep a hand in the TBT game just like I kept trying prematurely to short housing stocks during the housing bubble and kept getting burned — and then one day I didn't.
So that's my TBT story and I'm sticking to it. I'm bleeding a little bit with it, but my biotechs and other trade have more than offset any small losses in TBT.
Eventually I think TBT will be a good trade. At any rate, a position in TBT helps keep me in tune with the economy as I have plenty of skin in the game to pay attention. The upward trend in the US stock market can't be denied — yet I continue to have my doubts and continue to be concerned about another sideways market trap. To understand my concerns, please do the following. For starters, according to the Dismal Scientist websitethe ECRI Weekly Leading Index " has been on a more positive trend recently, though is not yet consistent with a stable recovery.
As another positive, the ISM Manufacturing Index is still comfortably in the expansionary range at Consumer confidence rebounded in August — that's good news — but it is still at levels consistent with slow growth. In a similar vein, retail sales have risen for a second consecutive month, albeit at a slow pace. Again some good news tempered with reality.
The most startling bad news is the horror show that is new-home sales. After spiking in April on the basis of what were then optimistic views of the economy coupled with government subsidies, home sales have fallen off a cliff and now remain at a record low.
In fact, this country is adding less thannew home units a year at the current pace in a country of almost , people. On top of this, existing home sales are at an 11 year low, with only 4 million units being sold a year. Finally on the unemployment front, this country is generating fewer thanjobs per month, which is far too low to materially reduce the rate of unemployment. So when we cycle back from this fundamental data to the technical indicators, you can see that there is at least some case to be made for an upward stock market trend — if for no other reason than the risk of a double dip recession seems to be receding and the US economy is plugging, if not chugging, along.
That said, in order to project from this current short-term upward trend of the market a sustainable bullish move, one would have to heavily discount the coming Obama hammer in in the form of higher taxes and a greater regulatory burden to be imposed on the private sector. Make no mistake about it, the "passive aggressive" tax hikes the Obama administration will impose are significant — passive because Obama is going to allow the Bush tax cuts to expire, aggressive because ObamaCare and other Obama programs are going to significantly raise taxes.
On CNBC 10 days ago, I said it could double if the FDA approved its drug and projected such approval the stock is gotten as high as seven dollars.
Be on the lookout this week for my latest video for the Street. Seeds of Destruction hit the Top on Amazon last week in the business and economics category. If you want to listen to the Introduction to the book, you can download the audio file from the top of this page.
Temptress Boy have I seen this pattern before. IBD confirms a new uptrend.
CompTIA | IT Industry Outlook - IT Industry Trends Analysis
Market Edge shows a broad technical improvement to the market. Shall I be seduced? All I need to do to be convinced that this is another harlot is to look at the one-year chart of SPY.
For starters, you can see a clear range bound market since May. This continues to seem pretty much like a sucker's game to me. To understand why, try this little exercise. If you got suckered into buying the bottom hit on June 6, you would've had a very healthy gain by June However, by July 6, you would've been deep in the red.
Cash Call, Part III Market Pulse In February, I issued a call to cash based on my reading of the fundamentals of the U.