Tax Cuts vs Infrastructure Spending

In my mind this is a no brainer. However, I keep hearing people try to dispute the fact that tax cuts don't work as good as infrastructure spending. When going into a recession you must increase spending to keep the level of GDP up and avoid the recession. It doesn't matter where this spending comes from, as long as the spending is done. When you give someone a tax cut they may spend it, they may not. They may just put it in their bank account, pay off some credit card debt, or make a mortgage payment. This doesn't stimulate the economy. Also, if they do spend it they will more than likely spend it in the service sector on clothes or food. This also doesn't help the economy, as the spending isn't directed at increaseing the REAL assets of the economy, which increases the productive capacity of the economy. Now for government spending. When the goverenment spends money on infrastructure the money is spent. There is no questions about it. The governement doesn't just sit money in a bank account. It goes and spends it on anything and everything. If it does happen to be on infrastructure such as energy, utilities, human (education), roads, and factories it increases the REAL assets of the economy and increases the productive capacity of the economy. This creates WAY more jobs than tax cuts and it sets the economy up for future growth.

This is a no brainer. Anyone who can't see the difference doesn't know what they are talking about and should be avoided in any political discussion.

Long Term Outlook

Here is a chart of my long term outlook on the S&P 500. I believe we will bottom somewhere near 450. Of course we will have a couple rallies between now and then, some could be very violent, but the downward trend will prevail. The chart shows it all.

So as it seems we are going to venture back to 1994 on the S&P 500. That was a good year wasn't it? Here are a few facts from the year that was 1994:

• The Dow Jones Industrial Average closed the year at 3834
• Average cost of a gallon of gas: $1.09
• Average yearly income: $37,070.00
• Cost for a dozen eggs: $0.86
• 500,000 people were killed in a mass genocide in Rwanda
• The channel tunnel opened between England and France
• Serbia continued its attacks on Bosnia
• 50th Anniversary of the Allied landings in Normandy
• Los Angelas Northridge earthquake
• O.J. Simpson fleed police in a white bronco
• Major League Baseball Players Association begin 232 day strike causing 1994 season to be cancelled
• Orange County, California files for bankruptcy protection
• Violent wildfires destroy 286,000 acres in Montana.
• Brazil Wins 1994 World Cup in United States
• Forrest Gump wins the best picture award

See, now aren't you excited to return to 1994? Financially that is.

Some Ideas to Consider

Some ideas for consideration follow:

• We know that Congress is corrupt and in the pocket of lobbyists. They show no courage to make necessary unpopular decisions because they won’t be re-elected. The founding fathers envisioned representatives who did their civic duty for a short time and then went back to their real profession. Almost 200 out of 535 members of Congress are lawyers and lifetime politicians. This explains much about our predicament. Term limits would inject our leaders with a dose of courage. Maybe they would do what was best for the country if they knew that they would only be in Washington for six years.

• Outlawing lobbyists and PACs would remove the buying and selling of votes in Congress. We must remove the corruption from Washington DC.

• The PAYGO rules that were allowed to expire in 2002 must be reinstituted. These rules would not allow new spending initiatives without an equal cut in other spending. These rules allow Congressmen to pretend to have a backbone and say no to constituent demands.

• The banks that are insolvent will need to be nationalized, investors wiped out, and good assets sold off to good banks. Nouriel Roubini lays out a logical scenario. The sooner we purge the system of its bad debt, the sooner we can get this economy on a positive track.

• Dr. John Hussman has a solution for the foreclosure disaster that would not stick the U.S. taxpayer with the bill. Banks could write down the mortgage balance but receive a PAR (property appreciation right) back from the homeowner. The idea is discussed in more detail here.

• The U.S. carmakers need to be restructured within a pre-packaged bankruptcy. They want another $39 billion of your tax dollars. No more taxpayer funds can be wasted on these bloated pigs.

• A truly non-partisan commission appointed by the President with the power to put forth a comprehensive plan to restructure Medicare, Medicaid, and Social Security for an up or down vote by Congress is the only way to create a viable future. Congress must be forced to confront this issue.

• John McCain’s moderate approach of allowing a path to citizenship seems like the best immigration plan. Most came here to try and live a better life. If they have committed crimes or don’t follow the prescribed path to citizenship, then they need to be expelled from our country. We need to encourage foreign professionals to immigrate to America with incentives, if necessary.

• If 50% of the $1.4 trillion annual military related budget was redirected to debt reduction, energy independence, and infrastructure rebuilding, we would actually get a positive return on our tax contribution. Our military is supposed to defend our country, not invade sovereign nations. (If we cut military spending by 50% we would still have by far and away the largest military budget in the world.)

• A “Manhattan Project” to develop new energy sources which would eliminate the $400 billion per year that we send overseas for foreign oil. The number of high paying jobs that could be created by building nuclear power plants, wind farms, and converting vehicles to natural gas would be in the hundreds of thousands.

• A tax system that eliminated all the preferences and loopholes for corporations and individuals while lowering rates would be fairer. Maybe even our Treasury Secretary could do his taxes correctly. Congress and lobbyists use the tax system to push their agendas. A flat tax or replacing the income tax with a national sales tax are other possible options.

• The Federal Reserve needs to be abolished. A currency backed by gold or a basket of precious metals would restrict what Congress could spend. This would save us from ourselves. The dollar has lost 93% of its purchasing power since Nixon closed the gold window in 1971 and the National Debt has gone from $389 billion to $10.8 trillion, a 2,800% increase in 38 years. Politicians will spend your money if they are given the chance. Let’s not give them the chance.

“All tyranny needs to gain a foothold is for people of good conscience to remain silent.”

-Thomas Jefferson

Watch This!!

I just want everyone to have the chance to watch this video!! Please, take the time to reflect on it!

Market Breakdown!!!!

Today the market broke out of its triangle pattern, as predicted in an earlier post:

http://themarketprophet.blogspot.com/2009/02/critical-point.html


This gives us a price target on the S&P of roughly 650 so prepare accordingly. Also, many of my intermediate term indicators gave me sell signals today and the ones that haven't yet are VERY close. This generally means that we will have another extended down leg in the markets.

The breakdown combined with extremely low levels on the put/call ratio generally means bad times for the market in the coming weeks. The put/call ratio is a indicator of how bullish or bearish options traders are. When a large number are bullish it is relatively bad for the market because the crowd is always wrong. Good luck out there, it could get ugly.

Scary picture being painted.....

Thus far throughout this crisis I have been a deflationist. However, doing some research this weekend, I am starting to come to the conclusion that we may see rapid inflation before I recently predicted. The reasons I am starting to see are coming about because of our monetary system. In a monetary system where the currency is backed by gold or other tangible assets you can have long periods of price inflation and deflation. However, in a system where the currency is back by essentially nothing you generally tend to only have one thing, inflation. This system is refered to as a 'fiat' currency system and it is the one that we have used since 1933. My previous predictions of deflation have come from comparing recent happenings with the Great Depression. However, when the Great Depression started in 1929 we had a currency that was backed by gold. Therefore, the Federal Reserve could not pump unlimited amounts of money into the system to prop it back up. This led to a deflationary spiral until 1933 when Franklin Roosevelt took us off the gold standard and gave the Fed unlimited ability to print money. Graph #1 shows when this change took place and how inflation essentially turned on a dime in 1933.

Graph #1

So, what does this mean for the prospect of impending inflation? It means that when the Fed increases the monetary base we should pull out of this deflationary period we are experiencing right now and have a rapid inflation. This doesn't mean that the economy will turn around. If anything, I believe it will just make the economy worse because the dollar will be severly devalued and U.S. citizens will lose half of their purchasing power. This next chart shows the effects of inflation on the value of the U.S. dollar since FDR pulled us off the gold standard in 1933.

Chart #2

Looking at that chart is very startling to me and it is only going to get worse in the near future. I believe the dollar can fall another 50% before the entire financial crisis/depression is all over. One only has to look at a chart of the U.S. monetary base to realize the grand scope of this fiasco. Here is a recent chart of the increase in the U.S. monetary base.

Chart #3

The increase in the monetary base is just staggering. Nothing has ever been seen like this before in the history of the world, let alone just the United States. We are truly venturing into uncharted waters.

What does this mean? This means that commodity prices should start rising again. It means that the dollar will start losing its value again. It means that people holding large portfolios of bonds will be hurt because inflation will be higher than the returns they are getting from their fixed income securities. What inflation basically does is redistribute wealth from the retired and soon to be retired to the young working class. Inflation destroys wealth, and the people who have worked the hardest to accumulate and protect their wealth over the years are always the hardest hit.

How do you protect yourself? You must hold assets in your portfolio that appreciate with inflation. This means holding hard assets like oil, gold, silver, and other commodities. Once the stock market starts to recover it means buying stocks such as oil producers, gold miners, agricultural companies, oil royalty trust, and certain real estate investment trust. Also TIPS bonds can be purchased. These are Treasury Inflation Protected Securities (TIPS) and are guarenteed to hold their value during high inflation peroids.

Right now I am watching a lot of differnet indicators and they are started to predict inflation. I'm believe that within the near future oil will start outperforming gold again. I think gold and silver are due for a pullback, but soon they will be giving me a buy signal again. I'll keep you posted.

Why don't we listen to Adam Smith?

"The only thing we learn from history is that we don't learn from history."

This is quite possibly my favorite quote. It is the truth. We don't learn from our mistakes. How many booms and bust have happened in the past 400 years? More than enough that we could predict them the next time they come around, or so we like to tell ourselves.

The most important book written on modern economic theory, "The Wealth of Nations", by Adam Smith clearly lays out steps that could have been taken to prevent the impending collapse of the American economy. This book is basically required reading for anyone majoring in a business related major. However, since it is 232 years old, I guess Ben Bernake, Henry Paulson, George Bush, Barack Obama, and Timothy Geithner don't feel that it is relevant in today's current situation.

What would Adam Smith say about our current situation? He would probably be laughing hysterically. Smith spotted the precise cause of our economic collapse 232 years ago. Digest this quote from "The Wealth of Nations":

"A dwelling-house, as such, contributes nothing to the revenue of its inhabitant. If it is lett to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue"

Basically, Smith concluded that, although a house can make money for its owner if it is rented, "the revenue of the whole body of the people can never be in the smallest degree increased by it". What does this mean? It means that even though housing and property prices are rising and people think they are getting "richer", they really are not. It is fake wealth. The productive capacity of the economy has not increased. Therefore, people are not more wealthy. However, because people perceive being more wealthy they take out loans using their increasing property values as collateral and then when the market finally collapses, as all property bubbles do, they can't afford to pay off their loan anymore.

To stop a debt collapse and prop up already inflated asset prices Keynesians believe that the Fed should increase the money supply because it increases spending. However, this does nothing but create more credit/debt financed spending and inflation. In the end, someone has to pick up the bill and you will eventually have a collapse, just like we have now. This is what Adam Smith had to say about increasing the money supply to fund more debt financed spending and prop up overvalued asset prices:

"To attempt to increase the wealth of any country, either by introducing or detaining in it an unnecessary quantity of gold and silver (they used real money in 1772), it is absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils."

So how would Adam Smith fix the current problem? It can be summed up in one sentence.

“The answer to a decline in the value of speculative assets is to pay less for them”

You have to wonder, does anyone remember anything that the past has taught us. Are the ghosts of Adam Smith and our founding fathers going to rise from the dead and save us from ourselves? I don’t think so. What the United States needs is to remember where it came from. People need to remember the Constitution. People need to remember what a free market is. The people need to control government. It really is a sad day when I can make an argument for Communist China having more of a capitalistic free market economy than the very place where capitalism was born.

Why couldn’t we listen to Adam Smith?

Watch out

Watch out, this could be the start of the next leg down, taking us to somewhere between 650-700 on the S&P 500. If you are long I would be a seller right now.

Watch out

Watch out, this could be the start of the next leg down, taking us to somewhere between 650-700 on the S&P 500. If you are long I would be a seller right now.

critical point

Market is at a critical junction. If it breaks the triangle on the daily S&P 500 chart all hell is going to break loose in the weeks ahead.

first trade

Just went short 105 shares of Shaw Group (SGR). I am sensing some weakness in the market right now and the risk/reward of shorting SGR was pretty good. This morning the market has been unable to hold onto its gains and the financials didn't participate in the rally yesterday. Not good signs for the market as a whole. Still potentially looking to enter a trade in Aeropostale (ARO) as well.

Early morning

Market trading right around even this morning. I'm again watching for some entry into some short positions. My indicators are still neutral in the short term, so I will be patient and let the trade come to me. Some stocks that look good for a short sell are ARO, SGR, and SYMC. Maybe today we will get some action towards the close. I'll leave you with a quote two things. First a look at article I of the Constitution where it clearly states that nothing but gold or silver shall ever be used as money in this country. Then a quote from Senetor Daniel Webster to the senate in 1833 when the nation was voting to disband its 2nd central bank (which it did).

According to the Constitution money is gold and silver coin, not Federal Reserve Notes of debt-obligation. Silver is the standard by which the dollar is defined – the unit of account of the United States.

• Article I, Section 8, Clause 5: The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

• Article I, Section 10, Clause 1: No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

As the Constitution states, Congress is empowered to coin money out of gold and silver, not to emit bills of credit (paper money). Nothing can be more simply said, yet that is not the form of money we have today.

“We are in danger of being overwhelmed with irredeemable paper, mere paper, representing neither gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people.”

-Daniel Webster


Enjoy!

My case for deflation

My case for deflation is based in the theory of the Kondratieff Cycle. However, I see some evidence, and this is my own theory, that could be showing deflation right in front of us. Deflation is a bad thing, it usually accompanies depressions, the last one being in the 1930s. Anyway, here is what I am seeing:

The U.S. dollar has been on a rally since June/July of this summer. But, how can this be? The U.S. Federal Reserve has slashed interest rates like crazy, almost to 0%. When interest rates fall the dollar tends to fall with them. U.S. rates have come down way faster than foreign interest rates, so why is the dollar rallying in the face of falling rates? I think it is because the REAL U.S. interest rate is not falling. The Fed is trying to lower rates and stimulate lending/spending, however, banks are not lending and people are not spending. If lending is not taking place there is no real pressure on rates to actually fall. Why is lending not taking place? It is because of the liquidity trap that the U.S. is in. What is a liquidity trap? A liquidity trap is, "a situation in monetary economics in which a country's nominal interest rate has been lowered nearly or equal to zero to avoid a recession, but the liquidity in the market created by these low interest rates does not stimulate the economy. In these situations, borrowers prefer to keep assets in short-term cash bank accounts rather than making long-term investments. This makes a recession even more severe, and can contribute to deflation." So, we have 0% interest rates, but because of the liquidity trap our REAL interest rate doesn't fall. What does this mean? Well, in countries around the world, such as Germany, China, Canada, and Australia, where a liquidity trap does not exist, their interest rate cuts ARE working. This reduces the value of their currencies relative to ours, since our REAL interest rate isn't dropping. This is what is responsible for the dollar rising. The rising dollar is responsible for oil, natural gas, copper, and other commodities absolutely collapsing. This creates deflation. Also now contributing to deflation are the falling home equity prices. People see houses getting cheaper and cheaper every day. So what are they going to do? They are going to wait another day before they buy a house. Nobody wants to buy a house for $250,000 when they can get it one year from now for $150,000. This leads to the expectation of further deflation. People quit spending because they know they can get the same goods tomorrow for cheaper, and it snowballs. Less spending means more savings and the money supply actually ends up contracting no matter what the Fed trys to do. We are basically going through the same thing as Japan's "lost decade" of the 1990s except on a much larger scale.

I expect to see the dollar continue its rally. I expect to see asset prices keep falling. I expect to see other economies recovering much faster than us (because they don't have mounds of debt and huge liquidity traps). Then after years of deflation and debt destruction I expect the United States to emerge once again, however, much weaker and hardly the center of the earth it is today.

Here is a summary of the Kondratieff Autumn (think 1980-2000) and Kondratieff Winter (think 2000-present & beyond). If you want to read the whole article click here. http://www.kwaves.com/kond_overview.htm

AUTUMN - Deflationary Growth (Plateau Period)

The primary recession occurs out of an imbalance forced upon the economy by real limitations. The rapid rise in prices and changes in production correct this imbalance -- at least temporarily. The change in price structure, along with the mood of a population used to consumption accompanied by the vast accumulation of wealth from the past 30 years, causes the economy to enter a period of relatively flat growth and mild prosperity. Due to structural changes and the limits of the existing paradigm the economy becomes consumption oriented.

Excesses of an unpopular war, along with fiscal liberalism, cause popular reaction toward stability or normalcy. A mood of isolationism permeates . The plateau period generally lasts seven to ten years and is characterized by selective industry growth, development of new ideas ( both technological and social ) and a strong feelings of affluence, terminating in a feeling of euphoria. The inflated price structure from the primary recession, along with the desire for consumption, produces a rapid increase in debt. Eventually, wealth consumption expands beyond all practical limits, and economy slips into a severe and protracted depression.

WINTER - Depression

Excesses of the plateau period effect a collapse of the price structure. This exhaustion of accumulated wealth forces the economy into a period of sharp retrenchment. Generally, the secondary depression entails a three year collapse, followed by a 15 year deflationary work out period. The deflation can best be seen in interest rates and wages that have shown a historic alignment with the timing of the Long Wave - peaking with and bottoming at the extremes.

Kondratieff viewed depressions as cleansing periods that allowed the economy to readjust from the previous excesses and begin a base for future growth. The characteristic of fulfilling the the expectations of the previous period of growth is realized within the Secondary Depression or Down Grade. This is a period of incremental innovation where technologies of the past period of growth are refined, made cheaper and more widely distributed. Incremental innovation consolidates industries.

As increment innovation narrows profits and increases

The Down Grade sees one final period of recession before transitioning to a new period of growth. The final recession is mild with very low inflation and appears far more severe than it will be remembered for later in the Growth Cycle.

Within the Down Grade is a consolidation of social values or goals. Ideas and concepts introduced in the preceding period of growth while radical sounding at the time become integrated into the fabric of society. Often these social changes are supported by shifts in technology. The period of incremental innovation provides the framework for social integration.

It is important to realize the Long Wave as global. While global issues are of prime importance today with increased air travel and communication, the Long Wave defines a time table for geo political events. The Growth Period is one of political stability. Staring a the peak old alliances become challenged. Through the process of the Down Grade old alliances fail and new alliances are formed. The final stages of the Down Grade is a period of coalescing or "quickening" of the alliances that will govern the next period of growth.


Hope you enjoyed....Brant (here is the chart of the dollar showing its recent strength)

Recession or Depression??

I just wanted to clarify what I meant earlier in my post about Obama's stimulus package. I was saying how every 70 or so years we have these huge build-ups of credit/debt and that "normal" Keynesian monetary policy (increasing and decreasing the money supply through the Fed's open market operations) only works during the build-up of that debt. Keynesian's believe that "expansive" monetary policy usually stimulates the economy by reducing interest rates and increasing credit availability so people and businesses can borrow more inexpensively and, thus, spend more freely. This is what the Fed is doing right now, and has been doing since August 2007. Everytime you hear that the Fed has cut its target for the Federal Funds Rate or that it has slashed its discount rate this means that the Fed is expanding the nation's money supply, and using expansionary monetary policy. This usually does work. However, when the economy becomes to saturated with credit and debt, it doesn't work anymore. It actually makes things worse. This is a direct quote from my finance text book, you would think Ben Bernake would have read this:

"In the Keynesian world, monetary policy always works unless the economy is in a liquidity trap, such as during the Great Depression of the 1930s, when Keynes thought people already had so much money relative to their needs that any extra money would be hoarded and would no longer drive down interest rates. However, because liquidity traps are rare and arguably occur only during major depressions, Keynesian theorists believe an expansive monetary policy stimulates the economy by driving down interest rates and increasing credit availability."

So, basically what this says is that when there is to much money, debt, and credit in an economy it can create huge bubbles. When one of those bubbles pops, think housing bubble, the only way for the economy to recover is to fix what caused the problem. What caused the problem was the fact that credit was to easily available. People had to much money relative to their needs, so they percieved themselves as being wealthier than they really were. So people took on more debt, buying houses, remodeling kitchens, buying new cars, and going on vacations. When adjustable rate mortgages started resetting to higher rates people realized they couldn't afford these houses and they started selling. The market collapsed, and all that is left is accumulated debt. So, the fix the problem we need to destroy the debt. However, you can't let debt destruction occur by throwing more debt/credit at the problem. This is why the Fed cutting interest rates has had absolutely no effect on the economy. If anything they are making things worse and turning a quick correction into 30s style deflation.

I hope this helps you understand what I am talking about when I say that the Fed, Obama, the $700 billion bailout, whatever is all useless. It won't work because they are trying to fix the problem with what actually caused the problem. Here is a chart showing the buildup of credit/debt in the economy over the past 100 years. It will help show you the "bubble" that was created (which in turn inflated asset prices to unrealistic levels and created a false sense of wealth in the United States). Enjoy!

No positions today......

I didn't end up taking a short position in ARO today, good thing, as the market rallied into the close. This is what I have been wanting though. I need for some of my indicators to get overbought and give me sell signals again before the risk/reward of going short favors me and not the bulls.

Anyway, I've got to study tonight for a test tomorrow, but I will leave you with something that is interesting. That is the Gold/Stocks ratio. Gold and stocks, representing real assets and financial assets repectively, always have predictable patterns. It is the nature of modern capitalism for either real assets to outperform financial assets or for the inverse. The Gold/Stocks ratio shows this extremely well dating all the way back to the 1800's. What is noticable is that when you use Gold compared to the Dow Jones Industrial average, and gold is outperforming, the ratio normally bottoms at around one. The ratio peaked in 2000 at 44 and since then gold has been outperforming the Dow Jones. Right now the ratio is sitting at 8.52. This means that if we are to fall to our historical turn around point we have a ways to go. Now I am not saying to buy gold. But I am saying that gold is going to outperform the Dow for a while longer. This could mean that gold rises and the Dow rises slower, or it could mean that gold falls but the Dow falls faster. The way to play this is to use a pairs trade. One would short the Dow Jones Industrial Average and go long Gold with an equal amount of money. That way you are just playing the ratio, rather than either of the two parts seperately. Here is a chart showing the ratio dating back to 1982.

Why Obama's stimulus package won't work

This stimulus won't work. It would work for a normal recession. However, we are going into a depression. The difference is that a depression is the popping of a large credit/debt bubble. A recession is a hiccup in the buildup of credit/debt in an economy. You can cure a recession by jump starting the buildup of credit and lending to stimulate the economy again. However, using that remedy to cure a depression, that was caused by having to much credit, just makes the situation worse. Debt/credit generally takes 70 years give or take a few to build up to a level consistent with the start of a depression. I'll talk more about this in the next few days, but the point is that the last debt bubble that popped in the United States was in 1929, or 77 years from the pop of this current debt bubble in 2007. Here are some reasons why this stimulus package is only going to make things worse for the United States. The rest of this post was taken from this article:

http://www.dailyreckoning.com.au/what-we-face-now-is-a-depression/2009/02/03/



"...there is $54 billion in the bill in the House of Representatives for new forms of "American energy," a phrase with an air of nationalism, along with a series of 'Buy America" requirements of dubious legality under trade treaties; $141 billion for education; $24 billion for lowering health care costs; and $6 billion for broadband service..." etc. etc.

Colleague Porter Stansberry adds this assessment:

"Congress wants you to believe we can dig ourselves out of the financial crisis by spending $400 million to research global warming, $650 million to convert analog TVs to digital, $7 billion to 'modernize' federal buildings, and $20 billion on food stamps, etc. According to the Wall Street Journal , 'only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus.'"

We don't doubt that all this corruption is well-meant. Heck, who doesn't want to blow up this Depression Asteroid before it hits us? But boondogglization won't work. Because it doesn't solve the real problem - the debt. It merely moves debt from the private sector to the public sector; overall, debt actually increases.

There is about $6 trillion worth of debt that needs to be eliminated before the economy can begin to grow again. Liquidation would do it - quickly and painfully. People would get what they had coming. The U.S. dollar-based system would collapse. Everyone would learn a lesson and be better off for it.

But that could happen only over the dead bodies of Ben Bernanke and other key policy makers. Which is our preferred approach. But we are in a tiny minority. Everyone else believes that somehow some hocus-pocus will get us out of this mess without pain or suffering.

VERY appealing short opportunity.....

Here is a nice shorting opportunity I just stumbled upon. Aeropostale (ARO). Short with a stop-loss around 22.10. Might take it, might not. Use your own due diligence.

Market Chop

Market just chopping around and making me lazy, still no good short or long signals. Good time to put the computer down, watch some TV, or grab a beer; however I am still leaning towards the short side.

Short post

Most of my short-term market indicators are giving me neutral signals at the moment. Even though the market could break down out of it's triangle tomorrow I want to wait for a bounce to get a more precise entry on some good shorting opportunities.

Wednesday I should have time to write a few post about my opinions on a few things. I'd like to write a piece on the U.S. dollar, Peak oil, the prospects for deflation and inflation, and some other investment vehicles like Oil Royalty Trust and Real Estate Investment Trust that are looking like they could be some decent long term positions.

have a good one.

No new positions........

I am not taking any new positons today as the risk reward just isn't there. I would like to see a little bounce in the market before it heads lower and I believe we could get it as we close today or tomorrow. Right now we are bouncing off the lower part of the triangle that the market has seemed to have formed. I believe a breach of this trend line will be the catalyst to take us to the previous lows and even lower. If I can get some of my short term indicators to give me some shorting signals before that breach it would be the perfect entry point for what I believe could be the last leg lower, leading us to somewhere near 475-500 on the S&P 500. Let's see what the next few days bring, even if my indicators don't return to shorting status I will go short on a breach of the triangles lower trend line.

Pre-market February 2nd, 2009

Today it looks like the market is going to sell off at the open. I am intermediate term bearish and think that we need to retest the November 2008 lows sometime soon. However the market has sold off sharply the last few days so it wouldn't be out of the ordinary for us to trade higher after the open this morning. If that is the case I might use the small rally to enter some new short positions. Some stocks I am watching for short entry are GS, SYMC, BRCM, MO, PBR, RIMM, XRT, STLD, SGR, and BTU.

Stay tuned. If the $TICK can return to overbought levels it would be an optimum entry point for the short side.

Chance of intermediate rally?

Here are a few reasons for an intermediate bull market during the midst of the primary bear market. I remain very skeptical that this market can turn itself around and head higher, however, I must realize that their are two sides to every coin. Enjoy.

clipped from www.financialsense.com my assessment may sound absurd but it looks as though the bear-market ended late last year and we are now in the early stages of a new cyclical bull-market.  Below are some of the reasons why I believe the skies are clearing for a 4-5 year bull-market: Surging liquidity – central banks have pumped trillions into the banking system Low-interest rates – yield on cash and cash equivalents is at a historical low Declining corporate bond yields– risk appetite is returning Declining Ted Spread – inter-banking lending rate has declined, a positive sign Low valuations – various stock markets are trading at very attractive multiples Horrendous investor sentiment – a contrary bullish indicator Volatility has peaked – VIX has topped out and is falling US Dollar rally has ended – bullish for the markets Global stock markets are making higher lows – sign of base building Huge amount of cash on the sidelines – US$8.85 trillion or 74% of US market cap

indicators test

here is my current indicators status

Indicators
Ticker	Indicators	Time Frame	Recommendation
$Gold/$SPX	13 & 34 EMA Cross	Daily	Bearish
$UST/$SPX	13 & 34 EMA Cross	Daily	Bearish
S&P 500	13 & 34 EMA Cross	Daily	Bearish
$NYSI	Summation Index	Daily	Bearish
$TICK	NYSE Tick	Daily	Neutral
$VIX	Custom Timer	Daily	Neutral
$NYA50R	% Above 50 Day MA	Daily	Neutral
$CPC	Put/Call Ratio	Daily	Bearish
$UST/$SPX	13 & 34 EMA Cross	Weekly	Bearish
$Gold/$SPX	13 & 34 EMA Cross	Weekly	Bearish

First Post

This is the first post of my new blog. Right now I am starting to analyze the market and look for some new opportunities, both long and short term. I will right a post later discussing my outlook for the market, commodities, gold, and a few other things I am adding to my watch list such as Real Estate Investment Trust, Oil Royalty Trust, Canadian Energy Trust, and some different currencies. Some of these new investments will be aimed at providing a steady income during the impending rise of oil in the next few years as global supply peaks and at the maintenance of consumer purchasing power over the next several years as we have rapid inflation and a falling U.S. dollar. I will discuss some of these topics in more depth in future post.

I'll leave you with a great video. This is Peter Schiff, economic advisor to Ron Paul during his presidential campaign. He was right about the entire economic collapse. I think people better start listening to him and Ron Paul. All these stimulus packages the government is setting up is just like putting a band-aid on a severed leg. All it is going to do is slow the bleeding and make things worse in the end. I will talk about this more in the future as well. Have a good day.