MarketCycle360

Absolute Misery Ahead!!!

2010-08-24T13:26:00.003-05:00

MarketCycle360 is proving itself once again!

January 2010
In late January I put out a Yellow Light warning to all MarketCycle360 owners that the markets were in peril.

May 2010
I followed that up with another direct warning in May to be very careful with a direct statement that going to cash would be wise.

July 2010
In early July I gave another warning that the MarketCycle360 Bull/Bear Indicator was leaning heavily toward going to cash or taking a short position.

So, if you were listening you would have gone to cash as I did in January, May, or July!

Listen, I do not invest or take positions like day traders. I do not predict market direction. I am not a prophet! I just let the market tell me what it is going to do using our indicators in MarketCycle360. More than half of my trade groups are now in cash so I am all in cash and waiting for MarketCycle360 to tell me when to go short!

If you are looking for a bounce you may get it! But the long term is down, just read the following to see others that are now joining my point of veiw.

As you well know, I do not post, or create videos for the sake of blowing alot of wind. I only post when I feel the market is in dangerous territory. We are there now. Similar to my warnings in the fall of 2007 the serousness is continuing to elevate. We exited the market in late 2007 to avoid the entire collaps of the market in 2008, in fact, following MarketCycle360 you could have made 38% profit shorting the market.

Please tell everyone you know to read this post!!!! I want no one to be hurt from the coming crash, it may be swift and devistating. If you do not own MarketCycle360 get it now because I will tell you the day to buy or sell, and when to short the market. I never post any warnings on my blogs until after owners of MarketCycle360 have positioned themselves according to the software.

You can be profitable in any market condition with MarketCycle360!

Livio Nespoli
402.518.8218

Bearish Signs Are Everywhere! Prepare Now

2010-08-16T11:19:00.004-05:00

My Recent Warnings

Since May of 2010 I have been issuing warnings that this markets was running on empty and since it has had a few higher lows and lower lows. Underlying momentum has been slowly leaching from the economy as owners of MarketCycle360 have noticed in my video updates.

If you own equities it would behoove you to take an incredibly conservative position with those assets. The short to intermediate term may be volatile but the long term is down. Don’t let the media or those who do not understand MarketCycle360 dissuade you from making proper decisions. Keeping what you already own is a good thing. Just ask anyone who lived through the depression of the 1930s.

Hindenburg Omen:

http://www.thestreet.com/story/10835851/1/hindenburg-omen-is-a-stock-market-crash-imminent.html

Marc Faber Questions if Dow Could Hit 1,000

In the August edition of the 'The Gloom, Boom & Doom Report' Marc Faber questions whether the Dow could hit 1,000 as predicted by Robert Prechter, based on his interpretation of Elliot Waves, Fibonacci numbers and socioeconomic trends.

Prechter, who has written 13 books on finance, believes that the stock market is historically overvalued in terms of dividends and earnings, because of a "great rise in positive social mood."

But the mood changed in 2000 and the "trend toward negative social mood will lead to an economic contraction," according to Prechter.

"Small bear markets lead to recessions, big bear markets lead to depressions. The current bear market will be the biggest in nearly 300 years, so the depression will be correspondingly deep," Prechter said.

Prechter goes onto to suggest the bear market is of super-cycle degree, the biggest since 1720-1784 and will therefore see a decline for equities deeper than the decline during the great depression, which saw the Dow fall 89 percent.

"The trend toward negative social mood that has been in progress since 2000 and which is about to accelerate will continue to curtail lending and lead to a tidal wave of defaults and a terrific deflation," he said.

"The amount of outstanding credit today is so large that system-wide defaults could lead to as much as an 80 percent -90 percent decline in the volume of dollar-denominated credits worldwide," according to Precther.

"In such an environment, surviving dollars and dollar credits, representing the denominator of the DJIA, will rise in value, and the Dow -along with everything else not used as money - will fall in dollar price," he added.

Faber's Response

Marc Faber says before dismissing Prechter as a lunatic you should look at his record. In 1978 when he predicted the Dow would reach 2,300 in his book Elliot Wave Principle no one believed it possible.

"Prechter is right when says that when manias come to an end, prices tend to retreat to where the mania started. So from this point of view, a Dow Jones at 1,000 should not be excluded," Faber said.

Faber also sympathizes with Prechter's view that there will one day be a complete credit collapse. Where he differs from Prechter is on that crucial factor, timing.

"It is likely that if the Dow where to fall by more than 20 percent from the present level there would be further massive fiscal and monetary stimulus packages - not just in the US but worldwide," Faber said.

These economic policy measures would likely fail to boost economic activity in the US but could support asset markets," he added.

Faber's biggest problem with Prechter's theory is his view that surviving "dollars and dollar credits, representing the denominator of the DJIA, will rise in value, and the Dow - along with everything else used as money - will fall in dollar price."

"The question here is really, with the Dow below 1,000, what kind of dollars - and especially what kind of dollar credits - will survive," Faber said. "It is safe to assume that almost all banks in the world, and almost all governments, will be bust."

"I want my readers to think very carefully about the implications of a Dow below 1,000 (or even just below 5,000). Does anyone really think that the money printing presses won't run 24 hours a day? For sure I don't," he wrote in his August report.

And how do you trade the Dow at 1,000?

One suggestion from Faber is buying a self-sustainable farm in the middle of nowhere surrounded by high voltage fences and barbed wire and equipped with booby traps and an arsenal of machine guns, hand grenades and armed vehicles guarded by vicious Dobermans.

-------------------------------

MarketCycle360 will keep your money on the right side of the market and protect your hard earned money during serious bear markets.

Because we are closing in on a serious decline and wish to help you prevent losses in the next bear market, I want to offer a huge discount on MarketCycle360! If you order before August 30, 2010, we will waive the $1500 up front software cost and start you simply on the monthly data feed. Order Today!

Livio S. Nespoli
402.516.8218
http://www.therightinvestment.com/

What phase of the stock market are we in?

2010-08-02T10:11:00.000-05:00

Let's consider a few facts presented by EWI.

The all-time high for the Dow Jones Industrials is 14,164 (October 2007). Then the trend changed. By the time the index hit the March 2009 low of 6547, stock portfolios were devastated and investor fear was pervasive. It felt like there was no market bottom in sight. The collapse was rightly described as the worst since 1929.

The comparison to 1929 is instructive. In that year, the Dow reached a September high of 381.17. After the October Crash, prices actually rallied into early 1930. But then came the second leg down, which was worse than the first: All told -- from the 1929 high to the low of 41.22 on July 8, 1932 -- the Dow lost 89%. This was panic on an epic scale.

Fast forward to the recent past: You know the market rallied from the March 2009 low to 11,205 on April 26, 2010. Since then the market has started to take back some of those gains.

So: Have we started a "second leg down," which will be worse than the 2007-2009 crash? Could it be like (or worse than) the market of the early 1930s?

The answer depends on investor psychology -- specifically, how long investors were in an "exuberant" phase before the trend changed from "bull" to "bear." Here again, we can compare today with the 1929-1932 period.

Investor exuberance from 1921-1929 was so great that we call that decade the "Roaring Twenties." In turn, recent decades -- 1974-2007 -- make it clear that investor exuberance was about four times longer compared to the 'twenties!

This chart is from the August 2009 Socionomist, a monthly publication from The Socionomics Institute.

The extended exuberance of 1974-2007 points toward a "panic phase" to follow, which could last longer than the 1929-1933 "panic phase."

How much longer? Just as importantly, how much more severe could it be?

Using MarketCycle360, this can still be a profitable time for you.

Livio

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MarketCycle360 Market Update – May 15 2010

2010-05-16T00:53:00.001-05:00

Take a look and enjoy . . .

Using MarketCycle360, this can still be a profitable time for you.

Livio

Technorati Tags: Stocks,Bonds,Mutual Funds,ETF,DJIA,S&P500,Nasdaq,Forex,Commodities,Gold,Silver,Economy,Depression,Recession,Food,Money,Investing,Advise,The Right Investment,Timing,Trading,Discount Broker,Broker,Professional,Trader,Congress,Senate,President,War,401K,etf's,financial freedom,free markets,investments,IRA,MarketCycle360,money markets,mutual fund software,mutual funds,stocks,trading,trading software.

Labels: 401K, Economy, etf's, financial freedom, free markets, investments, IRA, MarketCycle360, money markets, mutual fund software, mutual funds, stocks, trading, trading software

Current Volatility Indicates Topping . . .

2010-05-13T10:06:00.001-05:00

The top may or may not be in, but volatility indicates instability. Our bull and bear indicator give you peace of mind and allows you to know when the bear has come back out of hibernation.

Take a look . . .

Using MarketCycle360, this can still be a profitable time for you.

Livio

Posted by Livio S. Nespoli at 10:06 PM Links to this post

Labels: 401K, Economy, etf's, financial freedom, free markets, investments, IRA, MarketCycle360, money markets, mutual fund software, mutual funds, stocks, trading, trading software

We Are Way Over Extended For A Short Term Correction

2010-03-22T22:06:00.000-05:00

It is my opinion that we are overdue for another short term correction as illustrated by Elliot Wave International:

However . . .

Using Fibonacci retracement lines, the S&P 500 is now testing the 62% retracement line drawn from the May 2008 peak to the March 2009 bottom (see purple lines). According to John Murphy (StockCharts.com), a break of this key upside target raises the possibility that the Index could retrace 62% of the entire bear market that started in the fourth quarter of 2007, in which case the potential upside target is 1,232 (see green lines).”

Stay tuned, this may get interesting.

Our MarketCycle360 Bull/Bear Indicator is still bullish as you can see below:

So, in the short term the market appears over extended, yet it has shown signs of surprising strength to the upside.

Using MarketCycle360, this can still be a profitable time for you.

Livio

Where The Dow Is Going?

2010-03-02T19:01:00.001-06:00

We've observed that the nominal Dow follows the "real" one. For example, based on the picture in "the real Dow," Instead of soaring the Real Dow is crashing relative to the nominal Dow. In fact, it’s barely off its low of May 2006. This dichotomy reveals the weakness that underlies the financial markets’ push higher. When mood turns and credit inflation reverses, the ensuing drop in the nominal value of the market should be dramatic.

"Dramatic drop" indeed followed: Between October 2007 and March 2009, the DJIA lost 54%, high to low.

Now it is dramatically dropping again. Be careful.

Livio

My Official Warning!

2010-02-27T19:22:00.000-06:00

Although this market has been rising recently after an initial drop in January, it is 25 years of experience that tells me the market will drop! It probably will drop precipitously within the next 3 months and maybe sooner.

When people are out of work and more jobs are being lost, money stays in their pockets. When money stays in your pocket the markets simply cannot grow. In other words, you will only buy what you need and you will only buy it at the lowest possible price. And when someone wants to sell their widget to you rather than their competitor, they will lower their price. This is a deflationary and it is happening everywhere.

When people lose their jobs they tighten they tighten the family budget. The facts shown in the video below have not been fully priced into the market!

http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

The stock market still has a dreadfully long way to go on the downside.

Using MarketCycle360, this can still be a profitable time for you.

Livio

Manipulation

2010-02-23T17:27:00.000-06:00

I believe this could be the beginning of the next wave downward.

Here is a great little article from someone I respect, Tim Wood. Tim is a CPA and one of my all time favorite analysts.

As I have stated all along, my research suggests to me that the rally out of the March 2009 low has been a bear market rally. Nothing has occurred to change that point of view. As a result of the weakness that began a few weeks ago, I have received a number of e-mails asking about manipulation. Over the years I've noticed that every time the market makes a break, questions about manipulation and the ability of the powers that be to hold the markets up seem to surface. It is for this reason that I want to address the subject of manipulation in this article.

All throughout the period between 2003 and 2007 I explained that we were seeing a stretched 4-year cycle. I also explained that the efforts by the powers that be to hold things together would ultimately only serve to make matters worse. There is no doubt that the manipulative efforts seen during this period contributed in a very negative way to the credit and banking crisis. In my eyes, this was largely accomplished through the unscrupulous lending practices and the financially irresponsible, resulting in the housing bubble in which Greenspan tried to tell us did not exist. Well, we have all seen those chickens come home to roost and it hasn't been pretty.

In October 2007 the equity markets peaked and my subscribers were informed of that fact, prepared and knew exactly what was occurring. As the decline took root the manipulative efforts became more drastic. But, from my seat, none of this mattered as the market continued lower until the cyclical events required to make the 4-year cycle low and the Phase I low were achieved. It was from that point that this bear market rally began. In the eyes of most people and the politicians, they believe that they have "saved" the market and that the economy has bottomed. This is not so. The market and the economy merely reached a temporary bottom in March 2009, in which the rally that should ultimately prove to separate Phase I from Phase II of the bear market began. This rally has served to give the public a false sense of security and hope that the economy is now on the road to recovery. This rally has also given the powers that be a false sense of power in that they think they have every thing under control as a result of their manipulative efforts. This is not the case and once the bear returns, this will become obvious. Unfortunately, in the meantime, the hope and hype of Wall street and Washington keeps the public blindly optimistic.

I have gone back to 1896 and have identified a very specific cyclical "DNA Marker" that has occurred at every major market top. If I'm right about this being a bear market rally, this DNA Marker will appear in accordance with very specific statistics, which will set the stage for the suspected Phase II decline in this ongoing secular bear market to begin. These details are being covered in my monthly research letters. Once this DNA Marker is in place it won't matter what the powers that be do or say because the bear will have his way. The bailouts were a waste of money and were only associated with a temporary low. The powers that be cannot manipulate the entire world out of the natural forces and cyclical events that have to play out. Their efforts only serve to make matters worse and to postpone the inevitable. Again, the most recent example of this occurred during the efforts to keep things going between 2003 and 2007. Were things not worse in 2008 and early 2009 than they were in 2001 and 2002? Yes, they were. Were the efforts in 2008 and early 2009 more extreme than they were in the 2003 to 2007 period? Yes, they were and I look for the fall out from those extreme efforts to be worse than the fallout of the 2003 to 2007 efforts. In other words, once the Phase II decline begins, it will be worse than the Phase I decline into 2009. You have been warned!

The following text on Manipulation was taken from Robert Rhea's book, The Dow Theory.

"Manipulation is possible in the day to day movement of the averages, and secondary reactions are subject to such an influence to a more limited degree, but, the primary trend can never be manipulated.

Hamilton frequently discussed the subject of stock market manipulation. There are many who will disagree with his belief that manipulation is a negligible factor in primary movements, but it should always be remembered that he had, as a background for his opinions, a most intimate acquaintance with the veterans of Wall Street, and the advantage of having spent his life in accumulating facts pertaining to financial matters.

The following comment, taken at random from his many editorials, affords convincing proof that his views on the subject of manipulation did not vary:

'A limited number of stocks may be manipulated at one time, and may give an entirely false view of the situation. It is impossible, however, to manipulate the whole list so that the average price of 20 active stocks will show changes sufficiently important to draw market deductions from them.' (Nov. 29, 1908)

'Anybody will admit that while manipulation is possible in the day-to-day market movement, and the short swing is subject to such an influence in a more limited degree, the great market movement must be beyond the manipulation of the combined financial interests of the world.' (Feb.26, 1909)

'…the market itself is bigger than all the 'pools' and 'insiders' put together.' (May 8, 1922)

'One of the greatest of misconceptions, that which has militated most against the usefulness of the stock market barometer, is the belief that manipulation can falsify stock market movements otherwise authoritative and instructive. The writer claims no more authority than may come from twenty-two years of stark intimacy with Wall Street, preceded by practical acquaintance with the London Stock Exchange, the Paris Bourse and even that wildly speculative market in gold shares, 'Between the Chains,' in Johannesburg in 1895. But in all that experience, for what it may be worth, it is impossible to recall a single instance of a major market movement which depended for its impetus, or even for its genesis, upon manipulation. These discussions have been made in vain if they have failed to show that all the primary bull markets and every primary bear market have been vindicated, in the course of their development and before their close, by the facts of general business, however much over-speculations or over-liquidation may have tended to excess, as they always do, in the last stage of the primary swing.' (The Stock Market Barometer) '…no power, not the U. S. Treasury and the Federal Reserve System combined, could usefully manipulate forty active stocks or deflect their record to any but a negligible extent.' (April 27, 1923)

'The average amateur trader believes the stock market is guided in its trends by a certain mysterious 'power,' this belief being the one factor, next to impatience, most responsible for his losses. He reads tipster sheets avidly; he scans the newspapers industriously for news likely, in his opinion, to change the trend of the market. He does not seem to realize that by the time the news of real importance is printed, its effect, so far as the basic trend of the market is concerned, has long ago been discounted.'

'It is true that a flurry in the price of wheat or cotton may influence the day to day movement of stock prices. Moreover, sometimes newspaper headlines contain news which is construed as bullish or bearish by market dabblers, who collectively rush in to buy or sell, thus influencing or 'manipulating' the market for a short period. The professional speculator is always ready to help the movement along by 'placing his line' while the little fellow timidly 'lays out' a few shares; then, when the little fellow decides to increase his commitments, the professional begins to unload and the reaction ends, and the primary movement is again resumed. It is doubtful if many of these reactions would ever be caused by newspaper headlines alone unless the market was either overbought or oversold at the time---the 'technical situation' so dear to the hearts of financial news reporters.'

'Those who believe the primary trend can be manipulated could, no doubt, study the subject for a few days and be convinced that such a thing is impossible. For instance, on September 1, 1929, the total market value of all stocks listed on the New York Stock Exchange was reported to have amounted to more than $89,000,000,000. Imagine the money which would have been involved in depressing such a mass of values even 10 per cent!'

The stock market still has a dreadfully long way to go on the downside and needs no manipulation to get there. Be very careful.

Using MarketCycle360, this can be a very profitable time for you.

Livio

Welcome To The MarketCycle360 Blog

2010-02-12T13:43:00.001-06:00

Welcome to the MarketCycle360 blog.

Thank you for taking the time to visit.

As a new visitor I want you to know that my interest is your investment success. So I am going to make you a couple of promises then ask you a simple question.

Promise #1: I will do my best to offer information to you that is timely and valuable. Information you can seriously consider.

Promise #2: I will show you my active performance results as monitored by a third party so you can really trust the information I give.

Promise #3: If you become a subscriber to my blog, I will never sell or forward your email to anyone.

In these fast changing times, we are always striving to overcome the challenges that the markets face. We focus on supporting people like you throughout your career and standing for the interests of regular long term investors and traders.

As a subscriber, we will help you as you progress towards becoming a more knowledgeable and informed decision maker by making the information you need available, advising on issues that affect your finances and by providing guidance.

You will be able to benefit from an extensive range of training and educational resources as well as get access to state-of-the-art technology for your use at any time. You will also get substantial discounts on products from our partner organizations.

I personally guarantee you that I will provide you information that is accurate to the best of my ability.

Question: Would you kindly give me the honor of subscribing to this blog?

Once again thank for joining us and we look forward to providing you with a positive experience that will help build your professional career.

If you ever have any question, you can call me or email me anytime.

Livio S. Nespoli

Livio@therightinvestment.com (402) 608-1662

The Safest Banks In America

2010-02-10T18:45:00.000-06:00

With banks around the country closing at a faster pace, I thought you might be interested in knowing what banks are deemed safe.

The Street.com Ratings, Inc., formerly Weiss Ratings, Inc., provides one of the most reliable bank-rating services in America. CEO Martin Weiss has graciously consented to provide a practical guide for this book. The Table below lists what his researchers consider the two strongest banks in each state in the union. ... For our purposes, I see little point in listing the weakest banks, but if you want to know which ones they are, you can find them listed in the brand-new Ultimate Safe Money Guide, by Martin Weiss (John Wiley & Sons, 2002). Aside from banks and insurance companies, his firm also rates mutual funds, brokerage firms, HMOs and corporations with common stock.

IDC Financial Publishing, Inc. also publishes highly specific and easy-to-interpret quarterly financial ratings that track the financial safety of U.S.-based banks, savings and loan institutions and credit unions. You will find their contact information below:

Veribanc, Inc.
Website: www.veribanc.com
Email: service@veribanc.com
Address: P.O. Box 1610, Woonsocket, RI 02895
Phone: 800-837-4226
Fax: 401-766-2777

IDC Financial Publishing, Inc.
Website: www.idcfp.com
Email: info@idcfp.com
Address: P.O. Box 140, Hartland, WI 53029
Phone: 800-525-5457 and 262-367-7231
Fax: 262-367-6497

If, despite all your precautions, you come to suspect that any of your chosen banks face the risk of closure, move your money to a safer bank immediately. If you cannot identify a safer bank, then do not hesitate to withdraw all of your money in cash. If you are not first in line, you may forfeit the opportunity.

The Highest-Rated Banks in America by State
Ratings Based on Q3 2009 Data
Prepared: January 7, 2010
Courtesy of: TheStreet.com Ratings, Inc.

Full State	Bank Name	City	State	TheStreet.com Financial Strength Rating	Total Assets ($Mil)
ALABAMA	FIRST NATIONAL BK OF TALLADEGA	TALLADEGA	AL	A	368.9
ALABAMA	CITIZENS BANK OF WINFIELD	WINFIELD	AL	A	207.4
ALASKA	MOUNT MCKINLEY BANK	FAIRBANKS	AK	A	284.3
ALASKA	FIRST NATIONAL BK ALASKA	ANCHORAGE	AK	B+	2,623.1
ARIZONA	NORDSTROM FSB	SCOTTSDALE	AZ	A-	203.6
ARIZONA	FOOTHILLS BANK	YUMA	AZ	B	203.2
ARKANSAS	FIRST NATIONAL BK IZARD COUNTY	CALICO ROCK	AR	A+	137.9
ARKANSAS	FIRST NATIONAL BK & TRUST CO	MOUNTAIN HOME	AR	A	392.0
CALIFORNIA	FARMERS & MERCHANTS BK CTRL CA	LODI	CA	A	1,764.9
CALIFORNIA	CALIFORNIA FIRST NATIONAL BK	IRVINE	CA	A	348.7
COLORADO	DOLORES STATE BK	DOLORES	CO	A	109.5
COLORADO	FIRST NATIONAL BK ESTES PARK	ESTES PARK	CO	A	99.3
CONNECTICUT	CITIZENS NATIONAL BK	PUTNAM	CT	A-	302.2
CONNECTICUT	PEOPLES UNITED BANK	BRIDGEPORT	CT	B	18,761.3
DELAWARE	APPLIED BANK	WILMINGTON	DE	A+	284.6
DELAWARE	FIRST BANK OF DELAWARE	WILMINGTON	DE	A-	131.7
DC	NATIONAL CAPITAL BANK OF WA	WASHINGTON	DC	A+	268.4
DC	CITY FIRST BANK OF DC NA	WASHINGTON	DC	C	135.5
FLORIDA	DRUMMOND COMMUNITY BANK	CHIEFLAND	FL	A+	184.8
FLORIDA	FIRST FEDERAL BANK OF FLORIDA	LAKE CITY	FL	A	643.6
GEORGIA	FARMERS STATE BK	DUBLIN	GA	A	119.3
GEORGIA	WEST CENTRAL GEORGIA BANK	THOMASTON	GA	A	95.9
HAWAII	BANK OF HAWAII	HONOLULU	HI	B	12,185.7
HAWAII	FIRST HAWAIIAN BANK	HONOLULU	HI	B-	13,801.0
IDAHO	BANK OF COMMERCE	AMMON	ID	B+	720.7
IDAHO	FIRST FSB OF TWIN FALLS	TWIN FALLS	ID	B-	440.0
ILLINOIS	GERMANTOWN TRUST & SB	BREESE	IL	A+	302.8
ILLINOIS	FIRST NATIONAL BK OF DWIGHT	DWIGHT	IL	A+	115.1
INDIANA	BANK OF GENEVA	GENEVA	IN	A-	125.4
INDIANA	FIRST FINANCIAL BANK NA	TERRE HAUTE	IN	B+	2,418.3
IOWA	CITIZENS FIRST NATIONAL BK	STORM LAKE	IA	A	192.4
IOWA	NEW ALBIN SB	NEW ALBIN	IA	A	176.9
KANSAS	FARMERS & DROVERS BANK	COUNCIL GROVE	KS	A+	129.3
KANSAS	COMMERCIAL BANK	PARSONS	KS	A	233.2
KENTUCKY	KENTUCKY-FARMERS BANK	ASHLAND	KY	A+	146.1
KENTUCKY	EDMONTON STATE BK	EDMONTON	KY	A	401.0
LOUISIANA	M C BANK & TRUST CO	MORGAN CITY	LA	A	274.4
LOUISIANA	FIRST NATIONAL BK IN DE RIDDER	DE RIDDER	LA	A	173.8
MAINE	FRANKLIN SB	FARMINGTON	ME	A	309.9
MAINE	BAR HARBOR BANK & TRUST	BAR HARBOR	ME	B	1,059.9
MARYLAND	ROSEDALE FS&LA	BALTIMORE	MD	A+	633.8
MARYLAND	MIDDLETOWN VALLEY BANK	MIDDLETOWN	MD	A+	136.4
MASSACHUSETTS	EVERETT CO-OP BANK	EVERETT	MA	A-	258.4
MASSACHUSETTS	NATIONAL GRAND BK MARBLEHEAD	MARBLEHEAD	MA	A-	239.7
MICHIGAN	UPPER PENINSULA STATE BK	ESCANABA	MI	A	173.2
MICHIGAN	SUPERIOR NATIONAL BK & TRUST	HANCOCK	MI	A-	417.1
MINNESOTA	VERMILLION STATE BK	VERMILLION	MN	A	429.9
MINNESOTA	LIBERTY SAVINGS BANK FSB	SAINT CLOUD	MN	A	149.0
MISSISSIPPI	BNA BANK	NEW ALBANY	MS	A	392.3
MISSISSIPPI	BANK OF JONES COUNTY	LAUREL	MS	A	190.6
MISSOURI	NEW ERA BANK	FREDERICKTOWN	MO	A+	273.9
MISSOURI	FIRST NATIONAL BK	CAMDENTON	MO	A+	270.1
MONTANA	FIRST STATE BK OF MALTA	MALTA	MT	A	110.5
MONTANA	FIRST STATE BK OF SHELBY	SHELBY	MT	A	93.1
NEBRASKA	WORLDS FOREMOST BANK	SIDNEY	NE	A	830.8
NEBRASKA	FIRST NATIONAL BK OF GORDON	GORDON	NE	A	147.5
NEVADA	CREDIT ONE BANK NA	LAS VEGAS	NV	A	102.2
NEVADA	FIRST NATIONAL BK OF ELY	ELY	NV	A-	71.4
NEW HAMPSHIRE	LAKE SUNAPEE BANK FSB	NEWPORT	NH	B-	898.9
NEW HAMPSHIRE	MASCOMA SAVINGS BANK	LEBANON	NH	B-	898.9
NEW JERSEY	SUMITOMO TRUST & BANKING CO	HOBOKEN	NJ	A+	1,041.5
NEW JERSEY	FIRST INVESTORS FSB	EDISON	NJ	A	46.4
NEW MEXICO	WESTERN COMMERCE BANK	CARLSBAD	NM	A	311.8
NEW MEXICO	FIRST NATIONAL BK ALAMOGORDO	ALAMOGORDO	NM	A	246.5
NEW YORK	MASPETH FS&LA	MASPETH	NY	A	1,555.4
NEW YORK	ORANGE COUNTY TRUST CO	MIDDLETOWN	NY	A	534.0
NORTH CAROLINA	SURREY BANK & TRUST	MOUNT AIRY	NC	A-	213.1
NORTH CAROLINA	CEDAR HILL NATIONAL BK	CHARLOTTE	NC	A-	10.4
NORTH DAKOTA	SARGENT COUNTY BANK	FORMAN	ND	A	75.1
NORTH DAKOTA	FIRST NATIONAL BK	MILNOR	ND	A-	58.5
OHIO	ST HENRY BANK	SAINT HENRY	OH	A+	196.1
OHIO	WORLD FINANCIAL NETWORK NA	COLUMBUS	OH	A	1,713.4
OKLAHOMA	OKLAHOMA BANK & TRUST CO	CLINTON	OK	A+	130.9
OKLAHOMA	FIRST NATIONAL BK & TRUST CO	CHICKASHA	OK	A	350.4
OREGON	CITIZENS BANK	CORVALLIS	OR	A-	408.4
OREGON	PIONEER TRUST BANK NA	SALEM	OR	A-	270.7
PENNSYLVANIA	FIRST NATIONAL BK OF PALMERTON	PALMERTON	PA	A	615.3
PENNSYLVANIA	WAYNE BANK	HONESDALE	PA	A	514.3
RHODE ISLAND	TALBOTS CLASSICS NATIONAL BK	LINCOLN	RI	B	12.4
RHODE ISLAND	WASHINGTON TRUST CO WESTERLY	WESTERLY	RI	B-	2,885.9
SOUTH CAROLINA	FIRST PIEDMONT FS&LA OF GAFFNEY	GAFFNEY	SC	A	271.2
SOUTH CAROLINA	BANK OF CLARENDON	MANNING	SC	A	186.1
SOUTH DAKOTA	FIRST PREMIER BANK	SIOUX FALLS	SD	A	1,066.0
SOUTH DAKOTA	FIRST FIDELITY BANK	BURKE	SD	A	270.9
TENNESSEE	ELIZABETHTON FSB	ELIZABETHTON	TN	A+	333.8
TENNESSEE	CITIZENS BANK	CARTHAGE	TN	A-	491.8
TEXAS	CITIZENS 1ST BANK	TYLER	TX	A+	696.5
TEXAS	COMMUNITY NATIONAL BK & TRUST	CORSICANA	TX	A+	313.1
UTAH	OPTUMHEALTH BANK INC	SALT LAKE CITY	UT	A	1,166.1
UTAH	HERITAGE BANK	SAINT GEORGE	UT	A	78.9
VERMONT	MERCHANTS BANK	SOUTH BURLINGTON	VT	B	1,409.7
VERMONT	UNION BANK	MORRISVILLE	VT	B	443.2
VIRGINIA	VIRGINIA BANK & TRUST CO	DANVILLE	VA	A+	150.1
VIRGINIA	BURKE & HERBERT BK & TRUST CO	ALEXANDRIA	VA	A	1,944.6
WASHINGTON	WHIDBEY ISLAND BANK	OAK HARBOR	WA	A-	958.2
WASHINGTON	VALLEY BANK	PUYALLUP	WA	A-	210.5
WEST VIRGINIA	PENDLETON COMMUNITY BANK INC	FRANKLIN	WV	A	246.2
WEST VIRGINIA	LOGAN BANK & TRUST CO	LOGAN	WV	A-	227.6
WISCONSIN	AMERICAN BANK	FOND DU LAC	WI	A+	235.4
WISCONSIN	NATIONAL EXCHANGE BANK & TRUST	FOND DU LAC	WI	A	1,230.6
WYOMING	FIRST STATE BK OF NEWCASTLE	NEWCASTLE	WY	A+	126.5
WYOMING	CONVERSE COUNTY BANK	DOUGLAS	WY	A-	259.4

DISCLAIMER: This list represent only one rating group's opinion as of the prepared date above. The author reprints this list as a service only. If you choose to do business with any of these firms, you alone stand to realize the gains of that decision; so too do you alone stand to realize any related losses. The author takes no responsibility for the safety of these firms and encourages you to research these firms on your own before committing funds.

Thanks

MarketCycle360

I Have Recovered My 2008 Losses . . . Maybe Not?

2010-02-08T15:00:00.000-06:00

Looking at a numbers chart with percentage gains and losses, one might easily get the impression that the stock market is going up more than it really is. Why? The differences between percentage losses and percentage gains is significant and sometimes misunderstood.

For example, suppose Mr. Jones invests $1,000 in a stock and that stock drops in value to $500. That is a loss in value of 50%. Now that same stock appreciates from $500 back to $1,000. That required a gain of 100% in order to break even.

Many newsletters and financial gurus promote their investment returns or trading history to a trusting public by showing appreciation in percentage terms. Such misdirection and hype effectively inflates returns.

“Annual compounded return" percentages are the more accurate bases for gauging capital appreciation. Those in the financial trade who wish to exaggerate their performance publicize "average annual return" instead. Here is why “average annual return" is misleading.

If you average just a tad more than a 14% return annually for 5 years, you will have doubled your money. Not just 70% (5 x 14%) but a 100% return on your money. The reason is that there is compounding for each year that your money made 14%. The unscrupulous will use the 100% return, divide it by the 5 years and say that you made an "average annual return" of 20%. Extending this example out another 5 years, you appear to have earned a 300% return. Divide this by 10 years and, wonder of wonders, you have stepped up to an annual return of 30%! The reality is that your portfolio returned less than half that, a constant 14% annual compounded return for 10 years. So be aware of hype, especially when brokers and advisors promote very high annual returns that wondrously beat the market by the proverbial mile. Such tactics are an attempt to pull the wool over your eyes, arriving at "average annual return” by dividing cumulative return over the number of years. This method seriously overstates returns. Insist on knowing the "annual compounded return" for a constant and true measure of comparison.

Calculating the annual compounded return over a period of years can restore a sense of reality. In order to do realistic planning, it is important to understand that over a period of years, gains of 10%, 20%, 30% or more are not typical and greatly exceed long-term averages. Moreover, only one negative year can really damage what appears to be a solid growth pattern. Consider the following illustration of typical investor mentality using a $1000 investment.

On average, market sectors go through 5-year cycles. Four out of five are growth years, one is disappointing. Now, let us say that you have gone through a 3-year average growth of 10% per year and you are extremely pleased. There is no doubt in your mind that you should simply hold on to a vehicle that is growing so well. On the fourth year, however, that fund declines by 10%. You say, “No problem, I will just wait it out and it will be on track again next year.” The following year, the fund does rise at a 10% clip again, and you smile in your infinite wisdom.

Hold on, let’s take a closer look. The illusion of high average returns is shattered by the reality of compounded annual return. It turns out you are barely outperforming guaranteed instruments but you are saddled with 100% market risk!

Here is the scariest part that you never even ponder. How long do you think it will it take to get back to a 10% average compounded return? You would have to average 34.51% in the sixth year, 17.63% per year for the next 3 years, or 14.51% per year for the next 5 years, just to get back to a 10% average! Is this what you bargained for?

You can clearly see how avoiding losses is just as important as making gains. This example clearly illustrates what losses can do to your portfolio. It also shows you how volatility affects investment performance.

Does diversification help? Diversification says that you make a profit if you pick different investments representing different asset classes or different capitalization sizes, or different sectors, or buy 5 to 10 different funds? This theory is a carryover from the bull market era of the last 25 years, perpetuating the attitude that diversification still works in the new century. As we have seen since 2000, when a true secular bear market hits, it affects most asset classes and types, there are very few places that will protect you as well as sitting in cash.

Below is an example of a five-fund diversification with different annual average returns. Each fund has only one year of negative returns equal to the growth rate. Had you invested an equal amount in each fund your average annual return at the end of 5 years would equal 5.74%; not much different from the single security example previously discussed.

As you can see, just one bad year can significantly affect returns in the medium term. This alone shows the impact a sustained bear market can have on your investment. In a multiple‐year secular bear market, as it is now, you are better off in cash. We address the vital question of knowing when to get out later. For now, there is the matter of volatility and its powerful effect.

16 Bear Markets Slash Time

Between 1929 and 2009 there have been 16 bear markets, defined as those periods when the S&P 500 fell at least 20%. The average bear market slashed almost 39% off stock prices!

During that same 80-year period, a new bear market began on the average every 5.2 years, with an average duration of 19 months. Every time investors lose money in a down market, they lose valuable time for meeting growth goals.

If an average bear market reduces the value of a portfolio by 25%, a 33% return is needed just to breakeven. After eliminating overlapping bear markets, investors endured 45 years of either decline or struggling back just to break even. In other words, investors spent two-thirds of their lifetime just trying to stay even. Only 1/3 of the time is spent benefiting from the stock market's ability to make investments grow in value.

Volatility can devastate a portfolio, as many people have witnessed since 2000!

So lets add it up using the S&P 500 below:

	S&P Value	% Gain or Loss	Value of $100,000
January 1 2000	1140		$100,000.00
January 1 2003	855	-25%	$75,000.00
January 1 2008	1378	61%	$120,877.19
January 1 2009	825	-40%	$72,368.42
February 1 2010	1089	32%	$95,526.32

In just a little over 10 years a $100,000 investment is now worth $95k. If your account is higher, then you have added money to your account! And now the S&P 500 may be going down again.

How can you avoid some of this Volatility Risk? Let MarketCycle360 to get you in and out of the market at the right time.

Livio

Stocks Are the Last to "Get It"

2010-01-28T10:12:00.001-06:00

As I have always said, “there is no need to reinvent the wheel”! Graham Summers wrote the following article illustrating the current investment landscape. It is very shaky, read on. . .

I've been pounding the table about what I think is coming down the pike for months now. Rather than producing another editorial heavy essay, I thought today we'd let the market dictate what's going on.

First off, we need to examine the currency markets. With over $3 trillion traded daily, this market is the largest most liquid market in the world. As such it's the fastest moving market, the proverbial "smartest" money that often signals what will soon hit bonds and then stocks.

So what do the currency markets tell us?

The above chart shows the Dollar's performance of the last year. A lot of commentators like to talk about how the Dollar is doomed and worthless, but they are misguided and wrong. ALL currencies are PAPER currencies (doomed and worthless). And the Dollar, no matter how much you hate it, remains the reserve currency right this minute. As such, today it's THE most important asset class on the planet.

With that in mind, it's important to note that the Dollar is flashing a "flight to safety" or risk aversion. We've seen a clean break above the 50-day moving average AND key resistance (78) in the last month and a half. The Greenback now appears to be taking a breather just below its 200-DMA. Any move above the 200-DMA would signal a MAJOR change in market climate with risk-aversion dominating the world's markets.

On that note, I wanted to point out that despite stocks AND gold roaring higher over the weekend (I've detailed this weekly ramp job before), the Dollar only dipped a little. This is QUITE different from the usual weekend into Monday mania in which stocks erupt higher and the Dollar tanks. In light of this, we need to take the Dollar's refusal to plunge over the weekend as a significant change, one that likely forecasts continued risk aversion in the markets.

Again, the currency markets are flashing "risk aversion" has returned.

Now let's move on to bonds. At $72 trillion in size, the bond market is roughly twice as big as the stock market. As such it can be considered the "smarter" money (smarter than stocks, not quite as smart as currencies).

The above chart shows the iShares T-Bond 20+year ETF: a basic proxy for the long-end of the US Treasury market (bonds with maturities greater than 20 years). As you can see, the "risk aversion" trade began in mid-December here too with bonds rallying (yields falling as a result of this) into January.

Interestingly, the strength of this rally is not nearly that of the Dollar, failing to break above the 50-DMA. This isn't surprising totally given that most investors want shorter term US Treasuries right now (the long end of the market has been suffering for months). However, despite this, "risk aversion" remains the name of the game.

This is even more obvious for 10-year Treasuries.

Look at the spike that started late December. Also notice that the 10-year broken overhead resistance at 117 with no difficulty at all. It's now butting up against the 200-DMA and 50-DMA. Any break over these levels and the "risk aversion" trade should really catch fire.

Thus, we see the two largest, most liquid markets in the world flashing danger signals as early as mid-December. As usual, stocks were the last to "get it."

As you can see, the S&P500 continued its rally into mid-January (a full month AFTER the currency markets and bond markets began discounting trouble ahead). Stocks then made a gut-wrenching plunge breaking below their 50-DMA like a machete through a sheet of paper. The technical damage here is severe and we need to see a MAJOR reversal (stocks rallying hard back above the 50-DMA) for this not to signal that REAL fireworks are coming.

Given that both the Dollar AND Treasuries remain in uptrend's, I expect we'll soon see stocks breaking down to test the 200-DMA at 1,000. We won't get there all at once mind you, given the rampant bullishness (2007 levels) the market won't go down without a bounce or two. But overall, the market right now is flashing that "risk aversion" is the name of the game. This is bullish for the Dollar and bearish for stocks.

Thank you Graham for letting me reprint your analysis it is right in line with my last post.

Livio

The Incredible Deflation of Barack Obama

2010-01-22T18:49:00.000-06:00

A few weeks ago I wrote a blog post called Deflation or Inflation in August of last year and now Mort Zuckerman came out with an good article on that topic as well. Here is his article, please read on . . .

The air is seeping out of the Obama balloon. He has fallen to below 50 percent in the poll approval ratings, a decline punctuated by his party's shocking loss in the Massachusetts special election.

Why?

Barack Obama was undoubtedly sincere in what he promised, even if his promises were within the normal range of political exaggeration. The first trouble is that his gift for inspiration aroused expectations, stoked to unprecedented heights by his own staff, that he would solve the climate crisis on Monday, the jobs crisis on Tuesday, the financial crisis on Wednesday, the education crisis on Thursday, Afghanistan on Friday, Iraq on Saturday, and rest on Sunday. His oratorical skills were highlighted by the contrast with President Bush, who mangled words so much that his incoherence became, as Tina Brown wrote, "a metaphor for incompetence." Expectations were spurred, too, by Obama's recognition that Americans yearned for a new kind of politics, a rejection, as he put it, of "politics as usual."

Perhaps the inevitable outcome was disappointment—and on this Obama has not disappointed. Alas, he has accelerated the deflation of hope with his extraordinary volume of public appearances. In his first six months, he gave three times as many interviews as George W. Bush, four times as many prime-time news conferences as Bill Clinton, and more interviews than both combined: 93 for Obama and 61 for his two immediate predecessors. He appeared on five Sunday talk shows on the same morning, followed the next day by David Letterman, the first-ever presidential appearance on a nighttime comedy show. In another week, he squeezed in addresses to the U.S. Climate Change Summit, the U.N. General Assembly, the U.N. Security Council, and a variety of press conferences.

His promiscuity on TV has made him seem as if he is still a candidate instead of president and commander in chief. He—and his advisers—have failed to appreciate that national TV speeches are best reserved for those moments when the country faces a major crisis or a war. Now he faces the iron law of diminishing novelty.

Despite this apparent accessibility, Obama's reliance on a teleprompter for flawless delivery made for boring and unemotional TV, compounding his cerebral and unemotional style. He has seemed not close but distant, not engaged but detached. Is it any wonder that the mystique of his presidency has eroded so that fewer people have listened to each successive foray? The columnist Richard Cohen wryly observed that he won the Pulitzer Prize for being the only syndicated columnist who did not have an exclusive interview with the president.

Poor results. But Obama's problems are more than a question of style. There is doubt aroused on substance. He sets deadlines and then lets too many pass. He announces a strategic review of Afghanistan, describing it as "a war of necessity," only to become less sure to the point that he didn't even seem committed to the policy that he finally announced. As for changing politics in Washington, he assigned the drafting of central legislative programs not to cabinet departments or White House staff but to the Democratic congressional leadership of Nancy Pelosi and Harry Reid, the very people so mistrusted by the public. Who could be surprised that the critical bills—the stimulus program and healthcare—degenerated under a welter of pork and earmarks that had so outraged the American public in the past?

Pelosi benefited from $54 million to relocate a Bay Area wine train, not to speak of a secret deal with the drug industry lobby to preclude negotiations on Medicaid drug prices and exclude drug imports from Canada, concessions that had previously been strongly rejected by Obama. Reid favored the gambling industry by arranging an earmark for a Los Angeles-to-Las Vegas high-speed monorail, even though it won't be built for years. Some components of the stimulus did help soften the recession, yet only roughly a third of the $787 billion stimulus has been spent, and too much was spent on programs supported by liberal Democrats, which explains why so much of the stimulus money went toward education, health, energy conservation, and other activities, mostly worthy but not geared to achieving recovery and getting people back to work.

Taxpayers have thus come to see politics as usual masquerading as economic recovery. Indeed, both the stimulus and healthcare plans were voted on so quickly that the lawmakers had no time to read the bills. In both cases, the White House created the impression it was interested in passing anything, no matter how ineffectual. This was epitomized by Obama's chief of staff essentially asserting that a healthcare bill would be passed even if all it consisted of was two Band-Aids and an aspirin.

Most critically, Obama misjudged the locus of the country's anxiety: the economy. Instead of concentrating on jobs, jobs, jobs, he made the decision to "boil the ocean" and go for everything, from comprehensive health reform to global warming to a world without nuclear weapons ... and the beat goes on.

This was more than the Congress could absorb and more than the country could understand. Obama, the theoretician in a hurry, made no allowance for the normal resistance to dramatic change and the public's distaste for big government, big spending, and big deficits. He didn't seem to realize that Americans understand in the most personal terms that excessive debt has real consequences, given how many have mortgages that exceed the value of a home and credit lines that are too much to carry. Yet this was what the president seemed to be getting us into. Over 60 percent of the country believes that government spending is excessive; Obama's lowest approval ratings come from his mishandling of the present and future deficits.

Delayed stimulus. It is not as if the limited stimulus program has done the job either, since unemployment rates soared over 10 percent (compared with the 8 percent ceiling that was promised). Shelby Steele asked a good question in the Wall Street Journal: "Where is the economic logic behind a stimulus package that doesn't fully click in for a number of years?" Yes, we might have just escaped a depression, but as the Economist magazine observes, voters will not thank the president for averting a depression that did not come but are "more likely to blame him for the recession that did." On top of all this, and not all Obama's fault, a financial crisis usually produces weak recoveries in jobs, so a good number of Americans are likely to remain furious at the spectacle of the financial world doing well while so many ordinary folks lose their jobs and their savings. This anger will not subside while households see net worth slump to where it was 20 years ago and debt reach close to record highs at about 130 percent of disposable income, and while the residential real estate crisis continues unabated and the official jobless rate doesn't come close to reflecting the true extent of unemployment and ... and ... and ....

The White House might have at least demonstrated that it cares about fiscal restraint and independence from the leadership in Congress, but consistently Obama has failed to veto spending while centralizing power. A majority of Americans think it a mistake at this time of economic distress to embark on a costly healthcare program. As it was, the program's apparently stalled trip through Congress turned out to be another fiasco of political corruption, with millions of dollars allocated to buy votes, such as those of Louisiana Sen. Mary Landrieu and Nebraska Sen. Ben Nelson. Anger with that process and the bill it produced helped fuel the stunning election of Republican Scott Brown in Massachusetts.

The result is a widespread concern that progressive taxation to pay for the "nanny state" will snuff out future opportunities that Americans believe they deserve for themselves and their children. Obama misjudged the public's appetite for taxpayer-funded solutions; most people believe all the government does is waste money. In a recent NBC/Wall Street Journal poll, only 23 percent said they "trusted the government just about always or most of the time"—the smallest proportion in 12 years, and the all-important independent swing voters who decide elections now favor Republicans by 52 percent, up from 30 percent.

Unfortunately, there is not much solace in international affairs either, where, again, expectations were so pumped up. America's image is better, no doubt, but uncertainty and procrastination prevail. One major international political leader recently put it well: "Not only does the leadership of this region not think that Obama is strong enough to confront his enemies; they aren't sure he is strong enough to support his friends." The administration seems "hopelessly naive," according to one Arab foreign minister, and unable to face the full truth about Islamic terrorism. The public frustration over the administration's mismanagement of the latest jihadist attempt to blow up a plane with all its innocent travelers (on Christmas Day) was captured in the New York Daily News headline "Mr. President, it's time to get a grip!"

The consequence is that there isn't a single critical problem on which the president has a positive public rating. Only a minority of Americans now believe the president will make the right decisions for the country. Nor can he any longer take refuge in the rejoinder that "we inherited a terrible situation." Or blame it on fat-cat bankers and insurance companies. Blaming others, including Bush, for the country's predicament is less and less persuasive. "At some point you own your presidency," wrote Peggy Noonan in the Wall Street Journal. "At some point the American people tell you it's yours."

More worrying for the administration is that while Obama gets the approval of 76 percent of non-whites, his approval among whites is down to 41 percent, according to Gallup. This is a huge change that literally puts the Democratic control of Congress at risk. The Republicans have hardly been stellar either, but there is now a renewed openness in the country to hear what they have to say. Obama's political realignment of America is over. We no longer believe that he will "change the world" and "transform the country."

This brings to mind why an adviser to President Roosevelt in the 1930s, Bernard Baruch, told electors to vote for the person who promised them less. In this way, he said, "you would be less disappointed." There is still time for Obama to change and turn things around. But the first year is the critical year, one in which the public defines the president, and it has to be said that broad swaths of the country are deeply disappointed.

__________________________________

It is now apparent that deflation is taking hold of our economy, and with it comes a larger and deeper decline in the stock market. MarketCycle360 software is following it closely.

My recommendation is: GO TO CASH with all your investments.

Livio

Fund manager sees another crash in home prices FundWatch - MarketWatch

2010-01-19T14:02:00.001-06:00

Fund manager sees another crash in home prices FundWatch - MarketWatch

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Société Générale tells clients how to prepare for potential 'global collapse'

2010-01-18T17:54:00.001-06:00

By Ambrose Evans-Pritchard
Published: 6:12PM GMT 18 Nov 2009

Comments 224 | Comment on this article

Explosion of debt: Japan's public debt could reach as much as 270pc of GDP in the next two years. A bullet train is pictured speeding past Mount Fuji in Fuji city, west of Tokyo Photo: Reuters

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.

SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.

Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.

SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.

Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.

Listen to Pimco boss and you'll go broke Paul B. Farrell - MarketWatch

2009-12-22T14:10:00.001-06:00

Listen to Pimco boss and you'll go broke Paul B. Farrell - MarketWatch

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The MMMI Indicator Remains Bullish

2009-12-04T14:53:00.000-06:00

Before I get into what we need to think about this week for the stock market I want you to go back to last weekend and imagine what you heard people saying on television about the stock market. Did you hear negative talk or positive talk?

You make money by staying aligned with the dominant market trend and paying attention to people who are doing that too. Now it is very tough to pick exact tops and bottoms, but to make a lot of money in the stock market you don't have to do that. Nor do you have to be right all of the time. You just have to adjust at some point when things change and stay with the trend as long as you can when you are right.

Odds are that you are very anxious about the stock market right now. It has gone up a lot.

Let’s take a look at my Major Market Momentum Indicator, my bull/bear market indicator.

Major Market Momentum Indicator: BEARISH

Our Major Market Momentum Indicator was developed with over 20 years of experience and calls turns quite effectively. It is a monthly indicator and therefore only catches long term market direction changes.

When the GREEN cycle momentum indicator is above the RED cycle momentum line, the broad market (S&P500) is bullish.
When the GREEN cycle momentum indicator is below the RED cycle momentum line, the broad market (S&P500) is bearish.
When the S&P500 pricing bar is above the PURPLE momentum indicator, the broad market (S&P500) is bullish.
When the S&P500 pricing bar is below the PURPLE momentum indicator, the broad market (S&P500) is bearish.

The Green Arrow indicates it is time to go long on the broad market (S&P500), and the Red Arrow indicates it is time to go to cash, to short the broad market (S&P500). As you can see by the dotted lines, the only time a change of direction occurs is when both the upper and lower Major Market Cycle Turn Indicators mutually agreed on direction. This prevents false and whipsawed signals from occurring.

Our Major Market Momentum Indicator illustrates clearly that we are now in a bull market and to fight that fact or discuss anything bearish at this time is counter productive. Stay with the economic momentum.

Our Major Market Momentum Indicator has been designed and tested with data since 1950! It does not miss, just take a look below:

When you have a market indicator that is relatively accurate you can be on the right side of the market and that is all you need. The lesson is in cyclical bull markets you shouldn't be afraid of the bull market until there are real signs that the bull market is over. And there isn't a single sign I can point out to you that says this right now. In bear markets you shouldn't be trying to guess bottoms and in bull markets you shouldn't obsess over tops.

Using The MMMI To Your Advantage With MarketCycle360

Bull Markets:

Bull markets allow you to create more aggressive Trade Groups. Trade Groups that include high growth strategies.

Bear Markets:

Bear markets require you to become more defensive in strategy and sometimes remaining in cash is your best option.

Be Wise

No one knows when the markets or the economy with shift with abruptness, so it may be a good concept to always have a Gold Fund, Stock, or ETF present in your trade groups. In addition, another concept is to also consider an Inverse Fund or ETF to your trade groups. This way you may be protected from declining markets and serious economic collapse!

Just keep tuned into this site and we will keep you up to date with our MMMI.

Using MarketCycle360, this can be a very profitable time for you.

Livio

Bullish Blood In A Bearish World

2009-10-26T08:39:00.000-05:00

As you know, my monthly momentum indicator has accurately picked tops and bottoms in the market since 1950.

As of right now, underlying momentum is bullish.

Many are predicting a return to the secular bear but my the momentum indicator here illustrates that the market would have to severely correct and do so rapidly to turn bearish within 30 days. This model is not predictive and thus can only tell you what is occurring underneath the skin, and right now bull blood remains.

Current:

Since 1950:

As I stated in my previous post, I do believe that the Bear will reveal itself shortly, but until something occurs, and does so dramatically, any decline you see in the market is temporary.

If you wish to make it easy on yourself, just order MarketCycle360 and it will tell you exactly when to get out and what precisely to own at any given time. The fact is, you can be in the right investment at the right time, and with he right tool, it can make it systematic and disciplined.

Livio

Edging Closer & Closer To A Market Top

2009-10-06T14:33:00.000-05:00

If you did not read my warning, read the both below:

“Bear markets seem to be divided into three phases: the first being the abandonment of hopes upon which the final uprush of the receding bull market was predicted; the second, the reflection of decreased earnings power and reduction of dividends, and the third representing distressed liquidation of securities which must be sold to meet living expenses. Each of these phases seems to be divided by a secondary reaction which is often erroneously assumed to be the beginning of a bull market.” Robert Rhea

From one pro to another:

“Well, the evidence continues to suggest that we are still operating within a secular bear market and that this is a countertrend bear market rally. I realize that this may be hard to comprehend, but this is nonetheless the case. The powers that be and the talking heads seem to be convinced that the bottom is in and that we are now in a recovery. From my seat, we are merely seeing a counter-trend bounce that has now proven to be the bounce out of the 4-year cycle low and this is giving the powers that be a false sense of security about their success to hold things together. I maintain that based on the historical relationships between secular bull and secular bear markets that we have a long was to go before the final bear market low is reached.

I also maintain that we are dealing with a credit contraction and the deflationary forces associated with Kondratieff winter. After all, let’s not forget that it is deflation that the Fed is fighting. I furthermore maintain that the powers that be are still only making matters worse and that the
Phase II decline will be worse than the Phase I decline was. In fact, I don’t think that a Phase II decline is even considered a real possibility by
the spend happy folks in Washington or the general public. As a result, once the Phase II decline finally begins, it will take virtually everyone by complete surprise. When the Phase II decline begins I think it will steamroll the powers that be and that it will be much worse than the Phase I decline. “ Tim Wood: http://www.cyclesman.com

I've shown the below chart several times before. It depicts the S&P 500's performance since its March 2009 bottom. As you can see, the market has been carving out a near perfect rising bearish wedge: a rally in which the trading range becomes tighter and tighter the higher the market rallies.

This is a classic topping pattern in the sense that it typically precedes a large move to the downside. All you need is for the market to break below the pattern to the downside. And as you can see, we're sooo close to seeing this breakdown. When you consider that this pattern is completing on rapidly dwindling volume, you have the makings of a VERY serious collapse.

It's also interesting to note that a near identical pattern has formed from the July lows (when the latest leg up of this current rally began). Looking from this perspective, it appears the market has some additional upside to it before the pattern is broken.

However, I want to draw your attention to the absolute collapse in volume in the last few weeks. This tells us that we do indeed have the makings of a Crash here. This chart is literally screaming "no one is participating in this rally any longer" (remember 70%+ of volume is high frequency programs trading blocks of shares back and forth, NOT real buyers like you and me).

Remember, technical analysis is an art, not a science. And depending on how you slice a chart, the projections may differ. This is why I am comparing the rising bearish wedges from both the March and the July lows.

However, the fact that both charts depict a near identical pattern (with the only difference being in terms of WHEN the breakdown occurs) lends greater weight to my belief that when the formation does breakdown, the move will be severe.

Throw in the accelerated drop in volume and you've got a VERY, VERY ugly breakdown coming within the next month or so (I've said numerous times the Crash will be between September and December).

Watch the next few days closely. Stocks are showing serious signs of a major breakdown ahead.

On that note…

Kiss the "New Bull Market" Theory Good-bye

I've also been tracking the S&P 500 in relation to its 88-weekly moving average: THE definitive metric for what establishes a bull vs. bear market. As I said in the last two issues, if the S&P 500 breaks ABOVE the 88-weekly moving average and stays there, then YES, we're in a new bull market. However, if it's turned away and falls below the 88-weekly moving average… THEN LOOK OUT BELOW.

As you can see, the S&P 500 was rejected at the 88-weekly moving average. If you're having trouble seeing this, the below chart shows the recent action more clearly.

It is now literally "do or die" time for the stock market. Either stocks consolidate here and then push above the 88-weekly moving average OR they "kiss" the line one more time and then roll over and collapse.

As I've stated time and again, I fully expect the collapse to occur this fall. As the above charts show, it will be sooner rather than later. However, the bearish rising wedge patterns starting in both March 2009 and July 2009 both leave room for a little more potential upside. This is why you should keep all of your current positions small (I've recommended establishing only 10% of your full-intended short position, e.g. $100 out of an intended $1,000 position).

This is also why it's not yet time to go "all in" shorting this market. Time and again, the market has been manipulated higher on weaker and weaker volume courtesy of the Fed's loose monetary policy. It's never a good idea to bet heavily against the Fed. And our current Fed Chairman, Ben Bernanke, is a bubble-blower extraordinaire (seriously, he's managed to create yet another mini-bubble in stocks during the worst financial crisis in 80+ years). So you don't want to go stepping out in front of this bubble-making machine with much capital.

However, blowing bubbles is not an economic policy. It is a road to ruin. And we are now headed there at an accelerated pace.

To date, the US government (I include the Federal Reserve) has spent some $11 trillion+ trying to re-inflate the US economy and stock market, They have failed miserably. Consider:

27 states in the US now have unemployment rates above 8.5%
60% of Americans don't have enough money saved to retire
2,690 employers performed mass layoffs (firing of 50 or more employees at once) in August (up from 533 in July)
REAL incomes continue to collapse: at an annualized rate of 5% for the three weeks of August 28-September 23
REAL weekly unemployment claims have topped 500,000 since January
US bank loans have been falling at an annual pace of almost 14% since the early summer
Shipments in capital goods fell 1.9% in August, similarly, rail shipments which slowed their rate of decline the last few months, have begun to accelerate downward again
Industrial production has dropped 11%
Fannie Mae's August data shows a surge in delinquencies from $4.2 billion to $70 billion.

And those are merely the data points I can quickly recall from recent releases. Elsewhere in the world (remember the Stimulus efforts were global) things aren't any better. The Telegraph recently noted that, "China's exports were down 23pc in August; Japan's were down 36pc; industrial production has dropped by 23pc in Japan, 18pc in Italy, 17pc in Germany, 13pc in France and Russia…"

When you consider just how little "bang for your buck" we got out of the unbelievable amount of Stimulus spent… you have to wonder what the heck the point of it was. Remember, the bailouts were sold to us as a massive effort to help Joe America keep his job, his house, and his ability to spend.

Graham Summers

Reality is Either Accepted or Rejected

I have been writing market predictions supported by several other financial professionals. These professionals do not care which direction the market is going in stocks, gold, real estate, or any other sector, all they care about is being on the right side!

Permabulls (those who believe everything always goes up), blind followers of the media, and your local advisor keep you sheltered until you lose much of your wealth. Unlike them, the unbiased professionals see the market as it really is.

In 2005 I was independently advising a general contractor in Omaha Nebraska to liquidate his real estate positions rather than to increase them. Furthermore, while I was there I began sending economic warnings to over 200 commercial and residential brokers around the city for FREE. I felt obligated to the industry and to the person who had me on contract. Sadly, he did not follow my advice and is bankrupt and divorced today. Similarly, most brokers and firms followed the usual attitude toward my stated REALITIES'; they either ignored the warnings and did not reconfigure their direction or wrote me back telling me I was nuts. I have not been around those brokers in a while, but my guess a lot of them have found something else to do, or are considering it now. Today, I hope they trust me to tell the truth.

You see, it is not whether it is a bull or bear market in any particular sector. It is about where we are in the overall economic cycle! Once you know that, you know where your money should be!

To those real estate professionals, I would be happy to tell you where you can profit the most, just contact me.

Livio

Buy & Hold

2009-09-16T23:19:00.000-05:00

Chasing Returns

Many people simply chase returns. That is, they read an article in one of the many available sources of investment information and assume they can profit.

More than seventy percent of mutual fund inflows typically follow the previous year’s “winners,” usually based on the Morningstar Rating for funds. A Dalbar study concluded that the average investor holds a mutual fund for 4.2 years. The result of this short-term holding pattern is a phenomenon called “investor whipsaw.”

Please look at the tables below which provide an interesting analysis of managers’ performance over time.

They track the top 10 mutual funds from one year into future years. The managers are tracked to see how the top ranked funds performed in subsequent years. The results are similar, whether looking at all funds or one asset class.

For the top ten managers from 1998, the highest ranked from that group fell to 4,695 out of 6,348 in 2006. And the number eight performer from 1996 came in at 5,330 out of 6,348, and was outperformed by 84% of its peers--quite a tumble indeed.

The next set of tables show the top ten managers of specific asset classes and their subsequent performance. As the tables show, those funds that were the winners in one year performed poorly in subsequent years.

It is not difficult to arrive at the following conclusions:

1. Buying and Holding a mutual fund will pretty much guarantee extremely poor performance.

2. If you track the top ten performers in each period, you will see that almost every one eventually drops to the bottom of the pack.

3. You can see that manager picking, performance chasing or track record investing is virtually impossible and a complete waste of your time and money.

4. If you have decided to remain a buy and hold investor, purchase a low cost S&P 500 index fund and forget everything else.

5. If you wish to outperform the S&P 500, then you are going to have to continually monitor your investments and remain in the investment with the most economic cyclical momentum at any time. You can learn how to do this by reading our white paper entitled “Why It Works.”

How can MarketCycle360 help you?

MarketCycle360 is designed with two primary goals; wealth preservation and capital appreciation.

Research covering 80 years of economic cycle and investment momentum are built into MarketCycle360. It can put the economy in your pocket. No other system in the financial market matches it!

This research led to the knowledge that it is not the state of the economy that matters; it’s where money is invested during that time that matters. Again, it is not whether there is a bull or bear market, it’s where money is invested during that time that matters. Investors may take advantage of any economy and any market, bull or bear.

MarketCycle360’s proprietary economic momentum engine uses over 500,000,000,000 iterations per trade group, per week! It tells the user which security in the trade group has the most current economic momentum.

MarketCycle360 automatically issues trade signals that stay in synch with the economy as it moves forward. On average, it makes 2 to 3 trades per year. However, it can trade more or less depending on the trade group and what is happening in the economy.

It works with the Mutual Funds, Stocks and ETF’s you already own, and every Mutual Fund, Stock, and ETF listed in North America.

Bear Market Protection

Broad declining stock prices, known as bear markets, can wreak havoc on returns and can make volatility a household word. Bear markets really affect our emotions and this likely results in even poorer performance due to clouded judgment.

MarketCycle360 has a built in bear market defense system, which automatically can protect you from serious decline. It uses a proprietary algorithm that determines when the S&P 500 is entering a predominantly rising or declining economic momentum cycle. Had you used MarketCycle360 since 1999, you could have avoided the 2000 – 2002 bear market. As a matter of fact, MarketCycle360 delivered a trade signal in September 2007 to go to cash and avoided the entire 2008 bear market.

How much money could this have saved in your portfolio?

No Emotional Decision Making

As you have learned, investment decisions are often ruled by emotions. These emotions cause delay, inaction and losses that could have been avoided. MarketCycle360 can help avert financially damaging emotional decisions. Neither fear nor greed will ever get the best of you again because MarketCycle360 automates the trade signals for you.

You can use the system with all brokers. In addition, you can use it with Single, Joint, UGMA, IRA, Roth, SEP, 403b, and 401k accounts.

It all sounds like rocket science and in truth, with billions of equations, it is dauntingly complex, but all these happen automatically behind the scenes and the “user interface”, in techno-speak, is extremely easy to navigate.

All the lessons drawn from historical facts and the distillation of cyclical knowledge is built right in and ready to work for you. The average person with little to no investment experience learns all he needs to in less than 15 minutes.

Once you are set up, MarketCycle360 runs automatically once per week. We have a private user forum that includes free webinars and all the tools you need to build powerful trade groups and master MarketCycle360.

MarketCycle360 works for you in any economic climate.

With MarketCycle360, you are poised for . . . The Right Investment at the Right Time.

Livio

An Amazing Comparison

2009-09-04T13:34:00.001-05:00

Merrill Lynch Asia (Bank of America) strategists Sadiq Currimbhoy, Arik Reiss, and Jacky Tang suggest that the S&P 500 could soar another 40% by December 2010 before it collapses completely based on a unique comparison with the Nikkei 225. (Before you reject this possibility out of hand please read the entire article.)

Were the S&P 500 to indeed rise by 40% then, by extension, precious metals stocks (as represented by the HUI and GDM indices) and their associated warrants (as represented by our proprietary PreciousMetalsWarrants Index) would top out at record highs as would gold and silver.

Uncanny Relationship Exists (with a Twist) between the Nikkei and the S&P 500

The strategists have identified a pattern that supports the likelihood of major additional gains in the US stock market even without a strong economic recovery which suggests that the rally should continue until the end of the year. Below is an edited version of what the Merrill Lynch strategists had to say:

Some investors like to compare the US to Japan. From a market perspective, plotting the Nikkei and the S&P 500 shows no similarity. However, a peculiar variation shows an uncanny relationship.

The chart below shows the Nikkei in U.S. dollars compared to the S&P 500. The S&P 500 in DXY terms has been rebased to the same peak as in Japan, except 117 months (9.75 years) later. If this pattern repeats, there is potential for 40% upside over the next 3-4 months.

Assuming a relationship similar to what Japan went through, the S&P 500 in DXY terms could well rise another 40% pretty much from now until mid-December 2010. Importantly, this is in DXY terms, so if the U.S. dollar were to rally 20% and the S&P 500 17% (as it's multiplied), that would do it. If the market were to only rally to the lower trend line in the... chart, then the total upside would be 33%, split between the U.S. dollar and the equity market.

The Merrill strategists went further, constructing an equally-weighted index of all markets that have crashed more than 45% since 1970 plus the U.S. stock market crash in 1930 and then averaged the recoveries from these crashes (referred to as 'Historical Peak-Trough Index'). They found that strong "relief rallies" are common and that, should this pattern hold for the S&P 500, then it should experience a further 40% appreciation by the end of 2009.

Specifically, they looked at all the markets since 1970 that had had crashes of more than 45% in the previous 12 months in U.S. dollar terms (or 50% in local currency terms) and added in the U.S. stock market crash of 1930 to create their equally-weighted index. This is shown in the chart below with 25% and 75% bands.

Relationship Suggests S&P 500 Will Rise to 1400-1500 before Falling Back to 400

When they the Historical Peak-Trough Index was compared to markets that have recently experienced similar deterioration (referred to as 'Current Peak-Trough Index') they concluded that the current S&P 500 index looks like it's following a similar pattern and is set to peak in 3-4 months some 40% higher than the current level. That would have the S&P 500 topping out at somewhere around 1400-1500 (i.e. 5-10% less than the S&P 500's record high of 1565 in October 2007) before crashing back to its 1994 low of 400 (when the stock market bubble first began) by the end of 2013 or early 2014.

Livio

Let The Market Speak

2009-08-25T10:10:00.000-05:00

What I heard was a lot of people talking about a big correction coming. People saying the economy is going to continue to slide, the stock market has gone up too much, and even some Elliott Wavers calling for a Fall stock market crash.

The market had pulled back off of its high the week before and fell hard on Monday and that seemed to confirm everyone's worries. Most people either are worried about losing the big gains they've seen the market make since March or are just too afraid to get back into the stock market after last year's big collapse. Data from the largest online brokers shows that the average investor is trading less since the March lows. That means that many people with online accounts must have sold out at some point after the March bottom.

If you don't believe people have been worried about the market then consider these stories I just collected after a Internet search:

CNN - Beware the Double Dip

CNBC - Fast Money Last Monday - Is This Market Heading For A Serious Correction?

Bloomberg - China Slump Signals S&P 500 To Fall

CNBC Last Wednesday - Art Cashin Expects Huge Drop Because the market is "going into Ramadan on the 22nd."

What I want you to realize is that despite all of this bearish talk, the stock market - well - it went up anyway.

Ultimately the only thing that matters is the simple fact that the stock market is in a cyclical bull market right now. It is trading above its long-term moving averages and those moving averages are now pointing up while sector after sector in the market is going from a stage one base into a stage two bull market. Almost everything is making higher highs and higher lows now.

It is the complete opposite to what we saw happen last year. To me it became clear that we were entering a confirmed bear market in December 2007. Last month confirmed the new bull market.

Anything else that prevents you from doing this is simply a money costing distraction. And that is what I want you take from these headlines and the stuff you may have seen last week on CNBC.

Odds are that you are very anxious about the stock market right now. It has gone up a lot.

Let’s take a look at our Major Market Momentum Indicator, our bull/bear market indicator.

Our Major Market Momentum Indicator has been accurate since 1950! It does not miss, just take a look below:

By taking advantage of general market direction, you can use tools like MarketCycle360 to determine which vehicles have the most momentum amongst a group of investments, then ride that momentum. Take a look at the following chart because there are plenty more where this came from.

Success in in knowing general market direction with a solid exit strategy and discipline to stick with your system. We can all be wrong at times. I stayed bearish on the market after the March low for a few months until I saw the sectors break out into new bull markets all over the place and saw the bull market confirmed. You have to keep an open mind when it comes to the market and let the market tell you what its doing. If you turn wave patterns and sequences into a religion and stay fixated on them then at times you'll miss out on what the market really is doing.

What I do know is that we are in a big uptrend and just about everything is making higher highs and higher lows. And that's all you need to know to make money.

Truth is the real reason people have been anxious about the stock market isn't because they don't know if the market is going up or down, but because they have no game plan at all when it comes to deciding when to enter a position, take a loss, and book a profit. Their lack of plan is the true source of their anxiety - they just project it on to worries about what the market is going to do and then listen to all of these conflicting viewpoints to confirm them. In the end they just freeze up. Last year that meant doing nothing while stocks sunk and this year it means doing nothing while stocks go up.

If the masses had used stop loss orders and risk managements techniques they wouldn't have lost a lot of money last year nor would they be afraid of trading in the stock market now.

Those that are serious about making money in the stock market will do the work and thinking to come up with a game plan that will do that for them. Most people though are just too lazy to do anything. So they sit there like a knot of nerves and just listen to wild predictions.

And there are plenty of people that cater to this.

The fact is, you can be in the right investment at the right time, and with he right tool, it can make it systematic and disciplined.

Livio

In Memory of Robert Novak

2009-08-24T10:32:00.000-05:00

I have read Roberts political commentary for many years and have enjoyed his point of view. In light of his recent passing I am posting his final commentary.

ENPR: FINAL EDITION

To Our Readers:

As you can see in the accompanying letter this will be our final issue.

Therefore, we thought you would enjoy a look back of this newsletter:

In 1967, four years after Rowland Evans and Bob Novak joined forces for a six-times-a-week newspaper syndicated column, the two ace journalists launched a bi-weekly political newsletter with the name Evans-Novak Political Report

In 1967, four years after Rowland Evans and Bob Novak joined forces for a six-times-a-week syndicated newspaper column, the two ace journalists launched a bi-weekly political newsletter with the name, the Evans-Novak Political Report.

While their column was built around unearthing news about those in power and those aspiring to power, Evans and Novak used their newsletter to analyze the political scene, note trends and shifts in the landscape, and forecast elections. While both writers had their own opinions on policies and politicians opinions they shared in columns and television appearances ENPR, in order to be useful to readers trying to understand the political scene, always aimed to set aside political prejudices.

From the start, ENPR succeeded in stirring up strife, landing Evans and Novak on Richard Nixon's enemies list when an early newsletter drew attention to the disconnect between the President's demeanor and the real troubles he faced.

Throughout ENPR's history, dozens of journalists working for or with Evans and Novak have contributed to the newsletter. It was the journalistic training ground of many young journalists including the Wall Street Journal's John Fund, and National Review Online's David Freddoso. I, too, served as a staff writer, from 2002 through 2004, before returning in 2006 as senior reporter and more recently as editor.

ENPR's reporters and editors dug into every potentially competitive U.S. House and Senate race, poked their noses around Capitol Hill, and burned up the phone lines to sources in federal agencies, campaigns, and parties all with the aim of providing our readers with the most complete analysis of the political scene.

ENPR was among the first covering each House and Senate race and sizing up all the candidates. Evans and Novak were pioneers in this field, and for an aspiring politician looking to get his name known, trotting into the Evans and Novak offices was the way to show up on the radar.

Eventually Eagle Publishing bought the newsletter from Novak, leaving all editorial and hiring decisions in Novak's hands, but handling the business end. In the last decade, we began using the Internet and e-mail to distribute the newsletter, but the content remained the same.

In the prediction game, we had hits and misses. In 2002 and 2004, we beat the other prognosticators by refusing to read the elections as national races, but instead picking apart all 435 House races and all 34-or-so Senate races on their own. We were nearly perfect in those two cycles. On the other hand, the Democratic tidal wave of 2006 was more forceful than we had anticipated.

Last year, we correctly called Obama's Iowa win and Hillary Clinton's third-place finish, and we explained early that Mike Huckabee's caucus victory put McCain in the driver's seat for the GOP nomination. Come November, we underestimated Obama's Electoral College victory, but we got the Senate perfect and nearly nailed the Democrats' net pickup in the House.

We've also gotten some scoops over the years. In 2001, ENPR was the first outlet to report that Sen. Jim Jeffords ( Vt.) was bolting the Republican Party, swinging control of the Senate to the Democrats. In 2007, we were the first to report that Rep. Dennis Hastert ( Ill.) was resigning his seat early, triggering a special election.

But more important than the predictions or the scoops was the analysis. ENPR didn't engage in ideological arguments or the deaf-dumb-blind reportage that can make some newspaper stories useless. We didn't waste space with quotes-for-the-sake-of-quotes, and frankly, we didn't always give all sides equal space equal space and politicians' quotes are often more distracting than informative. Our reporting was mostly on-background conversations with sources in the know, so that we could put our readers in the know.

We hope you think we succeeded.

Senate 2010

Illinois:With Senate Democratic Leader Harry Reid and colleagues caving and seating Rod Blagojevich-appointed Democrat Roland Burris, fresh life has been breathed into Republican hopes of winning their first Senate race in Illinois since 1998. The 71-year-old Burris has never publicly agreed that he wouldn't run for a full term in 2010 and odds are strong he will face a primary challenge. Two Republican U.S. House members moderate Mark Kirk and conservative Pete Roskam are both reportedly considering a Senate race. The entire cloud hanging over the drama culminating in the impeachment of Blagojevich is not likely to go away soon and a likely indictment and criminal trial of the deposed Democrat can only help Republican chances in 2010.

New Hampshire: The surprise naming of Republican Sen. Judd Gregg as secretary of Commerce changes the political landscape here in a big way. Despite major Democratic gains in '06 and '08, Gregg would have been a favorite to win a fourth term in 2010. With his exit, Gov. John Lynch (D) named longtime Gregg associate and ex-University of New Hampshire President Bonnie Newman as interim senator. A self-described "moderate," Republican Newman, who backed Lynch for governor, has pledged to serve only the remainder of Gregg's term and not run in 2010 when Lynch himself is expected to make a Senate race. With New Hampshire Democrats controlling the governorship, the other U.S. Senate seat, both U.S. House seats, and a majority in both houses of the state legislature, the GOP does not have a strong bench here and the names mentioned as Senate candidates are increasingly those from the past, such as former Sen. John Sununu and ex-Gov. Craig Benson. The GOP will be hard-pressed to hold onto this seat in 2010.

New York: Surprisingly, Republicans are beginning to show some enthusiasm about winning the special election in 2010 for the remaining two years of Hillary Clinton's Senate seat. Appointed Sen. Kirsten Gildebrand (D), a two-term member of the House, has infuriated the liberal downstate voters (who increasingly cast the bulk of Democratic primary votes here) with her record of opposing gun control, taking a harder line on illegal immigration, and voting against the Wall Street bailout. Long Island Rep. Carolyn McCarthy, an outspoken gun control proponent, has strongly hinted she will take on Gildebrand in the Democratic primary next year. GOPers would love to see Rudy Giuliani run for the Senate, but sources close to the former New York mayor tell us he is uninterested. Rep. Peter King, considered far more conservative than Giuliani, has had some close calls in recent elections and is exploring a bid for either governor or senator in 2010.

A Final Word:

We are in fact, entering a new era of American politics. But then again, we frequently enter new eras of American politics. Barack Obama has immense political capital and popularity. Democrats are gaining politically in every corner of the map, and at every level of government. Obama's popularity and political skill contribute to this rising Democratic tide.

But ENPR has seen this before, in 1974, 1980, 1994, and 2006. "Paradigm Shifts" are a fact of political life, and only those with short memories believe that the resulting political alignment from these shifts is permanent.

Political trends always reverse. Republicans, after 12 years of accelerating federal spending, two weeks ago unanimously rejected Obama's stimulus bill in the House--reminiscent of their rejection of Bill Clinton's 1993 budget. Conservative Republican senators this week, while attacking the stimulus bill, also called on Obama to withdraw his nomination of Tom Daschle as secretary of Health and Human Services, which he eventually did. The fighting spirit that had been heavily sapped--or co-opted by President Bush--is back.

Obama, meanwhile, may be redefining the political operations of a sitting President. Within the Democratic National Committee, he has created a new organization that will try to harness the grassroots base that drove him to victory in November, and mobilize these people to push his agenda--presumably in the districts of wavering congressmen. Obama, in other words, may the first President to effectively cash in--and bank--political capital.

Also, Obama's readiness to toss overboard secondary goals--his support for corn ethanol, the Daschle and Richardson nominations, funding for contraception in the stimulus--suggests that he rejects the past Democratic Party modus operandi of fighting to win over every inch. Instead, he has some core, longer-term goals, and anything peripheral to them can go by the wayside.

Obama may enjoy a longer honeymoon than most Presidents, but it already seems to be coming to an end as various polls find a large portion of the public turning against the huge stimulus bill with its massive deficit spending. He will stumble. Republicans will build new political coalitions, and, even if they don't get back a majority of either chamber in the near future, the pendulum will eventually swing back.

Politics has a tendency to cast down the mighty and lift up the lowly. Politics makes a fool of any commentator or participant who, explaining the significance of a recent political development, uses the words "never" or "from now on."

Everything about politics--the heroes, the goats, the dynamics, the rules of thumb, the alliances, the enmities--comes and goes. With sadness, so does the Evans-Novak Political Report.

Livio

Deflation or Inflation

2009-08-19T22:29:00.004-05:00

Near Record Deflation Rates At All Levels

US capacity utilization leads core inflation by about a year

Chart source: Albert Edwards, Society General

Although I do believe if the government continues its fiscally irresponsible behavior we may eventually see inflation, we will not see it until the deflationary cycle ends. And that will not happen for while.

The stock market still has a dreadfully long way to go on the downside.

Using MarketCycle360, this can be a very profitable time for you.

Livio

It’s Different This Time!

2009-08-18T15:33:00.001-05:00

If you think that it's different this time around, IT IS NOT! Unlike all the new BULL MARKET fans who are just now jumping on the band wagon, I called for a 38% (9500) to 50% (10,400) Bull Trap Rally back in early April. Now, just like back in 1930, prominent Analysts, Politicians and Economists were all infected by the New Bull Market virus that seems so prevalent in today's financial media.

"While the crash only took place six months ago", said Herbert Hoover in May of 1930, "I am convinced we have now passed through the worst and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."

Back to reality: This is how a Bull Trap develops. It starts out in the midst of the most extreme Bearish Sentiment and the Bearishness continues all the way up to the rally top despite the Politicians, Wall Street and Media doing their best to convince us that the worst is over and there is a new dawn.

The evening of March 6, 2009 saw the DOW at the biggest percentage below its 200 day average ever recorded. That and a conglomeration of other readings such as AAII's most bearish readings ever and other bearish readings prompted me to hastily write and mail out my March 9th BUY signal.

Check the track records of all the Bulls. If they did not see the Crash or the Recession coming, you can safely bet they also did not catch the March bottom. I for one, since March 9th, have been calling for a 38% retracement pullback to 9500 and now that we are approaching our target. DON"T YOU DARE GET CAUGHT UP IN ALL THE NEW EUPHORIA. Nothing has changed - there is a wave of Socialism sweeping the globe and especially here in America. "YOU CAN"T FOOL MOTHER NATURE" not for long anyway.

Is it just a coincidence that the 1929/30 rally lasted from the November 13, 1929 bottom until the April 16, 1930 top, five months and 3 days? Will this dead cat bounce rally, that we are now in, also only last 5 months and 3 days, until August 31? History does not always repeat exactly, but it always cycles similarly and we are now definitely cycling and living on borrowed time.

BEARS MAKE MONEY, BULLS MAKE MONEY, PIGS GET SLAUGHTERED.

This can be a very profitable time for you.

Livio

The Bear Market Is NOT Over And Stocks Will CRASH This Fall

2009-08-07T00:37:00.001-05:00

Evert once in a while I like to post someone else's vision? I neither support or reject this vision, I only post it.

This article was written by Graham Summers.

A lot of commentators have begun heralding a new bull market in stocks. Day after day, I hear that March was THE bottom, that the next bull market has begun, and that anyone betting on another collapse is a moron.

These claims are not only wrong, they are completely misleading and should be depicted for what they are: nonsensical hype from sources with conflicted interests: folks whose jobs and income stem largely from people remaining bullish.

More often than not, these are the same guys who claimed that Bear Stearns marked the end of the Financial Crisis (how'd that work out?) and that the Federal Reserve can pump our way back into a bull market (how's that working out?).

The reason this is entirely wrong is because this recession is not your average run of the mill excess inventory recession: the kind of economic contraction we've experienced post-WWII.

No, this is a DE-flationary debt collapse, a bursting of a 30-year credit bubble that papered over enormous drops in real incomes, standards of living, and financial stability. The private sector hit a point of total debt saturation in 2007

This recession so far has been the first taste of DE-flation the US has experienced since the '30s. Comparing it to every other post WWII recession is like comparing apples and oranges. A debt bubble cannot be re-flated by issuing more debt. A second grader can understand this. I don't know why guys with PhDs, alleged experts, and the like don't get it.

For 30 years, our economy grew by borrowing from the future. I mean that the US's economic growth was funded largely by the use of credit: borrowings that would be paid back down the road.

In simple terms, the economy grew based on imaginary, not REAL demand. We pulled forward future sales of cars, TVs, homes, and the like. By using credit, we bought things NOW, that we would have normally bought LATER. This pulled future sales, future corporate earnings, future incomes, and future economic growth to the NOW through the '70s, '80s, and '90s.

So instead of having a safe, annual rate of consumer spending growth (say 4-5%), we saw double digit rates of growth: for example, between 1980 and 1990, credit card spending increased more than five-fold while average household credit card balances quadrupled. That's NOT normal.

This lead to the single largest debt bubble in history ($49 trillion in private sector debt and $50+ trillion in public sector debt). And a debt bubble can continue until you can no longer meet debt payments. The private sector hit its "debt wall" in 2007. The public sector continues to grow its debts, creating an even larger bubble that will have even worse consequences.

Now, as you know, there are only two ways of dealing with a debt problem:

Paying it off
Defaulting

The US consumer has begun both. From February to May of this year we paid off $45 billion in credit card debt. Consumer credit contracted $3.3 billion in May, the fourth consecutive monthly decline (this makes our current credit contraction the longest running since 1991).

And we're just getting started…

Total consumer debt at the bubble's peak was $2.57 trillion (the other $46 trillion was corporate). So the fact we've paid off about $50 billion of this means Joe America has a LOT more (98%) debt to pay back and default on before he's finished de-leveraging his balance sheet.

Folks, we've got a long, LONG ways to go before this crisis and Crash are over. Anyone who's telling you the Bear market is over either isn't looking at the data or is basing their analysis on "a gut feeling" or some other nonsense. They're all going to get destroyed this fall.

Because a lot of the alleged "analysis" that is backing up the bulls' claims of a new bull market comes from technical analysis and charts, I'm presenting the below chart from David Rosenberg of Gluskin Shef. It charts today's bear market over that of 1929-1932.

As you can see, today's bear market is mirroring that of the '30s almost to perfection. Indeed, the correlation between the two charts is an incredible 0.8, meaning it's 4/5ths perfect. In finance, you're lucky if you get a correlation above 0.6. (gold and the dollar are only 0.28 inversely correlated). A 0.8 correlation is virtually unheard of. But that's exactly how closely today's market is mirroring that of the '30s.

I can't take full credit for this insight. Ron Coby, an investment manager at Coby Lamson in Oregon first started pointing out the similarities between this market and that of 1929 back in February '09. No one wanted to listen to him then.

They're listening now.

Coby notes that from October 29, 1929 until November 13, 1929, the stock market collapsed 35% (almost exactly like October-November 2008). Ron points out that the market then staged a 155-day rally of 48%. Today's rally (starting in March '09) has lasted 150 days and the market is up 46%.

Folks, the last time we saw deflation in this country (never-mind that it's now showing up in Europe and Japan) the stock market staged a rally JUST LIKE the one we're in now. Stocks then rolled over and lost 70% in a gut-wrenching two-year downward spiral. "Bottom callers" INCLUDING legends like Jesse Livermore, Benjamin Graham and others bought ALL THE WAY DOWN, losing entire fortunes.

Ok, so the charts for today and 1929 are identical, what about the earnings? After all, profits are ultimately what drive the stock market: you buy based on expected future earnings of the companies.

Earnings today are even lower than they were in the '30s during the Great Depression. They've fallen 98% from their peak in 2007. Adjusted for inflation, stocks have NEVER been this unprofitable in the last 80 years.

The US was already in a recession in 2008. And 2Q09 profits are actually down 31% even from THAT. Indeed, based on ACTUAL posted earnings, the S&P 500 is trading at a P/E of 700 today. Even if you go by operating earnings the multiple is still 24: hardly cheap.

Looking over this, I can't see where any claims of a "bull market" are coming from. The people who are saying today is a new bull market probably went long Tech Stocks in 2001, Housing in 2006, and Financials in 2008.

In light of the rampant bullishness, the parabolic rally in the S&P500, the horrific earnings, and the similarity between today's rally and that of 1929, I believe the likelihood of another Crash (like 2008) is quite high. In fact, I would not be surprised to see stocks collapse within the next eight weeks.

In the meantime, I've put together a FREE Special Report detailing THREE investments that will explode when stocks start to collapse. I call it Financial Crisis "Round Two" Survival Kit. These investments will not only protect your portfolio from the coming carnage, they'll also show you enormous profits: they returned 12%, 42%, and 153% last time stocks collapsed.

This can be a very profitable time for you.

Livio

MarketCycle360 Highlights

2009-08-03T17:42:00.001-05:00

Watch the video for a quick and easy tutorial of how MarketCycle360 can preserve your wealth in declining markets, and build your wealth rapidly!

Click on the image below to watch the short video . . .

This can be a very profitable time for you.

Livio

Economic Theory "Schools" of Thought

2009-07-29T16:38:00.007-05:00

Chicago School Milton Friedman has said that economic cycles aren't really "cycles" that there is no clear beginning and end unlike the seasonal cycle for, among other economic activity, retail sales and seasonal credit cycle which peak before summer and trough after. The Chicago School emphasizes the correlation between the "credit cycle" and the business cycle. These economists argue that interest rates act as the general price level for money and that the monetary causes the shifts in the business cycle. This school of thought believes that correct manipulation of monetary policy, mostly through the Federal Reserve can eliminate the business cycles. The thinking goes that by correctly increasing and decreasing the supply of money at the right time, the toughs and bubbles can be avoided. Complexity Economics This school of thought disagrees with traditional economics in that there is no linear equilibrium that the economy trends towards. Instead, society is filled with a series of individuals who use rule of thumb judgments based on incomplete information sets. The result is a dynamic, chaotic system with no clear distinction between micro and macro economics. Eric Beinhocker views economic cycles from a network and game theory perspective. This view re-frames cycles in terms of evolutionary growth rather than having a discrete beginning and end. Growth Curve and Life Cycle The exponential growth of an economic bubble is unsustainable and results in synchronized weath destruction when the bubble collapses. On a global scale this reinforces the periodicity of the cycle because the entire world economy must go through the recovery at the same time. Individual savings and investment behaviors become synchronized so that the next bubble occurs 30-40 years later. Wind At Your Back Or In Your Face Investments, whether Stocks, Mutual Funds or ETFs have a life cycle that correlates directly to the economic cycle. In the late 90's you saw high techs fly only to see them crash, in more recent years you have seen gold, oil, real estate, emerging markets, China, South America go through their cycles as well. Now, lets use an illustration . . . clothes. Lets assume that US Large Caps equalled your swim suit and Emerging Markets was your Winter Coat. Let me ask you a question? Do you wear a winter coat all year jut to be ready for winter, or do you change clothes during the year? Look in your portfolio . . . is it filled with securities that you hope come back in season? Here is the solution. This can be a very profitable time for you. Livio Technorati Tags: Stocks,Bonds,Mutual Funds,ETF,DJIA,S&P500,Nasdaq,Forex,Commodities,Gold,Silver,Economy,Depression,Recession,Food,Money,Investing,Advise,The Right Investment,Timing,Trading,Discount Broker,Broker,Professional,Trader,Congress,Senate,President,War,401K,etf's,financial freedom,free markets,investments,IRA,MarketCycle360,money markets,mutual fund software,mutual funds,stocks,trading,trading software.

Dead On Again Part II

2009-04-08T15:27:00.000-05:00

Well as I mentioned in my previous post, the markets are headed up, possibly for the entire summer. That's the good news.

The bad news is that many people will fall into the mindset that the bear market is over. Certainly when the Dow gets close to 10,000 again they will.

This rally, as shown recently has the strength to surprise even the strongest bear with quick upward impulses. I feel, as I said in the Short Term Bottom At Hand, that this will be a long counter trend rally that will convince many that the bear market is officially over. It’s not.

The secular bear is no where near dead and the longer and larger economic domestic and international contraction back to value will take us well below 4000 on the Dow and 400 on the S&P 500.

MarketCycle360 can tell you what to own on the coming countertrend rally, so be sure to pay close attention to your software over the coming months!

If you do not own MarketCycle360, don’t worry. I will send you a Free Research Report that that will teach you all you need to know to make the right moves in the coming months. Just email me at Lnespoli@therightinvestment.com .

This can be a very profitable time for you.

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

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MarketCycle360 Dead On Again

2009-03-23T10:59:00.000-05:00

In our last post dated 2/25/09 I stated that there was a short term bottom at hand.

I quote:

“MarketCycle360 made several trades on Monday that tell me we are close to a bottom as represented by the Dow Jones Industrial Average and the S&P 500.

In addition, the last several trading days proved to possibly be pivotal. Bouncing off of the 7100 and 743 levels respectively may have been close to a turning point!

Do not misunderstand, I am not saying that we have hit bottom of the current decline, but we are very close and may make a push lower before the market turns north for an extended rally.

Currently, exit all short position on the broad market over the next week or two and temporarily stay in cash. Over the next several days to possibly a week as the market pushes down to a lower level, my short positions will be liquidated.”

Since then the market has risen 8% but should rise much more over the course of the next few months.

In fact, this rally will make believers of most investors. Many will buy into the fact that the bear market is over!

It’s not, not by a long shot. So, if you want to pick up some short term gains, you may be able to over the course of the next several months, but beware, the next stage down will eliminate the confidence of even the most committed investors as it take the Dow below 4000.

Stay tuned . . .

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

Technorati Tags: Stocks,Bonds,Mutual Funds,ETF,DJIA,S&P 500,Nasdaq,Forex,Commodities,Gold,Silver,Economy,Depression,Recession,Food,Money,Investing,Advise,The Right Investment,Timing,Trading,Discount Broker,Broker,Professional,Trader,Congress,Senate,President,War,401K,etf's,financial freedom,free markets,investments,IRA,MarketCycle360,money markets,mutual fund software,mutual funds,stocks,trading,trading software.

Short Term Bottom At Hand

2009-02-25T08:32:00.000-06:00

MarketCycle360 made several trades on Monday that tell me we are close to a bottom as represented by the Dow Jones Industrial Average and the S&P 500.

In addition, the last several trading days proved to possibly be pivotal. Bouncing off of the 7100 and 743 levels respectively may have been close to a turning point!

Do not misunderstand, I am not saying that we have hit bottom of the current decline, but we are very close and may make a push lower before the market turns north for an extended rally.

A Convincing Bear Market Rally Is At Hand!

However . . . we are very close to the beginning of a large countertrend rally that may last months!

The coming rally will be deceiving and fool many investors into believing the market has turned for good . The next rise may be swift and carry the market up substantially, maybe up 50 or 60%! The press and those that represent the market to investors to become long term bulls again.

President Obama will be proclaimed a genius as will congress and the “I told you so’s” will proclaim their brilliance!

This rally will captivate the attention of all; many will proclaim the bear market over! Investors will line up and follow the pied piper of market propaganda, but most will get in line toward the end of the rally, as usual. And just when it does capture investors en mass, guess what will happen?

The bear will pounce!

The secular bear is no where near dead and the longer and larger economic domestic and international contraction back to value will take us well below 4000 on the Dow and 400 on the S&P 500.

MarketCycle360 can tell you what to own on the coming countertrend rally, so be sure to pay close attention to your software over the coming months!

If you do not own MarketCycle360, don’t worry. I will send you a Free Research Report that that will teach you all you need to know to make the right moves in the coming months.

Most people bury their head in the sand and repeat the old “my advisor handles this for me”. Not only do their advisors have no concept of what is coming, they will look back having lost most of their clients savings and not have learned anything. They simply do not know what history has taught; do not continue to go down with their lack of knowledge.

This can be a very profitable time for you.

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

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Price To Earnings Ratio: How Close Are We To A Bottom?

2009-02-13T14:33:00.000-06:00

Lets take a look at a chart showing us an where we are on average in terms of P/E ratio. As you will see below we are still well above average historically.

Based on earnings on an "as-reported" over the trailing 12-months, the p/e ratio for the S&P 500 index stood at around 20 at the stock market's top in October 2007. At the beginning of 2008's fourth quarter, furthermore, the ratio stood at 25.4.

Are you sitting down?

The comparable p/e ratio as of Thursday night, based on data from Standard & Poor's, is 29.1.

How can this be, you might ask?

The answer is simple: Earnings in this bear market have fallen even faster than has the market itself. And no matter how fast the "p" in the ratio is falling, the ratio has to climb if the "e" is falling even faster.

Indeed, today's p/e ratio is higher than 97.8% of the monthly readings dating back to 1871, according to data compiled by Yale University Finance Professor Robert Shiller.

The bad news is that, even after an incredibly punishing bear market, we're not even close to the undervalued end of the valuation spectrum. Just consider one data point from the historical record: At the bottom of the 1973-1974 bear market, "p/e10" dropped to 8.3, only slightly more than half of today's level.

To be sure, these historical comparisons don't allow us to pinpoint how close we are to a market bottom, either in terms of price or time. Just to come back to an average of 12 in the chart above, we would need to see another 50% drop in the S&P and thats if earnings do not drop any longer!

Livio

The chart above was provided by Elliott Wave International.

Dow Theory Non-Confirmation

2009-02-10T18:23:00.000-06:00

This article below was written by Tim Wood and was simply too well written to paraphrase.

Although this article has nothing to do with MarketCycle360, it is interesting to note that within the greater economic Cycle, there are plenty of individual signs that confirm exactly how and why MarketCycle360 works. More importantly, it confirms why MarketCycle360 has remained bearish on the overall economy and stock market.

On November 21, 2007 the primary trend, in accordance to classical Dow Theory, was confirmed as bearish. To date, nothing has occurred to invalidate that setup. According to Dow Theory, once the primary trend is established, that trend must be considered intact until it is "authoritatively" reversed, which in this case would require a joint move by the averages back above their previous secondary high points. Since that has yet to occur, the primary trend must still be considered bearish.

Now I want to turn to the chart of the Industrials and the Transports below and in doing so I want to walk through a few things. First, I have marked the non-confirmation that occurred at the 2007 top in red. It was then from that non-confirmation that the averages ultimately drifted lower and then on November 21, 2007 with the joint move below the August 2007 secondary low points, marked in pink, that the primary bearish trend was established. The Transports then made their next secondary low point in January 2008 while the Industrials did not make their next secondary low point until March 2008 and I have marked this non-confirmation in black. It was then from this non-confirmation that the 2008 rally into the May/June highs began.

At these highs the Transports moved above their 2007 highs while the Industrials lagged and in doing so created another upside non-confirmation, which I have marked in blue. It was then from this upside non-confirmation that the 2008 meltdown got into gear and the last joint low made by both averages occurred on November 20, 2008. From that low the averages again rallied into the most recent minor highs that were made in early January. It was then from these minor highs that the Transports moved below their November closing low. But, because the Industrials did not, another non-confirmation has been born. I have heard that some are saying that this downside non-confirmation is bullish. It is true that non-confirmations often occur at the end of a move and can in some cases signal at least a temporary trend change. This should be obvious from the examples seen just in the chart above. However, just as the January/March 2008 non-confirmation was only lead to a temporary reversal, it's a bit too early to break out the party hats just yet. Rather, in the current case, I see this non-confirmation as an indecisive period that requires further confirmation.

For this I want to share a few quotes with you from our Dow Theory founding fathers on this subject.

William Peter Hamilton - "The movement of both the railroad and industrial stock averages should always be considered together. The movement of one price average must be confirmed by the other before reliable inferences may be drawn. Conclusions based upon the movement of one average, unconfirmed by the other, are almost certain to prove misleading."

William Peter Hamilton - "Dow's Theory stipulates for a confirmation of one average by the other. This constantly occurs at the inception of a primary movement, but is anything but consistently present when the market turns for a secondary swing."

William Peter Hamilton - "When one breaks through an old low level without the other, or when one establishes a new high for the short swing, unsupported, the inference is almost invariably deceptive."

William Peter Hamilton - "Indeed it may be said that a new high or a new low by one of the averages unconfirmed by the other has been invariably deceptive. New high or low points for both have preceded every major movement since the averages were established."

William Peter Hamilton - "The two averages may vary in strength, but they will not vary materially in direction especially in a major movement. Throughout all the years in which both averages have been kept, this rule has proved entirely dependable. It is not only true in the major swings of the market, but it is approximately true of the secondary actions and rallies. It would not be true of the daily fluctuations, and it might be utterly misleading so far as individual stocks are concerned."

Robert Rhea - "The most useful part of the Dow Theory, and the part that must never be forgotten for even a day, is the fact that no price movement is worthy of consideration unless the movement is confirmed by both averages."

Robert Rhea - "The Dow Theory deals exclusively with the movement of the railroad and industrial stock averages, and any other method would not be Dow's Theory as expounded by Hamilton."

Robert Rhea - "A wise man lets the market alone when the averages disagree."

Robert Rhea - "When the averages disagree they are shouting 'be careful.'"

So, my point here is that this while this downside non-confirmation may be construed to have at least temporary positive implications, nothing has occurred within the context of Dow Theory to invalidate the existing bearish primary trend. Also, it should be clear from the quotes above, non-confirmations represent periods of uncertainty and further confirmation of either a reversal are required and in the meantime, the existing bearish primary trend must still be consider to be in force until it is authoritatively reversed.

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

Shoots And Ladders: The big 2009 Slide

2009-01-26T16:40:00.000-06:00

Bear markets are as natural in the stock market as Bull markets are, Bear markets are simply allowing the market to come back to true value. Depressions are as natural to the economic cycle as growth periods.

I just want you to know that my predictions below are after months of observation in 2008.

JOB CUTTING

Here is a look at some top tech companies; what do you notice?

Microsoft (MSFT) $19.71 billion ($1.98 billion debt): Microsoft Layoffs - 5000 Jobs To Be Eliminated
Google (GOOG) $14.41 billion (no debt): Google Layoffs: 6000 Cut - Details Kept Off Web
Intel (INTC) $11.84 billion ($1.99 billion debt): Intel restructuring operations in Asia and US, up to 6,000 jobs affected
Cisco Systems (CSCO) $26.7 billion ($6.87 billion debt): Cisco Schedules Conference Call for Q2 Fiscal Year 2009 Financial Results
Adobe (ADBE) $2.02 billion ($350 million debt): 600 job cuts at Adobe > News > Flash Magazine
Yahoo! (YHOO) $3.2 billion ($63 million debt): Latest rumor has Yahoo firing 3,000 workers
eBay (EBAY) $3.64 billion (no debt): EBay cuts 1000 - MarketWatch
Apple (AAPL) $24.49 billion (no debt)

What do you notice? These companies are loaded with cash relative to debt and yet they are laying off jobs! These companies represent some of the wisest corporate leadership worldwide, they do not make these decisions without first carefully considering the future.

Job Cutting Point: If these companies are cutting jobs, others will be and in dramatic fashion as 2009 progresses. In addition, because they cut jobs now, they foresee very difficult times for the next 24 - 48 months where they will require the use of their cash reserves.

STOCK MARKET

There are many ways to value the stock market, but here is time honored method that has never been wrong!

The first of the two methods of valuing the market is Price to Book Value & Corporate Yeild Chart you see below:

Chart provided by Elliotwave International.

Simply put, we still substantially overvalued!

“The peak-to-trough decline in housing starts, both total and single-family, is the largest on record since record keeping began for these series in 1959 (see table 1). The duration of the weakness in home construction (peak was in January 2006) is also the longest on record.”

Source: Asha Bangalore, Northern Trust - Daily Global Commentary , January 22, 2009.

Asha Bangalore (Northern Trust): Housing Market Index spells more gloom
“The Housing Market Index (HMI) of the National Association of Home Builders fell to 8.0 in January 2009 from 9.0 in December 2008. Before the onset of the current recession, the record low for the HMI was 20.0 during the 1990-91 recession. The question now is: What is the low for the HMI? The answer is unknown, but we can say that the severity of the housing market situation grows in leaps and bounds everyday.

“The HMI is strongly correlated with sales of new single-family homes. Based on this historical relationship, it appears that a pickup in new sales in the near term is unlikely.”

Source: Asha Bangalore, Northern Trust - Daily Global Commentary , January 21, 2009.

Shadowstats: Decline in retail sales worst since World War II
“Annual real retail sales fell by 9.09% in December, versus a 9.11% contraction in November, the steepest annual declines since 1952. On a three-month moving-average basis the December and November declines were 8.88% and 7.87%, respectively. The December annual moving-average decline was the deepest in the history of the two most recent retail series, making the results the worst of the post-World War II era. The annualized real contraction for fourth-quarter 2008 retail sales was 17.1%.”

Source: Shadowstats , January 2009.

BCA Research: US deflation - this time it's for real
“Annual US headline CPI dipped to zero in December. Core CPI is still positive (1.7% annual growth), albeit is falling steadily.

“The decline in headline inflation is due largely to sharply falling energy (and food) prices. Underlying inflation moves with the business cycle, though it lags economic growth by several quarters. The economy decelerated steadily last year before imploding in the autumn. Thus, core CPI is on track to fall further as economic slack builds. Already, retail prices are falling.

“The current deflationary threat is much more serious than the previous episode in 2002, given the speed and magnitude of the credit and economic crunch. Thus, policymakers will need to work hard to anchor inflation expectations in positive territory, and ensure that a deflationary mindset among consumers and businesses does not set in.”

Source: BCA Research , January 19, 2009.

Paul Kedrosky (Infectious Greed): Banks are just a circle of their former selves
“Nice graphic of how the major banks are just a fraction of their former selves, at least as measured by market value.”

Source: Paul Kedrosky, Infectious Greed , January 21, 2009

Bespoke: Long-term charts of the financial sector
“A look at long-term charts of the S&P 500 Financial sector is downright depressing. The first chart below dates back to 1990, and as shown, the sector closed at its lowest level since March 1995 yesterday. The sector is now down 79% from its highs in 2007. A chart of the sector all the way back to 1940 shows just how much the sector has fallen in such a short period of time.”

Source: Bespoke , January 21, 2009.

Eoin Treacy (Fullermoney): Will bank indices be leading indicators?
“The downward breaks experienced by a number of Western banking indices over the last week are significant and suggest we can expect further moves by the respective governments to shore up their financial sectors. This relative weakness poses a headwind for their wider markets.

“When bank indices began to underperform in 2007, they had an incredibly large weighting in most country indices. The performance of bank shares was important both in terms of their high relative weightings and because of their status as lead indicators. However, bank sectors are now a considerably smaller weighting in most indices. This lessens the intrinsic importance of the banks sector to the performance of the wider market, but the psychological impact is undiminished.

“The performance of bank sectors is a major drag on sentiment. Dividends are being eliminated and a process of nationalisation is underway in a number of Western countries. However, one should not forget that many other companies will not need government support, will not eliminate their dividend and as such are likely to be relative performers in this environment.

“In addition, an interesting dichotomy exists between markets where banks are underperforming and where they are outperforming. Bank indices in the USA (S&P500 Banks, Philadelphia Banks, Regional Banks), Europe (DJ Euro Stoxx Banks), the UK, France, Germany, Norway, Finland, Sweden, Italy and Ireland all made new lows in the last week. Internationally, the Chinese bank index is closest to the upper side of its range. No other bank index, I know of, is showing such relative strength. All Asian bank indices remain within their ranges. The marked underperformance of the USA and much of Europe is a clear indication that this is where the bulk of financial risk is focused.”

Source: Eoin Treacy, Fullermoney , January 20, 2009.

Brian Belski (Banc of America Securities-Merrill Lynch): Liquidity is key
“US equity investors should concentrate on companies, industries and sectors that have the means to fund themselves, says Brian Belski, strategist at Banc of America Securities-Merrill Lynch.

“He notes that areas in the market exhibiting strength recently have been dominated by low-quality companies with higher debt levels. But he says fundamental conditions do not support a move to low quality. ‘If 2008 taught us anything, attempts to get ahead of an eventual stock market and economic recovery were premature and misguided.'

“He acknowledges that credit market conditions have improved but is not convinced the worst is over. ‘Remember, even though credit spreads have narrowed, they still remain considerably above the peaks exhibited during prior credit cycles which we believe is a consequence of the loss of confidence both from investors and lenders.

“‘This is particularly troubling to us because we expect US corporate bond issuance to decline in 2009, yet a significant amount of bonds are expected to mature for S&P 500 companies. As a result, areas within the market that rely on leverage to fund operations are likely to struggle in the coming year and the trajectory of corporate bankruptcy filings over the past several years certainly appears to support this notion. Therefore, investors should continue to focus on areas demonstrating strong liquidity in the form of high cash balances and free cash flow.'”

Source: Brian Belski, Banc of America Securities-Merrill Lynch (via Financial Times ), January 20, 2009.

Bespoke: Volatility Index shows more complacency
“Below we highlight a chart of the VIX volatility index along with the S&P 500. One difference between the current decline and the declines in October and November is that the VIX has not spiked nearly as much. Many think of the VIX as an indication of fear in the market, and whether it's good or bad, there seems to be more complacency during the most recent downturn.”

Source: Bespoke , January 23, 2008.

Bloomberg: Roubini, Edwards predict slump in S&P 500 on China
“Stocks will retreat around the world because of shrinking demand from China as growth in the third- biggest economy slows, said Nouriel Roubini, the New York University professor who predicted last year's financial crisis.

“Global equities will fall 20% this year from current levels as China, which contributed 19.5% to total growth in 2007, contends with its slowest expansion in seven years, he said. Wall Street strategists predict the Standard & Poor's 500 Index, down 8.4% so far, will rise 17% in 2009.

“Roubini, an economics professor at NYU's Stern School of Business, said China already is in a ‘recession' despite government data showing a 6.8% fourth-quarter growth rate, as power output declines and manufacturing shrinks.

“‘Demand is falling in China, they're over-invested in capacity and there's a global supply glut,' Roubini said in a telephone interview. ‘It has very, very important implications.'

“Roubini's view is shared by Societe Generale global strategist Albert Edwards, who was correct in forecasting in March that a US contraction would spur a bear market in equities. Edwards says the China slowdown will reduce earnings at industrial, energy and raw-materials companies, sparking a selloff in emerging and developed-market stocks that may send the S&P 500 down 40% to 500.

“‘People should be thinking really hard about this rather than sticking their heads in the sand,' said Edwards, a London-based strategist and member of the top-ranked global investment strategy team in Thomson Extel's surveys the past three years. ‘We're just pointing out when the emperor doesn't have any clothes on.'”

Source: Michael Patterson and Adam Haigh, Bloomberg , January 23 2009.

Bloomberg: Mobius to invest more in China, emerging markets
“Mark Mobius, who oversees about $26 billion in emerging-market stocks at Templeton Asset Management, said he plans to buy more shares of consumer and commodities companies in emerging markets.

“‘Valuations are attractive,' Mobius, Templeton's executive chairman, said at a briefing in Kuala Lumpur today. ‘We feel that this year would be a year of recovery of the stock markets in the emerging markets.'

“Mobius said rising income in China, India and other parts of Asia will spur spending on consumer goods, while commodity prices are now ‘too low'. The two nations, Brazil, South Africa and Turkey offer best investment opportunities, he said.

“‘There is an incredible build-up of foreign reserves in the emerging markets, and the increase in money supply is quite dramatic,' the executive chairman said. ‘We've seen a very big increase of money coming into markets.'

“The emerging-markets gauge trades at 8.2 times its companies' reported earnings, 36% cheaper than its average valuation last year, according to data compiled by Bloomberg. The developed measure trades for 10.8 times profit.

“The US economy and other economies will rebound in 2010, said Mobius, whose biggest holdings are in Asia.”

Source: Soraya Permatasari, Bloomberg , January 17, 2009.

Bespoke: S&P 500 Q4 ‘08 earnings now expected to fall 28.2%
“At the start of the fourth quarter, analysts were expecting S&P 500 earnings to grow by 30% versus Q4 ‘07. While this seems outlandish now, remember that growth in Q4 ‘07 was extremely poor as well, and analysts thought many companies would begin to turn the corner by Q4 ‘08. As we all know, the economy pretty much came to a halt last October. As a result, analysts quickly began to cut growth estimates for the fourth quarter after it became apparent that things weren't going to get better anytime soon.

“Fast forward a few months, and now analysts are expecting those same Q4 ‘08 earnings to be 28% weaker than the fourth quarter of 2007. With the direction that these estimates have been heading, when all is said and done, it's likely that this number will get even worse.”

Source: Bespoke , January 21 2009.

Bespoke: Pick your poison - stocks or bonds
“While we all know that investing in stocks has been painful, some readers may be surprised to learn that Treasuries haven't provided a much better alternative. While the S&P 500 is down 8% so far this year, long-term Treasuries (as measured by the US Long Bond future) are down almost 6%. With the recent break below their 50-day moving average, bonds are hardly looking like a ‘safe' alternative in the current environment.”

Source: Bespoke , January 22, 2009.

Financial Times: Barclays Capital's Larry Kantor says keep assets liquid
“The situation in many markets and economies is so tenuous now because we don't know what the policies are going to be. The next month or two are critical. Investors should keep an ‘arsenal of liquid assets to deploy', at some point it is possible that there could be a very big upswing in the economy and in equities, which investors should be ready for.

“In the meantime, debt of strong companies appears to be a good investment, especially as the Federal Reserve is considering buying corporate debt, together with other assets it is already buying, such as commercial real-estate backed bonds.”

Source: Financial Times , January 18, 2009.

Bloomberg: “Time to sell” Treasuries, biggest Korean fund says
“A rally that sent US Treasuries to their best year since 1995 is coming to an end, South Korea's National Pension Service, the country's biggest investor, said.

“US government efforts to combat the recession will prompt the Federal Reserve to raise interest rates this year, said Kim Heeseok, who oversees $160 billion as head of global investments for the service in Seoul. The decline would snap a surge that sent the securities up 14% last year, according to Merrill Lynch & Co.'s US Treasury Master index, as investors sought the relative safety of debt.

“‘It's time to sell US Treasuries,' said Kim, who took over as head of investments at the start of the year. ‘The stimulus plan may cause inflation. The US will raise the benchmark interest rate.'”

Source: Wes Goodman, Bloomberg , January 19, 2009.

John Hussman (Hussman Funds): The case for TIPS
“The way to think about the relationship between TIPS yields and straight Treasury yields is that the nominal yield on a security is equal to the ‘real' yield plus expected inflation. At present, we have extraordinarily depressed nominal yields, but relatively high real yields, which means that the inflation rate implied in TIPS is extraordinarily low. Indeed, in order for TIPS to achieve the same total return as straight Treasuries over the next decade, we would need to observe a slight but sustained deflation over that period.

“My impression is that we are not near the point where there is any real risk of inflation, and we may very well observe negative near-term inflation rates (which is why it is important to be careful with TIPS that trade at a substantial premium to par, since the apparently high ‘real' yields on near-term TIPS can be eroded by deflation). TIPS can't mature at less than par, but if there is a deflation, the accrued inflation adjustment on these securities can be whittled down.

“Suffice it to say that we are holding TIPS not because we anticipate a near-term resurgence of inflation, but because the real, inflation-adjusted yields available over the next decade are quite high on a historical basis, and will adequately provide for the maintenance and growth of purchasing power over time, regardless of the near-term course of consumer prices.”

Source: John Hussman, Hussman Funds , January 19, 2009.

Steve Barrow (Standard Bank): Dollar honeymoon won't last
“The arrival of a new US president often sees an initial rise in the dollar - although the honeymoon does not always last long and it is doubtful whether this time will be different, says Steve Barrow, currency strategist at Standard Bank.

“He says it is possible that the market might buy into new hope offered by an incoming president.

“‘There's little doubt that Barack Obama campaigned on a pledge to bring new hope to the American people. It is also possible that the Democrats' strong position in Congress will give Mr Obama more scope to impose his will than President Bush did.'

“But Mr Barrow doubts any early dollar strength in Mr Obama's presidency will last. He says the US budget deficit is set to balloon due to the recession and likely $775 billion stimulus plan and notes that the last president to oversee such huge deficit expansion was Ronald Reagan in 1980-1988.

“‘Dollar strength at the start of Mr Reagan's term gave way to a downtrend that lasted until 1995. The Reagan camp initiated this weakness with dollar sales in 1985. We doubt Mr Obama will do the same, but in one respect, the new president will be seeking a weaker dollar.

“‘The Chinese renminbi remains a thorn in the side of the US trade balance. Mr Obama has vowed to continue the fight for flexibility - and hence strength - in the renminbi as initiated by President Bush. In order to see the dollar weaken against the renminbi, the dollar may have to fall elsewhere.'”

Source: Steve Barrow, Standard Bank (via Financial Times ), January 19, 2009.

Jim Rogers: Sterling in peril
“The pound is a currency with no underpinning and should fall against the dollar and the euro, says Jim Rogers, chairman of Rogers Holdings and co-founder of the Quantum Fund with George Soros.

“He says his view reflects the UK's dire economic situation: ‘It's simple, the UK has nothing to sell.'

“Mr Rogers says the two main pillars of support for sterling have been North Sea oil and the strength of the UK financial services sector, in particular, the City of London's role.

“But Mr Rogers says just as North Sea oil is running out, so London's standing as a major financial centre is set to suffer.

“‘I don't think there is a sound UK bank now, at least, if there is one I don't know about it,' he says.

“‘The City of London is finished, the financial centre of the world is moving east. All the money is in Asia. Why would it go back to the West? You don't need London,' says Mr Rogers.

“Mr Rogers thinks the pound is more vulnerable than the dollar or the euro. He says the UK housing market is arguably in a worse state than that of the US, given pockets of strength in the US and prices that are sliding across the board in the UK.

“Meanwhile, he says, the UK is in worse shape economically than the eurozone, where most countries are not big debtors and do not run huge trade deficits. ‘If the UK discovers more North Sea oil, I might change this view,' he says. ‘But I don't see that happening.'”

Source: Jim Rogers (via Financial Times ), January 21, 2009.

Bespoke: British pound crumbles
“The US dollar is clearly back in rally mode after suffering a setback in December. As shown in the first chart below, the Dollar Index has now broken well above its 50-day moving average and appears to be heading back to its November highs. Unfortunately, rallies in the dollar have recently coincided with declines in riskier assets like equities.

“But the bigger news in currencies is the dramatic fall that the British pound has recently experienced. Today the pound is suffering another big drop, and as shown in the first chart below, the currency broke below recent support levels as well as the $1.40 mark. And the bottom chart shows just how much the pound has fallen in such a short period of time. In late 2007, the pound was trading at record highs versus the US dollar. Now it is trading very close to its lowest level since 1991. Anyone in the US that has the money to go to England can stay there on the cheapest tab in decades.”

Source: Bespoke , January 20, 2009.

Eoin Treacy (Fullermoney): Testing times for euro
“All countries in the Eurozone are now seeing their government bond spreads widen relative to German yields. This is an indication that all countries took part in the access to abundant credit made possible by the launch of the Euro and are now suffering the consequences.

“Some are being more affected than others. Spreads for Spain, Greece, Italy and Ireland have expanded most. These were some of the countries where borrowing costs had fallen most in order to join the Euro and where most use was made of the ability to access cheap credit. Without the single currency they would never have been able to borrow at such low rates, but they are now constricted by being unable to devalue their currencies in order to help them through the crisis.

“This is the first real test for the single currency. If it can survive the credit / solvency crisis without seeing some countries dropping out or its efficacy being called into question; then it stands a good chance of surviving for the longer-term as a viable entity. This may well depend on how long the crisis drags on.

“Spreads of more than 250 basis points over Bunds, for Greek government bonds are not encouraging for its long-term participation. Investors will no doubt remember there were significant questions about the Greek government's financial probity in the figures submitted to the European Commission prior to its entry into the single currency. Time will tell, but it will be a worthwhile exercise to monitor these spreads going forward.

“It is also interesting to see that in the UK, where control of interest rates is maintained by the BOE, that the brunt of the country's risk reassessment has been borne by the pound rather than government bonds. The spread over Bunds has been in a volatile downtrend since late 2005 and tested parity recently. The government bond spread has been contracting in line with the pound's decline against the Euro; both appear to have turned around the same time.”

Source: Eoin Treacy, Fullermoney , January 19, 2009.

CEP News: Treasury Secretary Geithner takes hardline stance on China
“In tune with the ‘change' mantra heard throughout the US Presidential campaign, the Obama administration signalled a new stance on China. But given the economic climate, analysts question the strategy of adopting a hardline position with the biggest purchaser of US debt.

“In comments to the Senate Finance Committee released Thursday, newly-confirmed Treasury Secretary Timothy Geithner said, ‘President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency.' He added later that Obama will aggressively push the Asian country to change its policies on foreign exchange.

“‘The comments from the new administration suggest a more robust position on China than the former administration,' said Shaun Osborne, chief currency strategist at TD Securities. ‘It remains to be seen what China's response will be, but the US is in a very delicate position at the moment.'

“In September, China overtook Japan as the largest foreign holder of US debt, but that appetite may shrink as China's growth has slowed dramatically in the global recession.”

Source: Patrick McGee, CEP News , January 22, 2009.

Well, it looks like 2009 will be no better than 2008 and I predict the following:

The recession, contrary to rosier forecasts from Wall Street, will continue throughout 2009 and result in a cumulative 5 percent contraction in the economy.
Housing prices, which have dropped about 20 percent so far, will continue to decline until mid-2010, with an eventual peak-to-trough loss of 30-40 percent.
The number of homeowners who are "under water" on their mortgages--they owe more than their house's current market value--will increase from the current level of roughly 12 million to a range between 15 and 25 million, depending in part on the number of 2009 foreclosures.
The economy will continue to eliminate jobs throughout 2009, reaching 9 percent by the end of the year, and job cutting may persist even after the official end of the recession, edging up toward 10 percent in 2010. And the official unemployment numbers, he notes, will likely understate the extent of the pain because of the growing number of "discouraged" workers who stop looking for jobs.
Home mortgage-related credit defaults will continue to mount, and growing defaults in the commercial real estate and credit card markets will become bigger factors.
Stock prices could slide another 20 percent in 2009.

If you cannot handle volatility stay in cash all year!

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

The Sad Truth Is Sometimes Very Funny

2009-01-08T10:02:00.001-06:00

Here are a couple of British comedians explaining the the upcoming financial crash . . . in 2007!

Having been in the investment business since 1985 I have found few who could explain absolute failure and criminal activity in such a creatively comedic format.

What they explain is deadly accurate!

Enjoy.

Livio

JUST IN TIME

2008-12-30T10:28:00.000-06:00

A friend was kind enough to send me the following link to an article dated October 10th 2008, written by Martin Armstrong.

Martin Armstrong (October, 2008) Its Just Time [77p.]

For those who have never heard of him, Armstrong is possibly the most knowledgeable man on the planet regarding the subject of cycles as they apply to social behavior. He developed a complex forecasting model - based on fractal natural cycles (cycles within cycles within cycles) - which was so accurate according to Armstrong that it came to the attention of the CIA who sought to acquire ownership of and control over it. As Armstrong tells it, when he turned the CIA down they contrived to ensure that he was sidelined and they took his computer anyway, which led to his source code self-destructing when it was tampered with.

The article was written whilst Armstrong was in jail. In it, he claims that he was incarcerated without due process of the law for a period of 7 years - at the whim of the presiding judge - pursuant to an alleged crime of market manipulation (conspiracy to commit fraud) which, if he had been tried and found guilty would have carried a maximum 5 year sentence. Effectively, in his words, he is "serving a 12 year sentence for a pretended offense that by law cannot justify more than five years when guilty" (At page 64)

Here is a quote from a New York Times article published on April 28th, 2007 (source:www.nytimes.com/2007/04/28/business/28financier.html?_r=1):

"Jailed 7 Years for Contempt, Adviser Is Headed for Prison

By MICHAEL J. de la MERCED

Published: April 28, 2007

A federal judge lifted a seven-year-old civil contempt sanction on the financial adviser Martin A. Armstrong yesterday, allowing him to begin serving a five-year sentence for conspiracy to commit fraud.

The decision by Judge P. Kevin Castel of Federal District Court in Manhattan ends one of the longest-running cases of civil contempt in American legal history. It will finally pry Mr. Armstrong, 57, from the Metropolitan Correctional Center in Lower Manhattan, where he has been held since January 2000."

Readers will note that the above makes no reference to Armstrong having been tried for anything at all under due process of the law. It talks about a five year "sentence". If there was a sentence then why was it necessary to jail him for 7 years for contempt before he was even allowed to "begin serving a five-year sentence for conspiracy to commit fraud"?

One of the most important arguments in Armstrong's article is that the Rule of Law in the USA is dead and that without a Rule of Law foreign investment in the country (on which it is life-or-death dependent) will inevitably dry up. He correctly observes that the most advanced countries in the world are those wherein the Rule of Law is sacrosanct; and those countries which are pariahs within the community of nations are countries where the Rule of Law does not exist. The reader just has to think of Zimbabwe to validate this concept.

Amongst other things, Armstrong is also anticipating a further down leg in the US equity markets which his model forecasts will commence on March 19th 2009 and will culminate on June 13th 2011.

There has recently been much debate amongst commentators regarding whether the equity markets may have bottomed at the current level and whether we may be heading for a strong secondary bounce. If we are then, according to Armstrong, that bounce will peak out on March 19th 2009.

Conclusion

In context of:

A likely downward adjustment in Price:Earnings ratios, and
Martin Armstrong's call that the next down leg will likely commence on March 19th 2009 and continue until June 11th 2011, and

… it seems foolhardy for investors to re-enter the market at this time and it seems opportune for investors still invested to liquidate their equity investments.

Author's Note:

Does the above constitute this analyst calling the market as he sees it, or does it constitute his attempting to manipulate the market?

In my view we have a shrinking window of opportunity to ensure that the Rule of Law is firmly re-established in the USA. The idea of incarceration without trial in the name of Homeland Defense (or any other spurious reason), and the idea that the Secretary of the Treasury can seek to withhold information from the general public about the application of their money, and the idea that billions of dollars of "bailout" money can be handed to investment banks even as billions of dollars of bonuses are paid to senior executives of those same banks - these are despicable affronts to the senses of decency and fair play of the average person in the street.

If his claims are true, it is nothing short of sickening that Martin Armstrong should have been treated in the manner he described in his article. The time has come for a shift in social attitudes towards humaneness and decency and the time has come to unceremoniously boot out from elected office the pork barreling and favor trading politicians and also their nominated cronies in positions of power. It's just time. Elected officials are supposed to protect your and my interests - not their own.

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

Bull Market At Hand?

2008-12-01T08:39:00.004-06:00

Yes. We have entered a Bull Market if only for a short time.

I am going on record saying this bull will last it's typical holiday rise through late December and maybe into early January! If we are lucky we may see it rise through the euphoria of a presidential transition.

Afterward, we should see a rapid decline of large proportion. Stay tuned, the Market Cycle is going to turn ugly.

It would be wise to sell the rise and go to cash, or go short right before January 7.

You have been informed!

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Manufacturing index drops to 26-year low

By CHRISTOPHER S. RUGABER, AP Economics Writer Christopher S. Rugaber, Ap Economics Writer 1 hr 19 mins ago

WASHINGTON – A measure of U.S. manufacturing activity fell to a 26-year low in November as new orders dropped for the twelfth consecutive month, a trade group said Monday.

The Institute for Supply Management's monthly index of manufacturing activity fell to 36.2 from October's 38.9. The reading is worse than Wall Street economists' expectations of 38.4, according to a survey by Thomson Reuters. A figure below 50 indicates the sector is contracting.

The November reading is the lowest since May 1982, the ISM said, when the economy was in the midst of a painful recession.

The report "indicates a continuing rapid rate of contraction in manufacturing," said Norbert Ore, chairman of the ISM's survey committee.

The survey's new orders index fell to 27.9 from 32.2, the report said, its lowest level since June 1980. The production index fell to 31.5 from 34.6, its third straight month of decline.

Manufacturing employers continue to cut jobs, the survey found. The employment index fell to 34.2 from 34.6, its fourth straight drop.

Manufacturers have been hit hard by the housing slump and financial crisis, which have led to cutbacks in business and consumer spending.

Deere & Co., which makes agriculture and construction machinery, has seen its profit fall amid the economic downturn. The Moline, Ill.-based company said last week that its fourth-quarter earnings fell 18 percent and it forecast that profit will drop by 7 percent in 2009.

By the way, the above article bodes poorly for the future. If the manufacturing index drops, all the resources that the manufactures require are also not purchased, which means these companies must produce less and cut their overhead, which ultimately leads to more lost jobs. It looks more like deflation is taking over.

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

Is Deflation At Hand?

2008-11-19T14:56:00.000-06:00

Consumer prices drop record 1 percent in October

WASHINGTON – Consumer prices plunged by the largest amount in the past 61 years in October as gasoline pump prices dropped by a record amount.

The Labor Department said Wednesday that consumer prices fell by 1 percent last month, the biggest one-month decline on records that go back to February 1947. The drop was twice as large as the 0.5 percent decrease that analysts had been expecting and marked the third straight month that prices had either fallen or been unchanged.

The worry is that the recession, which many analysts believe will worsen in coming months, will further depress prices, hurting such industries as housing, autos and retailing, and contribute to a downward spiral that will feed on itself.

A separate report Wednesday showed that the woes in housing, where the economic troubles began two years ago, have yet to ease. Builders slashed construction of new homes and apartments to a seasonally adjusted annual rate of 791,000 units in October, the slowest building pace on records that go back nearly 50 years.

With the economy sliding into a recession and mortgage foreclosures continuing to rise to record levels, there was little prospect of a rebound any time soon. Analysts noted that the National Association of Home Builders reported this week that builder confidence plunged to a record low in November, reflecting the gloom that pervades the housing sector.

The big drop in inflation reflected not only a huge fall in gasoline and other energy costs, but widespread declines in other areas. Core consumer prices, which exclude food and energy, fell by 0.1 percent last month, the first drop in core prices in more than a quarter-century.

There were price declines for clothing, new and used cars, and airline fares. Analysts predicted further declines in the months ahead as retailers struggle to attract consumers who are being battered by rising unemployment and the weak economy.

The big retreat in consumer prices represented a remarkable turnaround from just a few months ago when a relentless surge in energy prices raised concerns that inflation could get out of control.

Since that time, the economy has been jolted by the most serious financial crisis in seven decades. The U.S. troubles have quickly spread overseas, depressing growth around the world and cutting into demand for oil and other products, a development that has resulted in sharp declines in the price of crude oil and other commodities.

"Consumer price inflation has suddenly screeched into reverse as the recent abrupt slowdown in world economic growth has led to sharp declines in energy costs while very weak domestic demand is putting downward pressure on retail prices," said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

While falling prices especially for such key products as gasoline can provide a break for consumers, analysts said the worry is if price declines become so entrenched that consumers stop buying things, awaiting further price drops. That is one of the problems facing housing as buyers in some markets stay on the fence, expecting home prices to drop further.

The U.S. has not suffered through a prolonged bout of deflation since the Great Depression of the 1930s. But Japan was gripped with a period of deflation during the 1990s and it took a decade for that country to overcome those problems.

"I am worried that the situation in the United States could turn into a deflationary period in this country if trends continue," said Sung Won Sohn, chief economist at the Martin Smith School of Business at California State University. "With economic conditions getting worse and not better, the risk of deflation is there."

Other analysts, however, said they still saw deflation as a remote threat, in large part because they believed the Federal Reserve would use every means at its disposal to combat an actual period of deflation.

The Fed cut interest rates twice in half-point moves in October, driving the federal funds rate to 1 percent, a low seen only once before in the last half-century. Economists expect the Fed will cut rates again at its last meeting this year on Dec. 16.

The Bush administration has also been working to combat the current financial crisis, pushing out nearly $160 billion to banks from the $700 billion bailout fund Congress passed on Oct. 3.

Neel Kashkari, the Treasury official who is running the rescue effort, said Wednesday that he believed all the government efforts were having a significant impact.

"We believe the combined actions ... have stabilized the financial system and prevented a financial collapse," he said in remarks to a Washington business group.

For October, energy prices fell by a record 8.6 percent, led by a 14.2 percent drop in gasoline prices, also a record. Since prices at the pump have continued to fall this month, analysts are looking for a big decline in energy costs in November as well.

The nationwide average for regular gasoline now stands at $2.07, down 33 cents since the start of the month, according to the Energy Information Agency, and well below record-highs above $4 per gallon this summer.

Food costs rose 0.3 percent in October, just half the increase of September, as dairy products and fruit showed declines. Food prices are still 6.1 percent above where they were a year ago, reflecting big increases in past months as grocery stores hiked prices to reflect higher transportation costs.

Excluding food and energy, consumer prices fell by 0.1 percent, the first decline in core prices since a similar drop in December 1982 as the country was battling the effects of a severe recession. Many analysts believe the current downturn will be the worst recession since the 1981-82 slump.

The big drop in inflation meant workers got a bit of a break in their discretionary incomes. Average weekly earnings, after adjusting for inflation, were down by 0.9 percent from a year ago, but that was a smaller decline than the 2.5 percent drop for the 12-month period ending in September.

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Deflation is a decline in the general level of prices in an economy. It is the opposite of inflation, in which prices rise. Deflation is rarer than inflation, but its consequences can be more severe.

Beginning in September, a host of economic indicators, some coincident, some leading, have shown the worst economy in decades: we have the worst housing starts since 1991, the worst consumer sentiment since 1979, the biggest stock market crash since 1987, the worst builder sentiment since the survey began, the biggest drop in industrial production since the survey began, a sudden 10%+ drop in retail shopping, a collapse in car sales, and on and on.

The economic issue going forward is, therefore, will the Fed and the Treasury's combined attempt to flood the financial system with money overcome the deflationary impact of a collapse of consumer spending in time to avert a deflationary recession in 2009? Despite the fact that the Federal Reserve is now increasing the money supply at a 10% annual rate, the signs are that it may be insufficient to overcome the tsunami of deflation which is just starting to crash ashore.

In particular, the commodity bubble that brought us "Peak Everything" in Oil, gold, copper, and a whole host of agricultural prices just a few short months ago, has suddenly and breathtakingly collapsed:

This collapse has brought about the long-awaited decline in gas prices from over $4/gallon nationally, to well under $3/gallon in many places ($2.53 in my neck of the woods), and it has manifested itself in a decline in the inflation rate for imports, producer prices, and consumer prices as well.

Will monetary pump priming overcome consumer deflationary forces? The recent example of 2006 is instructive. In late 2006, Oil prices declined about 36% from ~$80 a barrel to $51 a barrel. The decline this year of over 50% in Oil prices is even more dramatic. This screen shot of BLS monthly inflation data for 2006-2008 shows the relative impact of deflation.

In 2006, the decline in Oil prices coincided with a -1.1% decline in consumer prices. So far in 2008, only -.5% of that decline has filtered through, even though now, unlike 2006, the consumer has collapsed.

Could this be the beginning of deflationary spiral? A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. Since reductions in general price level are called deflation, a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause. The Great Depression was regarded as a deflationary spiral.

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

So Much for Buy-and-Hold Advice

2008-11-16T22:18:00.000-06:00

You bet on stocks. You diversified. You lost a bundle. Should you get out? Experts disagree

They were reassured that stocks have the best long-run returns, so they plowed their savings into the market—only to watch in dismay as government bonds outperformed stocks over an entire decade. Moreover, investors were lectured again and again on the wisdom of diversifying their portfolios internationally. So they did. But foreign markets have done even worse than their U.S. counterparts lately. The most exasperating example is Japan, whose key stock market index is now back to where it was in 1981.

What many investors have failed to realize is that "the long run" can sometimes be very, very long. So says London Business School economist Elroy Dimson, co-author with his LBS colleagues Paul Marsh and Mike Staunton of the 2002 book Triumph of the Optimists, which challenged work by University of Pennsylvania Wharton School professor Jeremy Siegel, author of Stocks for the Long Run. The climb back into the black after a fall can take even longer outside the U.S., says Dimson. In Italy, he says, stocks failed to keep up with inflation over a 73-year period through 1978.

Dimson is far from the only expert betting that the U.S. market may need a lengthy recovery period. And, of course, stocks may not have hit bottom. Rajnish Mehra, a finance professor at the University of California at Santa Barbara, says that according to his calculations, stocks in the U.S. would have to drop a lot more to get as cheap—in terms of the ratio of total equity (including private equity) to gross domestic product—as they were in the dark days of the 1970s. That ratio peaked at 1.8 around 2000. It recently dropped to 0.8, but that's still twice the 0.4 equity-to-GDP ratio of the mid-1970s, says Mehra.

As for foreign equity markets, the worst-case scenario is that some might simply go away. In the 20th century, thriving stock markets in Russia and China were closed down by communist takeovers. Granted, those are extreme examples. But even in the absence of such a doomsday scenario, international diversification doesn't always lower the volatility of returns—because in major crises, stocks fall in every market. Thus, in 2008 global diversification isn't protecting investors from the financial crisis that originated in the U.S. In sum, two pillars of investment advice—buy stocks and go global—have proved to be weak reeds lately. No wonder pundits such as Jim Cramer, the CNBC stockpicker, are sounding off about "how the best way to invest is not to buy a bunch of stocks and just sit on them."

To be sure, darting in and out of the market like a day trader isn't necessarily the best idea, either. One advantage of settling in for the long haul is that you don't miss bolts from the blue like the rally on Oct. 28, when the Dow Jones industrial average soared 889 points, or 11%.

Wharton's Siegel says now would actually be the worst time to quit stocks, with equities cheaper than usual as measured by their prices compared to their earnings. As of Oct. 28, Britain's FTSE 100 traded at seven times the past four quarters' earnings, vs. 14 a year ago, and Germany's DAX is around nine times earnings, vs. 14 a year ago. China's Shanghai Composite is at 14 times earnings, vs. 47 a year ago. And talk about a round trip: Japan's Nikkei is back to where it was in 1981, while U.S. and European indexes are at levels not seen since 1996 and '97. Even China's once high-flying market is back to where it was in 2000. (These figures do not account for reinvested dividends.)

You don't have to be a Siegel acolyte to believe that right now, stocks—particularly international ones—could be bargains. Robert Arnott, chairman of Research Affiliates, a Pasadena (Calif.) investment manager, criticizes Siegel's argument for long-term stock outperformance as a "simplistic thesis," saying "it assumed stocks are wonderful at any price, and that's not true."

Nevertheless, Arnott likes current global market valuations and is particularly keen on the battered emerging markets. "Over half of [worldwide] GDP growth comes from emerging markets," he says. "It's a two-thirds-off sale right now." Dong Tao, Hong Kong-based Credit Suisse (CS) chief economist for Asia (excluding Japan), adds that good companies in the region "are not going to be washed away.... Fundamentals one day will come out."

That may prove true. But the global credit crisis is a dangerous and unpredictable beast, and in this environment, history may not be the greatest of guides. William Goetzmann, a Yale University School of Management finance professor, says the serious breakdown of credit and unprecedented government intervention in the banking system make it hard to compare this period with previous ones. Too many investors focus on simple statistical formulations and fail to heed "real, serious events that could cause ruptures," says Goetzmann. "Now is the time for real caution about projecting statistical models forward."

And since equity investors are the last in line to be paid in the case of a bankruptcy, they are particularly vulnerable if the financial system breaks down. Another potential risk: While emerging-market valuations may be tempting, Mohamed El-Erian, co-CEO of bond investor Pimco, points out that stock market investors are, of course, at greater risk in countries without strong property rights and the rule of law.

Will stocks pay off in the long run? Statistics show they have in the past. But it all depends on how long you're willing to wait. Investors probably shouldn't think too hard about what British economist John Maynard Keynes once said: In the long run, we're all dead.

By Peter Coy

My experience dictates a simpler approach.

Rather than concern yourself with what will happen in 3, 5, 7 or 10 years, take advantage of what is happening now. In other words, do not concern yourself with market direction, the tools are there to make money in any direction. All you have to know is where to look and how to take advantage.

You can be making money right now rather than losing it. It's your choice.

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

Two Presidents, The Same Stock Market

2008-11-11T09:39:00.001-06:00

Congratulations to President Elect Obama! You are the proud winner of the worst economic time since the 1930's.

As I have mentioned before the next 4 years are going to be difficult and challenging and will require more freedoms, less government regulation, and lower taxes. This will allow the open market the required liberty to invest and allow the American Dream to overcome this economic contraction. Unfortunately, both Presidents will not allow the markets to correct naturally and give Americans the freedom required for a rapid recovery.

As I am sure you have read in many other articles the likelihood of our next president doing just the opposite is high. Having visited Mr. Obama's Website, he has completely removed all the far left plans and promises and is now simply stating his goals for the next 4 years. By the way, these goals are vague at best. Now elected, he no longer has to coddle the far left and he can now try to appear a centrist and attempt to serve both ideologies.

Sadly, none of what I wrote above will have any effect on the direction of the markets. This correction will continue for a long time.

The markets direction is severely down from here for up to a month, maybe longer. I will keep you posted. Check in.

This Months Directions:

Stock Market: Down Dollar: Up Gold: Down

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

Say & Do What They Want . . . It Won't Matter

2008-10-30T08:07:00.000-05:00

AIG Bailout

$850 Billion Bailout

$1 Trillion Bailout

Plunge Protection Team Support

The Fed Cutting Rates Again . . . Eventually to Zero

On Drudge page today:

STARBUCKS' business may have bottomed...

GM calls bottom of downturn...

Wall Street feeling more upbeat about Fed's latest rate cut

And whatever else they do or say, it will not matter. What does matter is preparation and good stewardship and EXTREME understanding that this is only the long descents beginning, not the end . . . not even close.

It should end between 2012 - 2014!

You see, as euphoric the bull market was in the 80's & 90's, so the pain will be during this decline. And it will be a long grueling suffrage that simply will take the life out of the market until all things come back to true value.

At or near the bottom of the stock market you will see . . .

CNBC along with other bull market era programs may be off the air . Most of today's financial media may be gone, severely reduced at a minimum.
Thousands of Banks may be closed and have been nationalized.
The stock market may be partly nationalized and with other commerce industries.
Health care may be partly nationalized.
Thousands of Car dealerships may be closed.
Mortgage, Title, Escrow, and Brokers may dwindle to only a few.
Divorce and Bankruptcy Attorney's may get loaded.
Strip malls will be empty, causing developers and construction companies to go bankrupt.
People will simply walk away from expensive auto loans and leases.
Commerce will appear virtually dead.
War will loom for a long time possibly building into another great war.
The DJIA may go below 3000 and maybe below 1000.
Suicide rates will climb dramatically.
No one will want to invest in anything. Not stocks, mutual funds, ETF's, Forex, Bonds, or Real Estate . . . Nothing!

So, what tools can you use to protect your invested assets? Where should you be, what is your financial strategy? What about a life strategy?

The answer my friend is blowin in the wind of history?

The answers of what to do are already available from history. It's like taking an open book test in school, history gives you the answers. All you have to know is where to look and then it is easy to figure out what to do.

So, lets open your history book and learn about . . .

The Cycle of Money

It is the the Life Cycle of Money that tells the story of what has happened and what is coming. A cycle that has played out time and time again throughout most of the history of man walking the earth.

Stage 1:

A Free Market naturally develops as men and women apply their labor to the natural resources around them.

Stage 2:

Money that represents fairly the stored value of man's past labor naturally develops in the free market, what we like to call 'Free Market Money'.

Stage 3:

Soon governments and rulers emerge and eventually become deeply involved in the free market, regulating trade and imposing taxes.

Stage 4:

The cycle moves quickly to the next stage where government monopolizes money supply. In history, they have achieved this by taking control of the sources of issuance, the mints and private treasuries of the goldsmiths. They begin to dictate what is now to be acceptable as money in the market place, its weight and measures, and appearance and look (emperors and kings have always enjoyed seeing their faces appear on the money of the realm).

By the time this society has reached the conclusion of Stage 4, it no-longer lives in a free market as it once did. While its citizens may continue to apply their labor to natural resources to create wealth as they once did, some fundamental and significant changes are now in place.

Once the free market dictated the rules of trade instinctively through the natural laws such as supply and demand, loss and profit, abundance and shortage, greed and fear, risk and reward, and labor and wealth. Now the government controls and regulates the market and its money. The Government now polices the market and dictate the terms of trade; what can and can't be bought and sold, the profitability of trade, levels of taxation and the money that should and shouldn't be used.

Admittedly, some rulers and regimes are better for the markets than others, but regardless of how hard it labors, the quality of its natural resources, or the ingenuity of its people, the economic fate of this society now rests solely in the hands of the government and their economic advisors and monetary magicians.

But this is not the end of it all. There are far greater dangers ahead for this economy as further stages in the Life Cycle of Money are yet to be played out. I will reveal these to you shortly, just stay tuned to this blog.

Livio

Let me clarify what appears to be "negative" blogs that I have been writing recently with the following statement:

"Please accept that I tell it like it is, period.

During the 80's and 90's while the market was rising, I was a major bull and my clients were heavily invested and made millions.

Now they are making money on the way down!

You see, I do not care which way the market goes.

Up or down, neither is good or bad, it only matters where your money is positioned that makes up or down good or bad.

My philosophy is and always has been . . .

The Right Investment At The Right Time!"

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

An Intermediate Bottom In Place & A Depressing Future

2008-10-28T17:01:00.002-05:00

Social Mood Is "A Sign Of The Times"

It is plain to see that people do a lot of nutty things, and they usually do so in groups.

They wear leg warmers, wide neckties, then narrow neckties. Long skirts, short skirts. No skirts. Paisley.

They ride roller skates, then scooters. They buy Pet Rocks, collectible Beanie Babies, Webkinz, and stocks of dot-com companies with no profits and no business plan.

They ingest odd substances, and subscribe to odd belief systems. They also fight wars, and blow themselves up, buy homes they can't afford, and many other odd thing.

Markets provide a real-time reflection of the collective social mood, or Socionomic season.

Recognizing the three following points can help you measure social mood:

The events of history and culture are driven by the engine of collective social mood. Social mood temporally and logically precedes social events, and is the cause of social events. War and terrorism don't cause distressed people; distressed people create the conditions and events that lead to and comprise war and terror. A booming economy does not create ebullient people; ebullient people produce more, consume more and participate in and contribute to market manias.
Social mood is itself the product of the interaction of the society's members. Collective mentation -- herding -- arises from the interaction of the players in a process similar to the emergent behavior of other complex, non-linear systems as proven by Didier Sornette. Philosopher Eric Hoffer recognized: "When people are free to do as they please, they usually imitate each other." Social mood fluctuates between polarities of primitive emotional states, such as confidence/fear, skepticism/credulity, optimism/pessimism, benevolence/malevolence, etc.
These fluctuations are not effected by outside events, but move according to their own internal logic. They appear to arise in a dynamic that is endogenous to the social system.

Measuring social mood is important because you can learn much about the current environment you are living in. It can allow you to make the appropriate maneuvers to fiscally take advantage.

Ignoring Social Reality Will Cause Many To Lose Money!

"The belief remains that the long-term bull market will somehow reappear and markets always go up."

This is a perfect example of Socionomic belief that has not transitioned into reality. Today's market rise will once again pull many investors in with a little follow through over the next several days and maybe weeks. This will undoubtedly pull in thousands of investors once again. The media and gurus, being optimists or fools, will not quit until their ignorance gets the best of their clients portfolios.

In addition, brokers under pressure to maintain commission levels required by their firms will again go on a bull rampage and attempt to convince their clients "finally, the market has hit bottom, get in now!" Optimism will not turn to pessimism until most are bled dry.

Life As We Will Know It Now

Bear Markets do not happen overnight, they are the result of a mass psychological shift. Here are some mental thoughts to verify this social mood change.

A long-lasting downtrend implies a more negative social mood, which results in economic contraction, political polarization, world war and authoritarian values. It would be wonderful to be predicting the more benign long-term trend, but the weight of the evidence instead says that just such a trend ended in 2000.

Bubbles: Just the term should tell you that something has passed or is passing away! These terms are usually never acknowledged until they become obvious.

Clothing: Clothing is now getting more conservative again, a sign of negative social mood.

Movies: "Films will break new ground in horror, probably with themes that include suicide and torture. Gangsters, pirates and other outlaws will become popular folk heroes. Entertainment media will feature fewer heroes and more anti-heroes."

Music: Listen to new lyrics and music in all categories and you will notice a negative social mood.

Religion: Negative social mood breeds religious reverence and a turn to puritans. Religions will turn to more literal translation and indoctrination of their parishioners. More false religion will arise along with false profits.

Socialism: Like the "New Deal" negative social mood allows the mass conscious to want to be taken care of, and people will gladly give up liberty for security . . . behold the Patriot Act. This will only expand under an Obama, or a McCain administration. Social mood overpowers party, it simply will not matter who is in office.

Stocks & Equities: With economic contraction comes lower prices. Considering that the markets have been heavily inflated by money being dropped out of helicopters, the stock market, as measured by the DJIA, should land somewhere below 3000 before 2012.

Real Estate: Economic contraction leaves no market inflated. Deflation is occurring before our very eyes and yet most people cannot recognize it. In the bull run, individual markets like San Diego would correct for a while then rise again. This isn't a specific market, it is EVERY MARKET that will decline. And by historical contracting markets my guess would be an overall decline as high as 80% on the coasts and 50% in the Midwest.

Look for the markets in the long run to do exactly what they did from 1978 - 2000, except the opposite. Up and down, with a downward trend.

Livio

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

Are We Now Searching For A True Bottom!

2008-10-22T19:17:00.001-05:00

YES! But only intermediate term!

The bottom should come in the next 10 trading days. Expect a decent rally that could retrace up to 50% or more of the decline. The coming rally will show attributes that will make people believe that the bear market is over and we have hit bottom. If the coming rally does not retrace 50% watch out, the next legs down could be overwhelmingly severe!

Either way, do not be fooled, in the long run, the bear will roar again and grip the market with its claws. The market for the next year or so will continue to go down with brief oversold periods allowing the market to relieve downward pressure and have short term rallies. It has looked and will look similar to the 80's and 90's, only in reverse and may not stop until the Dow is devastated.

Unfortunately, or fortunately, depending on which candidate you support, the next president will have extremely difficult times and I am predicting that his presidency will be remembered as miserable and he will last no longer than his first term.

This decline is a natural occurrence after unprecedented over-leveraged bull markets in stocks, real estate, oil, gold, and exotic artifacts. Typical Price to Earnings historically have averaged 4 to 7, but only in recent times with fiat money have they averaged above 15, let alone 30, 40 or more! The high levels have been insanely supported by the media and pundits who were born as baby boomers or afterward. These people have not done their research of what drives true secular bear markets.

If you read the following you will know more than 97% of other investors!

1) Crashes: Introduction

2) Crashes: What are Crashes and Bubbles?

3) Crashes: The Tulip and Bulb Craze

4) Crashes: The South Sea Bubble

5) Crashes: The Florida Real Estate Craze

6) Crashes: The Great Depression (1929)

7) Crashes: The Crash of 1987

8) Crashes: The Asian Crisis

9) Crashes: The Dotcom Crash

10) Crashes: Conclusion

Soon enough there will be 11 points because 10 will become . . . Crashes: The Global Crisis!

We are now simply correcting to natural levels historically. Once the DJIA and S&P 500 P/E ratio drops close to or below 5, start looking to go bullish, or you will miss the bottom. Another strong determining factor that will confirm the P/E ratio is that no one will want to invest, everyone will be devastated and social mood will be horrific.

What does this mean in terms off the DJIA or the S&P500? Below 4000 on the DJIA and Below 400 on the S&P500; and possibly even lower.

Here is where many of the nations objective professional theories stand today:

Elliot Wave Theory: Bearish on both intermediate and long term. DJIA ultimately below 1000
Dow Theory: Bearish on both intermediate and long term. DJIA ultimately below 3000
Cycles Theory: Turning Bullish in the short term, but Bearish Long term. No low predicted.

It is wise to stay in cash or short if you are in Mutual Funds or ETF's as long as you plan on holding them at least 3 months or longer.

Don't listen to what the pundits, the fed, or any other media outlet is saying, you will lose money if you do.

More importantly, remember what I am telling you now, and look me up when you feel comfortable.

Livio Nespoli

PS: Please send as many people to my blog as possible via email or any other means! It is my goal to preserve the hard earned savings of all people.

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