First National City Bank

OK dinosaurs, put on your thinking tail spikes. Who knows what the title of this post means? Does the word "city" give it away?

This was my own personal introduction to the white dwarf star that is now Citigroup. Known as First National City Bank of New York, it cut off the New York part in 1965. And in 1976, Citibank was born (the holding company changed names two years prior).

I recall as it grew and grew, swallowing up Travelers, which swallowed Shearson Lehman's retail ops, Salomon Brothers, Smith Barney, Primerica, (which at one point was American Can - a can maker!). I don't have the time line right but who cares? Over the years, it ballooned.

And now it is a government agency. How sad.

The Feds can merge AIG and Citi to form another entity - PrimeAmerica!

'Tis Not the Season

I don't know. Usually, my editor comes up with much better headlines than I do but today I liked mine better. Perhaps his non-technical analysis mind did not get the reference. C'est la vie (from a non-French speaker, that's what you get).

Anyway, it looks like seasonals are shot to bits. What else will get shot down? The Kitchin cycle (4-year)? The 9-month cycle? How about the 28-day cycle Wells Wilder found for gold and based RSI around?

Tidbit - the 14-day parameter we all use because that's what came with the software is a half cycle in Wilder's research. Did you think the makers of Computrac and Tradecenter invented the number?

More reason to sit back and watch everyone else struggle.

What really makes me laugh is all the fundamental guys telling us the S&P is overvalued because projected earnings are 50 bucks or some such number. Do you think any of them have a clue about where a company will be earnings-wise nine months out in a financial meltdown? At least the charts are telling us how investors are putting their money where their fear and greed are.

I'll take shaky technical tools over fundamentals in a time of crisis every time.

Where's Wall Street?

I joked Sunday during my presentation at the Traders Expo that I was not wearing a suit because Wall Street was dead so there was no need. That got a chuckle from the crowd but when you think about it, all the majors are either gone or magically morphed into banks.

What makes me more afraid is not the natural capitalist selection of the broker/dealers. Rather, it is that there will be no replacement structure for several years. Trading, investing, raising capital and similar activities could be on hold as the recession takes its toll.

And with that, the demand for publications such as Barron's and my own newsletter can decline.

Now, I am not saying Barron's readership and/or advertising are down because I just don't know. But seeing all the accompanying businesses to Wall Street fade back into the shadows for a few years is not out of the question.

Yes, I know, getting out at the bottom is the sign of capitulation. But I do not think people in this business are getting out permanently. They may just want to take some time off and recharge while the economy and the market does the same. After all, Wall Street is in our blood.

Anybody want to buy a newsletter? (tongue near, if not in, cheek)

Slumdog indeed

I'd like to say that the relatively modest volume on the NYSE and Nasdaq today, not to mention the major ETFs, was a sign that the market's sell-off was an overreaction but I cannot. The only silver lining was, well, in silver, which went up a bit.

Price rules and the merely average volume today does not change that. Even worse, the tech ETF (XLK) broke below its short-term range. Alas, that was the last hope.

The market blew a great opportunity to reverse, if even for a little while, following Friday's unconfirmed reversal candles (see Friday's blog). In early afternoon, when prices started to edge up a bit and then failed, it became clear there was no dead cat to bounce.

Today's column looked for candidates to buy when things stabilize and certainly did not advocate buying anything now.

Traders Expo notes

I spoke at the Traders Expo in NY Sunday and wanted to share some observations:

1- The place was packed. Evidently traders are still interested in trading.
2- Only two presentations I could tell were focused on "surviving the bear market"
3- One guy who presented "How to profit every hour of the trading day" drew such a huge crowd to the main stage that people were spilling over the stairs at the back of the elevated platform. I had to find a place to see by standing on my toes. And this guy was not mainstream famous on TV, either.
4- There were at least 9 forex exhibitors. That seems huge for an event of this size.
5- Futures representation in the exhibitors was rather low
6- There were 4, maybe 5, news only vendors exhibiting. Also huge.

In talking with colleagues, two ideas came up:

1- The stock market is experiencing a buyers strike. There seem to be positive happening but everyone is saying, "you buy first."
2- The next bubble is not in gold but in forex. (See above). It was everywhere at the show and someone said they were offered leverage of 200 to 1. Two hundred to one! Sounds like no money down, no income check real estate to me.

The problem with a forex bubble is that there is no one currency to deflate. Pop one currency and by definition others soar. So what might this mean? Either a blowup of the industry (hey regulators, are you listening?) or a popping of the bubble in terms of the one currency that is not forex - gold.

It's Hammer Time

The Dow Theory sell signal kicked in (see Barron's Online column) and Friday the Dow was down 200 or so points intraday to close down 100 (I use round numbers when on the road as I am now). Yep, the media and pundits scared everyone with the big bad bear market and on cue they sold the next day.

But a funny thing happened on the way to oblivion - some major market indices and ETFs not only came off their worst levels but closed higher. But the Dow closed down 100! That's not good, right?

Let's go to the charts.

The Qubes (Naz ETF) closed a tad higher and sport a very arguable meeting lines pattern. Nice volume, too.


Spyders - a nice spinning top with big volume. Possible abandoned baby? Don't predict how a pattern will complete but pay attention.


The Dow itself. Oh yeah, a new low. But huge volume and could that be a hammer? Again, don't predict it will be confirmed but what it if is?

Quick Takes Pro subscribers, we'll talk about this in Monday's report. Everyone, what do you think? Again, I have no grand bullish delusions here but the evidence is interesting, no?

Thoughts on the stimulus

I am out of my element here talking about economics but I recall what I and many others did with the very first one then-President Bush sent us last year. I took my check from the government and promptly paid my bills. I did not buy anything new. I did not create any jobs. I did not add to the liquidity of the system.

Jumping to the more recent past, the automakers slunk (to move or go in a furtive, abject manner, as from fear, cowardice, or shame) to capital hill to beg for their lives. One congressman asked them how we knew if they would not come back in two months (or whatever) to beg for more. Sure enough, back they were Tuesday.

I wish I said it but someone else did - this bailout tarp is like pouring water on sand. After you are done pouring, the water is all gone and you still have a pile of sand.

Recipients are paying their bills (shoring up their capital) and not saving jobs (or making loans). And weren't jobs the whole point? We are not saving Chrysler (again) because we like them. It is because they hold thousands of jobs in the balance.

How can I get a piece of that bailout cash? Certainly not by being fiscally responsible and paying my bills on time on loans I am actually qualified to get.

I have every confidence in this country but not its leaders and financial architects. Greenspan spoke again recently but I would rather take economic postulating from my barber. At least he lives in the real world.

Nationalization. Socialism. Reworking legal mortgage contracts. Throwing good money after bad.

I admire our leaders efforts but I feel we are going down the wrong road. And tomorrow I have to write more about what used to be the ultimate in capitalism - Wall Street. The irony is killing me.

Baseball and Stocks

I was thinking about baseball the other day, sometime after A-Roids news hit and before the stock market smacked me upside the head. I have one simple question - what the hell is going on with America's pastime? Can we trust anyone? Why were the leaders asleep at the switch when all of this was happening?

Hank Aaron said to give the home run crown to Barry Bonds because there was no way of knowing whether he would not have otherwise gotten it. I have to hand it to Hammerin' Hank for a class move. Although I do recall him being conspicuous by his absence when the grouchy one hit number 756.

All of the financial weapons of mass destruction to me were steroids for Wall Street. The players got real beefy and made records of their own - until their internal organs shut down and their manhood shrunk. And where were the regulators.

Wow, baseball and the financial markets have a lot in common. It just goes to show how much crap gets overlooked during the good times and how hard the marginal greed-meisters fall when the times go bad.

Both are going to take a long, long time to cleanse themselves of all the crap exposed and yet to be exposed.

The Rise of the Auric Insect

OK, headline writing is a corny job but colleague Ian MacAvity recently called himself an auric insect. Auric (adjective) - of or pertaining to gold. Insect - bug.

Ian is a gold expert so he can be as corny as he wants with his descriptors. Anyway, have you noticed that gold and the dollar have been moving more or less in the same direction - up and down - lately? How can that be? After all, gold is priced in dollars so they should move inversely.

Well, the dollar component is just that - a component. The other is the actual value of gold based on supply and demand regardless of currency. Check this chart.

There are lots of circles and lines with a paragraph on the back of each one......(oh, sorry, I lapsed into Alice's restaurant). The point is that gold priced in euros has broken out to record highs, is in a real short-term bull market, is not overbought and had a nice test of the 20-day exponential moving average.

Maybe that talk of gold becoming a world currency is not so far off the (D-)mark.

Is GM a good deal?

I heard something on the radio this morning that took my bullish leanings (not actions) and twisted them all about. On the local rock station, one that is the current home of Opie and Anthony and the former home of Howard Stern, they actually discussed how GM had to be a good deal if you could wait a few years. "I cannot see General Motors going away," they said (paraphrased). "I cannot see the economy without this car maker."

Does it scare anyone about the state of the stock market when disc jockeys - and shock jocks at that - are talking about buying beaten down stocks? The contrarian bull in me just died.

Still, I do agree. General Motors will be around in my view. But there is one great big thing to remember. Just because the company will live on does not mean your shares of stock will go up. What happens when they go bankrupt and get picked over by some hedge fund? Your shares go belly up.

What if there is a simple takeover by somebody with deep pockets? What will you make? A dollar on each 2.50 you put up? That's a huge percentage but it is meaningless when you are buying a regular retail size.

And what if your "premium" over market price comes in the form of debt assumption? Then your profit will be bupkis (look it up).

Or a share exchange - 10 GMs for every share of White Knight Inc? Then you will own shares in a company that was not quite so "cheap" as GM and there goes your "deal of a lifetime" theory.

Yeah, GM will live but that does not make it a great investment. It might be great - really great - but don't bet the ranch.

Trader Transaction Tax

I have to chime in on this topic as it is getting some cyber press in chat rooms and websites.

There is a proposal floating around out there to put a 0.25% tax on securities transactions. It does not sound like much. But it is not on profits made. It is on value of the transaction.

You can read up on exactly what it means and how it works elsewhere. I have a point to make here.

The government assumes it will raise $100 billion per year in added revenue. Are these out of touch pencil pushers that stupid? They assume that there will be no change in behavior of investors and traders. Let's see, this insignificant tax will kill the day trading business as it eats up the razor think profits these people strive to make.

Who cares about day traders? Everyone should. Day traders, swing traders, hedge funds and anyone else who does not buy and hold forever create liquidity.

Who cares about traders and the volatility they cause? Everyone should, not for the volatility but for the fact that a robust secondary market is critical for the primary market to function. Why on earth would an institution buy an IPO if there were no readily available market to sell into if needed? Companies would have no capital market to tap to raise funds.

Isn't the whole point of the stimulus plan to create liquidity? A transaction tax will reduce liquidity and, as another blogger wrote, cause securities related firms to go out of business and lay off more workers.

Here is a quote from a market analyst who gets it right, Chris Carolan:
"I've often said that a requirement for an economics degree should be time served in a trading pit with at least 1/2 their net worth riding on a wing and a prayer. All that rational market nonsense would go in the trash heap where it belongs."

Pork

I fully expected both belly and live hog futures to skyrocket as the demand from Washington to feed a pork starved system exploded. It was nice being a superpower during my entire lifetime to date.

Cynical? Yeah, a little. And I am 100% behind the President but when he says the bill is imperfect I agree.

I have heard all sorts of ways to jump start the economy including taking the TARP money and distributing it to every adult man and woman citizen. It would come out to several thousand apiece and I know that would ease my pain. Imagine how that would feel to someone without a job.

My thought was to create the Bank of the USA and lend directly to homebuyers and businesses to keep capital flowing. Let the stupid banks and brokers that poisoned us go under and all of their innocent employees can work for the BofUSA. Guess who would have direct control for executive salaries that way? And to get good managers give them options in the new companey

And when all is well, take the bank public and sell all government shares. If successful, the managers would make a killing.

Just a thought. Why do we continue to prop up failed institutions buy funding failed managers?

Capitalism, wherefore art thou?

Bonds Again

I had a quick email discussion with one of my newsletter subscribers about treasury bonds. It's no secret that there was a flight to quality rush not unlike the 49ers of yore - and I don't mean the NFL doormats. But now, that rush is unwinding with more room to fall (see chart).

The subscriber asked why I have not put on a position shorting this market since the initial short that captured the first leg down. Well, I was asleep at the switch as the second leg down began. But now, this thing is oversold and showing some technical reasons not to be the last one invited to the shorting party.

Check out 9-day RSI (even though this is an ETF, I use the 9-day for bonds). Oversold with possible divergence. A 50% retrace from the major 2007 low is not far away and short-term support is at hand from the November gap.

It's the difference between being right and losing money anyway.

And its another reason why I say the financial markets are definitely healing vs. waiting for the next shoe to drop. Read my Barron's Online Feb 4 column if you have not seen it yet.

The pulse of the retail show go-er

So I've been at the Money Show in Orlando where thousands literally) of investors are cruising around a hu-mon-gous hotel and conventions center, The Gaylord Palms hotel gets better every year I am here. Today's I took a stroll through the everglades - inside the hotel! Gators, fish, turtles, rivers, palms, you name it.

But you don't care about that. What you might care about are a few observations.

First, the exhibit area looked about 20% smaller. And some of the usual suspects were not there. In fact, one of them has been sending out flyers via email for free six-month subscriptions to their services. Wow! Anything to get new customers.

Next, the bookseller reported that he cannot give away a certain mad celebrity tome (9 bucks) vs. its $40 or more regular price. I am going to interview him after the show to see what books have met a similar fate.

Finally, the average age of the attendees seems to have gone up quite a bit. Not that older investors are not quality customers but the ranks of the young are noticeably thin.

One thing I did not see is a blanket markdown or even hot sales of merchandise at the hotel retail shops. I guess if someone can shell out the cost of staying here and eating 12 dollar burgers with $3.50 juice bottles they do not need sales.

But back to investments. From my view, there is gloom everywhere. A good chunk if lectures deal with "the bottom." but not "the bottom is in". Its more of an absession with telling us things look bad.

FWIW

Social Networking

In case you have been living under a rock, or are over 60, you are well aware of the latest "thing" keeping your kids from doing their homework or going outside to play. Social networking sites like FaceBook, MySpace, LinkedIn and Twitter are getting people together at, for a lack of a better word, an alarming rate.

For example, and this just happened to me, I just found one of those six degrees of separation between me and Barack Obama. Really? The President of the United States? And it is only two degrees.

Granted, Mr. O has his own Facebook page where it seems that anyone can join. A contact of mine already has but who knows if in an earlier time in his life he did not have a chat with the Prez before he even ran for lower office in Illinois?

Today, a friend from college linked up with one of her old high school friends and since I am Facebook friends with her I get that notification. "Kathy just friended Garth the Avenger (not their real names)." Garth? Wait a minute - I know a Garth the Avenger. We were in the same bunk in sleepaway camp in the 70s. Couldn't be. She already is friends with my friend's second wife across the country. How can she know everybody from my past?

You get the point. The more we use these sites, the more evolved our networks become and the more our sometimes unwanted pasts come back to bite us again. The growth of these sites can be compared to a cancer if left unchecked by common sense.

So how does this get back to our portfolios? Look at it this way, my son has 379 Facebook friends and my daughter has 734. I don't think I've even met 734 people.

But if you can get a viral video or catch phrase going into social networking sites you can sell anything. (I'm the Man - Joe Jackson). I think marketing departments will take over from R&D when it comes to business. The more savvy they are on the web, the better they will do.

Traditional advertising? Forget it. These kids hardly watch TV and when they do they are also on the computer. or they are Tivo-ing past the commercials. Newspapers are dying. Radio is fading into mp3 players.

As for we grown-ups. don't get me wrong, I am wasting, er, spending plenty of time on FaceBook and LinkedIn too and love the time machine aspect. There are some people I have not seen in ages that I really miss.

But there were times in my life when I was a/an _____ (fill in your own negatively charged noun) and I do not want to relive them nor be with the people I was a/an ____ to. Yes, time heals all wounds but I've got other things to worry about like keeping a business and family moving forward into the future.