End of 2009

Great Balls of Fire! That was the headline in the NY Post with regard to the latest failed airline bombing. Gotta love them. Another rag had "pants on fire."

Great balls of fire was also 2009 and now I am happy to see it over. Many of us have had challenges this year, from health to jobs to just being on the wrong side of the stock market. But there is always something about which to be grateful. For me, it is having employment, a family, a house and readers - not necessarily in that order.

It is time for me to pack it in this year so this is the last blog post until Jan 4, when the stock market fireworks can be expected. After all, we are in a low volatility, low volume coil where everyone is expecting an explosion. We just cannot agree on which way.

For me, I end the year nearly flat. Bonuses will have been paid and as a reader commented in the previous blog post, the Fed is out of bullets.

Make your New Year celebration a safe one and we'll see you next week.

End of Year Prognosticators

Retail, Airlines and Energy are the sectors in the news thanks to the holiday, terrorism and geopolitical events, respectively. Do any of them matter this week as we have our second short and thin week in a row? How about healthcare now the light at the end of the tunnel is visible? My column this afternoon will be on healthcare so I won't spoil it here.

This is the time of year when the pundits look back and then look ahead. Every one is wrong. From predictions that Israel will attack Iran to Stimulus 13 (I cannot recall what number we are already on) it seems that everyone has an opinion on everything. Does the market's opinion no longer count?

I do not have a major revelation for you here today, partly because nobody knows the future and partly because I am trying to have a working vacation (does that really exist?). I've done the work part for today so I am rather eager to get away from my computer.

In general terms, however, I do "see" the stock market getting clobbered. What I do not see is when, since the evidence on the charts just shows a slow chug higher. It is the intangibles, from sentiment to smugness that all is well with the world because the economy is on the way back, that scares me.

Hope from the headlines

I don't know why these two headlines are comforting to me but they are.

• 'Balloon boy' parents going to jail

• Madoff in prison's hospital

Could it be that the idiots and bad guys the are getting their just rewards? The system is going to work?

In times when the government is running amuck and greedy pigs in a few parts of the economy can bring that economy to its knees, not to mention articles about how the "empire" of the USA is nearing the end of its life similar to ancient Rome, perhaps seeing the system work is a good thing.

The demise of capitalism? Never. Sharing or shifting of power, sure. Let the profits flow to where the people make the most productive use of their talents and capital. But I sure would love it if we could re-unleash the principles and values that the founding fathers gave us.

Thoughts on the range

I cannot quantify it but there are as many reasons - technically - to buy stocks now as there are to sell them. From good reactions to economic news (GDP revised down) and nagging problems around the world with debt to crappy volume and lack of momentum. Cycle A says we are at a low. Cycle B says we are at a high. COT reports are scary bearish. Sentiment perhaps is neutral. Flight to safety in T-bills, T-bonds and big cap stocks is over.

Pick your poison because relying on any one of them will kill you. If I were not in the advice game I'd have closed my PC - save for waiting to buy my gold back - last week. I could use the rest, that is for sure.

In that spirit, and even though Quick Takes Pro will be published a few more times this year, I am off to Boca later this week. I don't mind the two feet of snow on the ground here but getting away from the daily grind is a welcome event. Even if my staff and I will be watching the markets from afar - just in case.

This blog will be sporadic for the next week and a half but please do not abandon me.

To all, a happy holiday no matter which one you celebrate.

Quotes from cyberspace

From Barron's Online comments section:

Imagine that you are a central banker and can buy gold for free (by printing your currency). You know that when things go badly for your currency you will have gold to back it. What would you do? The future seems bright for gold.

From the Shanghai Daily (dot com):

It is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.
----(case for a rising dollar? Not if they don't want to buy more US debt)

From Robert Minkowsy (trader):

NDX at new high. BIDU tracking lower beneath its 50 DMA. Worrisome divergence.
----(BIDU was a Nasdaq leader so its fall from grace is a tell)

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Emerging markets bonk

I don't know of you noticed but both the Brazil and China ETFs bonked yesterday. Both broke trendlines and 50-day moving averages and I have the feeling that these BRICs in the wall are rolling over.This chart is at of 11am Friday and shows little rebound after a 2.7% drop the day before. A strong dollar hurts commodities and does not help commodities exporting countries.

Gold follow-up

The trendline is from October 2008 and will be rising to 1050 soon. The horizontal line, drawn extra fat, is the breakout level from a major, major pattern at roughly 1000. As I wrote in the column, I see another leg down in the correction but cannot see it reaching 1000.

Time magazine does it again?

Mr Bernanke is on the cover today- kiss of death for the Chairman's time at the helm? Or for his policies? (as in the policies will no longer work or it is time to withdrawn them)

10 Lessons From a Dismal Decade

Sorry for the delay in posting here but the family has had a rough week medical-wise.

Here is the real post from Monday. Please read the MarketWatch article (link in previous post) so you know why I am ranting and why Wall Street is more like the Vegas Strip than the pillar of wealth creation for the nation.

Before even getting into the selected myths, the title needs its own rant. Feel free to skip the next two paragraphs since they are a bit self serving.

A dismal decade? Excuse me but not if you were a bear starting September 1, 2000, the day the S&P 500 made a clear as day bearish reversal and never looked back. I wrote that one up for BridgeNews that very day. Yes, poor defunct BridgeNews. Another testament to managerial chowderheadedness.

Or if you got into real estate at the same time for a five-year ride. Or energy in late 2006 for a one-year ride. Or gold at any time during the decade. Or if you turned into a stock market bear, admittedly two months early, as I did in late 2007. Or if you saw the March 2009 reversal, even if you bailed too soon like I did.

OK, enough. Let's talk about the article, which I found to be a great disservice to investors.

Diversification failed myth - "Diversification did not fail," Mr. XXX said. "Our memories and our expectations failed. True diversification comes from stocks versus bonds, not stocks versus stocks, but a lot of people forgot that."

Sorry, pal, even bonds got creamed in 2008. Everything went down - period.

Asset Allocation works myth - see above. Managers piled into the fastest falling sectors and assets when they rebalanced and exacerbated their losses. Yes, over time it is a good thing. But not over THAT particular time.

Market Timing doesn't work myth - You know what I think about that. They say that if you miss the 10 best days you seriously lag the market. Of course, they do not say what happens if you miss the 10 worst days - you clobber all others. Please. Market timing made me a bear in 2000 and a bear in 2007.

Or this nugget - "Hold more cash if you think stocks are overvalued." And the difference between that and "timing" is what? It's degree, only. Enough said.

Recognize trends and cycles, they said. Excuse me, this is techical analysis aka the evil "market timing." Which way do you want it, fellas?

Here's the deal - Market timing for trading is indeed a tough business. But using timing to recognize the trend - bull or bear market - the the key. Asset allocation is also a good thing but let the market tell you when it is time to rebalance. What if you simply waited to reallocate to "cheap" energy stocks until the market for that sector stabilized relative to the rest of the market? You would have added more energy in October 2008, not say April 2008, and bought at that sectors bottom (did not make a lower low in March 2009).

But a dismal decade? Why yes it was - if you followed your Mutual Fund and Financial Advisor shepards down the rocky "buy and hope" path. The era of active investors is here - not day traders, not timers, but active investors who make only a few critical decisions per year.

Preview of this afternoon's post

I am writing the column now but have a look at this on Marketwatch:

10 lessons for investors from a dismal decade

You know where I will be going with this one.

Poem of the Black Swan

Here are the first two stanzas of the poem. Somehow, a vision of the stock market comes to mind with its investing sheep and controlling bosses. The line about "questioning" is rather scary.

The Black Swan
by James Merrill

Black on flat water past the jonquil lawns
Riding, the black swan draws
A private chaos warbling in its wake,
Assuming, like a fourth dimension, splendor
That calls the child with white ideas of swans
Nearer to that green lake
Where every paradox means wonder.

Though the black swan’s arched neck is like
A question-mark on the lake,
The swan outlaws all possible questioning:
A thing in itself, like love, like submarine
Disaster, or the first sound when we wake;
And the swan-song it sings
Is the huge silence of the swan.

Dominos

Upon looking this word up in the dictionary, it appears to be Dan Quayle's revenge. Dominoes - with an "e" - appears to be the common plural spelling.

Anyway, the dominoes around the globe are small sovereign stock and bond markets where credit ratings are either being downgraded or are on watch with negative implications. Of course, the mother of all markets - the US of A - has been on personal watch lists although there is no real official warning coming out. But over the past few days we've had downgrades in Greece, Portugal and Spain. Ireland was on the brink earlier this year and supposedly pulled themselves back (although not out). Check out the chart on the home page of the Irish stock market. Not pretty.

Today's column was about the ripple of Dubai still propagating around the globe. We have not really felt more than a hiccup in major markets but where there are waves there may be huge waves following. Just ask Hawaii.

Who's next? China finally admitting to overdoing it? How about another biggie? The UK is also up there with the USA on possible debt downgrade rumors.

I may not have been able to find the top of the rally but I am confident that when it ends it will be frightening.

Trader tax debate video zzz zzz zzz

If you can stay awake through it, here is a CNBC debate on the trader tax:

http://www.cnbc.com/id/15840232?video=1350262470&play=1

Airtime: Fri. Dec. 4 2009 | 2:44 PM ET

Discussing who will really be penalized when the tax gains traction, with Tim Ryan, Securities Industry and Financial Markets Association president/CEO and David Arkush, Public Citizen director.

I am on the side on no trader tax but Mr Ryan did not win this debate. Too bad. And too bad nobody seemed to have their facts straight.

Headlines!

No not the Jay Leno kind but the ones that get slapped on my stories without my approval. Most of the time, the editors come up with headlines and synopses that are both more interesting than the ones I concoct but also serve to entice readers to click on the story. After all, in this business it is all about eyeballs.

But today, my proposed headling was "The Momentum Crowd Abandons Gold" meaning the "speculators" had turned tail like a bunch of lemmings. What I got was an upfront statement of my next upside target after the correction. I remember a headline in 2008 that read "You Heard it Here, the Banks have Bottomed." The horror!

Let's talk about the story. For starters, gold closed lower and so did the dollar. Yes, gold was off its worst levels but down is down, especially after a dumping like Friday's.

My point? Momo drove it up despite the dollar not moving for many weeks and now reverse momo will drive it down even if the dollar does not really bounce (I think it will).

When to get back in is the question.

The Big Unwind

Take your pick - gold, dollar, T-bonds - they all were ready for some sort of reality check. The problem with this is that the stock market ended higher Friday, shrugging off the biggest dollar jump in months. Wagging the dog, indeed!

Actually, the stock market jumped on the fantastically rosy employment data, where fully 0.2% of the population found new jobs!!! The Dow rallied 150 or so points and then collapsed back to zee-roe. Yes, a final rally into the close flipped the bears another finger. The strong finish, however, was not enough to negate the total intraday failure that preceded it.

I sold half my gold Nov 25, the day before the Dubai Dump, and had a good thanksgiving watching gold dump intraday, too. Then it came back to ruin my dessert. So, today I feel vindicated. My Marketwatch article ran Tuesday with the topic of - the dollar is due to bounce.

Needless to say, I am not breaking my arm patting myself on the back. The stock market apparently stopped following the dollar, short-term yields (the 2-year I wrote about in Barron's Online Wednesday) backed up so things are still too fuzzy to become complacent.

Now looking to get back into gold. Yes, this soon but not at current prices. Still needs to squeeze the shorts a bit more. And the dollar has plenty of shorts to squeeze too.

Wagging the Dog

Who is the dog and who is the tail? Of course, that changes all the time but right now I think the bond market is emerging as the dog, taking over from the dollar. Yesterday's column (sorry, I was distracted yesterday and could not blog) was about how the two-year Treasury note yield has plummeted over the past few weeks. It is now rather close to zero, where Treasury bills have been for the past year.

Check this chart to see why this is more significant than meets the brain. When it meets the eye, you will surely see (don't call me Shirley).

This suggests a flight to safety again. TED spread easing a bit higher. Gold unrelenting. Stocks volume still low.

As the title of the column should have been - Something's Gotta Give.

As Jimmy Cliff would sing - The harder they come the harder they fall.

Alt energy

Hmmm. Alternative energy ETFs are looking like they want to break out from big triangle patterns. And then there's Maude, er, BioFuel Energy Corp.


This is a weekly chart but do you see anything interesting? How about peer ethanol stock Pacific Ethanol up 50% today on top of yesterday's similar gain?

I don;t know about you but when alternatives to anything start to shine it makes me wonder what shortages are developing with the primary. That would be "earl" in local drawl.