August 2013

Why You should Buy This Dip

There?s nothing like coming home and getting slapped in the face with a fresh mackerel the second I step off the plane. That?s what happens when you travel from a continent that is universally positive about US stocks, to one that is largely negative.

Take a look at the chart below from my friends at Bespoke Research, showing that 66% of all investors are now bearish on stocks over the next 30 days, nearly a two year high. That takes us out to mid September, when Ben Bernanke gives us his decision on whether to start tapering and pare back quantitative easing, or not. I don?t think he will do it, but the majority of the market thinks he will.

The economic data do not justify it. Strip out the weekly noise and focus on the longer-term averages, and the picture becomes more clear. During the second half of 2012, monthly job gains averaged 180,000. In the first half of 2013 the number bumped up to 202,000. That is an improvement, but is far shy of the 400,000 in monthly gains seen at this point in past economic cycles.

You also have to consider Bernanke?s inordinate fear of doing a 1937 repeat, when the country fell into the second leg of the Great Depression due to premature easing. That means he will continue to err on the side of over stimulation. Add all this up, and you get no taper in September, December, or even in early 2014. When markets figure this out, they will rocket to new highs.

So why are stocks so weak now? Blame it on the summer doldrums, which is why I spent the last two months sunning my self in Europe. Watching the market action today, it is clear that the ?B? teams are still in charge on the trading desks. Write it off to the fact that the market has gone up for nine months straight and is begging for a rest. It is nothing more than that.

My bet is that we are in for another standard correction. So far, we have breached the 50-day moving average at 1,658, off 3.3% from the recent highs. The largest decline this year has been the 7.3% we saw in May. A 9.5% dump takes us down to 1,552, bang on the 200-day moving average. That?s where you load the boat on the long side for a yearend run to new highs.

Sorry for the delays in my recent posts. As soon as I got home, the hard drive on my iMac promptly blew up. This, no doubt, is thanks to the porters who dropped my luggage at the last 20 hotels I checked into. So I have been working from my six year old backup Windows PC, which I have largely forgotten to use.

What?s that delete button for? And where?s the damn finder?

Welcome Home!

The Bipolar Economy

Diary, Newsletter

Corporate earnings are up big! Great! Buy! No wait! The economy is going down the toilet! Sell! Buy! Sell! Buy! Sell! Help! Anyone would be forgiven for thinking that the stock market has become bipolar. According to the Commerce Department?s Bureau of Economic Analysis, the answer is that corporate profits account for only a small part of the economy. Using the income method of calculating GDP, corporate profits account for only 15% of the reported GDP figure. The remaining components are doing poorly, or are too small to have much of an impact. Wages and salaries are in a three decade long decline. Interest and investment income is falling, because of the low level of interest rates and the collapse of the housing market. Farm incomes are up, but are a small proportion of the total. Income from non-farm unincorporated business, mostly small business, is unimpressive. It gets more complicated than that. A disproportionate share of corporate profits are being earned overseas. So multinationals with a big foreign presence, like Intel, Oracle (ORCL), Caterpillar (CAT), and IBM (IBM), have the most rapidly growing profits and pay the least amount in taxes. They really get to have their cake, and eat it too. Many of their business activities are contributing to foreign GDP?s, like China?s, more than they are here. Those with large domestic businesses, like retailers, earn less, but pay more in tax, as they lack the offshore entities in which to park them. The message here is to not put all your faith in the headlines, but to look at the numbers behind the numbers. Those who bought in anticipation of good corporate profits last month, got those earnings, and then got slaughtered in the marketplace. Caveat emptor. Buyer beware.

What?s In the S&P 500?

Has the Market Become Bipolar?

Testimonial

Testimonials

I cannot give higher marks to John's style of approaching the market. My wife has learned so much from him that we are actually having conversations about the global economy. Wow! You will learn money management, the concept of risk versus reward, and how to take advantage of trades that are worth taking.

Thanks John!

Robert

August 21, 2013 - Quote of the Day

Quote of the Day

?This is about how long grandpa will work and grandma will live,? said CNBC commentator Steve Leesman about the debt crisis.

Follow to Trade Alert - (USO) August 20, 2013

Trade Alert

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. Read more

Trade Alert - (USO) August 20, 2013

Trade Alert

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more

August 20, 2013 - MDT - QID Follow Up

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.

August 20, 2013 - MDT - Closing Trade

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.

August 20, 2013 - MDT - It's all about the Miners

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.

August 20, 2013 - MDT Pro Tips A.M.

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.