Archives for September 2012

Sell Rosh Hashanah Buy Yom Kippur

Each year at this time, people ask, “Is it sell Rosh Hashanah or buy it?”

The adage is definitely to sell Rosh Hashanah and buy Yom Kippur, which was derived many decades ago when Jews on Wall Street would sell their stocks before the High Holy Days began, not work over the holidays and then come back to work and buy.  And even though, that trend has diminished over the years, there remains a negative bias.  This year, it’s September 17 through 26.

BOOM Goes the Fed Dynamite

Ben Bernanke & Co. delivered QE3 yesterday by announcing a plan to purchase mortgage backed securities (mortgages) for at least the next two months at roughly $40 billion per month.  And the markets were delighted! The best analogy I can offer is that the markets are like crack addicts now and need their steady and regular fix of stimulus.  As time goes on, a drug addict usually needs more and more drugs and that’s exactly how the markets are behaving. 

I listened to Ben’s press conference and was really bothered that the Fed’s hope is that by buying mortgages, they will force mortgage rates even lower than the all time lows they are now, as if the problem with the economy is a 3.625% 30 year mortgage rate.  And in the Fed’s  mind, housing prices will increase and people will believe they have more money, which will in turn, make them spend more.

Am I missing something?

If the average consumer is strapped for cash and can’t get even get a low rate mortgage, how will they spend what they don’t even have?

Any thoughts???

German Courts and Apple

Markets breathed a collective sigh of relief after the German courts ruled “favorably”, allowing the European bailouts to continue.  Apple unveiled its latest iPhone as the stock sits near all time highs.  Both events did not inspire the markets to do much other than digest as they awaited the Fed’s 12:30pm announcement on Thursday. 

By the end of the week, the markets will have digested the ECB’s latest pledge to buy European debt in  a HUGE way, Apple’s new phone, the German court ruling and the Fed’s latest plan for more money printing.  Now that’s a month’s worth of news in one week!

As I wrote about in last week’s Street$marts, http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20120905.pdf, the market was following the more bullish of the two bullish scenarios I spelled out.  At this point, it may get really interesting with all time highs in the Dow just under 1000 points away! 

In the next issue of Street$marts due out next week, I will review the various canaries in the coal mine and see how they are behaving.

Time for the Fed & ECB to Put Up or Shut Up

Here is the piece I did last Friday after the putrid jobs report.  While the headline number may have indicated an increase of almost 100,000 net new jobs, the underlying data was awful.  Additionally, while the unemployment rate may have fallen to 8.1% from 8.3%, it was primarily due to people leaving the workforce than people being hired.

We already know that Bernanke & Co.  are close to another round of money printing (QE) and this will likely push them into QE3 with a combination of mortgage back security and treasury bond purchases.

http://video.cnbc.com/gallery/?video=3000114319&play=1

WHEN the Bull Market Ends

The latest Street$marts is here…

http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20120905.pdf

FOX Business TODAY at 1:30pm

I am scheduled to be on FOX Business’ Markets Now at 1:30pm today discussing the historically low volatility in the markets as well as the roadmap to the election. If you looked for me on CNBC last Friday, Labor Day traffic was off the charts, deeming it impossible to get to the station on time. 

This week, I will be posting the two Yahoo Finance segments I did last week along with a new Street$marts issue. Several cracks in the pavement are popping up for the stock market over the intermediate-term…

Hope you had a great (and safe) Labor Day weekend!

Paul

Apple in the Spotlight… Again

It’s been a while since I mentioned Apple, but the action of late deserves comment.  After peaking in April with the broad market, the stock declined into May with the broad market.  But when stocks declined further into early June, Apple did not follow suit by making a new low.  Rather, it formed a higher low than it saw in May and that was the first clue that it was ready to rally again.

This week, Apple made an all time high at almost $675 before reversing on Tuesday.  In the short-term, the odds favor some downside, possibly into the $630s, but over the intermediate-term, there should be some upside left before the final peak is seen later this year or early next.

As I have written about before, each and every bull market has at least a single story stock or more.  2007’s top was Google.  2000 was Yahoo and a host of other Dotcoms.  We researched back to the 1929 peak and found similar mesmerizing stocks in every bull market.  Of note, each and every story stock declined by at least 40% when all was said and done.  I believe the same lies ahead for Apple, everyone’s favorite company. 

Just like with Google and Yahoo and IBM and RCA and GM and Zenith, the masses always think that this time is different.  The story stock has no competition and rules the world.  There are always reasons why the stock won’t be like its predecessors.  I get that every time I speak publicly about Apple.  Sadly, investors will be left holding the bag without a plan. 

Don’t expose yourself to that kind of risk.  Put a plan together on when and why you should sell or hedge the position, possibly with options.  Profits are a great thing!  Keep what you have earned!!

Friday is Finally Here

It seems like the markets, investors and media have been waiting forever for Ben Bernanke to give his annual speech from the Fed’s retreat in Jackson Hole WY. Lots of initial expectations have faded into much ado about nothing.  I like that the stock market is showing weakness into the speech.  That leaves ammunition for a potential move higher next week.  Today’s decline was very orderly and began to restore a little worry in the markets.  We don’t need all that complacency!

I don’t want to put too much emphasis on one trading day, the last day of the slowest month of the year, but Friday should be interesting and telling about the short-term.

Like Watching Paint Dry

Unlike the summers of 2011, 2010, 2009, 2008, 2007 and 2006, the summer of 2012 has been very, very quiet.  Volatility is at an historically low level.  Volatility contraction leads to expansion and vice-versa.  At some point, we are going to see a spike in volatility and that will shock the system. 

Later this week, Ben Bernanke will make his annual speech from the Fed’s retreat in Jackson Hole WY on Friday at 10:00am.  While everyone will be on the edge of their seats for clues about the Fed’s next money printing program, it certainly does not seem like Ben will unveil the plan this week.  But I continue to believe it is coming!

Bernanke’s ECB counterpart, Mario Draghi, was scheduled to speak on Saturday morning but just canceled, a smart move in my opinion since Europe still has so many problems.  Circle September 12 on your calendar for the date that the German courts are supposed to rule on how and when bailout is allowed to be used.