Real Pullback or "Stealthy" Correction?

For a better idea on how the overall market is performing some analysts like to look at the S&P 500 Index. They feel the S&P 500 is a better indication of the market because it includes many more stocks and cannot be manipulated as easily as the Dow Jones Industrial Average. The attached chart shows how powerful the S&P rallied through 2009. Since hitting its low of 666.79 in March the S&P has surged to a yearly-high of 1101.36. This is a whopping 65% return in just seven months! The Dow 30 hit its high of 10,120 for a return of 56%! We projected the Dow hitting resistance at about 10,200 with heavy resistance at 10,500. I'll take these results any day. This rally has been for real as the Marketdoc Report has been telling its readers since February.

As I look at the overall market it seems the long-awaited pullback may have been coming in waves over the past few months. Many stocks have already pulled back from their 2009 highs and are poised to run more. Others are just completing their pullback. We have already seen about a 6% pullback on the S&P 500 from its 2009 high. The major indexes could run more as they complete their topping pattern. IBM has already challenged its multi-year high. It seems the S&P is getting ready to challenge the 1101 high. If it spends some time there without breaking through, it would be a great time to open some put positions against these stocks as well as the indexes. Everybody seems to be expecting more of a pullback which tells me we may have still more upside to go. Remember its not how much you make but how much you KEEP that counts in the market. It does not pay to be greedy when you are investing. To take profits now at about 60% would be an above average year and certainly better than the "gurus" who missed this HUGE run in the market!! Stay tuned as the market tends to telegraph the direction it will be taking. We should see more in the coming weeks.

Note: The above is for informational purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be discussed with your personal investment advisor.

America's Counter Cultural Revolution

Photo courtesy of Washington archives


As I look back over recent history I see that our country has gone through a Counter-Cultural Revolution of sorts. This is in stark contrast to the culture of forty years ago. During his Inaugural address President John F. Kennedy spoke these words: "Ask not what your country can do for you, ask what you can do for your country." Since then we have turned 180 degrees. The popular belief in this country today is, "What has my country done for me lately?"

The current healthcare debate gives testimony to this.

We are presently debating whether to implement a national health care system. Healthcare is only one of a series of debates we have engaged in recently that are moving our country towards socialism. During the GM bankruptcy hearings we watched as the government disregarded current bankruptcy laws and declared bond investors' holdings secondary to preferred equity holdings. The US government then took majority control of two of the "Big three" auto companies.

When Kennedy took office our nation had started a transition of sorts. The generation known as "the Greatest Generation" grew up in the midst of the Great Depression, was asked to serve in World War II and then Korea, had returned home to enjoy the freedom which they fought for. They served faithfully and selflessly without complaint. As the 1950s drew to a close their offspring grew up enjoying all the luxuries which the most affluent country in the world had to offer. Yet this was not enough.

The 1960s and 70s ushered in an era of unrest. The Baby Boomers became known as the rebels who did not conform to their parents' ideals. Questioning authority was encouraged and even rewarded. As Vietnam rose to the forefront of everyone's lives some served faithfully. Others burned their draftcards or bras, protested, or fled to Canada. The change had begun.

The 1980s saw a rekindling of the conservative spirit under President Reagan. Those who cherished the conservative ideal found their voice. It was a voice which united most of the nation, both conservatives and liberals. This flame was gradually put out by the end of the decade. George H. Bush made it very clear to the Reagan conservatives that they had no place in his administration. Reagan and Bush Sr. were bitter rivals in the 1980 Presidential election and this was not forgotten.

So the 1990s saw the return of a Democratic President who spoke on a platform of "what goes on in our private lives is our own business." But the Reagan economic policies of the 1980s took hold and this country saw a period of unprecedented growth and prosperity. Americans now felt "entitled" to the best of everything. And the Greatest Generation had started to die out.

The new millenium saw the pendulum swing back to moderated conservatism, at least in name. Right now the second President Bush stands out-of-favor with many Americans. But how long will George W. Bush be blamed for our problems? Now only a few of the Greatest Generation remain. Many remaining conservatives are not even sure what they believe and definitely do not have a unifying voice within their own party, let alone the whole country.

The present administration in Washington has given new thrust to outright socialism. President Kennedy's words in 1960 have been replaced with "I want it (blank) now." We just need to fill in the blank for whatever it is we want. National (free) healthcare, jobs, money, etc. Free enterprise and capitalism are touted as our enemies. We are told Socialism and entitlement programs are "good for us." Sadly enough, most Americans have now grown to EXPECT this.

DOW 10,000 Reached

Charts courtesy of www.realtimestockquote.com and www.chartoftheday.com


It ain't over 'til its over. This past week saw the Dow Jones Industrial Average reach and close above the seemingly magical 10,000 level. Only seven months ago this level seemed gone forever with focus on Dow crashing to 5000. Now the "experts" are telling everyone that we should "buy the dips" because this market may move higher. If you are a regular Marketdoc Report reader you (should) have ridden this market to its new 2009 high without much surprise. While the rest of the market "gurus" are looking at lagging indicators like unemployment, we have talked for several MONTHS how this economy is in recovery mode and the market tends to anticipate this.

Make no mistake. Many crosscurrents continue to jostle this market. One of the big "unknowns" has to do with the potential socialization of our health care system. The could have HUGE negative ramifications for the stock market and overall economy as employers may be forced to participate in the "public option." As this debate continues, keep something in mind: Access to a healthcare waiting list is not the same as access to good healthcare! The people who need healthcare the most today (the chronically ill) will be the last ones to receive it under a "public option." The sabre rattling in the Middle East is the other wild card.

Both charts above show there is still some room left to the upside, but not much. Our technical forecast has placed the Dow somewhere near 10,200. As we see more of a topping pattern it will be the perfect place to buy some puts against those positions which have risen skyward since March in order to protect gains. Stay tuned.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfilio should be discussed with your own personal investment advisor.

DOW Poised to Move Even Higher

We have now entered the "fall" season which has typically been a difficult time for stocks. Almost everyone has been waiting for "the pullback" because the market has "overextended itself." Why do the experts believe this market is overextended? We have just passed through a highly disconnected time in the market where fundamentals disconnected with overall market performance. Some have argued this was part of the normal and predictable business cycle. (See our Marketdoc Report, "Can You Say Business Cycle" from March 14, 2009) Yes, the argument can be made that this cycle was more severe due to the real estate and financial crises. There is still alot of cash on the sidelines which has to be put to work. The pressure is building for more cash to enter this market.

When I look at the Dow technicals I see the index moving higher. Almost all of the technical indicators show there is still room to the upside rather than a "topping" formation that would typically be seen before an extended pullback. Our Marketdoc technical goal places the Dow somewhere between 10,000 and 10,500. If I had to be more specific I would say 10,200. Sure, I could be wrong. There are still some uncertainties out there, particularly the health care debate. Anything can happen overnight in the Middle East. But technically, I am calling it as I see it. The economy is definitely picking up. A trip to Michigan recently showed some businesses even have "Help Wanted" signs out. GM'supplier Delphi Automotive is exiting bankruptcy after four years. Other companies are reorganizing their debt to avoid bankruptcy. The recovery has been underway. The declining dollar is helping international corporate earnings (for now). Many stocks are still inexpensive. And real estate is making a comeback. The glass is more than "half full" at this point. Typical leaders in an early economic recovery are the financials, transports, and technology.

This viewpoint is definitely not main stream. Most of the experts like to look at lagging indicators, like unemployment, for an idea where we are going. Its like driving your car while looking through the rear view mirror. That's alright. Marketdoc is working on a 53% portfolio return so far this year. We took profits when our return approached 90% last month. Not bad.

Note: The above is for information purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be discussed with your own personal investment advisor.

Capitalism: A Love Story- Rated "R" for "Ridiculous"

Photo Source: Starpulse.com


Very seldom do I take the time to write about a movie. But last weekend I had a chance to see Capitalism: A Love Story, the new film by Michael Moore, with my daughter. She thought I might like it because it was "about Wall Street" and it "seemed funny" in the previews. Our other movie choice was to see Zombieland. We both wished we had seen Zombieland. I honestly cannot remember watching a movie that was as bad as Capitalism.

Knowing full well that Moore has made less-than-par movies in the past, I still wanted to give him a chance. The movie starts out with what seems to be a historical comparison between the United States and Ancient Rome. With Moore drawing similarities between both societies and asking the question as to whether we might follow the same path as Ancient Rome. But there is where seemingly factual portrayal ends and fantasy begins. The movie is laced with half-truths and opinions, obviously Moore's own perspectives, sometimes completely false, and downright nauseating.

Moore goes on to talk about how the American people have been brainwashed since the 1950s to believe that capitalism was "good." He then goes on to spend several minutes pointing out how President Ronald Reagan helped us to "feel good" about capitalism and the profit motive without knowing the great evil that was among us. Switching between pictures and images of Presidents Reagan and Bush, Moore inserts interview footage of people who are being evicted from their homes, or other tragic circumstances. Somehow, in Moore's mind, Presidents Reagan and Bush are to blame for this. He spends several minutes developing the idea that capitalism is not biblical and even has a Catholic priest making a statement that "Jesus would not condone capitalism." What bible is he reading from? I cannot find any bible reference that states capitalism is evil. But the nausea continues...

The movie tries to dismantle the idea of capitalism, and the "evil" profit motive, but then uses an example of a successful bread company that is employee-owned. Moore states, "The employees each make over $60,000 which is three times as much as employees of other similar companies." Hello! This is called "free enterprise," i.e. capitalism. And in the employees' own words their incentive is to make a profit-- hence the profit motive! Just a plain contradiction.

He also talks about how the unions have systematically been dismantled and how bank derivative contracts helped cause our financial problems. Here, there is some truth. Apparently, Moore didn't do enough research to realize that more jobs have gone overseas during the 1990s with the implementation of NAFTA and other free trade agreements. The repeal of the Glass-Steagall Act in 1998 allowed banks to trade high levels of deriviatives on their books. Glass-Steagall was put into place in the 1930s after the 1929 stock market crash to prevent banks from being overzealous with derivatives trading, among other risky operations. Both events took place under the Clinton Administration. Oops. Moore must have overlooked these important facts. He doesn't mention these two key facts at all.

And why does he think that just because he shows up at a Fortune 500 company with a camera, he will get invited in to meet with its CEO? When he showed up at GM's headquarters and was not let inside, he made the comment, "What do I need to do to see someone?" Why not pick up the telephone, Michael, and schedule an appointment instead of showing up un-announced? What Hollywood producer would give someone the time of day if they randomly showed up at their office with cameras rolling?

The so-called "fat cats" and "profiteers" on Wall Street are portrayed as enemies of the American people. What Moore doesn't tell us is that his own net worth is somewhere around $50 million. Gee. Doesn't that make him a "fat cat" too? (No reference intended towards his weight.) He would never have achieved this level of wealth by making these 'B' rated movies anywhere else in the world. China or India perhaps? I doubt it. But he does his best to try to convince the audience that he is on "our" side. Moore has a history of associating with leftists and radicals which goes back to his early days working at "Radio Free Flint" (Michigan.) He even tries to suggest that the Constitution describes socialism as our fore-fathers' intended form of government. More half-truth and opinion.

Perhaps the best part of the movie is when he is shown outside of the NYSE asking for some "advice." One Wall Streeter shouts "Don't make any more movies!" I wish Moore would have taken this man's advice.

One thought I had was to show up in Moore's hometown, Flint, with my camera rolling, to ask for my money back. It cost me $17 to see this garbage he calls a movie. Michael, if you are reading this, just send me a money order.

My suggestion if someone wants to see what Moore's socialist agenda would be like when put into practice-- watch Dr. Zhivago-- a timeless classic which portrays socialism as its best (and worst.) In keeping with the Ancient Rome theme at the movie beginning, I give this movie two thumbs down. I would give more thumbs down but I only have two thumbs.

Thoughts about Healthcare "Re-Form"

Photo Source: News-Press.com

Last evening I attended a Health Care Forum which was held by Congressman Connie Mack IV, who serves the 14th Congressional District where I reside in Florida. Congressman Mack put together a panel of five health care experts within the community who presented comments about the current healthcare debate. The panel consisted of: Mayor Jim Humphrey, City of Fort Myers, serving as moderator; Ambassador Al Hoffman Jr; Edward Morton, former CEO of NCH Healthcare System; Jim Nathan, Pres/CEO of Lee Memorial Health System; Robert Sanchez, of the James Madison Institute; and Dr. Allen Weiss, Pres/CEO of NCH Healthcare System. Hundreds were in attendence.

Several good comments were made by the panel and audience. An attempt was made to present the issue in as much of an objective way as possible. Here are some interesting comments which were presented:

- Last year the discussion on whether Congress should approve billions in TARP funds to our financial system generated huge response from the general public from both sides. However, there was almost no response by the general public in 2003 when Congress voted to approve over $1 Trillion of Medicare increases.

- We have seen Medicare costs escalate about 14% since its expansion in 2003.

- Healthcare expenses use about 20% of our country's GDP.

- About 10% of the population incurs 70% of medical expenses in our present system. Most of these expenses are for treatment of chronic illnesses. (Source: New England Journal of Medicine)

- Experts have estimated that Florida alone could save about $6.4 billion by better utilizing the roles of the Primary Care Practitioner and focusing on preventative treatment.

- The current system easily approves spending $250,000 to amputate a diabetic patient's leg but will not spend a few dollars for a brochure to educate the diabetic patient how to better address their lifestyle and treatment of their disease.

- Vision care costs have actually decreased over the years as competition has taken hold between providers.

- Access to a waiting list is not the same as access to healthcare.

- Health Savings Accounts (HSAs) which roll over unused balances each year, combined with a plan that covers catastrophic illness or accident is probably one of the best answers. One panelist stated, "We can roll over our unused cellphone minutes-- we should be able to do the same with our HSAs."

What was clear is that this issue will be solved only when both sides come together to discuss the problem as adults. No name calling, no hurling of insults, no political bashing. Yes, emotions can run high. Our health care problem is serious and the clock is ticking against us. Much is at stake. Our friends in Washington should take note. The sooner we Americans unite and reach a compromise in a partisan manner, the sooner we can solve this problem as a win-win for all of us.

Congratulations Congressman Mack for putting this forum together.
10/3/2009 8:31:37 AM