Market Continues Upward Trend

Chart courtesy of www.realtimestockquote.com

As 2013 comes to a close we see the market continuing its upward trend. Corporate profits are good. The Fed is continuing is expansionary monetary policy. And Congress has reached a new budget deal before any government shutdown. Life is good. Meanwhile, the average American has no idea why it seems they are working harder than their parents to make ends meet. Many have to borrow from their credit cards just to pay regular monthly bills.

The Pivot network recently aired a documentary entitled: "End of the Road: How Money Became Worthless." This program describes how the Fed's forty-year experiment in "fiat" currency has led us to the present economic state of affairs. This began in 1971 when President Nixon decoupled the US dollar from the gold standard. Since then the Federal Reserve has worked hand-in-hand with the Treasury Department to print and borrow excessive amounts of money to keep our economy afloat. This ongoing cycle demands that the Fed borrow increasing amounts of currency to pay back amounts previously borrowed plus interest. The cycle MUST continue or else everything collapses. This process will someday be revealed as the biggest Ponzi Scheme in the Financial World. It further describes how the price of gold is being held artificially low as Central Banks lend out their gold stock multiple times over. Time will tell how long this process will be able to sustain itself.

This market continues to offer opportunities for investing, regardless of its direction, up or down. A well diversified portfolio has been shown to outperform over time. Right now many of the Dow stocks are paying at least a 2% divided. And companies paying this dividend are more stable than most banks.

The above information is for educational purposes only. Any decision to buy, sell, or hold a specific investment for your portfolio should be reviewed by your investment adviser.

Crisis Averted- This Market Wants to Rally

With our second debt crisis averted this market has shown signs it wants to rally. Alot of money has been sitting on the sidelines and needs to be put to work. Some larger investors were apparently betting that Congress would not succeed in striking a deal to avoid financial catastrophe. These investors were actually on the wrong side of the trade when the news started coming out for a possible agreement. That is why this market did not rally 500 points on the news. Instead some lame comment was given about how IBM missed its estimates and "Wall Street was worried." This blog has written several times about how Wall Street actually ignores IBM in favor of some of the other darling tech stocks. Expect this market to rally more due to the favorable economic environment we are in. The bad news of government shutdown hurting our economy only means that the Fed will not start to taper its bond buying anytime soon.

As for Washington:
All that was missing this week was story time and a nap. Most of our legislators needed to be placed in time out for their behavior over these last few weeks. Only an eleventh hour agreement brokered by Senators McConnell and Reid averted an economic disaster. Credit should be given to these Senators for acting like mature adults who actually showed some ability to lead our great nation in this time of crisis.

Senators McConnell and Reid demonstrated to the American people they have leadership skills.

The House GOP showed they are too fragmented to accomplish anything. Their strategy of not compromising, even within their own party, was flawed as they came off as a bunch of whiners who are being too extreme. This played directly into the hands of the Democratic party which has been promoting that message all along. Hopefully they can learn this lesson before they are voted out of office by the American people.

This market wants to rally because:
1. Large institutional money has been sitting idle and needs to be put to work.
2. Any economic damage from the government shutdown will postpone Fed tapering which will be favorable news for the market.
3. The weekly Dow chart above shows the market still has room to the upside.
4. We are entering a seasonal time that is traditionally good to invest in the market.
5. Investors want a return that is higher than the T-bill rate and the stock market is still a good place to find it. Many of the Dow stocks are paying a dividend above 2% and these companies are more stable than most banks.

Note: The above information is for educational purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should first be reviewed by your financial advisor.

IBM Breakdown.. And the Middle East

This past week concludes the worst month of losses in the Dow Jones Industrial Average since May 2012. As this blog has mentioned many times, IBM, one of the Dow's largest components has telegraphed the direction of overall market performance for several months. The above chart illustrates the breakdown of IBM from its all-time high.

All of this despite "good" economic news in the markets. Housing, unemployment, and other economic data have been generally favorable all summer. ...So what gives?

Secretary of State John Kerry speaks about the situation in Syria.

There has been alot of sabre-rattling going on around the world regarding the situation in Syria. The verdict has seemingly been given about chemical weapons used by the Assad regime despite no official report yet from UN inspectors who are on the ground in Syria. But the United States insists the evidence is there and the world should act immediately against the Assad regime.

Before the world jumps on this War Wagon, lets ask ourselves, "Is the Middle East a more stable place today than before recent UN involvement in Egypt and Libya?"

Lets look at the facts:
Libya- The decade long dictator Moammar Ghaddafi was apprehended and summarily executed by his people in 2011. This could not have happened without the help of the UN, specifically the United States, by enforcing a "no fly zone" over areas of this sovereign nation. The United States seemed to breathe a "sign of relief" that this long-hated dictator was now gone after ruling Libya since the 1970s. Today Libya still has no constitution and its government is still in a state of flux with fragmented political parties too numerous to count.

Egypt- This nation is today on the brink of civil war as its recently elected leader Mohamed Morsi was forced out of office by the Egyptian military. Tens of thousands of protesters were on the streets of Cairo yesterday in support of Morsi. Meanwhile, former Egyptian President, Hosni Mubarak was released from prison because of a technicality in Egyptian law. Mubarak was the man who brought stability to Egypt after the assassination of President Anwar Sadat. Mubarak, a long time ally of the United States was imprisoned shortly after Egypt's election. He served as Egyptian President for about 30 years.

It is clear these prior actions have brought more instability to this region.

Meanwhile, Russia and Iran have stepped forward in support of their ally Syria. Any military action against Syria would assuredly give these two nations the excuse they need to escalate the situation.

To their credit, the British parliament voted to hold off any military action until the situation could be assessed further. The voice of reason prevailed.

The market seems to be pricing in some sort of military response by the rest of the world. However, if cooler heads prevail we should see a relief rally in the coming weeks.

Blackhawks Win Stanley Cup

Chicago Captain Jonathan Toews hoists professional hockey's most valuable trophy.

With under two minutes to play in regulation time the Chicago Blackhawks overcame a one-goal deficit to beat the Boston Bruins 3-2 in Game 6 of the Stanley Cup Finals. The Blackhawks secured their second Stanley Cup in four years and their fifth in franchise history before a crowd of stunned Boston fans. It was a match-up of two of professional hockey's original six teams with a long history between them.

The Bruins seemed to have the game in hand when Milan Lucic scored his team's second goal at 12:44 of the third period. Then with under ninety seconds to play Chicago's Bryan Bickell tied the score at 2-2. Stunned Boston fans and players alike seemed unable to react when Chicago scored again with only fifty-nine seconds to play. Blackhawk player Dave Bolland found the net to make the score 3-2. Shots on goal favored Chicago 31-25 but Boston seemed to dominate most of the play. Both goaltenders were outstanding as they each made amazing saves throughout the game.

The Bruins certainly showed that they deserved to compete for the one-hundred year old Stanley Cup.

Chicago's Patrick Kane accepts the Most Valuable Player Award

Both teams line up at center ice for professional hockey's traditional handshake as a show of good sportsmanship.

Congratulations to the Chicago Blackhawks!

Memorial Day- Freedom Is Not Free

This article originally appeared May 29, 2010.


Residents in Southwest Florida hold a Memorial Day ceremony.

Ever wonder why veterans sell poppies for donations so close to Memorial Day? It is because of a popular poem entitled, "In Flanders Fields" written by a Canadian physician and Lieutenant Colonel John McCrae in May, 1915. McCrae was a surgeon in charge of a field hospital during the second battle of Ypres during World War I. McCrae wrote the poem after his friend, and former student, Lieutenant Alexis Helmer, age 22, was killed in battle. He noticed the poppies flourished over the disturbed earth of the battlefield days later. The term "Flanders fields" is a geographic region which includes parts of Belgium, France, and the Netherlands. McCrae wrote:
"In Flanders fields the poppies grow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved, and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields."

-Lt.Col. John McCrae, MD, 1915


Formerly known as Decoration Day, this Federal Holiday is a time of remembering those men and women who died in military service. The name was officially changed to Memorial Day in 1967, and is celebrated on the last Monday in May. One of the longest standing traditions with Memorial Day is the running of the Indianapolis 500 which began in 1911. Many visit cemetaries and memorials. Flags are placed on the gravesites of veterans. Parades held. A moment of silence takes place at 3PM local time. Many people recognize Memorial Day as the unofficial beginning of summer.

Please take a few moments this Memorial Day weekend to remember those who have fallen for our country. They paid the ultimate price for the freedom which you and I enjoy. God Bless America!

As Good As It Gets... Really?

Once again we have seen another record breaking week on Wall Street. The market has seemingly shrugged off the continued systemic, economic, political and military concerns which have not been resolved around the world. Interest rates remain at historic lows. Unemployment levels seem to be holding around 6 to 7%. Perhaps the U.S. markets are still the best place to invest. Perhaps a case can be made for the continued upside in the market. But, as Paul Harvey used to say, lets look at "the rest of the story."


Chart courtesy of www.chartoftheday.com

The above chart shows Standard & Poor earnings growth peaked several quarters ago. At that time earnings growth surpassed their highest recorded level since 2009, immediately before the Financial Crisis. Earnings growth has been declining since then. Can the market continue its parabolic rise at a time when earnings growth has been declining? Many so-called gurus think so. Or are portfolio managers trying to get into the market so they are not left behind?


Chart courtesy of www.realtimestockquote.com

The weekly ten year Dow chart seems to show there is still some upside potential. However, any further increase will create a steeper "rising wedge" formation which is a bearish sign. Some profit taking may actually be prudent at this time.

These are just a few points to keep in mind. There are definitely still opportunities to invest in this market. A well diversified portfolio remains the key to long term growth and wealth accumulation. And its not about how much you make in the market-- its about how much you keep.

Note: The above is for educational purposes only. You should speak with your own personal financial advisor regarding any decision to buy, sell, or hold specific assets in your portfolio.

Parabolic Rises and PE Ratios

Since January the Dow Jones Industrial Average has made new highs. Most every other stock index has confirmed a new high in one way or another. Our leaders in Washington have reassured the American public that the budget crisis is not solved but we are somehow made to feel better about the whole thing. The Federal Reserve has said they will continue their policy of monetary easing. Happy days are here again.

But why doesn't it feel that way?

There remains a lot of uncertainty in the financial markets and the global political picture. China is facing a real estate "bust" which will make our own real estate crisis in the US look minor. They will need to start liquidating assets in order to make good on their own debt obligations as they begin coming due. China is the single largest buyer of US Treasury assets. It stands to reason they will be forced to liquidate a portion of their holdings. How much liquidation has yet to be seen.

In addition S&P earnings are starting to slow down. This means that stock price-to-earnings ratios will continue to climb to historic proportions. Many countries around the world are still facing their own financial crises of different magnitudes.

The sabre-rattling around the world has become all too familiar. It almost lulls us into a sense of complacency. We are now closer to war in Korea than any time since the 1950s. Many countries are well along at building or obtaining nuclear weapons. The world is a much more complicated place than before.

But for now, the party on Wall Street is in full swing. Even the charts are confirming good times are here. I can't quite put my finger on it but something still does not feel "right" about all of this. It is certain that time will reveal all things. And all parties come to an end. This party might end when we least expect it.

Crisis Averted... For Now

The U.S. economy temporarily averted disaster at a much-anticipated bipartisan agreement to avoid going over the "fiscal cliff." It seems everybody was expecting the announcement because "we just couldn't let it happen." The market rallied as a result. No surprise.

Several key facts remain:
1. The government has just prolonged the agony of reaching a solution to our budgetary problems. The new agreement gives us an emergency extension.

2. The deadline for extending the national debt ceiling falls near the same deadline for resuming budgetary talks. The national debt ceiling could face even a more bitter battle in Congress before compromise is reached.

3. The economy will simply be put on hold until a definite solution is negotiated. Most employers will not be committing any significant capital or increase in their labor force until they are sure what the effects of the new agreement will look like.

4. Although both political sides claim victory they both have problems of their own. The GOP is clearly in disarray and seems to have fallen out of favor with the average American. Most blue collar, or working class Americans see the GOP as the party for the "rich." Yet nobody can seem to say who these "rich" people really are. The Democrats also have their problems. The President likes to say he has the confidence and support of the American people but he clearly could not get the other side to agree to a compromise without a significant amount of effort.

5. The market is trying to break above the right shoulder of our "head-and-shoulders" bearish pattern. The coming weeks will show whether the momentum is really there. If a meaningful compromise is reached the market should resume its bullish run. However, the uncertainty that presently exists will keep it in check.

The polarization in Congress is likely a reflection of the split among the American people as a whole. When united, we can accomplish alot. When divided, we accomplish little. Both sides are to blame.

There continue to be opportunities to trade these daily swings but the overall picture will remain negative unless Congress and the President reach a meaningful solution.