This Week in Barrons – 3-21-10:
According to a new report, ninety percent of all paper money in this country has traces of cocaine. Talk about your stimulus money! On the bright side, at least U.S. currency is worth something again.
I am currently travelling – therefore this Barrons will be shorter than most – thanks for understanding.
Do we all remember the gent who strapped some explosives into his underwear and made a feeble attempt to blow up an airplane. Did we forget that (a) he had an "accomplice" that helped him get on the plane, and (b) he had no passport but managed to get on this international flight? Can’t we fix the process before jumping into buying more ‘stuff’?
On Monday we got the "Dodd" bill concerning financial market regulations. In the bill there is: (a) no mention of the ratings agencies that gave those toxic assets a AAA rating, (b) the Fed gets even more power to oversee itself, (c ) no mention of the SEC who repeatedly ignored 4 different warnings about Bernie Madoff, (d) nothing about Goldman, Citi or J.P. Morgan OR ‘Too Big to Fail’, (e) but it does put tighter regulations on the small town regional banks – what problem are we solving again?
Toyota launched a big PR campaign to reassure customers that they’re standing beside their vehicles... because that's the only safe place to stand.
And then there is China. For some reason people still think we have some form of power over China. In fact one CNBC talking-head suggested we should "exert our influence" on them. What influence? China owns more dollars than we do, and they don't carry any debt on them. The Chinese military is nuclear and is bigger than our own. China is our biggest creditor, and if China were to halt exports to the US, Wal-Mart would have 4 items left to sell. We bought their products because we don't have our own. China bought our Treasuries because it was nothing more than a "loan" that allowed Americans to buy more Chinese stuff. We received stuff, and China received a trillion dollars of reserves and became the manufacturing capital of the world.
Moving to the market:
Monday was a picture perfect day of just how manipulated the market has become, and how complacent people have become about it. We opened flat, and stayed down about 30 DOW points until we heard Dodd's speech about his regulation bill, and then we magically turned green. Tuesday we found out from Ben Bernanke that “low rates will be sustained for the foreseeable future.” Larry Levin (on the Chicago trading floor) summed up what’s really happening to a CNBC reporter: “Yes, the market is being supported by the Government and each time something bad hits, whether it's Greece or what have you, they come in and support the market. Whether you like it or not, until that stops this market goes up.” That is how we get to 52 week highs while:
- the Empire state manufacturing index fell
- housing permits fell
- housing sales fell
- and additional banks were closed (making 30 this year)
Remember Ben Bernanke’s statement in March, 2009 - "Consumer confidence will increase with the gradual rise of equities" – do you think he saw this coming?
The latest Toyota Prius bumper sticker reads: "I'd like to brake for animals, I just can't."
I am in danger of having one of my predictions go south. I said that we’d see the market try and take out the recent highs, but probably come up short. Well, this week they pushed through the old DOW highs. If they take us to DOW 11,500 or more I'll be really wrong, and all we can do is ponder when this all does collapse. But for right now, I am going to continue to stand firm – and think that we are in the last days of the big run up, and we are in a mild form of "blow off top" right now.
It will be easy to see over this coming week if I'm right or wrong. If we are up and over 11K and still going, I am wrong. But if we gain a bit more and then see drop outs, my old prediction will have been correct. Yes we're at new highs, yet the volume stinks. This is a Fed driven move, and it's going to be interesting to see if they can sustain it.
The Senate voted against a plan to send a $250 check to 57 million elderly people. In the end, senators decided NOT to give the elderly money, because you know, they're just going to spend it on drugs.
I kept my stops fairly tight during the week – and on Friday was stopped out of all the short term holds that we had put out there. It’s truly not my style to day or ‘weekly’ trade stocks – but rather I prefer longer-term positions. Unfortunately you can’t fight the tape – so you take what the market will give you. Having said that … my stops are there only for ‘downward’ actions. That is to say: if I purchase XYZ at $20 and my opening stop would potentially be $19.50’ish – but once it started moving upward to say $21.00 – I’d adjust my stop to say $20.50 – strictly using the ‘tight stop’ to prevent us from losing our gains.
If you’d like to view my actual stock trades - feel free to sign up as a twitter follower – “taylorpamm” is my nickname on Twitter – fyi.
Until next week – be safe.