Do you want to ensure you’ll be working and panicking through your retirement years?  Then keep investing.

Today I’ll prove to you that unless you are a TRADER (not investor) odds strongly favor that, by the year 2019, your retirement will be worth exactly the same amount as it’s worth today — at best …

This is not about the Eurozone falling apart again; not about inflation, deflation or disinflation; not about politics or QE2 or anything that most people will care less about in 10-years.  This is a simple matter of history repeating itself, and a cycle that spans across a full generation.

I hope I don’t sound condescending when I say … WAKE UP!

I say it for your own good.

In financial markets, time has to be viewed in an emotional context because investors must adjust to new expectations.  Consider the power a few years of market advance or decline has on sentiment ingrained in the mind of the investor.  It tricks 85% of them at every turn — RIGHT?

Now consider what an 18-year cycle does to the mind of an investor.  Depending on the generation, he or she is trained to believe a market moves sideways over the long-term, or trends over the long term.

I’m a relatively young man — 43-years young — and some say I’m well read on stock market and economic history, while others (my wife and my kid) feel sorry for me for having a “boring” life, reading books, strictly, on the financial markets.  No novels, no fables — unless they are based on the financial markets or they are being read at my children’s bedtime.

But a person doesn’t have to have a single day of financial market experience to understand my point in the first couple of paragraphs today.  One need simply look at a chart of any financial market of the last 2 centuries. In fact, it would probably seem even more obvious to the non-participant that another decade of sideways action is a near certainty.

The Older We Get, The Longer The Hangovers Last

Look at the chart below that dates back to 1901.  It’s clear that long periods of economic expansion are followed by long periods of consolidation (trading sideways).

What’s more interesting is that, if you compare the booms (green) to the consolidation periods that followed (red), you can see that, after very long-term stock market advances, the market generally takes about twice as long to consolidate!

You can even look at the boom and consolidation period within the 1929-’54 “consolidation period” (if you want to call it that), and you can see that the huge gain from 1933-’37 (yellow) took nearly three times as long to consolidate (blue).

From the early 1800′s through the post-WWII era, the average cycle (not exclusive to the equity market) has lasted about 18 years.  But the length of this cycle seems to have expanded after WWII, possibly due to the significant increase of government interference and commitment to full employment.  The expansion of this cycle has caused an even stronger influence on the minds of investors who feel that “times like this” are here to stay.  That means it takes longer for these humans to adjust to the new cycle — a cycle that recently begun.

My Personal Perspective

I started paying close attention to the financial markets between 1992 and 1994 (in the wake of the 1990-1991 recession and S&L crisis.)  As far as I could remember, the market had always traded up.  In fact, it ran up from the early 80s for about 17 years!

In ’95 I started trying to convince people three times my age to buy and hold stocks, I couldn’t understand how they could sit on the sidelines or be so cynical and skeptical of the potential for a continued advance.  While I quickly educated myself on financial market history, I was completely uneducated in human psychology.  But how can you blame someone who sat through the market from 1965 – 1981 — and with inflation rates reaching over 14% — for not believing in the stock market?

Take a good, hard look at the chart below.

It’s a chart of the Dow Jones Industrial Average from 1965 (when it was at 874) through 1981 (when it was at 875).

So, you could have held a portfolio of stocks that mimicked the Dow for 16 years, and you would have made 1 point.

That’s a long time to wait for a point!

But it gets worse.  This period of time, adjusted for inflation, is actually comparable to the 1929 – 1932 market mayhem.  And consider the fact that this period began after 24 years of rising prices!  (Does any of this sound familiar to you?  The market ran higher from 1981 – 2000 where it peaked — adjusted for inflation — or made its first double top in nominal terms.)

“Don’t sweat it!  I’ve got time!”

The next 10 or 15 years will be a period of long-term consolidation for the stock market — meaning, it will ultimately trade sideways and end up in the same place it started.

If you’re like most retirement account holders, you’re passive, your 401(k) is largely tied to the general stock market, and you’re still in shock, trying to digest what recently happened and what the future holds.

Don’t understand the impact that inflation has on real stock market returns?  You’re not alone.  But here’s an inflation adjusted 140-year chart of the stock market.  Notice how this chart doesn’t show a flat market from 1965 – 1981.  Now you know why I said this period was actually comparable to the 1929 – 1932 crash.

Also notice that, adjusted for inflation, the stock market peaked in the year 2000.  The good news is that means we are already about 10.5 years into the consolidation period.  The bad news is that, historically, the market has taken twice as long as the preceding bull market to digest the intense gains.  Even if the recent economic expansion, from the early 1980s to the recent 2007 top, takes HALF as much time to consolidate (as opposed to the historic 1.7 to 2.88 of the time), we wouldn’t revisit the 2007 high until 2019.

Again, I highlighted this in the “nominal return chart” posted again below for convenience.

We are right in the middle of a “transitional period” for the economy and virtually all financial markets, so investors are experiencing the highest level of confusion we have seen in generations.

Don’t think we will recover and just move on “as usual” — just forget about that.

Banks are rehabilitating their balance sheets (by not doing any significant lending), and the sector is in the process of de-leveraging.  As a result, you are likely to see lower growth, lower investment, and nominal GDP.

The next 16 years may look similar to the the chart below (from 1965-’81).  That’s FINE, and could be a very profitable market to play in, as long as you aren’t considering the “buy and hope” strategy that worked for the last quarter-century.

There are solutions to this nightmare of a problem, but unfortunately only some of you will have the understanding you’ll need to adapt to the new economy, and the new market opportunities.

Step 1. Immediately break away from the concept that the majority of your equity holdings should be held and forgotten about over the long term.  This is the toughest step of all:  To be the minority.  To not view the world the way 80% of people in the market view the world.

Courtesy of businessinsider.com

Step 2. To make money in the market is to be a trader.  When I say “trader” I mean a person who trades trends (and sells options premium when it’s flat).  An investor, to me, is someone who holds stocks for many years.  Over the next decade it will probably pay to “trade” … even if that means holding for 3-6-18 months at a time.

Step 3. Be in the right sectors of the market — the ones experiencing “mega-trends” are the easiest to play.

Tycoon has a clear picture of what’s going to happen next, and we’ll be showing our readers and students how to make “Quantum” returns — not only by explaining what asset classes hold the most strength and when, but more importantly, by training you and educating you so YOU can find it for yourself.

What are “Quantum returns”?

Well, in 1970, Jim Rogers and George Soros founded the “Quantum Fund.”  During the following 10 years, the portfolio gained 4,200% while the S&P 500 advanced about 47%.  Jim Rogers has been leading the charge as the face of the long-term commodity boom.  If you agree with the idea that inflation is coming, then you agree with Rogers.

That’s why, earlier, I talked about how to best take advantage of the agricultural sector.  After a short pullback, the sector will likely advance another 25 – 40% over the next year.

We’re going to bring you the education you need to make sure you aren’t one of the MAJORITY of people who will have a stock account worth the exact same amount as it was 10-20 years prior.

And by the way, we have never had a period of time where the government prints tons of cash (as it has just done), that wasn’t followed by inflation.

The U.S. is likely going to end up seeing runaway inflation.

So, even though most people will end up with the same amount of money in absolute terms, the fact is that the money might be able to buy you half as much stuff!

While considering Jim Rogers’ performance from 1970 – 1980, and pointing once again to the charts above and the difference between that time period’s stock market in nominal terms and inflation adjusted terms, consider that in the 70s there were wars in the Middle East and inflation rates were over 14%, gold gunned higher to over $800, OPEC limited the supply of Oil and the U.S. economy was a mess.  Does this sound familiar?

In Closing …

Some of those reading this article can’t envision a market that doesn’t advance over the long term.  Who can blame you?  Many of you weren’t watching the market prior to 1981.

But the 24-year trend occurred because of corporate profits that were largely a function of cheaper and cheaper financing, and higher and higher leverage, combined with increasingly complex financial innovation and loose regulation.

Here’s what you have to do.

Now that we are IN THE MIDDLE OF the “worst crisis since The Great Depression,” you are going to have to do something that investors haven’t had to do in 30 years …

You’re going to have to shift your mindset away from the way you’ve been trained to view the stock market over the last couple of generations (for some, including me, that’s as long as you can remember investing), and adapt to the new stock market — one similar to the market from 1966-83.

After a three-year stock market massacre (from late 1929 to late 1932), we had a massive 4.5-year rebound.  The market would rally off of vast government expenditures and monetary chaos.

It was an artificial recovery (similar to what we are seeing today).  The economy went downhill again beginning in 1937-38 (followed by a brief rally and another four-year sell-off) because we didn’t encourage private enterprise.  Familiar?

And the reason I think this time frame is a better comparison is because now we are seeing the same thing:

We have interest rates at nearly zero (and a strong fight by global governments to keep that intact for as long as possible), and massive economic stimulus by the government into the economy.  (So, the gains are artificial, and Uncle Sam will eventually stop the massive “stimulus” that’s causing the “stabilizing economic mirage.”)

Even when the current economy is seeing GDP growth quarter-over-quarter, the big picture is the United States becoming totally addicted to the current policy framework.  And that’s the key to this whole article.  People become addicted and accustomed to a way of life in the financial markets and the economy.  It’s almost impossible to get people to change their mind without them first feeling severe pain.

What you’ll see, just like the late ’30s – early ’40s, is massive reliance on the government, followed by fiscal policy tightening to fight the inevitable inflation with higher and higher interest rates, and a country where private enterprise has been completely discouraged.

To put it simply, here’s an analogy: The economy doesn’t REALLY pick up again until the kid, who always had mommy and daddy paying his way, decides he is uncomfortable enough to get up and start a business of his own.

What the heck do we do?

Never fear!

Being forced to have your retirement account pegged to one of the major stock market indices such as the S&P 500 or Dow-30 is a thing of the past!  This isn’t the old days where your financial hands are tied!

There are plenty of other asset classes that will give us explosive opportunities, and if the stock market is your place of comfort, or if your 401(k) plan is restricted to the stock market, that’s perfectly all right, too.  You can make huge profits by TRADING the stock market instead of the “buy and hold” strategy that worked for the last few decades.

Before the roaring ’90s, the stock market was a place that seemingly was meant for wealthy Tycoons only.  We won’t go back to that way of thinking, simply because of the access to information and education that you now have at your fingertips.

Tomorrow’s market will be a place for different kinds of Tycoons! And you’re one of them …

Look again at the chart from 1965-’81. What do you see?

I see nine opportunities:

• 4 major long-term downtrends (red arrows) — profitable for bearish positions.
• 4 major long-term up trends (green arrows).
• And perhaps the best part: one zig-zagging sideways trend — a premium-collector’s dream (think options).

Most individual investors will look at their retirement accounts and regular accounts 10-20 years from now, and the value won’t be much different from today’s value.

You, on the other hand, can make “Quantum returns” in the same time frame, if you know how to view and trade the market.

(Remember, Jim Rogers and George Soros made 4,200% from 1970-’80 when the market gained 47%.)

How’d they do that?

The secret to making “Quantum returns” is to stop believing in “the market.”  If someone asked you what “the market” is doing, you’d probably tell them about an index of 30 stocks known as “the Dow Jones Industrial Average.”

Most investors, who are unsophisticated, believe they are at the mercy of this basket of securities.

GET THAT OUT OF YOUR HEAD RIGHT NOW.

You can free yourself financially if you understand two things:

1.  Understand that financial markets are broken down into many different categories.

You can trade stocks, bonds, currencies, etc.  If you find, at the time, that equities (stocks) are where the strength is, the first thing you would do is find out which of the global markets are the strongest (U.S., China, Brazil, etc.).

Then you should find out if the strength is in large-cap stocks, mid-cap stocks or small-cap stocks.

If it’s in large-cap stocks, is the strength in large-cap value or large-cap growth?  If it’s large-cap growth, is it in financials, energy, technology, etc?  If the strength is in large-cap growth tech, would that be in software, semiconductors, computers, Internet, etc.?

Zooming back out, you have to view the financial market as a place that offers you many choices.  You don’t have to be in stocks.  For instance: When we experience runaway inflation, you’ll make huge Quantum returns in commodities.

2.  Understand how to identify where the strength or weakness is found.

Whether the strength is in stocks, commodities, bonds or currencies, you can use basic technical analysis to spot the trend.  And the trends you’ll find will usually stay intact for a significant period of time.

You don’t have to find strength in a group to make money — you can make just as much money by identifying weakness.

If you have a 401(k) that’s very restrictive, only allowing you to invest in a hand full of equity funds, don’t sweat it!  Once you understand how to view the market (one that offers you many choices on where to put your money), you’ll know how to work that angle, too.

You can chose to invest in the funds, likely offered by your 401(k) plan, that are more likely to show the most relative strength.  And when the market starts reversing lower, you can move out of that fund and into a money market account (which is similar to cash) until strength returns.

Transition to your richest days yet.

Use the current economy’s “transition period” that I mentioned to educate yourself on how to break down the market.  Make “Quantum returns” and don’t sit there with your retirement at the mercy of a couple of indexes that are known as “the market.”  Those indices are nothing more than a distraction, and are being used to manipulate market psychology like shaking shiny keys to distract a kitten.

Don’t fall for it.  Don’t let them play you.  Start studying and play the markets.

Go read this letter to learn how to do all of this:

http://www.InvestorRules.com/VIP-Portfolio.html

Enjoy

Eric LeRiche

InvestorRules.com

What about now though?

There’s no doubt the previous six weeks are actually fairly remarkable. This rally resembles the 1 we noticed previously this yr, from the lows in early February towards the 2010 highs in April.

Using the S&P 500 Index closing yesterday at 1178 (breaking yet again another key resistance level at 1171) the marketplace rally which was sparked on September 1 has now booked an incredible 12% gain.

To say that we’re overbought is an understatement, but “overbought” doesn’t mean “over”.

The question for investors who are still riding the rally — or for those investors who are considering putting fresh money to work now — is “should we ?”

Here are 3 warning indicators that this rally might be in danger of peaking:

WARNING SIGN #1:

THIS RALLY HAS BEEN EXTENDED BY MORE SIZZLE THAN SUBSTANCE

Unemployment rate going down? Nope.

Housing marketplace turning around? Not fairly yet.

Credit expansion and consumption rates increasing? I think not.

Fed Reserve Bank to buy another half a billion to a trillion dollars of US Treasuries? Now we’re talking.

That’s right, using the economy threatened with deflationary pressures — excuse me, disinflationary pressures — and a double dip recession as a real possibility on the horizon, the markets are rallying on good old fashioned pump priming.

Increasing the money supply, sinking the dollar, and lowering interest rates are actually fuel towards the fire for equities and commodities.

I commend the Fed‘s bold actions to try to stave off another recession and jolt the fledgling recovery.

The Fed all but gave us a tour of the printing press room when the minutes from the FOMC meeting were released on Tuesday. Here are a few quotes from the text:

“Accommodation might be appropriate before long”

“Ready to move unless economy strengthens”

“Want to consider the framework for calibrating and communicating policy”

The markets are directly feeding off of these intentions and have fully discounted the injection of liquidity. The problem is that the time frame and quantities are unknown, and any type of let down in the marketplace place could trigger a selloff.

If the Fed does not over-deliver on marketplace expectations, we could be in for a traditional “buy the rumor, sell the news” scenario. In any case, the focus now to turns towards the Fed’s next policy statement on November 3rd, the day after the mid-term elections.

WARNING SIGN #2:

THE FINANCIALS ARE BEING LEFT BEHIND

Below is a chart of the S&P 500 Index since the rally began on September 1. Against the back drop will be the performance of the Thomson-Reuters Commodities Index (CRB) and the Financial Select Sector SPDR ETF, XLF which will be the product that includes the major financial banks.

The blue line shows the relative strength commodities have shown during this rally (the sizzle factor directly attributed towards the expectation that the Fed will ease) and the gold line shows the lag of the financials (the substance factor of real stability and economic health).

In fact, JP Morgan (SYM: JPM) released earnings Wednesday morning with an .11 beat above analyst estimates. The problem: JPM missed by half a billion on Revenue, and they goosed their bottom line with accounting shenanigans by lowering loan loss reserves by an arbitrary $1.50 Billion. Credit and default risk remain a viable concern, a fact conceded by the CEO, Jamie Diamond. Without the loan loss reduction, they would have missed on the bottom line as well.

The marketplace noticed right through this, and JPM finished down 1.5% on the day. Bank of America, Wells Fargo, and Citigroup are next to report, and will probably report similar if not worse results.

Without the financials improving, and using the problems that will continue to plague the banking system through at least the end of the yr, it’s going to be hard for the marketplace rally to continue to ignore this reality.

Continue to monitor the banks as they report — the other 3 report early next week.

WARNING SIGN #3:

SHOW ME THE VOLUME

Trading volume is of utmost importance in technical action. Although price action will be the most transparent and critical factor in technical analysis, volume tells us the conviction of the marketplace place.

The volume tells the story behind the scenes, and this rally has seen trading volume off by roughly 30%.

Below is a year-to-date chart on the SPY’s, the largest ETF that tracks the S&P 500 index, and a very good proxy for trading activity …

The lack of volume (conviction) in the current rally is similar to what we noticed leading up towards the April highs. (The red lines in the price chart and volume chart show the divergences.)

SO,  is the RALLY ABOUT TO FIZZLE?

When you couple all 3 of these warning indicators together with an overbought technical rally, caution lights begin to flash.

If you still believe in this rally, use some of your profits and buy some protection in the options marketplace with premiums at very low levels. If you’re right or wrong, it will be money well spent.

If you want to put fresh money to work at these levels, again use options to play the long side. Premiums are cheap and your risk will be limited.

Trade carefully

stock market collapsing

Unemployment is staying stubbornly higher, negating a continuation of last year’s recovery. A resurgence within the housing marketplace appears doubtful. Not too long ago, prestigious Yale College professor Robert Shiller estimated the possibilities of a double-dip recession are higher than 50%.

Stock market collapsing?

It is no wonder there is a mass exodus out with the stock market although money is flowing into bond money quicker than an Allen Iverson crossover. Individuals are concerned about their future, and their primary focus, right now, is protecting their capital.

Nonetheless, I’m right here to inform you that your investing technique is probably around the verge of disaster just like the stock market.

Where’s everyone heading?

Within the frenetic craze to discover safety for his or her portfolios, traders are leaping around the bond bandwagon, regardless of horrible returns. Not too long ago, yields for a 10-year Treasury fell as lower as 2.5%, although financial savings accounts and CDs are dishing out dismal, less-than-1% returns. However nonetheless, the rush goes on:

* In accordance with the Investment Company Institute, bond funds attracted much more money than equity money for 30 straight months, the longest in twenty three years.

* Regardless of a historically low multiple of price to prospective earnings below 13 for the broad marketplace as per the Morningstar, investors are not creating large demand for stocks, because the S&P 500 index is down for the yr.

stock market collapsing?

Don’t get me wrong. There is plenty of reason to be worried about the marketplace. Just like everybody else, I’m slowly watching the value of my portfolio decrease as my investments take unwarranted plunges into deeper water. However, regardless of what your macro outlook is, you nonetheless should stay invested in stocks.

Why? Because equities are able to provide income, to grow at substantial rates, to guard your portfolio against potential inflation. Fixed-income investments are just unable to offer such advantages. To put it simply: Investing in stocks is the only method to insure a secure and profitable retirement.

Make sure you avoid this error

Now I am not stating that you should not possess some of your hard-earned money in bonds or bond money. Quite the opposite, keeping a portfolio with proper asset allocation is essential, so you should definitely have a given percentage of your cash in bonds. But avoiding stocks altogether is a huge mistake, and it appears as though it is one that a large number of individuals are making right now.

To try and talk you out of this enormous blunder, I’ve decided to keep my VIP Portfolio membership open and am continuing to offer a 30 day free trial where you get access to the membership area without having to take out your credit card like most ytiasl ask you to do…

If after 30 days you decide you want to contuniue with it we’ll set it up then. In the mean time all you’ll have to do to get access to this money making site is to choose a username and a passwiord and voila, you’ll be in…

Simple enough?

Go ahead, Step up to the plate. Just click here to learn more about it and actually take advantage of the upcoming stock market collapse

Time to be bullish ?

Investors May Get Their Chance to Go Long as some think this is a good time to be bullish…

The summer might be ending, but the volatility continued yesterday, as shares prolonged the large gains made on Wednesday. And a late afternoon rally took prices towards the higher with the day almost at the final bell.

Economic reviews appeared to be the cause for the rally. Preliminary jobless claims for that week ended Aug. 28 came in at 472,000 versus an expected 475,000, and continuing statements fell to four.46 million from 4.48 million. Productivity in Q2 fell 1.8%, that is close to the prediction of 1.7%, and unit labor costs elevated 1.1% as expected. But pending home sales resulted in a very surprise — up 5.2% for that month exactly where analysts had anticipated no change. Factory orders for July increased .1% as opposed to an expected .3%.

Time to be Bullish?

Retail shares loved a strong session, climbing 2.2% subsequent a report of strong back-to-school product sales for August. Consumer discretionary shares gained one.8%, and industrials were up one.2%.

Alcoa Inc. (NYSE: AA) led the 30 Dow shares, up 2.85%, adopted by The home Depot, Inc. (NYSE: HD), up two.58%, and also the Boeing Business (NYSE: BA), up 2.1%.

The euro rose somewhat versus the dollar, and Treasuries fell again, bringing the 10-year note to a yield of 2.627%.

The Dow Jones Industrial Average rose 51 factors, closing at 10,320, the S&P 500 rose ten points, closing at one,090, and also the Nasdaq gained 23 factors at 2,200.

The NYSE traded 960 million shares with advancers ahead of decliners by two.5-to-1. On the Nasdaq, advancers had been ahead by 1.7-to-1 on volume of 463 million shares.

Time to be bullish?

Crude oil for October delivery rose $1.11 to $75.02 a barrel, and the Energy Select Sector SPDR (NYSE: XLE) closed at $53.55, up 44 cents.

September gold gained $5.20, closing at $1,251.50 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) gained 2.15 points, closing at 186.41.

What the Markets Are Saying

In just two days shares have miraculously revived and vaulted to regain almost half of the losses of the entire month of August. And the S&P 500 sprang from the support zone at one,040 to 1,055 subsequent daily reversals and buy signals from our in-house indicator, the Collins-Bollinger Reversal (CBR)!!!

Thursday’s Daily Market Outlook gave several levels of the S&P as targets for that reversal: Fibonacci numbers: 50% = one,084, 61.8%=1,095, and then the 200-day moving typical at 1,115.

And, of course, there is the psychological resistance line at one,100, which may turn out to be the first stop for this rally. Not only is one,100 touted by the press as a barrier, but on eight days this yr it has halted short-term rallies, and in every case the failure to penetrate 1,100 led to a reversal and a test of support back towards the 1,040 – 1,055 support zone. This is not solid enough evidence to “bet the farm” on a reversal down from 1,100, but we should closely observe the tape action of the S&P 500 and be alert to the possibility of a reversal if it nears that mark.

Today is Friday, and that means a review with the sentiment indicators. Last week, the AAII bulls were at the lowest percent (20.74%) since July 7 at S&P 1,028. And July 7 marked the beginning of a five-week rally that took the S&P 500 to the top at one,129 on Aug. 9.

This week another with the important sentiment indicators, the Investors Intelligence Advisors Sentiment, showed a drop of bulls for that third consecutive week. They were 29.4% versus 33.3% a week ago, and 41.7% at the start of August. Both the AAII and also the Traders Intelligence reports are reverse indicators — a drop in sentiment for both is bullish for that markets. And the markets appropriately responded.

A very fine technician, Sam Turner, of RiverFront Investment Group, produced a study that appears to indicate that if the current rally follows the course of the two major reversals this yr, the slope with the resulting uptrends is important. He concludes that we should see a multi-week rally and the now familiar resistance at one,130 should again come into play by the end of September.

Well, it’s a long time between now and also the end of September, but we should keep the target in mind. Between now and 1,130 there could be many opportunities to pick up lengthy positions since the two prior bounces from 1,040 had many detours — one of which took us not to 1,040, but to the low of the year at one,011.

We will not be publishing the Daily Market Outlook on Monday, but next week I will continue our discussion of forming a clearly defined trading plan. Have a happy and safe ( bullish) holiday…

stock market rally

Time for a stock market rally?

U.S. existing-home sales are down to their lowest level in 15 years, how on earth could we have a stock market rally in the short term?

It’s about two things:

Quant Funds and Market Sentiment.

SENTIMENT: Traders are already pretty bearish, so for the market to tank from here, we’d have to see a real sh** storm — which we may still get. You need to see human beings really panicking, but correct now the bearish trade might be becoming a bit overcrowded here, and that makes it harder to move lower. Those of you who understand how to balance current market sentiment with your trading decisions know precisely what I’m talking about.

In this weekend’s New York Times, in an article by Graham Bowley, I read that “Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year…

Time for a stock market rally?

“If that pace continues, more money will be pulled out of these mutual finances in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.”

At exactly the same time, I’m seeing that bond fund inflows (new cash invested in bond finances) has outpaced the equity fund inflows for 30 months in a row (through June).

Why is everybody scrambling, and what does it all mean?

First of all, this is a contrary indicator. Don’t believe the day of the announcement means we have hit the bottom. But these are the signs that we typically see near long-term stock marketplace bottoms. The individual investors that are exiting the mutual funds are exactly the same ones who thought it was a great idea to buy and hold stocks long-term, and that history doesn’t repeat itself (history pre-1995).

We can — and I think usually will — be able to use human beings as a really efficient contrary indication. But what about the quant finances? The quants are attacking!

Quant fund? Sounds like a breakfast cereal of some sort.

What is really a quant?

A quantitative analyst is somebody working in finance utilizing numerical or quantitative methods. Quantitative analysts were originally concerned with investment management, risk management, and derivatives pricing. But in recent times the phrase “Quant” has expanded to include analysts involved in most applications of mathematics within the financial markets.

Examples include statistical arbitrage, algorithmic trading, and electronic marketplace making.

The quant funds may truly help turn the S&P 500 around these days, pushing it as high as the 1,075 area by Thursday’s close (from 1,055 correct now) because, as you can see, the reversal these days appears to be happening correct at the key support level of 1,060. This is a level that computers have programmed in as a place for a reversal to happen.

Human beings who are smart traders might view this marketplace as a short-term turnaround because they know sentiment is already quite bearish. Unless there is a bunch of earth shattering news, it is going to be hard to send it straight down without a little relief rally first.

Time for a stock market rally?

So we have human sentiment as well as quant cyborgs both focused on a potential bullish reversal, but for two different reasons. The humans have the edge, though, because they know what the machines are likely focused on, while at the same time being able to use common sense. Machines are limited on how they quantify sentiment.

Do not get me wrong, I still believe the long-term down trend stays in play for a while, but for the next few days I’m not going to follow the herd. The herd is lazy to the point that they want to either purchase and hold, or let computers trade their accounts. I have a bad feeling ( or a good feeling depending on where I look…) that we will see a stock market rally in the very near term before heading back down.

With today’s cyborgs managing most of the money within the world, seemingly, investors have Truly hit cruise control. But the quant fund universe is getting overpopulated, and getting old fast. With the flash crash of Might 6, 2010 we saw how the robots can take over the world like some sort of bad sci-fi movie. That sent individual investors hitting the quant exit and going back to the good ole fashion human being.

The one winner out of everyone is the EDUCATED individual investor! They’ve been sticking with the equity markets, able to trade and make cash whether the marketplace moves higher or lower and they are having a field day. I know this First HAND!!!

The herd who have been exiting the equity marketplace all together (that means not taking bullish OR bearish bets) have been hitting the bond funds. Treasury bonds are skyrocketing pushing the yield on the 10-year note down to 2.49% after briefly touching its lowest level since March 2009 today! Remember what happened in March 2009? It was the bear marketplace bottom!

I’m not saying we are at a bottom or the bottom. I evolve with the marketplace and my educated students do exactly the same.

Once again let me warn you that I`m not saying we will have a stock market rally in the short term but I wouldn`t be surprised if we did before heading back down again….

Are you ready?

http://www.investorrules.com/VIPportfolio.html

economic recovery

Economic Recovery?

* The stat that looks more like “recession” than “economic recovery …”… and more where that came from

* Hedgies sour on stocks: Soros dumps holdings, Bass says, “I do not understand how I can be long”

* How the president just handed you the subsequent “mega income opportunity”

* The new frugality? Seattle getting back again towards the garden

* Readers fire back again on Social Security… and provide up a novel theory

Surveying the financial news this morning, it’s difficult not to ask the question, “Is this what a recovery really appears like?”

We are informed this morning that the final U.S. “combat brigade” has left Iraq, and “combat operations” there are more than. Of program, 56,000 U.S. troops remain there. The majority of them used to become “combat troops,” actually. But now they’re “transitional troops.”

You can be forgiven for thinking that nothing’s changed a lot. Ditto for what we are informed about “ the economic recovery .”

Certain sufficient, we have yet another “unexpected” increase in first-time jobless claims this week. Even worse, the number touched 500,000 for the initial time since final November, a figure which has more of the scent of “recession” than “recovery.” (Inside a more-or-less “healthy” economy, the number is much more like 300,000.)

Economic recovery ?

We also possess a mediocre statement in the Conference Board. Its index of leading financial indicators rose in July… barely. Some economic recovery …

In spite of a mainly chirpy statement accompanying the Conference Board’s information (“The indicators point to a slow expansion through the end from the year”), traders went into a snit. The Dow shed 145 points in the initial 35 minutes of trading, to amounts unseen in almost a month. Some economic recovery …

George Soros is bailing out of U.S. stocks. Soros Fund Management, with $25 billion in assets, slashed its equity holdings 42% through the second quarter — from $8.8 billion to $5.one billion. His once-sizable holdings of Wal-Mart, JP Morgan Chase and Pfizer now quantity to only a few token shares every. Hmmm, that doesn’t sound like a bet on economic recovery.

His greatest holding is GLD, the giant gold ETF.

Exactly where he’s shifted the cash is more challenging to inform in the 13-F he filed using the SEC, because the document tracks only U.S.-traded shares and related derivatives.

Maybe Soros sees the same thing Hayman Capital’s Kyle Bass sees. “I don’t understand how I can be long stocks,” Bass stated this week in one of those moments when CNBC goes suddenly off-script and the anchors’ faces turn white. (Memo to CNBC producers: Should you book someone who called BS on subprime anytime prior to August ’07, you have poorer-than-usual odds he’ll say things are hunky-dory now.)

And his factors do not even have that much to complete using the U.S. recovery, or lack thereof. Bass (no relation to the Texas billionaire Robert Bass, if you’re wondering) is worried about European bank leverage, European government debt along with a deadly mixture of debt and demographics in Japan.

American consumers haven’t stopped deleveraging. Customer indebtedness — that’s credit rating charge cards, mortgages, every thing — fell 1.5% during the second quarter, to $11.7 trillion. That total is now lower 6.5% in the peak in Q3 2008, according to the New York Fed. Some economic recovery …

Californians stay probably the most in hock, with per capita indebtedness of $78,000. The national average is $49,000.

A separate Fed report indicates charge card credit card debt has returned to its October 2005 level.

“We do not know where this procedure will go,” Bill Bonner wrote yesterday, “but if consumer credit card debt would be to be reduce in half, it’ll carry about seven-10 many years, at this rate.”

Of program, perhaps people are paying lower their high-interest credit cards by skipping their lower-interest home loan payments. Mortgage delinquencies remain stuck at insane amounts — six.67% of all exceptional mortgages had been at least 60 times in arrears during the 2nd quarter, in accordance towards the credit reporting firm TransUnion.

That’s really lower a bit in the first quarter, but far above the regular 2% or so.

For that 2nd Thursday inside a row, spot gold surged the moment the Labor Department announced an “unexpected” improve in first-time jobless claims. An ounce of the yellow metal presently goes for $1,237, a level final noticed in late June.

“Over the last couple of times, gold has broken out to the upside,” claims Richard Russell, the 80-something dean of newsletter males. “The breakout is capable of getting gold towards the previous record highs.” Which squares nicely with the seasonal elements Frank Holmes discussed right here last week, like wedding season in India.

“President Obama has provided us our next mega earnings opportunity,” claims our dividend hound Jim Nelson after reviewing a current speech the president gave on education. “Whether you’re an Obama loyalist, a Tea Partier or anything in in between, it is clear the subsequent major concern — besides possibly energy — will be education.

“Even with massive increases in education spending over the final a number of many years, comprehension and retention prices are falling flat. According towards the Department of Education, reading levels have not improved 1 iota amongst 17-year-olds because it started keeping track of these in 1971. However we’re paying twice as much on an inflation-adjusted basis.” Some economic recovery …

“Meanwhile, education amounts in our G-8 colleagues’ countries are at the same levels, and many are even higher. Yet they aren’t investing nearly as much every student as the U.S.

“Of program,” Jim persists, “just simply because the stats do not line up with spending right here within the U.S., it doesn’t mean we’ll see any less spending heading forward. In fact, the greater involved the federal federal government gets with education, the more cash we’ll see thrown at it.”

Indeed. “Local and state governments still make up the majority of training budgets. And they’ve the two been uniformly cash tight since the economic collapse started in 2008. But education may be the one department they aren’t searching to cut. Rather, they are just moving cash around. Some economic recovery …

“One department producing out even in this atmosphere is educational technology. Each yr, the number of students per pc goes down. Eventually, we could see much more classrooms with a one-student-to-one-computer ratio. Meanwhile, the software continues to improve at incredible prices.”

We  just identified a solid dividend-paying organization poised to create probably the most from the trend. It’s the ideal complement to another earnings opportunity that’s so reliable, he considers it “the other” government-backed retirement plan that could make up for threatened cuts to Government retirement. You are able to understand all about this here.

Sign of the times? The town of Seattle just created major modifications to its zoning laws, clearing the way for people to create much more of their personal food. Folks in the Emerald Town can now keep as much as eight chickens, and they can develop crops on as much as 4,000 square feet of property in residential zones. (They can sell their create on-site, too.)

Coming quickly to some metropolis near you…

Sure, you can chalk up some of the to effete Pacific Northwest kinds heading natural and “locavore.” However it could also be an extension of the “new frugality,” as seen with the boom in house gardening that got below way more than a yr ago, when mail-order seed companies ran away from supply.

And even Seattle has its limits: Roosters are banned.

“To the reader that talks about individuals ‘yammering’ for Government retirement,” a reader writes, “I’ve been spending into SS for longer than you (now 62). And you’re damn right I’m ‘yammering,’ as you put it. The federal government started stealing this money back again close to 1960, once they first started transferring from SS towards the general.

“As much as I’m worried, I paid into this fund (had no choice, actually) in good faith and the federal government owes me this cash. You might be completely content material to sit back again, do absolutely nothing and create off what’s rightfully yours, but I’m certainly not. Whether or not 1 has a backup strategy (I do) is not the concern. Remember the adage — All it requires for any tyrannical federal government is for good individuals to complete nothing.”

“For individuals people facing retirement without the Social security benefits for which they happen to be paying for all of the operating lives, putting an option in location is not only a great idea, but mandatory. But what about all the individuals who’ve already reached the age to obtain benefits, for whom Social security is currently a minor piece to some major piece of present funds for sustenance?

“It is a little late to tell us that what was a legally required bad offer to start with now leaves us starving within the gutter. It is just a little late for us to alter horses now. Anybody obtained an solution to that one?”

Present retirees probably have little to be concerned about, a minimum of if you’re to believe Alan Simpson, the Republican co-chair of Obama’s deficit commission. Final spring, he colorfully described who’s sending him probably the most mail about the concern: “These old cats, 70 and 80 many years aged, who are not impacted in one whiff. People who live in gated communities and drive their Lexus towards the Perkins restaurant to get the AARP discount. This is madness.” Some economic recovery …

Of all the Social security reform proposals floated in the last ten many years, “none of that affects anybody more than 57,” declared Simpson (who turns 79 inside a few times). For what ever it is worth…

Taking the discussion inside a whole other direction: “As an owner of several little construction-related businesses in Virginia, we have hired upward of 20-30 immigrant workers through the ‘good occasions.’ All had ‘proper’ paperwork and Government retirement charge cards. We followed all the guidelines, and so on., within the hiring of ‘immigrant’-type employees. When I once obtained involved in looking over some of the paperwork; it was easy to determine that some of the SS charge cards were just plain fakes. I then reviewed all of the employment files and determined that at least two-thirds of this operate force was probably illegal, if not all.

“After thinking about it, I instantly let all of them attrition out, which is easy with this type of worker, as I did not want to take any opportunity of my business being shut lower overnight because of INS ‘capturing’ my employees all in one day. Following much more thought, I wondered why hasn’t the federal government contacted us concerning these obviously fake Government retirement charge cards. There has to become some kind of contradiction within the system that would increase a red flag. WHY?

“Because the government is getting the illegals’ deductions in purchase to fund today’s retirees Knowing that they, the government, won’t ever need to spend out for these illegals, as they will, at some time, go back again to Mexico or wherever they arrived from. It is a perfect scam for that federal government to hold up Government retirement. They are knowingly supporting the unlawful immigrant scenario right here in the U.S. in purchase to fund the government. Why do you believe the ‘cost deficit’ for Social security has mysteriously increased more than the past yr? It is because a large proportion from the unlawful immigrant population has gone back again to their house nation due towards the nonexistent construction investing and is no longer paying into the fund. It’s a vicious circle, but one thing’s for certain, we won’t ever see amnesty for the unlawful immigrant populace; it would torpedo the entire Social security scam.” Some economic recovery …

stimulus backfire

The

Stimulus Backfire !

* The Fed can print it, but can’t manage it: States hoard cash intended to save teacher careers

* Sign from the times: Top-performing worldwide indexes belong to socialist nations

* Rich Lee on the sudden resurgence from the eurozone crisis

* Plus, Alan Knuckman about the current stock selloff… beginning of the downtrend or an isolated event?

You need to be particularly heartless to lay off a teacher, says the political will off the moment. That was the sentiment behind the $26 billion state stimulus bill passed last week, $10 billion of which was supposed to conserve 160,000 teaching careers at danger of elimination due to spending budget shortfalls.

Do it for the children, correct? Perhaps not…

“We’re a little wary about hiring people if we only have money for any yr,” Clark County Las Vegas CFO Jeff Weiler told The New York Occasions this morning. Heh, what do you imply, Jeff? It goes against your fiduciary instincts to invest “free” cash these days knowing you will require much more of it tomorrow?

“You’ve obtained this herculean job to deal with next year’s deficit,” said Lydia L. Ramos from the Los Angeles Unified School District, which may just take its “stimulus” cash right towards the bank in hopes of getting an early start about the college district’s $280 million 2011 spending budget gap. “So if there’s a way that you could lessen the blow for subsequent year, we feel like it would be accountable to try to do that.”

The Times is covering this story as you’d expect, tugging on heartstrings with first-hand profiles of teachers on the brink and a common air of resentment… “Some of the nation’s greatest college districts are balking at using their share from the cash to employ instructors correct away,” they report.

stimulus backfireBut haven’t we been through this already? Recall 2008, when a $160 billion stimulus gave each and every middle-class American a verify for $300… and what did they do with it? Several months later, banks get $700 billion… and didn’t lend a penny of it. GM got $57 billion, then went bankrupt. AIG… we don’t even keep track anymore.

We really feel for instructors and their students as a lot as the next guy. But can they be “saved” with more easy money?

The stimulus debate du jour is how the federal government will conserve Fannie Mae and Freddie Mac. Much more federal government assistance is essential, said Treasury Secretary Timothy Geithner, the maestro of yesterday’s White Home housing summit, “to make certain that Americans can borrow at sensible interest rates to buy a house even inside a downturn.” It’s, after all, your God-given right.

To be clear, the Treasury “will make sure the GSEs possess the resources to meet their financial commitments,” Geithner added. Whatever the fate of Fannie and Freddie, it will be financed with tax dollars and controlled by federal government. Both businesses, in spite of being in the really heart from the monetary crisis, had been left out from the current Monetary Reform Bill.

stimulus backfire“Government is component of our future,” Expenses Gross responded. “We need a federal government balance sheet. To suggest that the private marketplace come back in is merely impractical. It will not operate.”

Scary stuff, eh?

As menacing as this all ought to sound, here’s an interesting twist: A few of the best-performing stock markets on the planet this yr are in socialist-leaning nations. Denmark’s OMX 20 (like our Dow) is up 22% so far this year, the best-performing index in the created globe. Extremely, Hugo Chavez’s IBVC index of Venezuelan’s stocks is close behind.

In comparison towards the S&P 500, it’s no contest… 2010 is the year of the socialist investor.

There’s much more going on here than just form of government. Denmark, for example, is in the catbird seat of the euro crisis — part of the EU but not a euro nation, very low debt along with a conservative banking system.

But still, it’s worth noting… inside a world that’s terrified of excess federal government involvement, two countries with massive state presences are giving investors top-rate returns.

For investment advice on this matter, you should listen to Jim Nelson’s latest online presentation. Our fixed-income man has found a nifty way to tap into this trend.

“Market sentiment has turned about the rest of Europe,” The Richebacher Society’s Rich Lee wrote to subscribers late final week. “Worries are growing that current strategies and aid packages will not be enough to curtail further regional economic losses.

“Problems that have always been there are getting noticed once again. This time they are centered on Ireland and Spain. Of course, these two countries have been in the mix all along, but their negative contributions had been mainly overshadowed by Greece’s problems. Now the two are casting shadows of their own. Fears are mounting over the two rising bailout aid and sovereign debt costs. This has sparked fear that further external obstacles lie ahead in bringing the EU monetary crisis to a halt — slowing down the possibility of the quick recovery.

“It’s not like Spain and Ireland aren’t trying. Ireland’s federal government has cut spending, raised taxes and made drastic public worker wage cuts, yet budget deficit problems remain relatively the same. The country’s deficit is still approximately 14% of gross domestic product. The only real economic change within the final couple of months has been unwelcomed — unemployment has risen to about 14%. But what is most disconcerting is the fact the current austerity plan is set to cost more than originally planned.

“Anglo Irish Bank, one of Ireland’s major banks that almost failed, is in need of an additional 10 billion euros. That’s on top of the currently pledged aid of 14.3 billion euros issued by the European Central Bank to maintain the bank afloat. The number is staggering. It’s even worse considering the fact that the full bailout of 24.3 billion euros would constitute almost 12% of Ireland’s overall gross domestic product.

stimulus backfire“The sky-high expenses for recapitalization has foreign investors worried and clamoring for higher rates of return when it comes to bonds. Although Spain conducted relatively successful bond issuances in the last couple of months, the interbank market still remains relatively closed towards the country — as well as Ireland. This means that the two countries are unable to obtain favorable market-level lending rates.”

Back in the States, traders are a tad more optimistic. BHP Billiton’s attempted takeover of Potash Corp. helped bump the S&P 500 up over 1% yesterday. You are able to spin this story into common market optimism in much more ways than one…

* The mere fact that BHP made a bid shows a huge, multinational company willing to make a big bet on at least one industry.

* BHP’s offer was all cash. In other words, it might think its own stock is too cheap to be offered as currency.

* Potash rejected, even though the offer priced the company 16% higher than marketplace value. They clearly think they are not only worth more now, but also will be worth much more down the road.

“As it stands, “ says our resource trader Alan Knuckman, “the bullish trend for stocks is still intact. Final week’s selloff was not a change in trend but rather a standard pullback to assistance levels. The 1,070/1,065 level for the S&P 500 held strong, and most importantly for a bullish strategic mindset, new lows had been not made after the gap Thursday. This can be interpreted as a positive. When the marketplace was on its heels, additional selling did not emerge and it was able to stabilize.

“Another positive indicator: The VIX, which measures investor fear, was also unable to reach above 28. It bounced about the selloff but did not rally with subdued concerns of more selling. Combined with the S&P assistance holding at that 50% retracement from the 1,130 high, this tells me that last week may have been an isolated event.

“All signs are positive if the stock market can get some catalyst to begin the climb again with the majority of earnings behind us. Remember, second quarter numbers are what drove the market on its final run.”

Perhaps that catalyst will be a BHP/POT offer. Even though Potash rejected the offer, BHP announced today it would continue making hostile bids in hopes of the shareholder mutiny.

stimulus backfire

Only one shred of data today, and it ain’t pretty: Bankruptcies within the U.S. rose 9% last quarter towards the highest level since 2005. According to the Administrative Office of the U.S. Courts, 422,061 parties filed for bankruptcy between April and June. That’s up 9% from the previous quarter and 11% yr over yr.

And that “most since 2005” statistic really doesn’t do the situation justice. Remember that’s the yr Congress overhauled American bankruptcy laws, making it notably harder for businesses and individuals to file.

Nevada has the worst rate (surprise, surprise).<br> Much more than 1 in 100 people living there have filed within the final year.

Following rallying through most of this month, gold is sticking to a tight range. The spot price has been bouncing between $1,215-$1,230 all week.

The dollar index, however, has been in steady decline this week as stocks move higher. Opening at a high of 83 Monday, the index dipped below 82 this morning.

“Getting our history a bit more accurate,” a reader writes, refining yesterday’s issue. “No, it was primarily Lenin and Trotsky who engineered the overthrow from the Tsar in 1917. Stalin did not rise significantly within the power struggle until Lenin’s illness began in 1922. Nor was the assassination of intellectuals the initial thing done [what with Lenin and Trotsky among the most prominent examples[[]|]|[]|]. It took the consolidation under Stalin to get this going. What seemed like common sense once the Bolsheviks were in power [with new Hope[[]|]|[]|] was to argue bitterly among themselves, breaking into numerous factions, squandering their gains, until totalitarian strong-man Stalin took over. Now does that seem to be obtaining a bit closer to home?”

stimulus backfire

“Do you think that possibly,” another reader speculates, “the whole reason for amnesty for 12 million illegals (20 million is more likely) may have some connection to the Social Security shortfall? Hmmm, 12-20 million (mostly young) illegals now with potential citizenship paying into Social Security, which I presume will be part of the offer. My self-employed gardener might not even apply under those terms when he sees a 15% self-employed tax facing him in addition to IRS tax filings. Just a thought.”

“I have been paying Social Security taxes since I graduated from high college in 1971,” our last reader writes. “Whether that cash went to pay my parents’ benefits or into the common revenue fund since the surplus was used to purchase Treasuries, makes no difference. That money has been spent. If I and everyone else in my generation [I'm almost 57[[]|]|[]|] are to collect any SS benefits, that cash will come out from the paychecks of our children, and has anyone else noticed that good careers for our young individuals are not real simple to find these days? I’m still hoping for them to become fully self-supporting. To ask them to assistance me as well seems a bit much. I have been promised SS benefits, along with all other wage-earning Americans, but I’m making plans to get along without them. I don’t like the idea, but yammering about how “they better not fail to pay up” is pointless. Whether people march on Washington, or begin a revolution, or what ever, that’s not going to bring back the cash they really feel they are owed. It does, however, waste time and energy that could be spent preparing to get along without it.”

The 5: There are exceptions to every rule, but we’re hard pressed to think of many situations where having a backup plan is a bad idea. Saving for retirement certainly doesn’t seem like one of ‘em. Good for you, and good luck surviving the stimulus backfire.

china overtakes japan

China overtakes Japan…