Little evidence of structural change in recent years

I see little evidence of substantial structural change in recent years is the quote of the day from Ben Bernanke.

All Ben had to do was read my blog back from 2008 and he could have learned that this would be the outcome.  Heck, just look at Japan's last 20 years.  Point is, pretty sure he KNEW back in 2008 that all the money games would not return to the good old days.

But what matters for this blog is what does Ben's speech mean for the markets?   Gary of the Smart Money tracker says start buying again (in low quantities) the miners.

I am not so sure.  Today's talk was cheap from Ben, nothing was done materially.   Buying TINY to get a toe hold if this leads to a longer rally is fine, but I'd dare not go in deep.  There is a 3 day weekend ahead, and who knows what may get announced at the close. 

Best of luck

Short term, out of miners

Miners went up 20% in a month.  If holding for years, can still keep holding.
For others trying to "outsmart" the market, a sell now, or if/when GDX crosses below 46.5.

Up 20% in a month is too good to be true. In a market that pays 3% interest on 30 year federal bonds, best to take profits and buy back later.

This counters my "time to start buying" miners back in July, near term.  For a true professional, subscribe to Gary of Smart Money Tracker.

Stock market history bad guide for future returns

A good interview by Chris Martenson about the current marketplace for investing, part of his podcast series (click).
I completely disagree with any mention of a gold money standard, but excluding that item, the rest of the analysis is spot on.

A great watch for everyone, and a shorter, easier view than the long video series he has created. (A MUST watch)

Housing Bottom in sight?

Between baby boomers selling their houses (during retirement or death), the 20 year olds having 100K student loans and poor job options, I can't see a housing rally in the next 20 years.

But the doom and gloom death spiral started with subprime loans may have an end in sight.
Back in December 2008, I posted a graph pontificating the worst of the housing may end by 2012, in post titled "Mortgage Defaults just starting".

The graph showed all the mortgage resets occurring over the next 4 years (at that time).
Fast forward to today, and the various bubble loans should be passing.

Banks still have millions of homes in shadow inventory, with millions more of homes in default.  So I wouldn't call a house rebound anytime soon.   However, the massive housing mortgage reset backlog may be slowing down.

The New York Times posted article "Signs of Revival, Slight but Sure, for Home Sales".

Quote:
A number of factors have helped nudge prices higher, including shrinking inventory — particularly on the more affordable end of the market. There is about a six-month supply of homes, according to the Realtors’ group, down from more than nine months last summer.

So there ya have it.  What NYT did not post is the graph I posted back in 2008 showing that the housing would hit bottom around 2012 for mortgage resets.  NYT doesn't provide the depth in analysis to explain why housing is bottoming, just the surface of the here and now.  I'll take any good news.

With housing bleeding slowing down, it will be interesting if the US economy can get a toe hold of recovery.

Most Valuable Company in History

Congrats to Apple corporation and to Apple stock holders.  Today Apple has become the most valuable corporation in history.  As of Monday morning the 20th, Apple Market cap was 621 billion dollars, with each share reaching 664.65 per share.

The total net worth of Merck, Intel, Anheuser-Busch, Toyota, and Verizon combined is about equal to  Apple.

For a sharp contrast, about two months of US government spending is equal to Apple's valuation.

Market Patterns work until they dont

Back on August 9th, I posted about a Market Pattern.  The indication was market was likely to swing lower before resuming higher.  Instead the market just simply went higher.

It's very tough call on what is best from here.  I am still skittish to be heavy into gold miners, for the market has gone up nicely, and I am expecting a pullback.

But in bull markets sometimes the pullback doesn't happen.  Needless to say if GDX and GDXJ make a nice  pull back to 5% to 10% lower from current, I'll be adding more.

Then again, I may write later in the week that the train seems to keep on going and I'll buy more in anyway.
For those holding long term, just add over time and average costs.

I wont bother with charts etc, today.  Maybe after Monday's action.

Stock Market worst in 60 years?

John Bogle, the founder of Vanguard, had some interesting things to say in the New York Times article "A Mutual Fund Master, Too Worried to Rest"


“It’s urgent that people wake up,” he says. Why? This is the worst time for investors that he has ever seen — and after more than 60 years in the business, that’s saying a lot.
Start with the economy, the ultimate source of long-term stock market returns. “The economy has clouds hovering over it,” Mr. Bogle says. “And the financial system has been damaged. The risk of a black-swan event — of something unlikely but apocalyptic — is small, but it’s real.”
“Wise investors won’t try to outsmart the market,” he says. “They’ll buy index funds for the long term, and they’ll diversify.

Read the full article by clicking here

John, my attempt at the wake up is this blog and my Financial Ground Zero series.
At this point, not sure what good waking up does....and do what?
I agree with John one one thing, back to basics.

Social Media Stocks

Today I bought some stock in Facebook, Zynga, and Groupon.
It is a risky play, all have questionable business plans to increase profits.

All have been recently brutalized by the market, and FB and ZNGA have seemingly stopped the stock freefall.  Facebook insider selling can begin August 16th, quite likely the end of the selling is soon.  (Thanks greg)

Below is their charts.
I do not recommend any as a buy and 10 year hold, more like buy and think every week how crazy or genius is it to own.  These stocks have a few things going for them, Social networking is here to stay and they have hordes of cash.  I see social network transforming in the decades to come.  With their positioning and cash, surprises to the upside are not unreasonable.

Groupon by far is the biggest risk, but also most to get reward if they can do ANYTHING positive!

Mish on Inflation, Deflation, and the Economy

Good watch of interview of Mish, one of my favorite economic bloggers.

Saving Money with Credit Cards

UPDATE: Please see new Post "Credit Card Cash Back"
For readers that have the discipline to pay off credit cards in full each month, read on!

I was doing some research on credit cards, and ways to save money on web site called CreditCardForum.com.

For people who have American Express and pay for "mileage rewards", the American Express EveryDay card right now gives you $100 back after charging $500.   Pay for premium annual fee of $75 bucks, and get:

6% back on all groceries (Max 6K per year)
3% back on all gas and about dozen department stores (sears, jcpenny, macys, bloomingdales, lord & taylor, neiman marcus)
1% back on all else

For those too cheap to pay the $75, get 3% groceries, and 2% gas.  The extra % pays for itself for most households.

Next up is US Bank Credit card, with No Annual fee, you get (some vendors may have restrictions):
5% back on utilities!
5% back on fast food! (or restaurants)
2% back on drug stores

You can pick different categories than I did above.  I did so to compliment the Amex card above.
With the Amex credit card, there is a synergy for also choosing Amex card for other purchases and travel.

Fidelity American Express card has no annual fee (huge plus!) and pays 2% on everything cash back. Be sure to sign up for full autopay at autopay.fiacardservices.com

So there you have it, with the 3 cards above, you can get:
6% Groceries, 5% Utilities, 5% fast food , 3% Gas, 3% department stores, 2% on all else (Fidelity Amex)  is as good as you can get.  But there is no miles on the American Express credit cards.
According to this web site, buy GIFT CARDS from supermarket for other stores (such as Amazon.com) and get extra 6% off!

For those very adventurous, you can pump your Mortgage, Car Payments, Student Loan, and other reoccurring bills that normally don't accept credit cards through ChargeSmart.com.  But be careful of extra fees that may apply.  Make sure your credit card gives 2% or more back on such charges, otherwise I doubt it works for your favor.

Extra Benefits for Frequent Travlers
For those with moderate travel, the Starwood American Express.
Low mileage for rooms, free upgrades at Starwood hotels, and ability to transfer points to 30 different Airlines at a 1 to 1 rate all for $65 per year. Pretty good.

If you travel quite a bit, Platinum or Gold American Express may be your card to choose.  Gold American express offers  3x points on airfare, 2x points on gas, 2x points on groceries, 1x on everything else, a steep $175 annual fee, ouch!

Market Pattern

Recently there has been pattern of 5 days up, couple days down, then back up 5 days.
Expect that market may retreat a bit soon before resuming the up.

Gary of Smart Money tracker has additional comments on cycles, etc.
I am simply looking at the chart below, 5 days up, few days down, repeat.   since the down could at any time turn into a fireburn sell off, best to lighten up some when up.

I did not sell all positions, just lightened some today, and hopefully decent price in the AM tomorrow.

Good luck

Solar stock FSLR moving

Back on June 27th I posted "Solar, buy low, sell high".

Back then, FSLR was in the 15 dollar range.
Over the last few days FSLR has been moving at a pretty good clip.
Over the LONG haul, the ETF TAN (solar ETF) I still think is a no brainer.
And FSLR was at one time at 300 a share, so even at 21, maybe not expensive.
However, it would be nice to buy on a pullback, 14 to 21 is pretty big % in such a short time.

TAN hasn't recovered fully to the 27th price of 17.5

Chart on FSLR

Gold Miners looking good. Overall market higher?

On July 27th, posted a view on Gold miners going higher, waiting for short term trend confirmation.
In the short term, gold miners have confirmed chart wise looking good.

But so is the overall market.  In the near term, trend has broken higher, not lower.
And that is a setup for new highs in the market, which seems almost unbelievable considering the economic outlook of late.

But I think fundamentals relating to the market valuation is now in question.  This time its different :)
All kidding aside, from the charts, looking higher.

I'll be adding my own personal investing more into ETF's GDX, GDXJ, GLD, SLV, and OIH.
Food and natural gas has also been doing well. (DBA and UNG)

To the charts!

US Debt, Money, and Future growth

The US National debt is now on AVERAGE 139,747 dollars per taxpayer, and over 50K per person.
I think its pretty clear by now, this debt based money system is doomed to fail.
Back in the 40s through 1980, wages grew for general americans, and disposable income rose.  Savings per person also grew.  Since 1980, all of that has reversed or at a minimum flatlined.

Per person, people are not experiencing increase wealth or prosperity, overall.  This is not the baby boomer go-go years, we are in the baby boomer retiring years.

There are only a few end games to the debt based system the US and by extension most of the world is on.

Currency Devaluation - Basically we borrow money for 10 dollars that can buy 20 apples, and pay back 10 dollars that can buy 1 apple.  If this manages to occur, there is much political volitility going to happen, not to mention possible currency collapse.  Also historically Wars are started over such gaming of the system.

Economic Growth - The idea basically is the US and other debt based countries (think most of europe) reverse course and start to grow well.  Salaries grow, disposable income rises, and more taxes are collected.   This time around the politicians won't do what they did in the 90's to 2012, and that is increase spending.  Instead they curb spending AND pay back the debt AND the country continues to prosper economically.   While a great outlook for the next 30 years, I highly doubt it.

Indefinite Debt - the idea basically is interest rates can fluctuate, but yet the countries manage to refinance debt indefinitely.  This is problematic, simply look at Ireland, Portugal, Greece, Spain, etc.

Default - Basically do a Greece thing, and tell the world they can't have money back for their US bonds.  Not a pleasant aftermath.

Pay It Back without significant growth - Basically all services would need to be cut to near zero in the US government on Federal, State, and Local levels.  The money collected redirected to pay off the national debt over 10-20 years.  While possible, the effect on society may lead to revolution, as basic services cut to zero.  Not to mention the army of jobs lost between government layoffs, and the jobs related to those employees. (restaurants, taxi, air, lawn guy, landlords, etc - whatever employed people spend money on)

Change the Monetary System - At the heart of what I see happening is two elements.  Lack of law enforcement and a debt based money creation system. The lack of law enforcement I'll leave aside, but it is a critical component to changing the monetary system.

Every Dollar the US government creates currently is done so with banks buying US government bonds, that once purchased, allows the US government to create new money to pay bills.   In essence, the government if forbidden to create money unless a bank buys a Bond, and assigns a rate of interest.

Granted, these bonds can be bought by anyone, but the broker-dealer system has the bonds primarily passing through the Banking system.

What if the government didnt need to sell a debt-based interest bearing bond to gain "permission" to create new money?  What if, it simply created new money?  Most equate this to currency collapse, and in some ways cheating.  Perhaps.  I think that the government should be able to simply print new cash.

For forcing an interest rate onto the government to create new money is not sustainable.  Also it smacks of why does the government need someone else's permission and a tax-rate assest to it to print new money?  How does that make it more legitimate?

The current debt system is now so deep, I think its time to realize it is impossible to pay back.  Us can default, which i think may bring down the entire system.  Indefinite debt won't work if rates rise.  Economic growth of significant magnitude while possible, is unlikely.  A new boom such as biotech will lift only the most educated, not the masses.

That lease a system change.   I dont think any major shift can be done to prevent a crisis.  It is ONLY in a crisis will people accept basic sweeping change.  If raw printing is decided, and currency does not collapse, we will enter a new era of money creation without debt.

Then, the only thing left is to enforce the law and ensure the currency faith is kept.

What does this have to do with investing?  Well, people keep worrying about the US debt.  At this point it is almost irrelevant.  The end game is known, the debt cannot be paid back under the current situation.

People think that growth, indefinite debt, etc will be the answer.  I say we are headed for a radical shift, and a debt based system being modified is the path of least resistance.

I would expect for the years ahead, gold, silver, and other "backward' money systems will gain in value significantly, as countries like China try to become a legitimate option to the USD as currency leader.   Once such a shift is announced, I expect gold will hit the high of this entire bull run.

That will be the time to sell, it will be hard, for everyone will be running to gold afraid of the new system,  Couple this with China/India populous buy gold/silver in huge quantities as their countries grow and I still like precious metals.