iBankCoin
Read Scott here on iBankCoin and also at http://www.createcapital.com/
Joined Jan 19, 2010
717 Blog Posts

So Easy Even A Caveman Could Do It…

It’s been three years almost to the week since the bottom of the market at Dow 6500. The market has exactly doubled since then.

First, the accounting rules were changed. Then the Fed became the buyer of last resort for all kinds of bad paper. Then they came out and printed trillions to pump into assets to combat the deflation that was sure to follow a major market price break and economic freeze. And here we are, up 100% in exactly three years.

There is no coincidence that the markets rally during times of overt money printing and QE from anywhere in the world, now well into our fourth worldwide round. It is no coincidence that there are no dips during any of these liquidity-fueled rallies. But now that we have doubled in price, the “greats of investing” are telling you why we are here: because interest rates are so low! Never mind that the greatest manipulation carried out by the “guardians of the currency” will create any amount of money to buy bonds and drive rates lower so governments around the world can continue to spend profligately and with great vigor.

By forcing down rates, everyone knows that stocks–in comparison–look good relative to bonds. Bernanke says, “jump” and the market say “how high”? It is really that simple. With the British, Japanese and the Europeans printing cash, all that’s left is for us to begin QE3 and the Chinese to throw some cash around. That will be soon, sometime after the April 15 selloff that will occur after you plow money into your 401k/IRA’s near multi-year highs.

But in the meantime, the equity and commodity markets are acting similarly to 2008; a rising market in the face of the bad news that is “fully discounted” and money pouring into the safest commodity of all, oil. It is not Iran causing prices to rise and it is not Greece that markets will be truly afraid of. These are Red Herrings. It is protecting investors, banks and goverments at any and all costs until either the economy self-starts or blows up. Let’s enjoy the sickly low volume, ever levitating market while we can.

And don’t forget to RAISE YOUR STOPS TO PROTECT YOUR HARD-WON PROFITS!

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It’s All Techinical Now…

We are now into our first milestone date of the year, President’s Day.

Markets across the spectrum have rallied 20-30% across the board. There has been no pullback, just a one way, low volume, buy the dip action, similar to this time in 2011 & 2010.

The domestic economic backdrop is the same as the past few years as the Holiday Season brought about an uptick in economic activity. Not a big one, mind you, but rather just enough for economists, government and the media to take notice. Some say it is subtle propaganda. I say there is nothing subtle about it for it is designed to get you to believe. And your belief will certainly force you to allocate assets into your 401k/IRA at yearly highs.

The computer Algo’s that dominate the market have trained the remaining market participants that they must buy stocks regardless of the news or risks and they have, especially Apple. But I believe that much of the recent and frenzied buying in key stocks represent the unwinding of derivative-related bets left over from last year. A trending market causes a re-think of many strategies, especially since last year was all about the trading range. Plus, the absolute “thinness” of the equity markets cause moves to seem histrionic. And now that there are “good-looking chart setups”, be careful. That is usually when the ax falls.

And just like the past few years, the Central Banks own the markets, but this year more so. Now everyone is printing and that is all the markets care about. And it will occur until either the world economy self-starts, or it all just explodes.

So enjoy the elevated prices of financial stuff and have a safe and happy long weekend!

 

 

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Think the Market is Cheap? Think Again…

Everyone is talking about how cheap Apple’s earnings multiple is. So I wanted to compare that hard-to-believe number to some of the cheapest valued companies based on their simple P/E ratio.

I started by looking at the DOW stocks. I will eliminate JPM with the cheapest multiple of 8.5 because I don’t believe any bank earnings as they are all made up.

Then I looked at every other stock and guess what I found? Only two stocks have single digit P/E ratios. That’s right, the DOW, filled with “industrial” stocks, has only 2 “cheap” stocks based on their P/E multiple.

The first is Hewlett Packard (HPQ) with an 8x multiple. This is the stock that has done everything wrong in the past year and lost half its market value. It is truly hated and rightfully so. The second is Chevron (CVX), also with an 8x multiple. But CVX has a $210B market value and a 3% yield.

Every other stock in the DOW trades at a double digit multiple of earnings. Is that “cheap”? Historically, nope…

BTW–Apple’s market value of nearly $500 billion is equal to roughly 17% of the value of the 30 Dow stocks combined of roughly $3 trillion.

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THERE’S A NEW VAMPIRE SQUID IN TOWN…

And its sucking up all the spending and investment dollars everywhere. Can you guess who it is?

So much attention has been on the banks and all things finance, so we are blind to how Apple is sucking the lifeblood and dollars from everywhere. Remember when being an Apple supplier meant untold riches? Now it is like being a partner with Microsoft, facing increased volumes but significant margin contraction and poor earnings. Remember when a carrier would up revenue and earnings guidance when getting the iPhone? Today, Sprint said they sold millions of iPhones and took a huge loss. That’s right, record new clients and record losses.

As far as investment dollars are concerned, adding 3 or 4 billion each and every market day is normal. It is its own POMO but just to one stock. And the analysts tell us that a a trillion dollar market value would be normal. Apple TV with hand gestures replacing a remote control? Is that worth $70 billion in three months?  It is clearly an Apple world.

Is this sour grapes? Maybe just a teeny, weeny bit. Rather, I see a real problem of an ever-expanding market based on an endless closed loop of liquidity and one stock sucking in all the free cash.

FLAME ON

 

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As Fantastic as Last Year (and the year before)…

In the next six months you will witness one of the greatest economic comebacks in the history of mankind.

Unemployment will tumble and the rate will be 7%. There will be a new and aggressive energy policy ensuring our independence. There will be a new and massive housing reclamation similar to the 1980’s RTC that will bail out homeowners while giving investors access to property under current market prices. You will see banks fixing their balance sheets and corporate America will have the opportunity to repatriate trillions in offshore profits, no questions asked. The economic numbers will be messaged to always be better than expected and Chairman Bernanke will continue to worry aloud about slower than hoped-for growth, ensuring ZIRP and stimulus-at-the-ready, forever.

Can you see where I’m going with this?

The only thing different about this year versus the past two is that this is an election year. In the past two years, the major indices began a rally in the September-October time-frame and rallied in an almost uninterrupted fashion until about tax day. Each time it was on the back of better than expected economic numbers and more stimulus. Each year followed the same game plan of doing the same thing over and over again expecting a different result.  Is this the very definition of insanity?

Regardless of my disdain for the current economic regime, I know enough not to short anything in the face of strength (but I am getting very tempted). I am long a few stocks, but not nearly enough. My suggestion is not to confuse brains with a bullish market environment, regardless of the fundamental backdrop (do you really think the job numbers mean anything? They don’t).

Enjoy the rally, the Superbowl and the weekend!

 

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Nail in the Coffin

Today is the nail in the coffin for any shorts, doubters, and general miscreants that would bet against One World Capitalism in the 21st Century.

I’m firmly convinced that there are few speculative shorts left in any of the major indices as they were stopped at $SPX 1265 and have covered any and every reload since. The only short interest out there are simply protective hedges designed to prevent a disaster that can never occur while we “pump up the jam”.

Sure, this rally is very long in the tooth. It started on December 19, 2011, the day the Euro-Ponzi became official and has added 120 SPX points. We’ve had the best January in 25 years and it won’t stop on the first day of a new month. In fact, it’s accelerating.

As in each year since 2009, markets will rally into the April 15 deadline of getting your 401k/IRA money into the marketplace. The odd-lotter must pay up for it is the American way.

And for those of you thinking the housing market is bouncing; houses here in the Northern New Jersey suburbs have just dropped about 10% in price since the beginning of the 4th qtr. of last year, just like in the previous three years.

So enjoy the Green Shoots, the Euro-Ponzi, the Chinese Pump, the Hope for QE3, the Machine Momentum and the Greater Fool Theory. Forget about everything else and don’t worry. I officially have. And you know what that means.

I’ve said this phase ends with a big volume thrust higher. You’re witnessing it as we speak. Nobody should bet against the Money Train.

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