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Posted by Martin January 24, 2016
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Dividend Investor: DRIP or selective dividend reinvestment?


Dividend Meter

If you are new to dividend investing you are probably asking yourself a question: “Should I use DRIP (Dividend Reinvestment Program) to reinvest dividends or should I reinvest selectively into different stocks?”

This question is actually quite easy to answer, but first lets take a quick look at what each strategy means:

 

 · DRIP

 

DRIP is a program you can set with your broker up and automatically reinvest all your dividends back to the stock which generated that dividend. It is free (no commissions and fees), you can be buying fractional shares of the stock, easy to set up, and it is totally on autopilot. As soon as you receive a dividend, it is automatically reinvested without your intervention.

I didn’t use DRIP in the past, but at the end of the last year (2015), I decided to set it up. Later in this post I will explain why you should do it too; when and why.

 

 · Selective dividend reinvestment

 

You can choose reinvesting dividends selectively into different stock(s) or a stock which generated the dividend. They are not automatically reinvested. When you receive a dividend you keep it in your account as long as you accumulate enough to buy new shares of any stock you choose.

Unfortunately, with the selective dividend reinvestment you will pay a commission as it will be recognized by your broker as a regular trade. For this reason you need to accumulate enough cash to make it a meaningful trade so commission won’t “eat you up”. I, myself, have a limit $1,000 per trade. Buying with less money will cost you more on commissions.

For example, if you are trading with TD Ameritrade and they charge you $9.95 per trade, buying shares for $100 would cost you almost 10%. And to make 10% loss, your stock will have to go up almost 20% to break even.

With $1,000 amount your commission loss will be a bit less than 1% and that is acceptable.

I used to use this strategy, but no longer do it. But at some point in the future I will get back to this strategy. Find out below why and when you should do this too.

 

 · Selective dividend reinvestment or DRIP?

 

The answer to this question is easy.

You should use DRIP every time your portfolio generates less than your limit per month. Once you start making your limit amount per month, you can switch to the selective reinvestment strategy to boost your dividend income.

For example, if my limit is $1,000 per trade and my dividend portfolio generates less than that per month, I will use DRIP. Why?

If you just started and generate for example $100 per month in dividends, you will be waiting a whole year to be able to do your next purchase. It means, your cash will be sitting in your account doing nothing for the entire year! Not acceptable for me.

Of course, this is a simplified view as you can take into account your monthly contributions and adjust your limit and dividends accordingly. That means, if you can afford contributing for example $200 dollars per month, then you need $800 dollars per month in dividends to switch from DRIP to selective reinvestment strategy.

For example, I invest into dividend growth stocks (DGS) primarily in my ROTH IRA account. With annual contributions limit of $5,500 dollars I can contribute $458 dollars monthly not to exceed this limit. The remaining $542 dollars must come from dividends per month in order to switch into selective dividend reinvestment. Having such cash sitting in an account for a month or two before I can invest is not acceptable to me. Those monies could work for those two months instead.

 
 




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Posted by Martin January 22, 2016
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Rally! Hurrah, all is good again!


Hold your horses. We may have experienced a rally here but it may not mean we are done with selling. It is just a mere volatility entering the market. It is also typical for bear markets to have violent bullish spikes on its way down.

Before you jump on buying (or selling) long investments (or trades respectively) be careful. Even if this market goes up to 2000 or even 2200 it still can crash hard. And I believe, we will. I am not an economist, just a lame guy who tries to make money in this crazy market, but all economic data I can see coming in and analyze them look bearish to me.

And it seems that the market is seeing it too. But first let’s take a small reality check:

 
Bloomberg
(Source: Bloomberg)
 

Let’s take a look at today’s rally:

 
Bloomberg
 

At the first glance the rally looks impressive.

But what sparked this rally? Improved economic data? No, the market mover this time was Mario Draghi announcing that the European interest rates will stay unchanged (and negative).

This will most likely be a short lived rally then.

And what about intraday move? Check this out:

 
Bloomberg
 

Most of the rally actually happened in an overnight trading (futures). The intraday trading was more like a roller coaster.

The conclusion of this rally? Sell on strength…
 
 




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Posted by Martin January 21, 2016
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Dividend investor: buying stocks in falling market


Lately, when the market was tanking I had a few of my friends who invest into stocks asking me how to invest when markets are falling. When would be a good time to buy?

You probably experienced situations in the past when you bought a stock and then the stock went higher, and later higher, and higher again. It was probably a great feeling and happy investing.

But when the markets or stocks go down you buy a stock and the stock immediately falls down and you end up sitting on a loss. How many times this happened to you?

It happened to me a countless times.
 

Although, for dividend investor, the value of the stock or entire portfolio is not as important as income it generates, it is not much comforting seeing your holdings in red, right?

There is a way how you can avoid this effect when buying stocks in declining market or at least minimize the negative impact of falling stock prices. You can achieve it by timing your entry.

You might have heard a dozen times that it is impossible to time the market, however I will teach you a method how to bottom fishing and attempt to buy a stock of your interest at the lowest possible level. And works perfectly in a falling market!

The method can save you significant amount of dollars when buying stocks and help you to get the most bang for your money.

I have been using this method for about 5 years right now and it helped me to buy my stocks for a lot less than I originally anticipated.

So let’s dive in the rules I use when buying stocks in a falling market:

 

 · Rule #1: Don’t use all your cash at once

 

When you have more than $1,000 to invest, split it into smaller amounts. Never buy your desired stock using the entire amount at once. For example, if you have $3,000 available for your purchase, split it into three $1,000 purchases or two $1,500 purchases.

Do not go however, under $1,000 dollars amount to avoid high commissions and fees unless you can buy cheap or even for free.

Why you want to split the purchase amount? In falling market the stock may continue falling after your initial purchase so you want to buy next time at a lower price and average your cost.

 

 · Rule #2: Place your purchase above the previous market high

 

When buying stocks in a falling market I created a strategy where I calculate my entry based on the previous day trading. The new price is higher than the previous price (previous day high) and I buy the stock only if that price is reached. If it is not reach I trace the price down with the stock.

Here is the calculation I use to determine my entry:

 
(( 1/2 * ( Day Price High – Day Price Low )) + Last Price ) * 1.01
 

I calculate the day trading range of the stock between a day low price and a day high price. The divide this intraday range in half. Add the result to the closing price and multiply everything by 1%.

That will be your purchase price.

Let’s look at Caterpillar (CAT) example:

Let’s say, today, I decide to purchase shares of Caterpillar and I have $3,000 dollars available.

Previous rule tells me not to use the entire amount, so I split it into (3) $1,000 dollars purchases. My initial purchase amount will be $1,000 dollars and I keep remaining $2,000 dollars in reserve for the next purchase.

 
Today CAT closed at $59.69 a share.
The intraday high was $60.42
The intraday low was $58.25
 

Here is the equation again:

((1/2 * (60.42 – 58.25 )) + 59.69 ) * 1.01 = 61.38

My next purchase will be 61.38
 

I created a spreadsheet which calculates this price for me. I just enter a symbol and amount I wish to invest and it calculates the entry price and how many shares I can buy.

Stock calcs
(Click to enlarge)

You can download this spreadsheet here.

 

 · Rule #3: Use contingency order or “one triggers other” (OTO)

 

Here comes the fun part. Now that we know our entry price, we can place a contingency order or one triggers the other order (OTO). Most brokers have this type of the order available in their platform.

What this does it that you place your buy order above the previous intraday high price and then trace your purchase limit order down with the stock. When the stock is falling, the order is sitting there and doesn’t execute. You trace the stock lower and lower, and your buy order executes only when the stock reverses.

 
What the OTO does? It is made of two orders. One order is a trigger order and when the condition is met, the buy order is triggered. Our OTO order would look like this:

 
TRIGGER:  If CAT last price is equal or higher than 61.38 then
LIMIT BUY ORDER:  buy 16 CAT at 61.38 LIMIT.

 
If the stock continues falling the trigger order is not hit and thus your buy order is inactive. You trace the stock down until the stock stops falling and reverses. When the stock reverses and hits the target the trigger order activates your limit buy order.

But your buy order executes only if the price stays below the trigger price. This feature protects you against buying at big gaps up. When the stock gaps up, the buy limit order will be activated, but it will not execute.

Let’s take a look at this process graphically (if you are a visual person like me, this may be helpful):

 
Stock calcs
 
Stock calcs
 
Stock calcs
 
Stock calcs
 
Stock calcs
 
Stock calcs
 
Stock calcs
 
Stock calcs
 

You repeat this process every day until you buy all your shares you originally planned to buy. This method is not 100% foolproof but will help you to be buying as low as possible at stock’s reversal and not at high price.

If the stock is falling, you most likely do not buy immediately and then sit on a loss. Your buy price order will be going down with the stock and you buy at reversal. The calculation above will ensure that the reversal will most likely be a meaningful one and not just a small bounce.

 
After 5 years of using this method it helped me buying new stocks a lot cheaper then what I originally thought or expected or what I would have bought if I bought outright when I decided to buy.

Many times I could buy more shares then what the original calculation assessed. For example, I was going to buy 16 shares of a stock which started falling and when I finally bought after tracing the stock down, I could buy 19 shares.

With dividend paying stocks, you are able to get more dividends for your money when buying more shares and that’s what matters the most in dividend investing.
 
 




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Posted by Martin January 20, 2016
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Betting on Deflation May Be a Huge Mistake. Here’s Why…


Precious metals investors heading into 2016 worry the dollar will continue marching ahead, right over the top of gold and silver prices. The Fed is telegraphing additional rate hikes throughout the year, and commodity prices – led by crude oil – are falling. There have been tremors in the biggest beneficiary markets of all when it comes to the Fed’s QE largesse – U.S. equities and real estate. And the possibility of a recession is growing, both in the U.S. and around the world.

Inflation

There are plenty of reasons we might see even lower official inflation numbers and a stronger dollar in 2016. But don’t think for a second that consumer prices or living costs will fall. They haven’t, they aren’t, and they never will in a sustained way – thanks to the Fed’s creation in 1913. This is where the deflationists have it wrong.

The impact of further disinflationary forces or even a deflationary episode on precious metals prices is a bit harder to predict.

The bear case for precious metals is rather simple. Should metals trade like commodities, they are likely to follow other raw materials lower. If we get a liquidity crunch akin to the 2008 financial crisis, just about everything will be sold as investors raise cash to meet margin calls or flee to the dollar as a perceived safe-haven.

There is also the possibility that metals prices will simply be managed lower. Growing numbers of investors realize that Wall Street is not a bulwark of free markets. Major banks have admitted to rigging markets against their own customers, and the Federal Reserve aggressively intervenes in markets in its quest to centrally plan the world economy. Why wouldn’t the Fed also be active in trading precious metals? Those dismissing the notion that metals prices are manipulated are naive.
 

 · Today’s Situation Is Different Than 2008

 
The bear case assumes history, in particular the experience surrounding 2008, will repeat. Or that there is still plenty of ability for anyone seeking to force metals prices lower in the futures market to actually do so. Or both.

Maybe. But relying on those assumptions could be a tragic mistake.

For starters, the U.S. dollar is already near record highs. Meanwhile, commodities and precious metals have been beaten down mercilessly. This set-up is the complete opposite of what faced investors leading up to the summer of 2008. And even though stocks and commodities got hammered in 2008, gold posted modest gains for the year as a safe haven from the threat of a collapsing economy.

Lower gold and silver prices have already produced an imbalance between bullion supply and demand. Supply deficits in 2016 are likely to make the developing problem with inventory at the COMEX and other exchanges even bigger. Registered stocks of gold all but vanished recently as bargain hunters, particularly in Asia, have been happy to buy and take delivery. Silver inventories aren’t in much better shape.

More deliverable bars must come from existing stocks, but holders won’t be anxious to sell. Those with “eligible” COMEX bars have certainly been slow to convert them to “registered” of late. By all indications, miners will be unable to provide the needed supply.

Inflation

With prices below the cost of production, mine output is set to drop significantly this year.

If the metals markets look forward, as markets are supposed to do, they will anticipate the Fed’s response to a strengthening dollar and economic malaise. In 2008, investors knew little about the lengths to which the Fed would be willing to go. Today they DO know. The Fed will overwhelm deflation by creating new inflation.

Markets are completely dependent on Fed stimulus, and people simply expect officials to roll out an even bigger initiative whenever the need arises. Anything to prevent the cleansing effect of corrective forces from restoring heath to the economy. In a recent interview, market expert Jim Rickards predicted the Fed will abandon rate increases and actually commence lowering before the year’s end.

Metals investors should take heart in the fact that gold and silver prices have shown some resilience in the face of disinflationary forces recently. Both metals outperformed oil and most other commodities last year. Yes, prices declined roughly 11% for both metals. But crude oil fell 36% and copper lost 22%. The precious metals gained purchasing power against many other things.

Bottom line: Don’t bet on a meaningful deflation. Fed officials will not allow it. And they can keystroke dollars into existence until the power goes out for good.
 

Inflation

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs
 
 




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Posted by Martin January 20, 2016
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FED: We created a sense of wealth


Marine traffic
 

Yes, these were the words of a FED member (I believe it was Stanley Fisher, but not 100% sure) who said that when he expressed his views on the last 7 years of FED action and monetary policy.

FED wanted to create a sense of wealth so people would be comforted and spend money which would prop the economy.

And they failed.

They failed miserably. How can we verify it? A simple economic indicator will tell you if the sense of wealth helped or not – inflation.

If people spend money and buy goods, the price of the goods goes up. If they do not spend, the merchants are forced to lower prices to attract more buyers. That’s it.

With FED pumping so much money into economy via QE programs, one would assume, wealth-enlightened consumers would be shopping like crazy and inflation would skyrocket.

It didn’t happen.

In couple of last weeks I posted a few articles indicating that we are heading into recession (if we are not already in recession) and bear market (we are already in the bear market) and I was posting my evidence why I think so.

Besides declining trend lines of my indicators clearly pointing to more selling, yesterday I wrote about divergence between a transportation index, DJ index, and S&P 500 index. This divergence made me to believe that we might see another 10% drop of the market.

I also posted a Marine Traffic website results where you can clearly see all large cargo ships on the world map crossing oceans transporting goods between continents.

Some of my readers objected that most of the commerce is between Europe and China or the US and China and so transatlantic transportation may not be that busy.

So let’s take a look at the Pacific commerce:

 
Marine traffic
 

Nothing. Absolutely NOTHING is moving even in the Pacific. All ships are docked or at the coast. And the Baltic Dry Index dropped again today to new all-time low.

There is still no life out there.

If you still believe that the US economy is “just fine” and rosy and we are in no way in recession, let’s take a look at another evidence, that we actually are in trouble and recession, crisis and market crash is round the corner.

 

 · A sense of wealth effect

 

To create a sense of wealth in the economy and prop consumers to spend, FED started pouring trillions of cash into economy thru QE programs. I want you to take a look at the chart below. It shows the interest rates over time (blue line), monetary base or how much money is in economy (green line) and the stock market total market value index (red line):

 
Marine traffic
 

The chart indicates when FED started pumping money into economy. What’s interesting on this chart is how the money supply become correlated with the stock market. Almost a perfect correlation.

Let’s zoom in a bit:

 
Marine traffic
 

In the zoomed chart you can clearly see the correlation between money in the economy and the stock market value. I think you can even clearly identify time when the FED took away the QE program and when they started another one. I bet, I do not even need to point it out.

Let’s zoom even closer to the top of the market and the end of QE3:

 
Marine traffic
 

When FED ended QE3 the market still felt the effect of the “wealth sensation” and moved higher upon its momentum. But as the money base started being choppy, slowing down, and basically dropping, the stock market violently corrected down to the base to become once again correlated with the money base.

When FED decided not to increase rates in September, the market again popped up on expectation of drug support continuation, but when FED raised rates in December and monetary supply started dropping, the market immediately corrected and is still in that correction.

Currently the market is at approx. 3930 level (adjusted), the money supply is at 3650 level (adjusted). If we assume that this market would go lower to become again correlated with money supply, you can expect another 7% drop.
 
 




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Posted by Martin January 18, 2016
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This market is poised for another 10% drop


The S&P 500 is now 12% off of the all-time high price. Many investors and traders say that we are way oversold and we should go up from now here or bounce.

Yes, we may bounce, but overall, market price action data indicate that selling is far from over and that we may see more selling to come. The data shows that we may drop yet another 10% before we can claim an exhaustion and trend reversal.

 

The video worth watching with Peter Schiff predicting how FED and Congress will most likely try to fix the coming crisis, which will at the end create an even bigger crisis. The result may be that the new medicine FED is going to prescribe may not work at all.
 

But I admit, we are at the critical support which may hold. But will it really hold? What’s ahead of us then?

We may see a relief rally, bounce, or a plain rally failure and resumed selling.

 

 · Relief rally

 

The S&P500 is at the critical support level. Last week we dropped all the way down to the August lows. Some traders were predicting this outcome way before in October and November last year. I refused to believe it as I didn’t see any catalyst for a renewed selling. Yet it happened.

 
SPX trend
 

This creates a significant support which may attract “big dippers” (dip buyers) who will be buying at these levels. The buying spree may be strong enough to move the market relatively high.

We can see the market push back up to 1980 level.

 
SPX trend
 

The dipper’s buying may even push the market all the way back to back 2060- 2070 level. However, I do not expect this outcome at all.

 

 · Bounce

 

It is possible that bulls will be able to push the market only a little, more like in August 2015 when we saw only a moderate recovery and a second dip afterwards signaling a problem. We may see a bounce to 1930 – 1940 level only. We may even see a bounce to 1900 level which is now yet another significant resistance level which bulls may not be able to overcome.

 
SPX trend
 

When reviewing other data and market behavior as I will show below, I believe this is a more probably outcome, that we only see a small bounce and then selling will resume.

But I see an even bigger chance of the market opening with a bounce up tomorrow morning, then selling resumes in the afternoon and we will see another 10% selloff in the coming days or weeks.

 

 · Another 10% selloff

 

Why I think there will be more selling coming?

There are a few reasons for it. Of course the first reason is slowing US and world (global) economy. Do you remember my post about transatlanting transportation? I wrote the post 8 days ago and I was checking the cargo ship movements time to time on the Marine Traffic website to see if the halted commerce was an anomaly or something more serious.

There are still no ships transporting goods over the Atlantic Ocean. No single oil tanker or cargo ship. They are still halted docked at the port or near cost.

If you open the web site, you will still see the same picture as the one below I posted eight day ago:

 
SPX trend
 

Is this an anomaly? Or is the website working? How else we can verify whether the traffic is moving? Let’s take a look at Bloomberg Baltic Dry Shipping index:

 
SPX trend
 

The Baltic Dry Index (BDI) measures the rates for chartering the giant ships that transport iron ore, coal and grain, and it has attracted the attention of traders and market commentators hoping to take the pulse of world trade. This index has been falling the entire second half of 2015 and is at all-time low.

It corresponds with the calm seas and no ships being deployed to transport goods overseas. It seems like no one is buying any goods and no one is selling. If this trend continues, this will impact the economy further. And not only the US economy but the entire world one.

We can see this same evolution in the transportation index (DJT). For most of the time we could see the transportation index in line with other indexes such as Dow Jones or S&P 500. but recently the transportation index has been also falling hard and dragging other indexes with it. It too fell hard in the second half of 2015.

 
SPX trend
 

But the divergence of the transportation index and other indexes is so big, that I believe the markets will tend to get into alignment with the transportation index to find equilibrium. The transportation index may rise a bit to go to meet the indexes, but mostly the indexes will fall lower to meet the transportation index. But given the fact that there is no commercial activity out there, it is more likely that it will be the indexes to go to meet the transportation index.

To do so, the indexes will have to fall another 10%.

 

 · How to protect yourself?

 

It is quite hard to provide an advice and I cannot provide any financial or investment advice. But this is what I will be doing if my expectations are correct and the markets fall another 10%.

Dividend investor

There is not much to do as a dividend investor. Even if there will be a tornado in Wall Street and markets crash I will still continue reinvesting dividends using DRIP program.

I will continue buying shares on the way down (dollar cost averaging) but I will apply a strategy I call a contingency buying order. It means that I split my cash into smaller buying lots (not the market lots). For example, if I have $3,000 to buy my next stock, I will split it into (3) $1,000 lots.

Then I will place an OTO (one triggers other) buying order, which will basically do: If the price gets at or above a certain level, trigger a buy order at or below that level at market. Then I will place my limit price approx. 10% above the previous day high price.

What this does is that if the price of the stock is falling, the buy order is not triggered and I trace it down with the stock price. Once the stock reverses and reaches my limit, it triggers the buy order and buys the stock.

I used this method successfully in the past and thanks to that I could buy stocks at a lot cheaper price than originally expected. Don’t be greedy, wait for the price to come to you.

Options trader

As an option trader I will be very careful selling puts as of now. The market doesn’t show any strength which can be used and ridden. The bounces are weak and shallow and they can be quickly sold off by bears. We are in a bear market and when in a bear market, you want to go with the trend and not against it.

I will most likely wait for a bounce and then sell that bounce by selling call spreads.

 
 
What about you? Do you have any trading plan for the bear market protecting your investments? Are you going to sell everything and stay in cash until this storm calms down or continue diligently investing?
 
 




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Posted by Martin January 16, 2016
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Why the heck are the markets tanking?


Bear market

That was a question Yahoo! has recently asked. Sometimes it really stuns me out when liberals start slowly waking up and asking such questions, which all others with common sense already knew what was happening.

Yet there is still many with the rose colored glasses on unquestionably believing everything FED and Obama’s administration is feeding them with.

At first, I wanted to answer that question why the markets are tanking. But one of the reader in the discussion responded for me. I found his answer interesting and I decided to repost it here:

It is the economy, stupid!

Jobs: There have been no private sector jobs created, but 952,000 jobs have been added to Obama’s Federal Government. Source: White House Budget.

Unemployment: The percentage of our labor force that is employed is 62.4%., meaning that 37.6% are unemployed. Source: Department of Labor

Economic Growth: Virtually non-existent. Gross Domestic Product up 0.78% (after deducting revenue from bonds purchased by the Federal Reserve Quantitative Easing Program).

Credit Rating: The first time in Americans history our credit rating was downgraded. Standard and Poor’s dropped our rating from AAA to AA+, and Moody’s followed suit. Much was based on our debt at $14.7 trillion; now at $18,923,558,492,663.

Fraser Institute of Economic Freedom, a world-recognized organization reports that in 2010 the United States ranked #2 in the world, but 5 years of Obama’s economic Socialism has caused the U.S. to fall to #16.

The Heritage Foundation, which also calculates economic freedom reports that the United States has fallen to 12th place in the world.

Debt: up $8,262,260,795, Up 77.76%, Source: US Treasury

DOW Jones: Lost 96.61% of its 2015 gains since December 24, 2015.

Household Income:

Income per Capita (in 2013 dollars):

All Races -1.18%
White -0.37%
White (non-Hispanic) 0.66%
Black -1.57%
Asian -3.90%
Hispanic -1.66%

Median Household Income:

All Races -4.56%
White -1.72%
White (non-Hispanic) -3.01%
Black -6.41%
Asian -5.07%
Hispanic -0.13%

Source: U.S. Census Bureau

Poverty: 8,644,875 citizens added to our poverty rolls, Source: US Census Bureau
18,313,000 citizens added to our food stamp rolls, Source: US Dept. of Ag.
7,668,224 citizens filed personal bankruptcy, Source: US Bankruptcy Court

Health Care: Obamacare is Socialized Medicine. It is not about health care. It is about controlling the people and forcing them to become dependent of the Federal Government. It was sold to the citizens on lies, as most have experienced increases in premium and deductible costs. There is, indeed, a “death panel.” We have seen how it has worked with the Veteran’s Administration in Phoenix, AZ in 2014, where 40 wounded veterans died because they were denied basic health care needs.

National Security: There is none. Our borders are wide open, and Homeland Security has bussed in millions. Obama has released 106,000 criminal illegal aliens from our prisons, and the number of ISIS attacks continue to increase. We also have 1.7 million citizens of the radical Middle East countries here on student visa’s whose backgrounds have never been checked, and no means of determining where they are, if they have over staid their visas or if they have connection to ISIS. We need to secure our borders immediately.

Law Enforcement: Non-existent. Obama, and his neo-Marxist Democrats make victims of the villains and villains of the victims. Obama, Holder, Sharpton, and Lynch have incited our race riots in violation of Federal Law.

 

 

Judicial System: As corrupt as the rest of the Federal Government. According to the Federal Election Commission campaign finance reports, the Judges and Attorney’s PAC has contributed $2.2 Billion dollars to Democrat politicians, a full 84% of their contributions. Democrats are willing to pass millions of laws to control the citizens, and each law makes another attorney a millionaire. The Supreme Court has been stacked with Democrats, including John Roberts, who twists the law like a thing of wax. Additionally, on two occasions in 2015 he ruled on cases that resulted in money going to his family members. In one case the amount was $250,000. His administrative staff called it “human error.” Actually it is a conflict of interest, a violation of the law, and sufficient to impeach him in accordance with Article 3, Section 1 of the Constitution. We the people must demand term limits for Judges as well as members of Congress.

Guns: Obama’s teary eyed pitch for firearm control falls short of an Academy Award. It is not about controlling guns, it is about controlling law abiding citizens, making them defenseless and unable to defend themselves against murderous illegal aliens, ISIS cell members, and, possibly, from our Federal Government.

The 2009 annual report from the Center for Disease Control shows 13,200 homicides involving firearms. It further shows 2,453,000 deaths due to alcohol and alcohol related disease, and 37,423 deaths due to alcohol related auto accidents.

Marxist despots throughout history have, upon achieving power, disarmed their citizens, and then slaughtered all that refused to accept Marxist doctrine. Lenin, Stalin, Mao, Pol Pot, and Tito combined slaughtered 88,086,000 of their citizens for that very reason.

Bill Ayers, a close, personal friend of Obama’s who introduced him into politics in Chicago, was a co-founder of the Stalinist Weather Underground, an anarchist, and a convicted cop killer. In the Preface of their revolutionary Manifesto, “Prairie Fire,” they laud Sirhan for killing Bobby Kennedy.

Ayers informed Undercover FBI Agent Larry Grathwohl the Underground was prepared to slaughter 25,000,000 Americans if they refused to bow to Communism.

Thomas Jefferson said, “No free man shall ever be debarred the use of arms. The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.”

Global Warming: Our own NASA scientists, on December 13, 2015 stated that the France boondoggle on taxpayer dollars was the grandest fraud ever perpetrated on the citizens of the world.

Consensus is not science. But there is no consensus. Only 36% of supposed scientists believe global warming is man-made, while 64% believe it is not. That includes John Coleman of Chicago, who founded the National Weather Service.

The corrupt politicians, despots, and pseudo-scientists at the U.N. created climate science out of whole cloth. And corrupt world leaders continue to bilk the citizens of their countries. Obama and his Democrats have spent $138.2 BILLION middle class taxpayer dollars funding their friends and supporters like at Solyndra. In return millions of our tax dollars are returned to Obama and Congressional Democrats in the form of campaign contribution.

Green companies launder taxpayer dollars and turn them into cash for Democrat politicians.

It is a violation of federal racketeering law, but Democrats have never found a law they believe applies to them.

We need a Congressional investigation and demand the pseudo-scientists turn over all of their scientific data.

What do you think? Do we have a rosy economy and the current two weeks of selling is just transitory?
 
 




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Posted by Martin January 16, 2016
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Today we created a new lower low. We are in Bear market!


The August 2015 low was the first lower low of the trend; until today.

A week ago I wrote a post saying we are in a bear market and shown a charting showing why I think so.

 
SPX trend
 

I posted the chart above in January 7th, 2016 to show and explain what lines and trend I am looking at to identify a trend. But this was not my only warning about bearish market. I was posting about my bearish outlook in December when the market failed to create new highs that we were in a bearish trend. You can read my warnings in this post and here.

But in October and November the bull market could be still saved as you can see in the above chart. The trend was recovering from the August selloff and creating healthy new higher lows. It was until FED raised rates. Then the entire story started changing.

 

 

Here is the same chart again a few weeks later proving we are in trouble and that bigger trouble is ahead of us.

 
SPX trend
 

As you can see, there are a few significant changes:

1) We created a new lower low in a longer term time frame!

This is a big issue. Before we were creating lower lows in a short term cycles basically warning about troubles. This time we are creating lower lows even in a big picture time frame.

2) More selling is coming as we are not that oversold as in August

Take a look at the circles marking the fear and greed levels of the market. Although we are creating a new lower lows in the last 9 months, we are barely in oversold territory. That means, we can go lower and more violently before we see a reversal.

3) Trend slope is sinking further down

As you may know I use 50% regression channel study in TOS to identify the trend. It is a study inbuilt in the platform and it does all the charting based on price action of the market. I do not draw those lines. It is all done automatically the same way as moving averages are drawn.

The dashed grey lines are the only lines I draw manually. The lines you can see I drew in November 2015 and haven’t touched them since then. These are the trend projections lines to help me indicate where the market is moving. I draw them exactly on top of the 50% regression channel lines so later I can see if the market is rising or declining. Since November 2015 market started declining from these lines as you can see a magenta regression lines dropping below the grey dashed lines.

This confirms that the bear trend is deepening.

However. Even in a bear market like this, we may see relief rallies. But expect those rallies to be sold off.

In all this, FED is still clueless and promising more interest rate hikes. As usually, when FED realizes that the economy is already in a recession it will be too late.

People have short memory, but you still may remember when FED and media were all optimistic about economy at the verge of the great recession in 2008 and realized how serious the problem was when we were already in a big selloff and financial houses such as Lehman Brothers admitted that they were already bankrupting.

Unfortunately, we can expect the same from FED. They are still optimistic and they will be again late to the party trying to save the economy by another set of QE as they believe that the previous QE programs worked well, so let’s start another one to save the economy and market.

They will just kick the can down the street. But this time, this medicine may no longer work. Like when you overdose a patient with antibiotics, the bacteria will become resistant to the pills.

Expect worse to come.

 

 · What to do as an investor?

 

If you are a long term investor, for example a dividend investor, do not worry, this will be over in a year or two. So invest in this slowdown. It will create opportunities and make you richer (if not outright rich). Continue investing into a good quality dividend stocks or mutual funds and you will survive well.

If you are at the end of your wealth building journey, and about to ready to retire, you should have money located more in less volatile products than stocks (unless you are in dividend stocks). Relocating or selling stocks now is probably too late and risky. You should have done this a lot earlier. You should have reallocate in October – November.

I know, providing an advice now when the damage has been already done and after the fact is not much helpful, but if I were to retire next year and my portfolio was in stocks in this market, I would waited it out and postponed the retirement by a year or two.

This is by the way one of the reasons I am learning hard trading options so I can create an income in any market and be free from stocks falling in price during sell offs. I understand, this is not for everybody. So if you do not want to trade, invest hard into dividend stocks to create a dividend income which will also be independent from the price of the stocks.

Even if my ROTH IRA dividend portfolio value drops by 50%, my dividend income will stay the same as many of my holdings are still paying and increasing the dividend (for example, check Realty Income (O) as they increased the dividend recently and the price of the stock went up while the entire market was falling apart).

In 2008 I kept my long term investments intact and invested more into the declining stocks and funds. My 401k account doubled since then thanks to adding more cash into falling stocks and reinvesting dividends and distributions. I plan on doing the same this time. If we see a recession and the market crashes, I will be investing money and reinvesting dividends.

 

 · What to do as a trader?

 

Depends what you trade. If you trade options for example, as I do, then best approach is to ride the waves and time the market. Do not listen to those who tells you it is not possible, as they do not know what I am talking about.

Last few months I learned how to read the trend. You can easily see when the market rallies and suddenly the rally is exhausted and starts falling apart. That’s the time you want to short the falling market. When the market is falling, there will be times of relief rallies. You may want to ride them and get long again. In these situations I plan on selling call spreads and bull spreads to ride the relief rallies.

Trading bullish trades in this market can be dangerous so I plan on having tight stop loss orders and try to keep those trades short term. I may even stop trading them whatsoever.

Stay save and if you are not sure about the market, its trend, or a trade, then stay away. It is better to stay aside than be in a trade at all cost. It may turn out to be your all remaining cost at the end.

Cheers!
 
 




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Posted by Martin January 15, 2016
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Wall Street in panic, S&P 500 plunged 3.16%


FED
(Source: Hedgeye)
 
At one point today, the S&P 500 plunged 3.16% below August 2015 lows. Wall Street is in panic selling and stop losses are now being hit.

FED is still clueless.

But do not worry. My coworkers who normally have no clue about stock market noticed this and started asking if they should sell their 401k holdings to protect themselves from selling.




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Posted by Martin January 13, 2016
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Selling continues towards August lows


Chinese banks saving the market

An interesting parallel to save the market.

This market is a rip for dividend investors and a nightmare for traders. All over the internet we see traders expecting bottom and bullish reversal. It is not happening and more selling is coming every day.

Pundits blame oil and China. I blame slowing economy, gloomy economic outlook, worsening earnings, coming deflation and recession around the corner. On top of that I blame FED’s mishandling of the problem since 2009. I have always criticized the policy of “too big to fail”. I disagreed with pouring millions to GM, issuing $600 dollar check to everybody, saving big banks, printing cheap money, etc. If the money was used properly I wouldn’t have problem with such approach. But stuffing money into economy where it was used to artificially boost earnings by buy backs, or invested in the stock market rather than used for economic growth was a bad idea from day one.

 

 

I expected a bounce to approx. 1960 level, to 1990 or 2000 at most. It looks like, we had a lot shallower bounce only today, just to 1953.6 and then selling resumed. And it was a free fall.

Expect more selling to come. I hope I am wrong, but now we most likely will go to 1830 level which is an August bottom. If we do not bounce at that level, then more selling will come. I started to believe that this market can really go all the way down to 1550, which is the top of the end of 2007 before the market crashed in 2008.

Do not panic if you are a dividend investor. Invest diligently even if the market crashes. Reinvest dividends and lower your cost base by investing during this selloff time. If you are a trader, short the market every time it rallies hard. I am also selling bounce rallies but they can be dangerous so watch them carefully.

Stay safe and preserve capital.
 




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