"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
Making money in stocks is all about being in the market leaders when they're running. Making the "big" money in stocks happens when you buy the market laggards before they make their turn. Warren Buffett knows this, and so do the mega rich who own second homes in Palm Beach, Florida.
Let's call the Palm Beach crowd the quiet wealthy. With their mega millions and billions, they have enough money to buy up enough politicians to do the talking for them.
The market mantra for the past few years has been;
1) buy U.S. Treasuries,
2) buy commodities, & precious metals,
3) sell the financials, and
4) sell the U.S. dollar/ buy foreign currencies.
Like most one side trading philosophies, sooner or later the party ends.
-The party ended in 2000 after we were told that the internet was going to shut down most brink and mortar businesses.
-The party for oil ended in 1980 after the experts of the day continued to call for crude to surpass $100/bbl, gasohol was added to fuel, solar panels were encouraged, smaller cars were produced, the speed limit was lowered, and politicians told us to turn down the heat and shut off our lights.
- In 1990, the party ended for the Japanese stock market after the experts of the day inflated the Nikkei by hype after the index hit 40,000. The bear market that followed lasted 14 years.
In short, I feel its wise to ignore hype and to focus in on areas of the market that have been severely punished.
Today, it's more of the same. The Non-farm payrolls were released and showed the US economy lost 80,000 jobs last month. This was the third straight month of payroll declines. As a result the unemployment rate rose to 5.1%, and confirms what we have been saying that the U.S. is in a recession.
Crude oil is traded up today as the dollar continued to weaken. The front month May contract is trading up $0.82 to $104.65/bbl.
The latest CFTC futures and options report showed that large speculators decreased their net long positions in crude. My guess is we are near an important intermediate top in crude.
During yesterday's testamony in front of the Senate Banking Committee, Ben Bernanke made a comment that is extremely important to investors buying stocks in the quality financials.
He said "the Fed expects to recover most, if not all, the $29 billion worth of loans it made to keep struggling Bear Stearns Cos. from collapse."
Simply put, not all of the loans assumed are bad. The problem is with pricing the mortgages. At this point in time there is no market because everyone is scared. Once investors realize that not every loan is bad, the market for these securities will return. Until then, we have panic, and an illiquid investment.
Now, when you consider the writedowns taken by the banks, not every loan they wrote off was bad. In the months and years ahead watch for the banks to begin adding some of those written down assets back to their balance sheets.
Yesterday, I mentioned that Congress and Bill Clinton should shoulder much of the blame of the current credit crisis. It is amazing how much is hidden from us by the news media, and the power elite that controls them.
Here's what I wrote yesterday;
The people responsible for the Subprime Crisis was Congress and Bill Clinton when they repealed the Glass-Steagall Act in 1999. Glass-Steagall was enacted in 1933 to separate commercial banking from the securities business.
Clinton, and the members of Congress responsible for Glass-Steagall's demise, was repeatedly warned by General Accounting Office (GAO) that banks need to build up adequate capital levels before being allowed to enter the securities business.
Glass-Steagall prevented securities speculation from destroying bank capital, but since its repeal, look what has happened as a result. All of the people responsible for the repeal of Glass-Steagall should be held responsible for their misdeeds.
Today I learned that the banks are not entirely to blame for the subslime mortgage mess. Sure, banks must shoulder some of the blame, but once again our idiot politicians were the biggest culprits of the subprime debacle.
You ask how? In 1977 the U.S. Congress passed The Community Reinvestment Act (CRA) which required banks to loan money to people with poor credit, bad credit, low income, and the segment of population that has no fiscal discipline.
In 1995, Bill Clinton and his administration strong armed the banks to follow the Community Reinvestment Act or face severe consequences by regulators. This is so outrageous that I am lost for words.
According to Wikipedia, the revisions made by the Clinton Administration to the CRA in 1995 were one of the main causes for subprime mortgage crisis.
All I have got to say is what happen to the Clinton slogan "if you work hard, and play by the rules..."
Let me tell you what happens if you ""if you work hard, and play by the rules". You won't need to qualify for a loan through the Community Reinvestment Act. Why? Because you won't need it.
If you work hard, put money in savings, live below your means, stay away from drugs and alcohol, and become a decent, law abiding member of society, you would consider a loan from the CRA to be an insult.
After seeing this, please don't tell me you are considering voting for Hillary!
