John Mugarian's Dynamic Growth

Sorry for the late post, but I've been busy trying to console investors who made the mistake of having their accounts with a brokerage firm. The horror stories are many, and as Warren Buffett says;

"You don't know who has been swimming naked until the tide goes out..."

The important lesson in markets such as these is to one, stick to an asset allocation model, and secondly, don't be afraid to sell during euphoric times despite what your accountant may say.

I have some important contrarian tidbits to share with you this week. The first one is the recent criticism of Warren Buffett by Doug Kass, and recently Barron's. Once again, you had to be around the markets long enough to remember the last time the media focused on the criticism of Buffett. I was around then.

The year was 2002, the date was March 15th, and the publication was Business Week.

The above article just about marked the bottom for Berkshire Hathaway (BRKA & BRKB) stock as it started its meteoric rise from a low of $40,800 to $151,650 in a little over 6 years. I'll take a 371% return any day, and I'll be willing to wait a little over 6 years if need be.

Don't you love it when hedge fund managers short stocks like Berkshire Hathaway, and then are allowed to have a media sounding board that drives the stock down and allows them to profit even more? It happens all the time.

Others getting face time are the doom and gloomers. Whether this is by design or not is anybody's guess. I must say that I agree with Bill Cara (billcara.com) that;

Just like a big ocean liner, the stock market needs time to change directions, to transition from obvious Bear to obvious Bull. Large syndicates or pools of money need time to accumulate positions, their lines so immense that multiple brokers are used to complete the order, and many sell-offs needed to buy into weakness. These buyers have a vested interest in obtaining the shares at the best possible prices with as few investors on board as possible, so stories have to be floated (sorry, I mean broken by responsible reporters) in major media outlets in order to create fear, panic, hopelessness, and finally apathy so they can acquire such large amounts of stock.

It's just the Wall Street game folks. The rich have been doing in to the poor since the beginning of time.

Some brokerage technical analysts have put the markets on "death watch". I guess they can do things like that since the have the ability to push a button that sells massive shares of stock to create a panic. Wall Street firms who can trade against the investor for their own account like to do things like that.

What's becoming increasingly clear is a retest of the November 2008 lows looks like a real possibility. The crooks up in Washington refuse to work together as President Obama’s call for bipartisan cooperation was has been ignored. The House of Democratics passed a stimulus bill laced with pork, and the Republicans who allowed Wall Street and the oil companies get away with economic murder want a say in what pork they want in the bill. It's a big mess and the stock market knows it.

I find it astonishing that the politicians have no regard for fixing the U.S. economy, and helping its citizens get through these troubled times. Granted, many consumers are financial idiots, but when all is well they think their geniuses. The current economic problems will serve as a well deserved disciplining process.

Speaking of lack of discipline, the idol of many teens and Wheaties lovers saw their hero bite the dust today. A photo of Phelps smoking marijuana out of a bong at a party should piss you off enough to go rip down his poster from your child's bedroom.

I guess it depends on your morals however. If your going to have his poster up;

Put this one right next to it;

In short, the Michael Phelps problem is not just his problem. It's a societal problem. I was watching a reality TV show yesterday that brought to light the disciplining problems principals have at high schools across the U.S. One student was sent to the principal's for cheating on an exam. The principal said; "that isn't the way to success in life". I thought, he's wrong! Cheating, isn't that what they do on Wall Street? Cheating, isn't that what the analysts and Wall Street executives did during the NASDAQ bubble?

Cheating needs to be called out on the carpet regardless of who the cheat is.

Russian Prime Minister Vladimir Putin verbally attacked Wall Street and the New World Order gang in his first appearance at Davos. The NWO gang is deeply entrenched in the upper tiers of our government, and Putin said;

The crisis was a “perfect storm” that had arisen from a world dominated by one power, the US, and that only a rebalancing of global power could cure the problem.

“There is a temptation to expand direct interference of state in economy. In the Soviet Union that became an absolute. We paid a very dear price for that.”

Our politicians and big business have a strange way of getting us to believe the unbelievable. Through the media, the tell us what to think and how to think. They tell us things we can say, and things we can't say. Believe it or not, all this is done under the umbrella of making us think we are a free and open society.

For example;

Wall Street and politicians love communists. Yes, I think that is quite obvious. They love China and Vietnam since they are good for big business in the United States. Any communist nation that is not good for big business, Wall Street, and our politicians are known as “bad communists”.

So, as I watch the embracing of the “good communist” (China and Vietnam), and the condemnation of the “bad communist” (North Korea and Cuba), I am reminded of a phrase from the "Wizard of Oz"; "Are you a good witch or a bad witch?”

Among the "good communists", it is estimated that about 58,000 of our servicemen were killed in Vietnam (with support from China and Russia) , and during the Korean War, China joined with the North Koreans on November 26th, 1950 in fighting a military offensive against General MacArthur and the American military. From 1950-1953 it is estimated that over 30,000 American soldiers were killed in battle.

So, the now "good communists", were either directly or in directly responsible for the killing of around 88,000 American soldiers. I guess our politicians and big business don't care that this happened since they love to trade, and outsource American jobs to Vietnam and China.

Let’s focus on the "bad communists". Korea with the help of a good communist, China, was responsible for 30,000 American deaths, but another bad communist, Cuba, was responsible for the deaths of 4 American pilots during the 1961 invasion of the Bay of Pigs.

So, is this the way it works? If a country, even though communist, helps big business profit through cheap labor, outsourcing, and oil, it’s declared a "good communist". And, if not, you are a "bad communist?” I think I get it.

Going a step further, if you are not communist, have oil, and don't allow our big oil companies to go into your country and take over, you are bad too.

What I am trying to do by rambling on with all this stuff is to get you to think. I don't know what the answers are, but you do need to stop and think about what is going on around you. I am real big on thinking outside the box. Some people use the term as a cliche, but if you can honestly look at both sides of an issue, things become abundantly clear.

Unfortunately, too many people have their minds locked up. They are either republican or democrat, conservative or liberal, black or white. Think more in terms that none of the above truly exists. If we do this, now we can invest.

Here are our Top 10 ETF's for the week of February 2nd:

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) EEB: Claymore ETF BNY BRIC
6) DDM: Ultra Dow 30 Proshares ETF
7) GLD: SPDR Gold Shares
8) IYF: iShares Dow Jones US Financial Sector
9) PGJ: PS Golden Dragon China Fund
10) SSO: ProShares Ultra S&P500 Trust

Here are our Top 10 Fidelity Sector Funds for February 2009

1) FSCHX: Chemicals
2) FBIOX: Biotechnology
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSPTX: Technology Portfolio
6) FSCSX: Computers & Software
7) FSCPX: Consumer Discretionary
8) FNARX: Natural Resources
9) FSENX: Energy
10) FSRBX: Banking

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Rumors and threats to nationalize US banks threw the financial sector into a tailspin today. Apparently the plan to set up a "bad bank" to absorb concocted assets designed by Wall Street investment banks is running into problems.

Of course the first reaction in the financial sector was to shoot first and aim later. I have a hard time believing that many of the top banks will come under government Nationalization. If this does happen, soon we will be calling one another- Comrade.

Comrade is a term used in Russia during the heights of communism. A comrade is known as "a member of the Communist party or someone with strongly leftist views".

The best plan, and the people in charge already know this, is to;

1) Suspend mark-to-market accounting rule. This rule is killing the capital base of many financial company's.

2) Have the US government guarantee the at least "concocted assets" assets for lets say 65 cents on a dollar and take a wait and see approach as these assets age and get closer to maturity.

Believe me, the guys in Washington ans Wall Street already know this will work.

Today, the major market averages staged in mid-day rally the got stronger into the close. Buyers became aggressive and volume increased in the last-hour to lift the DJIA up 141 points. this rally was helped by news that showed of pending home re-sales unexpectedly increased in December.

After the close the Walt Disney Co. reported a 32% drop in profits for the quarter. In the after market, DIS shares were down 7%.

For the day, the S&P 500 closed up 13.07 points to 838.51 while the NASDAQ closed up 21.90 to 1,516.30.

The Obama administration will unveil their stimulus plan soon, and we will all see if we will be calling one another "Comrade", "hey dude", or my fellow American.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Despite the market, it was a wonderful day.

For one, I really enjoyed hearing Barrack Obama chastise the executives in the financial industry. Obama imposed a $500,000 cap on executives who ask for more money from TARP 2. Personally, I wish he would have made it retroactive to TARP 1.

Secondly, and I chuckled at this one, the CFO of Goldman Sachs said the company "would like to pay back the $10 billion it received from the" TARP fund "some time this year".

I could just hear these guys at Goldman. It probably went something like this;

What did Obama just say? We will only be able to make $500,000/ year if we take TARP money? Oh no, this is not the way we do business at Goldman.

In 2007, the CEO of Goldman Sachs Lloyd Blankfein made $70 million. Lehman Brothers CEO Richard Fuld made $34 million, Merrill's John Thain made $17 million, AIG’s Martin Sullivan, got a $14 million, JP Morgan's Jamie Dimon made $28 million, Fannie Mae's CEO Daniel Mudd made $11.6 million, Wachovia's Ken Thompson msde $21 million, while the company's recking ball replacement Robert Steel has a sweet deal with Wells Fargo.

Are these guys worth it? Not a penny. Hey, Barrack... Make them pay it all back!

Jewish investors (The Jewish Journal) worldwide are upset after getting cheated by Bernie Madoff. Madoff better watch out, some of these powerful investors may have ties to the Israeli Mossad.

With the economy and stock market in turmoil, there is light at the end of the tunnel. For those of you who have cash, many high quality blue chip stocks are beginning to look like manna from heaven.

As an example, take a look at General Electric (GE) now under $12 bucks a share. Walt Disney (DIS) is finally selling off too, and my purchases will take place if the stock can fall another 20-25%.

Somewhere in the financial sector there will be some huge winners. The so called safe ones that keep popping up are JP Morgan-Chase (JPM) and Wells Fargo (WFC). The ones scaring the heck out of everyone right now are the one's below $5 & $10 bucks. If some of these survive, an investor can make several hundred times their money over the next 5-10 years.

For now, the focus continues to be on a bank bailout plan. The Dow fell -121.70, the S&P 500 was down 6.28 points, and the Nasdaq only lost 1.3 points.

Two stocks added about 30 points to today's drop; Disney fell 1.62 to 19.00, and Kraft finished down 2.63 to 26.11.

Next week could be very interesting.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

How deep are the conflicts of interest in the brokerage business, deep, real deep.

Bank of America's CEO, Ken Lewis was contacted by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to buy Merrill Lynch and save it from collapse. When Lewis found out in December that Merrill was a piece of crap laden with $13.3 billion in losses, he flew to Washington to back out of the deal. Paulson and Bernanke, basically took a scene out of the movie "The Godfather", assuring Lewis that either his brains or his signature would be on the Merrill deal.

Here is the WSJ article.

If this seems unbelievable to you, wait until you hear this story...

A friend of mine, who I met when I was a broker at A.G. Edwards in the early 1990's, just recently left Merrill Lynch to go with an independent firm. Brokers are basically the rank-and-file employees of a brokerage firm. They don't create the crappy products, the firms do this.

When my friend resigned to go to another firm, Merrill slapped a restraining order on him so he couldn't contact his clients to let them know he was moving to another firm. A brokers clients are built through personal relationships, but the brokerage firm believes that a brokers clients are theirs, and not the brokers. You can see where I am going with this, can't you?

The firm could care less about their rank-and-file employees, and the entire system is set up to dilute the importance of the broker, and get the client (or revenue source) to be loyal to the firm and not the broker.

When a firm concocts a crappy, high fee product, they encourage the rank-and-file to sell it to you. If something goes wrong with the investment, the firm tries to blame the broker, but not the firm. In the end if a client files a complaint, the brokers record with the NASD and SEC gets tarnished, or the broker gets fired. Knowing this...What idiot in their right mind would want to work for these people?

In the case of BAC and Merrill, Paulson and Bernanke (The Godfather-Luca Brasi) should have allowed Ken Lewis to back out of the Merrill deal and allowed the firm to go bankrupt.

To pick up the Merrill pieces after a bankruptcy, the industry should do what insurance companies have done for years. Split up the assets of the bankrupt firm, and divvy them up to sound investment firms. But, no, the political connections run very deep between Wall Street and Washington.

Over the past few days it is apparent the the BAC executives are fighting back. Today, Bac insiders added to their personal stock holding, including CEO Ken Lewis bought an additional 200,000 shares today after buying 200,000 on January 20th.

One of the insiders buying today may be of interest to you. Retired General Tommy Franks, a new board member at BofA , bought 20,000 shares. Clearly, buying bank stocks over the past 5 months has been like paying a game of chicken. Sooner or later the winners will appear, but knowing who the winners will be is a tough call.

One thing for sure, next week, if the mark-to-market accounting rules are suspended, and the US government verbally guarantees Wall Street's "concocted assets" on bank balance sheets, we could see a mega rally in the entire market.

Today's rally came on the heals of next weeks unveiling of economic stimulus plan, and a possible suspension of the mark-to-market accounting rules.

Bank stocks rallied on the news, as did the "Wall Street Gang" (Goldman Sachs and Morgan Stanley), when they said they were solvent enough to repay government bailout loans.

MasterCard and Visa rallied strongly after each announced earnings that beat estimates.

All and all not a bad day, and it looks as if a ray of sunshine may be ready to shine on investors, who are more than ready for the clouds to lift.

Are you confused, frustrated, and afraid yet? Good. This is exactly how Wall Street wants you to feel.

During the last great market debacle (2001-2003/ They are becoming more frequent in recent years), I was accumulating shares in Disney (DIS) when the stock dropped below $17 in 2001. Over the next few years Disney dropped to a low of $13.85, and by then I had a fairly sizable position in the stock.

Almost like clockwork, Anal(ysts) were coming out saying not to buy the stock because their calculations said the stock was going to $7. It never did.

Today, we are seeing the same assessments on some great U.S. companies. Take General Electric (GE) for example. Anal(ysts) are falling over themselves to poo poo the stock claming the risk of owning the shares may result in a price of $9/ share. I don't know if the stock will go to $9, but if it does I will not be disappointed in picking up shares below $15.

Here's what I learned when I was a broker. When PaineWebber (now UBS) bought the small southern regional firm I was with (J.C. Bradford), The new company invited us to New York to visit the corporate headquarters for a day.

First thing in the morning, we sat in on the morning research call. About 10-15 anal(ysts) came in to express their vast wisdom to the brokers huddled around their various squawk boxes across the country.

As I looked around the large conference room table, I was sizing up the analysts who were attempting to convey their vast knowledge and experience to the PaineWebber sales force. Of course, after the information is given to the brokers, the brokers convey the message to...Well, umm...You!

I saw a few analysts who looked like they were in their late 40's, but for the most part, many looked like gen Xers who never experienced or lived through the 1972-73 recession. You know who I'm talking about. The "I mean like, I mean like" generation.

I left the morning meeting with an assurance that I would never take advice from Gen Xers in retro fashion square rimmed glasses, nor would I take any opinions today from someone who did not experience the 1972-73 recession.

Last week, the stock market ignored the worse than expected economic numbers and focused instead on the stimulus package and the bank rescue plan. Now that the details have been delayed until tomorrow, the market has also delayed the continuation of its rally.

Changes in the market to market accounting rules may set off a huge rally in the financial sector. This would be a very smart move on the part of the Obama economic team.

There is one fly in the ointment that concerns me. It comes from the rulers of the universe- Goldman Sachs. The company's CEO, Lloyd (I'm way over paid) Blankfein said "the financial industry shouldn’t abandon the “mark-to-market” accounting rules."

What bothers me is Goldman Sachs usually gets what they want. If the “mark-to-market” accounting rules are not suspended, the financials will still be in trouble. The accounting rule suspension will at least give them a fighting chance.

Here are our Top 10 ETF's for the week of February 9th:

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) EEB: Claymore ETF BNY BRIC
6) DDM: Ultra Dow 30 Proshares ETF
7) GLD: SPDR Gold Shares
8) IYF: iShares Dow Jones US Financial Sector
9) PGJ: PS Golden Dragon China Fund
10) SSO: ProShares Ultra S&P500 Trust

Here are our Top 10 Fidelity Sector Funds for February 2009

1) FBIOX: Biotechnology
2) FSPTX: Technology Portfolio
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSCPX: Consumer Discretionary
6) FSCSX: Computers & Software
7) FSCHX: Chemicals
8) FNARX: Natural Resources
9) FSENX: Energy
10) FSRBX: Banking

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Well, my concerns expressed in the weekly briefing have now become a reality. I really hoped that the latest "Pimp" to run the U.S. Treasury- Timothy Geithner, would have announced the suspension of the “mark-to-market” accounting rules that are hampering our financial institutions. This did not happen.

I don't know what these idiots are thinking other than trying to inflict as much pain as possible on the economy and financial markets. After Goldman Sachs CEO, Lloyd Blankfein said "the financial industry shouldn’t abandon the “mark-to-market” accounting rules," I had a hunch that the rule would not be abandoned.

I called Geithner a pimp because he was once employed by Henry Kissinger at Kissinger and Associates in Washington, D.C. If you follow the Bilderbergers and New World Order gang you'll see that Kissinger is a pimp himself for David Rockefeller's various tentacles.

I don't like harping on this issue, so you'll need to click around above and open your eyes to what is going on behind the scenes.

By temporarily abandoning the mark-to-market rules, it will free up banks to lend and the temporary fluctuations will no longer force banks to claim insolvency. It's just common sense.

The only reason I can see for not temporarily suspending mark-to-market is someone behind the scenes wants to see chaos continue in the financial markets. I cannot see any other reason than that. Any other reason would be shear stupidity.

Under normal circumstances, the stock market would be undervalued. Since no one has come up with a viable solution (or won't allow one) for fixing the current crisis, there is no telling if the market is undervalued or not. If the economy gets much, much, worse, then obviously the markets are not as undervalued as you might think.

This being said, the stock market can overshoot on the downside just as it does on the upside. When there is no clear light at the end of the tunnel, markets will eventually overshoot on the downside.

In 2002, the over shooting on the downside result in an October 2002 low of 7,282 on the Dow. In April of 1997, the Dow overshot to 6358. Given the magnitude and severity of the current condition, I would not rule out a decline back to these levels.

As far as the S&P 500 is concerned, and final capitulation low can pierce the November 2008 low of 741 which opens the door for a final "puke phase" which could register in the mid 600's.

Yes, I realize all this is awful news, but we have some awful people, who have done some awful things, making awful decisions.

For now, the "Pimps" are in charge, and when they lack details on specific costs, risks, and details, eventually you will catch something that will become a full-blown disease.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Yes, Geithner is wet behind the ears. Fortunately, those behind the scenes, telling him what to do are not.

Take Paul (The Hatchet Man) Volker for example. This guy basically left the nursing home (he's 81 years old) to help unscrew the current economic situation that we're in. This guy is a " Hatchet Man", and was responsible for jacking up interest rates to 20% in 1981 after stagflation crisis of the 1970s.

Volker has close ties to David Rockefeller, a relationship that was built while and economist (1957), and later a director and vice president (1965) at Chase Manhattan Bank.

Geithner's delivery was clearly a disappointment. The "button pushers" on Wall Street were clearly tanking the market at will. No, these were not mutual funds, pension funds, and small investors selling at once. It was the button pushers.

I have written about the button pushers in the past, so click here to read.

Today, the executives of major banks are testifying in Washington. The politicians better be nice since the banks testifying contributed around $1.8 million to various campaigns.

Our fearless leaders in Washington are reportedly close to agreeing on a stimulus bill that is smaller than both plans that passed through the House and Senate.

Research In Motion, the maker of the BlackBerry, was down 9.55 to 47.45 after warning that profits will come in at the low end of expectations.

Bank of America was trading higher after CEO Ken Lewis said that the company intends to pay back the sucker money as quickly as possible.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

After I researched several investments this morning, I caught myself nodding off due to the boring action in the stock market.

Several key items happened recently, first the House of Representatives passed the economic stimulus bill by a vote of 246-183. A degree of uncertainty is slowly being lifted as various disagreements and confusion over the stimulus and bank rescue plans is finally coming to an end.

Despite constant negative talk that a stimulus package won't work, China is proving that it can. A Merrill Lynch economist recently said that China looks set to be the first major economy to recover from the current global meltdown. You would think that the eternal pessimists in the U.S. would find a glimmer of good news in this announcement.

The stimulus bill did not get a single Republican vote which I find very sad. I am a registered Republican, and I am embarrassed that these clowns allowed the bankers and Wall Street executives to ride run rough shot (as well as oil prices) over our citizens over the past 8 years.

I am also disgusted with the Democrats who also helped crater the economy with their "Chicken in Every Pot" philosophy. They threatened bankers with law suits after insisting they adhere to the "Community Reinvestment Act". The act basically says if they don't loan money (they call it discrimination) to people who can't make the payments, they can be held liable.

You can thank Bill Clinton for this one too.

Today, the University of Michigan's consumer confidence index for February fell to near a 28-year low.

I do believe the tide is about to turn.

The stock market is down a little over 55% since October 2007 highs. The economy is in a severe severe recession and personal net worth are down sharply. All this leads to extreme pessimism, and a total lack of confidence.

Investors tune into the news, and all they hear about are crooks on Wall Street, crooked hedge funds, stupid banks, and an incompetent government. Given all this, is there any wonder why many investors have very little confidence in the future of our country?

Oh, but don't get too depressed. Many of the pessimistic feelings today have been felt before. The economy and the stock market have also not seen events such as these since the 73-74 recession, and not seen a breakdown of the financial system since the Great Depression.

On the flip side of the coin the economy looks to be bottoming. History has shown us that the economy will eventually recover, confidence will be restored, and the stock market will eventually reach new heights.

Unfortunately, many investors have been spoiled over the years. Instant gratification is the mantra today. It has been for quite some time. In the movie, "Willie Wonka and the Chocolate Factory", the character, Veruca Salt sung a song entitled, "I Want it Now."

Here are a few words from the versus;

I want my geese to lay gold eggs for easter
At least a hundred a day
At least a hundred a day
And by the way

Don't care how, I want it now
Don't care how, I want it now

Veruca Salt was a greedy, self centered, selfish little girl. Oddly, so were the investors who got caught up in the NASDAQ and Real Estate bubbles. Getting caught up in a mania isn't identified as greed until the balloon eventually pops.

Investors who got caught up in the euphoria or hype of past bubbles are now so depressed that they cannot recognized the other bubble that's formed. The current bubble in the economy and the markets is hysteria. Yes, we have a bubble of hysteria.

Sooner or later the hysteria balloon will pop. Now that we have experienced one economic shock after another, no one is prepared for an optimistic shock. No one is going to ring a bell at the bottom, and buying stocks when the economic news turns positive could result in missing one of the biggest rallies of all time.

Congress passed a $787 billion dollar stimulus package, and nations around the globe are chipping in too. The gloom-and-doomers are saying it won't work, but what if it does? Is it possible the stimulus package does stimulate, and reasonable to hold out the possibility it could result in a major positive shock to the economy and stock market?

Today, pessimism won as the DJIA closed down 297.81 points to 7,552.60, and the S&P 500 fell below 800 for the first time since November 2008.

Financials, Energy, and Material stocks wer down while gold prices climbed to a seven-month high.

Obama signed the $787 billion economic stimulus bill, but the recent manufacturing data showed the recession is getting worse. The S&P is now close to the levels we saw in November.

Here are our Top 10 ETF's for the week of February 16th:

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) EEB: Claymore ETF BNY BRIC
6) DDM: Ultra Dow 30 Proshares ETF
7) GLD: SPDR Gold Shares
8) IYF: iShares Dow Jones US Financial Sector
9) PGJ: PS Golden Dragon China Fund
10) SSO: ProShares Ultra S&P500 Trust

Here are our Top 10 Fidelity Sector Funds for February 2009

1) FBIOX: Biotechnology
2) FSPTX: Technology Portfolio
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSCPX: Consumer Discretionary
6) FSCSX: Computers & Software
7) FSCHX: Chemicals
8) FNARX: Natural Resources
9) FSENX: Energy
10) FSRBX: Banking

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

You know, if it wasn't so sad, it would be funny. Want to know how to pick a great stock to short and drive a company into the dirt? Look at companies that sponsor a sports team, and have their name on a stadium.

During the NASDAQ bubble, technology companies were tripping over themselves to have their name plastered on a professional sports stadium. This has less to do with advertising than it does ego. When times are good, egos are big, and greed is too.

Leading up to the bursting of the NASDAQ bubble in 2000, sports stadiums carried names like;

PSINet Stadium- Baltimore Ravens
CMGI Field- New England Patriots
3Com Stadium- San Francisco's Candlestick Park
Qualcomm Stadium- San Diego
Network Associates- Oakland A's and Raiders
Invesco Field- Mile High in Denver
Enron Field- Houston Astros
Adelphia Coliseum- Tennessee Titans

A few years ago, the financials were the next suckers;

Citi Field- New York Mets
Bank of America- Carolina Panthers
Chase Field- Arizona Diamondbacks
PNC- Pittsburgh
Comerica Park- Detroit Tigers
M&T Bank- Baltimore
Citizens Bank Park (Royal Bank of Scotland)- Philadelphia Phillies
Wachovia Center- Philadelphia Flyers
Key Arena/KeyCorp- Seattle SuperSonics
TD Banknorth Garden- Boston Celtics (NBA) and Bruins (NHL)

Clearly these big sponsorships occur when times are good, executive egos, greed, and pocketbooks are filled to the brim. They also occur during periods of euphoria, and when everyone is saying, "it's different this time."

The Market

No one, and I mean no one, has the ability to call the market accurately based on what is going on. We in an environment unlike those of the past. Banks need to loosen up credit, and they need to get funds to business flowing again. Without the capital, no one can say for sure what is going to happen.

The Wall Street gang can dramatically improve conditions (as they've done in the past) by pushing the "buy button", and begin injecting optimism back into the market place. Bank executives are just like us, they watch financial TV, and when they hear nothing but doom and gloom, they run their businesses accroding. In other words, "crap rolls down hill."

The financials continue to get pounded as fears of nationalizing the system has short sellers circling the wagons, and investors jumping ship. Whether the rumors are true or not needs to be addressed by the government, and a clear course of action needs to be explained.

Yesterday, the S&P 500 closed below 800 for the first time since November, and the DJIA bounced off its bear-market closing lows.

While some believe we are simply bouncing along the bottom of the current trading range, I believe the market is weak enough to put in a panic bottom around 6,500 on the Dow. Personally, I hope it doesn't happen, but something positive needs to emerge to break the negative sentiment.

For now, and wait and see approach is warranted.

Wow! What a corrupt financial system. Like Warren Buffett says; "You don't know who has been swimming naked until the tide goes out." If there is a positive aspect to corruption, it's that it sets up tremendous buying opportunities.

Seeing all the corruption in one of the most corrupt nations in the world, many investor feel as if they had been raped. Here's a case that was on Judge Judy not long ago;

Judge Judy to prostitute, 'So when did you realize you were raped?'

Prostitute, wiping away tears: 'When the check bounced.’

In bull markets, investors are reluctant to sell. There are many reasons why, but the reasons are absurd. Investors begin to think that the good times will never end, then when an investor asks their accountant what to do, they always discourage selling in fears of potential taxes on capital gains. Obviously accountants don't understand the meaning of buy low, sell high.

Despite all the bad news; weak earnings, a terrible economy, and uncertainty over the stimulus plan, I feel that stocks are in the early stages of a cyclical recovery. If economy bottoms the
middle of 2009, the stock market will anticipate this in advance. Often, the stock market leads the economy out of its doldrums.

The stock market has been nothing short of a horror show. If you are a horror picture freak, you know that they always end the movie with the bloodiest scenes.

The S&P 500 broke below support at 820, closing in on the November 20th lows of 741. Some market pundits are calling for another leg down (the bloodiest scene), which could drive the S&P to long term support in the mid 600's.

For those who follow the markets historically, you know that Bear Markets have five stages of grief:

1) Denial
2) Anger
3) Negotiation
4) Depression
5) Acceptance

The selloff in October and November had all the classic signs of the 4th phase which is depression. Now we have quickly approached the final capitulation phase which isacceptance. I don't know if we are staring at the bottom of the final phase now, or whether it will be later in the mid 600's on the S&P.

What I do know is retests of previous lows do happen. The October 2002 primary low was retested in March 2003, and the October 1974 primary low was retested in December 1974. We will find out soon whether the latest selloff ends up being a retest or another leg down.

While these are scary times, we need to keep in mind that the costs of missing the early stages of a market recovery can be significant. Investors who run to cash during bear markets miss some of the the largest percentage returns o record.

Oddly, new bull markets are often not recognized until the stock market has already increased
20%. The emotions of feeling safe cause many to miss a sizable portion of a bull market’s gain.

For this I must quote Mr. Buffett again; "Be fearful when others are greedy, be greedy when others are fearful."

Here are our Top 10 ETF's for the week of February 23rd:

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) EEB: Claymore ETF BNY BRIC
6) DDM: Ultra Dow 30 Proshares ETF
7) GLD: SPDR Gold Shares
8) IYF: iShares Dow Jones US Financial Sector
9) PGJ: PS Golden Dragon China Fund
10) SSO: ProShares Ultra S&P500 Trust

Here are our Top 10 Fidelity Sector Funds for February 2009

1) FBIOX: Biotechnology
2) FSPTX: Technology Portfolio
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSCPX: Consumer Discretionary
6) FSCSX: Computers & Software
7) FSCHX: Chemicals
8) FNARX: Natural Resources
9) FSENX: Energy
10) FSRBX: Banking

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Oh, how perfect. The morning before the new President's address to congress, the stock market is at multi-year lows. I've said it before, and it is worth repeating, IMO there is no way the powers that run this country are going to make Barrack Obama look bad 4 years from now.

In four years, Obama will be heralded as the guy that saved the US economy. He will be seen as the guy who brought the United States out of the abyss. What better platform to start from than an economy the looks to be on the brink of disaster.

Old timers in the market will tell you that a stock market bottom will come long before there is any good economic news. So, if the stock market bottoms, then rallies long before there is any good economic news, then who is doing the buying? I'll leave that to your imagination.

Clearly, the stock market is in the midst of a toilet hugging barf. I don't know if Dow 7000 is the final heave, but the perfect set up would be a brief visit to above or below Dow 6500, followed by a sharp reversal to the upside. Slowing but surely, good news will be released on the banking front, as banks announce they can handle the remainder of the downturn without any further help from the government.

As we speak, a refinancing boom is taking place. Lenders are refinancing existing loans, real estate inventories are being worked off, and the new plan to mitigate a wave of foreclosures is underway.

The sentiment is extremely negative as there are very few bulls or even long term optimists left.
As we stare at 12 year lows for the DJIA & S&P 500, there are record cash on the sidelines, and very low interest rates. The Fed and Treasury said they will stand firmly behind the banking system, but no one is listening.

Now that many investors wish they had never heard of the stock market, jokes about the economy are being highlighted by the late night talk show hosts, and the internet is mocking American corporations by redesigning their company logos;

Magazine covers have even joined the gloom;

"Chin up, everyone. This president is well poised to bring us back from the brink."

" The Bailout is a Bust"

I don't know where the bottom is, but we are getting close. The Final Barf?

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Here we go again. Goldman Sachs Chief Investment Strategist, David Kostin said the "S&P 500 may drop to 650 in the near term.” This goes right along with what I had said on Monday when I opined;

"Some market pundits are calling for another leg down (the bloodiest scene), which could drive the S&P to long term support in the mid 600's."

This brings me to the all important question. Do the people at Goldman know what's going to happen, or are they holding out the possibility that something may happen?

Goldman, and others see how trades are lining up. My guess is the know that hedge fund liquidations are lining up to meet redemption's, and they base their opinions on what they see coming.

Clearly, hedge funds are under pressure. After the Madoff scandal, investors are beginning to realize that having money with an unregulated entity can be a very dangerous investment. On the other hand, for us "little people, their misfortune (hedge funds) is our opportunity. I really don't care if the sell-off the markets to S&P 650 or DJIA 6500. If they do, I will keep building my long term positions.

Technically, the market is still in a downward trend until it can break above the 800 level on the S&P and hold its ground.

Yesterday, the financial sector perked back up after Fed Chairman Ben Bernanke told Congress that the government does not plan a full nationalization of banks, and wiping out shareholders was not in the cards. Bernanke also said that the mark-to-market accounting rule may be reworked to help take pressure off the banks.

Bank of America CEO, Ken Lewis predicted the company's revenue will top $100 billion in 2009. This is clearly welcomed news for BAC, and makes the possibility of paying back the TARP money within 3 years a reality.

U.S. unemployment benefits jumped last week to a 26-year high of 667,000, while total claims came in at a staggering 5 million.

Crude-oil futures rose to $44 a barrel this morning as supplies are beginning to tighten.

U.S. stock futures were higher this morning, but let's see if the Goldman prediction of 650 on the S&P holds true.

"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey

Yes, let's K.I.S.S. (Keep It Simple Stupid).

The turmoil in the stock market is being exasperated by an endless wave a negative news. This has led to redemptions among hedge fund clients, and mutual fund investors. This being said, in my opinion, we are witnessing one of the best buying opportunities in our lifetimes.

I will be brief since I am locked in to picking the proper time to add to client accounts, so here's what I believe we will see in the months and years ahead;

1) I was petrified of the market when the Dow was above 14,000. I am not afraid of it at 7000. What I am personally afraid of is not further declines, but missing the market on the upside when it turns.

2) Clearly, the stock market is in the midst of a toilet hugging barf, and in my opinion, the next best opportunity to add to the equity portion of investment portfolios will be below 7000 on the Dow Jones Industrials, and under 700 on the S&P 500. My calculations tell me that the market will be finish when it inflicts the maximum amount of pain to the maximum number of people.

3) Bear Markets have five stages of grief:
1) Denial
2) Anger
3) Negotiation
4) Depression
5) Acceptance

The selloff in October and November had all the classic signs of the 4th phase which is depression. Now we have quickly approached the final capitulation phase which is acceptance. I don't know if we are staring at the bottom of the final phase now, or whether it will be later in the mid 600's on the S&P.

4) Warren Buffett became a billionaire by investing during times of market turmoil. His favorite times to invest were the 1960-61, 1973-74, 1980-82, 1990,91, 2001-2003 recessions, and the recession were are experiencing now. When asked if he watched the CNBC business channel, he said; "yes, but I have the sound on mute." There is a great lesson to be learned here.

5) In my opinion, risk in the stock market is greatly reduced when the following three things are factored in;

a) A 25-50% declined in the broad market averages

b) Buying quality, and investing in the Indexes, ETF's, and Sector Funds.

c) Expanding your investment time frame from 3, 5, and 10 months to 3, 5, and 10 years.

History does repeat itself, and whoever tells you "it's different this time" does not understand economic and market history. George Santayano, the Spanish-born American philosopher (1863-1952) said, "Those who do not learn from history are doomed to repeat it."

I've said it before, and it is worth repeating, IMO there is no way the powers that run this country are going to make Barrack Obama look bad 4 years from now.

In four years, Obama will be heralded as the guy that saved the US economy. He will be seen as the guy who brought the United States out of the abyss. What better platform to start from than an economy the looks to be on the brink of disaster.

Old timers in the market will tell you that a stock market bottom will come long before there is any good economic news. So, if the stock market bottoms, then rallies long before there is any good economic news, then who is doing the buying?

I'll leave that to your imagination.