John Mugarian's Dynamic Growth

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

All the richest investors already know this. Do you want to know how to be a successful investor? "Ride the Wave, then get the hell out"! Be a 2-3 year buy and hold guy, then get out and wait for the next disaster to happen. Oh, believe me, every few years Wall Street or Washington will make sure another disaster happens .

There use to be a time in the investing world where buy and hold meant something. 30 or 40 years ago you could buy stock in a big blue chip company, reinvest the dividends for 20 years, and in the end, you would have a nice nest egg to live on. Not anymore!

So what has happened? Society has changed. I attributed most of it to a lack of discipline and greed. Discipline can be lacking in many aspects of ones life. It can be a lack of fiscal discipline is directly linked to greed (spending, real estate, the NASDAQ in 2000). Greed makes a person do unethical things in order to gain possessions, or an advantage over another person.

Imagine you were a conservative investor in GE or Bank of America. You bought your initial shares 20 years ago, reinvested the dividends, and add a few hundred a month along the way. Thinking you were doing the right thing, one day you wake up and find that your financial nest egg has been decimated.

The investor above would not be characterized as a "trader", and certainly not a "gambler". They were simply long term investors thinking they were doing the right thing.

Character in our society, particularly on Wall Street, no longer exists. The once-proud capitalist system that transformed the U.S. into and industrial powerhouse is essentially dead.

Beady eyed executives at Goldman Sachs (Wall Street) continue to receive huge bonuses while the rest of the nation is worried about a recession, their retirement plans, and making the house payment.

These are the same Wall Street clowns that try and convince you to be a longer term investor. What a load of crap.

How about this arrogant idea former IBM CEO Lou Gerstner. Gerstner said that US authorities ought to have a tax of 80% for those who buy in the morning and sell in the afternoon; a 50% tax if you hold for a year, and zero tax if you hold forever.

The arrogance of these fat ass CEO's is amazing. How about this rule Louie? No stock options, and no stock grants for corporate executives unless the giveaways are directly expenses against the company's earnings. No more free rides on the back of the small investors .

Now that you know how the game is played, "Ride the Wave, then get the hell out"!

Any rally, any short term recovery, has to be viewed as temporary. As explained in my Wednesday, July 1st journal post;

"Ride the Wave, then get the hell out"! Be a 2-3 year buy and hold guy, then get out and wait for the next disaster to happen. Oh, believe me, every few years Wall Street or Washington will make sure another disaster happens.

The current rally may be much shorter than 2-3 years I mentioned above. I believe the stimulus money will temporarily stabilize the economy, but clearly there are bigger issues facing consumers, commercial real estate, and states that are deeply in debt, and short of tax revenues.

The light at the end of the tunnel may be nothing more than a pin prick that is nothing more than a mirage.

I have to agree with Warren Buffett after being interviewed on CNBC last week. When he was asked if he was "seeing any green shoots, Buffett replied, "I looked. I wasn't seeing anything. I had a cataract operation on my left eye about a month ago and I thought maybe now I'll be able to see green shoots. We're not seeing them."

In other words, the green shoot comments are nothing more than a distraction, and giant hoax.

Clearly, people in America are manipulated for the benefit of the elite. We saw it with past and present wars, and today we are seeing it with the constant praising of Michael Jackson.

Jackson was extremely talented, but when his facial surgery made him look like the joker on batman, I knew this guy had some serious mental issues.

After finally getting a gut full of the media's constant coverage and praise, Peter T. King, a U.S. Congressman from New York’s Long Island, had had enough. King said;

“This low-life, Michael Jackson — his name, his face, his picture — is all over the newspaper, television, radio… Let’s knock out the psychobabble. He was a pervert, a child molester, he was a pedophile. And to be giving this much coverage to him, day in and day out, what does it say about us as a country?”

Here's the article- U.S. Congressman blast media on Michael Jackson praise.

I wish they would blast Wall Street in the same fashion.

Here are our Top 10 ETF's for the week of July 8th:

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) IYF: iShares Dow Jones US Financial Sector
6) DDM: Ultra Dow 30 Proshares ETF
7) PGJ: PS Golden Dragon China Fund
8) IYW: iShares DJ US Technology Sector Index Fund
9) CASH
10) CASH

Here are our Top 10 Fidelity Sector Funds for July 2009

1) FSPTX: Technology Portfolio
2) FSRBX: Banking
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) CASH

Anyone who believes a new bull market is beginning may end up very disappointed. Bear market trading rallies yes, bull market no.

I'll give you three very powerful reasons to remain cautious, yet don't be afraid to trade.

1) Louise Yamada, president of Louise Yamada Technical Research believes the 2000-2009 U.S. stock market action is mirroring the exactly track of the 1929-1939 stock market cycle.

Yamada said that “1938 to 1942 was a very volatile period of trading rallies and retreats. It was the stuff that eventual bases were made out of.”

Yamada notes that history has shown that structural bear markets have lasted from 10 to 15 years, and since 2000, U.S. equities have been mired within a longer-term secular bear market.

She went on to say that "the 2002 low has been exceeded. That could be a very serious event,” she warns. “We don’t know whether it turns out to be a bear trap or if we have new lows ahead.”

2) 2009 Bilderberg Group Conference: In past years, notes coming out of the annual Bilderberg conferences have turned out to be highly accurate.

For example:

In 2008, Bilderberg were concerned that the price of oil was accelerating too fast after it hit $150 a barrel and wanted to ensure that “oil prices would probably begin to decline”. This is exactly what happened in the latter half of 2008 as oil again sunk below $50 a barrel.

In 2005, oil was at $40, Bilderberg had called for prices to rise during that year’s meeting in Munich. Henry Kissinger told his fellow attendees that the elite had resolved to ensure that oil prices would double over the course of the next 12-24 months, which is exactly what happened.

This years main topic of discussion was the global financial crisis. According to Bilderberg follower, Daniel Estulin, here is what Bilderberg has in store for the economy and stock market in the months ahead;

a) Estulin warns that Bilderberg are fostering a false picture of economic recovery, suckering investors into ploughing their money back into the stock market again only to later unleash another massive downturn which will create “massive losses and searing financial pain in the months ahead.”

b) Bilderberg is assuming that U.S. unemployment figures will reach around 14% by the end of the year, almost doubling the current official figure of 8.1 per cent released by the US government.

c) Bilderberg is divided on whether to put into motion, “Either a prolonged, agonizing depression that dooms the world to decades of stagnation, decline and poverty … or an intense-but-shorter depression that paves the way for a new sustainable economic world order, with less sovereignty but more efficiency.”

d) The bank “stress tests” were a shameless hoax: Based on the irrational assumption that the economy won’t get as bad as it already is! Elitists divided on whether to quickly sink economy and replace it with new world order, or set in motion long, agonizing depression. Either plan will for the economy will be decided over the course of the next year.

3) Dr. David Bronner, CEO of the Alabama Retirement Systems, the 43rd largest investment fund in America, had these things to say during a recent speaking engagement;

a) The California financial crisis will send a ripple effect across the US economy, AND over the next two years one state after the other will fall to its knees financially as the federal government stimulus package ends by 2011.

b) Within 120 to 150 days, the commercial real estate market nationally begins to collapse as stores, malls, shopping strips and industrial plants have enough closures, and loss of rental revenue to make them unable to pay their mortgages. They will start going into foreclosure creating the second wave of the economic disaster which will start three to four months from now.

c) If oil prices do not remain above $70 a barrel, Russian and Mexican economics will begin to unravel since their economies require that much from oil to have an adequate revenue stream.

The only other big revenue stream for Mexico is illegal drugs sold in the US . . . so their economy will intensify their focus on selling drugs in America as a result in order to survive if oil stays below $70/bbl.

d) Without the huge Bush stimulus, and then the huge Obama stimulus, the economy would have already flat lined . . . (i.e., we'd be experiencing a Great Depression style economic collapse heading toward 25% unemployment or so as the tumble would have continued and intensified at an increasing rate, with the stock market hitting around 2,000). Bronner said the depth of the crisis was greater than ANYONE realized, and agrees today, after learning the extent of the crisis, that the federal government simply had to start "shoveling" money at it to prevent a true and complete collapse of our economy. He said he, at first, was mad at this shoveling of money until he learned the truth about the amount of money necessary to prevent a total collapse, which he believes would have happened.

e) Inflation will not arrive for 3 to 5 years as the economy is in a deflationary stage due to the economic plummet . . . and will not experience inflation until people start "buying things" again, and that's going to take while! He also believes 3 to 5 years is probably the term until true economic recovery establishes in the US and world economy.

f) A nuclear incident with N Korea, a plague, Israel attacking Iran (oil shock), or such could still throw the US economy into a Great Depression style situation. He said the greatest risk of this is anytime from now until the world economy gets somewhat back on its feet . . . in 3 to 5 years.

So, like I said a few weeks ago, "Ride the Wave, then get the hell out"! Be a 2-3 year buy and hold guy, then get out and wait for the next disaster to happen.

Here are our Top 10 ETF's for the week of July 13th:

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) IYF: iShares Dow Jones US Financial Sector
6) DDM: Ultra Dow 30 Proshares ETF
7) PGJ: PS Golden Dragon China Fund
8) IYW: iShares DJ US Technology Sector Index Fund
9) CASH
10) CASH

Here are our Top 10 Fidelity Sector Funds for July 2009

1) FSPTX: Technology Portfolio
2) FSRBX: Banking
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) CASH

A nice rally? Yes! Up, up, and away? No!

In the days and weeks ahead we think the DJIA will break above the 9000 level, and this psychological barrier could carry the major market indexes even higher. Expect the U.S. GDP report to perk up by August. This will serve as the catalyst to drive stock prices even
higher.

We also believe there will be a piling on effect after the GDP report is released that could carry the S&P 500 to the all important, but pivotal 1050 mark. I believe prudent investors need to capitalize on any break to the upside to raise cash, and minimize risk.

Several factors lead us to believe a more cautious approach is warranted;

1) Crude oil prices may have peaked at $73 per barrel in the short run, but make no mistake, the "green movement" cannot accomplish their goals without higher energy prices. Demand for alternatives will simply not exist as long as energy prices are viewed as affordable.

If the economy is improving as many say, then oil prices must rise because demand will increase. If oil demand is not improving, then there is no way a real recovery will occur in the economy.

2) The federal debt is now stands at $11.4 trillion, or $37,000 per person. Currently, spending is on track to expand by $2 trillion per year! Sometime in the future, you and I will pay for the irresponsibility of our government leaders. It may be by way of much higher interest rates, or a collapse of the U.S. dollar. Either way, the end result will be painful.

Nimble investors-those with cash, will have plenty of opportunities to profit. In the months and years ahead, investors with cash will be able to pounce on bonds when yields rise, and buy stocks cheap when the stock market reacts negatively to the above events.

Currently, ten states have deficits that are 20% to 30% of their respective state budgets. Arizona and Nevada are the worst with 30%. Oddly, the state you are hearing the most about, California, is only the third worst state with only a 26% budget deficit.

No one has a handle on where the $787 billion spending/stimulus bill has been spent, and now we are hearing calls for a second stimulus package, while the first one has not been properly implemented.

3) According to TrimTabs, insiders at some of the top S&P 500 companies have unloaded $2.6 billion in shares of their company stock, compared to only $120 million in stock purchases. despite calls that the financial sector is improving, and much of this selling pressure is coming from the financials. $2.6 billion worth of selling tells us that more danger may be on the horizon for financials. Obviously some financial companies are better than others, but something is definitely wrong somewhere.

4) More than 6 million Americans have lost their jobs since the recession began Until the job losses stabilize, consumer confidence will remain weak.

Many of the earnings improvements we have witnessed are due to cost cuts (job losses), and until companies can grow their sales and earnings without cuts, we cannot have a real recovery.

Given the uncertainty associated with the government intrusion into the capital markets and economy, investors should be positioned more conservatively in the years ahead. A large cash position will allow investors to take advantage of large sell-offs (like March 2009), and profit handsomely on strong rallies.

Here are our Top 10 ETF's for the week of July 21st:

NEW BUYS:

IGF: iShares S&P Global Infrastructure Index Fund

To take advantage of the stimulus money being thrown at the economies in the U.S. and around the globe, we want to own the iShares S&P Global Infrastructure Index Fund since we believe the stocks that make up this index will profit handsomely.

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) IYF: iShares Dow Jones US Financial Sector
6) DDM: Ultra Dow 30 Proshares ETF
7) PGJ: PS Golden Dragon China Fund
8) IYW: iShares DJ US Technology Sector Index Fund
9) IGF: iShares S&P Global Infrastructure Index Fund
10) CASH

Here are our Top 10 Fidelity Sector Funds for July 2009

1) FSPTX: Technology Portfolio
2) FSRBX: Banking
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) CASH

I just celebrated (?) my 51st birthday on Saturday. As most 50+ year olds, I pondered the past as well as the future. The past can teach you a lot about the future. Actually living through several recessions, you see how the same mistakes are met with the same solutions. You can objectively tell what will work, and not work in the future, by living through what worked and didn't work in the past.

Sure, things change, and times are different, but some things never change. My comments come from an understanding of what has happened in the past, but Wall Street, as usual, wants us to believe "it is different this time".

My first real recollection of tough economic times came during the early 1970's.

Today's "Green Movement" and energy crisis is like a remake of an old Hollywood movie. During tough economic times and high oil prices, alternative energy ideas sound good. If nothing else, it gives us little people hope.

But make no mistake, the power brokers who control the masses, do not want to see a mass exodus from oil into alternative energy. To maintain power over people, you must retain control over the product by which you can control them. Obviously oil is a controlling resource, as is a nations currency.

In the 1970's, when Jimmy Carter was President, solar panels were placed on the roof of the White House. During those same years, the "green movement" convinced people to buy solar panels for their homes. Many in California did, and others across the nation did not take the bait.

When Ronald Reagan took office in the early 1980's, he said, get that crap off my roof. My neighbors across the street had solar panels on the roof of their garage in 1990-1992. In 1993 the new owners took them down.

Through the years, there have been many opportunities for our nation and the world to aggressively adopt alternatives to oil. Every single time, as alternative energy seemed to gain momentum, oil prices fell, and alternatives were abandoned.

Having a clear understanding of the 'golden rule" will help you keep things in perspective. He who has the gold rules. You can control the masses by controlling the price of oil. If oil no longer becomes a controlling factor, then masses cannot continue to be controlled.

This being said, we need to keep in mind that higher oil prices in the past lasted for many years before eventually leveling out. In the months ahead, I believe oil prices will regain their upward momentum, and slower economic growth will continue for several years.

In my opinion, the current optimism in the stock market will give way to the realization that a slower growth recovery will eventually unfold.

Currently, investors are celebrating that the economy is no longer falling off a cliff. Leading economic indicators are showing signs of stabilizing, corporate profits are exceed consensus forecasts, and existing housing inventories are shrinking.

This being said, the ingredients for a sustainable recovery are missing.

1) Cost cuts are helping corporate profits, but at the expense of less jobs, and more unemployment.

2) The consumer continues to suffer as the unemployment rate approahes double digits, and net worth's have shrunk.

3) Consumer debt will continue to put pressure spending, and clearly we are entering a period of higher savings and lower consumption.

Don't get me wrong, I believe many of today's undisciplined consumers will spend every dime available to them. But, now that banks and credit card companies have shut off the flow of credit to unworthy consumers, spending habits will be altered for many years.

The stock market will be buoyed for a while on on corporate cost cuts and the short lived fiscal stimulus plan, but what will happen when unemployment hits 10-14%, and the stimulus money runs out?

Can anyone say...Double Dip?

We will ride the wave a little longer, but clearly there will be more turmoil ahead.

Here are our Top 10 ETF's for the week of July 27th:

1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) IYF: iShares Dow Jones US Financial Sector
6) DDM: Ultra Dow 30 Proshares ETF
7) PGJ: PS Golden Dragon China Fund
8) IYW: iShares DJ US Technology Sector Index Fund
9) IGF: iShares S&P Global Infrastructure Index Fund
10) CASH

Here are our Top 10 Fidelity Sector Funds for July 2009

1) FSPTX: Technology Portfolio
2) FSRBX: Banking
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) CASH

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

I realize my journal posts have been less frequent lately, but frankly I needed a rest from constantly counter-punching Wall Street and their misleading news releases. After years of listening to these clowns, I've almost developed a sixth sense on their modus operandi. The downside to constantly rebutting what an investor hears from media is loss of interest until an eventual disaster unfolds.

The old saying at the brokerage firms for years has been "investors have short memories in a bull market". Certainly this has to be the case, for why would anyone in their right mind keep their brokerage accounts with firms involved in the Nasdaq- Dot-Con scandal, or even with a firm involved in creating the risky mortgage bonds that almost bankrupted the entire financial system?

After months, and even years of warning investors, I continue to watch as they march behind the "Pied Piper of Hamelin", and drop into the water to their financial deaths.

After all this, I begin to ask myself; Is it just me?

Wall Street, like the Pied Piper, hypnotizes their financial children in bull markets and big rallies to buy into euphoria, and to sell into panic. This is not a new strategy, its been around for many years.

Almost daily, I watch in amazement as the promoters of financial news help the guilty repair their tarnished images. Here are a few examples;

1) Eliot Spitzer has no shame, and after his prostitution scandal media networks like Bloomberg, CNBC, and the Today Show allowed him to appeared on TV. Clearly, Spitzer's agenda is to ride the wave of resentment against Wall Street back into a public job. If the people of New York buy this one, they are much dumber than I thought.

Here's a question. Who at the media networks allowed this guy to have any face time?

Am I wrong? Is it just me?

2) Sally Krawchuk was on CNBC last week attempting to defending Wall Street's reputation.

Don't even go there Sally! Don't get me started.

Sally is obviously defending the cult in hopes of finding a high paying position within the industry. Here are some of my questions for her next job interview.

a) After causing trillion in losses during the mortgage meltdown, why has there been no criminal investigation of the commercial and investment banks?

b) How did the bankers convince our political leaders to eliminate bank restrictions and allow the banks to leverage their debt from 8:1 to over 30:1?

c) Do the largest financial institutions have control of our nation's elected officials, because of lobbying and campaign donations?

d) While you were at CitiGroup, do you recall anyone within the firm lying to shareholders about the risks associated with over-leveraging, or hiding these positions off the balance sheet?

The Market

The stock market has finally begun to rally. Wall Street and the media are trying to get us to believe the recession is over, and the markets will race higher from here. My job is to interpret what I see in the data, not what Wall Street wants us to believe.

Clearly, the ingredients for a sustainable recovery are missing. Currently, investors are celebrating that the economy is no longer falling off a cliff. Leading economic indicators are showing signs of stabilizing, corporate profits are exceed consensus forecasts, and existing housing inventories are shrinking.

In my opinion, the current optimism in the stock market will give way to the realization that a slower growth recovery will eventually unfold.

As the markets rally a little further in the weeks ahead, I will take profits, and allow my under- invested investment position to run.

My best guess is this bear market rally could carry the SPX into the 1000-1050 range. This being said, I am not waiting for 1000-1050 to lighten up.

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

A lot of bull (market?) has been thrown around lately. Read the following articles and you may begin to rethink your strategies.

Bernanke: This may be worse than Great Depression

Hyping a new economic recovery

The Real Unemployment Rate Hits a 68-Year High