The Dynamic Growth "Weekly Briefing" was posted to the Newsletter portion of the website on Sunday.
To access the "Weekly Briefing", go to the "Newsletter" link at the top of the page and sign in by establishing your own username and password.
Here are a few comments from this weeks Newsletter Briefing.
When the Congress and President began talking about stricter regulations on Wall Street and the big investment banks, I could couldn't help but laugh. After-all, who do you think controls these guys?
In 1999, when the Glass–Steagall Act was repealed, it wasn't Wall Street and the banks who introduced the legislation. The bill was introduced by Senator Phil Gramm (Republican of Texas) and Representative Jim Leach (R-Iowa). The final bill passed by a 90–8 margin in the Senate, and 362–57 in the House. President Bill Clinton signed the legislation into law on November 12, 1999.
Glass–Steagall (The Banking Act of 1933) was a depression era protection that was put into law after the collapse of the American banking system in 1933. Had it not been repealed, I seriously doubt we would have witnessed the collapse we saw in 2009-2009.
The repeal of Glass–Steagall allowed large investment banks to underwrite and trade mortgage-backed securities (MBS) and collateralized debt obligations (CDO's) and make up risky products like structured investment vehicles (SIV's).
So, now you know why I couldn't help but laugh when our fearless leaders said they were going to impose stricter regulations.
The Congress and Senate can pass all the laws they want. We have laws on the books for murder, drugs, and rape, but people still kill, do drugs, and rape. No law can regulate human nature. Since 1987, human nature has morphed into excessive greed, and a quest for power that is beyond a common man's intellectual capacity. We hear about the greed, and we hear about the power, but we sit in front of our TV sets stunned when we hear stories of very evil acts.
President Obama talked about a 10 year tax on the banks that got us into the financial crisis. Joe six pack watching the news is yelling "go get'em" while shaking his fist at the TV. What he doesn't realize is every penny of the so called tax will come directly out of his pocket. This was not a tax on the banks. This was a new tax on the consumer.
Be Careful Out There!
Stocks are getting overvalued. As we look at the Relative Strength (RSI) of a large majority of stocks, we are seeing more stocks overbought, than oversold. The RSI of every stock, and stock index has a range from 0 to 100. As a stock approaches a Relative Strength number of 70 or above, it is considered overbought, while an RSI of 30 or under suggests a stock is oversold.
You can gauge the RSI by using this simple to use tool from Bloomberg.
I would also be careful of the cheer-leading on the financial channels as the stock market becomes more overbought. This morning I laughed when CNBC's Erin Burnett was reading off the teleprompter. She called Iran's, "Republican Guard", an "elite" military unit, and very dangerous.
The last time I heard how tough or dangerous the "Republican Guard" was, was just prior to the US invasion of Iraq. Shortly after the bombing started, the "elite" military unit was waving white flags, and surrendering to crews from FOX news, and CNN.
Here is an example of the media getting you to buy stocks at the top. Once again, Erin Burnett was reading off the teleprompter-Video- on January 31, 2007, saying "Goldilocks move aside, we have Economic Nirvana." Jim Cramer on February 25, 2007 was saying the economy would be fantastic.
All I can say is...Be Careful Out There!
