Shop Till You're Broke

With the U.S. economy in the dog house you would think that Americans will be taking a break from their national past-time. If only the retailers would not entice them with bargains, then it would be easy to give up on shopping.

My local Kohls, a major clothing retailer, in conjunction with fast food eatery, Hardees, will be offering free breakfast tomorrow at 4 am to the first 200 shoppers. In addition, they will get a $25 Kohls gift card to help them get into the shopping mood.

At Best Buy, a major electronic retailer, the bargains are unheard off. So far I've seen an advert for a $900 50 inch Panasonic plasma TV. Only that it does not come with all the bells and whistle, but if you are shopping for size, then there couldn't be a better deal.

As is the routine, shoppers have already started pitching tents to guarantee themselves the deeply discounted wares. Other than shopping for a golf clubs set for my dad, I have no plans of buying anything substantial tomorrow.

I'll wait for the weeks leading to the Christmas holidays because I believe we will see much deeper discounts.

The Biggest Losers

If you think you've lost a lot of money then you can take comfort in the list below. A loss of $200 billion in a span of less than one year. - Source; Silicon Alley Insider

Name	Billion	Company
Jerry Yang	$0.8	Yahoo!
Michael Dell	$1.4	Dell
Stephen Schwarzman	$1.4	Blackstone
Oleg Deripaska	$1.54	BNP Paribus
Steve Wynn	$2	Wynn Resorts
Steve Jobs	$2.3	Apple
Bill Gates	$3.5	Microsoft
Jeff Bezos	$3.6	Amazon
Rupert Murdoch	$4	NewsCorp
Sumner Redstone	$4	CBS, Viacom
Eddie Lampert	$5	Sears-Kmart
Steve Ballmer	$5.1	Microsoft
Larry Ellison	$6	Oracle
Sergey Brin, Larry Page	$12.1	Google
Kirk Kerkorian	$13	MGM Mirage
Warren Buffett	$13.6	Berkshire Hathaway
Mukesh Ambani	$28.2	Reliance Industries
Sheldon Adelson	$30	Las Vegas Sands
Lakshmi Mittal	$30.5	ArcelorMittal
Anil Ambani	$32.5	Reliance

Licensed To Trade

I'm still trying to figure out where the market is before making my next move. At the point where we are, we could either explode upwards or crash downwards.

It's like in GoldenEye opening scene where James Bond free falls after an airplane that takes off from the edge of the cliff. As the Russians are waiting for an explosion they see the airplane flying up in the horizon over the mountains.

The plane in our case would be the Standard & Poor's 500 index, the run-away leading over the cliff would be the 7 weeks from October 6th to November 21st and the cliff is on the 24th of November. The Russians would be the Bears hammering down the market and I wish that that I am Pierce Brosnan in this plot.

For some odd reason, I did not save the numbers from the 10th of October and I can't seem to find anything useful on the web. From my post on that day, I know that we traded 11.6 billion shares on the NYSE but I don't know how many stocks made new lows or how negative the breadth was. Trading information from October 9th reveal a worse situation than the lows made on the 24th of November.

And if you throw in other technical indicators such as the RSI and the MACD, then it seems that the low point of this bear market is behind us. But if you consider the VIX, it closed 72.67 on the 21st of November after soaring to 81.48 on the the previous day compared to a close of 69.95 on the 10th of October and 80.06 on the 27th of November.

In the face of a weakening dollar and appreciating precious metals, the odds of the market making new lows are increasing by the day. And although the world would welcome a weak dollar, it may be the last straw that breaks the bulls back as it may lead to the lack in confidence of the U.S. economy.

Figuring out the coming few weeks is going to be a herculean task and if anyone out there has got any views/thoughts I'd appreciate if they shared them in the comment section.

Taking Profits

I woke up (very) late today to the news that the government had extended another bailout to beleaguered Citi. As I drove to work, I couldn't help but wonder how many more bailouts it will take to save the remnants of capitalism.

As expected, the market reacted positively and it was a huge day for financials. While on the surface the bailout news looks enticing, it helped expose the rot that Citi has been keeping away from its books. This only served to reinforce that the jump was temporary, especially knowing that previous government intervention has not helped.

And with that, I put in a limit sell order for UYG in the morning at $5 which got filled just after 3 pm EST. A 50% gain for less than 2 days of trading!

I had hoped to double my money on this position in the coming weeks but in the face of the new bailout news I couldn't justify the huge one day move. But instead I am happy to settle for a couple of hundred dollars for this trade.

In other news, Gold caught fire on Friday after spending the whole of the summer in the dog house. It seems like the markets have woken up to the massive liquidity injections which I believe will result in some serious inflation down the road. The extent to which the Fed and Treasury have been fighting deflation is unprecedented in the face of a collapsing stock market. Perhaps this time round I'll get a good chance to unwind my one and half year position in Gold.

This being a short trading week owing to the Thanksgiving holiday, I don't expect a game changer so I will be taking my finger off the trigger until 'normal' trading resumes next week.

Country First

This morning while I was looking at the US Dollar Index chart I asked myself "What will Obama do when he becomes president next year?" I needed to know whether I should change my investment strategy of focusing on emerging markets.

If you look at the chart you will see that the U.S. dollar has appreciated by 22% in a span of 3 months and it doesn't look like it is about to stall.

This means that imports are cheaper, U.S. exports are more expensive, overseas profits are shrinking and the manufacturing sector is becoming less competitive. Combined together, all this effects would drive U.S. companies to offshore their operations.

It didn't take long for me to find out what Obama would do regarding the situation at hand. Just after 3 pm Eastern Time, someone in Washington leaked to the Wall Street Journal Obama's choice for the Treasury Secretary.

So now we know how Barack Obama will deal with the currency situation. He's going to do exactly what the president is expected to do. Restore the competitiveness of the United States.

And the markets now understand that the president will do all it takes. The end will always justify the means.

I guess this proves that Barack Obama cares a lot about America and I don't think I would be any different if I was in his shoes.

The Beat Goes On

One thing that I have discovered, is that the stock market operates like a cough. You can't hold it back. And if you try, you may end up chocking.

The markets coughed loudly yesterday but we held in the cough today.

For the better part of the day, the major indices refused to bulge from yesterday's low. As the day proceeded, it looked like we were headed into another ugly close. It was not going to be any other close but a weekly close. You have to understand that not all closes are created equal.

A new weekly low close would have caused many a trader some serious bout of insomnia over the weekend. And that is why the powers that be decided to inject a dose of 'good' news into the markets.

It did not matter that President-elect Obama is 59 days away from occupying the White House. Rumours, or news as the media likes to call it, of his choice of Treasury Secretary is all it took to lift the Dow above the psychological 8,000 level.

In less than an hour, what looked like a horrible close was turned into a spectacular finish complete with fire works and champagne.

Unfortunately, the numbers beneath the headlines are clear. We are now back to the usual and it's going to be more of the same until the market finally lets the cough out.

Casino Royale, Part II

You'd have to be in it to believe it. We just closed 6.55% on the Dow Jones Industrial Average on rumors that New York Federal Reserve President Timothy Geithner will be nominated as President-elect Barack Obama's Treasury secretary.

I guess everyone is relieved that Hank Paulson will depart when George Bush leaves office early next year.

None the less, we have to go through the motions of finding a bottom before this market can stabilize.

I'm disappointed that I only got to buy UYG and missed out on the other companies which have been trading higher today. I'm already up 19% on this position as I got in close to the all time lows.

Now I guess I'll have to spend the rest of the weekend trying to figure my next move in the casino that is now known as the stock market.

Cliff Hanger

We are less than one and a half hour to the close of the market on this sunny but cold November afternoon. The market has been gyrating around yesterday's low and 6.7 billion shares have so far changed hands on the NYSE.

I just took my first position in UYG. Boy, did I get the chills when the message came through my blackberry. For a minute, I froze when I realized my limit order has been filled at $3.35.

I say we are on track for a lower close because a lot of people did not sleep well last night and I don't think traders can bear two more sleepless nights. It now feels like we are attending a wake for a burial that never comes.

Here's to the next 80 minutes. Never Say Die!

Cheap Can Get Cheaper

At today's levels it's hard to imagine that stocks can get cheaper. From last year, analyst after analyst have been saying that stocks are cheap. It's no wonder that thousands are being laid off from the financial sector.

All the logic has been thrown out of the window thanks to fear. Even the Feds have discovered that all the liquidity in the world is no match against fear. A testament to the power of human emotions.

Like with all bubbles, the fear bubble will one day burst. And when that happens, you'll see the equity markets explode. With all the money sitting on the sidelines and then some, we'll get one of the most viscous rally on the upside.

My money is on financials. The problem is that they'll spike up and then come down. It for this reason that I'm interested in UYG, a financials Exchange Traded Fund that has been battered 90% year to date.

The ETF consists of some of this year's worst performing stocks and the also some Credit Default Swaps. In other words this is one of the most toxic ETF available out there.

If we are to consider the NYSE McClellan Oscillator, we are barely into oversold territory. The index closed the day at -99.97, just shy of the -100 level that is considered to be oversold conditions and a couple of points higher than the October 10 reading. This means that we still have room to move lower in the coming days.

My guess is that stocks will close in the negative on Friday because traders don't have the nerve to hold onto stocks over the weekend. In the current situation, it's like traders are afraid of sleeping over their holdings because no one knows what news the night will bring.

If this plays out and UYG drops lower tomorrow, I'll pick up several hundred shares towards the end of the day for a speculative trade.

I could get burned like in AIG but that is a story for another day.

Another Day, Another Low

Forget October 10th and October 27th lows. We just hit a new all time low. Even worse, we closed at the low of the day on the major indices.

And trading volume was high. A billion and a half shares short of October 10th trading volume on the NYSE. And another billion shares short on the NASDAQ. That said, it's hard to ignore the high volume of shares traded today.

Save for Citigroup failing, it's going to take much more fear to bring the market lower. Talking of fear, VIX closed at 80.89 today. Slightly above October's 27th close of 80.06 but shy of the all time high 89.53 on the same day. Just goes to show that we are now in a fear bubble and until it pops we might as well get used of the kind of volatility that we are experiencing.

That said, I was a buyer today. Waiting until the last hour before making my trades. I loaded up on PVX, bring down my basis to less than $5 with the stock closing at a new all time low of $4.35. With a couple of hundred shares, I'm done with that position that should see me get 20% plus monthly dividend. I also bought into one more position today, an emerging market Telecom but missed out on an agricultural play that closed higher than my limit price.

I'll definitely be a buyer in the coming days and if we have another down day tomorrow, which I expect, I'll may take up some new positions.

Today's new lows means that the previous lows have been violated and we are back again to where we were on the 9th of October. Looking for the bottom. Although I don't think there is a lot of room on the downside.

I could be wrong but I hope I am right.

Almost There, At Last

If you've been waiting for the bottom then your moment may have arrived. Though the volume was on the 'low' side, we burst through a line-up of multi-year lows on the major indices today. And if you look at individual stocks, the situation is even worse. Most of the big names are trading at lows going back to 1997 and fast approaching 1995 levels.

We are seeing prices that I've never seen in the short time that I've been trading stocks and even guys who have been in the market for decades are wondering where we are headed to.

I can confidently say that if we go much lower, we will see a complete market crash. Not only will investors lose their money but everyone who has money in their pockets. It will mark the death of capitalism.

Who would have imagined a day would come when old money gets wiped out like the way tech stocks got beaten at the turn of the century. From the Ford's to the Maestro, Warren Buffet, and even Bill Gates himself. The value of their wealth is disappearing into thin air.

When you see companies like Berkshire Hathaway fall 50% in a matter of weeks then you know we are either in deep shit or there is some serious money to be made. I'll take the second option.

If you buy a stock in the next week and it does not make you money in the short-term (weeks) or medium term (months), then chances are that the company went bankrupt or the stock market got wiped out completely. Kaput.

Here's to the next few days. Good luck to everyone cause we will need a lot of luck or else we will see this market take down civilization with it.

NB. I WILL NOT BUY STOCKS OF COMPANIES THAT DON'T SELL A PRODUCT OR SERVICE AND HAVE BEEN SURVIVING BY ISSUING DEBT OR STOCKS WITH THE HOPE THAT THEY WILL SELL SOMETHING OR MAKE PROFITS IN THE FUTURE.

Another Day, Another Photo Finish

There is a good reason why I'm always weary of stock market numbers. They can be easily manipulated. Especially the most followed indices. In this case, this would be the Dow Jones Industrial Average consisting of stocks of the 30 largest corporations.

If you take a look at the daily volume, you will notice that there is usually a spike in the last few minutes of trading. Take for instance today, the DJIA closed up 1.83% after after struggling to stay positive for the most part of the day.

As impressive as the gain might be in the face of an economic slowdown, the general market fared worse. Declining issues outpaced advances by a ratio of almost 2:1 at the NYSE with 13% of the total issues hitting 52-week lows.

Bottom line, don't focus on the tape. Buried deep in the headline data is the true market data.

The Death Of Consumerism

Retail sales data for the 4 weeks ending November 1 couldn't have come at a worse time. With the exception of Wal-Mart, which reported a 2.4% gain in same store sales, all the other retailers posted negative numbers.

If you consider that more than 70% of retail sales are tied to the Christmas festivities (including the Thanksgiving holiday), then you realize why the U.S. economy is in trouble. A 10% drop in sales over this period is much worse than a 10% drop in the summer months.

Unlike in the previous years whereby retail stores devote a lot of space for holiday merchandise, there was little fanfare regarding Halloween paraphernalia this year. Even in the sub-divisions, there were fewer Halloween decorations adorning the front yards.

It's no wonder that Electronic retail giant Circuit City has filed for bankruptcy protection and Best Buy issued a profit warning despite aggressively cutting prices. For instance, the 50 inch Panasonic plasma TV that I bought last year now retails for $1,399 down from $1,699. And you can be sure that the price will come down as we approach Christmas day.

For people who have been putting away large purchases, this may be the best time to buy stuff that you need. And for investors wanting to buy into cheap retail stocks, they may have to wait as the retail stocks are bound to get cheaper. I'd wait until after the December retail sales data is announced in January next year afterwhich we will know how bad the consumer slowdown is going to be.

In Search Of The Elusive Bottom

The plan for today was to wait until the final hour of trading before making a move. It so happened that I had 2 back to back meetings from noon till 4 pm EST in which I was on the agenda. After I was done with my part and 30 minutes to the close, I excused myself so that I can check how the markets were doing.

To my disappointment, the markets had rallied big time from intra-day lows on substantial volume. This is the second time that this has happened, the first time being on 24th October (It's A Washout, Finally).

Today's events go to show that there too many bulls out there and not enough bears. There is certainly a disconnect between Wall Street and Main Street. In the heartland, the situation is bleak but in the financial markets investors are sitting on wads of cash.

I know its been said before that you should never try to time the market. So why I'm I trying to catch the bottom?

I believe the reason the majority of people fail to spot turnarounds is because they don't know what it actually looks like and therefore don't know what they are looking for.

Based on trading volume, indices, investor sentiment and technical analysis, October 10th remains the day the market bottomed but nothing has improved since then. In fact, the U.S. economy has worsened and that is why I'm wary of today's action.

The week is not over and we still have one more day of trading. On the cards are deteriorating consumer sentiment and retail sales data. I will not be surprised if we see one more day of window dressing despite the worsening economic situation.

Rather than get sucked into the fake rallies, I'll adopt a wait and see strategy. In situations like today, the best strategy is to be patient and let the market come to your level cause it will. Until I spot another bottom or what looks like a bottom, I'm going to continue stockpiling my money on the sidelines.

Sticking My Neck Out, Once More

The last time I bought shares was on October 10th, which turned out to be the day the market bottomed. We rallied back up and now we are resting on October 10th lows.

The volume has been lackluster which can mean a lot of investors are holding onto their losses which I think is a sign of bullishness. And as you know the market doesn't work that way which could mean that we yet to bottom.

I think this may be the case because many of the big names broke through their daily lows and may finish lower for the week. These include Microsoft which broke through 1997's $20 support, Google trading below $300, Citigroup trading at $9 and change and the respected Goldman Sach's trading at its 1999 IPO levels.

I'm not going to touch anything American as I don't have any faith in the strengthening US dollar. Top on my list are Provident Energy Trust that pays 20% plus dividend, Nokia which pays 5% and Veolia at 12%. I also have my eyes on Exchange Traded Funds for Russia and Canada which are trading at 20% above their October lows.

The Stock Market Crash of 2008

In the absence of any good news, I want to make a bold call and label the current bear market as the stock market crash of 2008.

What started as U.S. only housing bubble burst has slowly morphed into a monstrous situation. No asset class has been spared in the ensuing sell-off that has seen investors unload their over-leveraged positions.

Who would have thought that things would turn out this way. I can't even think of a solution other than let the financial system run it's course.

I'm afraid to say that the only glimmer of hope is a huge government infrastructure spending which will result in a massive deficit that can be paid for by increasing taxes in the future.

It's about time Treasury got out it's bowl and crawls out to beg money from the international community.

Goldman Sucks Warren Buffet Underwater

On September 23rd, Warren Buffet's Berkshire Hathaway offered beleaguered Goldman Sach a lifeline when he invested $5 billion via a purchase of preferred stock.

On the day the deal was announced, Goldman’s shares popped in after-hours trading, to $135.87 after closing the day at $125.05. The preferred shares which pay a 10% dividend yield are exercisable immediately and have a strike price of $115 a share.

What looked like a steal then now seems like a bad investment. Never mind the fact that Berkshire also got warrants to buy up another $5 billion of Goldman common shares because the shares closed at $74.68 after hitting a new 52-week low during the day.

While there is little doubt that Goldman Sach's may recover, it remains to be seen for how low Goldman's stock will fall considering the markets are still not oversold despite the on going sell-off. And yesterday's news that Meredith Whitney still thinks that Financials are over-valued means that we still have some down-side pressure.

I guess this post puts to rest the question that I asked (Innovator, Imitator Or Idiot?) the day after Warren Buffet bought into Goldman Sach's.

Don't Go Chasing Waterfalls...

"...stick to the stocks and the shares that you're used to."

Most of the 5 year charts of the major (and not so major) indices look like we're in the waterfall phase. Or is it a free fall.

To paraphrase it, don't try to catch a falling knife. Or in this case, falling knives.

Oddly enough, I prefer TLC's hit 'Don't Go Chasing Waterfalls' to Tom Petty's 'Free Fallin' as the soundtrack to today's financial markets.

May be I should be listen to Take That's 'Patience'.

Worse Just Got Worser

October is behind us but the future seems to be getting bleaker. Job losses seem to be the order of the day as we are greeted every morning by companies announcing rounds of lay-offs. It doesn't help that housing sales have ground to a halt. Very few houses are on the market and there are even fewer buyers.

The brighter side of the mortgage meltdown is that junk mail has decreased by half. No more credit card offers. No refinancing offers. No debt consolidation.

Even the coupons have not been spared. I now have to pay $15 plus tip for my haircut instead of $9.99 plus tip. The same applies to servicing my vehicle. The demise of $21.99 oil change has ushered in a new era of $34 oil change at my local Firestone dealer..

But wait. The fed overnight funds rate is now 1%. Which means that anyone who is in good books with their banker can borrow for cheap. Too bad that all asset classes are deflating so it doesn't make any sense to schedule an appointment with the banker..

Its no wonder that volume has dried up in the equity markets despite the negative breadth and gloomy forecasts..

And to hear star analyst Meredith Whitney, who has been right all along, say that the financials are going to go back to the government with more empty bowls begging for more bailout manna makes me wonder how bad the situation really is.

I guess we will soon find out.

It's A Beautiful Day

It certainly is a beautiful day on this 5th day of November the year of Barack Obama. It's 57F (18C) outside with a expected high of 72F (23C) against the background of warm fall colors and browning lawns.

Today is a big day for everyone and it means different things to different people. As a Kenyan and a black, I am very proud of Barack Obama's victory. His victory is even bigger for my kids who are Kenyan, American and black.

I wish Barack Obama the very best as he prepares to take reins of this battered and broken nation.

Congratulations to you all. We earned this day.

Partying Like It's 1960

It's 2 days to the grand finale of the most talked about event of this year. The U.S. presidential elections. All over the country, people are waiting for Tuesday to come so that we can put this matter to rest. To say that we are at the cusp of a great historic moment would be to ignore the events leading to the elections.

Only J.F. Kennedy's victory over Richard Nixon in 1960 comes close to what we are about to witness.

Barack Obama not only defeated the Clinton machinery to win the Democratic party nomination but he has out-fundraised all presidential candidates before him. In a journey that has lasted close to 2 years, he has re-written history and also the way presidential campaigns are conducted.

For this reason I will be celebrating the end of an era and the beginning of a new one on Tuesday night. Together with my family, we intend to hold a private party to celebrate the achievements of Senator Barack Obama.

Even though my kids may be too young to appreciate this moment, I want them to grow up with memories of this historic moment. We will all gather in the family room and watch election updates on CNN and/or MSNBC while we have our own little celebration complete with patriotic party items. Rather than buy Democratic or Republican paper goodies, I've settled for an American theme because the historic nature of Tuesday night transcends over party boundaries.

As my kids grow up, I want them to know that there is no limit to what they can achieve if they put their best efforts. When I look back to my youth, I remember measuring my achievements against my parents success and I want them to look beyond my achievements. Beyond growing up to be responsible individuals, I want them to excel in whatever they set out to do.