Futures Surging…Buy & Hold Does Work
News Update: Bank of America Share Sale Raises $13.5 Billion After Stress-Test Verdict
blah blah blah Bank of America stocks falls 5% in after hours, and quickly regains it all. That Bank of America is able to summon $13 billion dollars without consequence is proof that you can, in fact, inflate your way to prosperity. Maybe short sellers who have lost their shirts in recent months can go online to apply for the ‘bad bank’. I’m sure there’s a nifty form where you can input how much money you’ve lost.
Futures surging yet again. It’s fun being smart and making easy money with GOOGLE, POTASH, and Mastercard stock day after day after day after day…
If you have ES short contracts cover them NOW (at a loss). If you’re shorting stocks you’ll have to wait till 5:00 AM Pacific like the rest of the schmucks to cover (at a loss).
And now our feature presentation….da da dum !!!
Chad Brand wrote an interesting article on seeking alpha regarding the validity of the buy & hold investing methodology. He writes:
The current bear market resulted in the first negative ten-year period for the U.S. stock market in a long time. This has prompted many people to declare that the investment strategy of buying and holding stocks for the long term (?buy and ?hold? for short) is all of the sudden ?dead? or no longer viable.
However, empirical evidence has shown that buy & hold does work for stocks that fall under the following criteria:
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1. Large cap (market cap should exceed $15 billion)
2. Benefits from a weakening dollar, steady inflation, and globalization
3. Steady, strong YOY EPS growth
4. Market dominance
5. Superior 5 year returns vs. the S&P 500
6. Relative insulation from macro economic events
Detractors of buy & hold often defer to charts of a stalwart companies whose stocks has failed to appreciate such as Coca Cola:
The example of KO would only meet some of these criteria. It fails with regards to 3, 4, 5, given that Pepsi Co is a major competitor, for example.
There are only a handful of stock that meet all or most of the criteria; Google, Bidu, Research In Motion, Apple, Mastercard, Visa, Potash, Mosaic to name a few. Google is perhaps the only company that meets ALL the criteria.
Financial Crisis Over So Soon?
Various Indicators show that the the worst supposed financial crisis since the great depression may already be over.
We’ll begin with the LIBOR rates which have fallen substantially since peaking in October 2008. According to the Wall Street Journal:
Data from the BBA showed three-month U.S. dollar Libor, seen as a key gauge of the effectiveness of the Federal Reserve’s monetary policy, dropped to 0.82563% from Thursday’s 0.85438%.
Since peaking at 4.81875% on Oct. 10, the three-month rate has fallen significantly. The sharp decline has been aided by aggressive monetary easing by the Federal Reserve.
The most salient point is that the Fed’s liquidity efforts ARE working as evidenced by the rapid decline in LIBOR rates, and is more proof that perhaps Geithner, Obama, and Bernanke are, in fact, doing a good job not only making the stock market go up, but also restoring liquidity and confidence.
In addition, the longer term yield curve is steeping, another bullish sign as explained by MarketWatch.com:
“A steep yield curve is bullish because it means that investors are expecting the economy to continue growing at a fast clip for several more years. If the economy does that, it will put persistent upward pressure on longer-term rates. Unless investors are enticed with much higher rates, therefore, they would not be willing for several years to lock up their money in a long-term CD or bond.
Finally, the VIX index is plunging.
However one caveat is that a less volatile market doesn’t necessarily imply an appreciating market, but it’s nevertheless another indicator that the shock of the supposed crisis has passed.
We’re seeing a massive recovery on a global scale after what was a brief shock to the financial system and economy back in September/October. Nothing short of divine intervention can stop this bull market. As the third wisest human in the world I implore readers not to short.
Democrats Angry at Obama Regarding Lack of ‘Change’
Fringe Democrats are furious at the stimulus, bailouts, and lack of job creation. This is not the ‘change we can believe in’ the original Obama supports had hoped for. They want the abolition of leverage, trading instruments, bonuses, and supposedly ‘predatory’ lending all together. They want more welfare programs and unemployment benefits.
These moonbats fail to realize that the US economy thrives on risk, globalism and free market capitalism. Banks should be able continue to provide mortgages to those who may be unable to pay them back, or taken advantage of by dubious fine print. It’s the responsibility of the borrower to understand the exact terms, instead of having the nanny state impose quasi-socialist regulations on lenders.
The ’shovel ready’ sales pitch was just a lie to sucker in democrats. And they fell for it hook line and sinker. Obama is a politician; what else would you expect? Shovel projects would just be a waste of time and money, anyway. Same for funding for education (high tech labor can be insourced from India and China, and low tech work can be outsourced to india & china, hence rendering public education obsolete) and environment, just to name a few examples of inefficient use of economic capital. Fortunately, the stimulus money is being used on high tech ventures, tax cuts, and bailing out the too big to fail, which creates economic value.
Amusingly, only 150,000 news jobs have been created/saved since the passage of the $700+ billion Economic Recovery Act. Even obama and his advisers realizes that too much employment isn’t necessarily good for the economy, as written in more detail here.
But there’s even more reason to cheer. According to CNN, Fox Business News, and CNBC the recession may already over. They are offering tips on how Americans can shop and invest in these supposedly ‘trying’ times. Why not heed their advice instead of pointing fingers at Obama, Geithner, and Bernanke over stuff you have no control over? Experts say that Twitter.com and Facebook .com are worth $10 billion and $40 billion respectively, but no web 2.0 bubble. Maybe they are right.
What ever happened to the commercial real estate bubble that was suppose burst two years ago? Or the credit card debt bubble? Hmmmm? Why do these bubbles refuse to pop? These are just a few questions for inquisitive minds to ponder.
Deepest European Recession Since WW2 Not a Big Deal
According to the Drudge Report, the Eurozone is in the deepest recession since world war two.
However, just two hours later the headline was pulled and replaced with minutiae such as Michael Phelps and Michelle Obama. I guess that means the deepest European recession since World War 2 just isn’t such a big deal, or at least not as important as Michael Phelp’s records. Why?
For one, the GDP numbers were released last Friday and the market’s reaction was muted
(because these numbers were already expected)
It’s ironic how the Eurozone is in a deeper recession than the United States despite having much higher personal savings rates. Aren’t we suppose to be the stupid, irresponsible ones who ‘got everyone into this mess’? So why is the United States running laps around Europe? In the United States our recoveries are ‘V shaped’ unlike that of Japan, France, or Germany whose economies are bogged down by fiscal conservativeness, consumer frugality, welfare programs, employer regulation, and higher taxes.
Stocks are gonna surge next week. That’s why you need to buy GOOG AAPL MA V BIDU RIMM EWZ
FXI and make money instead of being a loser who sites on the sidelines watching other people
make money. The fake financial crisis is over. The mental recession ended after 16 months, four to eight months shy of earlier estimates.