The issue of energy is not a supply problem it’s a delivery problem.

The issue of energy is not a supply problem it’s a delivery problem. We are not running out of resources, its our ability to deliver energy to the right place at the right time to the right people at the right price that is the problem. The US has so under invested in energy infrastructure since the 1970’s the ability to deliver energy has been so constrained as to push up prices and until the restraints on the energy delivery system are relieved we will continue to feel the pinch of higher energy prices . That means we need, power plants, transmission lines, refineries, shipping terminals, drilling rigs, better regulatory environments and so on and so on…

Looks like we have gotten a strong counter rally the last two weeks. What has worked the last year or so, what I have been calling the 1970’s inflation trade or “Disco trade” of energy, Ag and precious metals has backed off while the counter sectors such as airlines and financials have rebounded. The process has been exacerbated by heavy short covering and the climatic event of Fannie Mae and Freddie Mac almost testing the implied guarantee of the federal government. So what’s next, I would expect the counter rally in airlines to continue until oil prices stabilize again and the financials bounce should get you back up to the 50 day moving average and then the fundamentals of each issue and the industry should begin to guide us.



I am available for public speaking and beers after work please contact me for bookings

Ball Four!

Years of economic observation has taught me that consumers tend to put off major spending decisions during the summer months. Looking to Wall Street and their annual proclamation of the next great depression after every summer holiday season of stalled consumer spending does not seem a reliable indicator of future economic activity. I find a more accurate way to tell the health of the economy in the seasonally slow summer spending period is attendance at major league baseball parks. Over the years this is one of the simplest ways to judge the underlying strength of the general economy. Given a baseball game in a major market can set you back at lest $50 per seat ,a set of $10 hot dogs ,$20 bucks to park ,gas and a watered down beer running $15 bucks. For anywhere from $200 to 400 bucks you too can take your kids to see the New York Yankees… ouch but as every parent will tell you and experience well worth the cost.

So let compare 2008 so far to 2007 and 2006


RNK TEAM GMS TOTAL
AVG


2008
1 NY Yankees
54 2,842,615 52,641
2 NY Mets
46 2,318,166 50,394
2007
1 NY Yankees
81 4,271,867 52,739

3 NY Mets
81 3,853,955 47,579
2006
1 NY Yankees
81 4,200,518 51,858

3 NY Mets
78 3,379,551 43,327

Looks like baseball fans don’t know about the economic slow down…

Starbucks closes stores

So lets take a look at Starbucks is it just another case of over expansion or perhaps a bad economy eating into consumer spending or is there something even more fundamental?

First some history,

For years I have used something called the “Starbucks test” to gauge the economic vitality of potential clients. The test simply says, the more expansive the coffee chosen by a particular consumer the lower there prospective net worth. The theory is simple the less money you have the more significant short term gratification plays in your consumption. People with more substantial net worth have many avenues in which save and spend and self actualize or feel significant. Let’s face it $10 bucks maybe a lot for coffee but to tuck $10 away for a rainy day is not nearly as gratifying. People with less means get a so much greater feeling of significance spending the money right away instead of saving it .That $10 bucks for a rainy day, that in the end is still only $10 ,which saved or not still hardily amounts to anything.

Since Starbucks has in my view lost its way ,the “Starbucks test” is no longer as valid as it once was.

In my view Starbucks is struggling because of 2 basic reasons 1) is over expansion ,enough said that seems obvious to most of us and 2) and significantly more serious, abandoning the “coffee house” look for the typical “sandwich shop” knock off look. The mass produced “coffee house” look was what made Starbucks ah Starbucks , and with out it ,its just not Starbucks .The fact that they continue to worry that Mac Donald’s selling better coffee is proof positive that the company has lost its way.


*this is not a recommendation, solicitation, offer it is the opinion of the author and only the author

you can’t fall off the floor

Ok so the back stop on the financials has been put in place and as a wise man once told me you can’t fall off the floor ,but incase you do the FED will step up and cover your ….yea.. you get the picture. So I have only one proverbial question, if government agencies operate under an implied Federal guarantee and bank deposits are insured by the FDIC why does the Secretary of the Treasury have to keep reiterating what appears to be the obvious?

The Treasury Secretary put on a grand show over the weekend in an attempt to avoid a Bastille Day route of the financials

The Treasury Secretary put on a grand show over the weekend in an attempt to avoid a Bastille Day route of the financials and in typical fashion as we have seen time and time again Federal reassurances often have the opposite effect not reassuring traders at all. The Secretary outlined the possibilities of a Fanny and Freddie bailout reiterating what this blogger finds all to obvious with the “implied guarantee” nature of the relationship that the two agencies have with the federal government. Some market participants however seemed quite surprised by seeing it all outlined on national TV.

Tuesday the grand show will continue when the FED Chairs testifying before congress and there is nothing more entertaining than a bunch of congressmen and women with little to no understanding of the banking system and the economy in general grandstanding and looking to pass the buck in an election year .Makes for very good daytime TV but I am afraid it is hardly a substitute for sound fiscal policy.

Other issues such as the more permanent nature of the inflation picture coupled with anemic US growth rate it is thought leave the FED little wiggle room. It does seem to this blogger that given the disconnection of the FED funds rate with more general consumer loan rates that the FED has more wiggle room that one might think .A small increase in the FED funds rate seems fairly insignificant to overall economic growth yet it might just do the trick boosting the dollar higher and reassuring markets that this FED really means business on inflation.

Fannie and Freddie may be forced in to receivership, yikes!

Fannie and Freddie may be forced in to receivership, yikes! Perhaps we all should have paid more heed to the warnings of the previous FED Chair as he pinned over how much on the hook the Treasury could be with its implied guarantee’s .Perhaps this is the climatic event that from which my past experience signals the end of the crisis and the beginning of a rebound in financials. I had long surmised that this current crisis would end with some major bank teetering on the edge of disaster. My regular readers will remember several times I pointed out that in financial crises of the later half of the 20th century all roads led to Citi bank but a crash and burn act from Fannie and Freddie might just do the trick .Apparently it would be an understatement to say that things are a bit worse than even the most negative commentator has led us to believe! Folks I am not ready to say buy yet but as Baron Rothschild once said,” buy when there is blood in the streets” and at this moment it’s starting to look pretty gory.

off to the races ...well sort of

So how does the sell off end and how does the rally start ? Unlike the huge oversold bounces of the previous decade the current decade has hard sell downs under low volume, little or no capitulation, followed by a rapid re-flation of equities values under steady volume. The key is no one calls the bottom and stocks are up 20-30% by the time anyone realizes the party has already started. The up motion of the market is characterized by a subtle shift from sellers to buyers and a slowly and steady building volume .

can you say re-remics ?

"Collateralized debt obligations that helped drive banks to $400 billion of writedowns and credit losses are finding buyers under a different name: Re-Remics. "

the word of the day?

Fed chair reiterates the “too big to fail policy”

Fed chair reiterates the “too big to fail policy” and avoids the big interest rate decisions till next year ,or “as long as emergency conditions prevail” .Again the current economic dilemma’s has been created more by continued poor policy judgment and much less by the forces of supply and demand.

The very congress that seems so out of touch on the sub prime mess continues to look to act on more regulation of the financial sector and throw in enough tax increases to go around consequences be damned ….humm sounds like the Carter Era to me and remember investment banks may be too big to fail but your portfolio isn’t .

As this current correction runs its coarse dust off your white suit and look to slowly add back the same sectors; energy, Ag and metals, with particular attention to natural gas and drillers. Like the 1990’s the sectors that led the market higher will lead the market when it comes out of a tail spin unless there is some major change in policy direction.

Given the inherent political opportunities with “global warming” and the current government penchant for raising taxes and over regulation “global warming” offers politicians a goldmine of unlimited chances to tax and regulate the human condition recognizing that all living activity results in the explosion of CO2 gases. This blogger however hopeful that sanity may prevail is rather dubious that any leadership will be exhibited from Washington.

The big issue once again is leadership and the 70’s generation’s inability to exhibit any.

As I put fourth in the last post the market has just about sold off everyday since the FED meeting and to readers of this blog that should be no surprise. The FED has once again talked the talk, waffled, but failed to walk the walk.

On the positive I don’t really think the economy is half as bad as we have been led to believe, after all productivity continues to grow which is virtually unheard of during a slow down and unemployment remains relatively low. Inflation for all the talk is still low compared to the 70’s, but still a long term treat and high compared to recent years .

The big issue once again is leadership and the 70’s generation’s inability to exhibit any. The lame 1970’s style political solutions are pushing the market down and will continue to do so given the vast failure of all these government first, tax and regulate everything that moves policies .The thing any keen market observer should take away from the 1970’s was the utter failure of the policies of that time period and the grave consequences that followed. So don’t forget to take profits from time to time but stick with the Ag ,Energy and Precious Metals trades that have performed so stellar year to date and given the possibility of an emergence of a “second jimmy carter “ presidency this trade should stay in tact for some time .

ITs the FED folks ...

reason for the selloff is yesterdays FED-speak and the failure of the FED to follow through and stem the tide of inflation !

a little bit about me................

I am a Investment Advisor with a unique perspective on markets, economics ,politics and media . I have experienced and weathered the 1970’s stagflation, the ’87 crash, 2000 meltdown and worked in ground zero on 9/11. I use everything from very basic number crunching to esoteric wave theory. I use a proprietary matrix that match’s historic trends to current data which attempts to isolate the dominant dynamic in today’s current price movements to maximize investor returns and minimize risk . I manage money for individuals and institutions and offer a wide verity of financial services operating in a traditional stock broker model using internet technologies to off “mass produced customized solutions”.No account is too big or too small. No cookie cutter financial planning ,everyone is treated as a unique individual .I am a free market guy all the way and do view government action as part of the problem not the solution.

I am available as a Keynote speaker for your event, feel free to contact me ...


James J Foytlin
Ridgewood NJ 07450
toll free 1(866)492-3959
phone 1(201)301-2780
cell 1(201)966-7788

The FED dose it again

So the FED did it again talk the talk on inflation then back down when clear action would send a strong signal . The failure to communicate its intentions clearly has continued to mar this FED and the byproduct being a continued decline in confidence in the FED chair and a continued decline in the confidence of the US economy, the US dollar and the entire leadership of the US government. Perhaps this generation (the 70’s) simply doesn’t have it in them, but the continued lack of leadership is starting to become a real problem. This 1970’s mindset seems so misplaced 2½ decades later but is on its way to becoming a self fulfilling prophesy. While the FED dawdles the two parties are busy embracing the failed policies from this bygone era ensuring that the same failed results. Under these circumstances further deterioration for most equities is a foregone conclusion. Investors will be wise to keep there focus on inflation driven results. Sectors such are energy, precious metals and Agriculture will continue to outperform . With particular focus on domestic natural gas, coal and drillers .Natural gas because its viewed as “cleaner” and we have plenty of it ,coal with its “dirty reputation” because we have even more and at lest it could be exported to China and finally the drillers because weather we spur demand with a new policy of drill drill drill or stick to our old prejudice against drilling a continued premium will be placed on domestic resources and access to those resources.

Brilliant simply brilliant : Drill Drill Drill

Finally a viable alternative to this silly idea that raising taxes is going to lower energy prices some how… Drill Drill Drill ..so will some kind of sensible energy policy that involves making more supply available ,thru drilling and construction of nuclear power plants as well as additional investments in alternative energy and passive conservation push to US toward energy freedom ,create an economic boom and change the security picture of the US over night.? It sure would and it looks like John McCain finally has something to run on. If he is serious this could fundamentally change the global energy picture for generations and would finally rid the US of this irrational fear of energy production and change the balance of power in the energy business for ever. Stay tuned this could be very interesting for investors and fundamentally change the dynamics of the US equity market, the inflation rate, productivity growth ,interest rates and national security. Remember there is NO Energy shortage just the political unwillingness to add to supply.

The cost of money is about to go up in the US

As the FED warns of imminent attempts to put the brakes on inflation, market watchers continue to speculate on the repercussions.
The main question on everyone’s mind is weather the dollar will keep falling or will a slow rise in US interest rates and perhaps a decline in EU rates push the dollar higher? My bet is that the dollar is moving higher in the short run but to what extent that is going to effect energy, commodity, precious metals, and Ag I am unsure. I would look for the G-10 to make some kind of a joint strong dollar pronouncement, given how much the weaker dollar has damaged EU exports.

McCain and Obama using the Carter play book

Ok so you are really surprised the proposed policies from our political leadership dating back to the Carter Era will not cause the same results? With Hillary out and McCain and Obama using the Carter play book the market quickly passed judgment like it or not on the foolish Carter style agenda.

It’s also important to remember that employment is a lagging indicator and unemployment will continue to climb for some time after the end of the current slow down. This factor will be exacerbated by the continued growth in productivity and the continued “under the radar” growth in home based technology businesses and professional consultants from all fields working from home or should I say from a laptop and blackberry. And of course at the low end the latest increase in the minimum wage which dis-employed many teens and students.

Beverley Hillbillies

Seems the continued demand for energy and the restricted supply situation in the US has begun to place a premium on domestic energy sources. Coal has its environmental political issues but natural gas seems to be plentiful with many new domestic discoveries coming on line with drillers on land already authorized to drill. Some experts suggest the as much as 90% of domestic US oil and gas is off limits to drilling dues to government environmental regulations so a premium is now being placed on operating US recourses.

An Isolated tribe is found in Brazil, and isolated worker found in his Pj's working from the kitchen table...

An Isolated tribe is found in Brazil, the space stations toilets finally flush and Susan Sarandon vows to move to Italy Ciao ! Wall Street starts to trade hot air thru Chicago Climate Exchange. Meanwhile the FED ponders its next move with many suggesting interest rates will move up. Inflations proves less than expected by some measures and the economy despite the all the negative news apparently has turned off the TV with GDP figures looking better than expected . The interesting thing is that despite the doom and gloom the unemployment rate has hardly budged and the growth rate in productivity continues to grow at an uncanny rate given the current economic slow down. I would suggest the little reported phenomenon of people thru the use of technology working independently from home in more and more occupations and industries continues to be below the radar for economic data collection.

death of the consumer ?

Charles Barkely pays gambling debts and vows to give up gambling, stock market tanks on fears of massive economic repercussions!

Transports when you cant make up your mind

Can’t make up your mind weather to bet on accelerating global growth or stick with the commodity boom? There is a way to play both, its through the transports, particularly with tankers or trains. Transportation booms along with an increase ion global trade and transports that carry agro goods, metals or energy will boom with either the current commodity boom and a resurrection of global growth .

Tax Free Municipal Bonds

Ask me about Muni Bonds:

Towns, cities, and regional and local agencies issue municipal bonds. Municipal bonds usually have lower interest rates than comparably rated corporate bonds and Treasury securities. The minimum amount required for investment in municipal bonds is $5,000.The most important feature of municipal bonds is their tax-exempt feature. Additionally, income from state and local municipal bonds can't be taxed if purchased within the geographic area. For example, New Jersey residents don't pay state taxes on New Jersey bonds. However, residents of California are subject to state income taxes on their New Jersey bonds.

“let them eat ah…Pizza”

So I stopped in to pick up a pie at Ridgewood Pizza the other day and was informed that my pie was now a whopping $10 a full 25% increase from the $8 previous Monday, Wednesday Special price. Yikes …so what’s going on with Pizza prices. Seems the global commodities price explosion has hit home. Prices of wheat, flour, sugar as well as prices for oil, natural gas, coal and precious metals to name a few have not seen these kinds of price increases since the 1970’s . Unlike many other places on earth there is no need for food riots or the offing of heads of inept despots ,in America making money of human folly is fair game .Yes but isn’t investing in volatile commodities very risky you ask? Risky yes but now because of the miracles of modern technology you can invest in Precious Metals, Gold, Oil, Natural Gas ,Agriculture Equipment, Green Power and so on through the use of what we call Exchange Traded Funds or ETF’s for short. What is an ETF you ask? An ETF (Exchange Traded Fund) is simply a basket of stocks that is bought and sold on a stock exchange as if it were a single stock. ETF traded funds are a great way to play a particular sector or diversify your portfolio. So if you want to take advantage of say a falling dollar or just looking to make some extra bread to treat yourself to a pizza give me a call your friendly neighborhood investment advisor and remember that these investments as all securities carry risk of loss of principal and are not insured like bank deposits and you could lose all or most of your money.


James Foytlin
Investment Representative
54 Washington Place
Ridgewood NJ 07450
Toll Free 1(866)492-359
1(201)301-2780
Fax 1(201)301-2762
Cell 1(201)966-788

The Dollar decouples form energy prices and food prices.

The Dollar decouples form energy prices and food prices. Till now lots of people blamed the higher prices in food and energy on the declining dollar, but what we have seen the last couple of weeks that the dollar has firmed yet energy and food have continued to raise. The global inflation genie seems to have been let out of the bottle.

Punish the Producers ,“wind fall profits tax” yikes!

“In 1980, United States federal legislation was passed that levied such a tax on oil companies because of the profits they earned as a result of the sharp increase in oil prices brought about by the Arab oil embargo. So the US Congress decided to punish the Oil companies for the “Arab Oil Embargo”.The Congressional Research Service has analysed that the windfall profit tax brought in $80 billion in extra revenues for the United States government, which was far less than the projected $393 billion. Also, domestic oil production by oil producers was said to be lowered.” Here we go again ,I guess the politicalo’s didn’t learn anything from the 1970’s early 1980’s , the “wind fall profits tax” not only failed to raise the needed revenue for the government, but also raised prices to the consumer and caused a decline in domestic energy exploration. My bet is what didn’t work in the late 1970’s early 1980’s wont work now ! Expect the huge price increases in energy to continue or even accelerate.

FED plots the easing end game

As FED plots the easing end game, a tug of war is developing in the short run between the weak dollar make money off inflation and the ending the FED cuts will strengthen the dollar crowds. The theory being that on one hand FED rate cuts weaken the dollar and raise prices of basic commodities like oil, natural gas, wheat, soy beans and so on while ending the rate cuts would have the opposite effect of pushing the dollar higher and in turn lowering the cost of basic commodities. Depending on which camp you are in defines what stocks you are buying or looking to buy. In the short run I would be looking at a dollar rebound but in the long run I favor the higher commodity price argument.

Meanwhile tomato pickers in Florida look to go on strike and congress continues its assault on free markets with talk of wind fall profits taxes, large gas tax increases, increased banking and finance regulation and a final assault on free trade. It’s funny that the same people that want open borders for illegal immigrants look to limit the amount of goods and services that can be exchanged from country to country. The continued rushing head long into the foolish policies of punishing the producers that led to the energy crisis in the 1970’s and now also being applied to the agricultural market will have the same disastrous results. The net effect being the same results as 1970’s; which were a government created energy shortage, higher inflation and slower economic growth.

You know I dont buy these indicators so...

Consumer sentiment has not been this low since 1982 just before the start of the 190’s -1990’s Great Bull Market!

Oliver Twist

Like Oliver Twist once said,”I want more”, first there were maze riots in Mexico now there is rice hording at Sams Club,I haven’t had this much fun since Johnny Carson started the toilet paper shortage rumors in the 1970’s …yikes and just like the seventies “the Saturday Night Fever’ portfolio is staying alive set up to take advantage of raising inflation a weak currency ,more onerous and stupid regulation and higher taxes. The sector focus is and should remain Energy, Precious Metals, Commodities and Agriculture .There is nothing as much fun as making money of other people’s foolishness especially when there is so much foolishness to go around, it looks like easy pickings. Again stick with the “Saturday Night Fever”, portfolio which is made up of sectors that thrive in a higher inflationary environment and the self inflicted shortage that over regulation, higher taxes and price controls always brings about.

Short term in an odd twist the US dollar has staged a rally today, my guess is that the FED is about to curtail its interest rate cuts which as I have stated time and time again were the wrong medicine applied to the current banking crisis. Since the Bear Stearns debacle the FED seems to have sharpened its focus on the secondary market for mortgage backed securities which is the real center of the problem.

In the short term you may want to lock in some gains on Ag ,Energy and Precious metals as the dollar rallies, or use the weakness as a buying opportunity depending on your portfolio and cash situation. Banks and financials have also started a counter rally though it still seems like a bounce and again the road to recovery is littered with “almosts” so its best to do a lot of home work.Remember commodity cycles are punctuated with enormous corrections along the way.

The strong Euro is also killing European manufactures and curtailing EURO exports as wells as the tourist trade which Europe is so over dependent on. The ECB may soon be facing a slowdown of similar magnitude to the US so it’s not much of a stretch to expect significant rate cuts. I think the ECB is a bit behind the curve and should have been cutting rates already.

“what were they thinking”?

We seem to be hearing the words earning surprise way to often, in fact so much so that this blogger is often left wondering “what were they thinking”? But last nights earning announcement truly was a surprise to virtually all market observers. After being written off and maligned the previous day Google knocks the cover off the ball with home run numbers and with a little help from Citi and Caterpillar are giving the market a huge boost this morning. Again I have always been a bit skeptical of the recession is going to slow down internet traffic. I hold a counter theory which is that inflation and economic slow down coupled with higher energy prices feed the very strengths of the internet and give the net an even greater competitive advantage. The internet is low cost interactive entertainment, it creates customized solutions of a mass produced scale and it clearly saves on energy costs because you don’t even have to leave your house, finally business gain and enormous amount of information about their customers or lack of customers.

While the shorts stampede like elephants running around a bath tub the big picture suggests that there is even more evidence that the US economy is moving form the global buyer of last resort to the global producer of first resort. I know the current political landscape seems more suited for 1977 than today but that trend and its coming failure should only be seen as a bump in the road. The unintended consequence may even speed the process of the US moving from net consumer to net producer. The embracing of information and communication technologies continues to reshape the US business environment even though the media and government seem totally unaware. The new model has man merged with and using technology to find business opportunities in a more fulfilling self employed business structure. We are becoming the land of independent business technology contractors and wealth is know being created from a kitchen table with a lap top and a website.

Be very quite it’s earning season heheheheheheheheh

Be very quite it’s earning season heheheheheheheheh and so far it has brought us much disappointment, with the economy slowing you would be wise to expect earning to slow, but in the usual fashion many annalists are surprised by this very fact. GE falls short; it happens to the best of us from time to time. The question remains as to why GE has so underperformed and underperforming market since 2000. American Airlines ground even more flights, and the real question is why would anyone use that airline for any reason what so ever? Even before this incident their customer service makes getting an IRS audit looks inviting. I mean lets face American Airlines has ranked lower than the IRS in customer satisfaction for over 20 years running and it is also considered one of the top 5 worst run companies by this blogger for well over 20 years.

Saturday Night Fever

With the continued creep of the idea that protectionism more regulation and more taxes are “good” and the specter or raising inflation and a slowing to morbid economy I continue to recommend the Saturday night fever portfolio which worked well the last time the erge to over regulate and over tax were in vogue in the 1970’s: focus on commodities, agro ,energy and precious metals. Look to ad on weakness!

April 15

Remember all 2007 IRA contributions are due by April 15, 2008 !

it is just not feasible in most areas to cut back on driving

It continues to amaze me when many analysis’s in the mainstream media site the mantra that a slowing economy is going to cause a significant decrease in demand of energy, barring a major depression in America most people need cars to manage there everyday lives, it is just not feasible in most areas to cut back on driving, the car is a necessity not a luxury. Sure higher fuel efficiency helps but the fact of the matter is that most people drive to go to work and drive to go to the grocery store ,so unless there are massive layoffs and unemployment jumps into the 30% level or everyone goes on the zone diet ,demand for gasoline is simply not very elastic.

to be or not to be ........

The obsession over weather to call the current stage of the US economy a “recession” is reaching epidemic proportions; news flash if the past is any indication by the time the Government pronounces a recession, the recession is already over. Remember the market trades on future economic activity not present; the old saw being that the markets trades 6 months head of the general economy.

Mr Bernanke goes to Washington

So the question of the day is, till now after every time the FED chair has testified before congress the market has sold off within a day or so. No sell off could imply the “bottom” or as I would prefer to say the lack of a sell off my signal that the steps being taken are truly the right steps to stabilize the financial system. Not the bottom but the beginning of the end of the banking crisis.The FED, the market, wall street and the regulators look like they are finally applying the right medicine to the crisis . Early efforts by the FED looked misplaced but recent events seem to be addressing the problem.

As for the economy I don’t want to rain on anybodies parade but employment is a lagging indicator not a leading.

The Quarter is over and once again now for the kitchen sink…

European banks look to take some major write downs today, while the US ponders trying to “manage” ie…socialize the financial system. The increase in Commodity margin requirements may take some of the froth out of surging commodity pricing but let’s face it in a higher inflationary environment commodity prices will continue to increase and any short term drop in pricing still suggest a buying opportunity . For the investor looking to play it safer the treasury TIPS and Municipal Bonds look to be of good value. I still like energy, mostly natural gas, agro, commodities and metals and some transports like rails. Banks and financials remain under suspicion, at the moment I am willing to let the “John Reed” effect continue to work its way through the financial system ,but again I caution its not over till everyone stops saying its over .

May I remind you ,'it aint over till its over"

What continues to make me very edgy is the concerted effort of the business media (CNBC) to talk up the market. The funny thing was not matter how many times they said oil and gold had turned and the commodity bubble was over virtually all of my commodity and energy plays were up. Have we turned a corner yes, it seems so the latest FED action is more targeted to the problems at hand ,,but the road to recovery can be littered with failed rescue attempts . The fact of the matter is the real estate bottom is yet to be seen.

All this brings little joy to my eyes because the bigger picture still suggests higher inflation, higher commodity prices, bad government, higher taxes, protectionism, and more onerous regulation. I am still waiting for the jimmy carter resurrection and with it those failed foolish policies of the past will bring about exactly the same results in the present. The scary thing is that everyone knows it and yet the move toward collectivism seems unstoppable.

So for now I would suggest using any sell off in commodities, metals, ag and energy as long term buying opportunities and keep looking toward financials for short term and intermediate term longs and shorts.

$2 well maybe more

Rumors continue to circulate that JP Morgan is going to up its offer for Bear Stearns ,look for around $10 a share . Look for around $10 a share . This would be a nice boost for the financials and may signify the bottom.

the "up tick" rule

There is much rumbling about the abolition of the up tic rule by the SEC .This rule put in place in the 1930’s protected investors against savage shorting. Many credit the recent extremes in volatility to the run away no holds bar shorting of stocks. Turning even the slightest rumor into a self full filling prophesy. Although I do think the “up tick” rule as it was called was valuable in the functioning of orderly markets I am still on the fence as to weather its abolition has greatly increased volatility. Yes since the rule change volatility has grown but we had just passed through a period of almost no volatility that many investors have mistaken for normal, this is simply not the case. This period of no or little volatility was more a symptom of an uninspired stock market. In my view the current banking and liquidity crisis that coincided with the rule change has greatly exacerbated market volatility with or with out the up tick rule change. The weakness in the market can also be credited too raising inflation, lack of leadership, populist politicians, anti business and anti individual freedom attitude, lack of confidence and in my view the coming reemergence of the jimmy carter years take 2.I guess my point is that with a credit crisis of this magnitude ,I am not sure I’d look to the reinstitution of up tick rule to turn the market around or repair bad managements or stupid politics.

$2 broker

JP Morgan looks to have made one of the great deals of all times, buying Bear Stearns for $2 a share. The question now is with Bears book value of over $80 per share what does that mean for the value of other Investment Banks ? The Bear take over sends a strong little noticed signal, the signal is that if you “step up” as the buyer of very troubled assets the FED will grant you a prize.

JP Morgan Buys Bear Stearns for $2 bucks a share

and you think you lost money look at the holdings and not just the big guys looks at the mutual funds

MAJOR DIRECT HOLDERS (FORMS 3 & 4)

Holder Shares Reported
BEAR STEARNS COMPANIES INC. 2008 TRUST 27,316,339 14-Feb-08
CAYNE JAMES E 5,612,922 21-Dec-07
SCHWARTZ ALAN D 1,026,680 21-Dec-07
GLICKMAN CARL D 291,542 31-Jan-08
MINIKES MICHAEL 250,000 21-Dec-07

TOP INSTITUTIONAL HOLDERS

Holder Shares % Out Value* Reported
BARROW, HANLEY MEWHINNEY & STRAUSS, INC. 11,485,058 9.73 $1,013,556,368 31-Dec-07
MORGAN STANLEY 6,335,729 5.37 $559,128,084 31-Dec-07
Legg Mason Capital Management, Inc. 5,721,010 4.84 $504,879,132 31-Dec-07
PRIVATE CAPITAL MANAGEMENT, INC. 5,541,259 4.69 $489,016,106 31-Dec-07
Barclays Global Investors UK Holdings Ltd 4,245,451 3.60 $374,661,050 31-Dec-07
STATE STREET CORPORATION 3,550,715 3.01 $313,350,598 31-Dec-07
VANGUARD GROUP, INC. (THE) 3,149,691 2.67 $277,960,230 31-Dec-07
JANUS CAPITAL MANAGEMENT, LLC 2,765,699 2.34 $244,072,936 31-Dec-07
FMR LLC 2,359,011 2.00 $208,182,720 31-Dec-07
PUTNAM INVESTMENT MANAGEMENT, LLC 2,242,980 1.90 $197,942,985 31-Dec-07

TOP MUTUAL FUND HOLDERS

Holder Shares % Out Value* Reported
VANGUARD/WINDSOR II 8,358,352 7.08 $949,508,787 31-Oct-07
PUTNAM FUND FOR GROWTH AND INCOME 2,350,605 1.99 $267,028,728 31-Oct-07
LEGG MASON VALUE TRUST 1,600,000 1.35 $196,496,000 30-Sep-07
JANUS TWENTY FUND 1,496,429 1.27 $132,059,859 31-Dec-07
VANGUARD 500 INDEX FUND 1,100,046 .93 $135,096,649 30-Sep-07
PUTNAM VOYAGER FUND 965,300 .82 $109,658,080 31-Oct-07
American Beacon Large Cap Value Fd 862,450 .73 $97,974,320 31-Oct-07
PUTNAM INVESTORS FUND 742,700 .63 $84,370,720 31-Oct-07
VANGUARD TOTAL STOCK MARKET INDEX FUND 702,594 .59 $86,285,569 30-Sep-07
COLLEGE RETIREMENT EQUITIES FUND-STOCK ACCOUNT 696,560 .59 $85,544,533 30-Sep-07

Bear Moves toward Shot Gun Wedding

FYI on Bear Stearns,

Yes crazy day…we deal with Bear Global Clearing and Prime brokerage services, Bears investment banking uit was a lead underwriter for mortgage backed securities, which are at the center of the sub prime lending credit crisis. Bear experienced a crisis of confidence with some of its hedge fund customers ,soto sure up its cash position Bear turned to the Federal Reserve and JP Morgan Chase. Unlike banks the securities industry looks to preempt any problems, so Bear went to Chase and Chase went to the FED to alleviate the cash crisis. YOUR FUNDS ARE SAFE AND INSURED UP TO $500,000 by SIPC.



From Bear:

12:56pm 03/14/08


Bear able to do business as usual with new credit : CFO - MarketWatch




12:54pm 03/14/08


Bear saw no big withdrawals after bailout announcement - MarketWatch




12:53pm 03/14/08


Bear went to Morgan because it knew firm's holdings:CFO - MarketWatch




12:53pm 03/14/08


Morgan was able to quickly decide on helping Bear : Bear CFO - MarketWatch




12:50pm 03/14/08


Bear CFO:Firm has had no big mark to market hits since Feb - MarketWatch




12:48pm 03/14/08


Bear CEO says he believes book value in the $80s a share - MarketWatch




12:46pm 03/14/08


Bear had big cash outflows on Thursday from hedge funds:CFO - MarketWatch




12:45pm 03/14/08


Bear shares fall 41% as CEO begins conference call - MarketWatch




12:44pm 03/14/08


Bear will continue to explore alternatives with Lazard:CEO - MarketWatch




12:44pm 03/14/08


Bear comfortable with current range of Q1 estimates : CEO - MarketWatch




12:42pm 03/14/08


Bear Stearns had explored alternatives with Lazard : CEO - MarketWatch




12:43pm 03/14/08


Bear will give more detail on its positions on Monday : CEO - MarketWatch




12:41pm 03/14/08


Bear Stearns clients' withdrawls accelerated quickly: CEO - MarketWatch




12:41pm 03/14/08


Capital ratios remain in good shape: Bear Stearns CEO – MarketWatch





This is what I know so far



James

Citi bank Picks Up John Reed...waspbuzzzzz

Looking for a bottom or near bottom in banking Citi bank always the fountain head of every banking crisis, has just picked up John Reed as an advisor. Folks start the count down.Don’t underestimate the John Reed Factor.

the USA no longer the buyer of last resort

For Kristine the call girl that was implicated in the New York Governor, client number 9 scandal I have one question, do you have a stock broker?

Although there is still suspicion out there that the current financial crisis in the credit markets has more to go.The FED move has managed to shift fears from financial crisis more to an inflationary spiral, with a plunging dollar leading to higher energy and food prices. Inflation seems to be a global contagion manifesting itself from many quarters especially China.

While most are focused on the dollar, with booming middle classes in China, India and Brazil this blogger has long felt that there is a global shift where the USA is longer global buyer of last resort and will for the first time since world war two become more of an export and production story.

the end of the road for client # 9

Spitzer Resigns Market Rallies

net out flows from equities markets because of a short term lack of confidence in those markets

A disturbing trend has been the recent run up of many commodities without the corresponding run up in the stocks that are involved in the same sector. Gold and oil are hitting records yet oil and gold stocks have been sinking of late. Many pundits presume this market action demonstrates a short term market top ,but I am more leaning to the camp that worries that this is more of sign of net out flows from equities markets because of a short term lack of confidence in those markets.

We continue to flirt in an eerie manner with significant market break downs and Client 9

March 10, 2008

Hello,

Either edible or wearable its all about commodities, inflation continues to heat up. With the FED looking to cut rates the net result being a weaker dollar and higher inflation. But unlike the 1970’s were the small investor had real estate to lean onto this time around it’s simply all about commodities.

The current state of the market looks a bit precarious .We continues to flirt in an eerie manner with significant market break downs. The light volume and lack of direction is symptomatic with lack of conviction. Even the market leaders are starting to crack.

The bond market continues to signal significant strains on bank credit and risk continues to grow for a credit break down. Yikes…

But remember the market leaders such as energy, agro .metals and mining will quickly resurrect themselves after any major short term sell off. Unless the market fundamentals are significantly somehow changed.

Oil Prices

Best to Bet on Inflation

There is much uncertainty in the current market environment. Rumors of government bailouts for the mono line insurers, are countered by fears of ever larger write offs. Populist politicians target business, success and free trade with echos of the 1930’s. The current environment has the distinctive 1970’s jimmy carter feel with taxes and regulation looking to increase. There is simply no confidence, weather it be in leadership, economics or politics. So what’s an investor to do?

The one certainty at this point seems to be the increasing inflation rate so the higher probability bet is to focus on making money off inflation instead of trying to bet which way the sub prime mess is going today. Again and I repeat commodities ,metals and mining, gold, agro and energy.

True Confessions

February 28, 2008

Hello,

One of the issues that has been throwing off my trading since the big sell off in March 2000 ,has been that I have been using the wrong historical comps in my analysis . I was looking to the 1930’s and comparing the 2000 NASDQ melt down to the DOW melt down of 1929,the 1930’s with their foolish policies ushered in the great depression and were the prelude to world war two .
The Elliot wave gave me a chart in 2000 that appeared to be signaling a war was coming and after 9/11, it’s seemed to be a pretty solid comparison. The one nagging problem was how could the US stock market under perform so much with such a booming economy, with a huge productivity growth rate low interest rates and low inflation.

The fact of the matter is that we were more like a 1960’s stock market virtually remaining flat from 1966 till 1982, this market seemed to giving a warning of the creeping red disease and the coming hang over that would be the 1970’s.

I have reengineered my methodology and there for I have introduced the Carter Era Portfolio in an effort take advantage of the low growth, high inflation atmosphere that we are moving ever closer to with each day.

Again:

ENERGY
GOLD
METALS AND MINING
AGRO

Utilities Under Pressure

Utilities one of my target sectors for my Carter Era Stock Portfolio are being pressured buy both increasing prices for coal and natural gas and eco friendly politicians looking to score points with there constituents . 80% of the world’s electricity is generated by coal and natural gas and most utilities bargain with local regulators to set prices to consumers.

Utilities in there quasi monopoly positions are becoming pressured by cost increases both fuel and eco compliance again I remind you we went thru this in the 1970’s with very adverse consequences, thus the weakness in utilities stock prices.

As we head more into a 1970’s state of mind it’s very important to keep reminding your self that 1970’s economic polices were disastrous, stupid and destructive so look out for more of the same and be prepared to profit off bigger government ,higher taxes ,higher energy prices, higher inflation ,weak business conditions and really stupid politics. And Yes you can profit from all these trends.

some basic rules for investing

So given the nature of the current market perhaps its time to re-chunk our focus . I am going to offer up some basic rules for investing:


1) Forget the lazy mans Buy and Hold , as Jim Crammer always says do your home work ! For every stock you own you have to know the reason you’re buying it and know the reason for selling it another words; Before you buy it you have to know when you’re going to sell. Some stocks are investments and some stocks are trades and some stocks can be both at different times. Do your home work! Again I refer to Jim Crammer who says for every stock you own it takes one hour a week of research every week! If you can’t do the time then hire a financial advisor like my self.

2) Forget the woulda, shoulda , coulda ,you only make money in the future not in the past ! Analyze your trades good or bad, try to learn something and get back on the horse. Don’t beat your self up and always keep in mind that the past is no indication of the present.

3) Forget “Hot Tips” ,tips are for waiters ,if its really a tip its called insider trading and your cell mate bubba is gonna make you his ,well you know what I mean .

4) And finally don’t put all your eggs in one basket, but beware of all the Wall Street diversification talk, know as “the talk”. In Bear markets 90% of all stocks go down and in Bull markets 80% of all stocks go up, so don’t take too much confidence in this non correlated asset class non sense of over diversifying yourself out of a return. Most Wall Street firms are pushing the fund manager full employment act. So to sit with gold stocks for 10 years before they ever move is a waste of money. If you want to truly diversify true non correlated assets are like cash, commodities, real-estate, small businesses, equities and bonds not different growth stocks in different markets.



James J Foytlin

Carter Era Portfolio

February 20, 2008

Hello,

Clients continue to ask, what era do compare the current market environment to ? I don’t think things are as dire as the 1930’s, and the politicians of today are just totally incompetent, they couldn’t screw things up that much as they did in the 30’s they just don’t have the skills. Nothing like 1987, the market has not moved adjusted for inflation in almost 7 years ,in 87 it have almost tripled from 1982 , To me this smacks of jimmy carters 1970s’ an era of dumb dumber and dumbest .Most of today’s politicians and pundits sound like the dopes form the 1970’s . And everyone is just going along for the ride with the big lie. I see almost no difference between Hillary Obama and McCain they sound like jimmy carter 2 to me. And this idea that if you challenge the Medias forgone conclusions you are an enemy of the people is also so very 1970’s, so break out the DISCO ball and look toward our old nemesis jimmy carter and “peak oil” for investment advise.

Therefore continue to focus on what I call a Carter Era Portfolio, sector focus is on:

Metals and Mining
Energy
Agro business
Utilities
Gold

the China Syndrome

Importing inflation from China ,as I have said before except for a few isolated markets most of the emerging markets are at major levels of over valuation .China looks like the bubble that no one is talking about.Everyone is in denile .Inflation is brewing; social unrest is fermenting, government sensors are clamping down. When the China bubble pops I think its going to catch a lot of market players by surprise.

Savior or the great bond swindle?

Buffet looks to take insured Muni portfolio off the hands of bond insures? Is it just me or am I the only one that knows that that’s not where the problem lies. Munis are only insured if they don’t need it. That’s what makes it such a great business. He is not touching the mortgages which are where the problem lies because to paraphrase “with the mortgages no one knows what the values are”, no sh*t isn’t that the whole problem to begin with? Looks like back to square one well maybe …

I know that separating the muni market from the mortgage market will decouple that market from the sub prime mess which should give investors confidence but It seems unlikely any solution is going to let the people who inject the capital walk away without taking any risk and leave the government or the market to swallow the toxic mortgage portfolio.

Odd Changes to the DOW Jones Industrial Index

I look at the new changes in the DOW with great trepidation ,adding another bank in the middle of a banking crisis and a significantly underperforming oil stock will do nothing to enhance the performance of the index. If you don’t know Dow Jones has dropped Honeywell and Altria from the Dow Jones Industrial and is adding back Chevron and also adding Bank Of America.

NASDQ nears key long term support level

(chart from amateur-investor .net)

The Nasdaq is at a key longer term support level that coincides with its 38.2% Retracement Level (calculated from the late 2002 low to the late 2007 high). It will be important for the Nasdaq to hold support near the 2200 level . If the Nasdaq were to move significantly below the 2200 level then its next potential area of longer term support would be at its 50% Retracement Level near 1985 ;Yikes!

Cell Phone Issues

We are currently experiencing a dispute with Sprint our cell phone provider. We are working diligently to rectify the problem. Sorry of the inconvenience service should be restored shortly.

James J Foytlin

Go Giants

The Super Bowl indicator justifies recent market action with Giants upset victory. When an old NFL team wins the super bowl 86% of the time the stock Market is up for that year. The Giants being one of the original NFL teams ,so maybe despite early indications the market will also surprise everyone and be up this year.

Learn the Laffer Curve

a tug of war between two long term market trends

There appears to be a tug of war between two long term market trends the first be the correlation between a decline in employment growth and the precipitous decline in the stock market .Research seems to indicate that it doesn’t take much of a decrease in job creation to cause a fairly significant decline in the stock market. The one thing in our favor is that much of the job creation in the last 7 years is through the hard to measure growth in technology, with basically a person sitting at their breakfast table with a lap top running some kind of a technology enterprise.

The second trend is the panicked FED syndrome, which as the tide of FED rate cuts quickens to catch up to a declining economy ,The lower rates force up the most beaten down and out stocks ,in our case a rally in banking, real-estate, retail ,and other financials . Its hard to fight the FED despite the strong evidence that the worst is far from over with the current banking crisis.

Its the mentality of the 1970's that is so dangerous

The mentality of the 1970’s has returned read below:

You're an ass. It's as simple as that.

Look how deregulation has ruined this country. Food, airlines, water.. you name it, it has been ruined by letting these greedy-ass corporations run wild.

Deregulation has accelerated the decay of the planet.

But as long as you can have your 12-seater SUV and your bottled water, that's ok with you. You could care less.

And the rich are never "soaked" because lawmakers only work for the rich.

How do you justify this cushy, privledged upscale suburban life you have been handed and still want more? How much is enough for people like you?

Take take take-- and fuck everyone else. You (and your rich neighbors) must be proud of yourselves.

Thanks for the comment ,By the way I drive a 2 seat sports car that gets 35 miles per gallon My life isnt cushy I work any where from 10 to 18 hours per day like most people how want to be successfull. As for taking I not the one looking to mooch off other peoples hard work such as your self.I don’t drink bottled water Ridgewood has well water . And as for greedy ass corporations they create jobs for millions what have you ever done for anyone ? As for destroying the planet apperantly you have never traveled because you would know that by far the most poluted places on earth can be found in old former soviet economies , corrupt dictatorships and other forms of closed ,non free over regulated economies . Oh and by the way most of my friends are first generation latino’s who work very hard,suport there families ,serve our country and yes they are very pround of themselves and I am pround of them also .

Counter Trend Rally or did we put in a frim bottom?

We will have to wait until next week to see if this weeks counter trend rally has run its course the Spider (SPY) looks like made its 50% entrancement to around 140.

Awful January markets are always except once met with future lower lows .

and the next President is...

Moratorium ,Interest rate freeze ,the government to the rescue ,class warfare ,soak the rich, more regulation ....

FED moves to a supportive mode ....

So the FED produces the expected ½ point cut and the market rallies. Hummm I am not sure if this is a case of “ if it cant get any better than this it can only get worse “ ? or and example of the old saw “don’t fight the FED” . X all the big banks and financials, builders, realestate and a few others current technical seem to be shaping up. I have noticed that last years losers seem to be this years post emergency FED shooting stars. Unlike, many I would be looking to new market leaders instead of a resurrection of the justifiable beaten down sectors. My problem is that on one hand I have learned never to fight the FED, but I am not seeing solutions to any of the current banking problems and perhaps to some extent these problems have gotten even worse as the regulators swarm. I am also not sure that this post Volker- Greenspan FED has managed to build the confidence that the two previous FED’s have mustered. So I remain bullish on energy, utilities, gold, agro, international large construction and anything that spells exports for the US. But I remain very skeptical about the mounting sub prime debacle and what it means for the financial sector. And I still remain very negative on the leadership issues in the US and finaly I find all this cheerleading for the financial sector a bit unsettling .So I am sticking to the sector picking story for now .Focusing on areas that benefit from a weaker dollar ie..that mean stronger exports and lower consumption .


James J Foytlin

The FED Shades of 1970's William Miller

Miller succeeded Arthur Burns as Fed Chairman in January of 1978. He inherited a high inflation economy, still suffering from the increase in oil prices from OPEC. The change in the Consumer Price Index was 4.9% in 1976 and 6.7% in 1977.[3] Nevertheless, Miller maintained a Keynesian belief that inflation could "prime the pump" of the economy, and would at any rate be self-correcting.[4] He thus pursued a strongly doveish policy and opposed raising interest rates. The effect of this was to send the dollar's value spiraling downward. In November 1978, only 11 months into his term, the dollar had fallen nearly 34% against the German mark and almost 42% against the Japanese yen, prompting the Carter administration to launch a "dollar rescue package" including emergency sales from the U.S. gold stock, borrowing from the International Monetary Fund, and auctions of Treasury securities denominated in foreign currencies.[5][6] This proved only a short-term fix; while temporarily steadying the dollar, it soon resumed its fall.[7] The portmanteau stagflation, the combination of stagnation and inflation, increased in popularity during this time to describe the high rate of inflation that was failing to spur the economy.

Miller's lackadaisical measures against inflation caused distress among members of the Carter Administration itself. Treasury Secretary Blumenthal, Inflation Adviser Alfred Kahn, and Chief Presidential Economist Charles Schultze all advocated for increasing the interest rate prior to the April 1979 meeting, where Miller opposed such measures. Carter had to admonish his own staff over the press leaks used to carry on the dispute.[8]

Miller was not perceived as having great prestige; not coming from an economics or Wall Street background, he was seen as an "outsider."[9] A 2003 article in The Economist said that "America's central bankers have all made their weight felt across the political sphere, with the possible exception of William Miller, whose brief tenure in 1978-79 was notable for his attempts to ban smoking at the board."[10] It is rare for the influential chair's opinion to not carry the vote at the Federal Reserve's meetings, but Miller was outvoted by the Board of Governors at a meeting in 1979 where he opposed an increase in the discount rate, the rate at which the Federal Reserve lends to banks.[9]

Economic historians have generally considered Miller's short tenure unsuccessful. The high inflation that Miller allowed required harsh "shock therapy" treatment by his successor Paul Volcker to bring under control, which sent the U.S. economy into recession from 1980-1982. Steven Beckner, a Federal Reserve analyst, offered a particularly harsh assessment:

Under Arthur Burns, who chaired the Fed from 1970 to 1978, and under G. William Miller, who was was chairman from January 1978 to August 1979, the Fed provided the monetary fuel for an inflation that began as a flicker and grew into a fearsome blaze... If Nixon appointee Burns lit the fire, Miller poured gasoline on it during the administration of President Jimmy Carter. Without question the most partisan and least respected chairman in the Fed's history, this former Textron executive worked in tandem with fellow Carter appointee, Treasury Secretary W. Michael Blumenthal, in pursuit of monetary policies that were expansionist domestically and devaluationist internationally. The goals were to spur employment and exports, with little thought to the dollar's value. By early 1980, inflation was running at 14 percent.[6]

—Steven Beckner, Back from the Brink: The Greenspan Years

FED : Shades of the 1970's Arthur Burns

Burns served as Fed Chairman from February 1970 until the end of January 1978. He has a reputation of having been overly influenced by political pressure in his monetary policy decisions during his time as Chairman[1] and for supporting the policy, widely accepted in political and economic circles at the time, that Fed action should try to maintain an unemployment rate of around 4 percent.[2] (See also: Phillips curve)

When Vice President Richard Nixon was running for President in 1959-1960, the Fed was undertaking a monetary tightening policy that resulted in a recession in April 1960. In his book Six Crises, Nixon later blamed his defeat in 1960 in part on Fed policy and the resulting tight credit conditions and slow growth. After finally winning the presidential election of 1968, Nixon named Burns to the Fed Chairmanship in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.[1]

Later, when Burns resisted, negative press about him was planted in newspapers and, under the threat of legislation to dilute the Fed's influence, Burns and other Governors succumbed.[3][4] Inflation resulted, which Nixon attempted to manage through wage and price controls while the Fed under Burns maintained an expansive monetary policy. After the 1972 election, price controls began to fail and by 1974, the inflation rate was 12.3 percent.[1]

Another factor contributing to inflation under the Burns Fed was the belief among Burns and other Fed Governors that "the country" was not willing to accept rates of unemployment in the range of six percent as a means of quelling inflation. From the Board of Governors meeting minutes of November 1970, Burns believed that:

...prospects were dim for any easing of the cost-push inflation generated by union demands. However, the Federal Reserve could not do anything about those influences except to impose monetary restraint, and he did not believe the country was willing to accept for any long period an unemployment rate in the area of 6 percent. Therefore, he believed that the Federal Reserve should not take on the responsibility for attempting to accomplish by itself, under its existing powers, a reduction in the rate of inflation to, say, 2 percent... he did not believe that the Federal Reserve should be expected to cope with inflation single-handedly. The only effective answer, in his opinion, lay in some form of incomes policy.[2]
During Burns' tenure, the consumer price index rose from 6%/year in early 1970 to over 12%/year in late 1974 after the Arab Oil embargo, and eventually falling to under 7%/year from 1976 to the end of his tenure in January, 1978, with an annual average rate of consumer price inflation of approximately 9% during his term. Negative economic events included multiple oil shocks and heavy government deficits arising in part from the Vietnam War and Great Society government programs. The high interest rates set by Paul Volker with the support of Ronald Reagan were able to mitigate certain policy outcomes derived from the earlier actions of Burns and the FOMC under his leadership.

just right....

Looks to me like the FED is painted into a corner ,if the cut ½ its too much ,if they cut ¼ its too little either way at this point it looks like the FED is still reacting and not leading .

NEWSWEEK says we are in a Recession ...oh my

Dispite the cover of NEWSWEEK ( a significant bullish event):

At the end of the day the problem with FED rate cuts is that they don’t fix the Sub Prime Mortgage problem !

It aint Over till it's Over

$7.2 Billion lost by ONE rogue trader …and NO ONE knew anything about it …yea right.Mean while too many people are still calling the bottom for my taste, there is just too many cheerleaders.

Again when they stop calling the bottom it’s the bottom!

Think late 1970's look toward energy, agro utilities and gold.

too Little Too Late

So the Treasury Speaks and the FED cuts, but as usual the action is muddled. A FED rate cuts in order to have maximum impact needs to catch the market off guard. A better move would have been to remain silent and run into a sinking market with a rate cut once trading began. This move was just too telegraphed and keeps the FED looking in the reaction mode. This FED action is not a confidence builder on the contrary the FED continues too look reactive instead of proactive. Worse yet is looking for this congress to do anything substantive, which seems to be no more than a pipe dream.

I have reevaluated (once again) my trading model and found the historical data was out of sync, I plugged in new data and it seems more inline with the current situation of the post 2000 melt down till the current time. I Think is more of the 1960’s, very strong economy but not much upside in the stock market with creeping economic policy mistakes that culminated in the destructive period of 1970’s ,we have just arrived in the 1970’s and look for a jimmy carter presidency no matter who wins this election….

It aint over till its over

I will be more apt to call the bottom when everyone gives up calling the bottom

Yep 2008: back to the 1970's

Well that’s it its official the thing I have feared the most has come apoun us ,we are heading back to the 1970’s ,a period noted for bad hair,bad taste,bad music ,divorce,cheesy clothes ,a lousy economy ,an abrigation of personal resonsibility ,rabid statism ,sticking up for failed policies and a blind adherence to abject stupidy(one dumb thing after the next) .Don’t dispair at lest football was good and I can show you how to make money off all this and have a great laugh at the same time.

So why is this happening ,well the generation that came of age in the 1970’s that brought you DISCO,hair helmuts ,global terrroism and so on is like all generations looking to make its mark. Since the 1970’s were such an abject disaster ,this generation now of an age to effect change is once again asserting its self in an attemp to prove they really were right the first time. It is a demographic shift as baby boomers retire and now the 1970’s (bad taste) generation wrestels for control over the decision making process of the economy .

Dought me look at the data ,inflation is faning the fires,productivity slowing ,regulation and taxes are creeping ever upward . Now I am not saying that the hyper inflation and maylasse of the 1970’s is coming back ,but inflation will be higher ,and growth will be slower than we have been used to . So whats an investor to do? Focus on the sectors that prospered in the 1970’s or go short against the market and make money off the market decline. For the average investor there are now many ETF’s (exchange traded funds) that one can use to bet against the market.Understand that these bets can offer high returns but also entail extensive risk. So dust of your DISCO ball and break out your white pollyester suite ,here we go again…

2008: Back to the Seventies

Sectors of Focus

GOLD
UTILITIES
ENERGY
AGRO
HEALTHCARE
INTERNAT CONSTRUCTION

Begining of the end or the end of the begining ?

So does a deal between Bank of America and Country Wide signal as Jim Crammer says the beginning of the end of the sub prime lending debacle? Or as it looks to me a company desperate to cover up a so far failed investment by buying the whole company and merging it into a far larger balance sheet so no one will be the wiser? I been thru this before weather it’s the Latin American crisis, saving and loan debacle or 1998 Asian Contagion and I am bit skeptical. So far we have heard many times that after this write down we will finally be getting our act together. Yet write down after write down is met with cheers then groans when we get the “oh by the way we omitted to mention” ….. The devil it seems is in the details.

The second issue is the FED which seemed to bemired into the stumble and then recovery mode, I am just not feeling the leadership, just too many mixed signals. My other problem with the FED is that I just think the credit markets are dysfunctional right now, it’s not the rate of interest, it’s the lack of availability that is the issue, which if it continues could lead to a serve credit contraction.

The next problem is once again leadership in Congress and as the Congress once pressed to lend to all ,credit standards be damned, they now look to punish those that followed their lead . My fear is that the political fix may inadvertently stop lending all together.

This blogger has seen over the years that 9 times out of 10 times all roads lead to Citi bank so I am sticking to my original prognostication .Which is until Citi cuts its dividend I think there is just way to much risk not accounted for on balance sheets to say the bottom has been reached and we see light at the end of the tunnel. My bet is that we are more likely at the end of the beginning, than the beginning of the end.

Utilities look to entering a very favorable investment period.

As I stated at the end of December Utilities look to entering a very favorable investment period. First Utilities have a tendency to out perform durring periods of declining interest rates.Secondly even in a slowing economy consumers still have to have lights and heat also the regulated side of the business gives utilities a predictable income stream which in times of uncertainity is very desirable . Another interesting factor is the current upgarde cycle in the whole power generation industry ,weather it is investments in alternative energy or opertunities to expand traditional capacity thru conservation. Finaly all the uncertainty in the bond markets have income investors looking for a place to go .

there is a Bull Market Somewhere ...

Clients are asking if I think we are going into to Bear market? I will repeat we have been in a Bear Market since March of 2000. The simple fact is that the economy and productivity have grown like a weed over the last 7 years yet the stock market has barely managed to out perform cash. Does that mean you can’t make money? No there is as Jim Crammer is famous for saying (and this blogger has said for years)a bull market somewhere we just have to find it .

Oil Spikes Yikes!!!!

January 2, 2008

Once again happy New Year!

First I want to apologize for the slow turn around this last 10 days for P&L’s or anything else you asked me to look into. I have been a bit overwhelmed by year end demands and been slowed down with technical problems with my internet service. I am playing catch up for the next couple of days.

Oil spikes but looks like some profit and loss taking got pushed from 2007 to 2008. I am not sure it really means anything more than there is a lot of tax driven transactions or perhaps a warning of things to come.

For the beginning of 2008 the market looks to offer more of the same. Energy, Agriculture And Global Construction look to continue to dominate, the key to 2008 looks to be when will the financials come clean and turn around and my guess is a lot of money will be made in financials once this happens but at this point and I know I was late to the party on” sub prime” I think there may be more bad news to come. Several major regional banks are have trouble raising capital and as I warned in my previous post I have become concerned about a spill over into the Muni bond Market. Perhaps a clue to the bottom in financials will be when Citibank cuts its dividend or some shot gun weddings arranged by the FDIC or SPIC.

Another issue that cropped up once again was the preponderance of high priced stocks to out perform there lowre priced brethren . The effect being a huge distoration and lots of volitility for returns in smaller accounts and huge advantages in larger accounts.

Yikes................

Oil spikes but looks like some profit and loss taking got pushed from 2007 to 2008

So far 2008 look to offer more of the same,

Energy, Agriculture And Global Construction look to continue to dominate, the key to 2008 looks to be when will the financials come clean and turn around and my guess is a lot of money will be made in financials once this happens but at this point and I know I was late to the party on”sub prime” I think there may be more bad news to come. Several major regional banks are have trouble raising capital and as I warned in my previous post I have become concerned about a spill over into the Muni bond Market. Perhaps a clue to the bottom in financials will be when Citibank cuts its dividend or some shot gun weddings arranged by the FDIC or SPIC.

Happy New Year!!!

Market Performance
2007

12/31/2006 12/31/2007 Year 2007
Close Close % Change

DJIA ^DJI 12,463.15 13,264.82 6.43%

S&P 500 ^GSPC 1,418.30 1,468.36 3.53%

NASDAQ ^IXIC 2,415.29 2,652.28 9.81%

Russell 2000 ^RUT 787.66 766.75 -2.65%

Tax Free Bonds : Crisis Brewing ?

I have three issues with tax free Muni bonds at this juncture

1) Many of the Insurers also have insured Mortgage backed securities; the decline of issues may force a lowering of credit rating for the Muni insures and there for negatively impact the Muni Bonds they have insured.
2) Many Hedge funds buy Munis to barrow against, a decline in the credit quality may lead to a decline in collateral and there some hedge funds to sell other equities.
3) On and un related note several state including New Jersey and California are facing some major fiscal issues which could further pressure Muni prices .

I don’t want to come off as an alarmist its not my style but in general Muni investors are the most risk adverse investors and we have already had significant price erosion in many bonds.

So I am suggest for some customers to look at the old stand buy Utilities for income.

End of the year mark up time

It might be time for more Mark-downs in retail ,but on Wall Street its year end Mark-Up time.

......And yes I am swapping some bonds for utilities

Merry Christmas!

I would like to take this time to wish everyone a healthy, happy and prosperous Christmas and New Year

Financials a Value or a Value trap?

Because there is a floor dosent mean there is going to be a rally....

The ECB turns on the faucet..............

The ECB turns on the faucet looking to avoid credit seizure and suggests seriousness to dealing with the sub prime lending mess.

The Three Stooges

The Crisis of confidence continues the FED seems to have massively fumbled its recent actions, government involvement in the sub prime mess seems suspect at bets and banks and financial institutions continues to claim,” just one more cash infusion should do it”.

Buck stops here..or is here or here ....

So what happened? The market was looking for firm decisive action. The market was looking for the FED to take the lead, but instead we go a muddled academic statement. I know I have po- poed this thing since the beginning ,but weather it’s a calamity or not the market wants certainty and firm FED action would say to all that the “Buck stops here” .

FED fails to deliver market reassurance….. stay tuned..

What is a Customer Centered Philosophy ?

Over the years many of my clients have asked me to speak with one of their friends or colleagues concerning my Customer Centered Philosophy and Private Client Asset Management Services. I consider it an honor and a privilege and have been happy to accommodate their wishes. For your future reference, I want you to be aware of the standards by which I comply with such requests.

First, confidentiality is the cornerstone of my business. Each of my client relationships is distinctly separate and totally private.

Second, thoughtful and courteous service is guaranteed. This is a people business.

Finally, I will never give advice and counsel to a client without thoroughly understanding his or her needs.

My purpose in writing this letter is to let you know that if and when you would like me to speak with a friend, relative or associate, you will feel comfortable with my professional standards.

Best Regards,



James J Foytlin

E* Trade : Because you asked ,What Happens When a Brokerage Fails?

TheStreet.com

What Happens When a Brokerage Fails
Monday December 10, 6:20 am ET
ByPhilip van Doorn, TheStreet.com Ratings Bank Analyst

When headlines were screaming about problems at E*Trade's bank unit, depositors weren't the only ones unnerved. Word of the S&L's home-equity loan exposure and writedown of asset-backed securities also sparked a run on E*Trade's discount brokerage accounts. E*Trade stated that investors pulled a net $7 billion from both bank and brokerage accounts month to date, through Nov. 27.
Judging from reader questions, there's a lot of confusion about what the bank's problems mean for E*Trade's brokerage customers and the risks associated with the failure of a brokerage firm.


Bank Failures
If a broker-held bank were in danger of failing, its regulator would probably try to help avoid a failure by encouraging a sale to a larger, strongly capitalized institution. This would avoid a failure, so no depositors (insured or otherwise) would be hurt.

If the regulator were forced to close down the bank, the FDIC would then immediately pay off insured deposits, usually by transferring the balances to another bank overnight. Uninsured depositors would later be paid a "dividend" to recover a portion of their uninsured deposits.

For example, when NetBank failed, depositors were immediately paid a dividend of 50 cents on the dollar for their uninsured balances, with the possibility of additional dividends as the FDIC sold off NetBank's remaining assets.

Brokerage Firm Failures and SIPC Coverage

If a brokerage firm fails and securities are missing from customer accounts, the Securities Investor Protection Corporation, or SIPC, will ask a federal judge to appoint a trustee to oversee the liquidation of the firm's assets and orderly transfer of customer accounts to other brokerage companies. The day of the SIPC's request is called the "filing date."

Investors may simply have their accounts transferred to another broker with no loss. In the event that securities or cash are missing from a brokerage account, investors have some protection from SIPC.

There are major differences between SIPC protection and FDIC protection. Unlike the FDIC, SIPC does not provide blanket protection for losses. The purpose of SIPC protection is to replace securities that are missing when a brokerage firm fails. It does not make up missing value for securities that may have lost market value while missing or for investments that the customer may feel he or she was ill-advised to make.

If you are missing 100 shares of IBM when your brokerage firm fails, SIPC will simply replace the 100 missing shares, regardless of whether they have gone up or down in value since they went missing.


Eligibility and Coverage Limits
It is important to make sure that your broker is a member of SIPC. The words "Member Securities Investor Protection Corporation," or "Member SIPC" will appear on signs at brokerage offices and on websites or advertisements for most brokers. If you are not sure, go to SIPC's Web site to check.

Both cash and securities are covered, with a limit of $500,000 in value as of the filing date, including a $100,000 limit for missing cash. However, some types of investments are not covered, including commodity and currency futures contracts, unregistered investment contracts and annuity contracts.

Most investors are eligible for SIPC protection. Those that are ineligible include officers, general partners and directors of a failed brokerage firm, and brokers, dealers or banks acting on their own behalf, rather than for their customers. You should visit SIPC's Web site for a full list of the rules on eligibility and coverage.


SIPC Coverage for Money Market Funds
This is an area that can easily cause confusion. Many investors consider money market balances held at brokerage accounts as "cash." But a money market fund is actually a mutual fund that seeks to keep its share price fixed at $1.

The companies that manage these funds may or may not be affiliated with your brokerage. Money market funds hold short-term debt instruments, such as Treasury bills, commercial paper, certificates of deposit and other securities with maturities usually averaging about 90 days.

Because of the short maturities and generally liquid nature of these securities, it is very rare for a money market funds to "break the buck," or fall below $1 a share, which could lead to investor losses. When this has happened, fund managers have usually stepped in and supported the $1 price with their own money, but this has not always been the case.

So while investors often think of money market funds as safe alternatives to bank accounts, they are not insured by the FDIC or any other entity.

For SIPC purposes, shares in a money market fund are considered securities. SIPC protection may or may not apply to investments in money market mutual funds within your brokerage account. Whether or not your money market shares are covered depends on how your relationship with the money market fund is set up. There are two possibilities:

While the broker helped place your money in a money market fund, you have a separate relationship with the money market fund manager. This means you have your own money market fund account number and probably a checkbook and separate statement for the money fund. The company managing the money market fund "knows you." In this case, if your broker fails, SIPC coverage does not apply to your money market fund, and is not even necessary, as you can contact the money fund manager directly to access your shares.
The broker has placed your cash in the money market fund on your behalf. This means that the money market fund "does not know you," and that the broker is supposed to keep track of each of its customers' shares in the money fund. In this case, if any of your money market shares are missing from your account when the broker fails, SIPC covers the money market shares as part of your coverage for missing securities, up to $500,000.
Filing Claims

If your broker fails and securities are missing from customer accounts, the trustee will send you a claim form and instructions with a deadline for placing a claim, which is usually 30 to 60 days from the filing date. You will need to supply proof of what the broker owes you, which shows how important it is to save your statements. If you receive or have access to electronic statements, save the electronic files and maintain printed copies as well. Most customers receive their property back within one to three months.


Again, you should visit the SIPC Web site for further information. There's a much more detailed summary of how SIPC protection works. Among the other highlights is the Investor Survival Quiz. Take it. You may be surprised at your score!

... maybe these retailers just ,"suck"...

December 10, 2007

Hello

Give us your poor your weak ,your hungry your hudled masses and your sub prime lenders….consenious builds for government bailout for the sub prime mess far be it for me to rain on anyones parade but isnt this just warehousing bad loans similar to Japan did in the late 1980’s and is still paying the cost for this action to day ?....yikes!

Productivity remains strong ,employment hangs tuff and even gun toting Christmas shoppers cant keep the American Consumer away from the mall. However the drum beat on wall street continues to be negitve finding doom and gloom at every turn.

One componet so often left out of the consumer story is customer service and merchandising and lets face it many of the merchants suffering lack of consumer love are poorly stocked,badly merchandised ,and have awfull customer service. Failure to meet earning expectations is more a function of these facts than that somehow a given retailer has missed its mark due to the death of the consumer. The real question is an remains and is the cunsumer taped out or do some of these retailers just , “suck”?
Ho Ho Ho or Humbug for the market in December ? Since 1943 each time the month of November has ended with a negative return the year prior to an Election Year the Dow has had a positive return for the month of December gaining an average of 4.8%. When the Dow was down significantly in the month of November (1943, 1987 and 1991) it was followed by a strong December. So Ho Ho Ho I suspect.
So why all the talk of doom and gloom ? I will refer to my December 21st ,2006 comments,
“Many analysts seem surprised by the large increase in retail spending this Christmas season, not this blogger. One look at the age old “Christmas light “gauge gives you a clear indication that the economy is booming. The Christmas light gauge is a theory that’s says when people are flush with cash and spending they feel joy for the season, so the more out door Christmas lights you see house to house the more prosperous people feel about themselves and the economy . It seems a bit of a slow start this year but in the last few weeks people have been decking the halls with close to reckless abandon. Bottom line the more Christmas light you see the more prosperous people feel and the more they spend. Look for a big gain in Christmas retail sales.”

Again watch out for those Christmas lights the amount clearly indicate the direction of the economy.

Iranian students staged a new demonstration at Tehran University on Sunday,