Weekly/After Stock Market Review Archives

Contrarian Indicators Show Tradeable Rally Imminent

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As an indication that we are far from bull market trading where bad news is brushed aside and any glimmer of good news is a catalyst for a rally, the early positive tone from strong Thanksgiving weekend retail numbers gave way to more financial doom and gloom and a rush to the equity exit door.  Citigroup layoff rumors, UBS downgrades of Freddie Mac and Fannie Mae and finally Senator Charles Schumer urging regulators to look into the risks associated with the goverment lending to Countrywide Financial which Schumer called "their personal ATM machine" provided the gloom du jour.

From a price standpoint today’s action was obviously ugly, but volume levels didn’t show tremendous conviction behind the move and leading stocks held up remarkably well (see below).   However, it was the first day of trading after a long holiday weekend, so taking that into consideration today’s action was no fluke and sets us up for further deterioration and a test of the August lows in the Dow at 12517.  The S&P and Nasdaq still have strong support levels in place before setting up a test of their August lows with the S&P500 level of 1400 and the Nasdaq level around 2500 becoming important psychological levels of support to keep an eye on.

I’ve been mentioning in recent reports that we are close to a tradeable bottom and as Doug Kass points out over at the Street.com, several contrarian indicators support this theory.

– Net long hedge fund exposure has plummeted
– Invidual investors are now as bearish as they were in summer of ’06 and March of ’03
– Consumer confidence at levels not seen since 1992
– Market oscillators indicating dramatically oversold

DailyWealth has also pointed out recently that we’re due for a bounce based on indicators from Jason Goepfert who says "current indicators are as lopsided as they’ve been in the past few years".  In a run down of over 100 indicators, 26 are showing bullish, while only 2 bearish.

Another contrarian play comes in the form of a member in my live chat room, who mentioned to me that his mom just called wondering when she should sell.  He received the same call in August.  What are you hearing from your family and friends?  Pay attention to the discussions at all the holiday parties and get a sense of how the "average" investor is feeling towards the stock market. 

I do believe we’re close to a bottom, but when I say bottom I’m just referring to a tradeable rally.  Just how big this rally will be is anyone’s guess, but there will be some significant opportunities on the long side very soon.  What I’m looking for is some kind of big capitulation day characterized by some panic selling followed by some institutional buying and short covering.  Until that happens, I remain in a large cash position.

When this market gets going again, you might like to take a look at these potential leaders.

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day November 26th 2007

Nasdaq: DOWN 2.14% today with volume 10% BELOW average
Nasdaq ETF (QQQQ) DOWN 1.73%, volume 8% BELOW average
Dow: DOWN 1.83%, with volume 6% ABOVE the average
Dow ETF (DIA): DOWN 1.51%, with volume 23% BELOW the average
S&P ETF (SPY): DOWN 2.21%,  with volume 9% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 2.72%, with volume 8% ABOVE the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks actually fared relatively well today, dropping less then all of the major indices with little conviction behind the selling.

Summary:

* Decliners led Advancers 225 to 78
* Advancers were up an average of 2.08% today, with volume 28% ABOVE average
* Decliners were down an average of 2.62% with volume 9% BELOW average
* The total SI Leading Stocks Index was DOWN 1.41% today with volume 0% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days): 
Bonds, Commodities, Agriculture
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Semis, Retail, Internet, Tech, Utilities

* Today’s Market Moving Industries/Sectors (UP):
Bonds across the board

* Today’s Market Moving Industries/Sectors (DOWN):
REITs, Real Estate, Energy, Financials, International Real Estate

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Sorry, no stock of the day today but you might like to have a look at the following Self Investors Leading Stocks that moved up with volume today and are above the 50 and 200 day moving averages.  These could be your next leaders once the market turns. 

Listed in order of total rank (fundamentals + technicals) with the best at the top.

Arena Resources (ARD)
Fossil (FOSL)
Vimpel Communications (VIP)
Astronics (ATRO)
Dolby Laboratories (DLB)
Dynamic Materials (BOOM)
Stanley (SXE)

 

Stocks

Leading Stocks Defying the Market – Strong Demand, Above Moving Average

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Today, I wanted to bring to you a screen of the SelfInvestors Breakout Tracker.  This particular screen filters out leading stocks that are showing significant demand and above both the 50 and 200 day moving averages.  They are holding up remarkably well despite a market correction and many of these will most likely lead the market once we begin to turn around. 

Please click the image below to see the top stocks sorted according to Total Rank (Fundamentals + Technicals).
This is absolutely not a buy list.  Please pay attention to the Pivot points listed in the table as well as the stocks in relation to their support levels and please do your own research. 

If you’d like to receive the full list in an excel download (about 60 stocks), you can register for a free Bronze membership to the left there and get access to the archives of all the excel screens.  I’ll be releasing this screen to members within the next several hours.

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Future Profits Through Lessons of History

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2DIME’S INVESTOR NOTES
Wednesday, November 21st, 2007
 
“On Average, History Will Repeat Itself”.
 
 
 
Wow! What do you think about the recent moves in the Markets? Truly, the only constant is change. As for my personal efforts to stay ahead of the crowd, I’m about even with my trades for the past two weeks. Gains off setting give backs. The advantage of picking good stocks in good industries at good buy points, they weather the storms of market fluctuations nicely. Its great to even see some of them motoring onward and upward while "Rome burns."
 
During the first week of November, I was feeling some relief as the markets were recovering from the late October pullback. I pondered whether the expected last quarter rally was at hand and wondered if we would see new highs. I made a mental note that GOOG and AAPL looked a bit Over Bought…..with rising prices during the previous week BUT with declining Volume. Hmmm…..
 
I was trying to refresh my memory about the average price of stock during the last 52 years that has historically made the greatest run-up. I recollected it was around $48; but wanted to pin it down. I guess the need for precision is an old carry over from my days as a professional pilot.
 
 Where did I see that?  It was in William O’Neil’s book “The Successful Investor” ( pg.111)

As I was thumbing through the book, I noticed a chart of AOL from 1999 and thought….That sure looks like GOOG. It was talking about how to recognize tops and was using AOL as an example of an “Exhaustion Top.” I took another look at GOOG and noted on the chart:
 
“ Same Pattern as AOL 1999
1. 7-8th Base formation
2. Highest daily gain 19 on 10/30/07
3.Prices continuing to rise on declining daily volume
4. Exhaustion Gap 10/23 – 10/24?”
 
Later in the trading day, on November 5th,  I thought about how important studying past performance of individuals and stocks is to gaining an understanding of the markets and the trading craft. So.. I trimmed off a few profitable trades (Rule of thumb is to take ½ off when your gains hit 100%) and purchased high DELTA Puts on GOOG, AAPL, DIA and the QQQQ’s. With the uptick on the 6th , the little voice of greed in my head started chattering and vacillating and then became quiet on the 7th as the correction swooped in and gave the FED another opportunity to inject cash into the marketplace. (On Thursday November 15th they injected $47 billion in temporary reserves into the banking system, its biggest injection since September 2001.)
 
Granted Google is not AOL and 2007 is not 1999; but it sure is gratifying to see stuff happen after you think it might and take a few precautionary steps “just incase.”
 
The puts on GOOG, AAPL, DIA and QQQQ helped to blunt some of my less favorable plays. And yes, golly darn, I exited before I thought I should have. And now, a week later it is a moot point. Cause I’m all about Calls.
 
As I said, “The only constant is change;” but it sure is helpful when that change repeats itself. Now! Where’s the BULL?
 
Cheers, 2Dimes / Barry Brush (To contact me send an email. To support@selfinvestors.com and Tate will make sure I get it.)
Weekly/After Stock Market Review Archives

Goldman Sachs Citigroup Downgrade Spooks, But Nasdaq and S&P Hold for Now

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So much for stabilization!  I had mentioned in the weekend report that the market was showing some signs of improvement and was beginning to stabilize around key support levels but Goldman Sachs took the legs out with a downgrade of Citigroup.  The downgrade in and of itself wasn’t enough to derail the market.  These kinds of downgrades are routine nowadays and news of banks coming out with statements about a couple billion in write downs is commonplace.  That much has been priced into the market for the most part.  What isn’t priced in is a prolonging of the credit crunch with a magnitude of double digit billions.  Clearly the Goldman Sachs estimate of 15 billion in write-offs in Citigroup over the next two quarters was a bit too much to stomach and spooked traders into heading for the exits today.  It certainly didn’t help that the National Association of Homebuilders confidence levels didn’t improve over October readings with a score of 19.  It’s the lowest level since this reading began in 1985, but on the bright side it didin’t drop over last month.  With 22 year record low levels and no drop over last month, perhaps this is a sign that the homebuilders are near a bottom. 


Get all the sentiment data here.

So now what?  Today’s move certainly puts a kink in the plans for a pre Thanksgiving rally but I still feel like we’re going to get a decent sized relief rally sustained over at least a few weeks very, very soon.  We just may need to see some more capitulation before that happens.  I discussed the key support levels in the S&P and Nasdaq in the weekend report which are are the last lines of defense before testing those August lows.  Both indices barely held at those levels today, but they did hold and volume levels didn’t indicate a tremendous amount of conviction behind today’s move.  That is encouraging but there is still significant downside risk tomomorrow.  The Dow took out and closed below 13,000 today and in all likilihood needs to retest the next level of support.  I failed to include this level of support at 12800, so wanted to highlight it here tonight.  It’s support at the February 07 highs and the close of that big August capitulation day and the last line of defense before testing the August lows.  I would imagine there is a very good chance of testing this level tomorrow but it probably depends on the housing numbers (starts, permits) as well as the FOMC minutes later in the day.  The HP quarter should help keep the market afloat at the open and the Fed will probably do everything it can to keep from roiling the market in its Fed minutes tomorrow, but it remains a dangerous market and one that can eat into capital in a hurry if you’re not careful!  I’ve been dabbling in a few of the strongest positions on the long side and profiting here and there but I will not get aggressive until we get a big day of accumulation or some kind of capitulation day.

::: Major Indices Performance – The Numbers :::

(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day November 19th 2007

Nasdaq: DOWN 1.66% today with volume 8% BELOW average
Nasdaq ETF (QQQQ) DOWN 1.15 %, volume 27% ABOVE average
Dow: DOWN 1.66%, with volume 10% ABOVE the average
Dow ETF (DIA): DOWN 1.4%, with volume 50% ABOVE the average
S&P ETF (SPY): DOWN 1.39%,  with volume 42% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 1.98%, with volume 31% ABOVE the average

::: SelflInvestors Leading Stocks :::

The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base.  Leading stocks were hit much harder than the general market today but there wasn’t much conviction behind the selling.

Summary:

* Decliners led Advancers 264 to 38
* Advancers were up an average of 1.51% today, with volume 30% ABOVE average
* Decliners were down an average of 3.22% with volume 4% ABOVE average
* The total SI Leading Stocks Index was DOWN 2.62% today with volume 7% ABOVE average

::: Where’s the Money Flowing :::

Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading.  The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s.  A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing).  Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash.  For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/

* Current Leading Sectors/Industries (over last 30 trading days):  
Internet Infrastructure, Bonds, Agriculture
                                          
* Current Lagging Sectors/Industries (over last 30 trading days): 
Semis, Retail, Internet, Networking, Utilities

* Today’s Market Moving Industries/Sectors (UP):
Commodities, Bonds

* Today’s Market Moving Industries/Sectors (DOWN):
Home Construction, Basic Materials, Gold Miners, Retail, Financials

::: Stocks :::

The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.  Sorry, short on time tonight so no stock of the day today.  However, you may like to take a look at these SelfInvestors Leading stocks the moved up with volume today and are above both the 50 day and 200 day moving averages.

Stocks are listed in order of total rank (fundamentals + technicals), with best at the top.

IntercontinentalExchange (ICE)
TransDigm Group (TDG)
Astronics (ATRO)
HMS Holdings (HMSY)
Interactive Intelligence (ININ)
Darling International (DAR)

Weekly/After Stock Market Review Archives

Market Stabilizes, Holiday Rally In Sight; Hot IPO – CreditCards.com (CCRD)

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Heading into the holiday Thanksgiving week, the market finds itself somewhat stabilized and consolidating around some key support levels (see below).  Expect to see trading around these levels at least until normal trading volumes resume the following week.  What I’ve found is that the trading in the first few days after a holiday break  are very revealing into what we can expect for the following few weeks. 

Overall, last week was a positive for bulls which kicked it off with a big price surge on Tuesday, but one that lacked significant conviction.  Essentially it was just a big dead cat bounce.  It didn’t follow through as expected but the following action should be viewed as bullish considering selling volume subsided in the face of doomsday comments and negative news out of Goldman Sachs, Wells Fargo and Barclays.  Remember at market bottoms, traders begin to shrug off news and focus on the positives.  I don’t think we’re 100% there just yet and we still need a confirmation day before I’m going to get a bit more aggressive on the long side, but given the technical action has improved and that we are heading into a historically bullish period for the stock market, the odds are good for a tradeable rally here for the next few weeks up to key resistance levels of the 50 day moving averages.

The Nasdaq is holding right at key support of its 200 day moving average and looking ready to rally up to resistance around the 50 day moving average.  If the Nasdaq does bust through the 200 dma, it’s likely headed down to test the next level of support around 2500.  I think we retrace some of these of November losses before that becomes a possibility.

The Dow is consolidating around support of 13000.  It really needs to get back above resistance of the 200 day moving average and hold there very soon.  The long it bounces around here, the greater the chance it ultimately fails and tests the August lows.

The S&P is stabilizing around key support of 1430 – 1440 but has much farther to go before even getting to that 200 day moving average and will have a much more difficult time of staging a big rally to get to the 50 day moving average.  Notice on Wednesday it busted through the 200 day but turned tail at the end of the day and closed below this resistance level.  The area around 1490 – 1500 would be an area where the S&P would most likely fail following any holiday rally.

NOTE: There will be not Weekly Market report next Sunday. 

::: Model Portfolio Update :::

 

Following the first weekly loss in many last week, the portfolio bounced back a bit this week with a small gain of .7%, bringing the year to date return to 24.6%.  I continue to tread very carefully in this volatile, unpredictable market and continue to sit on pile of cash (55%).  However, the market is showing signs of improving at least on a short term basis and we are heading into a period that is  typically strong so I’m going to begin adding just a bit more exposure to the long side down here.  I added to a long term core position last week and did the same this week, in addition to initiating a new Quick Strike Profit play which is up nearly 9% in just a few days.   I am looking to add two more positions next week, another core holding (long term play) most likely in tech as well as another QSP play (PGI might be a good candidate, a stock recently highlighted as Stock Trade of the Day).  There are currently no short positions in the portfolio.

Would you like to follow along with the SelfInvestors Model Portfolio each day with buy and sell alerts within minutes of the transaction?  It’s part of my Gold service which also includes all of the tracking tools (breakout stocks, IPO’s and ETF’s and unlimited personal support). 

::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Long Distance Carriers: 10.80%
2. Major Airlines: 9.35%
3. Recreational Goods: 9.30%
4. Internet Service Providers: 5.85%
5. Grocery Stores: 5.75%
6. Computer Based Systems: 5.05%
7. Regional Airlines:  4.75%
8. Dairy Products: 4.25%
9. Home Improvement Stores: 3.90%
10. Home Furnishings & Fixtures: 3.80%

– Top 10 Worst Performing Industries For the Week –

1. Mortgage Investment: -9.90%
2. Gold: -8.70%
3. Rental & Leasing Services: -7.00%
4. Silver: -6.55%
5. Heavy Construction: -6.30%
6. Industrial Equipment Wholesale: -6.25%
7. Industrial Metals & Minerals: -5.55%
8. Semiconductor – Memory Chips: -5.55%
9. Trucks & Other Vehicles: -5.30%
10. Trucking: -5.25%

– Top 5 Best Performing ETFs For the Week –
 
1. India Fund (IFN)  8.70%
2. Morgan Stanley India (IIF) 8.55%
3. MSCI India (INP) 6.00%
4. HLDRS Broadband (BDH) 4.55%
5. Chile Fund (CH) 3.90%

– Worst 5 Performing ETF’s –

1. Thai Fund (TTF) -6.85%
2. Asa Limited (ASA)  -6.80%
3. Market Vectors Gold Miners (GDX)  -6.70%
4. Ishares Silver (SLV) -6.20%
5. Power Shares Global Clean Energy (PBD)  -6.05%

:::  IPO’s Worth Watching for This Week :::

One very interesting IPO this week.  Are we entering another Internet bubble phase?  In some regards I believe so and you’ll begin to see many of the so called Web 2.0 properties go under within the next year or two, but also keep in mind that the internet has matured greatly since the late 90’s and many of these companies are making money and lots of it.  CreditCards.com is a company that has been doubling revenues and profits, so the days of internet properties with no profit going public are over.  I’m very interested to see how this stock does in the marketplace. 

1.  CreditCards.com (CCRD)  runs a Web site where visitors can sift through about 150 card offerings from more than 20 issuers. Users can sort by interest rate, rewards, cash back, airline credit, and other card criteria; by credit quality (excellent, good, fair); or by issuer. Card issuers pay CreditCards.com a fee based on either card applications or approvals. Trading set to begin on Tuesday.

::: Upcoming Economic Reports (11/19/07 – 11/23/07) :::

Monday:         Leading Indicators
Tuesday:       Building Permits, Housing Starts, FOMC Minutes
Wednesday: Initial Claims, Crude Inventories
Thursday:      None
Friday:            None

::: Upcoming Notable Earnings Reports :::

Monday:  TransDigm (TDG)

Tuesday:  Blue Coat Systems (BCSI), GameStop (GME), Home Inns & Hotels Management (HMIN), China Medical (CMED), Focus Media Holdings (FMCN), Mobile Telesystems (MBT)

Wednesday: Abercrombie & Fitch (ANF), Trina Solar (TSL)

::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::

1. Do You Have a Millionaire Mind?

2. Trade of Day – Bullish Triangle Emerges in Premier Global Services (PGI)

3. SalesForce.com (CRM) Surges, China Stocks Still Getting Hit On Earnings

4. Breakout Stocks Review: Capital Preservation Key In Down Market

5.  Solar Still Shines – Suntech Power (STP) Surges After Earnings

6.  Three S Bio (SSRX) Still Looking Bullish After Earnings

7. This Dead Cat Made of Rubber From China; Stock of Day – Cellcom Israel (CEL)

8.  Cramer Has a Credibility Problem

9.  Quick Strike Profit Plays Video Review – Entries & Exits
Sorry, but this post is available to Platinum & Gold Members only.

News

Warren Buffett Wrong on Estate Taxes

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The hotly debated estate tax issue has been in the news again recently after the Senate Finance Committee held a hearing where Chairman and Montana Democrat Max Baucus said he supports ending the estate tax along with the Iowa Republican Senator Charles Grassley who said, ""The estate tax is unjust. … Death should not be a taxable event."

Warrent Buffett weighed in on the other side saying, "In a country that prides itself on equality of opportunity, it’s becoming anything but that as the gap between the super-rich and the middle class is widening."

Below is an editorial written by Dan Ferris of DailyWealth and republished here with permission.  I completely agree with the Senators and Dan Ferris that a repeal of the estate tax is in order.  Now Buffett is obviously a smart guy who has amassed a fortune but he’s wrong on this.  In my opinion this is not an issue of equality but rather an issue of the best way to distribute wealth.  Bottom line.  Who would you rather distribute wealth?  The government or the wealthy?  With all the inefficiencies of goverment, the waste, the fraud… is this really a very difficult decision?  The United States in terms of percentage of GDP gives back more to local charities and world programs than any other nation in the world.  With a repeal of the estate tax that kind of giving will only increase.

Consider this.  Suppose the estate tax was repealed and Warren Buffett passed on all of his wealth to his children (what’s ever left over after his charitable donation to the Gates foundation).  Now his children will be given the same opportunity to direct this excessive wealth into charities that they believe strongly in just as their father did.  The alternative is allowing the goverment to decide where to allocate this wealth. 

Dan makes a great point in saying "It’s interesting to note that Buffett advocates the estate tax, and yet has deprived the government of its fair share of his own national resources by giving some $37 billion to the Bill & Melinda Gates Foundation. The shares are worth more now, too, so the taxman is further deprived as the market bids up Berkshire’s stock."

Does Warren Buffett not trust that his own children will continue his charitable ways?  Does he not trust that your children will?  What do you think?

Why Warren Buffett Is Dead Wrong About the Estate Tax
By Dan Ferris

I saw the following recently in an article at CNNMoney.com:

"’Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit,’ Warren Buffett told the New York Times in 2001. ‘[Repeal would be like] choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics.’"

Warren Buffett, one of the world’s richest men, is referring to the practice of leveling large taxes on your wealth after you die. Of course, the problem with Buffett’s statement is that "the resources of the nation" don’t belong to "the nation" at all. You own your wealth or, at least, you’re supposed to own it. I guess if you have a billion dollars, you think you get to say how "the nation" ought to be run. 

The wrong-headed idea that permeates our culture and allows for Buffett to advocate estate taxes is the idea of "giving back to the community." This idea is a nonstarter because there was no taking in the first place. You get rich by offering value for value. You get rich by trading, not taking. "Taking" is what the government did to Suzette Kelo when it condemned her house so Pfizer could build a parking lot (a crime that was upheld by that bastion of justice, the U.S. Supreme Court, in Kelo v. City of New London). THAT is taking. 

But traders have no need to give back anything, unless for reasons of recission due to the use of fraud or force, unless they’re guilty of a crime. Earning wealth is not a crime… at least, it’s not supposed to be one. I heard Buffett once say that he always planned to give his money "back to society." Never mind that nothing was "taken" from any "society," only wealth that was created and trading that was done. Why does he feel so guilty?

If Buffett needs to imagine a future that doesn’t rankle his idea of fairness, maybe he should remember that incapable allocators of wealth will lose their wealth to other more capable allocators. So if the inheritors aren’t the Olympians he says we’re making them out to be, the market will take care of that.

Like a man looking for a good time on a small budget, money goes where it’s treated best. People who inherit wealth and don’t treat it right will lose it. But to be quite accurate, that’s off topic. Even if the inheritors of wealth don’t lose it, it doesn’t matter. The most important point, the one Buffett doesn’t acknowledge, is that the wealth is theirs to lose or keep as they may. It absolutely, positively does not belong to "society."

It’s also a mistake to suggest that, by honoring property rights and allowing people to keep their wealth, we are somehow choosing some sort of future "Olympic team." Not true at all. We are simply acknowledging a man’s right to dispose of his property as he sees fit. There can be no such thing as the "aristocracy of wealth" Buffett fears.

The inheritable wealth Buffett wants to destroy through taxation (a euphemism for "theft") must be created and earned. An aristocracy, on the other hand, is the ruling class in a monarchy. All of the monarchy’s wealth is seized, conquered, and redistributed wealth. The term, "aristocracy of wealth," is like "military intelligence." It’s self-contradictory. That the aristocracy passes its wealth from generation to generation is a funny thing to worry about, too. The aristocracy eventually has to sell it all off to keep out of the poor house. You can’t live on unproductive inherited wealth forever, anymore than you can live on borrowed money forever. To paraphrase Robert Louis Stevenson, those who attempt to live on unproductive inherited wealth, sooner or later, sit down to a banquet of consequences.

It’s interesting to note that Buffett advocates the estate tax, and yet has deprived the government of its fair share of his own national resources by giving some $37 billion to the Bill & Melinda Gates Foundation. The shares are worth more now, too, so the taxman is further deprived as the market bids up Berkshire’s stock. 

Isn’t Buffett afraid that Bill and Melinda already have much more than their fair share of national resources to command? Isn’t he committing the wrong he alleges will be righted by the estate tax? Who cares about the Gates’ superior ability to command the resources? The playing field is decidedly other unlevel already, yet Buffett insists in unleveling it some more. Seems like Buffett thinks your estate ought to be taxed, because you don’t know what you’re doing.

According to Buffett, your children will be better people if we just steal your money before you can give it to them. They’ll have to work harder.

Buffett thinks the estate tax creates a level playing field. Ah, the level playing field, the illusive goal of the society builders and master planners. The only trouble with the level playing field is that you can’t ever have one, because it means penalizing people for their ability, for their success. It means cutting the tops off the maple trees so they don’t block the sunlight for the oak trees (or are oaks taller than maples? I don’t know).

And if we consistently chopped the tops off all the tall trees just for being tall, then the Buffetts of the world would never have the chance to amass so much to give back to society. At that point, he’d be society, waiting for someone to give him something back.

I wonder how he’d like that?

Good investing,

Dan Ferris

Inspiration

Do You Have a Millionaire Mind?

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2DIME’S INVESTOR NOTES
Friday, November 16th, 2007
 
“Pick a penny up and all day you’ll have good luck”.
TGIF! I think I have almost recovered from last weeks time change. Are we still saving daylight or did we just give back what we saved all summer? Did we really save anything? I’m confused. Calling it Daylight Shifting Time might be more accurate.

I did a quick poll of my friends and family and no one seemed to know much about the whys or what’s of Daylight Saving time so, I did a little research. The official spelling is Daylight Saving Time, not Daylight SavingS Time. The main purpose of Daylight Saving Time (called "Summer Time" in many places in the world) is to make better use of daylight; and, to save energy.

Studies done by the U.S. Department of Transportation show that Daylight Saving Time trims the entire country’s electricity usage by a small but significant amount, about one percent each day, because less electricity is used for lighting and appliances. Similarly, in New Zealand, power companies have found that power usage decreases 3.5 percent when daylight saving starts. In the first week, peak evening consumption commonly drops around five percent.

Energy saving aside, a poll conducted by the U.S. Department of Transportation indicated that Americans liked Daylight Saving Time because during the summer "there is more light in the evenings and so you can do more.”
Did you know? And…. On August 8, 2005, President George W. Bush signed the Energy Policy Act of 2005. This Act changed the time change dates for Daylight Saving Time in the U.S. Beginning in 2007, DST will begin on the second Sunday in March and end the first Sunday in November. The Secretary of Energy will report the impact of this change to Congress. Congress retains the right to resume the 2005 Daylight Saving Time schedule once the Department of Energy study is complete. Cool! So What!

So, in short, Daylight Saving Time gives us the opportunity to enjoy sunny summer evenings by moving our clocks an hour forward in the spring. I can hardly wait.

While we are on the topic of “Saving:” have you ever thought about your relationship with money and how the preconceived notion about money that a person carries around with them affects the amount he or she is able to accumulate.
 
The accumulation of money or gain for family and civic benefit is at the focus of my trading career. I would hope that it is near the center of yours as well. I believe that before achieving success as a trader, one must be certain his attitude towards money is in sync with one’s ability to accumulate it. That would mean you would have developed a set of money rules to go along with your trading rules. Simple Rules, like: Never pass a penny that you see on the ground without making an effort to pick it up.
 
It is not that the penny has any “real” worth in that you could actually use it to buy something. It is that the penny even without “worth” is still a very large and significant mental symbol whose real value lies inside your minds attitude toward wealth. I believe that if you see and pass up one lonely penny on the sidewalk, you are setting off an avalanche of negative values toward money in your mind which in turn will color your ability to attract and accumulate meaningful wealth.
 
I know you will still think I’m dumb to go out of my way to pick up that penny; but at least you’ll know why I did it. Sometimes, I’ll even go down for dimes and quarters that others are oblivious to. You might even hear me say to myself…..”Well, I’ll be Rich!”
 
So what other “Money Rules” come to mind? How about…”Always think good thoughts or congratulatory ones about the monetary successes of others, no matter who they are, whatever political party they represent or religion they espouse.” It’s a tough one but:
 
The slightest negative thought about your or another’s monetary situation will have a long term negative impact on your prosperity. You may still be able to accumulate wealth, but just think of the fortune you could be missing.
 
Like a lot of folks, I’ve made some unwise financial decisions in life and have been burned pretty badly by them. I carried the wounds from some of those misadventures around with me for years; avoiding this risk and that. Then one day I was fortunate enough to accept a friend’s invitation to attend a free 2 day seminar put on by T. Harv Ecker called “The Millionaire Mind.” What an amazing wake-up-call! All it cost was a 4hour drive to Atlanta and two night’s room and board at the Westin Peach Tree Plaza.
 
I credit those two days with permanently deleting any baggage I was carrying that had anything to do with an inability to attract, accumulate and most importantly hold on to money. It was emotionally cleansing and wealth enabling. As a part of assembling your trader’s toolbox, I recommend you find a seminar near you and attend.
 
secrets to millionsBy the way, his book “Secrets of the Millionaire Mind – Mastering the Inner Game of Wealth” is in print and available on Amazon.com for almost postage only.
 
 Better yet, ask around. Perhaps a rich friend has a copy that you could borrow.
 
Cheers, 2Dimes / Barry Brush (To contact me send an email. To support@selfinvestors.com and Tate will make sure I get it.)
Stock Trade of the Day

Trade of Day – Bullish Triangle Emerges in Premier Global Services (PGI)

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It’s been quite awhile since I’ve posted a trade of the day here .. been a very busy few weeks.  Today, I wanted to bring to you a great opportunity emerging in PGI.  The stock broke out of a 6 month base with near record volume to a new all time high on October 19th and ran up over 20% in just a matter of days.  Since that time, the stock has digested those gains in a very bullish manner, with tight price action and diminishing volume.  It’s carving out a triangle pattern which happens to be one of my favorite patterns and is looking ready to bust out at any time.  It probably just needs the wind of another dead cat bounce rally at its back to get going out of this formation.  Once of the better looking charts out there right now. 

Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation.  Please do your own research and make a personal decision based on your own tolerance for risk.  I currently do own a position in Premier (PGI)

Company Earnings

SalesForce.com (CRM) Surges, China Stocks Still Getting Hit On Earnings

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Today’s SelfInvestors Leading Stocks Moving on Earnings

UP

• SalesForce.com (CRM )  Internet Software & Services, fundamental rank [22/30],  up 10%, holding up above 50 day moving average after recent breakout

DOWN

• Qiao Xing Mobile Communications (QXM) Diversified Communication Services, fundamental rank [26/30],  down 14%, testing the lows since going public in May.. I think it provides a buy opportunity soon.  Way oversold.

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