Does Q-Easing Matter at this Point?

The Fed's last gasp of air will be coming soon. Today's stock market rebound from rumours of more QE is even more telling. Now markets will digest that possibility and move on to more prescient matters. Even when the Fed inevitably announces QE measures, the market will fade from the pop because the "smart" money has already factored in the move and will look toward what is next (and who will support the markets going forward)...

Is Apple the Next Microsoft or Cisco?

Think about it for a minute. Both Microsoft and Cisco became unrelenting powerhouses in their hay-days. They both continued to march higher based on their competitive edges and grew their market caps to extreme levels. MSFT and CSCO both had a "corner" on the market for their products, much like AAPL does today. At the peak of their moves up, these two stocks have essentially done nothing over the past 12 years. However, in the short-term - AAPL may be a stable stock to be invested in this chaotic market due to their relatively low valuations. Even so, I believe that this recent earnings miss and guidance disappointment will mark a long-term turning point for the stock, much like what MSFT and CSCO experienced in the early 2000's.

Is the Fed Giving Banks a Way to Unload Risky Assets?

This may sound like a conspiracy theory – that’s because it is. I do not believe that this is really happening, but as an avid player of Chess – I like to look at things from different sides and 3-4 moves ahead. Okay, here’s the conspiracy……the Federal Reserve is pumping gigantic amounts of liquidity into the markets in order for the “too big to fail” banks to be able to unload risky assets at higher prices before the next crisis hits (and freeing up capital to boot). Once the sheet hits the fan, the banks will have “better” hopes of surviving. One good thing, if this is the case – it will be the trading robots that eat the losses. Imagine their drive home to tell their robot spouse...

Investors Should Be Wary Of S&P 500 P/E Ratio

Every time you log-in to some financial news outlet, they have articles and live interviews with "analysts" who recommend buying equities in general based on a couple weak reasons. The most popular of those factors is perhaps the most flawed - the P/E ratio for the S&P 500. This number is compiled by dividing the price of the S&P 500 by the "expected" earnings of the companies that comprise the S&P 500 (with an emphasis on "expected"). The reliance of this model goes right out the window when corporate profits shrink. One cannot accurately gauge the direction of risk assets when the P/E is rising only due to declining earnings. The media will inevitably continue to mention the overall P/E ratio for the market, but as global economies shrink - it will be something the "analysts" speak of much less.

Technical Storm Brewing for Bank of America - BAC

Bank of America Corporation - BAC will be the company that financial stock investors will monitor the share price of over the next week or two. If you look at the posted chart going back to mid June, you will see that the stock has been establishing lower highs and lower lows. If BAC is to break-out of this bearish trading pattern, it must close above $8.22. This scenario could very well come to fruition given the current erraticness of the markets. If you are a trader, the level to short has two different entry points at either a failure to close above $8.30 (with a tight stop at $8.40) or a break below $7.40 on a closing basis. On the other hand, if you wish to go long for a quick bump, then be careful and only do so if BAC closes above $8.30, with a tight "closing" stop just below wherever the 50-day moving average is at the time. I believe that the markets will be focusing on how financials trade over the next few weeks to get a gauge on how things will pan-out for the rest of the year. However, this point will only prove valid if we don't get any earth-shattering news out of Europe or China - then all "bets" are off.

A Shout Out for Fed President Bernanke

I know many folks will think I'm crazy (join the club), but I think Bernanke has done an incredible job over-all. He came into office during the financial crisis of 2008-2009, and with zero help from Congress - he has managed to keep things afloat (for now). The economy is better stimulated through fiscal policies (taxes, etc) rather than monetary policies (The FED). Unfortunately for Mr. Bernanke, he wasn't privy to having a Congress that conjunctively passed fiscal policies to spur economic growth.

A Bubble No One is Talking About

Bubbles form over time, and the majority of the media and investors are aware of the bubbles as they grow. However, despite the realization of the bubble – speculators continue to drive up prices for a seemingly long time before the bubble bursts. As we have seen in the past 20 years, bubbles that form always pop – and are violent when they do. There is a new “stealth” bubble that is going on right now in the markets. The difference between this one and the others from the past is that no one is talking about it or giving notice. I am calling this new bubble the “Hope Bubble”. It seems that with each passing day we receive negative news out of Europe, the global economy, or even the U.S. economy. What happens when we get this news? The stock market goes up in value. Investors are “hoping” for two things. The first is that the world’s central banks will ramp up stimulus measures thereby giving a pop to riskier assets. The second “hope” is that the global economy as a whole will have a “soft” landing and avoid recession. In order for the “Hope Bubble” to stay inflated and continue to get even bigger is for BOTH of these hopes to stay intact. If stimulus comes from central bankers, that will keep the bubble going. However, if the global economy starts to show evidence of a moderate to severe recession (which I believe is just a matter of time) – this “Hope Bubble” will burst and markets will plummet from all of the “Hoper’s” exiting the market.