Paul O'Neill

both the ball player and the former treasury secretary, are good people. But I question the timing of Mr. O'Neill's comment on the US dollar since he works currently for a large institution currently. Comments like this should be looked at as a turning point not as a continuation of a trend.

So short the EURO. Because he didn't make a comment on how healthy the European economy is. The dollar will continue to decline in foreign currencies but probably not as much in relation to the EURO or POUND.

The Tiger and the Snow

I wanted to share with you a wonderful film that I saw and I believe most don't know that it every was made. Roberto Benigni the filmmaker of Life is Beautiful attempted to do the same about the situation in Iraq and I believe succeeded. It is very relevant to our world since Iraq at one time was the center of the world. Here in the best scene and most absurd Roberto Benigni, as Giovanni, is talking with his depressed Iraqi poet friend, Faud, played by Jean Reno.

Faud: That's just what I said to Vittoria. She asked why Id come back to Baghdad. I told her about the 351st story of Arabian nights. Remember it?
Giovanni:You know all 1001? How about 406?
F:406 is about the Italian poet with a funny side.
G:The Arabian Nights are wonderful. Beautiful sky.
F: The Baghdad sky is the pillar of the world.
G:Looks like they're firing angels.
F:80km from here, over 3000 years ago, they built the tower of Babel so they could climb up to this sky.
G:80km from here all our languages were born.
NOW THEY ARE SITTING ON THE HEAD OF THE DESTROYED STATUE OF SADDAM HUSSEIN...
F:Since they tried to touch this sky, we no longer understand each other. A Muslim legend says that Allah come back here because he misses the look of the starry sky from below. Centuries of wisdom and what have we learned? Nothing. You know why there are wars? Because the world started without men and it'll finish that way.

How do you value a bail out?

If we know that the FED is going to bale out too large to fail corporations like JPM and FNM, how do we value the company. Granted the value wont go to zero, but what is the intrinsic worth of a company like that. Do we buy just on dividends? Really need to explore this one.

Do unto others....

My biggest fear with the likes of amazon, google, yahoo, and wikipedia is the amount of free information or services that are provided. Eventually it plays a toll on the economy which hasnt been felt yet.

But look at airlines. First the federal government placed costly oversight on them, then discount carriers eroded their earnings, and now fuel prices have destroyed earnings causing massive bankruptcies.

Yes the products and sevices have decreased but there does come a point when the straw breaks the camels back. It may be starting.

As I write this I am thinking about Microsoft. First the governments of the world have forced them to conduct their business in a less profitable manner, the likes of google and facebook and apple have eroded their market presence, but will be the foot that causes Microsoft to have a earnings yield in excess of 5% ?????

That stock will be a buy when Barrons makes some funny crack about the share price and its name.

The problem with indicators are

that they indicate something that has happened in the past, but doesnt tell you what to do. Also, you have to use averages of different periods to see what has worked in the past, but what about a possible new cycle that is unforeseen? That is where discretion and the art of technical analysis lie (possible double entendre?).

Cycles are important as the bible noted through Joseph's words of 7 good and 7 lean years. But they are hard to discern.

As a result, the index isn't getting cute with precise entry points but capturing the possible early markings of a trend.

A value investor mentioned that 52 week hi/los are meaningless since a 52 week low doesn't imply the stock is cheap, nor a 52 week hi means that the stocks is overvalued. I would say that is true on analyzing individual companies. But when you see the market decreasing and 52 week lows decreasing and highs increasing of the general market, it is a good indicator that investors are seeing tremendous value as the general market decreases. This is what Newton meant when he said that he stood on the shoulder of giants.

Which brings me to the conclusion of what technical analysis ultimately is: standing on the shoulder of giants. Of course, you better watch yourself, since you could also be stomped by them as well.

UnderConstructionII

Today, I decided on the time frame we will be looking for by using the idea and cannot remember who said it: "some of my best long term investments were made in fifteen minutes." We will be looking to capture a long term trend but wary enough to take profits (or smaller losses) when certain terms that we have set out are hit.

Ummm, is she speaking for all of us?

Hillary had this to say concerning her push to boycott the opening ceremonies of the 2008 Olympic summer games which in and of itself is a weak protest since you're still participating!

"Americans will stand strong in support of freedom of religious and political expression and human rights. Americans will also stand strong and root for the success of American athletes who have worked hard and earned the right to compete in the Olympic Games of 2008."

Standing strong doesn't mean meddling in others business. Even though a socialist song Woody Guthrie's sang "This Land is My Land" not "This Land is My Land and Your Land in Our Land."

Lets work on our problems and I am pretty sure that will inspire others to emulate our good way. No one likes to be shoved around; especially by someone who cannot speak Chinese!

And trust me, the markets will not take this political meddling sitting down in a Buddhist position.

Under Construction I

Most of the indicators that I have back tested work well long and short, but you have to know whether the trend is up or down. Otherwise it reduces the percentage of success, but maximizes profits if you are correct about the trend. So the first work of our index will be to define trend.

1) The index will have only 65 stocks, in honor of the DJ65, as well as keeping the index to bearable levels for me. 30 Industrials, 20 Transports, and 15 Utilities. Also, need to decide mix of big,mid, and small cap stocks.

2) We need to define what an uptrend is as well as a downtrend. And maybe we should start by renaming the uptrend for what it really is: an increase in liquidity, .ie inflation (more buyers than sellers). So we are going to measure what counts as an inflating market. As well as a deflating one.

3) The second question is: are we setting this index for short, intermediate, or long term trades? Or possibly a mix of the three.

BUY DCU

Go to http://finance.yahoo.com/q?s=dcu for further information.

My friend asks me why I recommend such a stock and that is because of my disgust recently with the popularization of value investors. I am a big believer in finding true value, but what is value when currencies and our value of work are changing at a dramatic pace?

The general market hasn't even sold off 25% and the news media is leaping everywhere trying to get an interview with some old, stodgy, and possibly senile value investor who proudly claims that he bought dogs in the eye of horrible economic news and an uncertain future. These interviews to the unwary eye are saying subliminally to buy now and be patient as these sages of Wall Street are doing.

Nothing has changed. Credit markets are uncertain. Layoffs haven't been felt. Commodity prices are still high and still pushing near and quite possibly past their all time highs. Purchasing MBI and Ambac now is speculation my friend, and your safety of margin is tremendous pessimism. But I question the pessimism part. And don't call a leopard a zebra.

A few months ago, this guy, a professional value investor, and making more money than me, kept talking his book of Circuit City and Ambac, while I mentioned the other great opportunities out there. His only comment to me was "this is the beauty of markets. You place your money where you like." I bumped into him recently at a costume party where he fittingly dressed as Superman, but I was wondering, didn't Superman have a weakness?

When these investors don't use the restroom anymore by saying "deep value" "long term" "will never sell" then I 'd venture to believe they are value investors. Until then Doyle Brunson should be interviewed on his take about the market.

So I write this blog showing you what a value investor would buy and it might work but you need to do your homework on this one; especially since the market cap is only 9mln...

On a napkin: it makes 1.2mln a year and at 8mln looks cheap; especially since the owner didn’t dump all his shares at 2-3 bucks. Yahoo says book is (off top of my head) at .80.

Am going to analyze, but let me tell you, much easier than MBIs or Ambac's book. Additionally, everyone needs to clean something - from CDOs to socks. So their is a moat ... of bubbles!

Rolling Index Redux

When I started this blog I wanted an index that reflected temporary movements in the market. I unfortunately didnt have time to update the index on a weekly basis; additionally, it was based on arbitrary methods that proved mind boggling over the course of time so this weekend I hope to have an index that proves to be more efficient and profitable as well.

My working theory is exactly what my previous blog mentions: hard work and patience. The hard work is all the experience I have so far gleamed from the market and the patience necessary for my observations to turn fruitful.

Now Joe Granville may have other reasons, but he does seem achronistic, sticking to his OBV theory, while the world has adopted wild, outlandish, and mathematically complex alternatives to his theory, but he sticks with what has worked and proves, as Bernard Baruch mentions in his autobiography, 2+2=4 no matter how you look at it.

I mention this as my index is simple in the idea that it reflects buying interest as well as selling interest. No more no less.

The secret of making money they cannot tell you in books

I am getting the suspicion after two years of trading that not one book says in bold print...hard work and patience.

As someone near me has said more than once: "The only time success comes before work is in the dictionary."

I cancelled most of the information services realizing that it comes from me on whether I succeed or fail. As it must for you.

Hard work and patience.

SHORT TEVA

A work in progress.

But everyone loves pharma and yet they have performed just as well as well as uranium mining shares.
There is a horrible discrepancy in these shares as the population is aging.

When Clinton was in office everyone was laughing at how low the price of oil was.

Now we have generics castrating big pharma’s payday.

With the Democrats seeming lock in on the presidential office (McCain wouldn’t be bad either) there is a thought that medical costs will be cheaper. As with Bush and oil, that is what we will be seeing with Democrats and Pharma.

Unfortunately, there is no products that are blockbusters but you buy when there is blood on the street.
From AMGEN TO SCHERING PLOUGH TO PFIZER, the sun will come out tomorrow.