Retail Investors: Don’t lose your shirts!

We have seen the euphoria over the last five months. We have also seen how fragile this rally could be when some kind of fear hits the markets. No doubt the US data has been getting better of late, but is that a good enough reason for the markets to keep posting weekly highs and monthly highs? Is sky the limit?

And what about the Banks & Institutions that bought the stocks when the markets were low? Do you seriously think they are going to keep on buying without realizing or booking the profits on their holdings?

Markets have been driven by the Central Bank fueled unparalleled, unlimited liquidity. It is almost akin to everyone (read: the Banks, Institutions & the other big fellas) being given free chips to play in Las Vegas. You know pretty well what would happen eventually if everyone is given free rides in Vegas..

What happened to Apple could happen any time to Google, Priceline, Netflix, Amazon and other high flying stocks. And to the stock indices too.. All that is needed is a small trigger for a big drop in the indexes and individual stocks. May be once again Europe could be that trigger (with declining retail sales and news that Spanish Banks need more capital).. Or it could be fueled by the currency war that is gaining further momentum – with the ECB, RBA and RBNZ joining the Fed, BoJ and SNB. Or by the Fed deciding to cut down on the stimulus (they can’t afford to stop printing totally but a cut back is quite possible). Or it could be in the form of further crash in commodity prices. I am not worried about China as of now, though a bad news from there will be a bigger trigger for a market crash. The point is, there simply is no room for the market players to take further risks by going long at this juncture.

The bull theory that “there is a lot of money waiting in the sidelines to enter stocks” will be put to a real test in June. True, a lot of people are holding back on investing and are sitting on a cash pile but these are mostly retails investors like you and me.. When you and me decide to jump in finally, that is when the Banks, hedge funds, institutions, big players, operators and manipulators will be dumping the stocks.

And do not forget the fact that when the crowd in the room grows bigger, the exit always gets smaller..

The song “Sell in May and Go Away” did not come true. But what we saw last Friday could just be the tip of the June ice berg.. So my new song is “Prune down in June or you’ll be a singing a sad tune”.

Retail investors, please do not lose your shirts…….or pants for that matter.. If you still want to go long on some individual stocks, it is okay but make sure you keep an eye on the overall market movements (S&P and DOW) and ensure your stop losses are kept very tight.

Happy trading!

Disclaimer:  This is not an investment advice but I am bearish on US stocks right now. I am short SPY, IWM, AMZN & GMCR. I already shorted and covered GOOG, FB, LNKD and NFLX in May. Will be shorting GOOG again of it goes up to 909 and FB if it goes up to 26. GLD seems dicey, so I am not touching it right now. The only long position I currently have is VXX (yes, I love volatility and expect this June to be very volatile).

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Markets: S&P at 3000

The US markets and the global indices are at an all time high.. The reason?  Investor euphoria due to the following:

1.  The US economic data shows some improving signs of the economy – mainly in housing, employment and corporate earnings (mostly decent data but no one cares to question why the US GDP is not improving despite the “all round improvement” in the economy)

2. The Chinese economy has not shown any “real” weakness so far.. (for the doubting Thomases who question the China data, let me tell you – even the US data is suspect)

3. All the problems in the Eurozone have been resolved (laugh out loud here). The ECB which so far addressed the problems ONLY through its INACTION has finally acted – by cutting the interest rate. Is that not a confirmation that things are NOT rosy in the Zone? Who cares anyways? Now that the ECB (which stood pat all this time) has joined all the other Central Banks which are working overtime to print money & devalue their respective currencies (Fed, SNB, BoJ and possibly RBA and RBNZ), investors think they are on the path to glory..

4. The US dollar is up and Gold prices are down and this of late has been feeding more frenzy into the stocks (and people believe that the so called “money in the sidelines” is supposed to be flowing into the stocks non-stop for possibly the next twenty years or so)

5. After the Apple/iPhone led rally over the last few years, we now have the next technological invention – the Google Glass, ready for launch. It should bring the whole world to our door-steps and should solve all our problems including poverty in third world countries – as long as you don’t complain about privacy violation and eye strains. Another good reason to buy all the stocks, not just Google at 900!!

Since all the problems in the world seem to have been resolved one way or the other in the last four months, and since all the Central Bankers are thinking alike and seem to be in cahoots, we should keep buying the stocks without worrying about anything.. Yes, let us take the markets to new highs everyday and make sure the S&P crosses the 3000 level in the next two months. Go bulls!

p.s:  There were some rumors circulating on Friday (after the market close) that the Fed will be announcing a “withdrawal” of stimulus soon. The bears who create these rumors are really pathetic! Who cares about the Fed any more, as long as the ECB, SNB and BoJ are there to support us and lead the globe into hyper-inflation?

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Cyprus – the Genie is out of the bottle

Finally, after a long wait, the news has arrived re: the bail-out (or bail-in??) in Cyprus. The EuroZone leadership is still grappling with the problems in the zone and possibly has no clue as to how to contain things. Now they are setting a bad precedent in bail-outs by imposing a penalty on the savers, ie, the depositors who keep money in the Banks! Isn’t this ridiculous? No doubt it is!! And this is sure to cause a run on the Banks in other weaker countries in the Eurozone.

Cyprus is such a tiny country and so, this issue shouldn’t cause any major setbacks to the global markets, right?

Wrong!!

To know why, please read this article:

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Angry Chimp – Laugh out Loud!!

Ha ha!! With all the “currency monkeying” by the Federal Reserve, European Central Bank, Swiss National Bank and the Bank of Japan, this chimp is really upset and angry!!

(A friend of mine sent this pic – I don’t know who the owner is but due credit / acknowledgement given to the person who clicked this amazing pic!)

pic.twitter.com/B2j51h7oqk

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Think Higher, Act Higher

I just wanted to share this beautiful story a friend of mine sent to me last week… THINK higher, ACT higher!!

think higher

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Two things that can bring the US down – Part 2

Having read the first part of this article published yesterday, you must be wondering what other issues (other than healthcare) in the US can create more chaos.. Actually, there are a lot of issues that need to be addressed if US needs to retain its superiority. But nothing is more critical than tackling the next financial crisis –  and the one thing that could create another financial mess, I am afraid, is the ballooning student loan debt problem.

Care to know the figures?? At the end of 2012, Student loan debt stood at $966 billion (yes, close to a trillion dollars) with the debt TRIPLING in a matter of eight years!

Delinquencies? About one-third of the borrowers are delinquent!! About 6.7 mil borrowers are delinquent by 90+ days, which is 17% of the total borrowers!

The Federal Reserve offers five reasons to explain this trend:

  • More people attend college and graduate school
  • Parents take out student loans for their children
  • Students stay longer in college and more often attend graduate school
  • Lower repayment rates as borrowers delay payments through deferments and forbearances
  • Discharging student debt is very difficult and the balance stays with the borrower

Considering the size of the total student loan debt, the growth rate of debt and the galloping delinquency rate, I am wondering if this could be the next financial mess just waiting to explode (like housing / derivatives / Lehman)… Please share your thoughts.

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Two things that can bring the US down – Part 1

What are the two things that can really bring the US down ?

The no. 1 factor is the chaotic US healthcare system with continuously rising costs.. Flaws abound in the design, administration, governance and cost structure of the US healthcare system. The healthcare industry is dominated NOT by the doctors or the hospitals but by the insurance companies & pharmaceutical companies and surprisingly by the law firms that specialize in healthcare related litigation and claims. No one knows (not even the Government) where we are really going with healthcare in the US..

Can healthcare kill you? yes, it can, especially in the US of A. Just look at some of the statistics (thanks to a recent article in Time magazine) -

- the United States spends more on health care than Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia combined.

- Back in 1960, an average of $147 was spent per person on health care in the United States. By 2009, that number had skyrocketed to $8,086.

- Approximately 60 percent of all personal bankruptcies in the United States are related to medical bills.

- According to the Association of American Medical Colleges, the U.S. is  currently experiencing a shortage of at least 13,000 doctors.  Unfortunately, that shortage is expected to grow to 130,000 doctors over the next 10 years.

- Health insurance administration expenses account for 8 percent of all health care costs in the United States each year.  In Finland, health insurance administration expenses account for just 2 percent of all health care costs each year.

- If you can believe it, the U.S. ambulance industry makes more money each year than the movie industry does.

- the health insurance costs are likely to go up by at least 10% in 2013

- Prescription drugs cost about 50% more in the United States than they do in other countries.

And here is the best one – In America today, you are 64 times more likely to be killed by a doctor than you are by a gun!!!

Lovely, isn’t it? I am not sure how many people read the Time story but I am hoping that Hollywood will come out with couple of blockbusters this year, based on the “kill with healthcare” theme!! Movies after all can reach more people than a Time magazine story that is bound to be forgotten in a few days/weeks.

Now if you want to read about the second critical thing that could bring the US down – financially – please wait for Part 2 that I plan to publish tomorrow.

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