Remember how in early March the banks, starting with Citi's (C) purposefully leaked memo, announced that they had operating profits? This was the beginning of a rally of over 20% on the S&P 500, which might now be over.

Zero Hedge reports that these profits everyone thought marked a turn for the economy actually resulted from [[AIG]] unwinding its CDS positions. Basically, the government gave money to the banks through AIG, and the banks said these payments were profits.

The S&P 500 is up around 10% since its low of 666.79 on Monday. (Investors 'sentiment, including my own, was so negative, that I decided to sell my puts and buy calls. It turned out to be a week too early, oh well (my calls are now about even).

It's remarkable how when the majority of investors are of a particular view the opposite of that view turns out to be correct. Remember, for example, the notions Nasdaq 6,000, Dow 16,000 (I'm thinking of Morningstar's call a year ago) 36,000, etc, China is safe until the Olympics, we'll have a stock rally until March? These, and many other consensus views, have been proven wrong.

This post is yet another demonstration of why holding leveraged ETFs for a longer period is not worthwhile. It is also a brief examination of how the less risk averse among us might take advantage of this fact.

I don't know if I'm turning into one of those crazy "the world is ending let's buy physical gold and silver" types, but I found this article interesting and scary. The author provides his interpretation of the Davos Forum. The author comments about Putin's blue print for a post USA world. It seems credible, but it's not mentioned anywhere that Russia is on the verge of bankruptcy. They'll burn through cash very quickly if oil prices don't rise.

I never heard of this guy before, but he seems to be dead on:

Jim Rogers, the famed investor and writer, is always informative and fun to watch. Below is a recent Bloomberg interview.

Jim Rogers continues to be bearish on US stocks, but has covered his short position in long term Treasuries "because of Mr. Bernanke." Presumably that means Rogers thinks the Fed can keep yields low by buying Treasuries. He also briefly mentions that he's shorting [[IBM]], [[GE]], and [[JPM]].

I've been watching Treasury yields for a while, looking for a sign that the bubble has burst. It looks to me like it might have. I'm certainly late to the party, as the Ultra Short Lehman 20yr+ ETF (TBT) is up considerably from its lows. However, I think it has far to go up, and the downside risk appears limited. This doesn't mean that it won't reverse course, but I think over the longer term (despite my misgivings about leveraged ETFs), it will do very well.

click to enlarge

Are the House Democrats serious about fixing the economy, or are they just morons? The Wall Street Journal estimates that about 12% of the spending will go to anything that might produce jobs, but the rest of it is waste, including $54 billion for Federal programs that can't pass basic financial audits, $600 million for green cars (on top of the $3 billion a year the government already spends on its vehicles), $1 billion for the insolvent Amtrak, $400 million for global warming research, $50 million for arts, $150 million for the Smithsonian, $2.4 billion for carbon capture demonstration projects, and $335 million for sexually transmitted disease education, among other things (most of the money goes to government programs).

I'm a liberal and think some of these things are worthwhile if we have the money for them. If we're spending money we don't have, we must spend it on something that will create jobs. None of the above does.

I've always paid attention to current events and politics, but I don't think I've ever witnessed so much blatant corruption, stupidity, and double talk in such a short period (apart from news out of the various banana republics around the world).

We've got Bernie Madoff (government regulators asleep at the switch), the Governor of Illinois, before that the former New York Governor, New Mexico's Governor, and Tim Geithner's taxes, among many others.

A popular strategy among those investors who trade actively is dividend capture. There are several different ways to implement it, and I would like to go through some of them.

The last time to buy a stock and be eligible to receive its dividend is the day before ex-dividend day. That is, if ex-dividend day is December 15, one must buy the stock on December 14 (or the last trading day before December 15) at the latest. If you sell your stock on ex-dividend day, you are eligible for the dividend as long as you bought it, or exercised a call to buy it, the day before.

A month ago (December 10, 2008), I started an informal technical analysis experiment:

Certain chart and volume patterns are supposed to foretell a stock's (commodity's, ETF's, etc) future price movement. Occasionally, if I come across such chart patterns I'll post about them. Then, I'll check back after a while to see how the predictions turn out.

This is one of those "the market will either go up, down, or sideways" posts. Read no further if that infuriates you.

The number of stock market bears seems to get smaller every day. It seems as though every new survey of market strategists and fund managers by publications like Barron's and USA Today says that now is the time to buy stocks, at least until March. We hit bottom in November, and now we're going to get a good bounce. Anchors on CNBC are reporting the folklore that an up January means an up year. Others are saying an up close on the first trading day of the year means an up year.

As investors, we cannot generally control the prices of the assets we invest in. We can control only two things: our risk exposure and the costs we incur. All else being equal, minimizing these ensures better returns. With this in mind, below is a list, New Year's resolutions as it were, of things we can all do to limit our costs and our risks.

The list is compiled from my own mistakes and those I've observed others making. I've mentioned some of these before in previous posts. They may seem obvious, but time and again we see smart people make silly mistakes.

My previous ruminations on dividend paying companies can be found here, here and here.

What do you think of the following "investing" strategy?

In this new era of extremely low interest rates, is it possible to get a decent return without taking on too much risk?

One way to limit your losses and stay in the stock market to participate in any upward gains is to take a loss upfront by buying puts on your stock positions. But how would you like to participate in the stock market's returns with no risk to your principal? Index linked certificates of deposit, or ICDs, promise to let you do just that, and are starting to be recommended by some financial advisors. Although they have been around for years, ICDs are relatively obscure and not widely available.

Bernard Madoff, former chairman of the Nasdaq, has apparently been running a Ponzi scheme. According to some, he stole $50 billion--$1 billion for each of his 50 respected years on Wall Street.

The news coverage of this latest Wall Street scandal amuses me. It's shocking, commentators say, that something like this could have happened. The only shocking thing is that more individuals and firms on Wall Street haven't been accused of/caught running Ponzi schemes. After all, what types of individuals work in the financial sphere? Isn't greed one of the primary qualifications? Finding a fraudulent investment business on Wall Street is about as surprising as finding a liquor cabinet empty after entrusting it to an alcoholic.

There are three general opinions of technical analysis: (1) it is a science that works, (2) it's a pseudoscience that works because its practitioners all do the same thing when a chart is a certain way, or (3) it's a bunch of hogwash.

I'm somewhere between (2) and (3), but am more open to (1) after tracking Adam Hewison's predictions on spot gold for a couple of months. I would like for (1) to be true, as would most people, for obvious reasons.

The Model ETF portfolio's original description and list of holdings is here. All updates, like this one, are available here.

As of this update, the ETF portfolio and the S&P 500 are about even, each down almost 30%.

Historically, the market's tendency is to go up. That's one reason why inverse and ultra inverse ETFs are for short term trades only.

Some may think, however, that since the market tends to go up over the long term, leveraged long ETFs should outperform their regular counterparts. The thinking may be, for example, that if stocks have historically returned 8% per year, a leveraged ETF tracking those same stocks, should return 16%. After this thought comes, "why buy the S&P 500 (SPY) when I can do twice as well with the leveraged S&P 500 (SSO)?" If the S&P goes up x% a year on average over the long term, the leveraged ETF should go up 2x% a year over the same period. Seems like a no brainer.