Well, they did it! They pushed the Dow back up over that magic number of 10,000. (Let’s save for another time the questions of why is that level so important, or what is the euphoria behind this sudden boost .)

More important tonight is the question “What is going to keep it there?”

An early CNBC headline today (10/6/09) read: Stocks Power Upward!

Then came others: “crude is higher, greenback lower, dollar under attack”, “gold hits all-time high”. What are we to make of these confusing and contradictory claims?

Dear Fellow Investor,

At the risk of being labeled a perpetual pessimist, or a disciple of Dr. Doom (Nouriel Roubini), let me offer a few words of caution.

Early headlines on April 2 would have been far better a day sooner. Then we would have read them for what they are: a late April Fool joke. “Wall Street rallies on HOPE” and “FASB gives companies (read: BANKS) more leeway to value assets”.

A later headline of the day reads: “World markets surge as US data boosts recovery hope”. Lest we forget, it is our government pushing these numbers out the door to an eager press - and for many reasons, it is in the interest of the governing party to make things look as bright as possible, especially when our President is speaking to the world from the G20 meeting.

This is being written on March 5, at 3:15 p.m. ET, as the Dow continues its downward glide/slide to approach the 6,500 mark we envisioned just days ago.

This writer has been investing, trading, and writing about the markets for over two decades, and has always refrained from including political remarks in his comments.

Dear Fellow Investor,

Shopping for a crisis to trade? Take your pick, we’ve had some dandies: family real estate; local restaurants and retail stores; commercial real estate; auto industry; banks; and every corporation with a lobbyist strong enough to get itself a TBTF (too big to fail) award from Congress.

Dear Fellow Investor,

On Jan. 26, we suggested that those of you wanting to rebuild capital ought to look closely at TriQuint Semiconductor, Inc. (TQNT), one of the stocks that came through our screen for “heavily oversold”. We liked the numbers as presented that night, and suggested that TQNT deserved a due diligence review by anyone looking to put some short term gains back into a portfolio.

Dear Fellow Investor,

On May 1st the big question for all of us will be “what happens now?” - for on that date the President’s traditional 100 day honeymoon will end. (At this writing, it appears that it might be ending a bit sooner.)

Yes, our economy is in the doldrums. Yes, the market is depressed - - - and still has further to fall. (We see the S&P 500 testing a 700 – 680 zone before any recovery can truly start.) However, this is a good time to begin the task of rebuilding your beaten-down capital.

When disasters of this magnitude strike, many otherwise valuable equities are discounted in the rush to the exits. Perhaps they are sold to cover margin calls. Perhaps they are sold because the investor just wants out of this market entirely - at any price, no matter the cost. Whatever the reason, this truth remains in play: Follow the stock, not the market.

2008 was a year filled with ups and downs: market down big time; bankruptcies, job losses, mortgage foreclosures up big time.

All in all, a year of infamy filled with surprise bailouts, re-counted elections (still counting), and a world record ponzi scheme still unraveling. Now what will 2009 bring?

On Friday, Dec. 4, while the Dow gained 259 points for a 3% rise, Penn West Energy Trust (PWE) dropped 7.25%, closing at $10.49, and hitting a 52 week low of $9.97 on the day. Investors on both sides of the border are now either:

a) puzzled and confused

Investors wise enough to go to cash when their stocks hit recent exit zones should now be exploring ways to recover. Major indexes (and their underlying stocks) will be a long time regaining previous heights; so astute investors will be looking for opportunities off the beaten paths. If you are seeking to re-build a battered portfolio, consider putting a bit of risk capital into this small bio-tech.

Thompson Reuters rated it as= "Outperform" on 11/18/08.

Let's face it - the market is in turmoil. Investors of all stripes have been blitzed. Our Washington, DC coaches, led by Paulson and Bernanke, have lost their clipboards. Congressional hearing committees, like so many half-time commentators, are pontificating but producing nothing but wind. Wall Street pros are stumbling around like an NFL quarterback being chased out of the pocket.  The coaches on the sidelines and their coordinators in the boxes (read TV talking heads) cannot even agree on the next signal to call.

The average investor, sitting in the end zone on the wrong end of the field, has taken a beating, not so much from the weather or the price of a hot dog and a beer, but from declines in his portfolio and from successive dividend cuts. This is especially true for those fans with a “buy and hold” mentality. They are not likely to see their portfolios recover for quite some time. After all, when a stock has lost 50% of its value, it has to double just to get back to even. And how many stocks increase by 100% in 24 months?

In previous letters we have said that “markets do not like uncertainty”.

These words certainly bear repeating now, because the markets are getting ever-increasing doses of same - - - and are reacting just as one would expect - - - lurching severely downward on high volatility.

Last Monday, September 29, we wrote about the market in terms of a potential meltdown, adjusting our outlook for the Dow downward to 9,500 from a previous prediction of 10,200. Sorry to say, at 2:45 p.m. EDTon October 6, the Dow came within 38 points (9,538.07) of our adjusted number before regaining some of its loss to close for the day just above 10,000.  

We doubt it will stay there - - - more bad news is on the way, and markets world-wide are in disarray as they struggle to accept the reality of what is coming. The words recession, depression, stagflation were all an anathema just weeks ago, but are now on the frontal lobes of economists around the globe. They should be on yours also.

With all due respect to those optimistic market prognosticators who still see the glass as half-full, we offer you some continuing words of caution:

There is more pain to come. The fat lady has not yet sung. In fact, she has more lives than a cat. And, the ping-pong ball has not yet reached the bottom of the stairwell - it occasionally gets carried up a few flights by well-meaning passers-by - but gravity will prevail.

You got fooled if you thought you heard the fat lady singing last week when the Dow dropped 519 points in 2 days (7/24 and 7/28), then gained back 450 of those on the next 2 (7/29 and 7/30). Why? Because the Grand Old Index finished out the week by giving back 250 of its hard-earned points - - - and it is not done surrendering value.

The net effect of those six volatile days was a drop from 11,632 to 11,378. From all appearances, both technical and fundamental, there are further corrections to come. And before it all ends and the fat lady does sing her finale, you can expect the Dow to have tested the 10,000 level.

If the first 2 weeks of trading are any indication, these next 6 rounds (two quarters) will be a very bruising indeed, with steeper drops to come. Using other analogies, the ping pong ball still has not reached the bottom of the stairwell. And though she is now on stage, the fat lady has not yet sung.

Back in October, we cautioned about 4 Horsemen of the Apocalypse appearing on the horizon, posing a threat to our stock market. They were Fed Policy, Economic Data, Corporate Quarterly & Annual Reports, and Political Events. Well, they each have arrived - - - and from all appearances, they will not soon depart. In general, stock markets are fed by 4 forces: economic growth - profit growth - interest rates - inflation.

Stay tuned, folks - take your Prozac and fasten your seatbelts! The battle of the century has begun. In one corner we have the challenging U.S. dollar tag team of Bernanke and Paulson, who we understand have been taking steroids to improve their talking abilities. Their worthy, and still unbeaten, opponent is the Law of Gravity - who in this match is teamed with "world opinion". "W-O" had been expected to serve as a referee but instead chose to side with the "L-o-G", so this match will proceed without a neutral party in the ring.

There you have it - the ultimate in historical fights to the finish, where one contestant or the other succumbs or else capitulates. We have seen the early rounds, and already there is much B&P blood on the canvas, not to mention that which has been splattered on spectators closest to ring-side.

Act I

Can you recall the last time, if ever, that a U.S. Secretary of the Treasury went to the Middle East to jawbone the local potentates, trying to convince them that the dollars they receive for their oil are really worth holding?