Courtesy of Bespoke Blog, we have the latest update of best-performing stock markets by country (in local currency). Keep in mind the past few days have seen the best performance for emerging markets since July. When last we looked, Peru was in the lead.[May 20, 2009: Year to Date Returns by Country - Go Peru!] since then, Russia has taken the crown.

But all the B(razil)R(ussia)I(ndia)C(hina)'s are doing well - gains of 70-126%. G7 countries obviously lagging. Average among all 82 indexes is 33.3%. Still love my Indonesia, although I've been chasing it all year... another missed opportunity. [May 22, 2009: Indonesia: A Must Own Emerging Market]

As the United States spends money it doesn't have (much of it borrowed from China ironically) to manipulate housing prices upward, and get its debt-laden consumers to spend with financial handouts, bail out its financial oligarchs and funnel money into states so its public sector employees have no need to make any necessary adjustments to reality, China continues to spend its surplus on "nation building" in return for access to other country's resources. [May 13, 2009: Commodities - It's China's World: We Just Live in It] .I literally could post a story each week as agreements or strategic purchases are made by China; much of the emphasis has been in Africa....

A $9 billion minerals-for-infrastructure deal is presented by Congolese President Joseph Kabila as a cornerstone of his plan to rebuild the Democratic Republic of Congo after years of war.

An interesting question posed by the Wall Street Journal, but I believe a misdirected one. Central bank policies are creating bubbles; ETFs are simply the mechanisms for transferring of said dollars - they are not the cause of all the excess dollars.

Before we get to the main WSJ piece, data from Asia is lifting spirits (and futures), although I noticed in the 4 PM hour yesterday, S&P futures were already up 3.5 points... did that "urgent buyer" who really needed to get into the stock market not have time to buy during the 6.5 hours of normal market hours? So we will definitely be seeing our move to S&P 1100 first thing this morning and it's game on. China, as always, had "positive" economic news (do they ever disappoint?) and even Japan pitched in... all the more good news to punish the US peso. And when the U.S. dollar goes down... everything else on the globe must go up.

Oh captain, my captain... will you show us any life?

The relationship between the U.S. dollar and every asset on Earth has now reached the point of absurdity. As we've been describing for a few months, it is the end all and be all. I was doing some reading this morning the dollar, and after its traditional daily beating, it showed a little life after 10 AM and of course everything started selling off. It's really just annoying at this point how no analysis needs to be done, and nothing matters other than the dollar.

Engineering / infrastructure firm Fluor (FLR) is one of those few stocks that one could purchase before heading to a remote island for a decade, arrive back in 2019, and the company would be executing and thriving. However, its business - dependent on large projects - is quite lumpy from quarter to quarter, and it has been struggling of late. You can see while the market has had an upward bias, the stock has been in a downturn for a good 2 months, signaling "those in the know" *knew* what was coming, and were exiting stage right, which is exactly why I think a hybrid approach of technical and fundamental analysis is a bedrock for stock evaluation - in this case the technicals were telling you something was amiss.

The engineering and construction firms are definitely mid to late cycle, not early cycle stocks, so for companies in this sector, their time will be in the future. Fluor and Jacobs Engineering Group (JEC) remain the cream of the crop in this group, and for those with multi year time horizons, they probably begin to present some compelling valuations. Some of the smaller firms in the sector might, however, be acquisition targets and present higher risk/reward opportunities.

Not much sarcasm or spin to put on this one; in an increasingly bifurcated U.S. society we are seeing a lot of fraying of the seams. We've been pounding the table on the "real economy" for 2+ years, as the number of Americans on food stamps surges from 1 in 11, to 1 in 9... and now even Costco (COST) is rolling out food stamp programs [Oct 30, 2009: Costco to Roll Out Food Stamps Nationwide] but the country is obsessed with very different measures in calculating our domestic "prosperity".

This line by a Wal-Mart executive will take it's place as a candidate for quote of the year [Sep 1, 2009: China Sovereign Wealth Chairman with Quote of the Year 2009]

Quite an interesting situation here as we see a substantial divergence among some of the major indexes. I've excluded the NASDAQ from the discussion below because it is effectively mirroring the S&P 500. Our contention has been that over the past 3-4 weeks, smaller cap stocks have lagged, and aside from 2 weeks ago, speculators / computers (or fund managers) have been hiding out in the big caps. One can see this by looking through a lot of individual charts, and this is borne out by looking at 3 major indexes, from largest to smallest.

1) We rarely look at the Dow Jones Industrial Average, as it is 30 stocks and this index is price weighted... meaning a company like IBM has countless more importance than a company like General Electric. Makes little sense to me, but that's how they have always done it... whatever the case, the DJIA has broken to a new yearly high.

I can't fight this feeling that.... I've totally whiffed when it comes to our holding in Priceline.com (PCLN). Much like Baidu (BIDU), we had a great entry point early last spring, then took profit on a trade... and simply never went back in as we awaited some sort of pullback. Our twins of missed opportunity.

I was struck in much of my reading of the G20 meeting this weekend, especially in the UK papers, about how the central bankers' actions - specifically in the U.S. and US-mini me (UK) - are designed specifically to inflate assets. So while we mock it, it seems to be an implicit strategy... the idea is increased asset prices flood into all other parts of the economy. Sort of how the U.S. economy was run the past 6-7 years using housing as a prop (house ATM) for spending.

I can see the logic in it, while disagreeing with purposeful manipulation of values to create a false sense of prosperity. More importantly, I guess it was a cold splash of water that the central bankers want these epic rallies in every asset on Earth, and are not in any way troubled by them. In fact they apparently cause the Anglo Saxon central bankers joy...

While I've traded Dr. Reddy's Laboratories (RDY) in the past, I have not touched it in the past few years; however as we await for the new Market Vectors Indian Small Cap fund to launch, I was poking my nose around Indian stocks this weekend since the Indian market has corrected quite a bit (and rebounded from oversold levels last week). So this name came back onto my radar in the limited universe of Indian ADRs. (full list of Indian stocks available at TickerSpy)

Other than Bucyrus (BUCY), I cannot find a better chart, and right now it's all about charts, momentum, and liquidity so let's start there. Not much you can argue with here; you can see as Sensex took a big hit (large caps were hit hard in India) Dr. Reddy's downdraft was relatively limited. Further, with today's move the stock has broken out to yet another new high which technicians love to see (and chase into).

I am not going to break down the full unemployment data because, like much of our government reporting, it is "garbage in, garbage out" and "you can't handle the truth" mixed together. If you are newer to my website, please peruse these entries during your spare time.

1. [Oct 2, 2009: True September Unemployment in America Reaches Towards 14%; Our System is Broken].
2. [Apr 3, 2009: Real March Unemployment Rate Reaches 12.5%] <---last time I reviewed all the inaccuracies of the report
3. [Apr 2, 2008: The Underemployment Rate is Rising]
4. [Jan 27, 2008: Monthly Jobs Report & Birth Death Model]
5. [May 10, 2008: Finally Some Mainstream Reporters are Figuring Out the "Spin" from Government]

But I want to point out a few key metrics and conclusions. First, the politicos (both parties) have changed our metrics since the early 90s. You will hear today that the unemployment rate is the worst it has been in 26 years; that is inaccurate. As best as I can "retrofit" the measurement today, in an apples to apples comparison, if we measured unemployment as we did in the late 70s, early 80s we'd be somewhere in the mid teens. It's been roughly a 4% spread over the old ways we used, i.e. we've been understating by about 4%... so figure 14.2% unemployment.

As mentioned Friday morning, we added back to our Blackstone Group (BX) exposure as the stock jumped back over a key moving average on the back of a solid earnings report. After 7 sessions of purgatory, the stock is in a better position today (click chart to enlarge).

Unlike a "widget maker" type of company, I will give analysts a lot more leeway for a firm such as this with so many moving parts. However, the difference in revenue between what analysts estimated ($450 million) and actual ($603 million) is astonishing. As long as markets hold up, it should allow Blackstone to continue to unload its prospects onto a world full of newly minted US dollars and nowhere to put them. [Oct 12, 2009: Blackstone Group Surges on Potential Listing of 8 Portfolio Companies, and Selling of 5 Others] Full (and lengthy) report here.

If you are not familiar with what an option ARM mortgage is, read this piece [Aug 13, 2008: Option ARMs- Who Thought Up these Time Bombs?].

I too was unfamiliar with it, despite following markets closely, until I read a BusinessWeek article in October 2006. Interest only mortgages? Yep, I knew about those. Alt A mortgages? Yep. [March 19, 2008: Alt A Mortgages Beginning to Break Down] But option ARMs? Wow - eye opening.

Many things we are seeing now on the charts are similar to what was happening mid-summer. Many of us (hand raised) were excited about a potential "head and shoulders" formation that was in process of being created. (What the heck is a head and shoulders? See here) Literally, we were a handful of S&P points away from this formation completing, but on a fateful Monday Meredith Whitney upgraded Goldman Sachs (GS). The next day, Intel (INTC) reported and bears were steam rolled as we went on a 3-month rally.

In the past week we've once again broken below that 50-day moving average, which should have been bearish. On top of that, there have been 5 (6?) intraday reversals which should have been bearish.

We see in the news something I believe has been happening for many years, and continues ... under the surface, slowly but surely. I call it erosion because it is not obvious or a "big bang" emergency, but as we look around and ask where all the jobs went [Aug 14, 2009: No New Normal Say Some Economists, Prosperity Without Jobs?] while concurrently trying to create bubbles on 5 year cycles to create work, the truth can be seen in countless press releases.

Here is an example of some news with a technology company we have owned in the past - Blue Cost Systems (BCSI). As I wrote Thursday morning (and many times before) this increasingly flat world is great for capital, not so fun for labor. Especially labor in high cost countries...(we can argue its a net positive for labor in low cost countries). Speculators are correctly driving up the stock of Blue Coat (+14%) as "costs are lowered" - sort of ironic because what is good for this company, if extrapolated over countless examples the past 2 decades and many more in the future, is harmful to the domestic society as a whole.

We restarted a position in Myriad Genetics (MYGN) as a long term "growth at good value" play about 6 weeks ago, despite a horrid technical condition on the chart. Since then the stock has just sort of hung around and done nothing, trading in a very tight range. I was hoping this quarter's earnings report would provide some "oomph" but it appears we have nothing. No need to wait around at this point as the chart looks no better than it did 6 weeks ago, and now our catalyst to change that condition has come and gone. At this moment, the stock is simply in a slow downturn and is a better catch for the bears than for bulls.

I am selling our 1% exposure in the $24.40s for about a 5% loss on the remaining batch we owned. We traded around this position in small pieces during the past month but any gains or losses were inconsequential.

There are so many rescue programs going on, I am losing track. Thanks to reader Patrick for notifying me of this; I have been so busy staring at the mirror (while clicking heels 3x) slowly repeating "prosperity is back" I sometime forget how "prosperity" is being achieved.

So here is the latest... if you don't qualify for any of the current homeowner rescue plans, which allow you to refinance even if you owe 105% 125% of the value of your home, you now can qualify for this new Fannie Mae plan. Yes sir... step right up... the government (via Fannie) will allow you to stay in your home as they take over the deed, and offer you a rental option, at market prices. So did you overpay when you put nothing down on that option interest loan using a 48% income to payment ratio? [Sep 26, 2008 : 15% of Americans Spend 50%+ of Income for House Payments] 36% underwater on your home? No problem - we (the collective) are here to "fix it".

Here is an excellent presentation by Whitney Tilson of T2 Partners - embedded within his monthly investor letter. While others have done a better job of self-promotion, Tilson actually made many prescient calls on the housing market the past 24 months (much like a certain blogger) - essentially he believes we are in the eye of the storm.

While a lengthy presentation, the housing market section is a great overview loaded with graphs, charts and for those of you old enough - similar to how Ross Perot tried to educate the masses about the federal budget circa 1992. It begins on page 9 and many pages are simply 1 chart or another - worth a look through.

While we're happy to own Fuel Systems Solutions (FSYS), we took profits on this name after a-long standing limit order hit [Oct 28: 2008: Bookkeeping - Limit Order Hit for Fuel Systems Solutions], and we experienced a spike in price the very next session [Oct 29, 2009: Bookkeeping - Selling Most Fuel Systems Solutions on Spike] , and are just sitting with a tiny 0.1% exposure. So correct assessment of a company, bad timing in terms of lacking exposure - we normally cut back ahead of earnings either way, but since the stock had broken below its 50 day moving average, we were at our lowest possible exposure. Obviously technical analysis is moot around important news events. As I type the stock is up 23%...

Either way, very impressive results; 77 cents per share excluding "one time" items, 34 cents better than expectations on only 10% year over year revenue growth. Obviously they can now raise guidance for fiscal 2009 - which they have: $416-425M v $379M consensus. Gross margins target 30-32%; operating margins 14-16%.