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Individual investor with a Top down approach. I don't believe in diversification. Spreading your chips across the table is senseless to me, when based on good old economic fundamentals only certain areas of the market are poised to benefit in certain stages of the economic cycle.
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  • Is The Trash Index Garbage?

    The trash index is perceived to be a very simple concept. The more an economy consumes and produces the more trash we will generate. Here is the most recent chart of the Trash Index relative to United States GDP.

    (click to enlarge)

    What a lot of economists find alarming is the divergence toward the right side of the chart where the trash index has gone down and United States GDP has gone up. This scares some economists who choose to use trash as a leading indicator. However is it a backward looking number just like GDP. Quite frankly I view this chart differently than most economists, I see it as a positive going forward. I think it represents what has happened with the shift in the economy, consumers are consuming less, and corporations are more profitable than ever.

    How are corporations more profitable than ever you ask? It's simple. They are producing less trash! Corporations have learned how to run leaner in every business dynamic: Implementations of stricter ordering policies for raw materials to produce goods, not hiring more employees than absolutely necessary, conversion to paperless workplace environments, in a nutshell the concept of "doing more with less" has been achieved with high degree of success across all levels of the American corporate infrastructure.

    The concept of "doing more with less" has also taken the American consumer by storm too. Everything from carpooling rates going up, to the number of people who are taking a bicycle to work increasing, the increased demand for fuel efficient vehicles, to maximizing the number of meals that can be made from a cooked chicken. In virtually every facet of the American consumer lifestyle drastic changes for increased efficiency and less waste have been made across the board. I haven't found any statistics to prove it, but i'd be willing to bet the usage of "hand me downs" has increased tremendously.

    Being an optimist I view the "doing more with less" concept as a positive sign for the economy. As long as we have positive GDP growth and America continues to add jobs we will have stronger corporations with higher profits and financially stronger Americans. It's all in how you view buying power. American consumers in the future could eventually evolve into people that have money leftover after they get their paychecks and pay their bills, versus the Americans of 2008 whose paychecks were completely spent before their employers put it in their hands.

    It all comes down to the concept of quantity versus quality! Chasing quantity with ridiculously low profit margins is part of what sent the American economy into a tailspin. Now we have companies that are more profitable than ever and doing it with lower revenues. And that's how it should be in my opinion. Now hopefully the American consumer can get to the point of having money ready to spend for tomorrow, instead of their entire paycheck going to the expenses of the yesterday with no money leftover for the expenses of tomorrow.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: This article is also posted to my personal free blog, stocktradingidea.com

    Sep 10 12:48 AM | Link | Comment!
  • Why I Am Long The Stock Market For The Short Term

    I am currently long equities in the short term for the following reasons:

    1. Performance chasing trumps fundamentals. Even if fundamentals don't merit a rise in equity prices, there comes a point in time at which fund managers have to chase performance to keep their jobs. I haven't met a fund manager that chose to not participate in market rallies and risk losing his job because macro-economic fundamentals don't merit a rise in equities. Currently the market is up approximately 4.5% since the July 4th low of 12492 on the DJIA and approximately 8% since the June 4th low of 12035 on the DJIA.

    2. The "Fed Put" and the lesser discussed "Draghi Put". Economic leaders will continue to prop up markets by making vague statements about federal intervention to stop the economy from sinking further. Economic leaders will not allow the market's drug addicted like craving for federal easing to go unsatisfied.

    I am long for the short term (NYSE:AG) - First Majestic Mining, (NYSE:HL) - Hecla Mining, (NYSEARCA:SPY) - SPDR S&P 500 ETF.

    Disclosure: I am long HL, AG, SPY.

    Additional disclosure: For more of my trading ideas, visit my free personal blog at stocktradingidea.com no sign up necessary.

    Sep 02 1:07 AM | Link | Comment!
  • Stocks To Potentially Go Down Another 1.5 Percent

    This has been a market climbing a wall of worry for the past 3 weeks. Companies that missed on revenues and beat on earnings have been handsomely rewarded for the past 3 weeks. It appears the pendulum has now gone the other way. As the markets climbed the wall of worry all the way up to resistance of 13,330 on the Dow Jones Industrial Average(NYSEARCA:DIA) and 1,426 on the S&P 500 (NYSEARCA:SPY), stocks with similar quarterly reports of lighter than expected revenues and better than expected earnings are now getting crushed.

    Recent earnings casualties are Big Lots Inc. (NYSE:BIG), Guess Inc. (NYSE:GES), Aeropostale Inc. (NYSE:ARO), Best Buy Inc. (NYSE:BBY), Hewlett Packard Inc. (NYSE:HPQ), Dell Computers Inc. (NASDAQ:DELL), Salesforce.com Inc. (NYSE:CRM), Dollar Tree Inc. (NASDAQ:DLTR), and Autodesk Inc. (NASDAQ:ADSK).

    Gold(NYSEARCA:GLD) and Silver(NYSEARCA:SLV) have also recently broken out to new highs. Volatility is finally coming back in to the market as we've now had our second 110+ point trading range on the DJIA and the VIX is now firmly over 15. As of the close of today's trading, the S&P has now pulled back approximately 1.7% from the recent market highs but is still up approximately 9.5% since July 1st. I personally am looking for approximately another 1.5% downside in the market. I believe fund managers will then step in fiercely to defend their potential 8% return for this current quarter ending in September.

    I am personally shorting individual stocks at this time with put options. I will remain short until the S&P 500 reaches my estimate of 1386.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: For a list of shorts that I currently have positions in, please visit my free personal blog at www.stocktradingidea.com

    Aug 23 6:36 PM | Link | Comment!
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