There is no Black And White

I recently wrote in our commentary at www.oexoptions.com:

Nine lenders that got government aid paid at least 1 million to 5000 employees. These are banks that last year, under the first Paulson bribe, got 33 billion. The nine firms in the report had combined 2008 losses of nearly 100 billion.

Sadly this is a grey line. Surprise you? Of course, Congress, which initially approved this whole bail out, pre Obama, we know were all on this graft, as the banks got money that seemed to go nowhere, everything collapsed, and all of us were paying consultants to figure out what the actuaries had actually done for all the brokerages and companies betting derivatives.

Some of this stuff was actually legitimate banking, and most of it how the guys have the country club prison down there in N.C. Bernie, Ebbers, and the boys.

Goldman just rapes during the second quarter, and we're all amazed how much money is being made.

But some argue we have to pay these top people to either 1. Analyze and get us out of our lies (Blackwater), or 2. Create new ways for the banks to make money, or continue legitimate trading.

I'll leave it here today. Think of this:

1. The banks are making money.

2. Corporate profits appear to be up. Much are from continued write offs of bad investments, but much because of cost cutting.

The market has been marvelously up for so many days. Wall Street is coming back. The economy is improving. We hear this each day, and are able to interpret the data we receive to prove that this is true.

And I asked subscribers at OEX to venture to this blog to hear why there is no black and white, no absolute, and we have a situation that we are not seeing the obvious with.

1. The economy is still declining, but at a slower pace. This is seen postiively.
2. With good corporate earnings companies are doing better; sadly they are doing better right now only because they have laid off employees to the bare bone everywhere.
3. When people are laid off they have less money, so they spend less.
4. When homes decline in value by 30 to 50%, and don't sell because 1 of every 2 being sold is in foreclosure, people become more strapped.
5. Banks, to be profitable, dropped credit ratings, put new interest rates in,and further raped the American people.
6. New derivatives and ways to short the American people are already being developed on Wall Street.
7. The American savings rate rose to its highest level in years, as people save more.

It's pure logic: people will be spending less unless things change, and after a while only certain types of companies will be profitable.

When consumer spending is 70% of the American economy, and all we did while we got fat these past years was consume, there is something scary to think about: There has never been a time in the last 50 years where year over year consumer spending has been negative until now.

It's time to buy some SIN

It is sad to me to recommend a sin stock. Certainly not because I am a conservative, or opposed to sin J, but because I know what sin products can do.

But here I am recommending Phillip Morris (PM), sadly, for what they help us hedge against.

The above chart I created at 2 p.m. during the market tops occurring on Friday.

Actually, PM is a way to play against the declining value of the USD.

Facts:

1. The company books nearly 100% of its sales in international markets

2. PM owns 16% non U.S. market share, seven of the top 15 international brands, and margins over 40%.

3. They have no shame and target the youth in developing countries with a vast variety of addictive products.

This trades at 13 times earnings, and has raised prices even as taxes raise.

Smoking in emerging markets is a natural, and PM even buys their emerging market competitors up.

And of course it bribes us to keep the stock (this is called a dividend) with a 4.6% current yield.

It’s time for SIN.

Buy PM at market, and continue to buy on any dips. Set a 25% trailing stop loss. Buy this in our speculative portfolio.

We do not recommend options on this stock.

Two Generations of a Lopsided Economy

Read that title sentence carefully, as that is what we are dealing with.

For at least the last 20 years our government has fostered a type of capitalism that is lopsided, as few get rich, not many.

Study the facts on this.

We've created bubbles extraordinaire that have made people millionaires, and people lose millions. Values of things have lost all proportion of reality (housing, the internet stocks, retail products) and the citizenry, Joe the Trader, have been working, investing in their homes and retirement accounts, and feeling and acting wealthier.

For years Ayn Rand student Alan Greenspan was our hero. "Lower interest rates", promote debt, and "allow creative means to get more into homes". The bubble built and built.

Certain industries flourished. During the Bush era, for example, jobs looked good, but if you looked close, they only looked good in housing, construction, and banking.

Lopsided economies bring entitlement. They make us think we "are worth it", that "we can afford it" and that the "economy" will come back, and it will be okay again.

I see this much differently.

Unemployment, true numbers, are close to 20%. We have 1 in 2 homes being foreclosed on that are being "sold", so houses are not selling. The stock market is rising, and banks appear to be finding new ways to rape us.

What will be different, as I see it, is that there will be less money. We will be spending less.

Or, if we are not, and we rebuild the same model, we're hellbent to destroy ourselves.

A lopsided economy has us expecting 20% returns, or investments to go up 40%, and despite OUR moving our industrial nation overseas for our desire for LOW prices, it precipitates choices that must be made.

I believe we will be sacrificing. That the "bottom is not over" and that the "world is not better".

The world has become such a consumption driven economics that we forget the birth of home economics, the way we financed World War 1, personal savings, and our move in recent years to $400.00 Gucci purses made of plastics.

All this would mean that I would be against government spending, when at this point in time, I am actually seeing it as the necessary medication to move dollars back into our economy.

As everyone argues, we must recognize that two generations of a lop sided economy cannot be fixed without pain to everyone.

Gold is Range Bound

Gold is struggling at the same resistance lines it's hit before. Chartists see this as a large inverse head and shoulders pattern, and from a point and figure charting perspective we see a double top breakout.

Most traders see the decline of the USD in conjunction with the rise in Gold. At Blue Chip we own a position in GLD, having sold off two thirds of our position several months ago when we hit the exact same top.

Several months ago, at the top as we sold, we suggested waiting for re-entry to GLD at 870.00 an oz up to 920.00 an oz. The chance has not come yet, but we're charting to see if Gold can break the $1000 barrier short term.

Subscribers at www.bluechipoptions.com will receive a detailed recommendation before we play short or long, as Gold is simply "waiting" right now.

Even the name of this company is funny☺ Buy it.

Even the name of this company is funnyJ No one knows of it. It’s not well covered by institutional traders, and has good volume, but not great for the size company that it is.

It has a long history, some bad. It’s recently cut back 50% of its workforce, and is just starting to rehire.

This is a true definition of a value stock.

Read all about itJ

http://www.khdhumboldt.com/phoenix.zhtml?c=92949&p=irol-irhome’

KHD is the name and at www.bluechipoptions.com we have TWO distinct ways we’ve traded, and will now trade again on KHD.

But first we’ll say this: any increase in construction, any “fixing” of old buildings just sitting there (much of GM, Chrysler, old Wal Marts) et al, this company is the expert worldwide.

Again, a true definition of a value stock.

Above is a setting for a Pnf (Point and Figure Chart) that takes the noise out of the chart. All you see is supply and demand.

Floyd has been following KHD for about a year now, and has recommended it within our speculative portfolio several times, as an unusual swing trade. For the past six months I’ve simply bought KHD on down moves, and sold it for $1.00 per contract on up moves. You can pull up charts to help you see the recent pattern of slight sell off, and buy up, as this stock builds steam again.

Since the market took off in the past month KHD has held pretty steady and holds at over $9.00 most days.

We consider KHD a buy in our speculative portfolio in two ways:

1. 1. Buy inventory for long term (three years) at under 9.50.

2. 2. Buy inventory on downturns to compliment #1, and also to watch the stock for swing trading it for $1.00 per share as it rises.

We will later recommend a stop loss of 25% trailing stop, but let’s allow buys to be made over the next few weeks to gain an average cost. It’s a value stock extraordinaire.

Think and Read Less. Know More

One Basic Rule – Let the Winners Run, Cut the Losses Quickly.

Overbuying and overstudying the market confuses your thinking. Limit your input.

There can be a second chance to sell if you’ve got a break out stock, that has dropped in value.

Watch that there is no lengthy period of distribution, and that the Point and Figure Relative Strength (RS) chart for the stock and the sector is still bullish.

If the stock fell while the market itself fell it may well be the “move of the majority”, and act as “test” of the breakout, and could then springboard higher, with another opportunity to sell.

Using Relative Strength in Analysis

Positive Relative Strength stocks snap back fastest during distribution, and perform best in bull markets. Remember, we calculate RS on Point and Figure Charts.

Relative strength is best defined as “ how a stock is doing compared to another stock, and most importantly, in the same sector.

Traders must also be careful to see how the charting company preparing a point and figure chart with relative strength “classifies for sector” so that true “like companies are positioned together and can be compared equitably”.

For years Floyd analyzed and did manual point and figure charts and than did overlays of the stocks in a sector to “create” Relative Strength. And remember, I was taught to trade or study always 50 stocks or less, and seldom changing. Knowing the relative strength of any stock we pick in a sector in comparison with other stocks in that sector helps define where the stock is in the seasonality of the sector at the same time.

Constantly Monitor Relative Strength Charts

Watching RS point and figure charts for change can alert you to when a good stock moving up is losing support.

Relative Strength Charts show what’s going on, and allow you to let your profits run.

Relative strength charts are market indicators and can help you know whether you are playing offense or defense.

Dumb people, continued

Subscriber MP took exception to my article on Dumb People. His comments:

"That article was arrogant and no different than the Limbaugh or Fox News garbage you so willingly criticize...

You are the same as "them"...just on the other side....

Floyd: Unlike Fox or Limbaugh, however, I provide you facts

And a "few" needy families with "free" cars is a much better situation that getting those "few" gas guzzlers off the street...like that is seriously going to change the environment...taking several thousand cars off the road? Are you kidding me? Please!! And that is better off than helping several thousand families? How many CO2 emissions has the government just saved us with their new cash for clunkers program? IT IS IMMEASURABLE!! Maybe WE ALL should just stop breathing - that would lower the CO2!!

Floyd: This is an example of not thinking. Imagine the back lash for the conservatives for "giving away cars to poor people:

What would the administrative cost be to do this? Right now each "clunker" is worth $1000 in raw materials.

To put cars with bad emissions back on the roads does not stimulate the economy in any way, as we don't face eenvironmental impacts.

We can easily lower CO2 by being smart, not stupid. By not providing stimulus less than two years ago by Bush for buying a Hummer. By putting tough emission standards in.

As an example, and factual proof:

1. Please look up the environmental impact on emissions et al for a 2009 Toyota Prius and a 2008 Toyota Camry Hybrid. Compare them to a Ford F150 (90% of whom buy have no need for a truck) or a GM Tahoe.

Buying cars like this can impact this nation.

2. Greenhouse gases can be eliminated by shifts to Natural Gas (Boone Pickens) and many other methods, it just takes US to get the lobbyists out of the picture

I cannot wait to move into my new farm house and just "change the global climate" with my home heating system (my home will be heated with an outdoor wood boiler that the liberals want to ban because of smoke and CO2 emissions..I was barely able to obtain a building permit to install my wood boiler because of all the liberal protesters in NY.)...IT'S A FREAKIN' JOKE!! But they want us off oil as well...WHAT ARE WE SUPPOSED TO USE TO HEAT OUR HOMES?

Floyd: Perhaps there is a REASON the "liberal protestors" (those that care about the environment) fight this.

I would assume these "environmental freaks" have some good true facts on what this does, when there are

other alternatives. (Study our investment in ITC, for example, not up 11%)

We want to reduce our dependence upon fossil fuels that are not self renewing, worldwide, We must.

But here we are debating nonsense again and discussing a no-win case...pure waste of time.

Floyd: Sadly, the nonsense is whether Obama was born an American citizen, or what Sarah Palin is going to do now.

It is not nonsense to talk about the states (Montanta, W. Va, etc) strip mined of coal that is now in low

demand and piling up in giant coal mountains

Sarah's answer, drill offshore everywhere in the U.S., doesn't even recognize it would take 10 years to achieve results, and doesn't solve our problems of a renewable non polluting resource

All I'm saying is don't write garbage like that and criticize others for writing the same garbage just on the other side...you're all the same...

And please tell me how I'm supposed to heat my home if we are supposed to conserve on oil? Not use COAL or CORN or GAS? I guess those options are better than just cutting down some trees while I plant new ones..we have the most renewable energy source available (besides the sun) and by far the cheapest...but the environmental libs have a problem with burning wood and now want all kinds of regulations on outdoor wood boilers....

Floyd: Sadly this reader misses the emission controls put in. Go to Denver any evening and watch the emissions from wood smoke, until they had to put

laws in as their air pollution overtook the norm.

I am angry at stupidity, but am armed with facts, not innuendo or "what should be".

The future is ours. We'll see what we do with it.

They are A FREAKIN' JOKE!!

And you talk about dumb people.

Dumb People Listening to Dumber People

Dumb people listen to dumb people, and dumber things happen.

1. Cash for clunkers. This is a brilliant government move to stimulate industrial and retail economy and to lift spirits.

There's no way the auto industry lobbyists would have allowed cars getting so many more miles per gallon more, as there weren't enough cars being made. The purpose of this program is:

a. Move cash.

b. Create retail optimism

c. Improve emissions, greenhouse gases, by getting these gas guzzlers off the road (can you imagine the nightmare of administrating giving them away to other poor needy people, when the goal is get these cars off the road)

2. Health Care. A high school kid taking economics could figure out that the health insurance companies are raking in millions in profits, CEO's even more, and that they are lobbying the RNC. Many of the anti health care ads running on TV are sponsored by Universal Healthcare.

Find what the Cleveland, Mayo, et al clinics do and model programs after these that work. Offer different choices, but make sure that those that have pre existing conditions are not fucked by the insurance boys, and make sure that the insurance boys don't fuck the small business, while lobbying the 540 in Congress that decide our future.

Just because you might have insurance don't be stupid enough to think that everyone can get it, or afford it. It's a basic in most countries. We do NOT have model health insurance.

3. The economy is vastly improving already. High unemployment and lack of consumer spending are huge concerns, and Obama and group inherited a "clusterfuck" in which they are now only beginning to find how deep the slime ran.

In fact, we have new Wall Street games being played (high frequency computer trading) while we are figuring out the rest of the mess.

4. Yes, America, we are going to have to pay for this. Much as you want "less taxes, but more benefits" (like bridges that don't fall down), we have created such a house of cards, and it has fallen and blown in the wind, that the entire global economy does hinge on the U.S. economy.

5. We will pay for this in many ways, as will our Grandkids. But, under Bush we were already going to pay, and we had "no problems and a healthy economy" and my favorite from Shooter Cheney just months before leaving office "deficits don't matter" and the RNC agreed.

Dumb people listen to dumb statements that are half truths, and wishful (we should give the clunkers to other poor people) and don't think of WHY we are spending billions, which is to stimulate the economy and improve the environment.

Dumb people worry about where Obama was born. I worry that our country doesn't sink into a vast depression, which we were on the brink off in early January after the "house of cards" began imploding.

Dumb people worry about where the money is going to come from. That's easy. The government will:

-raise taxes

-sell lots of Treasuries to other countries,and to us

-find cost cuttings

And, sure, in the end it will cost way more than we can imagine. More than we can afford.

Dumb people listen to Limbaugh or Fox News tell us how this cannot happen, we cannot afford the debt, but no one can find any RNC or other "solutions" that actually address the issues.

Dumb people do not get that it is 540 people that make our decisions, and that each of them are influenced by lobbyists and corruption, when they are not too busy having affairs.

As someone that feels they have fully read and understood the Obama economic plan I have studied at length Nobel Prize Winner Paul Krugman, and New York University Economic Laureate Roubini. I listen to what these studied men say on the deficit, around what Bernanke tells us (rightly) about averting the second great depression in January.

Of course we will all pay for it. We paid already when the market went from 14,100 to 6,100 and our home values plummeted. We may have been part of what "it was" that made it all go up, but we are already paying for this situation, and will continue to.

A small dog on a leash in Central Park could figure this out, but we spend hours of our news every day debating the obvious.

When NOT to buy a BreakOut Stock

*Break Out Stocks At Risk to Buy:

-Is it breaking out after its peers within the sector?

-Is it breaking out in the late stages of an overall market rally, or as the market begins consolidation?

-Have there been down days with low volume, or a high volume reversal?

The Consumer is Destroying Us

We've all heard the maxim "There is no such thing as a free lunch". It appears, however, that few of us seem to understand that there are consequences to having a free lunch, as there is to everything.

For years we have bitched about the foreign cars destroying the American car industry. For sure they did, with a better car that many of us drive.

For years consumers in the U.S. must buy "on sale", "get a bargain", or "buy wholesale". It's engrained in our thinking, that getting a "price" is what we must get, unless we are of courses rich when we can not worry about what is on "sale".

"The Sales Bargain" mentality, "buy at cost plus" was truly defined by Sam Walton as Wal-Mart and various concepts permeated the U.S. and changed our retail environment.

What this means is that it is the CONSUMER who is at fault for the move to outsourcing our products and people resources to China, India, and the "global economy". Prices did this, not evil corporations intent on huge profits.

When a consumer is only willing to "pay to market" and the market creates the price points, the manufacturer (and thusly those distributing the product) are forced to lower the prices.

This cuts margins.

No matter what the business there is a minimum gross margin of profit a business must make (dependent by sector) for that business to stay profitable.

Of course we all know of the banks, and their rape of the American people, and we all hear of the massive bonuses and CEO salaries. Wrong as these may be, they are actually irrelevant to the overall financials of the company, and the "extravagance" in many instances of the corporation.

Let's use the example of a "Polo Shirt". Originally American made, and a "brand name" for a man's casual shirt.

Over the course of a 30 year period this shirt went from an "exclusive brand" (step 1 for a product), to "generally accepted" (step 2-now becoming a commodity", to "for sale by others" (this is when Lands End, and numerous other retailers began copycats of the product, some U.S. made, some import (step 3-the dissolution of the brand, and creation of the commodity), and finally to where the majority of all Polo Shirts are now imported, in various qualities,and at various prices. (Step #4-the product has become fully commodity driven, even if NOT a commodity) and retailers/ manufacturer

both begin price wars to stay in the business, often losing money.

The consumer "wins". The price of the product is lower.

Or so we think.

Now, let's move it to a larger type of business, a foodservice equipment distributor outfitting a new restaurant. These distributors buy wholesale the commercial product that they resell, and provide services (design, installation, holding of inventory) as part of their fee to "get a job".

In recent years manufacturers have begun offering "direct" prices to the consumer, the web has allowed everyone to "price" a product (many that do not have overhead that raises their cost of the goods for actually holding the inventory).

The bottom line: the industry has become an unprofitable shambles. Web companies do not stock product, but "sell the product" and drop ship. Larger distributors buy much better and have lower margins based on their buying ability. Smaller distributors, that often can do a superior job, are forced to either give up business because they can't be profitable, or "take the business" and end up losing money.

Oh, and by the way, even in this traditional industry now well over 50^% of the products we use commercially in foodservice are imported, many with questionable safety standards beyond mere licensing.

It's still our fricking fault.

It is our insatiable desire to buy at the "best price" that creates the need for such competition that we move industrialization from our own country,and blame corporations for out sourcing.

Yet again, we as the American people deceive ourselves. We are THEY, as Pogo said, and the THEY is what is "shopping ourselves" to death, both in discounting of product, and in the 70% of our GDP that is driven by consumerism.

Climax Tops and When to Sell

* Always pay attention to volume increases in any stock issue.

*The First Sell Signal in a point and figure chart in a bull market is the recognition of a very strong buy signal. This is particularly true when the stock is coming off a “double top” in pnf charting language. If it breaks out later it will give a triple top buy signal. This is the “shakeout” period

*A climax top is reached when a stock has moved up many months, and then moves 25% to 40% up further within a three week movement. This is a classic top.

*In a double top the second decline must be lower than the first.

Seeing The Background of Life

Seeing the Background of Life

I teach to view the audience, not be in the audience.

This means while you are “there” be in the “all” of there so you can see and experience others, and not just yourself “waiting to perform”, or “be noticed” or “do what the boss wants”.

It is the same as seeing background. Next time you are watching a favorite TV show watch only the background. Some is “real”, some is obviously a “set’, and some will even surprise you more, that you are looking at dim hues and colored walls.

I often watch TV this way to hone in on what is. The overall event of the show precludes the “effect” that is part of what makes the overall effect.

This is true in “being the audience, not being in the audience”. When I am consulting for a large group, or giving a speech, I like to “be in the audience” to “see the audience” and “view the people”. I do this when I am consulting. Simply listening, and taking notes.

The very act of saying little and taking notes helps people to truly show themselves.

This is also true in index option stock trading. It is true in managing a business, or being a salesperson, or running a household.

As I practice “simply watching” or mindfulness, a Buddhist practice, there is a way to hone this meditative practice to the moment of “what is happening” and how you fit within it.

if interested in learning more about our transpersonal approach and “real time therapy”, contact us at

floydiantherapy@gmail.com