False Facts

And, now on to a few false facts:

1. Reported in Bloomberg, and this is "accurate":

http://www.bloomberg.com/apps/news?pid=20601087&sid=afS8pwr.gnNk

This report shows a drop in recent unemployment findings. Hip hip hooray!

2. Reported in Briebarts, and equally factually: http://www.breitbart.com/article.php?id=CNG.4452bed82adf3124e5884678e236d7fb.361&show_article=1

This report estimates actual unemployment at 16%. Floyd projects it at over 20%

As you study with me you will learn that much of my stock work is first considered "contrarian". In actuality my work is based on how the emotions of the trader (the trader defined as a group) and how they react to FACTS, or FALSE facts.

False facts are seldom "caught" or even questioned, typically for weeks. When reports come out "correcting" data it's always in the small print. Or, even if not, the damage has been done and Americans "believe" the first false fact.

As an example, the commission proved there were no WMD in Iraq, and that there was no reason to believe there was. After this study of facts came out, 46% of Americans in a poll "did not believe the information" and "did believe" that Iraq had WMD. At that point it was too hard to change the "mindset".

Much of this occurred recently around Palin's "death panel" comment, which got publicity, and soon America began to believe. Many still do, when it's not true. Following Palin the "Karl Rove" method of creating false facts and FEAR was put in place by the RNC to "fight healthcare" (with no solution themselves) by arming America with incomplete information. This created battlefields at our town hall meetings, and idiots bringing AK 47's to the town hall meeting.

Much has been bandied about the Constitution in recent months, again mostly false facts, as I'll personally bet you that 95% of the U.S. has never even read the Constitution and aren't even sure what we are doing or not doing.

As a trader, be smart. Question all authority. Question all facts. Go into a situation you are studying with a sense of "cynicism" as the "spin" of the situation will depend on the deviousness of who is spinning.

3 months before Merrill Lynch went under it was rated a "strong buy" by Goldman Sachs. Have I said enough?

The Failure of Conglomerates

There are key times to buy hedge fund or conglomerate buy ups, what I call the "roll up" of stocks as a large company decides to diversify.

With few exceptions The Peter Principle always occurs. Managers at companies that are acquired typically are promoted to their level of incompetence, consultants come in with no knowledge of the direct business, and models are "smoothed and improved".

We watch this as restructuring business consultants, my original business, with smiles. It's a movie we've seen many times before.

When the buys are taking place there are several good quarters while the consolidation fudges the books, writes off everything, and meets projections.

Typically we can watch these stocks grow, with dividend, for about three years if their acquisitions do not continue, and up to five years if they continue to acquire before the Floydian Law #4578 comes into effect:

The company will exist on it's Powerpoint ability to communicate with one another, the financials will become "creative", a few at the top will do extraordinarily well, and Joe the conglomerate employee will be avidly investing in their company stock.

The "suits" have now taken over and law 4578 fills their days. There is no customer to these people, merely statistics on "revenue stream growth", or "organic growth".

By now the company has entered Dr. I. Adizes famed "lifecycle of a company". It's called the maturation period, and it's the beginning of the end.

Watch conglomerates and "roll ups" for the short run they can provide, especially in break out potential, and for the time to sell, just as the business magazines are telling you how "hot" the stock is.

The U.S. Debt Clock

Much has been discussed in recent months on the never slowing devaluation of our Dollar.

This began during Emperor Bush's reign, while Cheney was sharing with us "deficits don't matter" and we were borrowing money from Communist China to fight terrorism in a country with little terrorism, Iraq.

Our rising debt is only part of this. Much is the faith, or changing faith, in the world that finances us.

http://www.usdebtclock.org/

(Cut and paste this to your computer)

This debt clock is just visual enough to transfix you with FEAR as you watch what has happened with our national debt and what could happen.

"There is a real risk that the United States may soon lose its vaunted AAA credit rating. That means the federal government will have to pay higher rates on the national debt, worsening the situation"-Alex Green

Bear in mind that government incompetence is NOT new, however, and that the United States is revered by the world first for its size and strength, and now with a President focusing on "bringing people together" rather than "the axis of evil" crap, I believe China and Japan will continue to sponsor our debt.

And to surprise long term subscribers that know I am dead against deficits, dead against being in the hole, I'll share this:

In the economic conditions we currently have, still horrific, the world knows that the U.S. must make it. This is key issue. The entire Global Economy still hinges on the success of the U.S.

Lastly, what most Americans do not understand is that the debt is not real, nor is money.

This is simple a created value, unlike Gold or Silver, that is backed by nothing.

Follow the USD. Gold is too neutral range to define another buy yet and the market must first "slow" to truly see our spending.

For the fiscal conservative that I am, and a true believer in Economics 101, I see the spending of money, and the waste to forums, sadly necessary. We were almost on the brink of financial ruin last fall.

Recommendations of Three Stocks This week

As this blog is open to all, and we're glad of it, we thought we would share that in our Preferred Member subscription service www.bluechipoptions.com is recommending three new stocks this week.

Over the course of the next few weeks you'll see these recommendations repeated in our blogs at times, allowing you to know what we are buying.

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