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Buffett: Time To Be Greedy And Buy Stocks “For Long Haul”, I Disagree

Buffett came out and declared that it was “time to be greedy” and buy stocks in this fear. While I agree that it certainly is a far better time to buy than when all the Talking Heads ignored the problems coming as I repeatedly warned, I disagree totally with Buffett’s assertion to buy for the long term. I have made the case, often, that Buffett is shrewd, not genius. He made his money buying and buying and holding and holding over the last 30 years and taking companies over and increasing their efficiency. That worked BECAUSE real incomes in the United States have risen for 70 years, basically. This is no longer the case and hasn’t been the case for almost 10 years. That is why the stock market has negative returns for the last decade. You cannot have a growing economy that is solely based upon paper with real incomes and savings in decline. It is a mathematical impossibility, in my estimation. Therefore, changes have to be made (and perhaps they will be) to dramatically change this or the market is going nowhere, long term. Period.

This is why I have said this nonsense about “buy and hold”, “buy for the long term” is complete nonsense. It is a traders market and you have to be proactive. To make the case, as Buffett is, to buy and hold this market is the same nonsense spouted by brokers and financial advisors. They both have a vested interest for everyone to stay in the game. If you leave “the game” they do not get paid. This is a traders market and will be for a time. I will change my view on this if, and only if, we make the required changes for long term REAL growth based upon production (not consumption). Then it will be time to load up for the long haul. Big if, I know.

Market Lesson: This Market Proves What I Preach - Know When You Are Wrong And Never Hope

With the recent market plunge and near total and complete collapse it proves what I have been preaching since I started this site - KNOW when you are right and KNOW when you are wrong and NEVER guess. Never. I have pointed out on many occasions that most people, even hedge funds and professionals GUESS. I never guess. Never. If my view proves wrong, then it is wrong and my view is to exit and re-evaluate. You may lose 1%, perhaps 2%, but you avoid down 20%, 50% or in the case of CHK, WLT, etc. 80% or so. I hope my readers understand and have learned from this collapse.I have made this point many times on here but I suspect many readers scoffed at my views and held on to the common view that “stocks are undervalued” and “buy this stock with a 15 PE” or some other nonsense that the media preaches. It is all a bunch of crap.

You do not know the earnings going forward and far more importantly you do not know how the market will price those earnings. Is CHK worth $12 or $74? That is a HUGE difference rather obviously. The same can be said for the vast majority of stocks in the last few months. Is WLT worth $112 or $27? The point being is it doesn’t matter. Every single stock is worth what the market says it is worth. Nothing more, nothing less. Therefore, you have to listen to what the market is saying it is worth. The market will tell you, each and every time. But you have to “listen” and not be a sheep.

For a specific lesson, let’s look at CHK. Oddly enough I wrote a post that said something like “if you cannot see that CHK is a short, then you should not be trading” or something like that. That post was near the high. After that CHK made one and ONLY one attempt to reverse and hold a level before this meltdown. That was above $35.30. If you were long above that you EXIT once that cleared and wait if you are going to view the markets as I do. Let others guess!!. Period. I gave the short number up top. Did the market say to be long? NOOO. People bought on PE, value and other nonsense and they got crushed, to say the least.

McCain Surprises: Picks Sarah Palin As Running Mate: Brilliant Choice

There has been a lot of talk on CNBC that the market was disappointed that he picked relative unknown for his running mate, Sarah Palin, Gov. of Alaska. What are they talking about? I am watching this and she ROCKS. I would vote for her for president ahead of McCain. I think the choice was brilliant. But that is how I see things. Her husband is a union guy, races snowmobiles, she sold the state jet on Ebay. THIS is what the country needs, not some “politician”. Not to mention I think she is a fine woman, lol. Her husband is fortunate, to say the least.

 Great job McCain!

StockBlade.com Proposes Long Term Economic Fix: The Ten Step “Save America Plan”

This is an economic plan that I believe McCain should adpopt, in some form to fix the serious economic problems facing our country. These are not ideas to simply stimulate the economy like sending out checks to everyone, which does zero to solve the reasons why we are having declines to begin with. We cannot continue on the same road we are on or I see incomes and manufacturing decline continuing their slide. 

The Ten Step Save America Plan

The Problems:

1. Real Incomes have declined for 8 years” This has never happened before in our history, to my knowledge, not even during the Great depression, for this long a period.  

2. Trade deficits continue to swell with both China and the middle east

3. The dollar is no longer considered the preferred currency of the world because we have practiced massive fiscal irresponsibility both at the government and consumer levels.

4. Our manufacturing base has eroded to all time record lows.

5. We have the greatest generational wealth divide ever seen. All wealth, literally, is concentrated to the population over 40. This is a direct correlation to the free trade policies with third world nations. This has never happened before. 

6. The social security fund will be bankrupt long before the baby boomers die unless changes are made to it.

7. The concentration of wealth is the greatest since the Great Depression.

8. 10% of all disposable incomes in this country go to pay interest on credit cards.

9. We are completely dependant on foreign oil for the survival of our economy

10. The CEO pay relative to workers within their companies is at all an all time high since the Great Depression

The Solutions:

1. Real incomes: Real incomes have been declining rapidly because we are have free trade policies with countries that are not equal partners, in both economic terms and environmental regulations. This can and should be resolved by having a temporary “trade balance tax” designed to adjust trade to some measure of equilibrium by placing a flexible tax on imported goods if the trade gap with a country exceeds a certain threshold. For instance, if the trade gap is above 25%, a .5% tax would be implemented, a 50% trade gap would equal a 1% tax, etc. The tax would be reviewed annually to see if the balance has become within a different threshold. 

2. Trade Deficit: This issue would be addressed by implementing the policies named above. In addition, much of the trade deficit is a direct result of complete disregard for labor rights as we know them as well as a complete disregard for the environment - for which we will all pay for, eventually. In addition, some of our trade deficits have been the direct result of countries refusing to allow their currency to float with the market as should be required as part of having free trade status.

3. The dollar: Our currency would once again regain the strength it deserves if we would get our house in order both in terms of trade and fiscal soundness. 50% of all taxes collected on “excessive” imports would be earmarked to social security, 25% to community college education grants, and 25% to rebuilding the infrastructure in the country, which desperately needs attention and would also create jobs. People in this country do not fully understand the importance of the value of it’s currency as it has never collapsed unlike Germany in the 30’s. It is far more important than most anyone realizes.

4. Manufacturing: This would improve as companies would have a more even playing field with some level of taxation from countries bringing in excessive imports from possible unfair practices such as manipulating their currency or paying wages far below a livable standard.

5. Generational Wealth: The generational wealth divide is the direct result of a collapse in manufacturing and should improve with time if the above policies were implemented. One could argue that this divide is simply a direct correlation with free trade, but I firmly believe it is causation, not just a correlation.

6. Social Security: The fund would receive billions in funds currently not expected,  to replenish a system that will be bankrupt otherwise via the excessive import tax revenue.

7. Wealth Equality: There should be a standard rule that gives companies a clear choice: the possibility of unionization or provide full health coverage to it’s workers.  For instance, possibly a rule that all companies above a certain number of workers should be allowed to unionize if the majority of the workers elect to do so. Votes should be mandatory every 5 years. Companies could avoid this mandatory vote if they elected to provide full medical coverage to their employees. This would allow a possible redistribution of some of the wealth and eliminate some of the burden on the state medicare systems from large companies not paying a livable wage nor health coverage. Therefore, companies would have a very clear choice to make - pay for health coverage or be subject to a union vote.

8. Credit Card Debt: This is a more difficult issue as it involves freedom of choice. On one hand we should not place a maximum on cards a person should have, but on the other hand we need to place firm rules on a national basis for when credit companies can increase rates, and set firm limits. In addition, there should be a some kind of rule that requires credit card companies to set income to debt ratio guidelines similar to those for other types of debts, like mortgages. This would assist in our country in becoming a saving nation rather than a borrowing nation, at some point.

9. Carbon Tax: One percent of all profits from all petroleum based (oil coal, natural gas) companies should be required to go to wind energy to generate electricity. While this may only seem to benefit homes, autos will eventually be electric as well, if not hydrogen, and the power required to convert will be substantial. This should not be viewed as simply a socialist redistribution of wealth. Society pays a price in real dollars from the burning of these fuels and there is no reason some sort of a carbon tax should not be implemented and used to plan for the future.

10. CEO Compensation: All companies that conduct business in the U.S, publicly traded or not, should have to adhere to a maximum multiple of their average worker for executive compensation, unless shareholder approved via a vote. Keep in mind, this is not setting a limit on compensation it is simply mandating that any compensation above a threshold, must be approved by a majority of the stakeholders/shareholders of the entity. If the shareholders deem an CEO worthy of excessive pay, they certainly should have the right to pay them what they think he/she is worth. But it should be law that it be put to a vote and allow the true owners of the entity to decide.

 These are 10 very dramatic problems we face in this country. In addition, there are 10 easily implemented solutions to each. I can easily provide documented proof of each and every problem on here, but I suspect that all are very self evident and need no documentary detail. In addition, the solutions are reasonably simple, if someone has the courage to move forward and put them in action.

Other Related Issues:

Consumption Tax: I also feel that the Federal Reserve mandate should be changed to an inflation only mandate similar to European nations and their rate policy should only be used to control inflation and not GDP. Instead of raising rates in times of excessive GDP expansion to slow the economy, there should be a national consumption tax that automatically enacts when GDP exceeds a certain threshold. This money should be set aside in an “economic downturn rebate fund” and be released when GDP falls below a defined threshold. This would not only even out the economy, it would also somewhat eliminate the current bias of creating budget deficits when GDP falls.  But I realize this is far too complicated to be “sold” for election purposes, but I believe it clearly should be done.

Healthcare: I also contend that healthcare should be based on a single pay system. There is no excuse, on any level, for the system currently in place. For instance, I know for a fact that the premium paid counting my contribution AND my employers was less than $150 a month total. I left the company and for the exact same coverage with the exact same company it was over $550 a month. While i agree there should be some extra adminstrative fee involved, to charge 3 or 4 times for what is essentially a financial commodity is unethical at best. There should be a single pay system set up, where companies pay via the internet the fee of which individuals have equal access. This is a very simple solution to what has been made out to be a complicated problem. It isn’t.

Ok, I guess there are 12 suggestions. If some or all of these suggestions were implemented, it would bring America back rather quickly I believe. And one cannot argue that we are imposing “tariffs” for protectionism. We would be creating temporary taxes on goods to level out temporary extreme imbalances related to most likely unequal laws or other factors that should adjust over time.

Therefore, whoever wins the election, McCain or Obama, some or all of these ideas would greatly assist in restoring this great country to what it once was. If we do not, expect more of the same, regardless of any rhetoric from either. I cannot think of any other alternatives to bring wealth creation back other than letting the dollar continue tofall and that would increase manufacturing. But that reduces real wealth and relative spending power as well, so that does not seem like a real solution.

While this site is my personal blog on the markets and trading in an effort to provide “the average Joe” an idea of how the markets really work, these issues are too compelling to ignore. We have to restore this country to greatness and the issues we face are long term structural issues I believe, but not nearly as complicated as many make them out to be. It can be done, rather easily. But someone has to have to the fortitude to do so.

I am not an economist, so perhaps all of this is a bunch of nonsense and wouldn’t work. But seems to me they are ideas that should be given consideration.

Should I Try And Win Wall Street Survivor Game?

There is an ad on my site that appears periodically, Wall Street Survivor that gives prizes based on trading results with paper money. Unfortunately they do not have SP futures or I would consider making that a living, lol. To win, you have to be up over 50% for the week, in geberal. i never have liked these games as it isn’t real as it does not account for risk. People will simply trade the “all or nothing” stocks and see if it works out. So the games are silliness, in general.

The question is, can I beat 50% a week to win the prize. I am not sure as it requires far more luck than skill. For instance, one weeks winner was long FNM. Well, that was an all or nothing trade, but the trade was long above $6.68 at the time, so I get that. But still, those are the type of stocks you HAVE to trade to try and win, so the concept has never appealed to me. But I may give it a whirl. 10% a day seems within reach if i intraday trade it.

FDIC Report: 117 Financial Institutions In Trouble, One Big Problem, I Do Not Believe It

Today the FDIC came out with their report of possible troubled financial institution list. it counted 117 as possibly troubled, up from 90 the previous quarter.one small problem, I believe this nonsense like not at all. The only reason that there were not far more on the list as banks refuse to realize the true value of the loans they hold. This was witnessed recently by I believe Merrill when they sold loans at $7 billion when they they had them on the the books just weeks before at $37 billion.

 Today;s number of banks in trouble was comical, at best. It has to be far worse than indicated and people that believe otherwise are wrong. I have said this for over a year, and have been proven correct each and every time, and am right again. This is nonsense. The banks should be required to write down the value of the loans to CURRENT values NOW and move on. They refuse to do so. The list is FAR bigger than 117 and there needs to be something done about the financial institutions that continue to “hide” bad debts on their balance sheet. And I mean something punititive. Then again, this was supposed to be illegal, as Cramer has alluded to many times.

Consumer Confidence Up? This Is Clearly An Indictment On Public Education

Consumer Confidence numbers released today were up to a reading of 53. Much was made of of the number as a “percentage”. This is complete nonsense. If consumer confidence was 1.0 and then moved to 2.0 it would be the largest percentage move of all time, by far. Would that be meaningful? Uhhhh no.

The facts are the facts are the facts. Real incomes in the U.S. have fallen for 8 years. Real incomes in China are skyrocketing. Maufacturing is at an all time low in the U.S. Manufacturing is at an all time high in China. Literally 100% of the wealth in the United States is held by those over 40 (prior to free trade with China). Consumer debt levels are at all time highs and consumer delinquncies are rising rapidly. Those ARE the facts.  

And consumer confidence up? From what and why? Election hysteria is the only possible answer. The eternal hope for massive change. Unfortunately the change that would be made by an an all Democratic Congress and Obama presidency would very, very likely cause a worldwide depression, if addopted in full. The trade issue with China, while i am in 100% in support that it is a massive mistake has to be handled with great care. If we place significant protectionist tariffs, nationalize both FNM and Freddie Mac, nationalize healthcare, we WILL go into a depression, IMO. Without question the stock market will be FAR lower than it is today. That is a given.

I would provide an outline of what i believe needs to be done but unfortunaely nobody cares, lol.

Market Direction: While The Chart Still Says Long….

While the chart still says long above 1261 cash, 1260.50 futures, I have a belief probably not widely shared. Most seem to believe the more times an area or trend is tested the stronger it becomes. I believe the exact opposite. It tells me the market wants to break it and likely will, at some point - but nobody wants to be the lone ranger in taking it out.

If we revisit the lows soon, I do not believe they will hold next time around. The market continues to test the 1261 area. I am a firm believer that the first test of an area will almost always hold. The second test is questionable, the third test is likely to fail. The market has pooked around the 1263-1265 area the last two days to see the resolve. It appears weak, at best. I could be wrong, but do not expect the next visit to this area to hold if and when we get there.

Market Update: My Gap Rule Rules The Day

I said before the market opened that “if we were going to reverse it should come early” It reversed 5 mins in and we haven’t looked back. I later said “if we hold the low and clear 1280.75 the gap should fill, at least”.

The strength has taken me by surprise a little, but I mentioned there really was nothing of significance up top to stop the move.

New Leadership: Retail - Only problem Is Facts Say Otherwise

The retail space exploded higher today. Not really that surprising because money has been rotating out of commodities and energy and has to go somewhere. The problem with this is only one small thing - it makes no sense. Retail profits are falling and will continue to do so, IMO. If these stocks continue to rise, this will be the next implosion. The U.S consumer is dead in the water and to bid these stocks up like things are improving is complete nonsense. I think I have mentioned about a billion times rthat the markets have nothing to do with logic, so do not fight it - for now. But this will end very badly if we march higher into October in this sector.

U.S. consumer debt levels continue to rise at a scary pace. 10% of all disposable income now goes to pay the interest on credit cards. Real incomes have fallen for 7 years. And you want to bid up retail chains? Ha. What comedy. Retail chains will ONLY go higher long term if real incomes increase. Period, end of debate. The odds of that happening are near zero as I see things. But they are being bid up on falling oil because people will now have more “income” to spend. One small problem with that thesis, people arent spending income, they are charging it and the cards are maxed.

This “trend” will end very badly eventually. U.S. consumer spending as “leadership” is comical - at best. These companies will warn when earnings are released next quarter, if not sooner. Be careful chasing this nonsense, but do not fight the trend - for now.

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