Sep 29, 2008 - Issue #130

Intervention Failure

Intervention failure. Some say free markets failed us. Not so. Government intervention is what failed us.

CNBC, Kudlow & Company and Fox contributors have stated free markets would never have loaned money to non-credit worthy borrowers.

Lenders, under the 'Community Banking Act' (government intervention, your tax dollars at work), forced lenders to loan to borrowers who couldn't afford to pay their 'ninja' (No Income No Job Act) loans.

Warren Buffet (possibly the world's most successful investor), when asked, "How come you never got involved with 'sub-prime' loans?", replied, "I didn't like the business model... Lending money to people who can't pay you back."

Donald Trump (one of the world's most successful real estate investors) said, "Sub-prime? I don't even like the name... I like 'prime'."

Sam Zell (definitely one of the world's most successful investors) said, "Government intervention is against everything I stand for."

SEC Commissioner Cox thinks traders (except market makers) should not be allowed to 'sell short' a list of 799 financial stocks. It's not helping. Get real.

Fight back. Don't trade any market that you can't short whenever you feel like it. Let the market for those stocks dry up. When the market-makers find out all they're running is a quote business, the government will get the message.

Don't use 'stop' orders any more. Specialists are now allowed to trade aggressively. Maintaining a 'fair and orderly market' has been put on the back burner. That means 'stop orders' are being raped. If you doubt that, look at the charts of DD, GM, AMR, CNW, JBLU, LSTR, R, YRCW. Need any more proof? I could go on and on. Someone should call a 'cop'.

The only protection worth a damn is using Puts and Calls to hedge your positions. If you can't find suitably priced options, don't trade.

Sarbanes-Oxley (more government intervention) has succeeded only in increasing accounting fees, accomplished nothing, and driven business overseas. It should be repealed, in my judgement.

Notice how the 'Dow' deals with components that 'stink up' the place. They simply replaced AIG with KFT, adjusted the stats, and continued on. Never missing a beat. See how simple life can be? Unless, of course, you happen to actually own AIG. In which case, you actually lost money. The 'Dow', however, never lost a cent. AIG was never there. It never happened. Buy and hold, right? In your dreams.

Have you noticed how the 'Libs' tried to slip 20% of any profits realized from the 'bail out' to there favorite 'charity' A.C.O.R.N.? Nice try, Pelosi. Are the voters never going to wake up and smell the coffee? It's true. We really do deserve the government we get. Heads Up:

During the next two weeks, the following Dow components will report earnings. Keep a sharp eye for 'surprises'. You might be able to catch a nice swing in the week or two leading up to 'Earnings Day':

10/10 GE.

Dow score card for the week ending 9/26/08.

DJ-30: 11143.13 -245.31 -2.15%. The Real World (arithmetical) DJ-30: 46.64 -1.02 -2.15%.

UP: 5, Down: 25.

Trends (weekly charts): This is the subjective part.

Rising (Generally Higher Highs/Higher Lows) 1 (-8) 3%:


Consolidating (Generally Lower Highs/Higher Lows) 23 (+17) 77%:

+*AA, AXP, +*BA, -*BAC, -*C, CAT, CVX, -*DIS, +*GE, +*HD, -*HPQ, +*IBM, +*INTC, -*KFT, MCD, -*MMM, +*MRK, +*MSFT, +*PFE, +*T, +*VZ, WMT, -*XOM.

Declining (Generally Lower Highs/Lower Lows) 6 (-9) 20%:

-*DD, -*GM, JNJ, KO, PG, UTX.

+/- denotes change of direction.

* denotes change of category.

Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!

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