Today is Thursday, May 17, 2012

Speculation

Taxes: Why you don’t want to trade commodity ETFs

Everyone knows how complex the state and federal tax codes are. The Wall Street Journal warns speculators to avoid trading commodity Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs) and those that own multilateral partnerships because the cost of preparing tax reports on those trades quite likely will exceed trading profits. (Paid sub required.) 

It's better to trade the stocks of companies that produce and process commodities and the stocks of multilateral partnerships than the ETFs and ETNs that own them.

7 Colorado stocks look strong on their charts: MWE, PENX, Q, TWTC, TIE, WLL, XEC

If you’re a chart or technical trader who buys and sells stocks based on their technicals regardless of their fundamentals, you might like the seven Colorado-based stocks listed below.

Out of 75 Colorado-based stocks that I screened, these seven are 

Aetna, Wellpoint, Humana fall on health insurance reform news

Aetna, Wellpoint, Humana, Cigna and other health insurers are continuing to fall under pressure from political attacks by Congressional leaders and President Obama.  The politicians are trying to create a government-run public option health plan (government HMO, PPO, Fannie Med) that would compete with the nation’s 1,300 insurers. And they are moving to take anti-trust exemptions away from health insurers. How important the latter move is to insurers is hard to tell at this point. More about that later.  Wellpoint’s hourly, daily, weekly and point and figure charts all are very bearish. At the moment, it’s trading at $46.47, down 1.13% on the day. It’s bearish point and figure price objective is $34. The point and figure price objective shows that there are way more buyers than sellers of the stock. The P&F price objective is not a prediction, and it often is overshot on both the bullish and bearish sides. Stocks reach their P&F price objectives about 70% of the time, and the objectives can change quickly after prices stage sudden trend reversals.  Links Charts for AET, CI, CVH, HS, HUM, UNH, WLP, XLV, IYH, VHT Click on a stock’s chart to see hourly, daily, weekly and point and figure charts like these for Wellpoint. Good time to buy health insurers, pubic option futures contract? Well, I was a little early on this call.

Investing by asset allocation doesn’t work in big bear markets

Conservative investors have used asset allocation strategies to minimize their risks for decades, but I’ve always been suspicious of them because most stocks historically have moved together and because the strategy looked like a good excuse for brokers to churn clients’ accounts to generate commissions.

Last year, asset allocation by industry sector as well as by asset class failed to protect speculators against the big declines in the market. Indeed, some asset allocation strategies saddled investors with bigger losses than the overall stock market suffered.

This is a typical portfolio diversification strategy that I blogged on in April.

Institutional commodity index speculators distort wheat futures markets, Senate panel reports

Large institutional specualtors that only buy indexes tied to wheat futures contracts on the Chicago Board of Trade and other exchanges distort the futures markets so that they ruin the price-hedging effectiveness of the futures contracts for farmers and food manufactures who use the markets to hedge their price risks, according to a report issued by the U.S. Senate’s Permanent Subcommitte on Investigations. The CBOT is owned by the Chicago Mercantile Exchange (CME).

Simply put, pension funds and hedge funds that only buy and never short the futures markets have increased the cost of foodstuffs for the whole world, and similar speculation has increased the cost of energy and probably the costs of metals and other commodities.

Call this the Jim Rogers effect, because his mutual funds and book, Hot Commodities (Random House, 2004, 252 pp.), convinced the institutional investors that they could hedge against inflation buy buying commodities.

From the 174-pp. report’s executive summary:

Investment committees make bad decisions for clubs, colleges, mutual funds and charities

It’s becoming better known that letting a financial adviser, or stock broker, make your investment decisions for you is a bad idea, especially when you have the work ethic and incentives to manage your own money.

What probably isn’t as well known is that many, if not most, so-called investment committees make lousy money management decisions. Indeed, in his Wall Street Journal article (April 25, 2009), “How group decisions end up wrong-footed,” Jason Zweig’s most important graphs discuss the history of group decision making and why they usually go wrong:

Professionals are questioning the seven-week rally; are black boxes distorting the markets?

A long-time portfolio manager, financial advisor and publisher of the widely-followed Cara Community blog, Bill Cara, wonders what is going on in the markets, which have rallied for seven weeks on relatively modest volume.

He writes:

 

How to diversify a portfolio

Jane Bryant Quinn reports on what Mark Kritzman, chief executive of Windham Capital Management in Cambridge, Mass., thinks investors should do to diversify their portfolios.

She concludes:

 

Questions to ask stock brokers and financial advisers

Stock brokers, financial advisers and mutual funds have failed their clients over the last 24 months, and most should be fired.

I’ve been saying this since last year. And the commenters who responded to Howard Gold’s article at http://www.marketwatch.com seem to feel the same way.

Questions to ask article writers, TV stock touts and commission-paid brokers (financial advisers):

Bond markets predicting another 17% drop in industrial production and 7.8 million job loss in 2009

The bond markets are predicting the U.S. economy will see another 17% drop in industrial production by yearend.

And another 7.8 million jobs are likely to be lost. We’ve already lost 5.1 million.

Those predictions come from an econometric model based on the bond market’s pricing, which has been very accurate in forecasting the economy since 1973, The Wall Street Journal reports here.

Impact graphs from wsj.com:

Most major stock indexes turn bearish

The Dow Jones Industrials fell 122.4 points, or 1.65%, Friday and sank below its critical 50-day moving average, which is a sell signal for a lot of speculators.

Most other widely followed stock indexes followed. Only the

 

4 stocks with strong earnings and improving technicals: BJ, FDO, HSY, ROST

Four stocks out of the eight touted by Smart Money have both improving earnings and daily charts.

Only one of the four has uniformly bullish daily weekly and point and figure charts.

Smart Money’s Jack Hough found 200 companies that

Three stocks touted on Barron’s: McDonald’s (MCD), Coca Cola (KO), Safeway (SWY)

Today’s Barron’s touts three stocks:

McDonald’s (MCD). I own it.

Coca Cola (KO). I own it.

Safeway (SWY). I don’t own it.

Charts are

Stock market technicals look mixed; fundamentals still weak

While some touts are trying to prematurely call a bottom in the bear market, more cautious technical analysts are saying the outlook for stocks is still mixed after last week’s 9% rally.

Although some fundamentals are

James Cramer wonders at the Obama team’s “thin skins;” he also has problems with Bush

James Cramer has attacked President Obama’s destruction of wealth, much as he attacked President Bush’s cluelessness last year.

In this interesting article, Cramer expresses his surprise at the thin skins of the Obama team. He shouldn’t be surprised, because Obama has had a thin skin since he began his presidential campaign. Cramer also responds to his liberal critics, Frank Rich and Jon Stewart.

Stock market sophisticates mock Cramer’s show, Mad Money, and I have, too. But his online articles show that he’s a clear thinker and knows the markets and economics.

Great insights and entertaining.