Speculation

During the 60s and 70s I wrote hundreds of stories and weekly columns about the futures markets, the Chicago Board of Trade, Chicago Mercantile Exchange, Chicago Options Exchange and several of the characters mentioned in "The Futures, the rise of the speculator and the origins of the world's biggest markets," by Emilly Lambert, a Chicago-based reporter for Forbes.

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.

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, 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.

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.

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:

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:

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:

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:

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):

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:

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

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

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

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