Current Trading Ranges of US Markets

This is a free edition of the Technical Indicator, a financial newsletter, and rather backs up what I've been saying on my High Yield Times blog. It looks at the short-term trading ranges of the major US stock markets.

The S&P 500 February high of 1,104 matches perfectly with the 50-day moving average at 1,105. We are now just 10 points away from this and a break-out will obviously be bullish. Note that the 200DMA has not been tested and is now at 1,025 and rising up to the recent market support at 1,044.

As I myself have said, the 50DMA and 200DMA are currently sandwiching the market and a break in either direction could signal the start of a new trend. All the media talk of a 'correction' is just to stop investors panicking about another crash, however, this may indeed be a mere correction, so long as that 200DMA holds firm.

The Technical indicator also looks at the Dow and Nasdaq charts, which have a similar shape to the S&P 500.

How to Compare Bond Fund Yields

The idea that investing in stock markets is more profitable than bonds has been thoroughly trashed in recent year. Many people are therefore taking a keen interest in bonds again. However, trying to compare different bond funds can be daunting as there are so many different ways to measure yield and income. However, there is one common measure, known as the SEC Yield. This assumes that all the bond holdings are held till maturity. The calculation is therefore unambiguous and the investor can compare like with like.

The SEC yield is better than historical data at estimating future income yield, said Ken Volpert, head of Vanguard Group's taxable bond group and co-manager of Vanguard Total Bond Market Fund. "It's a close approximation to the net yield-to-maturity of the fund, which is what we as bond investors think about," he said. [MarketWatch]

However, in trying to rake back quickly any recent losses, it may be tempting to head for the highest yielding funds. But be careful when making comparisons to also take a look at the fund's rating as high yielding bonds often come bundled with high risk.

Three Government Reports Point to Fiscal Doomsday

"When our leaders have no awareness of the disastrous consequences of their actions, they can claim ignorance and take no action.

Or when our leaders have no hard evidence as to what might happen in the future, they can at least claim uncertainty.

But when they have full knowledge of an impending disaster … they have proof of its inevitability in ANY scenario … and they so declare in their official reports … but STILL don’t lift a finger to change course … then they have only one remaining claim:

INSANITY!"

So says Martin D. Weiss. Three separate reports were published mid 2009 - from the Fed, the Treasury Department and the Congressional Budget Office (CBO). They all paint a gloomy picture of the US heading for either disaster... or catastrophe.

The Long-Term Budget Outlook from the CBO paints a dire picture of exploding debt, reduced national saving, lower domestic investment, depressed income growth and economic growth, the potential for government insolvency leading to enforced higher interest rates and an inability to finace these. Phew!

OK, these are all fairly dry technical reports that most people are unlikely to want to read over breakfast, but the corporate media does nothing to inform the public of what is really going on. There are hundreds of intelligent, articulate and well-informed commentators outside the propaganda media.

Government Statistics: The Emperor's New Clothes

How can government statistics keep showing improvements while the real economy keeps getting worse? US GDP apparently rose 5.7% in the last quarter of 2009 after a 2.2% rise in the third quarter. Quite astonishing considering that the number of people employed also dropped by 1.2 million. What the general public now have to grasp is that GDP is a very bad measure of the health of the economy. Indeed, in general, every social statistic is only useful until someone figures out a way to manipulate it. In the case of GDP, this statistic does not distinguish between productive and unproductive spending - it lumps together commercial activity and government spending. The recent rises are therefore just the manifestations of government spending such as the bailouts and the stimulus package. It is rather like a person dipping into their savings to finance their lifestyle and claiming that as extra income rather than as an expense.

The corporate media also like to point at the recovery on Wall St as a sign that things are improving. Firstly, the Dow is full of multinationals so has little to do with the health of just the USA - all of the Dow companies are in various global indices, such as the FTSE Multinationals. Secondly, the looting of public money by Wall St banksters continues with the population seemingly impotent to react en masse. I'd wager that European countries will see much more social unrest than the USA. The manipulation of the stock markets has been amply recorded. The pump and dump strategies that have led to two major bubbles and hundreds of short term bouts of effervescence are ways for Wall St insiders to try to claw back money they have lost. Investors should just look at the numbers and either ignore the news totally or assume it is just part of the entertainment industry.

The solution, according to EIR is to call the bankers' bluff, close down the Fed and show the world that the emperor indeed has no clothes. As the article says, this is the scenario that haunts the banksters and this is why so much government spending is going into the military and police so that the oligarchs can protect themselves if the people ever summoned the guts to start another revolution. I suspect a miraculous solution will be presented to the public just as the sound of gunfire starts to fill the air. A new world order with a new world bank, a new world currency and a new warm cell.

The Emperor's New Statistics by EIR.

Financial Wisdom Becomes Investment Lies

Investment advice is full of mantras that are repeated over and over again and thereby becoming 'truth', at least in the eyes of investors. These last two decades, with two booms and busts, have blown to pieces so much market wisdom that it is shameless that advisors have not turned bright crimson.

Shares outperform bonds: wrong, unless you look at a 30-year timeline.

Government bonds are safer than corporate bonds: wrong, just look at municipal bonds and the current sovereign debt crisis unfold.

Value stocks are safer than growth stocks: wrong, they're not called growth stocks for nothing.

Diversification will protect you: laughable!

"Investing lies we grew up on" goes on to discuss the slippery subject of risk, what it means and how to manage it. All very nice, but for the average investor seems to add a further unknown unknown to the cacophany of market noise. In essence, the buy-and-hold strategy promoted by fund managers sucks big time - though not for those fund managers - and the passive investor has been passively taken to the cleaners. In my opinion, some form of active investing, however basic, can help the neophyte investor navigate these very turbulent seas.