Air Marshall Obama's new strategy
Steve Cook on Disciplined Investing

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Have You Seen This?


The Market
    
    Technical

    The Averages (DJIA 12170, S&P 1309) had another good day, the news flow notwithstanding.  They remain within their intermediate term up trends (11722-15146, 1226-1655) and their short term trading ranges (11554-12405, 1247-1345).

    Volume continued anemic; breadth improved.  The VIX dropped again, leaving it below a support level.  It has returned to directionless meandering which is mildly positive for stocks.

    After hitting a new high, gold (GLD) fell back below what has now become a quintuple top although it is still above the lower boundary of its intermediate term up trend.  I am still waiting for a decisive move before taking action.

    Bottom line: technically speaking, stocks have performed remarkably as one serious challenge after another to global growth has hit the headlines.  I may not fully appreciate why but as long as the trend is up, there is nothing to do but enjoy it while being very sensitive to any break down in the up trend of any individual stock.
 
    An up turn in a breadth indicator (short):
    http://www.bespokeinvest.com/thinkbig/2011/3/24/another-breadth-measure-turns-positive.html

   Fundamental
   
     Headlines

    The news flow didn’t improve all that much yesterday.  Weekly jobless claims were better than anticipated but not by much and the headline number itself was small to begin with.  The best news was that radiation levels are reportedly dropping in Japan; hopefully as this was not another fabrication.

    On the other hand, turmoil continued in Yemen, Syria, Gaza/Israel and Libya.  With respect to the latter, yesterday was another head scratcher.  Air Marshall Obama has decided that He wants out--without, by the way. having accomplished any semblance of a stated objective.  So the US is now transferring responsibility for the no fly zone to NATO.  Of course, since Libya to date has put one plane in the air one time, manning that no fly zone is like supervising a one kid cub scout pack.  The real issue is who is going to be responsible for the continuation of the bombing of Gaddafi forces.  This is where things really get confusing because the US ‘says’ that it is relinquishing this power also.  If it really does, the problem is that if NATO assumes control in order for it to act there has to be unanimity of agreement for all actions among the 28 NATO participants; in other words, war by committee. How do think that will work out?   And if it doesn’t, what happens if Gaddafi holds on?  What does that do for the US image globally, other than provide fodder for late night TV comedians and Saturday Night Live?  And this is making investors wee wee in their pants to buy stock in America.

    Bottom line: while this is just the second week of generally lousy economic numbers, it is still a little concerning.  Granted, I have repeatedly said that an uneven flow of data is to be expected in a historically below average recovery--and I will stick with that opinion.  However, when coupled with the relentless advance of commodity prices and the potential negative impact of global events, my bias is that our forecast is more likely to be too optimistic than too pessimistic.  I am changing nothing yet, largely because the Market is telling me that there is something wrong with my analysis.  That is clearly frustrating; and it will remain so until I can figure out what I am doing wrong or I get proven correct.

    This analysis by Doug Short provides some substance to my margin squeeze concern (short):
    http://dshort.com/articles/indicators/profit-margin-sqeeze-and-inflation-risk.html

    Thoughts on Investing--from Max Gunther


Max Gunther set forth basic trading principles called The Zurich Axioms:

On Risk:
- Worry is not a sickness but a sign of health – if you are not worried, you are not risking enough.
- Always play for meaningful stakes – if an amount is so small that its loss won’t make any significant difference, then it isn’t likely to bring any significant gains either.
- Resist the allure of diversification.

On Greed:
- Always take your profit too soon.
- Decide in advance what gain you want from a venture, and when you get it, get out.

On Hope:
- When the ship starts sinking, don’t pray. Jump.
- Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.

On Forecasts:
- Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.

On Patterns:
- Chaos is not dangerous until it starts to look orderly.
- Beware the historian’s trap – it is based on the age-old but entirely unwarranted belief that the orderly repetition of history allows for accurate forecasting in certain situations.
- Beware the chartist’s illusion – it is characteristic of human minds to perceive links of cause and effect where none exist.
- Beware the gambler’s fallacy – there’s no such thing as “Today’s my lucky day” or “I’m hot tonight”.

On Mobility:
- Avoid putting down roots. They impede motion.
- Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia.
- Never hesitate to abandon a venture if something more attractive comes into view.

On Intuition:
- A hunch can be trusted if it can be explained.
- Never confuse a hunch with a hope.

On the Occult:
- If astrology worked, all astrologers would be rich.
- A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place.

On Optimism & Pessimism:
- Optimism means expecting the best, but confidence mean knowing how you will handle the worst. Never make a move if you are merely optimistic.

On Consensus:
- Disregard the majority opinion. It is probably wrong.
- Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.

On Stubbornness:
- If it doesn’t pay off the first time, forget it.
- Never try to save a bad investment by “averaging down”.

On Planning:
- Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans or other people’s seriously. In essence these axioms point to the benefit of having an investment strategy and sticking to it, regardless of what other investors say or do. If you don’t have an investment strategy, you could do worse than adopt these principles. However, don’t be afraid to add or subtract ones according to what works for you.  
 
News on Stocks in Our Portfolios

    Accenture reported second quarter earnings per share of $.75 versus expectations of $.73.

Economics

   This Week’s Data

    The final fourth quarter GDP revision came in at +3.1% versus estimates of +3.0; the GDP price index was reported at +0.4% in line with forecasts; corporate profits were up 11.4% versus the third quarter result of up 27.2%.
    http://www.calculatedriskblog.com/2011/03/q4-real-gdp-growth-revised-up-to-31.html

   Other

    Leading economic indicators elsewhere in the world (short):
    http://mjperry.blogspot.com/2011/03/prospects-for-future-economic-growth.html

Politics

  Domestic

Obama’s rosy scenario (medium):
http://reason.com/archives/2011/03/23/the-rosy-scenario-system

Friday morning humor (2 minute video):
http://www.wjhg.com/home/headlines/Video_shows_spring_break_brawl_at_PCB_Burger_King_118505599.html

  International War Against Radical Islam

    Obama’s confusing Libyan strategy--if that is what you want to call it—from two of the best conservative thinkers

Victor Hansen(long):
    http://www.nationalreview.com/articles/262678/our-libyan-march-madness-victor-davis-hanson

    George Will (medium):
    http://www.jewishworldreview.com/cols/will032411.php3








Posted 03-25-2011 8:17 AM by Steve Cook
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