"Is this for free?"
I looked up from my laptop. A dreary looking blonde in a chintzy dress -- not the kind of lady that typically graces Joe's Cigar Bar – was taking a handful of match boxes from a bowl on the counter.
Joe, who was fixing me an espresso at the end of the bar, turned and gave her a puzzled look.
"All my cash is tied up right now," she said.
"That's a good one," I thought. "I bet your cash is tied up."
She looked at me and back again at Joe. "Hey," she said. "You got a phone I can use?"
Joe walked by her and put the espresso on the coffee table in front of me. "Yes, I have a phone," he said. "But it's for business and you can't use it."
Just then a phone began ringing. The lady pulled a cell phone from her pocket and answered it. "Whatever," I thought. I went back to my cigar and laptop.
"Hello there," she said.
She was now directly in front of me. She bent forward, smiling at me, and picked up a copy of Cigar Aficionado from the stack on the coffee table. She glanced through it and then put it in her plastic shopping bag.
"Put the magazine down! "Joe yelled.
"Why?" she shouted back. "They're free. "
"No, they are not free," Joe said. "And I'm going to have to ask you to leave." He came toward us, presumably to walk the lady out.
"If you touch me, I'll call the cops!" she said.
I closed my laptop and sat back to enjoy the drama.
Go ahead "Joe said "call the cops."
"Why don't you call the cops?" she retorted.
"I don't have to" said Joe. And with that, Lewis, an off-duty cop who'd been sitting at the bar, walked up to the woman and flashed his badge.
"Put the magazine back and leave now," he commanded.
She did as she was told. With tradition and order restored, I went back to my writing.
Tradition and order would seem to have been restored in the equity markets as well. But just like at Joe's, an idyllic environment can change dramatically with the introduction of an unexpected visitor.
What buzz killer is coming to call on Mr. Market? Read on.
Is it Time to "Get even and get out?"
After the big move off the bottom in March, many investors are considering wading back in to the water. Some believe the stage has been set for a new bull market. I don't buy it. Take a look at the chart below, particularly, the volume.
As you can see, despite the surge in the markets, trading volume is low and has been declining. Low volume suggests there are simply not a lot of buyers.
The foundation of a new bull market is not built on low volume. The key to this rally has been the tapering off of aggressive selling. Why? Investors are waiting for higher prices.
Taking a loss is difficult for most investors. Investors typically bring a "get even and get out" attitude to their portfolios after they've suffered big losses. Look for these buyers to start selling again, the closer they get to "even". On the other hand should this rally falter look for these "even and outers" to lose hope and resume selling. Either way, we will see more selling than buying down the road. Not exactly a prescription for a rising market.
"I'll gladly pay you Tuesday for a hamburger today."
The current headlines are soothing. Ben Bernanke says prospects for near-term growth appear good. Existing home sales rise a surprising 7.2%. GM is rehiring workers and even paying overtime to meet new demand.
Good news? Maybe if your name is Wimpy, Popeye's sidekick, who is quoted above.
The government has simply shifted future demand to the present. The "Cash for Clunkers" program has taken a legion of potential car buyers out of the market for a new car for 7.1 years! That's the average period of car ownership. The $8,000 tax credit for first time home buyers has done the same thing for potential homeowners.
Of course, borrowing from the future to pay for something today is something that Wimpy and the government have in common. And as the lady whose cash was all tied up found out at Joe's Cigar Bar, nothing is for free.
On Friday, we asked for your thoughts on Bernanke's re-appointment campaign and you didn't disappoint…
Around here, we don't think too much of the guy… and even less of the usurping organization he represents. But our own Christian Hill thinks Bernanke should get another appointment. "He got us into this mess. Let him get us out of it."
Subscriber, PJ, agrees. "Helicopter Ben should be re-appointed," he writes. "I think by the end of next year we will have Obamageddon. Ben should be around to face the music."
But these two mixed endorsements were the only love Ben could muster from the IDE readership.
RL says, "Fire his stupid, incompetent ass!" JDZ put it in a slightly different way. "Fire his rotten, lying ass!"
He goes on to write, "This is the guy who is part of the problem, who doesn't give a damn for the electorate or our government. Keeping him on board will only prolong the access that the Huns and Visigoths have to plunder taxpayers' money. Hell no, he shouldn't stay!"
According to SB, the entire issue of Bernanke's re-appointment is a diversion.
"European central bankers have been on course for global dominion through debt for over a quarter of a millennium. What possible difference could it make who they decide to place in the driver's seat at the Fed? The Fed chairman is a hired bus driver. He no more chooses the route than do "world leaders."
"Bernanke can't use a hanky without permission, and the same would be true of any replacement. Anyone suggesting otherwise is at least one of three things: disingenuous, deluded, or a dolt."
Well, SB, our own Jon Herring agrees. Here is what he said today when we met to review the news:
"Bernanke might be the "Chairman" of the Fed, but he is nothing but a lackey. He receives his orders from those higher up. And those "higher ups" are a supranational banking elite who care nothing about U.S. sovereignty. To express your preference for one Fed Chairman over another is akin to quibbling over which robber you would prefer to burglarize your house."
On that note, we'll leave you with some advice…
The U.S. dollar has lost more than 90% of its value since 1913, when the Federal Reserve Bank was created. It has lost more than 50% of its value since 1987, when "Easy Money Al" Greenspan began his tenure at the bank.
It would not surprise us to see this trend to continue. In fact, considering the recent massive expansion of the money supply, it might quicken.
There are investment opportunities out there – even in the banking industry. But those are for the speculative portion of your portfolio. Take action now to protect the bulk of your wealth.
We are recommending bond plays, select dividend stocks and hard assets, including gold, silver, oil, and the companies that pull these natural resources out of the ground.
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Good Investing,
Bob Irish
Investment Director
Investor's Daily Edge
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