Danny Fontana

Craving Capitulation

2010-06-30T14:56:12Z

So was yesterday's market action enough to make you throw in the towel? Did the constant bleating coming from the talking nanny goats on CNBC scare you sufficiently to sell all of your stock holdings and go to cash? If so, welcome to the world of total capitulation. That is when the individual investor turns into Popeye and says, "that's all I can stands; I can't stands no more.?

So, is that you bunkie? The phenomenon know as capitulation is an important indicator of future market movement. If we have indeed reached that point, then fear is the dominating emotion and the stock market most likely is at its cheapest point. I call the scenario "shaking out the riff-raff", because most folks can't handle severe market declines. The fear factor takes over and they bail. Inevitably, the market goes back up. The best example I have of this is March of 2009 when the stock market on the Dow hit 6,500 down from 14,200. That was the breaking point; you all bailed, and the market marched forward 70% in 9 months. It was a great move and one of the more bullish in history and my guess is that most of you missed it having sold your holdings back in March.

That is the face of capitulation.

So, did we hit it yesterday? I don't think so. Make no mistake, yesterday was not fun, but I think people are still kind of shell shocked. I still don't believe that folks are in this market given the volatility and the bad news bombarding them everyday. So, if they are not in the market, they can't get out en masse. That's the point. For now, the market is in a trading range between 9,800 and 10,300. The S&P 500 index got very, very close to breaking support at 1041. All of the pundits were saying that if the index closed below that level and stayed there for another 24 hours, then the next support was at 980 or about 6 percent lower. We could see that. Would that get you to bail? I still think not. For the time being, we have bigger fish to fry than a 6 percent down move. What are we going to do about a free market economy that, everyday, gets less free. That is the real issue. Until we start to get answers about government spending and money policy vis-a-vis de-leveraging, the market stays locked into a short trading window.

Here's what the individual investor ought to be doing while bemoaning a government out of control; learn as much as you can about markets and investing. Start by reading THE INTELIIGENT INVESTOR, by Benjamin Graham and Thomas Dodd. Drop me a line and let me know what you think. After 25 years in this business, it remains the best book I have ever read about understanding the stock market.

Til next time.....

Krugman's Folly

2010-06-29T14:04:46Z

Paul Krugman is a columnist for the NY Times. He is also a left wing, liberal pseudo economist who wants to re-write history. Krugman recnetly took on the G-20 summit for failing to "get it". The "it" in Krugman's diatribe has to do with further government spending (imagine that). The astonishing thing to me is that it was Krugman who urged last years bottomless government spending in some insane hope that jobs would be created as a result. This deficit spending did not create jobs; it cost jobs as all government programs are wont to do since governments don't know how to do anything efficiently. So, what's the answer for Krugman? More spending. What's the definition of insanity. Isn't it something like doing the same things and expecting a different result. It is to the G-20's credit that they are refusing to go along with the Obama administration's insanity and are trying to de-leverage. This is getting old, folks. Now here is the real problem. The United States is going to be stuck in an economic malaise that last at the outside a couple of years. Even with a Republican led revolution in November, undoing this damage is going to take a very, very long time. I am not normally a doom and gloomer, but clearly, there is much wrong with America economically given the liberal penchant for higher taxes, increased spending, union favor, and income distribution. All of these things cause growth to stagnate. The hope rests with the rest of us. If it is true that Americans vote their wallets, the bums get thrown out in November. The problems however remain. If we are to emerge from this horribly stupid ideological nightmare, we simply must be willing to take an honest look at history. Somebody needs to shout BS when the President says that spendiing is working. Somebody needs to shoult BS when Joe Biden trumpets an insane plea for higher taxation or when Barney Frank (who caused the Fannie?Freddie dilemma in the first place) ignores the same and calls it financial regulatory reform. Somebody needs to identify that regulators are nothign more than government soldiers who enter the fray after the battle is over and shoots the survivors. The answer is not more government. The problem is more government. When will we admit that the emperor is buck naked? Folks, there is comfort on the horizon and it rests within each of you. You know the truth. We have to believe int he biblical mandate that the truth shall set us free. Because it is freedom that is the answer. More not less. Can I get a witness?

The Problem with Joe and Jane America.

2010-01-26T18:14:00Z

America is in a world of hurt economically, politically, culturally and spiritually and it is officially and collectively our own fault. It is not the fault of Nancy Pelosi, Harry Reid, Barack Obama, Hillary Clinton, George W. Bush, Karl Rove, evil bank CEO's, or purveyors of fast food, cigarettes and other vices.

It is Joe and Jane's fault. And, by Joe and Jane, I mean go look in the mirror.

In a representative republic we get the government that we deserve. The sad truth of today's America is...we deserve this. And, by this, I mean pain. Humans react any number of ways to emotions like grief, sadness, anxiety and fear. But, America is not being emotional right now. America is in pain, and pain has a way of simplifying processes.

We obey pain. The more intense it gets...the more we seek a way to get rid of it. And therein lies America's problem. I worry that Joe and Jane have bought the lie that the best approach to national healing is to numb the pain, and wait for it to eventually go away. History demonstrates that numbing the kind of pain that America is in only leads to more severe pain. This kind of pain is indicative of a chronic injury. Chronic injuries are meant to be faced and overcome...not numbed.

With that as a basic premise, my supposition on how we achieved this pain is predicated on the idea that we haven't done the work necessary in order to make informed decisions. And, in not doing that work, we have created a scenario where no one remembers the lessons from our past on how to alleviate said pain.

Instead of taking the time to focus on what our history tells us about getting rid of pain, we've bought into the notion that there must be an easier and better way. No one reads beyond the headlines anymore. The pyramid has become so inverted that Joe and Jane America believe almost anything you throw at them...as long as:

(a) It isn't boring and...

(b) It sounds right to them.

And far worse, any enterprising mind with an ax to grind and a decent publicist can become a foremost authority on redefining basic American fundamentals (like the free market and the constitution) as long as he or she:

(a) Is good at sounding right and...

(b) Is not boring.

I fear that our nation's worldview is in danger of becoming what America spent the first two hundred and thirty two years of our history fighting against. And, far worse, those forces that seek to destroy what made this nation great are doing it from within our Republic.

James Madison warned that faction from within would be the biggest enemy to this, the greatest economic and political experiment known to mankind. I fear that his prediction has come dangerously close reality.

It is Joe and Jane's fault. And, by Joe and Jane, I mean go look in the mirror.

There is probably no bigger divide in America ideologically than the argument regarding big government or small government. Should we be spending more on social programs? Is it appropriate to tax the wealthy more in order to pay for those programs? What about Healthcare Reform?

How much do Joe and Jane actually know about any of those issues? Have they read anything that would give them the foundation to render a just decision on matters like these? Regarding taxes and the re-distribution of wealth, where are they getting their information? An unbridled desire for the latest, hottest juiciest information has placed TMZ ahead of the Wall Street Journal...or God forbid an actual legitimate history book. Don't believe me? Go to your facebook page right now and ask how many of your friends have read Common Sense.

Let's not pull any punches here either...

How about the furor surrounding the definition of marriage? Other than an emotional, visceral reaction, whether fueled by religious fervor or sentimental cultural drivel, how many have actually studied the issue? Have Joe and Jane taken the time to read what religious figures like Jesus or Muhammad actually taught about the institution of marriage? And, if Joe and Jane are atheists...have they read the well-documented record of all of the great Republics throughout history and what happened to them soon after they bent politically towards a more culturally tolerant national policy as it pertains to the marriage of one man and one woman?

No.

A faction from within the republic has wiped all of this information from the history books, brainwashed at least 3 generations of Americans and made traditional American family values the most controversial concept in the eyes of Madison Avenue (who control the flow of information in this country).

It is Joe and Jane's fault. And, by Joe and Jane, I mean go look in the mirror.

Exacerbating our collective ignorance is the fact that somewhere along the way Joe and Jane lost the spirit to pick themselves up by their own bootstraps.

Americans are angry over what they perceive is being done to them. If they lost their job, then somebody else caused the malady. If they can't pay their mortgage, the fat cats on Wall Street are the source of their pain. If their credit card bills are straining their budgets, then the card issuing banks are to blame. The slow creep of the progressive faction's efforts to marginalize our traditional Judeo-Christian worldview has redefined the ethic upon which our forefathers built this great democracy. And, in doing so, we have de-stabilized the foundation of The United States of America.

That foundation is hope. Hope that tomorrow will be better than today. Hope that inspires this generation and the next to never lose sight of our dreams...no matter how much pain we experience.

We have replaced this hope with entitlement. Entitlement is societal ether, numbing the pain and deadening the pursuit of happiness.

Folks, it is a simple equation. If you take away Joe and Jane's ability to reach for their dreams, then you have taken away their life and their liberty. The Second Continental Congress knew that these three fundamental "inalienable rights" do not work independently. And, so do those in government today who would forsake these rights in order to create a more "equitable" and "tolerant" society.

I believe that the root problem is a systemic laziness fueled by the fact that Joe and Jane would rather get their information from the internet and TMZ, than take the time necessary in order to understand the tyrannical nature of the progressive faction and their desire to centralize this economy. Don't believe me? Go to your facebook page and ask your friends if it is possible to acquire a student loan from a private lending institution.

But Joe and Jane don't really care too much about all of that anymore. Joe and Jane, in all of their soaring rhetoric about serving those who have the least, have become so self-serving and ego-centric that if something does not directly impact their narrow self-interests then they choose not to focus on it. In time, the natural byproduct to this is a nation of infants who lack the maturity or humility to accept what experience teaches is best for our nation, and instead cry when they see others with something that they do not have. A progressive would have you believe that in that situation, government should play the role of parent, and has the responsibility to see to it that there are no unhappy babies. Anyone who has been the parent of multiple children knows that all this will accomplish is stifling the growth and maturation of the upset baby, and probably make the other baby angry.

The solution to all of this is simple. You allow Joe and Jane the opportunity to grow up. Teach them to make decisions for themselves, and reward those Joes and Janes who actually do something with their lives. The problem with the presentation of this solution is that liberal progressives have raised a generation of Joes and Janes who now have a stranglehold on government, education, and the media...faction.

Rather than manage by what is right based on our traditional core values, they choose to manage by the litmus test of what:

(a) Sounds right and...

(b) Is not boring.

Don't believe me? Go to your facebook page and ask if anyone has a problem with an oil company or bank turning a profit this year?

If I contend that government is not the solution to our situation in life; then, Joe and Jane owe me an explanation as to why that cannot be. That solution must be centered on something more than "because that is the way I feel." That is an infantile defense of one's position and not worthy of credence when discussing matters of the common defense, the general Welfare and the Blessings of Liberty. Here is the reality facing each and every one of us; it should no longer be good enough to attribute solutions to massive problems to those that:

(a) Sound right and...

(b) Are not boring.

That is how we got into this mess in the first place.

Joe and Jane are the solution. And, by Joe and Jane, I mean go look in the mirror.