Making Money Alert
Get Ready for a Breakout
05/27/2009
Stocks continue to climb higher and higher, and despite some big sell-off days, the predominant trend since March 9 has been up, up, up.
Now, over the past couple of weeks the market has been in somewhat of a consolidation mode, meaning that stocks have been building what's called a technical base right at the 900 level of the S&P 500. Meanwhile, the move higher in the S&P 500 along with the sinking of the 200-day moving average now has brought stocks close to a new bull market breakout.
As you can see by the chart above of the S&P 500 index, stocks are trading just below the 200-day moving average (red line). If we see the value of the index break above this key technical indicator, we could be looking at a very big surge in stocks.
How big?
Well, if the index moves above the 200-day average -- particularly on strong trading volume -- I think we could be in for a 15-20% rise above current levels. That would put the S&P 500 well into the mid-900s, and possibly well beyond.
In my Successful Investing advisory service, we've used the 200-day moving average to help us identify the trends in the market for more than three decades. Our experience tells us that positioning yourself in the right assets based on the key technical indicators of the market is the way to make big money in stocks.
If you'd like to find out how to use the 200-day moving average to your advantage, then my Successful Investing advisory service could be right for you. Hey, following the long-term trends in the market is what Successful Investing is all about, and we've been making readers money by following market trends for more than 30 years.
To find out how you can put the power of trend following on your side, click here.
There's been so much one-sided attention in the press about the bailouts and the government's role in "stimulating" the economy that it's easy to think that there are no alternative theories as to what to do to solve the crisis. Well, it seems that there is an alternate view, and one company has decided to feature the writings of one of that view's most articulate spokespersons. Now here is my friend and colleague Jim Woods with all the details.
Bravo Barnes & Noble
By Jim Woods
In a January 9, 2009, article in the Wall Street Journal, Stephen Moore, the newspaper's senior economics writer for the editorial page, wrote a story titled, "Atlas Shrugged": From Fiction to Fact in 52 Years . In his excellent piece, Moore offers us the following observation:
"Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that 'Atlas Shrugged' parodied in 1957, when this 1,000-page novel was first published and became an instant hit."
Indeed, there has been a renewed interest in the works of Ayn Rand, and particularly in her magnum opus, "Atlas Shrugged," and one chief reason is because Rand knew that once you let the government start meddling with private industry, the inevitable result is fiscal -- and moral -- chaos.
I have been an admirer of Ayn Rand since the early 1980s, and have read nearly every word she's ever written. But even as a confirmed Rand devotee of nearly thirty years, I too was inspired to re-read "Atlas Shrugged" a few months ago. I must say that the novel's prescience and nearly pinpoint accuracy regarding the steps taken by government to "solve" economic problems that it originally created is just uncannily spot-on.
Given the relevance of her writings today with respect to the direction our country is headed, and due to the resurgence in popularity of her readership, bookseller Barnes & Noble has decided to feature the works of Rand in a special display in approximately 2,000 of its retail stores.
"I am happy to see that Barnes & Noble thinks these books are so commercial," said Dr. Leonard Peikoff in his May 25, 2009, weekly podcast. A close associate of Rand for 30 years, Dr. Peikoff was designated by her as both her intellectual and legal heir.
I echo Dr. Peikoff's sentiment here, and would like to say bravo to Barnes & Noble for choosing to feature a writer whose views represent such a powerful challenge to today's mainstream orthodoxy that government is the solution to society's ills.
I also want to congratulate the company for recognizing that there are big profits to be made by selling a book published more than 50 years ago. In fact, given that Rand was such a champion of capitalism and profits, I suspect that she also would have found it both ironic and gratifying that her work would be displayed in bookstores as a de facto antidote to the prevailing collectivist ideas of our time.
So, if you want to treat yourself to a great intellectual experience -- and one with the timely brilliance that addresses the philosophic bankruptcy of today's mainstream economic thought -- then go to Barnes & Noble and pick up a copy of "Atlas Shrugged."
I guarantee you won't come away from the experience unchanged.
Jim Woods is a freelance journalist specializing in the economy, the markets and politics. He is a frequent contributor to Doug Fabian's Alert, as well as many other publications. He celebrates the virtue of making money from his home on the California coast. He welcomes your comments, and can be contacted by clicking here.
Don't Let Your Retirement Be Funded by a Ponzi Scheme 2
The just-released 2009 Social Security Trustees Report shows that the recent economic woes have had a big negative impact on the Social Security budget. The report projects that by 2016 Social Security spending will exceed the revenue it receives each year from all of us.
But just how bad is the situation?
Social Security is a pay-as-you-go system, which simply means that the government takes your money and gives it to current recipients of Social Security benefits. The government, in effect, guarantees that it will confiscate (via taxation) money from one block of people (workers) and give it to another block of people (retirees).
Does this type of investment architecture sound familiar to you? If you are reminded of the Bernie Madoff Ponzi scheme, then you and I are on the same page. In essence, the Social Security system is basically just a very big version of a Ponzi scheme, and as long as the numbers work out everything should be okay.
But what if they don't work out?
In the 1950s, the Social Security system's worker-to-beneficiary ratio was approximately 16.5-to-1. However, now that the average lifespan has increased, the worker to beneficiary ratio has dropped to 3.1-to-1. Within the next two decades, that ratio is expected to drop to 2.1-to-1.
I think you can see that in order to keep its Ponzi scheme going, there either will have to be more revenue raised -- i.e., an increase in the Social Security tax -- or a decrease in Social Security benefits, or a combination of both.
So I ask you this, why would you trust your retirement to a government-sanctioned, Madoff-style investment scheme?
The way I see it, the only person you can trust to look after your retirement is you, and that means it's imperative that you take responsibility for stewarding every dollar you make.
Don't let your retirement be determined by a Ponzi scheme. If you need help managing your retirement assets, why not check out my High Monthly Income advisory service? This service is designed to help you preserve capital and generate the retirement income you need to live the life you deserve.
For more on how you can start maximizing your retirement efforts, click here.
Don't Tread On Me
So be it
Threaten no more
To secure peace
Is to prepare for war
-- Metallica, "Don't Tread On Me"
Understandably, over the last nine months most of America's attention has been rightly focused on our near-unprecedented economic woes. But now that things have stabilized somewhat on the financial front, we have to remember that we face many exogenous threats from the likes of North Korea, whose recent nuclear saber rattling is cause for concern by the entire free world. Then we have Islamic extremists running Iran, not to mention terrorist organizations such as Al Qaeda. The bottom line here is that with all of the money going to bail out the banks, the auto industry and delinquent homeowners, I hope there is enough money left to secure the peace by preparing for war.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else. Click here to Ask Doug.