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Market Oracle FREE Newsletter

UK House prices predicting general election result

The Summer Stock Market 15% Discount Sale Continues

News_Letter / Stock Markets 2011 Nov 15, 2011 - 01:41 AM GMT

By: NewsLetter

News_Letter The Market Oracle Newsletter

August 14th, 2011 Issue #16 Vol. 5


The Market Oracle Newsletter
August 14th, 2011            Issue #16 Vol. 5

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Real Gems

The Summer Stock Market 15% Discount Sale Continues

Stocks Stealth Bull Market 2011 Ebook Direct Download Link (PDF 2.8m/b)

Interest Rate Mega-Trend Ebook Direct Download Link (PDF 2.3m/b)

Inflation Mega-Trend Ebook Direct Download Link (PDF 3.2m/b)

Dear Reader

The stock market managed to make it through to the other end of a wild week having survived the bears repeatedly letting off both barrels at the bulls, throwing everything they had at the market, starting with the downgrading of the US debt from AAA to AA (eventually to junk), intensifying in core eurozone countries such as France itself now also in the a firing line for a downgrade, however by the end of the week the net result was a market that closed higher by about 100 Dow points against last Sunday evenings Dow futures of 11,170.

High volatility became extreme volatility with the Dow yo-yoing by more than 500 points virtually every day, which presented accumulating investors multiple opportunities to buy stocks at deep discounts of more than 15% off recent highs as the Dow retraced to an intra-day low of as deep as -17% off the bull high at which time the usual suspects appeared in the mainstream press, (regurgitated in the blogosfear) to proclaim the end of the "bear market rally" and resumption of the bear market, which as is usually at the precise time that the stock market would reverse direction sharply higher.

The old 1930's charts of the Great Bear Market were again used to justify expectations of what perma bears and deflationistas' had in mind for what was expected to occur next, (for the umpteenth time), though those that spend so long staring at these 1930's charts are missing the most obvious point, which is what?

  • Dow 1929 Peak 381
  • Down 1932 Bottom 41

What is that saying ?

Think about it for a moment, Dow 1929 peak 381, Bottom 1932 41.

Where does the Dow stand today ?

11,270ish.

What's 11,270 divided by 381 ?

What's 11,270 divided by 41 ?

What's the trend trajectories off either the 1929 bull market high or the 1932 low ?

Where do the trend trajectories imply the Dow will be in 5,10, 20, 40, 80 years time ? Significantly Higher or lower ?

If there is a constant battle between Deflation and Inflation then why is this not reflected in the general stock market indices such as the Dow?

It is because the general stock market indices are locked into an inflationary exponential growth spiral, as corporate revenues and earnings (profits) are leveraged to rising commodity and consumer prices (fuelled by perpetual currency debasement) AKA the INFLATION MEGA-TREND, trends of which are further enhanced by expanding profit margins as a consequence of increasing worker productivity as technological advances are taking place exponentially, for instance today's smartphone has more processing power than the whole United States had 50 years ago! And the technological advances over the next 50 years will be exponentially greater!

You may argue that companies go bust thus this cannot be be so ? Yes, companies do go bust, but they get thrown out of the general stock market indices long before they disappear into history and replaced by EARNINGS GROWING companies, a fact that apparently fails to register in the consciousness of deflationistas' who place theory and models of what SHOULD happen over the REAL world of experience what actually takes place in investor portfolios.

The bottom line is that there is no battle between deflation and inflation because deflation only exists in the minds of ivory tower academics or other vested interests that are paid to pump out economic propaganda to keep populations sedated on the consequences of the ever present Inflation Mega-trend, where anything less than 2% annual compounding of official inflation (that is significantly lower than the real rate of inflation that people experience) is deemed to be bad therefore supportive of the fiat currency money printing system that all governments are engaged in utilising to enable then to spend monies they do not have by conjuring it out of thin air.

I'll stop here else I will just be repeating what I have already written at length countless times over the past 2 years and iterated in the Inflation Mega-trend ebook (FREE DOWNLOAD).

Stock Market inflation Mega-trend Investing

Stocks of rising divided companies are one of the best long-term inflation mega-trend hedges therefore oscillations around the general stock indices growth spiral should be utilised to both bank profits and accumulate into which means bear markets and market panic events are buying opportunities. Yes, EVERY CRASH and BEAR MARKET without exception has been a buying opportunity for stocks in consistently raising dividends because they hedge your cash against inflation, because deflation does not exist in our fiat currency money printing world.

This is how I invest and grow my stocks portfolio, bank profits when the yields drop, accumulate stocks when the yields rise, a simple yet effective strategy where the yield is far more important than the stock price, because that is what will generate the return and DRIVE the stock price higher over the long-run.

So all I saw this past week was a summer discount sale of as much as 15% on the indices, though the reality is that solid dividend stocks are not only a hedge against the Inflation Mega-trend but also against market panics, which means I was lucky if I was able to secure a discount of 8%, let alone 15% on target stocks, which matches my previous long-term study of such companies that on average can be expected to fall at half the rate of the general stock market indices during market panics and bear markets followed by greater upside on the other side as a consequence of consistently rising earnings and therefore much lower P/E Ratios.

There are countless such dividend stocks such as Tesco, BHP, Vodafone, BATS, Coca Cola, HSBC, Glaxo, Royal Dutch Shell to name just a few. Key metrics to look for are consistent high dividend payers / raisers, good dividend cover and a low P/E.

So, if you get your investing mindset right (psychology) then market panic events such as last week are not times to panic, but rather a time to stock up on higher yields courtesy of lower stock prices of between 5% to 15% compared to where they were barely a few weeks go. Always Keep Yield in Mind, for you only need to know price if you intend on SELLING, after all when you put money in fixed rate savings account / bond do you ever consider the exchange rate of your domestic currency ? No you consider the yield, which is how you should also approach stock market investing.

Now before you run off an buy dividend stocks do remember that investing in the stock market is high risk and for the long-term, if you cannot acknowledge these fundamental facts of stock market investing and are prone to start sweating on every market dip then you should not be considering investing in even safe high dividend yield stocks let alone big name tek stocks that the mainstream media obsesses over.

Look, even if worse comes to the worst and stocks fall say another 20% by the end of the year, that translates into a 10% risk for dividend stocks ( an opportunity to accumulate more at an even higher yield), against which you are hedging against the long-run impact of the Inflation Mega-trend that looks set to deliver year on year rising dividend income ultimately matched by rising stock prices as a consequence of falling P/E's. Though my expectations remain for general stock market indices such as the Dow to make NEW bull market highs by year end.

And don't forget than there is a literal avalanche of scared money sat in the likes of U.S., UK and German bond markets, all it would take is a little stability in the economic data for stocks to spike significantly higher.

Are British Police to Blame for Extent of London Riots and Looting?

Whilst The US was being stripped of its AAA credit rating London high streets were being stripped of their consumer goods. Many thousands of residents and business owners were all saying the same thing, "Where is the Police?"

The spark for the trouble was the shooting on Thursday 4th August of an Afro-carribean male by police in Tottenham (London) under Operation Trident which targets black on black gun crime, with the initial protest at his killing starting in Tottenham on Saturday 6th, then spreading across London on subsequent nights as rioters and looters took advantage of an apparent lack of police response, utilising social media sites such as Twitter, Facebook, and smartphone's such as the Blackberry to quickly organise and target rich pickings for consumer goods on high streets.

Rampaging mobs of looters after clearing high street shops of their goods then took the insane step of setting them alight, destroying many livelihoods and homes.

The rioting / looting spread further across England's inner cities with severe disturbances taking place in at least 6 cities including Birmingham, Bristol and Liverpool which culminated in the killing of 3 asian males (hit and run) in a group of 80 in Birmingham that had sought to protect their homes and business against looters due to the lack of police response. The killings had risked the start of race riots which were prevented by the victims parent's dignified calls for calm.

However unlike the early 1980's, Britain has become the CCTV capital of the world with more cameras than even totalitarian states which ensures that the vast majority of the rioters, looters and arsonists would be be tracked down and brought to justice, which is small comfort to those that are losing everything during each nights rampage.

Whilst many in the media have focused on the social causes such as economic austerity cuts, social exclusion, lack of jobs for possible reasons why. The truth is that the real reason for 90% of the looting masquerading as rioting was because the Police let it happen.

Britain's extensive 5 million strong CCTV camera's mean that for several years the police has had an apparent policy in action of letting civil disorder / crime take place. Why ? Because then the police are better able to convict with the aid of cctv and other video footage than had they attempted to intervene at the time resulting in lesser charges fewer convictions. In fact elements of the police have been actively engaged in inciting crime and demonstrations to take place so that evidence can be generated enabling convictions to take place as I wrote last February.

The recent highly public case of under cover police infiltration and incitement operations on climate change activists is further evidence of a defacto police state in action where under cover police officers are inciting protesting groups to break the law. How many more hundreds of under cover police operatives are out there who's primary purpose is to incite a group or protesting crowd into a course of action that they would not have otherwise undertaken so that the police can generate evidence for prosecution.

The Police, by standing back and letting riots take place for several days with little action other than filming the perpetrators is just a continuation of this policy of letting rioting / looting fools generate evidence against themselves.

Unfortunately the lack of police response sent the green light to many more people than the usual suspects as students and those in low paid work that were bitten by the looting bug and fell into the police evidence generating trap and in the process have now likely wrecked their futures as the Police have already arrested near 3000 rioters / looters based on video footage evidence as homes are raided for evidence and suspects arrested.

Off course those that broke the law are nothing more than common criminals that deserve everything that is thrown at them as they are brought to justice, but the Police did take several steps back and allow the Riots / Looting / Arson to take place for several days which resulted in far more crime than would have occurred had the police acted following the initial disturbances in Tottenham and failure to respond to subsequent disturbances. One could speculate that this could have been part of a collective message from the Police to the government as to what it can expect to happen more often if the planned Police cuts are implemented.

Another point to consider is that the frenzy of looting activity was probably further fuelled by the mainstream broadcast press as it pumped out blanket 24 hour coverage of looting across London's high streets without any police presence for hours at end.

Your bloated analyst having gorged himself on high yielding stocks during the week.

Source and Comments: http://www.marketoracle.co.uk/Article29886.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2011 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.

Stocks Stealth Bull Market Ebook DownloadThe Interest Rate Mega-Trend Ebook DownloadThe Inflation Mega-Trend Ebook Download

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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