Pres. Obama's Budget Plan - Pros, Cons, My Thoughts

Today, I actually have something to say so the market overview is going to be quick.

Asia
Nikkei => 7,568.42, +110.49, +1.48%
Hang Seng => 12,811.57, -83.37, -0.65%
Straits Times => 1,594.87, -22.57, -1.40%

Europe
FTSE => 3,830.09, -85.55, -2.18%
DAX => 3,843.74, -98.88, -2.51%
CAC => 2,702.48, -42.36, -1.54%

U.S.
Dow => 7,062.93, -119.15, -1.66%
Nasdaq => 1,377.84, -13.63, -0.98%
S&P => 735.09, -17.74, -2.36%

My portfolio:
AMD => $2.18, +0.09
AMD DG => $0.10, unchanged
F => $2.00, +0.02
HRP JZ => $1.50, unchanged
NLH JZ => $1.55, unchanged
NG => $2.86, -0.07

When President Obama revealed the initial steps taken by his economic budget committee, he addressed agriculture, energy, unemployment, benefits, taxes, industrial waste, health care, and education. That is a lot of information at one time. It definitely says a lot, but it also leaves out a lot. The only way to get that information is to actually sit by and read all that information and I am not one to do it. But I will give you my opinion.

The biggest pro that the media is failing to see, that I believe Pres. Obama wanted to get across is that his administration did hit the ground running. As mention above, a lot was addressed in a short a short address. However, that is also one of the biggest cons. Too much at one time.

In addition to there being too much at one time, it also, as has been the norm, failed to go into substantial detail about the positive moves that have already been taken. Sure, he mentioned an increase to the COBRA health care benefit, as well as the unemployment pay benefit, but beyond that Pres. Obama went into generalities about the other positives in his budget plan.

I believe there should have been more detail given about how his administration is promoting the development of the wind and solar energy industry. Pres. Obama failed to elaborate on how his administration is going to create jobs to fulfill the reforms to agriculture, health care, and education that he mentioned. By failing to elaborate on those programs, the word "cut" stood out more as a negative.

The cut to the tax deductions of those making more than $250K stood out as a negative, that all of the media personalities, took as an attack on them. That was all that was needed to get them on the offensive. Today, several media outlets, like CNBC and the New York Post, railed against this budget plan. Because they are the ones that are the means of disseminating the news to the masses, they are going to skew the information in their favor. They are going to focus on all of the possible negatives that could result.

The cut to the health care programs and educational programs that do not work, should have been reworded. Because of the wording, the health care sector took a hit and dragged the market down. A better way to have worded it would have been to say that "the funding of health care subsidies will be redistributed to more effective programs to create jobs for the American people", or that "the funding of failing programs will be added to the budget to accomplish the electronic medical record keeping program." Anything along those lines would have surely reduced the hemorrhage of the sector.

Two things that seem to be the biggest issue are the cutting of taxes and the closing of the loop wholes. Sweeping changes like that without explaining how that helps the economy only adds to the economic decline. The mentality of the "rich" is that if they can't reduce the money they pay in taxes by some sort of means, then where is the incentive not to hoard it? In order for the "rich" to feel comfortable letting go of the cash, tax deductions for doing so are needed. It would have been better to say that "the tax loop wholes that allow businesses to export jobs will be replaced with deductions for creating jobs in the U.S."

The need for the government to spend billions per project to stimulate the economy with a resulting price tag in the trillions is unnecessary. The private sectors are already equipped and innovative enough to do it on their own, they just need the incentive and capital to do it. Have all the project proposals that the senators and representatives want to accomplish put on a government website, where U.S. based businesses can read them and apply with their business plans and bids to do them. Let the incentive for them to do so be government funding, and tax deductions for hiring U.S. citizens and residents. Then lets see if you don't get bipartisanship in congress. I am confident that you will.

That is my opinion, you can take it or leave it.

Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.

Today's Market Recap.

Greetings! How did the markets fare today? Lets start with the international markets.

The Asian markets produced a mixture of results. Although all three major indecies opened higher, but only one was able close with a gain. The Nikkei closed at 7,457.93 for a loss of -3.29 points, a -0.04% move. The Hang Seng closed at 12,894.94 for a loss of -110.14 points, a -0.85% move. And that leaves us with the Straits Times which closed at 1,617.44 for a fractional gain of +0.65 points, a +0.04% move.

In the European markets all three major indecies had bull days. The FTSE closed at 3,915.64 for a gain of +66.66 points, a +1.73% move. The DAX closed at 3,942.62 for a gain of +96.41, a +2.51% move. And the CAC closed at 2,744.84 for a gain of +47.92, a move of +1.78%.

The Dow closed at 7,182.08 for a loss of -88.81 points, a -1.22% move. The NASDAQ closed at 1,391.47 for a loss of -33.96 points, a -2.38% move. The S&P closed at 752.83 for a loss of -12.07 points, a -1.58% move.

Initially the three major U.S. indecies opened with a bullish warcry swallowing up the losses of the previous day in the first couple hours. This was on the rumors that the government aid deal with Citigroup may come out this week; also the news that the government continues to support private banking and not nationalization.

Shortly afterwards news that President Obama unveiled details about his 10-year budgeting plan surfaced. Following that news, it appears the bears went to market and cashed out, erasing all the progress that the market had made. Additional news that new home sales fell to a record low in January did not help the situation.

The media would have you believe what was heard in President Obama's speech caused the market to go down. But one could also argue that his speech made it go up, because during his speech the Dow rose back to an earlier intraday high. What did cause the market to go down was the realization that the budget cuts to all of those private health programs that were not working for the good of the citizens cause all investors to pull out of several of them. Chances are that as soon as understanding about which private health insurance companies were not waistful becomes apparent, those will start to go up while the rest will reform so that they will be viable to government subsidies.

I still find surprising that despite the assumptions about the bank stress test and the list of weak banks increasing didn't cause those sectors to decline. Four of the leading industries on Yahoo's Industry Center were banks. Sadly though the worries about the health care sector was over powering.

But there is some good knows. For the week, so far, the Dow is only down half of what it down at the end of last week and there is only one market day left. This investor thinks that profits taken today will start to funnel into other sectors, probably healthcare and education as those were the sectors talked about by President Obama.

My portfolio as it stands today:
AMD - My position on Advanced Micro Devices closed today down at 2.09.
F - My position on Ford Motors closed today down at 1.98.
FPL - Florida Power & Light continued to decline today breaking and holding below the support level that I was counting on for it to return to the up side. I will allow it to expire and not resubmit another one until I see evidence that a positive move is in the works. For that reason I shall be leaving it out of my posts until further notice.
HRP JZ - My 2.50Oct09 call on HRPT Property Trust (HRP) closed unchanged at 1.50
NLH JZ - My 2.50Oct09 call on Libery Media (LINTA) closed unchanged at 1.55

There are also two other positions that I had prior to opening this blog that I wish to include and will be commenting on.
AMD DG - I have a 3.00Apr09 call on AMD which closed down at 0.10
NG - I have a position on NovaGold which I added to today. Reasons? It's price has changed direction to the upside, and it has reached and bounced off of my indicators that it has been oversold and momentum has shifted. There is, however, a recent ceiling at about $4, so there may not be much room for it to go up, unless it breaks through. That is okay since the goal with this stock is to sell OTM calls against it so I am just increasing my stake for future use. NovaGold closed up at 2.93, but slightly under where I added to my position.

My day wasn't good but not that bad. I shall be looking for other opportunites and will be posting if I see something.

That is my opinion, you can take it or leave it.

Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.

Today in the Market

Well, today wasn't another up day as one would have hoped. Apparently, President Obama's speech lacked details again according to those that polled investor opinion, and the stock market was set to open lower. However, it didn't affect the Asian markets the same way. After the speech, the Asian markets continued to hold on to their gains and even picked back up again hours prior to it's close.

At the close the Nikkei ended at 7,461.22, up +192.66 points, or +2.65%. The Hang Seng closed at 13,005.08, an increase of +206.56 points, a +1.61% move. And the Straits Times closed at 1,616.79, +2.35 points higher, a marginal +0.15% move.

Unfortunately, it appears the European markets didn't see it the same way as Asia and was affected by the opening of the US markets towards the end of their day. The FTSE closed at 3,848.98 only an increase of +32.54 points or a +0.85% move after tumbling from a high of 3,884.06 to a low of 3,803.92, a deficit of -48.68 points from it's open. The DAX closed at 3,846.21 a decline of -49.54 points, a -1.27% move to the downside. The CAC closed at 2,696.92 a decline of -11.13 points, a marginal move of -0.41% to the downside.

Today the Dow closed at 7270.89, a decline of -80.05 points, or a -1.09% move. The NASDAQ closed at 1425.43, a -16.40 points, or a -1.14% move. The S&P closed at 764.90, a -8.24 points, or a -1.07% move. An overall, bearish flat day.

So how did I do in the market today? Well the intended trades of Advanced Micro Devices (AMD), Ford Motors (F), Liberty Media (LINTA, NLH JZ), and HRPT Property Trust (HRP, HRP JZ) executed today. My preferred stock of FPL didn't get moved into today due to moving lower. I still like it at this price but I am unwilling to change my entry and exit points. I will be resubmitting them for tomorrow.

Advanced Micro Devices - I was entered into AMD at 2.21 and the day ended with it at 2.22. Minus commissions this is a bearish flat day.

Ford Motors - I was entered into F at 2.04 and the day ended with it at 2.01, a bearish day.

HRPT Property Trust - I was entered into the long call of HRP JZ at 1.50 and the day ended with it at 1.50 still. Minus commissions this is a bearish flat day

Liberty Media - I was entered into the long call of NLH JZ at 1.55 and the day ended with it at 1.55 still, a bearish flat day.

Other than resubmitting my OTO order for FPL I have no other trades I am planning to make at this time.

That is my opinion, you can take it or leave it.

Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.

How do you figure that?

The following link is a video article on Yahoo! Finance where Aaron Task interviews Jon Najarian, President of OptionMonster.com.

Four Simple Steps to Resolve the Financial Crisis and Boost the Stock Market

In the above video article, Jon Najarian outlines three of his steps he thinks will boost the Stock Market and Aaron Task adds a forth one to the list. My opinion? A complete joke, except for maybe one.

1) Cut taxes by 10% across the board for corporations and individuals alike?
Ha! This is a good one! With such a budget deficit, how in the world is government suppose to function? Print more money? Devalue the US currency even more? And how exactly does that encourage other countries to buy our debt? It doesn't.

Cutting taxes is not the answer as so many want to preach. I understand that we want to get people to spend more, but that isn't the reason why they are holding on to the money they do have. It is the lack of job security.

How about this? Rewrite the tax rules. Supply scale able tax deductions for companies that higher US citizens and resident aliens. And add a temporary tax to anyone that imports any new people or outsources any new jobs out of the country, retroactive to January 1, 2009. Notice the concession there, I am not without compromise or compassion to grandfathering in people.

2) Raise the FDIC insurance limit to $1 million per account?
This is another joke. Jon mentions that the average American had his money spread across several accounts and with the financial situation pulled their money out. What numbers is he looking at. The average American barely has a $10,000 in their checking account much less $100,000 in any one account. The only ones that have remotely near that much in there account is the upper-middle class and the upper class. These account for less than a 25% of America.

The average American doesn't understand what FDIC insurance is or even trust it. That is why so many people lined up at banks to pull their money out and stuff it into there mattresses. Raising the FDIC insurance limit would only encourage a small amount of people to put their money back in banks if any at all.

3) Suspend mark-to-market accounting?
Good try! This seems like a good thing for the bank but it is a lousy thing for the tax payer. The banks screwed up. They should have to accept the debt they incurred. But a compromise can be reached. The bad bank idea isn't really that bad of an idea. It just needs a very rigid foundation.

My opinion is that the US government, after federally mandating a temporary moratorium on all foreclosures in process, should buy all of the bad real estate assets that the banks have at market value or the remaining principle value, whichever is least. And then supply a tax deduction to the banks for accepting their losses.

Then assign the government in which the real estate asset resides to auction it off. The capital from the auction then becomes assigned to the education and infrastructure budgets. See how cash can flow?

After all that is done, any remaining home mortgages on primary homes must be allowed to be refinanced at a fixed rate for the remaining principle regardless of the payment status of the borrower. Why not let up to date borrowers better their terms? And if the mortgage is backwards, any back ended interest is a loss to the bank. Another lump the banks should have to accept. But again, another tax deduction to the banks for accepting the loss.

Secondary homes? Well who needs one should be able to afford it. If you have one and can't afford it, you lose. Banks, put them on the auction block regularly until they are sold. Hire a rehabilitation professional to get them in selling condition. Nothing extravagant, just clean and presentable.

As far as regulations go, make it mandatory that the mortgage applicant be screened against the payment to be expected on the first month of the 6th year to determine if they can afford the mortgage instrument. That should prevent 5-1 ARMs from being sold to the majority of incapable borrowers. That mandatory tax records for the past two years.

If, after all this, some individuals still can not afford to stay in their homes, they probably shouldn't have been in them anyway. Those then also get seized by the US government for market value and distributed to the local government to auction off and the funds funneled into the education and infrastructure budgets.

4) Reinstate the uptick rule?
Now, since I don't short stocks or commodities directly, I didn't have a clue what this was. So I looked it up. Thank you Wikipedia. The uptick rule is a rule that pretty much states that a short trade has to be made at the next 'tick' higher than the last executed long sale or at market value if the last long sale was higher than it's previous long sale. At least that is how I understand it.

Well, Aaron Task came up with this one and he might have something here. If you think about it, without the uptick rule, shorters can do trades without restriction. And since the market can have unlimited gains but only a finite loss, resistance against profiting on loss is actually a good thing. It would help slow but definitely not stop the market decline. The financial sector needs to stabilize, people with a job need to feel secure, those that are looking for a job need to find one, and those with businesses need to be able to hire more from within the country. The only way to accomplish all of this is to uproot the problem in the financial sector, and provide the needed incentives to get credit and cash flowing correctly.

So, in conclusion, Jon Najarian is either a confused individual or someone with his own agenda. Considering he is president of OptionMonster.com, I lean towards the latter. But...

That is my opinion, you can take it or leave it.

Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.

Glad to be wrong.

Well I am happy to say that I am glad to be wrong about the market today. It almost completely wiped out it's losses from Monday on news that Federal Reserve Chairman "Helicopter" Ben Bernanke prognosticates that if the bailout works as planned, the recession may be over by the end of 2009, beginning of 2010. The Dow rose 236.16 points to 7350.94, short by almost 15 pints of yesterday's loss; while the NASDAQ and S&P did a little bit better. The NASDAQ rose 54.11 points to 1441.83 while the S&P rose 29.81 to 773.14 both bringing them into the green for the week. This usually means we will have a rally for a few days so I am going to be making a few more trades. We will see if the market can hold on to these gains for the rest of the week.

This morning I reported that I submitted a Buy order for FPL. The good news is that FPL did go up. The bad news is that it didn't go up enough to trigger a buy. It ended the day at 49.10. Several things show that this stock is improving. The highs and lows have gotten tighter, the price opened and closed above yesterdays closing and for candle stick readers, we have a Bullish Harami. The secondary indicators of the MACD and Stochastic show that the momentum is officially turning. For these reasons I am resubmitting my order but with slightly tighter parameters.

I submitted an OTO order for 9 shares of FPL with a Entry-Stop of 49.40, Entry-Limit of 49.56, and a Exit-Stop of 47.78. This defines a risk of approximately 4%. In addition I have also found a few more stocks that I like at this time. Below are the details of my orders.

Ford Motors?
Yes, Ford Motors. Out of the Big Three (GM and Chrysler being the other two) I can only believe that Ford will survive this recession without filing for bankruptcy. They have the best fundamentals of the three. They are also about as cheap as they are going to get before bouncing again. This is my order: 100 shares of F at 2.02-2.04 with a stop of 1.78. This allows for about a 13% loss.

Advanced Micro Devices
I am a fan of AMD chips. I really do like their performance over Intel. The sad thing is they have made some agreements in the past that have hurt their profit. That being said, I think they finally are getting better at there contract writing with their partners. They might be very well set up to start dominating the market again, but that won't be known for some time. Technically speaking though, everything seems just right. Momentum indicators are turning up and the price is on the floor. This is my order: 100 shares of AMD at 2.21-2.24 with a stop of 1.99. This allows for about a 11% loss.

Option Plays?
Yes, I am into options also. This weekend I found a few stocks that are actually fundamentally strong and in a very under valued price range. HRPT (HRP, a Real Estate Operations company) and Liberty Media (LINTA, a Broadcasting & Cable TV company). Both of them are dirt cheap as stocks but are even more dirt cheap as options, even way out in October. These are my orders: I submitted an order for the 2.50October09Calls (HRP JZ for HRP and NLH JZ for LINTA).

That is my opinion, you can take it or leave it.


Disclaimer: I am not a stock broker; I am not a financial advisor; I am not making any recommendations to you about what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.

The Market Sucks Right Now, But...

Right now the market sucks. It looks like nothing good can be seen on the horizon. But, if you look hard enough you can find a few shiny stones in the murky black. Todays pick and the usual blatherskite.

Tuesday, February 24th, the market is suppose to open with a little money in the pocket. I suspect that the same as yesterday is going to happen. The bulls are going to try for a rally, but the bears are going to claw them at the heal.

However, I do have one pick that might just buck the trend. It is a utility stock in my own little home state, and the provider of electricity for more than just my familiar home. It also provides electricity for much of the south-eastern states of the Union. I'm talking about FPL. Yeah I know utilities took a beating yesterday also but just about everything did. Strangely enough the major airlines had some upward as US Airways states that they will no longer charge for non-alcoholic beverages, but who is really traveling by air these days?

So, back to the pick, FPL. I am personally going to try for it today. My strategy is to Buy 9 shares at a price between $50.12 and $50.29. That is a Stop of $50.12 Limit of $50.29. I am also going to be protecting the majority of my "bet" with a OTO (One-Triggers-Other) Stop of $47.48. That is a position of just under $500 with a risk of about 6%. My target is the $55-$56 range. Which means a moderate gain of maybe $45. Not a whole lot but in this market you take what you can get. This is my own personal opinion. I think it is ready to go up again. It has been doing this oscillation thing since October of 2008 and currently it has been dancing at the bottom of this oscillation for the past 4 days. The technicals say that it is oversold, and the downward momentum has been slowly declining, so I am ready and to pull the trigger.

Understand, please, that I am not a stock broker; I am not a financial advisor; I am not telling you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking some risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will incur regardless of my opinion.

So if you are not ready to follow in my footsteps, I have two words for you. Paper Trade! Get a legal pad. Make 9 columns and above each column right the following labels: Symbol, Shares, Entry-Stop, Entry-Limit, Stop-Loss, Target, In, Out, and Difference in that order.

• Symbol is for the stock symbol, obviously.
• Shares is for the number of shares you want to buy.
• Entry-Stop is the least you are willing to pay.
• Entry-Limit is the most you are willing to pay.
• Stop-Loss is the most you are willing to watch it fall.
• Target is the value you "hope" it reaches so you can take some profit.
• In is the product of the number of shares and the price it was bought, for pessimist sake use the Entry-Limit figure.
• Out is the product of the number of shares and the price it was sold, assume the closing price for pessimist sake unless you hit your target then use that.
• Difference is the difference between the In and the Out, which will either be positive or negative.

That is my opinion, you can take it or leave it.

It's Only My Opinion.

It's only my opinion, but the state of the current economy is a result of short-sightedness and the inconsistent way that individuals are taught financial math.

The short-sightedness has to do with the issue of instant gratification. This is not the forum for it so I am not going to get into it. However, the method by which people are taught financial math is for this forum. Here I am going to give you my opinion. Take it or leave it, it is only my opinion.

Too often the math for money is too basic. It's goal is to answer the basic of questions. How many pennies, nickels, quarters, and dimes make a dollar? How to calculate sales tax? How to calculate interest? So may think that is enough, but there is a lot that is missed.
People need to understand what to do with this math that they are taught and that goes well beyond the basic information that they are taught. Some teachers try to give projects to their students that will get them to apply what they have learned, and I applaud the effort. But more is needed.

How much more can be done? I have a few ideas but I don't want to get into them right now, but the key one is that financial math courses should be mandatory in high school. By the time a child leaves elementary school they should already know how to add, subtract, multiply, and divide whole numbers, decimals, percents, and fractions. I did and I am from a middle to low income school district, so the school budget is not as relavant to the math department. In middle school (junior high for some) the students should be learning algebra, if they don't know enough to do algebra then they shouldn't be there. Hold them back! In senior high students should be given accounting and practical math courses.

What about advance math courses? If they want to learn calculus then they can take it as an elective. The majority of students are not going to become scientists or engineers no matter how hard you push them. It is not what they want. Maybe a psychological career placement test should be given to place them on the righ high school career path so that they will learn what they need to learn to get the career they want. Hmm, just a thought.

Well that is enough ranting for today. Tomorrow...stock picks and exit strategies according to my opinion.

Monday, the 23rd of February, in the stock market the Dow lost 250.89 points to arrive at 7114.78, a low not seen since 1997. As for the NASDAQ and the S&P, the NASDAQ lost 53.51 points to 1387.72, and the S&P lost 26.72 points to 743.33. Maybe tomorrow will be better. Probably not much, if any, until unemployment figures show a significant slow down.