The market is cris-crossing back and forth over it right now.  If we can stay above that at the close, it may be a bear market rally of 10-15%.  If it closes or dives below, we may retest the market lows of November before the turn.

When will all this uncertainty end?  Answer: no time soon.

In the 1970s when we went off the gold standard and inflation ate away at purchasing power, the typical American household became a 2 wage earner reality to pay the bills.  In the 80s and 90s, our savings rate went to zero as we spent more and more of our available income to keep up our standard of living.  In this century, we have moved to deficit financing to keep the party going.

What is left?  How is the American consumer, 70+% of our economy and 40+% of the world economy going to “get things going again”?

Answer: no time soon.  Prepare for, in the words of our new President, a “lost decade” my friends.

To show you where my head is at, the most recent additions to the clutter on my desk are 2 boxes of shotgun shells and the 10 oz of Platinum that I bought back in Dec (finally delivered … now worth 35% more than I paid for them).

Like Hunter S Thompson once said, “When the going gets weird, the weird turn pro.”

Later…

I have been looking for a bounce in the stock market, maybe back to 1000-1050 in the S&P500 index.  It is looking like a tough fight as the overall trend in the market is down.  One of THE most important things you can learn as an investor is (memorize this):

YOU MAKE MONEY IN THE STOCK MARKET BY INVESTING WITH THE DOMINANT TREND IF YOU INVEST AGAINST THE TREND YOU WILL LOSE MONEY.

The we are in mess started with real estate and real estate has to start a recovery for us to be heading back to an even playing field.  And real estate market is not coming back anytime soon.  I know a lot of Realtors (I am a Broker myself).  Most of them are good people.  They made good money in the boom.  Nearly every one is hurting now.  A good number of them think properity is just around the corner….NOT!

Thank you Mr. Hoover but, I don’t think so.  Futures are looking like late 2010, maybe even 2011 before that happens.  Sometime preceding that is when the stock market will have truly bottomed and a new bull will begin.

The S&P500 COULD really get to 500 before all is said and done.

Look out below.

How much is a trillion anyway? Pretty tough to get your head around just how big a number that is.  I heard a great visual analogy the other day (someone had attributed it to Ronald Reagan).

If you have $1M in the form of a stack of $1000 bills, it reaches about 4.3 inches high.

How high is a stack of $1000 bills enough to make up a TRILLION dollars?

Over 66 MILES high.  And since last September/October we have added nearly TWO TRILLION dollars to the national debt, that stack is 132 MILES HIGH

Holy deep guano batman!

Get real.

If you add the $850B cost of the proposed stimulus package to the $1.2T already allocated to bailing our ass out of this mess, you come up with a bump to the national debt of another 2 TRILLION DOLLARS.  Well boys and girls, those of you that sit at the front of the class know that we as a country have to pay interest on that debt as we sell off Treasury bills to foreign governments and others.

Even at a 3% annual rate of return, that $170M is just over 1/30 (0.034) of what we have to pay EVERY MONTH to finance the debt we are taking on to bail out the mess we call our economy.

If you want to get mad about something, get mad about that.

As you no doubt know by reading my blog, I am partial to precious metals which are a different sort of a bird when it comes to the more basic commodities such as oil, wheat, lead, etc. due to their significant inherent value (in small quantities).

Anyway, one of the prevailing schools of thought (by Jim Rogers and other commodity gurus) is that we are seeing a goodly amount of supply side destruction on the part of the people and companies that actually product the food we eat, basic industrial metals, etc.  Rogers in particular is fond of saying “farmers cant get loans to buy fertilizer and nobody is going to be building a zinc mine anytime soon.”  When things get back to normal, the proverbial cupboard may be bare when we need wheat to make bread.

Bottom line is that commodities could soar when the inflation you know we are going to have comes pounding on the door.

Read the referenced blog …  good stuff.

I went to see Stomp! with my family in Sacramento a couple of nights ago. One of those ‘we are not having enough fun in our lives’ moments where we went online and got 5th row seat 6 hours before show time.

Fantastic show (if you dont know what Stomp! is, here is a link to the official Stomp! website)

What I found to be even more interesting is the business model of a show like this. It’s the same as others like it (e.g., Blue Man Group, Cirque du Soleil) but it was the first time I really thought about it.

Sort of like a franchise except without all the FTC BS.  It’s pretty simple and I suspect amazingly profitable:

Come up with an idea for a performance, make it happen, perfect it, do it many many times until it is viral or popular enough to expand, replicate.

Once the guys who started Stomp did the above and had a core group that performed and constantly sold out shows, they trained another cast so 2 performances could be ongoing at the same time.  And then another, and another.  Dont want to do too many or the market gets saturated.  Pretty soon, they have trained the trainers and they just do whatever part of this business they want to.

Like branch out into the creation of a DVD.  Or an IMAX special film.  Etc.  They get royalties from everything since it was their intellectual capital that started it all.  All passive income sources.  Scalable, expandable, etc.

Very entrepreneurial.  Very nice.

If the S&P 500 were to close below 850 I would expect to see a quick move down to the November lows (around 740), putting in a double bottom (technical traders consider this to be a good thing, essentially a test of the previous low and recovering without go significantly lower). However, if the S&P 500 breaks out of its 918 short-term resistance point I’d expect the S&P 500 to rally up into the 1000-1050 level by mid-February at the latest and then top out to have another correction that would take the market at least down to its November low.

The real take away point here is that IT IS QUITE LIKELY THE MARKET WILL RETEST THE LOWS OF NOVEMBER. This will happen sooner if the lower end support on the S&P is broken at 850 in the next couple of weeks or later into the first few months of ‘09 if we quickly move up through the 918 resistance point (more likely the latter in my opinion).

You need to be nimble and understand market trends to make money these days. The market action in the next couple months will be a great way to see how the Buy and Hold strategy of “yesteryear” is flawed and will get you nowhere in your portfolio. If the market turns up soon, I wont be buying much and will wait to short it on it’s return to the November lows. At that point, we should see the beginning of a nice bull market that will be with us for quite awhile.

This is the last trading day of 2008. If you have gains (Yes! Somewhere, someone … has gains) you may want to get out of some of your losing positions to offset the tax hit on your profits.

The market will be fun to watch over for the next 4-6 weeks…hang in there.

So, let’s talk about part of the solution:  getting people smarter now about how to actually save, invest and earn.  That is one my broader purposes with this blog (and my other blog at Your Inner Expert) but also in my life right now…I’m here to help (uh oh … I sound like Henry Paulson).  Some of you can still change your bad habits (some are beyond hope but you are likely not reading this anyway).  Anyone can benefit from the following resources but the are targeted toward the best place to start and that is: WHILE YOU ARE YOUNG.

This blog includes some off and online resources that can be used to educate your kids (anyone’s kids … hold weekly classes at your church for that matter) about money and why knowing this earlier in their life can make a HUGE difference later on.

After all, future generation are going to need to make a lot of money to pay off the debt they are being burdened with.  They will also be choosing our nursing homes.  So, when I have a conscientious and financially sound attendant wiping my chin when I am toothless and drooling in my “past the golden years”, I will sleep peacefully knowing I contributed in some small way.

Online Resources

• California Jumpstart - a non-profit aimed at improving young people’s financial chops
• Money Smart Kids - this is a weekly column on kids financial issues by Kiplinger writer Janet Bodnar.
• 360 Degress of FInancial Literacy - financial advice for all “younger people”, from kids to teens and college students.
• California Department of Education - website features money management books, tools, and resources for K-12 students.

Offline (books)

That’s it for now.  I may update this as time goes on (or add new addendums).

After that, it could be a retest of the lows we saw in November.  The economy is just now getting into the full throws of the recession that is upon us and it is not going away anytime soon.  Continuing to print money and throwing it at any problem that comes along is going to start to come back to haunt us as well.

I see that the automaker (auto-faker?) bailout died in the Senate.  Must not have been enough pork in there for the homeboys to pass it.  My guess is that the UAW is in deep engine grease here and is going to feel the heat of decades of greed and inefficiencies when Congress makes more demands.  Then some bailout money will happen.

It dawned on me early today that the powers that be would likely make them squirm some more nd then give them the money anyway.  The rest of the traders must have figured that out too.  GM opened today around $2.70, dropping significantly in overnight trading.  I figured that it was going to rebound but I took too long to think about it.  By the time I decided I might buy a few 1000 shares, it was already up $1.

Could have made 40% profit in about 30 minutes.  THAT would have been nice!

Trust me …. they are not all like that.  Even if they wear their heart and soul on their sleeves, what they say and what they do can turn out to be two VERY different things.

It’s called MOXXOR.  Yes, another one of those made up words (which probably means something) but easy to remember.  If you want to know more about (or join) Moxxor, go to their main corporate site at Moxxor.  More on what I personally am doing to build this business soon.