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Saturday, March 29, 2008

Market Update for March 29, 2008

Market Statistics for 03/29/08

It looks like the NASDAQ remains in bear market territory while the others major markets are off their lows and down less than 20%, but still painfully down.

Click charts courtesy of Stockcharts.com to view full sized.

S&P500

More S&P 500 Charts
(Using Intraday prices):
Last Market High 10/11/07 at 1,576.09
Last Market low 03/17/08 at 1,256.98
Current S&P500 Price 1,315.22
Decline in Pts 260.87
Decline in % 16.6%
Max Decline 20.2%

This means the correction from intraday high to intraday low is 20.2% and we are currently 16.6% off the peak.

The decline from the high to the low on a closing basis is 18.6%

DJIA

More DJIA Charts
(Using Intraday prices):
Last Market High 10/11/07 at 14,279.96
Last Market Low 01/22/08 at 11,508.74
Current DJIA Price 12,216.40
Decline in Pts 2063.56
Decline in % 14.5%
Max Decline 19.4%

This means the correction from high to low has been 19.4% and we are currently 14.5% off the peak.

The decline off the high on a closing basis has been 17.1%

NASDAQ:

More NASDAQ Charts
(Using Intraday prices):
Last Market High 10/31/07 at 2,861.51
Last Market Low 03/17/08 at 2,155.42
Current NASDAQ Price 2,261.18
Decline in Pts 600.33
Decline in % 21.0%
Max Decline 24.7%

This means the correction from high to low has been 24.7% and we are currently 21.0% off the peak.

The decline off the high on a closing basis has been 24.1%

Congratulations to anyone who "market timed" from equities to Gold (GLD on this graph) last October!

For more of my recent articles, see:
BTW, if anyone wants to see what my monthly newsletter sentiment update looks like, then check out this PDF file: "Take Profits & Sell Sentiment Indicators from The Market Top." The page of my newsletter is from last year with the markets near an all time high at 1540.

The S&P500 was at 1540 when I said take profits in my monthly newsletter shortly after we had all five of the indicators say BUY on a correction.

Unlike on October 19, 2007, I am NOT saying to sell or take profits now!!!

Subscribe to my newsletter NOW to see what I recommend today!
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Friday, March 28, 2008

ECRI Calls it "A Recession of Choice"

A RECESSION OF CHOICE: A Special Report

By ECONOMIC CYCLE RESEARCH INSTITUTE
Founded by Geoffrey H. Moore
March 28, 2008

The U.S. economy is now on a recession track. Yet this is a recession that could have been averted. In January, given the plunge in the Weekly Leading Index, we declared that the economy had entered a clear window of vulnerability. Yet we emphasized the brief window of opportunity within that window of vulnerability for timely policy stimulus to head off a recession.

We asked readers (see January 25, 2008: ECRI Says There Is A Window of Opportunity for the US Economy) to envision a large Roman stone column that has just started to topple. As the fall began, a modest push back would have been enough to right it again. But if its fall gained momentum, we warned, it would be virtually impossible to stop it from crashing down.

Make no mistake – the opportunity was there for prompt action in terms of both fiscal and monetary policy to avert this recession. At that juncture, prompt stimulus to boost consumer spending could have made a decisive difference, and policy makers seemed to understand. The Administration and Congress passed a tax rebate package with unusual speed, as officials noted that “time is of the essence.” Unfortunately, policy makers may not have understood what that really meant, since they were content to let the rebates start reaching consumers several months later, rather than demanding innovative ways to let stimulus reach consumers much sooner, as was needed.

For the purpose of averting a recession, several months is a lifetime – after all, the last two recessions lasted just eight months each. So, despite a unique opportunity, fiscal stimulus is likely to arrive too late to avert a recession.

And only this month, the Fed has finally begun to take aggressive and unorthodox steps to stabilize the housing and credit markets. While such actions met the need of the hour, they are unlikely to have the same impact today as they would have had a few months ago. In effect, an unusual opportunity to avert a recession was missed by policymakers.

Why was speed so important? Because uniquely in this business cycle, premature pessimism created a window of opportunity to right that stone column of the economy before it came crashing down. Normally you would never get this chance.

Sector Contributions to Slowdowns and Recessions
Recession expectations have been growing for a long time due to Fed rate hikes, followed by oil price spikes, a bursting home price bubble and the subsequent credit crisis. This premature recession fear caused consumers and businesses to rein in spending, creating the danger of a self-fulfilling recession prophecy. However, there is another side to the story.

As the chart shows, the biggest negative impetus in any recession comes from manufacturing, driven mostly by the inventory cycle. Typically, unaware of an approaching recession, businesses gear their production plans to expectations of rising demand. When demand for their products falls apart because of an unexpected recession, inventories surge, forcing sharp production and job cutbacks, thus reducing income and spending power. The spending cuts force further production cutbacks to work off the excess inventory.

This time around, premature pessimism induced them to slash business inventories. As a result, the cupboards were bare, and the manufacturing sector was primed for even a modest boost in consumer spending to force them to ramp up production and hiring, reversing the vicious cycle that is recession.

Had timely stimulus resulted in a quick burst of consumer spending, it would have forced manufacturers to ramp up production instead of reducing inventories, and they would not have been able to get the goods from China on such short notice. That is why prompt stimulus could have been unusually potent this time. But as we emphasized in January, the stimulus was “needed in a matter of weeks, not months.”

Separately, global pessimism about the U.S. economy, causing a major decline in the dollar, made U.S. exports much more competitive, bolstering U.S. export growth and further supporting production. Thus, the unusual drawdown in inventories and the boost to exports were the paradoxical results of widespread pessimism.

But the potential self-negating prophecy of a recession was not to be realized. Indeed, the process of spreading weakness that leads to recessionary job losses is now underway, and it is too late to head off the recession.

We know this because the weakness has now spread to ECRI’s leading index for nonfinancial services, a sector that accounts for five out of eight U.S. jobs. Even if the downturn in manufacturing, which accounts for one in ten U.S. jobs, is modest, we are likely to see sustained job losses.

It is a somewhat different story with regard to GDP, because the cyclically volatile manufacturing sector still accounts for 36% of GDP. A mild downturn in that sector should limit the decline in GDP in this recession.

In fact, we may or may not see two straight down quarters of GDP in this recession. But, contrary to popular belief, as we have detailed* elsewhere, that is neither a necessary nor a sufficient condition for a recession.

Some will rightly argue that recessions are cathartic and that to try and avert a recession with stimulus would be tantamount to rewarding the bad behavior of those contributing to the housing and credit bubbles. Perhaps, but we must also recognize that recessions bring with them collateral damage affecting millions of innocent bystanders.

The bottom line is that the outcome was not pre-ordained. Policy-makers had a choice about the speed with which stimulus took effect. If they had understood this, their actions could indeed have averted this recessionary downturn.

* If you would like a copy of this report, please email research@businesscycle.com. © 2008 Economic Cycle Research Institute 212.557.7788 420 Lexington Avenue, Suite 1626, New York, NY 10170

Also see:

Edited and © 2008 by Kirk Lindstrom for:

The Economic Cycle Research Institute
420 Lexington Avenue
Suite 1626,
New York, NY 10170
212.557.7788
Feel Free to ask questions of ECRI Managing Director Lakshman Achuthan at our facebook forum ECRI - Economic Cycle Research Institute

Doubled Money in a Down Market!

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP a tiny 8.6% vs. NASDAQ UP a tiny 3.5% (All through 12/31/09)

In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%

HURRY! Subscribe NOW and get the CURRENT Month's Issue for FREE!
(Just mention this article and I'll start your 1 year, 12 issue subscription with the next month's issue.)

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Ground Zero Trading Tips

Trading using the NYSE Advancing Issues Indicator.

Post #22 at Spiral Forum: Trading Futures with Groundzero on Facebook, Patrick Slevin asked in the discussion called "3/25/08 9:53 am EDT A BUY SIGNAL CONFIRMATION YESTERDAY!!!"

Have you ever gone back to check if using the EOD numbers is better than taking a signal intraday? I wonder because of time periods that involve chop.

I get out of the Spiral now & then because I tend to be watchful of impending chop. I guessed it was coming after Tuesday & seems that's what we have, although tomorrow should start a seasonally bullish time frame.
Post #32 at Spiral Forum: Trading Futures with Groundzero on Facebook:

Pat, the indicator I find to be very helpful is the 5 day moving average of the NYSE advances... when the 5 DMA is above 2000, then you can expect a sell off at any time... when the 5 DMA is below 1500, then you can expect a rally at any time... the tide of buying and selling moves in and out with high reliability... when the 5 DMA reached 2266.4 on the 25th after that great rally, the market began selling off... as of yesterday's close the 5 DMA is still at 2008.4, but will drop off rapidly over the next two days since the 5 DMA will drop the two earlier daily advances and bring the 5 DMA into allignment for a rally... GZ
Click Chart courtesy of Stockcharts.com to see it full sized

Patrick Slevin (no network) replied to Ground's post2 hours ago.

Thanks, that would tend to help with respect to chop.

I'd been looking at an Advance.Decline Ratio (which calculates the ratio between advancing versus declining data sets).

Can't say that it's been helpful, so I drifted away from A/D charts these past few weeks. However you've given me new hope.

Ground Zero (no network) replied to Patrick's post 2 hours ago.
Pat, the ratio is not as sensitive as the simple DMA, and also the decline data is a variable which only contaminates the data, the decline figures mean nothing and only gets in the way... the only figure than means anything is the advances... I keep the 5, 10, 20, and 50 DMA of the NYSE advance ONLY... you will see how nicely it works for the day to day moves... I use the spiral for the general direction, then I can focus in more closely with the 5 DMA of the NYSE advances...

A good example is when prices reach the WP and the 5 DMA is above 2000, then you know we've seen the highs for a while...

GZ


For more information or to ask questions: Join Spiral Forum: Trading Futures with Groundzero at Facebook
.
DISCLAIMER: All comments, replies, and opinions are general in nature, they are not meant or intended as specific investment advice to anyone, and certainly do not represent the opinion of anyone but Ground Zero. Individuals should consult with their professional advisors for specific investment advice. The spiral model is strictly experimental in nature and should not be used for trading purposes except by those individuals who have a fluent working knowledge of its abilities, mechanisms, and limitations.

Tuesday, March 25, 2008

March Consumer Confidence Falls to Five Year Low

Worsening job prospects, rising prices, tight credit markets, a 20% decline in the stock market all contribute to drive March consumer confidence (press release) to a 5-year low. The Consumer Expectation index is at a 35-year low reaching levels not seen since December 1973 when the Oil Embargo and Watergate caused the expectations index hit to hit 45.2.

The director of the Conference Board's research center, Lynn Franco, said the latest index reading was the lowest since 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.

  • "Consumers' confidence in the state of the economy continues to fade and the Index remains at a five-year low (March 2003, 61.4). The decline in the Present Situation Index implies that the pace of growth in recent months has weakened even further. Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon. The Expectations Index, in fact, is now at a 35-year low (Dec. 1973, 45.2), levels not seen since the Oil Embargo and Watergate."


Chart courtesy of Martin Capital

Note that the last low was in March 2003.

March 2003 was the test of the October 2002 S&P500 bottom.

Chart courtesy of Stockcharts.com

Stock market bottoms don't happen when everyone is optimistic.

Some of us believe the recent weakness where the S&P500 traded in the mid 1200s may be a successful test of the January 22/23 low.

Back in 2002-2003 I had a stock, CACS, more than double between the October 2002 low and the March 2003 correction. CACS went on to be the top percentage gainer for the NASDAQ in 2003 at some 3500 percent.

This time I have VLNC that I accumulated over the past couple of years between $1 and $3. Using my sentiment indicators and my asset allocation and price targets, I sold some trading shares of VLNC at $1.97 on Oct 22, 2007. I bought them back at $1.64 in January 2008 and sold them at $2.49 while the rest of my shares in that stock are at about $4.40 now.

Given the very low consumer confidence, we could be seeing a similar buying opportunity now for the markets as we had in October 2002 and March 2003.

BTW, if anyone wants to see what my monthly newsletter sentiment update looks like, then check out this PDF file: "Take Profits & Sell Sentiment Indicators from The Market Top." The page of my newsletter is from last year with the markets near an all time high at 1540.

The S&P500 was at 1540 when I said take profits in my monthly newsletter shortly after we had all five of the indicators say BUY on a correction.

Unlike on October 19, 2007, I am NOT saying to sell or take profits now!!!

Subscribe to my newsletter NOW to see what I recommend today!

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Monday, March 24, 2008

Major Newspapers Publish Articles About Possible Depression

One of the best "timing indicators" that we love to point to years later is how wrong the major newspapers are at major market bottoms and tops. It makes sense because newspapers report THE NEWS not "THE FUTURE."

When everyone was getting rich on company stock options and quitting jobs to be day traders when the market was at a peak in March 2000, the newspapers were full of success stories about this. Likewise, the papers were full of how much money people were making in real estate a couple of years ago before the bottom fell out for many markets around the country.

So, it should be no surprise to read today that people are worried that the bad times will turn into a depression.

Here are three bearish articles that "ring the bell" for those who can hear it.

March 23, 2008 New York Times: Depression, You Say? Check Those Safety Nets Excerpts:
  • "Some innocent bystanders might be forgiven for wondering why that last word — “depression” — has started popping up. Is it possible our economy could speed past a recession into a full-blown depression like that of the 1930s, when American unemployment reached 25 percent?"
    and
    "Even if consumer confidence hit rock bottom, that most likely would not be enough, by itself, to cause a depression. For things to become really dire, the nation’s financial institutions would have to fail at the same time that unemployment began significantly rising. Only if banks suddenly closed, or it became impossible for companies to access short-term lines of credit, would things begin spiraling out of control."
    and
    "Some economists and financiers say it’s likely that the current recession will extend for at least a year. Others think the American economy will suffer from an extended malaise as Japan did in the 1990s."
    and
    "But whatever name economists give the current downturn, we are unlikely to see the bread lines, shantytowns and dust bowl of the Great Depression. More likely, these economists say, would be a sudden increase in the number of people selling belongings on eBay."

March 22, 2008 San Jose Mercury News:
The Great Depression couldn't happen again, could it?

  • PARALLELS BETWEEN GREAT DEPRESSION OF 1930S AND TODAY ARE MANY, BUT MUCH HAS CHANGED SINCE THEN; EXPERTS SUGGEST IF CATASTROPHE IS IN OUR FUTURE, IT WOULD BE MUCH DIFFERENT

The above is a reprint of the following Michael A. Hiltzik article

March 20, 2008 Los Angeles Times:
A new Great Depression? It's different this time

  • "On the surface, there are disquieting parallels between economic conditions in the early 1930s and those of today. There is the popping of enormous asset bubbles -- stocks then, housing now."
    and
    ""I've been asked many times whether we will have another Great Depression," said David M. Kennedy, a Stanford University history professor and the author of "Freedom From Fear," a Pulitzer Prize-winning history of the Depression and World War II. "My standard answer is that we won't have that one again -- I'd be surprised to have one of that seriousness and duration. But that doesn't mean we wouldn't have a catastrophe we haven't seen before."
    and
    "New Deal programs aimed at staving off a wave of home foreclosures may be especially relevant today. Among the most important was the Home Owners Loan Corp., or HOLC, which is one of several models for homeowner relief being considered by Congress.
    .
    HOLC took over 1 million mortgages in default starting in 1933, worked to keep the owners in their homes and made new loans to strapped mortgage holders. When the agency was finally liquidated in 1951, it even returned a small profit to the U.S. Treasury.
    .
    The Fed's recent actions were "a temporary palliative" to the fundamental problem in the economy, which is the rapid fall in home prices and its ripple effect on mortgage bonds and other securities, said Barry Eichengreen, a professor of economics and political science at UC Berkeley. "You have to reorganize the system, but the discussion about that has only begun."

I kept my copy of the San Jose Mercury News business section back to the 1980's. The January 1, 1991 edition talks about how many banks have failed. That was the start of a great bull market that peaked in March 2000.

The good news for us contrarians is all this fear is good news.

For a comparison, click to view the attached PDF file for when the markets were peaking at all time highs in October 2007. "Everyone" was bullish so my indicators said "take profits."

Things are quite different now. The six sentiment indicators in my newsletter (I added a new one since last October) are saying quite a different story today.

If you want to know what I have been buying in this period of weakness with my profit taking dollars from selling when the markets were higher, Subscribe to Kirk's Investment Newsletter TODAY and get the March 2008 issue FOR FREE!

Saturday, March 22, 2008

Market Update for March 22, 2008

Market Statistics for 03/22/08

Year to date, the S&P500, DJIA and NASDAQ Composite are down 15.6%, 13.4% and 21.1% from their all time highs made in late 2007.

On an intraday basis, the S&P500 and the NASDAQ Composite have been down as much as 20.2% and 24.7% while the DJIA has "only" been down 19.4%, just shy of the 20% decline required for an "official" bear market definition some use.

S&P 500 (More Charts) :
Click the charts courtesy of stockcharts.com to see them in greater detail.

  • (Using Intraday prices):
    Last Market High 10/11/07 at 1,576.09
    Last Market low 03/17/08 at 1,256.98
    Current S&P500 Price 1,329.51
    Decline in Pts 246.58
    Decline in % 15.6%
    Max Decline 20.2%
This means the correction from intraday high to intraday low is 20.2% and we are currently 15.6% off the peak.

The decline from the high to the low on a closing basis is 18.6%
.
DJIA (More Charts) (Using Intraday prices):

  • Last Market High 10/11/07 at 14,279.96
    Last Market Low 01/22/08 at 11,508.74
    Current DJIA Price 12,361.32
    Decline in Pts 1918.64
    Decline in % 13.4%
    Max Decline 19.4%
This means the correction from high to low has been 19.4% and we are currently 13.4% off the peak.

The decline off the high on a closing basis has been 17.1%

NASDAQ (More Charts)

  • (Using Intraday prices):
    Last Market High 10/31/07 at 2,861.51
    Last Market Low 03/17/08 at 2,155.42
    Current NASDAQ Price 2,258.11
    Decline in Pts 603.40
    Decline in % 21.1%
    Max Decline 24.7%

This means the correction from high to low has been 24.7% and we are currently 21.1% off the peak.

The decline off the high on a closing basis has been 24.1%

FIXED INCOME:

The yield curve is very healty for banks with the 30 year T-bond paying 4.17% and the 3-month T-bill only paying 0.61%, a spread of 3.56%.

See: The Yield Curve Spread as a Market Predictor

This sort of a spread usually signals a strong stock market ahead just as the inverted yield curve in late 2006 and early 2007 correctly predicted the recession or near recession we are in now.

From 1/1/1999 through 03/22/08:
    Kirk's 80:20 Aggressive Core Portfolio is up 62.6%
    Kirk's 50:50 Conservative Core Portfolio is up 67.3%
    Kirk's 70:30 Explore Portfolio is up 175.7%

    80% Core Aggressive plus 20% Explore is up 85.3%
    90% Core Conservative plus 10% Explore is up 78.2%

    100% Total Stock Market (VTSMX) is up 35.6%

If you want to know what I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY and get the March 2008 issue FOR FREE!

More info at:

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Monday, March 17, 2008

Jim Cramer on Bear Stearns March 11 & 17, 2008

Today Jim Cramer was on Erin Burnett's "Street Signs" (Erin Burnett Fan Club) show to say he was not bullish on Bear Stearns (BSC) last week. He said he was only telling the person with the question to not take their money out of the brokerage.

"Bear" closed today at $4.81 as hopeful investors think they might get more than the $2 per share JP Morgan announced they will buy Bear Stearns for. (See J.P. Morgan Chase buys Bear Stearns for $2 a share )



Tuesday with BSC at $62.97, Jim Cramer took a call from a viewer asking about Bear Stearns liquidity problems. This was his reply.

  • Caller Question: Should I be worried about Bear Stearns in the terms of liquidity and get my money out?
    .
  • Jim Cramer: NO! NO! NO! Bear Stearns is fine. DO NOT take your money out.

Watch the video here to decide for yourself.

There has been a ton of message board discussion today about Cramer's "bullish call for Bear" last week. To answer the questions, this is what he told Erin Burnett:

    Look, let’s understand two things,” Cramer said. “I said the common stock was worthless on Friday, as soon as this thing was at 36 because we saw a look at the bonds. If you kept your money in Bear you made out. You got the liquidity. Keeping money at Bear – I guess I could have caused a run on the bank and said take your money out of Bear. I guess people could say hold it, he’s saying buy the common stock. I mean, what the heck. I cannot cause a run. It turned out the Federal Reserve guaranteed the money. I’m not going to tell people to pull money out of these places. The Federal Reserve is guaranteeing the money. They are not guaranteeing the equity. I got a lot of things wrong in my life, but I don’t regret the fact when I said don't take your money out of Bear. If you have your money in Bear you still got it today. Remember, there’s Bear Stearns the common and that person was going to pull the money out of Bear. We got a guarantee. J.P. Morgan is now Bear.

I checked SeekingAlpha for their daily recap. It is called

The TITLE says "Bullish on Bear" and it shows in the URL....

On the “Today” show March 17, Cramer said:

    If you’re a diversified investor, you’re not going to get hurt. Those who only had their money in Bear obviously will get wiped out today."

hmmmmm..... Maybe we should ask Bill Clinton what "in Bear" means.

One thing for sure....



Anyone who was in Bear Stearns the stock last Tuesday and held it on what Cramer said is not going to be a happy camper today.

This graph of the rise and fall of Bear Stearns stock is one for my historical files. Let it be a reminder to not put all your eggs in one basket, even if you work at the company and the company pays you in company stock. Take profits and diversify!

Sunday, March 16, 2008

The Yield Curve Spread as a Market Predictor

This graph shows the 30-Year Treasury Bond (T-Bond) interest rate divided by the 3-month Treasury Bill (T-Bill) discount rate with the S&P500 price on the same graph.

Click chart courtesy of StockCharts.com to see it full sized.

Historically, periods with an inverted yield curve (circled areas) have been followed by a recession and falling stock prices.

The chart may speak for itself but to get my take on what this chart indicates for the future, read the April 2008 edition of "Kirk's Investment Newsletter" due out around Easter which is March 23 this year.

Wednesday, March 12, 2008

Rally Follow-Through Day - Definition and Charts

Many pundits on TV are saying we failed to have a follow-through day today because the markets went down. They are wrong according to Investors Business Daily or IBD. IBD says we have to wait for the window to open for a follow-through day.

TV pundits should know the "IBD Definiton of a Follow-Through Day" but I am not surprised that so many seem to enjoy the sound of their shouting more than they enjoy sharing truly valuable information.

A Follow Through Day according to IBD:


After a significant market correction, the market will look to regain its footing. Any up day then counts as Day 1 of an attempted rally.

The next two sessions, Days 2 and 3, don't need to show much in the way of gains. As long as they don't undercut Day 1's low, the rally remains intact.

For a follow-through to occur, you want it to land between Day 4 and Day 7 of the attempted rally. On any one of those days, you're looking for one or more of the major indexes -- the Nasdaq, S&P 500 or Dow -- to rise 1.7% or more in higher volume than the previous day.

Though a follow-through in that span gives the strongest signal for a new rally, one that hits anywhere between Day 4 and Day 10 can work. Follow-throughs that occur after Day 10 yield lower success rates.
Remember a key caveat when it comes to follow-through days: Every bull market starts with a follow-through day. But not every follow-through day triggers a new bull market.

Lets watch the major markets with these graphs to see if we get a 1.7% upside day:



The "Window" for a follow-through day is March 14th through March 19th for a strong bull signal and March 14th through March 25th for a "regular strength" bull market signal, at least according to IBD.




Even the hated Financial Spyder is worth looking for signs of a real(TM) bottom.


Defintion of IBD Follow Through Day.

To make your own custom charts, please visit BigCharts.com

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GE: General Electric's CEO Immelt Invests Another $5 Million Of His Own Money In GE Stock

Following insider buying can be a great way to make money even in a falling market. Major insider buying at General Electric (GE) could yield similar gains to patient investors as we have seen with Valence Technology (VLNC).

Yesterday number one insider at General Electric, chief executive officer Jeffrey Immelt, bought 62,000 more shares of GE stock worth $2.04 million at an average price per share of $32.93 according to SEC filings. Immelt told investors that GE should outperform the Standard & Poor's 500 index this year in a "challenging'' environment.

In an annual letter to shareholders released today, Immelt wrote:

  • "You could try to pick the perfect investment for this environment, but it would be a challenge."
  • " Maybe it is in technology, or emerging markets, or commodities, or Treasury bills. Or you could pick GE."

At $34.00, GE has a market cap of $340 billion with a dividend yield of 3.90%. Ten year US Treasury bonds only yield 3.56%.

On why GE won't sell NBC:

  • "We are in a good cycle, with momentum around the Beijing Olympics, the U.S. elections, and the 2009 Super Bowl," Immelt said. "NBCU benefits from GE's global footprint, financial strength, and human resource skills."

NBC profits were up 6 percent in 2007 on 5 percent lower revenue of $15.4 billion.

Immelt's $2 million investment in his companies stock follows a February 29 purchase of 90,000 shares at an average price of $33.42 worth $3.01 million.

Here is a 5-year summary of insider trading by Jeffrey Immelt and a graph.


Insiders usually sell stock as their stock options vest then expire. Exercising stock options reduces shareholder equity to reward insiders for good work, or so the theory goes. They would be foolish to not take advantage of this shareholder generosity so tracking insider selling is not as useful as tracking insider buying.

When insiders use a significant amount of their own money to significantly increase their holdings in the company they work at, then we should pay attention. Valence Technology is a stock with significant insider buying that has recently doubled. This chart of VLNC insider buying is from the Feb. 22, 2008 article "CSCO: Open Letter to Cisco's Board of Directors."


Valence is one of many technology stocks that have been in a prolonged bear market decline after peaking in early 2004. That didn't stop insiders from buying and now they are being rewarded.

I believe GE will eventually offer similar rewards for patient investors.

GE is a great international play as more than half its sales come from outside the US with about $40 billion of the $195 billion total coming from emerging markets.

In the 1976 movie "All the President's Men" on how to uncover the details of the Watergate scandal, Deep Throat told reporter Bob Woodward "I'll keep you in the right direction if I can, but that's all. Just... follow the money."

Discuss this article and GE in general at our facebook "Investing for the Long Term" forum called GE: General Electric "We Bring Good Things to Life"

Disclaimers:

  1. I own GE in my personal account with a 13% profit considering reinvested dividends. I have also hold GE in my newsletter explore portfolio with similar gains.
  2. I own VLNC in my personal and newsletter explore portfolio with gains in excess of 100%. I have taken some profits and have targets to take more profits should it go higher.

Monday, March 10, 2008

DOW and S&P500 Testing Key Support Levels

I drew this support line for the DJIA many months ago and I did not think we would see it tested given the good outlook for the economy at that time.

Note how the DOW is now back to its all time high set in 1999! If you were lucky enough to have sold on the day of the DJIA high and kept your money in CDs, you could be up about 50% rather than flat after all this time.

The next chart of the S&P500 shows it is testing its intraday low of 1270.05.

Forget about CDs, S&P500 Buy and Hold Investors would have been happy to have their money in a mattress since the peak in March 2000, eight years ago!

Hopefully, now is a great buying opportunity for us long-term investors who take profits when the markets are up so we can buy at times like now when the markets are down.

I added a new security to my "explore portfolio" Friday. To find out what I recommend for purchase today and my advice for the long-term, subscribe today and get the March 2008 Issue of my newsletter for FREE!
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