NO TAPER!!! on the spot ..

So, all those 6 figure making analysts at Morgan Stanley, Goldman Sachs, JP, bla bla bla bla ... wanted us to believe that there is going to be taper. Questions is, was this a manipulation attempt to get retail investors like you and I against the market so they can buy? OR did they really get their analysis wrong - in which case, I might be interested in an offer... hint***

With that being said, what next...

First my favorite - GOLD - will be the biggest beneficiary of the decision and thus makes it the most attractive investment/trading opportunity in ST or MT. Reasons;

• Markets will speculate USD to inflate that is already showing in the dollar drop as soon as the announcement. Investors will start hedging against with GOLD.
• Emerging markets will rally, creating demand for GOLD. Exact opposite effect of what caused it to crash.
• This just added a lot of uncertainty in global market. No taper - everyone will decipher it in their own way. But, GOLD has always been a hedge against uncertainty. No tapering mean future uncertain, which should in turn help raise GOLD demand and thus the price. 

Second - OVER ALL US MARKET - will actually get hurt in the ST to MT, I think. 

• With all star analysts touting taper, market today was already priced with the speculation that 10-15bil will be reduced. When that did not happen, it has created confusion for strategists. They are probably scrambling through meaningless data to create some explanation - right now. As I can already see Bloomberg reporting interest rates to rise by 2015 whereas, FED just said, they have NO TIME line. All this is BULLSHIT speculation.
• How will market actually react - initial buy frenzy (that is going on right now as Im typing this) followed by realization that economy is really not doing so good at all and then, pull back. 

To sum it up, I see a big correction on the horizon. When the market will go through 15-20% downturn from today's high, is when secular bull will take charge again. But, we need to see a good cyclical bear run. Which I see in the horizon pretty soon... 

Lets see... 

Feds dilemma: Stock Market Bubble vs. Fight Deflation

THE WALL OF WORRY THAT BULL MARKET LIKES TO CLIMB ON IS AKIN TO THE SLOPE OF HOPE THAT BEAR MARKETS DESCEND ON.

Any news is a good news for the stock market of today;

• Past Friday, Japanese media came out with the news that Larry Summers had been picked by President Obama as the next Fed chief - markets opened high and continued rally for rest of the day. 
• Later in the week, Summers dropped out of the race, market rallied insanely again. 
• Majority of economists believe that Fed will start to taper from this meeting (though I disagree), again the market has kept its upward swing. 
• Debt ceiling issue is coming up real fast and no solution has been implemented yet, market is still rallying. 

I believe, the price point for all major indices indicate that market believes, FED will not taper. Hence, regardless of whatever the news, as long as $85 is being pumped into the market, people will keep investing and stocks will keep going up. Free money from the fed ends up in the stock market in hopes of making more free money so rich keep getting richer and poor keep getting poorer... Anyway, this cycle is making banks' balance sheet larger and larger - making them larger and larger to fail, creating larger and larger problem for us in the future. 

However, GOLD is acting very strangely. If the Fed was to keep the QE3 intact, should increase inflation which in turn should support GOLD prices since GOLD is the ideal hedge against USD.

At the same time, the way USD has been rising with speculation of tapering, any type of monetary tightening hawkish policies will shoot up the USD, which will in-turn be really bad for the over all economy, here at home or globally. 

So, FED has a pretty huge decision in its hands - 

On one hand, it can keep its low interest rates and keep pumping money into the market in hopes of increasing inflation, keeping unemployment low and assisting housing recovery - the whole point of QE policies for past 5+ years. But, risk creating a larger stock market bubble. 

On the other hand, it can start tapering this week and risk the USD being deflated and send the stock market in the downward spiral path with effect being trickled down to emerging markets. Just the talk about tapering crashed the emerging market's, one can imagine what the action will do. 

We will find out within next 24 hours... 

I think, FED will keep its QE3 untouched at-least till the next Fed Chair is elected. That would be an ideal time for this since market will already be on its edge and will be open and fast adjusting to the change. 

Disclaimer: I am expecting market volatility and GOLD's upswing and currently hold calls in GLD and VXX. 

Bear Case - Future looks gloomy

Both $BAC and $JPM have come up with gloomy analysis for future US growth (links below). My verdict - WallStreet has become a legal gambling ring with uneven playing field where the stakes are increasingly getting higher. A BIG caution for retail investors!

Fundamental analysis -
There is no fundamental reason for the stocks to be soaring at all-time high level when we are struggling to keep GDP rate at even 2%, and unemployment under 7% with interest rates near 0% - AND THAT IS WITH ALL THE STIMULUS MONEY! This should send chills down your spine. There is no real growth anywhere - global growth has stalled. Plus, the inter-twined "Global financial system" that we have created has made things so complicated and interdependent that one of the economy's bust could drag everyone else down with it.

Technical analysis - 
Look at SnP's 5 year chart below - we have been in a secular bull market since mid-2009 with 4 noticeable corrections in the chart. Technically speaking, a healthy  bull market should always go through cyclical bear markets every now and then in between to ensure proper distribution and accumulation of assets. All these corrections you see below were very short lived which is another flag for a big wave coming - in other words, perhaps a good 20% market correction on the horizon? Who knows ...

Source: MarketWatch

Some links that further support my argument.

Gloomy GPD: http://www.businessinsider.com/us-potential-gdp-growth-lowest-since-ww2-2013-8
Gloomy Housing: http://www.marketwatch.com/story/housing-markets-about-to-get-squeezed-2013-09-13
Gloomy Consumer Sentiment: http://www.marketwatch.com/story/consumer-sentiment-hits-five-month-low-2013-09-13

Apple ($AAPL) is losing its MOJO. Might see 400 before it sees 600

I wrote the piece below almost 2 years ago, few weeks after Steve Job's death when AAPL shares were flying and the entire world was convinced it was going to $900+. I shorted and made some money...

If you are a tech geek, investment guru, headgy, marketing professional, IT , student, multimedia
professional, a kid in china (who sold his kidney to buy an iPad and iPhone) … everyone knows what apple is and wants to possess one or more of its product. In very short time, Apple has progressed to become the world’s most valuable company thanks to its almost blind customer base (including me) and investors who think Apple is more valuable than any other company out there. According to its recent 10-K, Apple has $9.8 billion in cash and cash equivalents.

As an investor, any one would like to know, how is Apple utilizing all these extra cash sitting around. Right?

Let’s take a step back and look at Apple when Steve Jobs came to its rescue and resurrected the
company from the verge of bankruptcy and complete melt-down. Today it has struggled its way to the top, literally to the TOP of the WORLD. – awww … it’s a fairy tale. But, how did Apple achieve such a feat? With innovation and marketing backed by Steve Jobs wit and vision, which acted like a catalyst in the composition – the product was Apple’s core competency. I had once read in one of the books during my MBA that innovation and marketing are the only two functions business – everything else are instruments to support these two functions.

Now, with so much capital sitting around what had Aaple been doing? - investing in bonds, treasuries, foreign securities while innovation has slowed down significantly. Think of iPod how that revolutionized portable music, iTunes that killed CDs, iPhones that gave birth to a whole new world of smart phones and PDAs and now iPad that is shaping a whole new world of portable computing, even threatening laptops, hitting PCs at such a vulnerable time.

Im sure everyone agrees that Steve Jobs was a visionary and make things work. Though I think there are a lot of people in this world with his capabilities, maybe even better, but having such capability and doing something with it are two different things.

Hence, I see innovation being a real problem going forward due to lack of strong leadership. New CEO will face a lot of resistance with every decision. I think $AAPL will fall soon.

FAST FORWARD TODAY - ALMOST 2 YRS LATER, my prediction has been on the spot.

SO WHAT NOW FOR AAPL?

Two years has enforced my initial analysis about Apple. Innovation has become a real/ongoing problem. Apple used to create products that created new markets that in turn changed the world. With their exeptional marketing and almost blind customer base, they could do anything. But, Apple seems to have lost complete focus on their core competency - they've lost their mojo! It seems like their sole focus is increase revenue and market share so they can keep their stock prices - very short-term thinking, not Apple like at all and I believe the stock will test 400 levels soon.

Reasons;

• I was convinced that Apple was going to demonstrate some crazy innovative product during the last product launch (few days ago) and surprise the world. All the rumors about different types of products - they did not deliver anything. 
• Mini iPad and now cheaper iPhone. That will cannibalize their actual iPhone's market plus reduce already shrinking margin. 
• Late on emerging markets, Samsung has gained some serious traction globally. Nokia is the new buzz. Apple was the buzz. Apple had traction.
• CEO talking with headgys. I don't think Steve Jobs would have ever talked to Icahn. Shows Cook's focus on stock price. When hedge funds try to manipulate the stock - Stay out of it! 

Basic point of the rant - Apple is losing its MOJO and until and unless they come up with something innovative, this company is in a downward spiral and I would not invest in their stock right now. 

I do not currently hold any POS in AAPL.

GOLD is golden

MARKETS WILL REMAIN IRRATIONAL LONGER THAN YOU CAN REMAIN SOLVENT... great words someone said somewhere that has been stuck in my mind for a long time.

With that being said, I believe Gold's recent drop this week is very irrational. Because the positives far outweigh the negatives.

Positives:

• Fed is NOT tapering this year. Even if they do, they will probably reduce their purchase amount by 10 billion, at most. This reduction i believe is already priced in.
• Syria crisis is no where close to solution. What Russia is doing is a "Stall Tactic" and will fall apart pretty soon. 
• Emerging market's crash is over which should increase demand in gold - India largest consumer of physical gold. 
• China stimulus for their economy if happens, will make money cheap, again upside potential for gold. 
• A little hint of inflation in the US $$$, which has to happen if Fed keeps the bond buying program intact, should also help raise the gold price. 

Negatives:

• Rise in interest rates
• Fear of Fed Tapering
• "Great rotation" if that is really happening as market gurus are speculating then it might stall upswing.

Verdict:

I see Gold setting up stage for a massive upswing soon. Might fall further in ST but it will yield profit. 

I currently hold slightly out of money calls and might add more if it falls further.

Dont believe the WalStreet Media - Fed will not Taper

Federal Reserve really has two instruments to fulfill its function in the market;

1.       Increase or decrease money supply. (Print money/Sweep Money in laymen terms)

2.       Increase or decrease interest rate.

Let’s start with #2, interest rates are as low as they can get. Any lower and banks will start imploding. So, that option is off the table.

Now the complex #1, Quantitative Easing, is supposed to increase the money supply so there is enough money in the market to fuel recovery. Ok, somewhat working or should I say worked… why?

1. Housing is slowing down. I doubt they saw the real interest rate increase.
2. Unemployment improvement is slowing down.
3. Retail is terrible – no one is buying.
4. Emerging markets crash triggered by “taper fear” – shows there’s no fundamental growth. It can be argued that majority of growth is artificial because of QE including the stock market.
5. Most important, inflation. The reason Federal Reserve has the power to print and sweep money is to keep inflation in check. No-one and I repeat NO-ONE saw the inflation rate going down with so much money being pumped. This is in contradiction to the basic economic models. US $$ should be highly inflated given how much money the Fed has pumped into the system since 09. But, it is not happening. Why? Millions of reasons – that’s not my concern. Concern is, with emerging markets crashing and US dollar deflating, there really is no recovery. In simple terms, what are you going to do with a mountain of gold when people can’t afford tiny bit of it. Opens doorway to substitutes.

Finally, Dr. Ben has consistently said, there are no taper plans till the end of the year. He has consistently said that every time taper talk was on the table. Still, Wall Street media wants you to believe there will be a taper. This is a highly speculative.

My suggestion, if you are invested in stocks for the long haul (year plus) – stay put. But, if you are not, we are in a cyclical bear correction. We’re falling hard – I think SnP will test 1600 by the end of this month. Let’s see …