Thursday, January 17, 2008


Don Hays writes that investors have reached the level of fear that Sigmund call "snakes under the carpet". The German Proverb for this situation is that "Fear makes the wolf look bigger".

Panic is in the market, which means it is the best of times to buy. The ARMS index, which is a measure of upside volume to downside volume has hit levels that have historically only been hit soon before a big bounce. In like manner, the Bulls/Bears AAII index is at levels that have preceded bounces of an average of 21.75% over the following 12 months. For a market to bounce 21.75%, the "good stocks" have to move by 50% or more!


More than 200 bidders have lined up to buy a piece of the 700MZ Internet Super Highway. The auction will take place on January 24. In the mean time, TV services are being expanded in advance of the construction of the Super Highway. If you want to get the feel of the future of TV, buy yourself a SlingBox and watch your favorite shows when and where you like. Apple has redone its TV service and has begun to rent movies. More to come.


The slowdown in China has induced oil speculators to switch to the short side of oil. The 10% decline in oil in recent weeks is relief but not stimulus. In the meantime, the President, the Congress and the Chair of the FOMC are all yacking about fiscal stimulus to the economy. There will likely be a $100 billion or so package that will be designed to make the public believe the government has come to the rescue. The fact is that the economy is not in a recession and natural forces are already at work which would push the economy forward if the FOMC would get its foot off the brakes. If it were not such a crime it would be laughable that the FOMC is talking about fiscal stimulus while holding the Fed Funds at 2% above the 2 year treasury rate. By lowering the Fed Funds Rate to the market rate, the FOMC would give more than 100 times more stimulus to the economy than a stupid bail out to be passed by congress. The big difference is that the FOMC is not looking for votes but the congress is.


The SC race has been all over the chart in recent weeks. At one time or another, I believe 5 different candidates have been in the lead in reputable polls. The Rasmussen Tracking Poll showed a big lead by Huck immediately before McCain won in NH. McCain surge to an 8 point lead after his win because many voters want to back "the winner". Now that Romney has kicked butt in Michigan, McCain is just another of the 4 who could win it all. Michigan was home turf for Mitt and SC is home turf for Huck. If it were not for the large military vote in SC, Huck would beat McCain by 10 points or more. As it is, Huck has jumped back to a tie. Romney has no hope to win so he is headed out to Nevada. Even so, Romney is likely to run third in SC which means Thompson is out.

Huck picked up another big endorsement in SC today. The Lt.Governor is now on board with the former governor and the state party chairman in support of Huck. Huck just may win by a large enough margin in SC to launch his campaign into the lead in the big "winner take all prize" in Florida.

A regular reader is concerned that the FairTax will be harmful to real estate investing. There are two sides to this story. Since the FairTax eliminates the tax on dividends, interest and capital gains, it is a very investor friendly plan. A rental house bought for $100,000 might after some years be sold for $200,000 with ZERO TAXES DUE! No paperwork to file and no gains to report. On the other hand, the FairTax is collected each time a person buys a new product or service and rent would be a taxable service. The opponents to the tax quickly reply that the tax is very regressive as the poor would be paying a tax on their rent. Opponents seem to have a hard time realizing how freeing it would be to get a full paycheck with no deductions for taxes and to also get a pre-bate check to cover the tax on necessities. The poor family would pay less under the FairTax and investors would buy rental properties and offer them at low rents as more of their profits would come from tax free capital gains.

Again, there is no difference in the FairTax and a flat income tax with unlimited IRA deductions available. The current system punishes those who do not spend all they make. The FairTax would give all citizens incentives to save.


By using the tracking feature of mobile phones, bottlenecks can be identified and fixed. Never before has it been so easy to put detailed traffic patterns into a computer program to "fix bottlenecks". Retailers at big stores will even learn how to redesign stores to eliminate congestion and to drive customers to the most profitable goods. We live in a brave new world. Thousands of ideas are swirling around that will improve your life in the near future. Time is the most valuable commodity that you own and new technology is ready to show you how to save a lot of wasted time.

The public sees snakes in the carpet but insiders are buying stocks like crazy. Who is the crazy one, the one seeing snakes or the one buying like crazy. Martin Luther King said that fear protects us but that it also paralysis us. If you are paralyzed by fear, do something. It is time to hock the family jewels to buy all you can!