"View from the Top" are macro comments made on a timely basis about the markets or significant "items of interest" during the trading year. These "non-technical" observations are not guaranteed to be right and is the personal outlook of our head-trader, (with over 30 years experience in the markets), at that point in time.

September 30, 2009.  We have sold GE today at 16.50 as our last longer-term position that was established in March 2009 for a gain of $6.57, (cost was $9.93), or just over 66%.  We are weary of the marketplace as everybody is getting bullish, no large pockets of jobs are created, unemployment insurance will soon run out after a year's run, financial reforms are still elusive and yet to be passed, and the economy remains weak and at times, contracting. [WL]

August 14, 2009.  Foreclosure activity jumped 7 percent in July from June and 32 percent from a year earlier as one in every 355 households with a loan got a foreclosure filing was the analysis from RealtyTrac.  These filings, which include notices of default, auction and bank repossession, have escalated with unemployment.  The dilemma is that with an absence of job creations either by the public sector or President Obama's relief programs, unemployment benefits are starting to run out for the individual and that can only increase foreclosures.  These benefits basically go on for 46-to-79 weeks in different states, ( http://money.cnn.com/news/storysupplement/economy/unemployment_benefits/index.html ), and is destined to run out between the last quarter of 2009 and first quarter of 2010 for the unemployed that started their claims in spring/summer of 2008; (in July 2009, the number of people collecting unemployment benefits is over 6 million).  So like the train that derailed last year, this train might run also out of gas if the job numbers do not improve.  Conversely, we all know how many companies went bankrupt, cut cost, or made layoffs during the past year, (52-weeks), but could we even count on one hand who has created jobs during this time?  Which leads to the conclusion that if the consumer is still reeling and not purchasing goods and services, (consumer spending accounts for about 70% of GDP), current markets that have discounted the end of the recession have seemingly not discounted an economy going back into a recession! [WL]

June 23, 2009.  Core position AXP was stopped out yesterday at $23.25 for a profit of $10.42 or plus 81% as the stock was purchased for $12.83 on March 30, 2009.  We have now sold 4 out of our 5 positions, will monitor them for a future repurchase, and are keeping GE for now. [WL]

June 22, 2009.  Some of the market analysis that we have been reading is affirming our decision to exit 3 of our 5 core positions and initiate a workable stop on AXP.  When we purchased our core positions on March 30, 2009, everyone was negative, investors were underweight equities, and we expected a rush to own stocks with President Obama's policy changes.  And now as we exit, this news is on the horizon and is why when "everyone is in," it's time to consider leaving the party:

"Fund managers have moved to overweight equities for the first time since December 2007 as hopes of an economic recovery remain intact despite a sell-off in bonds and rising yields, a survey showed on Wednesday. The monthly poll by Banc of America Securities-Merrill Lynch showed a net 9 percent of the respondents are overweight stocks. This means the difference between equity overweights and underweights is 9 percentage points. In May, fund managers were a net 6 percent underweight stocks ... The survey found that global growth expectations rose further, with the growth composite indicator hitting a six-year high of 78. A net 7 percent of investors believe global recession is likely in the next year, compared with 70 percent just two months ago ... 'While investors are finally overweight equities, risk appetite remains relatively constrained. Investors seem happy to underweight defensives at this point, but overweight conviction is tightly concentrated on just two sectors; energy and technology,' said Gary Baker, the bank's head of European equity strategy."
(Reuters (ft.com) – "Funds move to overweight stocks – Merrill poll" – 6/18/09) [WL]

June 19, 2009.  We have taken some profit on 3 of our 5 core positions and should repurchase them when the time is right.  US Steel [X], Alcoa [AA], and CitiGroup [C] were all sold at today's opening prices of $37.66, $11.12, and $3.21 for gains of 75%, 66%, and 39% respectively.  We still believe in these issues but feel that they are fairly valued for the next several months in both a fundamental and technical standpoint.  Kudos to all the subscribers that saw what we saw! [WL]

June 18, 2009.  Markets are getting a bit "fluffy" and we will now make adjustments to our core positions.  On March 30, we purchased X(21.55), AA(6.69), GE(9.93), AXP(12.83), and C(2.31) for a longer time frame, (one year.)  But as the indices are higher by over 40%, we now see that the markets have changed sentiment from one that could take almost any bad news and still move higher to one that has a hard time moving with good news and decline with any negative stories or even no news!  Conversely, it seems to be fairly priced and maybe even fully priced for the next several months.

We will take profits on X and AA at best possible prices because the US Auto car industry remains in trouble for the foreseeable future, construction is basically stable-to-down, while the "Buy American" rules require a stronger economy which at the moment is still elusive.  Technically, both US Steel and Alcoa are hitting resistance lines, (200-day moving average), and as they are each up over 60%, we will take profits in this sector.  Noted is that in the May 29, 2009 Preliminary GDP report, companies cut total spending, including equipment, software and construction projects, at a record 37 percent annual pace while residential construction fell at a 39 percent pace last quarter, the most since 1980.

We will also put stops on AXP at 23.25 as it is seemingly building a toppish structure, sell C at best posible prices as it's inability to rally with the indices and also the financial sector is worrisome, and keep GE in the event markets do not go backwards but forwards as it has the best risk and reward scenario. [WL]

April 27, 2009.  Markets are on the verge of a small correction, most probably a sideways-to-down type of grind but nothing major.  A lot of people think that the indices will test the March lows while giving them another chance to go long and we are not believers of this.  The world has changed.  President Obama has lots of money to quell any bush fires and the power to change the securities laws as well as empower his quest for the stabilization of the economy, both here and around the world; (mark-to-market and short selling rules are two examples.)  Conversely, the markets are strong but maybe a touch overbought at this point in time.  Looking around, we see banks failing and seized by federal regulators to guarantee and pacify all depositors, auto companies restructuring with government help and not going bankrupt, large unions taking concessions, banks making money and harping to give back the TARP money, and techs underpinning the economic growth by posting solid earnings in a time where you would think they would lose money.  Maybe after the summer and if President Obama's stimulus plan cannot garner a stronger economy will the markets then decide whether to test the March lows or not.  So for now, we are keeping our longs, (March 30, 2009.  We have been asked what we are buying with today's decline and here is our shopping list for now: X(21.55), AA(6.69), GE(9.93), AXP(12.83), and C(2.31)), and will ride out any short-term pullback. [WL] 

March 30, 2009.  We have been asked what we are buying with today's decline and here is our shopping list for now: X(21.55), AA(6.69), GE(9.93), AXP(12.83), and C(2.31). The first two selections goes directly with the world economy as well as Obama's "infrastructure" plays while the last two are financial stocks that should only turn when the consumer/economy is ready and/or Obama's new rules for finance are changed; (maybe mark-to-market reforms.) And GE is the microcosm of today's crisis. [WL]

March 23, 2009. With today's new government plan, (Public-Private Investment Program), to mop up a trillion dollars of financial "toxic waste," the effects are the same as revising the mark-to-market rules for these securities. Conversely, if the "toxic waste" is being "well-bid," bought, underpinned, and/or supported by the government program, then markets will not have to be made with these securities just as if mark-to-market rules were eliminated from this sector. Afterall, if the government is bidding 100 million in size for a bond priced at 79.00, and the whole issue was only 125 million to start with, the price will remain 79.00 or better forever. (We assume with "tongue-in-cheek" that Blackstone owns the remaining 25 million!) Noted is that CNN has reported today that there are 2 trillion of these toxic issues outstanding and the government is already at the halfway point or more with other programs such as TARP. [WL]

March 18, 2009. The question posed to us is that what is "the importance of buying equities prior to mark-to-market accounting changes." Alot of funds now are underweight financials because they just do not know what or the amounts of toxic-waste these financials hold. Or if further bank failures lie ahead of us. We all know AIG still has 1.6 trillion dollars of CDS on their books but as we see banks fail from week to week, (16 banks closed in the first three months of 2009: Freedom Bank of Georgia, Commerce, GA, Security Savings Bank, Henderson, NV, Heritage Community Bank, Glenwood, IL, Silver Falls Bank, Silverton, OR, Pinnacle Bank of Oregon, Beaverton, OR, Corn Belt Bank and Trust Company, Pittsfield, IL, Riverside Bank of the Gulf Coast, Cape Coral, FL, Sherman County Bank, Loup City, NE, County Bank, Merced, CA, Alliance Bank, Culver City, CA, FirstBank Financial Services, McDonough, GA, Ocala National Bank, Ocala, FL, Suburban Federal Savings Bank, Crofton, MD, MagnetBank, Salt Lake City, UT, 1st Centennial Bank, Redlands, CA, Bank of Clark County, Vancouver, WA, and National Bank of Commerce, Berkeley, IL), nobody would overweight financials unless something changes. Mark-to-market reforms should do that and at least stabilize the "accounting losses" that are incurring each quarter. Banks like CitiGroup, Bank of America, Wells Fargo, etc., might not be forced to take mark-to-market losses and institutions would then invest as the unknown quarterly losses diminish. Because after any reforms or if the rules are changed, CDS or CMO do not have to be written down again and again; or in the best case scenario, revalued back up to cost or to a "distressed date" as set by the FASB or SEC. Then these banks would probably "gap-up" considerably from these prices. Conversely, funds would start averaging their holdings as some stocks have plummeted over 80% and that is why we are seeing some unrelented buying. And once the banks are stable, they will lend out the TARP money which is now only being used to buffer the mark-to-market losses and really, nothing else that benefits the economy or help the companies that rely on credit.

Today's announcement that the Feds are buying $300 billion in treasuries and mortgage-back-securities is basically a way to inject money into the system as well as backstopping mortgage-back-securities and restarting the real estate sector; (ie, packaging mortgages to institutions). In a way, buying mortgage-back-securities with government money is akin to creating a strong bid so that any mark-to-market values will be stable and not "marked" lower. But more is needed for the CMO and CDS and if you think today's rally was exciting, wait for any potential mark-to-market changes in the coming weeks. [WL]

March 16, 2009. Financials are strong as the FASB makes recommendations on "mark-to-market" rules. The Financial Accounting Standards Board, which sets U.S. accounting rules, proposed today to allow companies to exercise more judgment in determining if a market for an asset is active and if a transaction is "distressed." U.S. lawmakers last Thursday pressured FASB to deliver new guidance on mark-to-market accounting within three weeks, or face legislation to relax the rules. So in a nutshell, the "die is cast" on making mark-to-market reforms and the proposed guidance will have a 15-day comment period with the hope of issuing a new and revised guidance in the first week of April. Markets are strong but we now expect a pullback to midpoints before a resumption of the uptrend. [WL] 

March 12, 2009. As a follow up to the October 23, 2008 commentary, on March, 9, 2009, Warren Buffett said on CNBC he doesn't regret writing a commentary in the fall encouraging people to buy U.S. stocks, (New York Times "Buy American"), but he joked that in hindsight he wishes he'd waited a few months to publish the piece. Since that commentary appeared on Oct. 17, the Dow Jones Industrial Average has fallen from 8,852.22 to close at 6,626.94 on Friday, March 6, 2009. Which is to say, technical analysis rules on when to get in and out, (ie, timing), and not fundamental analysis. [WL]

March 11, 2009. What we expected unfolded correctly in that with this morning's opening up-gap, "a pause day" is currently in the works. Both the SPX.X and the COMPX opened higher than yesterday's high, retreated down and should close relatively flat or near the opening print. But the fact is that Tuesday's long vector was not negated and prices are seemingly "consolidating at the highs" which should lead to higher prices in the coming days.
Noted is that U.S. Senator Johnny Isakson, R-Ga., today called again for reform to mark-to-market accounting rules during a speech on the Senate floor. Isakson believes mark-to-market rules are disproportionately penalizing American banks. Which is to say, the mark-to-market change is gathering momentum. What we would propose is that mark-to-market rules be eliminated on "illiquid" institutional bond instruments and placed in "special accounts" that the government oversee because they are "engineered" to hold, made for the so-called "professionals" and institutional accounts, and do not trade on a listed exchange. Afterall, how many Joe the plumbers bought a CMO or CDS or even know what they are? And leave the mark-to-market rules for all the listed stocks, (OTC and big board), and corporate and government bonds so that a certain degree of transparency will be maintained. [WL]

March 10, 2009. Traders are a funny lot,,, alot of them have told me that "they missed the low" and cannot seem to buy at higher prices. Very illogical! When prices were falling, more like collapsing, they were always trying to pick bottoms and would see further losses in the days ahead. Now that prices are finally going up, they want yesterday's prices. Our contention is and always will be, "trend." We would rather pay higher prices if the trend is up than to buy at any price when the trend is down. Similarly, we will sell short at lows in a decline and not against an uptrend. The trend is your friend so it's better to buy at whatever prices you can during an up market and not try to catch a falling knife in a bear trend! Case in point, we never got caught with our pants down in this crisis. [WL]

March 5, 2009. These are our thoughts and forecast on the financial crisis that has gripped the Wall Streets around the world. We suspect that the bottom is near, (targeting March 12, 13, and/or 16 as possibly turning dates), with the catalyst being the next set of government changes that could give the markets the much needed boost for a sustainable rally.
The subcommittee on capital markets, (the U.S. SEC's chief accountant and the chairman of the Financial Accounting Standards Board), has tentatively scheduled a hearing on "mark-to-market" rules for March 12, 2009 and we think that this is what President Obama "must" to do in order to stabilize the financial fallout. If he doesn't do it, good money after bad will not end and just AIG will decimate alot of banks by going bust on CDOs that everyone owns, (collateralized debt obligations). Plus say bye-bye to CitiGroup, Bank of America, Wells Fargo, etc, etc, because there's just no end to the toxic waste out there.
In September 2008, Chief economist Brian S. Wesbury and his colleague Bob Stein at First Trust Portfolios of Chicago estimate the impact of the "mark-to-market" accounting rule on the current crisis as follows:
"It is true that the root of this crisis is bad mortgage loans, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market. What's most fascinating is that the Treasury is selling its plan as a way to put a bottom in mortgage pool prices, tipping its hat to the problem of mark-to-market accounting without acknowledging it. It is a real shame that there is so little discussion of this reality." But now, the discussions are here, slated for March 12, 2009.
By changing, eliminating, and/or postponing the "mark-to-market" rule, everybody would live and if that rule was altered last year, both Bear Stearns and Lehman could still be alive. This rule basically values a financial instrument at a real value which is usually based on market price. If your house is bought for $500,000 and the only price you can sell it right this minute is at $150,000, a similar valued financial security would be "marked" down $350,000 and the financial concern would lose $350,000 on their income statement. Now if a bank has $100 dollars, lends $1000 to XYZ when times were good, and have to mark down XYZ's bonds to $300 when times are bad, it becomes insolvent because losing $700 and having only $100 in the kitty is negative equity. And that was why Bear and Lehman disappeared in a span of days and not weeks; never mind months or years!
To change the rules and not "mark-to-market" will save the financial system because at the end, either the banks carry this $1000 XYZ loan as $1000 and continue to operate or go bust while letting the government carry the loan at $300. But a couple of months later, like AIG, this $300 loan is now marked down to $150 and more money is needed to buffer this accounting loss. Here is the heart of the problem with the government's bailout plan as there is no end in sight with the good tax-payers money that keeps pouring in to support the trillions of CMOs, CDOs, etc. The solutions are very limited for President Obama and that is why next week's meeting is so important and why we expect changes in this area in order to stabilize the financial crisis and markets.
As such, we are buyers going into March 12, 2009 as our technicals are taking shape for a bottom and please remember, these are our thoughts only and we could be completely wrong. Markets can continue falling through March 12 and any other news event could change and/or alter the above observations/rationale immediately. Afterall, the government can do whatever it wants regardless of what we think. But for the next several days, this is how we will be thinking and looking at the outcome of events. [WL]

October 23, 2008. Along with Warren Buffett, everyone seems intent on looking for a bottom. But as we said yesterday, the recent "consolidation at the lows" could be "just a 'pause' or midway point of a broader decline" and that is what we are seeing. In other words, rallies are not firm and the selling is not abating. As such, as long as prices remain below the midpoints, the market tone remains negative. [WL]

Here's an article by A. Gary Shilling of Forbes and we share the majority of his views:
Click here: "We Haven't Seen the Worst Yet" (Forbes Nov 10, 2008)

October 22, 2008. With the inabiity for the markets to move higher, and the fact that any positive news is either a one day love affair or overshadowed by some negative news, we are coming to the conclusion that it is possible that this low is just a "pause" or midway point of a broader decline. Maybe the past decline has just "discounted" the credit crisis and not the full recession / depression. And if that is the case, this "consolidation at the lows" could break much lower. Technically speaking, midpoint resistance remains strong in limiting price gains and a break of last week's lows could then plummet prices, leading to a capitulation. In other words, if those lows were to break, everyone would throw in the towel because losing 30-to-50% in the 401K is already bad enough but any more will lead to a "Sell! I don't want to own stocks anymore" herd mentality. [WL]

October 13, 2008. Today's huge rally gives everyone an idea of which stocks are the stronger ones as several of the top net gainers in tech include, GOOG, BIDU, AAPL, RIMM, PCLN, AMZN, IBM, MSFT, etc., while the losers and marginal gainers show SFLY, INSP, AMAT, MOT, NT, TXN, etc. Conversely, if institutional buying is not there today for the latter group, they must be still sellers into this rally which doesn't auger well. Which is to emphasize, isn't it worthwile to switch from let's say TXN into AAPL last Friday? We actually traded in CSCO and ADBE for AAPL as the former two never went far over the past several years, were always a "recommended buy" or blue-chip tech holding by the "smart" brokerage houses, and traded in a wide range but not an uptrend while AAPL was just a star performer during this same period. [WL]

October 10, 2008. Quite a few people have asked me "what to do" during this massive meltdown. Brokers, day traders, swing traders, and investors alike are frozen and shell-shocked with this decline, not knowing what to do.
With over 30 years trading the markets, I have told people to switch today while stocks are seemingly closer to a bottom than the start of a decline. We are switching from stocks that just seems to go sideways into the ones we expect could lead the next Bull market. Let's say you owned INTC for over a year. This stock never really got going during the last Bull market and exhibits a 4 year range from 2004 till today of about 18.00-to-28.00. So even if one were to buy the stock at 28.00, the loss would have been close to 50% with a low at 14.00. Now if we find a stock that we like and has also dropped 50%, we would make a lateral switch today. Since 2004, AAPL has risen from 11.00-to-200.00 and has also dropped over 55% to 85.00. But this stock has the potential to rise 100% or more in a shorter time frame whereas INTC has a high propensity to stay in its range. US Steel has gone from 40.00-to-196.00 in the same period and is now back to 40.00. Once the economy comes back, we believe US Steel will be one of the beneficiaries.
Every stock is getting hammered from hedge fund sales, margin calls, mutual fund dumping, day trading mistakes, panic dumping, etc., but once this selling is over, the stronger stocks will come back alot faster. Switching from one stock to another, with each having lost 50%, is analogous to going from the weaker ones into the stronger issues. So pick the ones that you like but thought was too expensive and switch the same dollar amount into it. Otherwise, the portfolio might stagnate if one does not have the right stocks in it after this financial crisis ends. Switching at the bottom works well because once the bottom has passed, the stronger stocks will have already flown away. [WL]

September 22, 2008. Here's a piece from option veteran McMillan whom we completely agree with:
"First of all, the partial ban on short sales is preposterous and amateurish (frankly, I can't believe this happened in America). It shows the inexperience of Cox and probably Bernanke (if Paulson was involved in that decision, he should be ashamed of himself – either that, or he did it to provide his buddies in the financial institutions with a big windfall profit on Friday's trading). Short selling is necessary for arbitrage and liquidity in all derivative markets – options, convertible bonds, and so forth. It even provides liquidity in the stock market because long-short hedge funds are a major style of trading (a typical hedge fund might be 60% long and 40% short, for a net exposure of 20% on the long side; if shorts are banned, such a fund might dump 40% of its longs, too, to get down to a 20% exposure). Secondly, what is this with making these moves right in front of a major futures and option expiration? Again, as was the case in August of 2007, Fed action on Thursday night caused the "a.m. settlement" of S&P futures and options (and many other indices) to gap higher. $SPX closed at 1206 on Thursday night and the "a.m. settlement" was at 1279. Is that supposed to crush the shorts? Once again, all it proves is that Fed can bully small market makers out of business any time it wants to. Ridiculous!" [WL] 

September 10, 2008.  We are not a huge believer of fundamental analysis for short-term trading since intraday moves involve spikes in volume based on supply and demand. And in longer-term trading, who knows if the funnymentals [sic] will unfold correctly. Here's one that did not and it was the analyst's second time around recommending an "average down" of Fannie, Freddie, and especially some Fannie preferred stock! Ouch!
[WL] Click here: "My Bet on Fannie" (Forbes Sept 15, 2008)