A Few Theories on the Economy

And the market continues its bullish rise, hitting theoretical Dow tops of 10,158. There is strong chartist argument now about whether the Dow will approach 10,700 before correcting, and then the bubble bursting again.
And just as strong an argument that we've more than reached market tops, and will correct to the 9679 area. Call traders were again day trade profitable with easy buys on the OEBKD November 21 2009 520.00 CALL, which was available 3.70 buy to 4.80 sell, right within the tight ranges we recommended on calls. We'll recommend the same trade again today, holding a hedge put. Begin watching if the call or put begin to waver back and forth in slight price ranges, which could afford slight day trade moves of .50 to .75 per contract. This is "learning to fall in love" with an option.

However, that's if the market holds. No one knows. Earnings look good for many companies, and there is a positive resiliency to the market.

Let's talk this week about a few theories of the economy, or better yet, clarification of false facts:


* The Dollar is Collapsing.
It's surely not healthy, is in a downtrend, but the ICE U.S. Dollar Index is about the same as it was a year ago.

* Institutional traders have not yet fully entered the market, and it will raise our outlook higher.

The average U.S. equity fund is right now about 5% higher than the S&P 500. Fund managers are playing stocks on the uprise well.

*10,000 is too far a jump and too high, too fast

This is true in many ways ,but part of a normal retracement from bottoms. For reasons we'll debate forever, it's happening very fast.

*Many compare what is happening now to what happened in 1974-1975, which would imply a very stiff correction shortly, followed by new highs.

This is very true. And very possible. The ONE variable left out of the economic turnaround in real estate, which is a lie.

*Real Estate sales are improving.

Commercial real estate is a bubble waiting to collapse. Residential real estate 2 of 3 homes sold are in foreclosure, or short sales. A bit of optimism on "facts here"

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The Dow has criss-crossed 10,000 no fewer than 25 times before, sometimes amidst bubbles, and sometimes like last Friday where it closed at 9996, up 1.3% for the day. We talk about this two days later, as the 10,000 area, and how long and if the market holds at this "magic 0000's" threshold.

What we may be seeing is the re-making of the USD, and of the values we put on things. People say they cannot afford even state or county taxes, point rightly to the constant fraud, but drive on roads with unsafe bridges, and fly in vastly overpopulated air traffic highways, on what appear outdated planes. We may see a re-shaping of priorities, and we may see as unemployment remains high (some think just under 10% is the NEW standard) that our entire spending priorities will shift, putting the country more in turmoil.