You've been in a winning stock for months.  You've got a double or triple and feeling like a boss but quite honestly you're becoming concerned the bull trend may be coming to an end.  Not a crisis mind you; but mean reversion is normal and typical.  You understand such things so what method do you have to protect profits in such a case?  Here I offer a video by Jeff Hirsch, Editor of Stock Traders Alamanc which gets you out and to the sidelines; ready to re-deploy cash at lower levels.  Cheers-

CLICK TO VIEW

With July behind us, it was once again to review monthly charts and many were quite interesting.  The S&P500 negated it's monthly sell signal in May by exceeding it in July.  Not only that, but prior 2000 resistance clearly turned into support in June with the market confirming that market strength with a solid July close near the high.  My stop (alert since I don't use stops) is now below June's low.  (Click charts to enlarge)

Why the market strength?  It could be any number of reasons (or none of these at all):

• The belief QE will remain the new normal with such a weak jobs recovery
• Global easing
• Money is coming in off the sidelines (doubtful)
• Money coming out of bonds into equities (some is but not all)
• Belief that Europe and Asia have bottomed
• Housing recovery and the amount it contributes to job growth and GDP. 
• Hope Obama's proposed Corporate tax cut passes
• Anticipation of China growth
• Anticipation of earnings growth
• Well the pundits said the 2nd half of the year would be better, right?  idk how but they wouldn't lie, right?
• Search for yield
• Energy sector strength

It's all speculation at this point but we're chugging our way towards $1750, possibly even higher by year end.   In fact this weeks Commitment of Traders report is nothing but bullish in S&P e-mini futures. 

To all those blogs and websites who continually said the sky was going to fall and we would double dip "do you work for Goldman Sachs to intentionally bring in shorts so the market can gobble them up and fuel us higher?"   Clearly sequestration and tax hikes were just smoke screens (once again) and the market doesn't seem to care (so far) about September debt ceiling (another wall of worry). 

Just stop asking why.  Stop buying the doom and gloom.   Move up your stops and if/when the market does give us a solid correction, you'll be out...........and waiting to buy when everyone else is afraid.

Jobs+Speech+7 30+Fact+Sheet+FINAL+for+RELEASE by caitlynharvey

"A couple of weeks ago, we recommended to clients to buy the September Natural gas $3.50-$3.60 put forabout $500-$900/contract for a potentialprofit of $1200-$2,000 (3x to 5x) return over the next month." From Cumberland Advisors hat tip @Ritholtz

However GannGlobal is proposing a runaway move in commodities is fast approaching.  If you're a believer in "herd" mentality (that big investors move together as a herd and the herd moves the market), you may wish to checkout their video and register for their free webinar

This would make sense with the breakout in BDI in late June  (see my prior blog posts in February and March) as well as the theory that the next step for China is to build out their rail system to connect their (ghost) cities and dramatically improve their distribution channel, connect people to jobs and lower costs.

If this move in commodities were to take place, we as investors, would want to establish positions in commodity futures and/or equity/producer names (or commodity ETFs) however WHICH commodities will be key.  I've love to hear your thoughts.

Full disclosure:  long NAT, WLT and AKS as drawer stocks.

A plan, which on the surface, appears to be very Reaganesque and commendable however business (in my opinion) has mutated since the '80s and I immediately envision Congress ripping this to shreds eliminating the following:

• Eliminating tax loopholes while lowering the Corporate tax rate to a "fair" 28%  - seriously?  As if Corporations suddenly want to pay what someone may deem their  fair share?  It's all about profits baby and low-to-no taxes means profits.
• Removing incentives to relocate overseas.  Corporations have and will continue to shift their mfg to wherever costs are lowest.  What's he smoking and why isn't he sharing?

Give them incentives TO manufacture here (more tax breaks)

He also proposes the sale of America Fast Forward (AFF) bonds to attract private capital to invest in infrastructure investments.  This reminds me of the bonds which were sold in the 50's...........which I don't recall anyone raving about what a great investment they turned out to be.  Just sayin'.

There are some good ideas here and I commend him for "saying" he wants to work across the aisle by investing in the future of America's workers.  I'm obviously no economist, pundit or politician for that matter but you can already her big business stomping this sucker to death on the Hill.  Sure, they'll push for lower Corporate taxes but stuffed in the pork will be loopholes galore and only tny slivers of anything to actually benefit and train the little guy.  Another waste of time.  This isn't Reagans Congress and Corporate cronies control the ball.

Read the full fact sheet here Jobs+Speech+7 30+Fact+Sheet+FINAL+for+RELEASE by caitlynharvey

We've already seen China build subdivisions, a mall, amusement park, a university and more, all sitting (essentially) empty so what is next?   For your consideration, this McKinsey video where their research shows that over the next 10 years, China plans to spend tens of billions of dollars building thousands of kilometers of metro lines to connect 35 cities (I wonder how many of those are currently ghost cities) which will not only transport people, but enormously improve efficiencies on shipment of goods.

I still remember being kept after class and having to clean the erasers, clouds of white dust billowing through the air leaving a film across my skin and causing me to cough like a three-pack-a-day smoker.  The smell is imbedded in my memory as if it as yesterday.   Boy are those days gone.

Fast forward to 2013 and not only are tablets and ipads becoming more prevalent in the classroom, but phones can share files with merely a touch and "the cloud" is only beginning to penetrate the education system, but what lies ahead for technology in the classroom?

For over a decade, the New Media Consortium (NMC) has been charting the landscape of emerging technologies in teaching, learning, and creative inquiry on a global scale.  Here are some quick insights....ALL within the next 4-5 years: (comments in italics mine)

• By the end of this year, the mobile market is expected to consist of over 7 billion accounts
• Mobile users will have downloaded 70 billion apps across smartphones and tablets.
• Digital textbooks (no more saying you lost your book but at least we'll be saving some trees)
• Monitoring tools that provides students with insights into their study habits and behaviors while using e-textbooks (something I'm sure would surprise many a parent)
• Algorithms that turns a random graders feedback into statistics and performance reports.
• Interactive fictional games that could turn learning history or other subjects.......into fun.
• Web-based interactive games that engage nursing students with real-life scenarios
• Computer-aided design classes featuring the incorporation of 3D printers for rapid prototype development.
• A virtual ocean laboratory to conduct studies on the acidification of the marine environment.
• Imagine a laboratory classroom where students utilize a wearable sensor that detects hazardous gases and immediately alerts the user of these conditions.
• A brain-sensing headband making it possible to control actions with one’s thoughts and to collect data about the brain’s reaction to various stimuli.

Find out more @ http://teacherswithapps.com/10-emerging-educational-technologies-and-how-they-are-being-used-across-the-glob/#comment-46406

As I read this morning's offering, I thought not of next week's trade or the possibility for growth next year but much further down the road.  I pondered the future for my children and my children's children.  All I have to say is I pray they stay in school. -kos

IBM's Ai project Watson “now applying for jobs at call centers, and getting them. In finance, and in law, and getting them.” - MIT’s Erik Brynjolfsson

When Growth Hits Zero

A Carter-era text called The Zero Sum ­Society, suggests a grim dystopia that emerges once economic growth hits zero point zero, at which moment to gain anything........................requires that you take it from somebody else. “Once you start to think about growth,” the Nobel laureate Robert Lucas has said, “it is hard to think about anything else.”

What if

The global economic slump that we have endured since 2008 might not merely be the consequence of the burst housing bubble, or financial entanglement and overreach, or the coming generational trauma of the retiring baby boomers, but instead a glimpse at a far broader change, the slow expiration of a historically singular event. Perhaps our fitful post-crisis recovery is no aberration. This line of thinking would make you an acolyte of a 72-year-old economist at Northwestern named Robert Gordon, and you would probably share his view that it would be crazy to expect something on the scale of the second industrial revolution to ever take place again.  (Note: for further reference see TED Talk by Robert Gordon entitled The death of innovation, the end of growth)

Economic Growth

One way to think about economic growth is as a product of human capital and technology: At moments like this, when human capital is not growing much (when the labor force is unlikely to grow, when it is not becoming more educated), all of the pressure rests on technology. For this reason, some economists who think Gordon greatly understates the potential of computers still agree that it will be hard for technology to sustain the growth rates we’ve become accustomed to. “We’re not going to get to 2.25 percent GDP growth—that’s way out on the tail,” Dale Jorgenson of Harvard told me. “There’s going to be a slowdown. It’s not a secular stagnation. It’s a change in demography.......this is a watershed event.”

The Computer Age

It sometimes take a while for humans to figure out how to use innovations, he said, and perhaps we are just now beginning to comprehend the full possibilities of computerization. We are now in the beginnings of the new machine age, an extended moment of revolution in artificial intelligence. “A child’s PlayStation,” he said, is more powerful than a military super­computer from 1996; a chess program contained on a cell phone can defeat every grandmaster.  Watson, the IBM AI project, having successfully amassed enough everyday knowledge to defeat the grand champions on Jeopardy!, was “now applying for jobs at call centers, and getting them. In finance, and in law, and getting them.”

“The problem is jobs,”  Sixty-five percent of American workers,.........occupy jobs whose basic tasks can be classified as information processing. If you are trying to find a competitive advantage for people over machines, this does not bode well: “The human mind did not evolve to multiply triple-digit numbers,” he told me. The robot mind has. In other words, the long history of Marx-inflected pleas, from ­“Bartleby” through to Fight Club, that office work was dehumanizing may have been onto something. Those jobs were never really designed for the human mind. They were designed for robots. The existing robots just weren’t good enough to take them. At first.

“The grand challenge is: Can we scale them up?” Brynjolfsson said. “We haven’t seen that yet. Otherwise, employment would be going up rather than down.”  READ MORE......

During the last few years, a lot of hype has been heaped on the Brics (Brazil, Russia, India, China, and South Africa). With their large populations and rapid growth, these countries, so the argument goes, will soon become some of the largest economies in the world – and, in the case of China, the largest of all by as early as 2020. But the Brics, as well as many other emerging-market economies – have recently experienced a sharp economic slowdown. So, is the honeymoon over?

Brazil's GDP grew by only 1% last year, and may not grow by more than 2% this year, with its potential growth barely above 3%. Russia's economy may grow by barely 2% this year, with potential growth also at around 3%, despite oil prices being around $100 a barrel. India had a couple of years of strong growth recently (11.2% in 2010 and 7.7% in 2011) but slowed to 4% in 2012. China's economy grew by 10% a year for the last three decades, but slowed to 7.8% last year and risks a hard landing. And South Africa grew by only 2.5% last year and may not grow faster than 2% this year.

So, what is ailing the Brics and other emerging markets?

First, most emerging-market economies were overheating in 2010-2011, with growth above potential and inflation rising and exceeding targets. Many of them thus tightened monetary policy in 2011, with consequences for growth in 2012 that have carried over into this year.

Second, the idea that emerging-market economies could fully decouple from economic weakness in advanced economies was far-fetched: recession in the eurozone, near-recession in the United Kingdom and Japan in 2011-2012, and slow economic growth in the United States were always likely to affect emerging-market performance negatively – via trade, financial links, and investor confidence. For example, the ongoing eurozone downturn has hurt Turkey and emerging-market economies in Central and Eastern Europe, owing to trade links.

Third, most Brics and a few other emerging markets have moved toward a variant of state capitalism. This implies a slowdown in reforms that increase the private sector's productivity and economic share, together with a greater economic role for state-owned enterprises (and for state-owned banks in the allocation of credit and savings), as well as resource nationalism, trade protectionism, import-substitution industrialisation policies, and imposition of capital controls.

This approach may have worked at earlier stages of development and when the global financial crisis caused private spending to fall; but it is now distorting economic activity and depressing potential growth. Indeed, China's slowdown reflects an economic model that is, as former Premier Wen Jiabao put it, "unstable, unbalanced, unco-ordinated, and unsustainable," and that now is adversely affecting growth in emerging Asia and in commodity-exporting emerging markets from Asia to Latin America and Africa. The risk that China will experience a hard landing in the next two years may further hurt many emerging economies.

Fourth, the commodity super-cycle that helped Brazil, Russia, South Africa, and many other commodity-exporting emerging markets may be over. Indeed, a boom would be difficult to sustain, given China's slowdown, higher investment in energy-saving technologies, less emphasis on capital- and resource-oriented growth models around the world, and the delayed increase in supply that high prices induced.

The fifth, and most recent, factor is the US Federal Reserve's signals that it might end its policy of quantitative easing earlier than expected, and its hints of an eventual exit from zero interest rates, both of which have caused turbulence in emerging economies' financial markets. Even before the Fed's signals, emerging-market equities and commodities had underperformed this year, owing to China's slowdown. Since then, emerging-market currencies and fixed-income securities (government and corporate bonds) have taken a hit. The era of cheap or zero-interest money that led to a wall of liquidity chasing high yields and assets – equities, bonds, currencies, and commodities – in emerging markets is drawing to a close.

Finally, while many emerging-market economies tend to run current-account surpluses, a growing number of them – including Turkey, South Africa, Brazil, and India – are running deficits. And these deficits are now being financed in riskier ways: more debt than equity; more short-term debt than long-term debt; more foreign-currency debt than local-currency debt; and more financing from fickle cross-border interbank flows.

These countries share other weaknesses as well: excessive fiscal deficits, above-target inflation, and stability risk (reflected not only in the recent political turmoil in Brazil and Turkey, but also in South Africa's labour strife and India's political and electoral uncertainties). The need to finance the external deficit and to avoid excessive depreciation (and even higher inflation) calls for raising policy rates or keeping them on hold at high levels. But monetary tightening would weaken already-slow growth. Thus, emerging economies with large twin deficits and other macroeconomic fragilities may experience further downward pressure on their financial markets and growth rates.

These factors explain why growth in most Brics and many other emerging markets has slowed sharply. Some factors are cyclical, but others – state capitalism, the risk of a hard landing in China, the end of the commodity super-cycle – are more structural. Thus, many emerging markets' growth rates in the next decade may be lower than in the last – as may the outsize returns that investors realised from these economies' financial assets (currencies, equities, bonds, and commodities).

Of course, some of the better-managed emerging-market economies will continue to experience rapid growth and asset outperformance. But many of the Brics, along with some other emerging economies, may hit a thick wall, with growth and financial markets taking a serious beating.

Originally posted @ http://m.guardiannews.com/business/2013/jul/23/emerging-market-boom-over-nouriel-roubini

In an economy where a good percentage of jobs being added are part time or earning $7.50/hour, I always wondered when the spending would slow, or at least corporations' efforts to hide it from their earnings line via internal re-organization, share buybacks, exhausting inventories, etc would run their course........and that time may be upon us.  Consider that MCD is already running their wildly famous "Monopoly" game now, in July rather in it's typical October/November slot and you get an idea that they're doing whatever they can to rustle up business.    24/7 Wall Street is wondering if the party is over as well.  My question now is who's next?  Mid-level retailers?  Leisure and activities? 

After McDonald’s Corporation (NYSE: MCD) posted a disappointing company earnings report we can only yet again consider that perhaps the easy money has been made in the casual dining sector. Many of these stocks have run up and done incredibly well since the end of the recession and now the private equity buyers have been sneaking their restaurant chains and even fine dining chains back on to the stock market.

How can single-digit earnings and revenue growth be exciting even with an at-market multiple of about 17-times expected earnings? Maybe this is not just a growth concern. Maybe there is a concern that there are just real catalysts that want to make McDonald’s investors chase the stock up over $100 now even if there is a 3% dividend yield. The analyst community had a consensus stock target price of over $106 ahead of earnings and that may be ratcheted slightly lower. If so, then McDonald’s may not be exciting until shares get back into the low-$90s or even back into the high-$80s again.

Checkout their analysis of others within the casual dining sector such as YUM, BKW, JACK and CMG @  McDonald’s May Signal Peak Valuation in Fast Food and Casual Dining Stocks - McDonald's (NYSE:MCD) - 24/7 Wall St. http://247wallst.com/investing/2013/07/22/mcdonalds-may-signal-peak-valuation-in-fast-food-and-casual-dining-stocks/#ixzz2ZokKJk00  

As first reported by 9to5Mac, Apple has been bringing on board experts in sensors that monitor the human body. They’re from companies like AccuVein, C8 MediSensors and Senseonics.

The wearable technology market is expected to grow immensely in popularity in the next few years: one firm estimates the 500,000 smartwatches that have shipped so far this year will explode to 5 million units by the end of 2014. The optimism built into the numbers comes from the long-held assumption that Apple will do its own smartwatch. But lots of big consumer electronics companies will help bring the devices into the mainstream: that may include Microsoft, Motorola and Samsung, in addition to entries from smaller, niche companies like Pebble.

But wearable computing includes far more than watches. There’s Google Glass, of course, and simple fitness-tracking, wrist-worn devices like Nike’s, and products from Jawbone, Fitbit and others. Clothing with sensors in them will be part of the mix too, like Heapsylon’s smart socks that infuse material with sensors that track body processes and movements.

The frequency of reports about the progress of Apple’s wearable device project have picked up in recent months. The company has registered the “iWatch” trademark in several countries, and is said to still be hiring hardware engineers to work on it.

But will it be an actual watch? Based on the kinds of people Apple is hiring, the device may have a health or fitness component to it that will take advantage of the company’s vast third-party app platform and its expertise in mobile hardware. It will probably tell time, and it may be worn on the wrist — Cook has said he finds that area “interesting.” Still, “watch” is a little too simplistic considering the kind of sensors it’ll likely have inside it.

Read more @ Gigaom

It's difficult to envision just where growth and expansion will come from today in a world of debt and low job growth however McKinsey offers these five (5) game changers:

• Shale-gas and -oil production. Powered by advances in horizontal drilling and hydraulic fracturing, the production of domestic shale gas and oil has grown more than 50 percent annually since 2007. The shale boom could add as much as $690 billion a year to GDP and create up to 1.7 million jobs across the economy by 2020. The impact will extend to energy-intensive manufacturing industries and beyond. The United States now has the potential to reduce net energy imports to zero—but only if it can successfully address the associated environmental risks. 
• US trade competitiveness in knowledge-intensive goods. The United States is one of the few advanced economies running a trade deficit in knowledge-intensive industries. But changing factor costs, a rebound in demand, and currency shifts are creating an opening to increase US production and exports of knowledge-intensive goods, such as automobiles, commercial airliners, medical devices, and petrochemicals. By implementing five strategies to boost competitiveness in these sectors, we believe the United States could reduce the trade deficit in knowledge-intensive industries to its 2000 level or close it—which would add up to $590 billion in annual GDP by 2020 and create up to 1.8 million new jobs.
• Big-data analytics as a productivity tool. Sectors across the economy can harness the deluge of data generated by transactions, medical and legal records, videos, and social technologies—not to mention the sensors, cameras, bar codes, and transmitters embedded in the world around us. Advances in computing and analytics can transform this sea of data into insights that create operational efficiencies. By 2020, the wider adoption of big-data analytics could increase annual GDP in retailing and manufacturing by up to $325 billion and save as much as $285 billion in the cost of health care and government services.
• Increased investment in infrastructure, with a new emphasis on productivity. The backlog of maintenance and upgrades for US roads, highways, bridges, and transit and water systems is reaching critical levels. The United States must increase its annual infrastructure investment by one percentage point of GDP to erase this competitive disadvantage. By 2020, that could create up to 1.8 million jobs and boost annual GDP by up to $320 billion. The impact could grow to $600 billion annually by 2030 if the selection, delivery, and operation of infrastructure investments improve.
• A more effective US system of talent development. The nation’s long-standing advantage in education and skills has been eroding, but today real improvements are within reach. At the postsecondary level, expanding industry-specific training and increasing the number of graduates in the fields of science, technology, engineering, and math could build a more competitive workforce. At the K–12 level, enhancing classroom instruction, turning around underperforming high schools, and introducing digital learning tools can boost student achievement. These initiatives could raise GDP by as much as $265 billion by 2020—and achieve a dramatic “liftoff” effect by 2030, adding as much as $1.7 trillion to annual GDP.

For the full report visit McKinsey.com

One of my favorite scans for a trade in the stock market is looking for setups with a tight Bollinger band squeeze with divergence (just ask our member Donald) but this end of month was different.  I was looking for confirmation of something more....ominous.

In case you missed it, the S&P500 exhibited a rare (and solid) piercing of the upper monthly Bollinger band in May which was met with immediate selling pressure.  To many technicians, merely piercing the upper band raises a warning flag as quite often it indicates the market will revert to the mean, or at a minimum the nearest support. 

The Bollinger band mantra goes something like this:

• Buy when the price falls below the lower Bollinger band
• Sell when the price pierces outside the upper Bollinger band

and boy......did they sell! 

I call it "rare" because normally price is contained within the Bollinger band and actually piercing the upper band with such severity only occurs every 5-10 years or more.  Of course a naysayer will call this voodoo and the typical news television host or commentator entertainer will sit behind their camera doing what they do best; smile and reassure the viewer that all is well, the Fed's got our back, the economy is improving and buy the dip.  That's their job after all.  They have sponsors and advertisers to satisfy.  They need to keep you engaged and coming back for ratings sake however historically these "cheerleaders" are dead wrong most of the time when it comes down to a monthly BB being pierced.  There IS definite reason for concern.

Rather than ponder the many "whys" of the market selling, I will merely present these historical charts highlighting periods where the monthly BB was pierced solidly and you can judge for yourself if price reverted or not. (click on any chart to enlarge)  In my book, the fact that June couldn't even take out the high is confirmation that no dear trader, odds are we're not heading higher just yet.  Whether we find support at the 10month, 20month or even lower is up for discussion, but confirmation is now there with June behind us.  Lower we will go.

With every pundit hitting the wires on his/her belief on why the market sold off, I began a list.  Remarks in italics mine:

• Second consecutive month for China's  PMI below 50; considered recession territory by most (we've been programmed to believe they'll always save us.)
• China's bonds reflect an increase in rates.
• Bernanke didn't increase QE.  (we want more!)
• Rates are going up (panic, run for the exits)
• We're beginning to "bake in" the Fed easing off the gas pedal (taper)
• Lack of confidence in the true strength of the US economy w/o QE
• Quadruple witching (Opex)
• Dollar strength will kill US export demand
• Japan's Abe needs to ease more (seriously?!)
• Next week is end of quarter (do you really want to show you went long AAPL this quarter?)
• 16x p/e is close enough for now
• Typical mean reversion
• 6-8% above a prior all-time high is typical to see massive profit taking
• Summer solstice (yeah, I know)
• Some UK banks are not meeting reserve requirements (fear of banking collapse)
• Unrest overseas will spread
• Austerity isn't working
• Record margin debt is unsustainable
• Sell when everyone's elated
• It's the end of the cycle
• Elliott Wave count said we were done
• DeMark count indicated "sell"
• Stops were hit and a waterfall effect took control as it triggered more stops
• Meant to sell in May and go away but I was greedy and waited
• It's all smoke and mirrors; we're going to crash! (yeah, I know)
• I'm too buys playing Candy Crush
• My dog ate my homework

What kills me is that it doesn't matter who is right and who is wrong.  Traders are so focused on trying to determine "why" they forget the 800 pound gorilla in the room.

• There are sooo many investment funds out there - ALL making sell decisions based on a variety of facts and NOT all for the same reasons!

Who knows?  It's a Helicopter!  Sure we all talk about it (the why) but I learned long ago (thank you Dad) not to put too much energy into "why" and to trust the charts.  When you see breadth breaking down and major profit taking w/volume on risk assets such as THD, JNK, HYG, etc. it's a sign: warning Will Robinson!   The "whys" don't matter as much as trusting what the charts are telling you, move up your stops.......and protect your capital.  Another buy opportunity will present itself.  It always does.  Last time I looked, people didn't suddenly stop putting money into their 401K's.  Be patient, get out, enjoy the Summer sunshine and check back in next week.  The pundits will try to convince you over to their way of thinking (be on my team!) but it doesn't really matter.  Charts don't lie; people do.

Over the years, I've read over and over again that consolidations in an uptrend were a healthy phenomenon. Inability to break down meant investors (basically) have every faith in a companies abilities and find value at the current price.  After a consolidation (the longer the better) a move higher would come.  Let's look a few examples: (click all charts to enlarge)

AAPL is very well known for it's consolidations, or taking a "rest" before moving higher as this weekly chart reveals.  Investors clearly believed in their innovation and were willing to add to positions during these consolidation periods; thus holding up  the price and holding the range.   That's called appetite, right there.

In fact, the longer the consolidation, the greater the move holds true; especially when you take a look at the biotech ETF IBB.  After it's debut as a new ETF, investors found value in it at $40 and began to accumulate.  After a brief reversal up, held it in consolidation for an amazing eight years.  Again the longer the consolidation, the greater the move and it's been a remarkable run.

Now this consolidation in internet security provider FTNT intrigues me.  Go figure; internet security threat provider.  I don't think demand is going to wane on that area, do you?  It seems to me that investors have said "ok, I'll buy it at $16-17" and for two years it's been held rangebound.  Will this be a sector of strength going forward?  With this type of action, I really have to wonder. 

(Full disclosure; yes, I'm accumulation on these dips)

Is it possible we are in the early stages of an enormous secular stockmarket bull run?  We talk about this continually in Chat on StockBuz.

Since 1900, there have been four large stock market basing patterns which exceeded 12 years in length:

• 1906 to 1924—18 years
• 1929 to 1955—26 years
• 1966 to 1982—16 years
• 2000 to 2013—13 years

What prior breakouts had in common is investor behavior reflected an underlying distrust or disinterest and characterized by underinvestment in equities.  This results in a rebound that is relentless (emphasis mine), providing little opportunity to buy on pullbacks.  To put it bluntly, the distrust creates so many bears, that the inflow of bulls plows them over and with minimal pullback, they've forced to cover higher and higher...............fueling the market (my words - not in the article)

How and what caused those breakouts to sustain is a point of discussion in this Raymond James presentation  (courtesy of MarketFolly)

Also reviewed is the improving US economic data (albeit weak) the recent rise in interest rates and the decisions which lie ahead for the Federal Reserve so grab a cup of coffee, put the phone on silent and enjoy.

Anyone who knows me, knows I built a career mortgage services...........and that I now detest mortgage bankers.  It's not that they don't offer an invaluable service.  I cannot tell you the countless stories of homeowners who actually wept when informed of their loan's approval, brought me homemade cakes and mailed cards, even at Christmas.  Many returned to me years later when they "moved up" to a larger home or referred their family members directly to me which I felt was an enormous compliment; that they trusted their own son/daughter in my care.  It wasn't the lender they trusted.  It wasn't because we had the lowest rates in town.  It was my ability to package even the most complicated of circumstances, anticipate and document what would be required and steer them through the process with personal service and empathy they deserved.  I rarely made a sales call on a Realtor; maybe twice a year.  My flow was 95% referral and business was good; a fact I am to this day proud of.   It was an extremely rewarding job and I can honestly say, one that I loved until sometime around 2000 when service was clearly sacrificed on the alter of "crank 'em out" profits.  This story is a result of that shift in the industry.

This is about the six former Bank of America ($BAC) employees who stepped up, filed suit and admitted they "lied and denied" (my phrase) eligible homeowners sending them to Foreclosure or an in-house modification program; possibly not justifiably and one that would yield BAC more profitability.  Shocker yes I know.

Now before you point a finger at the employees, that they were merely being greedy and did this on their own without the knowledge of Management, just do a reality check.   Any Manager worth his/her salt knows exactly what their internal costs are running on a month-to-month basis; especially the largest expense: payrolls, commissions and incentives.  Hell, we ran an extremely high 36% payroll but still came in as one of the most profitable branches each year due to a focus on having a well-trained staff and purely "knowing our stuff".   In fact, nowadays part of a Manager's job to promote incentives and steer business where upper Management wants it go.....where it's most profitable.  Talk 'em into something they don't want rather than counsel on what's best.  Don't fool yourself for a moment thinking these employees acted without anyone's knowledge or came up with the ideas all on their own.  From what I saw, a great percentage of current "processors" nowadays have no right being in their position.  It's disgusting.

The suit also aledges that those not achieving their "targets" were met with discipline (poor employee reviews I imagine) and even firing.  Still think Management didn't know what was taking place?  It's easy to turn a deaf ear and just hire another (unqualified) replacement.  Job security for a job well done is a thing of the past.  Lying is rewarded because you met a quota.

Sure they knew.  Just as Countrywide Regional Managers must've chuckled talking about their infamous FOM (friends of Mozillo) loans.  I didn't even work for CFC but I knew about FOM mortgages.  Talk about such things are cocktail hour and three-Martini lunch legend within the industry.  Even if a Regional Manager was somehow in the dark (impossible) each lender has their own internal auditing system which would've questioned the F.O.M. markings as well as the prudence of approving loans which did not meet income/asset requirements or documentation. I myself conducted internal Quality Control audits at one point in my career and my Branches themselves are continually subject to random Audit each year by Corporate.  Believe me; the numbers and documentation are thoroughly double checked and if files didn't measure up, not only was the Branch Manager informed, but so was the Regional Manager.  It's the normal business process; everyone knows what is taking place.

Another great example is Branch and Regional Managers throwing their weight around with Appraisers.  Appraisers are always under enormous pressure to get the value high enough.  Somehow justify it using older comparable sales or sales in other neighborhoods (both against regulations) to get the appraised value up to the sales price/refi value or you'd lose future business.  Be blackballed.  Word would spread.  Period.  Don't use so-and-so appraisal service; they won't give you value.  So much for honesty and integrity.  Ditto with Underwriters.   Approve it or you risk a poor review and job security.  It's merely swept under the carpet..........

You have to ask yourself "why was BAC rewarding incentives for foreclosures or in-house modifications but not government-sponsored HAMP modifications"?  Why not reward accuracy and thorough documentation over volume?  For the profits baby. 

All that mattered was "crankin' em out".  Forget accuracy.  Sweep aside morals, ethics and honesty.  This is big business where profits are king and when push comes to shove, it's all good.  Just memorize the lines "not that I was aware of" and "not that I can recall" before you testify in front of Congress (wink wink).   After all, we're "too big to fail" and too big to find guilt and truly prosecute.  We might shake the confidence in the system; a system that is systemically vital to the nation.

If you've never watched the iPhone release, it's well worth the time.  Just six short years ago (January 2007) Apple's Steve Jobs unveiled their first iPhone to a enthusiastic crowd at the Mac World Convention in San Francisco and blew away the phone industry.  By June, hundreds stood in lines outside of stores across the nation to get their hands on the hot, new innovative product.  Remember them camping out?  *lol*  People scrambled to save their pennies and begged Mom/Dad to get a piece of the "magic".  Here's a quick visual of AAPL's innovation and I realize I'm missing much but bear with me:

• 1984 MacIntosh which changed and challenged the entire computer industry.
• 2001 iPod transformed the music industry.  My own kids had one iPod after another.   As soon as a new one was announced, I knew what to add to their birthday/Christmas list.
• 2010 The iPhone which transformed phones (in my opinion).  This was the biggie which took an ipod style phone without keyboard buttons or stylus and added touch screen technology from the ipod touch and incorporated it into a phone/first-ever scrolling and tap ability/Camera/a SMS internet communicator running OS10 which synched to your desktop, music, office, video, email, etc. and switched seemlessly to Wifi, maps (and much more)............ALL rolled into one.

Fast forward to 2013.  We've seen improvements (dare I mention Apple Maps?), pixels increase, retina display, etc. but industry changing?  Not in my mind.   iWatch or iTV coming?  Meh. Yes, sales continue worldwide and in emerging markets as more users find the ability to afford such expensive devices however, show me how they're going to transform how we live, work, eat and interact each day and I'll get on board.   Unfortunately we're not seeing or hearing anything to that effect.  Just a new "toy" at this point (to me). 

In fact in 2013, in terms of global internet usage, Samsung climbed ahead of Nokia to take second place behind Apple on a worldwide basis according to StatCounter.  Another reason to wonder if AAPL's ability to innovate and draw users is waning.

Of course AAPL says they're still innovative but I truly beg to differ and I believe the stock's movement reflects the concern of investors.  It's become more of a value play in my mind.  What do you think?  Now I'm certainly not saying AAPL isn't a great company.  Of course it is.  But a growth story?  Anyone standing in long lines anymore?  Not this chick.

Sources: Wikipedia  TechFortune   MacRumors  StatCounter

Edited 6/16/13 to add Stat Counter data

Steve Jobs had true vision and it's amazing and inspiring to see him in action.  Please take the time.  You'll be very glad you did.