It's against human nature to be bullish these days.

You don't have to think long and hard about it: the economy is in the tank, your neighborhood real estate values are falling every week, we ALL have friends who have been out  of work for a year-plus…with no new work in sight.

No credit, low bank balances, and oh…have you looked at your brokerage statement lately?

So yes, it's against human nature to be bullish these days.

Which could be a big mistake.

Each month, the University of Michigan releases a "Consumer Confidence" report.  You may have heard of this on the news.  It is called the University of Michigan Consumer Sentiment Index.  And this month (July 2010), "consumer confidence" has fallen to the lowest levels in a year (Bloomberg).

The objective of the survey is to gauge attitudes about business, personal finance, spending and forecast future spending.  This monthly survey basically takes people's temperature (optimistic/pessimistic) about the economy.

In a nutshell, here's the twist: Since the survey began, when people feel generally optimistic, over the coming five years the market does poorly (S&P 500).  And, when people are generally gloomy, the market (S&P 500) tends to do well over the coming five years.
(source: systematicrelativestrength.com)

I have a few "personal indicators" too.  Like a few clients I do not hear from often and have a tendency to call at extreme turning points in the markets.

Here is just one example:  I have a client who I speak with a few times a year who called me on April 23rd (the recent peak in the market) wondering if we should put more money INTO the market.  Which would have been a mistake – then.  This very same person called me back – just last week, as indicators are starting to turn up.  This time, they were wondering if we should be selling more.  A good "contrarian" indicator!

The main message here is try to set aside emotions, and almost ignore what's happening in your world.  Your local universe can have an influence on your decisions.  When things are looking good, you know it might just be a mirage.  Likewise, when things are looking pretty grim, it could also just be a mirage.

I like using these point and figure charts to help manage your money.  They carry no news or events on them – just X's and O's.  These charts form patterns and trends, and give us clear signals when to make changes.   And, as so many of you have heard me say, "when the charts change, we change."

When you can set aside the news (or noise), it makes making investment decisions easier.

Just what the heck does that mean…"back on offense?"

When I refer to "offense" and "defense" I mean which team currently controls the momentum of the market.

If the defensive team is on the field, then "supply" is in control.  If the offensive team is on the field, then "demand" is in control.  When the market is on defense, news can be interpreted as either "no news" or "bad news."  Meaning "surprises" (good and bad) usually bring lower prices.  Nearly everything can become a reason to sell.

When the offensive team is on the field, "demand" is in control of the football.  We don't know how long we'll have the ball.   It could be "3 and out" or it could be a sustained drive culminating in a touchdown.  We don't know the outcome.

But we know the plays to run when which side is in control.

See, a lot of folks (in my line of work) just run "offensive" plays, all the time.  Yes, ALL the time!

And when the things don't work out, they lament "well, right now the market is bad."
What kind of _____ answer is that?

I've got a fiduciary O-B-L-I-G-A-T-I-O-N to my clients to make sure we invest this money prudently. If we are on defense, the first play in my playbook is to STOP buying.   There is an entirely different set of plays I run whether we are on offense or defense.

You should know the market can go UP even when we are on defense. Or markets can just hang around doing nothing.  Defense means the risk of losing money is greater.

Here's an example: in this recent defensive period, the Dow Jones climbed to their highs for the year, but most individual stocks — and most sectors — pulled back and stalled.  You probably noticed in the 4th quarter that your accounts stayed flat, while the Dow moved up.  Most stocks and most sectors pulled back to the middle of their trading band.  So we didn't get hurt during this defensive period.

Ok, for this time around…defense was on the field and didn't give much yardage.  But we can spend more time talking about defense later.
For the present time, we are back on offense.

Which means the chance of making money is better now than in the recent period (when we were on defense).  Yes, the market can (and does, sometimes) go down while on offense.  But the odds of making money in the market improves when on offense.

Some areas will out-perform others.  My work keeps us in those areas.  But the tone on offense is a rising tide.  And a rising tide lifts all boats in the harbor…good and bad.

So a lot of lousy investments may go up when we are on offense.  When the football goes into defensive hands, the lousy investments will be exposed.  Warren Buffet said "It's only when the tide goes out that you learn who's been swimming naked."

We have the football.  Let's get to work.

Interest rates — short term interest rates turned negative on Thursday November 19th. Rates have been low and look like they could stay there awhile…but who knows? In this video, we discuss the purpose of a bank, and one possible reason rates may be so low.

Here is a quick video I put together to help explain the difference between equal-weight and cap-weight investment "baskets" like the S&P 500.

The other day, I spent time talking on the phone with a friend of mine (who also happens to be a client).  He is undergoing treatment for a serious illness and taking some time off work, so I am delighted that we have some time now to catch up.

I have to tell you, I really like this guy.  I have learned (over the years) we have much in common: kids roughly the same age, his wife used to work for the same company I did (but in a completely different capacity).  Also, he is a good athlete — and umm, well, I like sports.  Over time, I've learned there are many common threads where our lives cross paths.

Wait a second…what does this have to do with point and figure analysis?

Everything.

I really believe I would have never met him if it weren't for point and figure analysis.  See, like many folks, he was referred to me — by another client.  If I didn't use the point and figure approach in managing the risk for my clients, I am not sure  he would be my client today!

Time out.

Look, prior to learning point and figure analysis (in 1997), I was just like every other financial adviser out there.  The game plan, as directed by the home office, was "gather assets, place the assets with a money manager — or in mutual funds run by "professionals," then go find more assets."

When I was a financial adviser, there were many of those "episodes" where Toto pulled back the curtain and exposed the "Wizard" of the marketing department.  You know what I mean…new product launches (like new mutual funds) would crash and burn, limited partnerships would blow up, stock recommendations would go straight down.  I got tired of watching people's investment accounts getting blown up — through no fault of their own.

It's a wonder anyone made money.

There wasn't "one defining moment" in my 16 years as a broker that pushed me to change.  It was more like a "body of evidence."  And in 1997, I started looking at alternatives to "fundamental analysis."

Let me put it this way: a company can deliver record revenues, record earnings, record profits, raise the dividend twice and announce three stock buybacks in 2 1/2 years.

Fundamentally — that company was doing everything right…right?
But that stock dropped from $60 per share to $22 per share during that same time.

Sooooo…how would you like to own a stock that was doing everything right, but getting carved by two-thirds all the while?

Funny thing, you probably DID own it!
See, the stock is General Electric (GE) from 2000-2002.

You say you didn't own that stock back then?  Ummm…OK.

Oh, say…did you happen to own any mutual funds back then? Did you know GE was one of the most widely held stocks in ALL mutual funds back then?

Hmmm.  Oh well, onward…

Know this: fundamental analysis does have a purpose.  But fundamental analysis will never tell you when to get out. Which is precisely what people have needed to know — especially over the past two years.

What I was able to show my friend — in screenshots — is how the market has moved from a "negatively trending market" to a "positively trending market."

For the first time in about a year and a half!

That darn chart makes it crystal clear there are times you should be "in the market," and times when you should be "out of the market."

Fundamental analysis will never tell you when to get out.  Never.

My friend and his wife (and many other people) spent a significant portion of 2008 with most of their money out of the market…in a time where the major averages fell 35% to 40%.

With all they have going on, I'm happy they sidestepped a lot of potential damage.

And what about you…what's your story?  Is getting a game plan for your investments important today?

This is precisely why I use point and figure analysis… point and figure simply measures price.  And price IS the ultimate indicator — as it reflects changes in supply and demand.

In my opinion, point and figure is the best indicator of risk… which, incidentally, is what we do at Mullooly Asset — we manage the risk in your investments.

Feel better my friend, you are on my mind.

There's an old saying: People want to do business with folks they know, like and trust.

A few years ago, I took a long look at my website and thought "if you cover up the name at the top of the screen, it's just like every other investment firm out there."

Yuck.

Now if you click over to Mullooly Asset Management, I think you'd agree — it looks nothing like any other adviser's site.

I wanted to put my own spin on the business.  After all, it's my name on the front door.  And people have told me repeatedly, "I like doing business with you because — unlike other money managers — I can talk directly to you, and we have gotten to know each other."  I can say many great friendships have unfolded over the past 23 years.

So…why Facebook…LinkedIn…Twitter?

OK, truth be told, I first went on Facebook because my kids were there, and a part of me wanted to periodically …ya know…check in on them!

But I found Facebook – and also LinkedIn were great ways for folks who maybe weren't in my immediate area to get to know me a little better.  They can read about me, they can see some of my articles I have written, they can check out my friends, who I am in touch with.

Now, in my line of work, results matter.

But I'll say it again, people like to do business with someone they know, like and trust.

And in case you have not noticed, investment advisers really should not have (meaning: they are not supposed to) have testimonials on their marketing material.  That's right!  Even simple stuff like, "I like working with Tom because he explains things clearly."

Not permitted.

So what's an adviser (or anyone interested in marketing) to do?  They need to find a way to get people to know, like and trust them.  Here's what they ought to check out:

Facebook
LinkedIn
Twitter

These are three great ways to be "in the conversation" and three great avenues for me to stay in touch with clients of mine in other parts of the country.  And three great ways for someone who is "not yet sure" about working with me to feel more comfortable.

Facebook = definitely more social.
LinkedIn = more business-oriented, I need to really develop this avenue more.
Twitter = how to get answers/information quickly

Find me on all of these applications and let's spend some time getting to know each other better.
When your friends are tired of the same old message from THEIR adviser, tell them to sign up on my website, or just check me out on Twitter, Facebook or LinkedIn.

It's a great first step.  And no pressure.

The reason these sites work is because these sites really don't want you promoting your business outright.  That's why it's called "social media" or "social marketing."

Now, what if I bump into someone who has never been to Facebook, LinkedIn or Twitter?

I tell them to Google: Mullooly Asset Management.  There are nearly 2000 different items Google serves up on Mullooly Asset Management.  That's page after page of results of content.

A few weeks ago, I was giving a presentation and two of the questions from the audience were:

1.  Most people I know already have an investment adviser.  What makes you different?

2.  How can I get more information about you and your business?

I tell them to google my firm.  Or, they could also Google "NJ Investment Adviser"

Or try Investment Advisor in NJ on Google.  Or perhaps they could Google 401k adviser (where I have two listings in the top 5).  Maybe they should Google "find an investment adviser in NJ."

There are TONS of way to look me up that way on Google.

But I think my personal favorite is this.  Go to Google and type in:

Best stockbroker in NJ

See what you get.

So, head over to LinkedIn, Facebook and find me.

Or if you are on Twitter, check out (send a tweet to) 401kExpert.

Why didn't we buy…this or that?

Getting calls from some folks who are asking questions like:

"Why didn't we buy GE at $7?"

"Why didn't we buy Citibank at practically zero?"

"Why didn't we…blah blah blah…"

Many of these same folks were screaming "Make it stop!  Make it STOP!" only a few months (and in some cases, just a few WEEKS) before.

Human behavior is a great source for comedy routines.

Look, many people in my line of work want to over-complicate this stuff.  They want to talk over your head and use jargon to confuse you, and perpetuate their existence.  I know, they send "fan mail" to me all time.

Basics.  Just basics.  Look at pictures.  I would like to acknowledge the use of these charts from Stockcharts.com.  You can check them out here.

Would you buy anything that had a pattern like this?

You know this company.  They "bring good things to light…"

The only time I would think about buying a pattern like this would be if it were incorporating writing (selling) covered calls against the stock.  Otherwise, yecchhh…

That's just way too much risk for me.  Do me a favor.  Read the next line carefully:

The definition of RISK, as a verb, is "to act in spite of the possibility of injury or loss."

I don't know about you, but that first chart looks like risk to me.  Take a look at the next chart.

The picture is heading in a completely different direction than the first picture.  Yes, it is heading up!

OK.  But you say…

"I don't buy stocks.  I only invest in mutual funds."

Or,

"I only have 12 different mutual funds to choose from in my 401k plan at work."

Charts are charts.  Doesn't matter if we are looking at a chart of a mutual fund, a stock, or the price of gasoline.

I look at the charts in your 401k plan on a continuous basis.  If none of the charts are going up, here is our plan: we stay on the sidelines.  Pretty simple.  No need to be a hero.  This is money you will have to LIVE on some day.  (You're not counting on social security, are you?)

Today's Lesson: Buy things that are going up.

That's an important lesson, and a lesson MOST people overlook, or forget.

So, good job.  Now take the rest of the day off.

Probably the toughest part of covered call writing is finding the right idea.

And ideas change all the time — as markets change, prices change and the option prices (premiums) also change.

Let's quickly review what "covered call writing" actually means.

Covered Call Writing (sometimes called "buy writes") involves the simultaneous purchase of stock AND sale of options.  Remember, any time you sell something, you are bringing money into your account.  So you are BUYING a stock (you are spending money) and also SELLING something at the same time (bringing money in).

If you were to buy 500 shares of XYZ at $50, you would SPEND $25,000.  If you were to buy 500 shares of XYZ and also sell 5 calls with a strike price of $55 (sold at a price of $9), you would only SPEND $20,500.  Put another way, your "net" cost would be $41 (buy the stock at $50, sell the calls for $9).

With me so far? 

Great.  Onward.

Now, whenever we examine any stock, there are three possible outcomes:

• Stock moves up
• Stock does nothing
• Stock goes down

In only one of those scenarios will you make money if you simply buy the stock.  Right?

Now what we have done in this example is this:

• We lowered our out-of-pocket cost to buy the stock from $50 to $41.
• We have protected our "downside."  Yes, the stock trades around $50.  But we are at break-even – even if the stock falls to $41. And the charts will clearly define where we should have a stop order to protect us.
• Yes, we have limited "upside" — the stock could be taken away from us at $55, but we were paid $9 for that chance. (By the way, if that happens, what is the gain?  Bought at $50, called away (sold) at $55 for a 10% gain, plus you were paid $9 as well.  Sweet.)

When looking for candidates for call writing, here are a few things I try to keep in mind:

Covered call writing works well when the market is confused.  Like now. We have short periods of time where the market runs straight up, and then reverses quickly.  In the big picture, we are still in a negative trend for most major indices, but getting closer and closer to testing resistance lines.  We still do not have confirmation this is a significant turning point, and no clear signals the market is turned a page.

So covered call writing is also an excellent way to get some money into the market, and still protect your downside exposure, or simply just bring in additional money into the account.  It's a great way to goose the yield on your money as well.

But the main thing to know is that you need individual stocks that are in uptrends.  A few weeks ago, there were only a small handful of stocks in uptrends.  Now there are more.  Here are some stocks that are in uptrends that may make good covered call writing candidates.  These are *NOT* recommendations. Call me and we can walk through what makes sense for your own individual situation.

Again, I am not recommending writing calls for everyone on the following:

IBM, Amazon, Reliance Steel, Imperial Oil, Scotts (Miracle Gro), Apple, EMC, Borg-Warner, AutoNation, Staples, and many more.

We need option papers on file.  And we need to have a thorough discussion so you understand clearly how this works.  I would not write about this if I did not feel comfortable at least discussing the topic with you.

It's worth a look, don't you think?

When do you know an economy is coming out of a recession?

Watch the banks and commodities.

Hey, I don't want to turn you into an "economics professor."  You would need your own beanie hat with a propeller to do that.  But let's cover the cocktail party "economics" conversation, so you can hold your own at a party.

There really is no "textbook" formula "how recessions end," but patterns tend to emerge.

First, understand why recessions start in the first place.  Banks stop lending.  Money supply shrinks.
Like it or not, the world runs on credit.  When credit dries up, business evaporates.
How do you get the machine moving again?  Lending.
And all the lenders have "gotten religion" recently, and are sticking to traditional lending yardsticks.

Often, two completely opposite ends of the market tend to move first when recessions end.  They give "clues" things are starting to loosen up: banks and commodities… especially precious metals like gold and silver.

See, the rising price of precious metals can sometimes signal that we're starting to see money back in circulation.  This would be a very strong indicator that the recession is coming to an end sooner than most people expect.   A rise in commodity prices tends to signal a pick up in economic activity.  And when you get enough economic activity, you get inflation.

A little inflation is a good thing.  Over the past year-plus, we have had no economic activity to speak of.

Now, there are plenty of people in the market today speculating that we will have massive inflation.  That's because the government has been printing money like crazy.  And when you stuff this much cash in one end of the pipeline, at the other end of the pipeline, you should expect runaway inflation. However (compared to other times), we have witnessed some massive price deflation in many areas of the economy: the price of your house, your stock portfolio and the job market.  So this massive "print job" the government has been doing (printing dollars) might actually just "offset" the price deflation we've seen.

Or not.
I suppose all of the pundits could be right!
When was the last time that happened?

See, the issue is not whether we MIGHT see runaway inflation or not.
The real question is: what are we going to do about it?

Over 23 years, I've learned the hard way.  Worrying about the future is really a waste of time.

We have to focus on what's happening right now.

As strange as it seems, we need to set aside what might — or might not — happen a year, two years or even three years from now.
So what is happening right now?

We have seen a massive bounce back in the financial sector.  Banks are far from being healthy, or even back on their feet.  But the selling was completely overdone.  So they are bouncing.  On the other hand, commodities: energy, natural resources (and the countries that are rich in natural resources) are really starting to move.

When do you know an economy is coming out of a recession?

Watch the banks and commodities.
Here we go.

The other parts of the series:

The Economic Recovery of 2009, part I

The Economic Recovery of 2009, part II

The Economic Recovery of 2009, part III

How to get help with your 401k from Mullooly Asset Management.

This process will also help you with your 457 deferred compensation plan — or your 403(b) annuity at work.

First, if Mullooly Asset Management has never worked with an employee from your company before, we will need to get the list of investment choices available to you in your plan.  You can fax them to us at (732)223-9600, or you can send us the link to the website (if we don't need a password), or you could copy and paste the list into an e-mail or Word document.

We are not looking for your specific investments, or your most recent statement! What we need is an inventory — a list — of all the choices available to you within your plan.

We will need a day or two to review the choices available in your plan, take a look at the charts, and come up with a game plan.

We will then call you back — or set up by convenient time for us to speak — and review the best performing choices available to you in your plan at the present time.  This phone appointment should take no longer than 15 minutes.

Unlike financial planners or others in the investment advisory business (many use asset allocation pie charts), the recommendation you will be given will be based on what is working — right now — and are the best choices available in your plan today.  One of our core beliefs is "when the charts change, we change."

We will then alert you — usually by e-mail — when it is time to add, subtract, move money into, or out of — a particular investment in your 401(k) plan.

There are some years where we might make three or four changes.  There will be other years where we make significantly more changes.  The whole concept is to keep your money invested in the strongest asset classes at the current time.

Since Mullooly Asset Management is a fee only investment advisory firm, we have no product or investment to sell you.  We take a fiduciary obligation to manage your money strictly with your best interests in mind.  Unlike brokers (employees of brokerage firms) and some financial planners (who may work on a commission basis, or a "fee-plus commission" basis), a fee only investment advisor's only income comes from the fees generated by offering advice.

Therefore, it's in everyone's best interest (the Fee-Only advisor and the client) to avoid large risks and losses.

After we have had a chance to review the choices available in your plan, we encourage you to meet with us over the phone and be sitting in front of a computer with Internet access.

We use computer-sharing software.  This will allow you to see the charts of the choices in your 401(k) plan, as we describe the process to you.  This will also give you a visual demonstration of how we manage the risk for our clients.  We can usually accomplish everything on our agenda in less than 15 minutes over the phone with you.

We are not going to judge your prior investment performance.  We are primarily concerned with which investments are working today in the plan — and how to invest your money properly right now.  Since the future is unknown, it is a waste of time to predict what markets will do in the future.

At the conclusion of the call, if you are satisfied with what you've heard, we would be delighted to send you an investment advisory contract for you to review and sign.

The stock market has been posting gains the past few days.

After two very tough months to start 2009, what could go wrong?

Plenty, especially if you are focused on just the Dow Jones Industrial Average.

The Dow Jones has many financial-related companies, like Citibank, JP Morgan, Bank of America, American Express and quasi-financial stocks like General Electric and Caterpillar Tractor, which perform extensive lending and financing.

Remember, the financial stocks have led the charge the last two weeks, after Citibank's CEO circulated a memo to employees announcing the bank did well in January and February.  But two months do not make a full quarter, and the banks have posted significant losses in the previous quarter, as mentioned before.

In fact, JP Morgan CEO James Dimon mentioned on Friday, March 27, 2009 that March is shaping up to be a difficult month.  And financial stocks promptly swooned, bringing the rest of the market along with them.

What else could go wrong?

On Tuesday, March 31, we will finally hear the final revised 4th Quarter GDP numbers.  Remember, one month after each quarter, we get preliminary GDP numbers.  Then one month later, we get revised GDP numbers.

Then, at the end of the following month — which is also the end of the NEXT quarter — we receive the final revised GDP number.

The market took a beating on each of the previous two GDP announcements at the end of January and also February 2009.  If the number on Tuesday is revised downward, watch out.

We also will receive preliminary 1st quarter GDP numbers (1st quarter 2009) one month from now, at the end of April, 2009.  Fasten your seat belts.

Every time I see headlines about future budget deficits, I keep telling myself "that is a weather forecast!"  Most folks read the headline, perhaps scan the first paragraph, proceed to get bummed out and turn on the NCAA Tournament.

Just drill down into this a bit.  The forecast is for a $9 trillion deficit to amass between now and the next ten years.  Ten years!

Ten years ago, we were all worrying about Y2K.  Remember?

Buried in the next-to-last paragraph was this little golden nugget.  Read this whopper:  "Long-term deficit predictions have proven notoriously fickle — George W. Bush inherited flawed projections of a 10-year, $5.6 trillion surplus and instead produced record deficits — and if the economy outperforms CBO's expectations, the deficits could prove significantly smaller."

There is so much ink spilled every day in the financial media that is essentially nothing more than predictions, or a public relations spot for something else.  Unfortunately many of the PR and predictions become headlines.  Our decisions can be swayed by too many headlines that are merely predictions or opinions.  I've come to the conclusion everything written by the financial media has an agenda attached to it.  Or said another way, everything written by the financial media is intended to make you do precisely the wrong thing.

I cannot help but laugh when I see some "expert" interviewed about the stock market, and the excuses/reasons given why markets went up or down that day.  "The market is worried about inflation."  Later the same week "deflationary fears rattled the market."   Look, the market is not that smart — or that "forward-looking."

Don't get hung up on the Dow Jones.  The Dow Jones may not be a "relevant" yardstick for you to use.  After all, it's only 30 stocks…and you might not own ANY of them.  And avoid predictions and projections.  It's just a waste of time.

Have you seen the ads that Charles Schwab has been running on TV?
You probably have seen them.  They sound like real people, but they're actually cartoon/colorized images.

These may be the best ads for financial services ever created.  Here's why:

You're probably not aware of this, but in the financial services industry, firms and advisors are strictly prohibited from running testimonials of any sort. Think about it… how powerful would an ad be if some firm could get a few of their clients on TV and have them say: "You know, at so-and-so brokerage firm, they told all of us to get out of the stock market last summer!"

Too bad we can't do that.

I would love nothing better than to have one client after another — in print, audio or video — in their actual voices — splattered all over my website.

See, I can expend tons and tons of hot air (or spill a lot of ink) telling you how great I am.  But it becomes much more believable when you see an image of someone who looks like you, or someone who looks like someone you know, or who talks like you, or has the same problems as you, and is seeking a similar solution as you.

Which is why referrals are the strongest kind of recommendation/testimonial I can get.  You told your "story" in person to someone else, and told it in such a compelling way that it moved the other person to pick up the phone and say "I want that too!"   I sincerely appreciate the countless referrals I have received from you.  It tells me you appreciate the work I am doing for you, and also tells me you care enough to refer your friends and co-workers.  How terrific is that?

Testimonials are great — they are real people telling you real things that are important, or, at least matter to them.  Maybe their advisor or brokerage firm didn't get them out of the market, but perhaps they provide a valuable service, like — "he clearly explained everything to me like no one else had ever done before…" or even something like "he's the first advisor I've worked with who actually returns phone calls!"

Can you believe we are not even permitted to run testimonials saying "we were happy just to get a phone call back, that's never happened before!"?

By the way, if you happen to spot a financial advisor or brokerage firm with testimonials on their website, run!

This is why brokerage firms usually resort to running only "branding" advertisements.  Not that there's anything wrong with branding advertisements, in fact, they're usually very effective over time.  It's easier for them to say "we are bullish on America" (what precisely does that mean?), than to get their lawyers to approve an ad that says "well, my broker did not steal my money and basically did an okay job."

This is precisely why these ads from Charles Schwab are excellent.  They are not real people — they're illustrated images of real people.  Their voices are real, their situations are real — the woman on the street, the guy standing over the barbecue, the older couple.  People you and I could know very well.

More than that — Schwab really captures the essence of what's going on.  You know, that conversation going on in the back of your mind.  These stories they tell are dead-on, bull's-eye perfect.  I can tell you that every single one of these analogies they use in their commercials, I have also heard from new clients over the last few months.  Schwab has nailed it.

These are real people that really need help.

Of course, the next time you are with a friend or co-worker, listen.  Listen hard to what they are saying.  The main theme I have heard lately borders somewhere between worry and hopelessness, which is a terrible neighborhood.   The situation today is NOT hopeless, and worry never got anyone, anywhere.  Do THEM a favor, send them over to me.

I am not a big fan of Comedy Central or Jon Stewart, I've watched the show a few times.  But on Thursday March 13, 2009 Stewart interviewed Jim Cramer on his show.  And for the first time (at least that I can remember), someone actually tried to hold Cramer responsible for some of the advice he has given, and also for the fact that CNBC has "morphed" into an entertainment channel.  The thrust of the conversation was more toward exposing CNBC (and to some extent Cramer) as shills for Wall Street and no investigative work is done on that channel.

Bravo.  It is truly an excellent piece to watch and encourage you to do so now.

I expect Yahoo and Hulu will chop up this video shortly. So, don't delay, see this video as soon as possible.  It's nearly 20 minutes, so take some time and watch this, it will be worth it.  Here is the link: http://tv.yahoo.com/blog/stewart-vs-cramer-winner-take-all–183

Stewart said "CNBC could be this great financial tool…especially for people who believe there are two financial markets…the people who are told to invest in 401ks and just leave it there…invest for the long term…don't worry about it."  And the other market — that occurs in a back room.  Where giant piles of money are going in and out…" "But you go on TV and pretend (that market) isn't happening."

By the way, if you have not checked out Hulu (http://www.hulu.com) you really should.  Full-length TV shows (and even some movies) are shown online.  Free.  Since they have no business plan to make money, I don't expect them to be around very long.  But worth a look.

Did you know General Electric (GE) posted record revenues last quarter?  That has not really helped their stock, has it?   Remember always, price is the ultimate indicator, which is why I rely more and more on charts.  Fundamental analysts and company management can pontificate all day long about market share, earnings and revenues.  If the market doesn't like it, the stock is going down.

I don't think I'll ever get tired of reminding people that the job of the media is to sell advertising.  The fact that you get informed — or get information — is a side benefit.

BY the way…would like like to LISTEN to this post instead?  Click the icon at the top, and turn up your speakers.

I'm not saying the media dispenses incorrect information.  What I'm saying is they tend to focus on some really dumb things, and then pound it over and over and over.  Just keep reminding yourself: their job is not to hang around and "fill you in" on the news of the day.  The media is there to sell ads.  So their teasers and headlines will often be filled more with drama than facts.

And often, the drama persuades you into doing precisely the WRONG thing.  My friend, Tom Dorsey has often said "Remember everything that is written or said in the media about Wall Street is made to make you do the wrong thing."

Example of "News" headlines:

One of the headlines on CBS MarketWatch is Freedom Bank (Georgia) is the 17th bank failure in 2009.  OK, look, in the previous recession, there were over 700 bank failures.  Some will be spectacular.  If we have less than 700 bank failures during this recession, now THAT will be news.
Here's another:

General Motors shares trade near Great Depression territory.  Face it, the stock trades for about a dollar, it's not coming back. Sure, it might get to two dollars.  But will this ever be a $30 stock again?  I don't think so, under its present structure.  Now if they were to file bankruptcy, wipe out the common stock and reorganize (where the debt/bondholders become the new stockholders), anything is possible… see Kmart. 

I am far more interested in learning what will happen to General Motors and the bondholders in a bankruptcy proceeding.  The government has poured $13 billion into General Motors in the last few months, and company management is back at the trough asking for another $17 billion.  Amazingly, the market capitalization of General Motors is less than $1 billion ($900 million currently — one third the size of Burger King).  Where did all that money go?

And another:

This past week, the financial media focused on how the banks were killing the Dow Jones Industrial Average.  This is total nonsense.  Citibank trades for $1 per share, Bank of America trades for $3 per share.  If these two companies filed for bankruptcy tomorrow (or were nationalized — essentially, the same thing), this would move the Dow Jones Industrial Average a total of 50 points.  I wonder how long it will take Dow Jones to remove Citibank, Bank of America, General Motors and General Electric from the Dow Jones Industrial Average.

Another favorite topic:

Unemployment rate reaches 8.1%. Okay, lots of room for debate on this topic.  Historically, the average unemployment rate hovers around 5%. Did you know, for the past 15 years, the economy has averaged an unemployment rate between 3% and 4%?  This is actually a pretty spectacular news item, but no one was writing headlines about that.  During economic recessions, the unemployment rate often reaches 10%.  So be prepared for that, and don't be surprised when that news arrives. In fact, there have been several times where the unemployment rate surges in the latter stages of a recession — and the first phase of recovery.  You read that right — many times the unemployment rate will rise, as the economy is improving.

And lastly:

GDP numbers. The stock market fell out of bed last week when it was announced that fourth-quarter GDP came in at -6.2%.  First of all, this should not be a shock to anyone.  Secondly, the media never really puts it in its proper perspective.  So let's look at this number.  It measures growth (or shrinkage) of the economy in the fourth quarter 2008.  The quarter ended December 31, 2008.

The original estimate was released January 31, the preliminary number was released February 27, the final revised GDP for fourth-quarter 2008 will be released at the end of March.  The final revision may be a completely different number — for better or worse.  But by the time we get it, that information is petrified like a redwood. Irrelevant.

By the way, at the end of April we will receive the original estimate for first-quarter 2009 GDP.  What do you think THAT number will be?  I expect it will be absolutely dreadful.  And the media will go crazy. Be prepared.

Mark to Market is a topic I have written about previously.

You can read about them here. I don't like changing the rules of the game in mid-stream, but something drastic needs to be done.  A terrific opinion piece was written in the Wall Street Journal recently by Peter Wallison.  If you click on his name, you can see his very impressive resume.  Graduate of Harvard Law, adviser to Nelson Rockefeller, adviser to President Reagan, General Counsel to the US Treasury, Wallison has the credentials.

The Obama Administration has still not come up with a plan to remove troubled assets from the balance sheets at banks.  Therefore, their solution appears to be "semi-nationalization," as evidenced recently when the US Government and Citigroup agreed to convert the preferred shares held by the government into common shares.  The US Government will soon own approximately 36% of Citigroup, which is about as aclose as you can get to nationalizing a bank without coming right out and saying it.

Wallison asks a very important question as the thesis of his article.  Accounting rules are very important, and should not be bent.  This situation appears exceptional, but that does not mean there will be other exceptions in the future.  It is a dangerous precedent.  What most commentators and other media are missing is this important twist.  Wallison writes:

What happens, then, when there is virtually no market for these assets — as has been true for at least a year? In that case, accounting rules require the banks use whatever market indicators are available.

What will this imply for other banks that are in trouble, or soon fall into trouble?  How endless is the money supply?

I agree with Wallison's approach…nationalizing the banks is a terrible solution.  Revisiting mark to the market needs to become a priority.  And Wallison writes:

…Both taxpayers and banks could come out well — and so would our economy — if the government were to buy the assets at their "net realizable value," which is based on an assessment of their current cash flows, discounted by their expected credit losses over time.

Take a look at the article here (printed in the Wall Street Journal February 25, 2009).  Additionally, suspending mark to market can effectively replace another cash infusion from the Government.  It is worthy of consideration.

This was the headline on the Associated Press on the evening of February 17th, 2009.  Is that a fact?

This is how the media distorts.  Pay attention.

So many investment decisions — made by investors, traders, mom & pop, everyone — gets determined by the headlines.

I am no fan of GM whatsoever.  I think their products are not very good, their cost structure is bloated and the executives should not get a bailout.  Lots of bad decisions over the years have put and the entire American auto industry in this position — this isn't something that unfolded in the last few months.

But the media should be shot for their careless and sloppy reporting.  The distortion is maddening.

As a preface, GM is currently trading around $2.00/share.  The stock price is ALREADY TELLING YOU the company should be in bankruptcy.  Even if GM's stock price were to jump 30% in a day (or even a week), it is still not hitting $3/share.

But the "early impression" I had from clients that had been in contact with me in these past 24 hours is that GM needs an *additional* $30 billion dollars.  Why?  Read the headline and first sentence from the Associated Press:

GM, Chrysler seek more government aid, to cut more jobs
THE ASSOCIATED PRESS

The U.S. auto industry needs even more help from the government to survive than originally thought.
General Motors on Tuesday said it could need up to $30 billion from the Treasury Department to keep operating.

Unless you read the entire story, you would never know the actual numbers.

GM had already been approved for $18 billion in November, but only used $13.4 billion. They are now asking for $9.1 billion.  So they were originally approved for $18 billion and will need $22.5 billion.

By the way, buried further down is the point that the "new" $9.1 billion is not even actually cash, but loan guarantees.

What about the remainder?

The remaining $7.5 billion is an "emergency" line of credit GM does not expect to use, but wants to ask for and have lined up.  This is a "worst case scenario" (it's already pretty bad) but this will cover expenses like bankruptcy costs, if it gets to that.

It's the media's job to sell newspapers, attract eyeballs to their TV channel or website.  Don't forget that.