Do You Think Buffett's Right?

Warren Buffet today joined many other economist and investors when he said it's time to buy US Stocks. He think US stocks drop too much since last year and it's a bargain to buy now.

DO YOU THINK HE IS RIGHT?

Let me give you some facts and numbers and you decide:

---Since the Great Depression 1929, every economy crisis started by a huge drop in stock market around the world. However, when a crisis headed towards the end, stock market tends to rebound to a level higher than before the crisis actually started.

---Stock market always climb and that's because inflation exist. Inflationary pressure will push the stock market higher. That's why when look at stock market, inflation rate must take into account.

---Here are world stock market friday close and its drop percentage off the high of last year:

Market Friday Close Off from high

Dow Jones 8852.22 37.11%

Nasdaq 1711.29 40.19%

S/P 500 940.55 39.43%

Russell 526.43 36.6%

FTSE 100 4063.01 39.6%

DAX 4781.33 41.1%

CAC 40 3329.92 43.13%

Nikkei 8693.82 48.75%

Hang Seng 14554.21 54.46%

FSSTI 1878.51 51.12%

All Ordinaries 3944.80 42.61%

Shanghai 1930.651 67.85%

NZX 50 2808.765 35.12%

SMSI (Madrid) 1035.09 40.29%

SMI (SWISS) 6099.62 32.54%

As you all can see, US stock market drop are relatively small compared to other stock market around the world such as Hang Seng, Singapore FSSTI and Shanghai. So if look at this data alone, US stock market are still relatively expensive.

Of course I admit that in every market, there are good and cheap stocks but in general, i still think US stock market are relatively expensive as average PE ratio of stocks are still very high (>10x) compared to other stock  market.

So choose wisely and study the company well first before buy the stock of a company. Don't start by looking at the chart of a company but look at its balance sheet first. Find a profitable sound company may be a difficult one but that's the thing you gonna do.

So I don't think Buffett is absolutely right on that. Some US stocks may be cheap but others are really expensive and should be avoid at all cost. You don't wanna end up owning share of Bear Stearns

Suddenly, Even Nobel Proze Winner Think US Is Right

Paul Krugman, Princeton University professor, New York Times op-ed columnist and winner of the 2008 Nobel Prize for Economics, had been very critical of Treasury Secretary Henry Paulson’s original bailout plan, saying it was distorted by ideology.

Today, however, Krugman told CNBC he thinks the new plan, which will inject $250 billion into U.S. banks, “looks much better.”

“In the last six days this thing has come together with a plan that really does address the critical problem of inadequate capital at the banks (and) addresses the need for guarantees to calm the markets down," said Krugman. "We don’t know this is going to work, I wish we were sure, but this is a much better. For the first time I’m starting to feel that policy is really getting some traction on the crisis.”

Krugman said the current financial crisis repudiates the financial-markets-are-always right principle.

“A certain amount of public intervention, oversight and—in crisis—partial takeover of the financial system is something you have to do," he said. "Leaving the financial system to work things out on its own was disastrous in the 1930s and brought us to the brink of disaster again now.”

“This is not a case for socialism, it’s a case for regulation, oversight and for government-led rescues when there’s an emergency," he added. "We’re not going to go back to Karl Marx, but we are going to rediscover some of the things Franklin Roosevelt learned 75 years ago.”

Even with the new bailout plan, Krugman thinks we're headed toward a "serious recession."

"Even before the financial markets went crazy four weeks ago…there was a lot of downward momentum in the economy, and this isn’t going to reverse that. This is just preventing that from getting much worse.”

“I think this is the right thing for the immediate financial crisis, but I would say let’s have aid to state and local governments, let’s have public spending, let’s have some expanded unemployment benefits, partly because people need it, partly to put cash in the hands of people who are likely to spend it.”

Sources: CNBC

I copy this article exactly as seen on CNBC.com about Paul Krugman, the recipient of Nobel Prize Winner this year and frankly, i think he is wrong about that.

I know he is a very smart man and what he did is great. However his opinion for the plan is wrong. It's clear that he change his mind right after he receipt his nobel. Is that a coincidence? or political power come in play?

“This is not a case for socialism, it’s a case for regulation, oversight and for government-led rescues when there’s an emergency,"

I like this sentence so i highlighted it. So Paul, if you can hear me, how can the 700 billion bailout plan and 250 billion in bank nationalization is not socialism but regulation.

Glen Beck said once and i could not agree more: We are either a free market or we are socialism. We can't be both.

So you tell me is bailout most financial companies with trouble, ban short selling, nationalize banks are free market mechanism and not socialism?????????????

Name me a country that would do that. Argentina, China, Russia.... Are they capitalism or socialism?

So Paul, if you wanna repay US for awarded you with a nobel prize, at least say something wiser and with more intelligent because that's a joke!

For Those Who Bought Today, God Bless You!!

Stock market soared yesterday and today especially in Asia as people actually believe in G7 power and nationalization of banks would help the economy to recover.

Stock Market in Asia soared yesterday and today. Market such as Nikkei and Hang Seng, soared more than 10% in 2 days.

European stock market open high in early trade, rise more than 5%. Together with yesterday gain, European stock market rise more than 10% as well. FTSE 100 touched an intraday high of 4534.35, a 15% jump from last Friday close.

US stock market also surge more than 3% in the opening, that's a 13% gain from Friday close but came down sharply to settle at 9435, up only 50 points.

That's the good news folks, and that's the only good news for those who bullish about the market.

Here's the bad news: If you bought today at high or near the high, YOU WOULD NOT BE ABLE TO SELL YOUR STOCK FOR A LONG LONG TIME!!!!! SO GOD BLESS YOU.

Don't believe me? just wait and see.

Time and time again i proved myself right. If you follow my advice from the very beginning of my blog, you'd know i am right and you'd be able to make a lot of money. I remember my first recommendation was get away from Fannie and Freddie.......

This technical rebounded is one of the strongest in history. 15% in two days!!!

As we knew, the stronger the technical rebound, the harder it will fall afterward. So on average and in most conservative way, we will have a 10-15% more on the down side for any stock market from last Friday close. Eg. Nikkei recorded a 1171 point or 14.15% gain today as yesterday Japan stock market closed. So you should take the last Friday close 8276 minus another 14.15% on the down side which equal to 7105.

So that's the most conservative level for Nikkei. By this calculation, you will be able to find the conservative level for any stock market. It may fall lower as that's the most optimistic level. For instant, Nikkei may end up lower than 7105 but 7105 is the best possible ending for Nikkei.

So what we gonna do? I told you millions of time, buy gold and other commodities. Buy foreign currency against dollar such as euro, franc, canadian dollar, australia dollar, NZ dollar, Singapore dollar......

Bear Market Trap Coming Monday???

Yesterday amazing rebound off the low at the US stock market marked a technical rebound for stock markets around the world Monday. I think market such as Nikkei, Hang Seng, and other Asia market will surge at least 4-5%. However it is called bear market trap.

Bear Market trap happen when a big technical rebound in between a long bear market trend and usually bear market trap suck in huge volume. So i guest Monday we will have a big surge all over the world with a huge volume to support it and everything will look just like we found the bottom for the great depression '08.

However, great depression 08 had just begun and still a long ride to go so people who buy next Monday will be trapped with bunch of overprice stock in their hand and will ask every expert they know either to cut loss or hold it for good.

As a stock market broker, I seen that situation many times during my career. I have client that hold Citigroup at 20 dollar, research in motion at 85, and GE at 26. So don't be like them. Don't try to buy when market is irrelevant and surge in the short term. Never think it is too late to buy. In the long term bear market like this, you always have the chance to buy lower so remember: cash is king and patient is your best friend.

So now the world are looking at G7. 7 most advance and wealthiest country in the world will be together to fight the credit crunch. However this will never work and here's the reason:

No Free Market Mechanism

Remember this: More Government intervention, more failure. The problem exist because of government intervention so we can not allow government to solve the problem. The government will make the problem worse. All the central bank will do is lowering interest rate and increase money supply and that will absolutely destroy the economy. In other word, central banks intervention will make great depression 2008 much meaner and last much longer.

All Central Banks all over the world have is interest rate and money supply. They can only use those two intsruments to control the economy. However, those two powerful weapons are useless. It is not what the economy needed.

No Fairy Tale or Epic Hollywood Movie

All 7 countries in the G7 coalition failed in their plan to solve the problem. They failed on their own and they actually think they can solve the problem by teaming up together. I remember some fairy tale such as the wolf and the 3 pigs and Hansen and Gretel where team work will make many weak character beat the strong. I also remember some epic Hollywood movie where a bunch of weak and lousy player teaming up and beat everyone and win the big cup etc.

Great Depression 2008 is neither a fairy tale nor an epic Hollywood movie. It can't be solved by simply team up few man together and train hard. If they all failed on their own, what make you think they can win as a team?

Too Little Too Late

The credit bubble burst more than a year ago and it was created 7-8 years ago. Now only the G7 react?

Well I remember Paulson and Bernanke keep saying last year that no problem and stock market jump to all time high last October, I guest everyone think it's a small and manageable problem. Then Fed and central banks all over the world started cutting interest rate and make the bubble bursting faster.

A year later, finally everybody admit it is a huge and unmanageable problem. Guest what they do now? They did exactly the same as last year such as cutting interest rate and increase money supply.

So what went wrong, Paulson, Bernanke, Bush? How you all manage the economy? You cut interest rate and increase money supply when you all said we have sound economy (2007) and you do the exactly same things now when you said we are in big trouble (2008).

So end of the day, you will see a jump in stock price next monday but beware, you might be trapped by the evil bear market trap!!!

Barca Cheted Against Much Smaller Club

Watch the Highlight of that match here:

http://www.lovefooty.net/shakhtar-donetsk-vs-barcelona-highlights-champions-league/

I didn't write about sport for some time now as i think stock market is much more interesting place to look at.

However i never miss my favorite sport event: football (or soccer). Last week i watched Uefa Champions' League match between Barcelona vs Shakhtar from Ukraine.

Shakhtar is no not a weak club but compared to Barcelona, they are much smaller and weaker.

The main focus on the game was on the 87th minute which Shakhtar were leading 1-0. Shakhtar had a player down and their player kicked the ball out of play. Then that injured player recovered and stand up. Barca player never give the ball back as a sign of sportmanship and use the opportunity to score.

Seven minutes later, Barca got the winning goal on the 4th minute of injury time, 2-1. However that goal was easily scored as shakhtar player gave up the play as they still disappointed by the controversial equalizing goal.

Now here's the question: Are they cheated?

According to FIFA and other regulation parties, they are not. In soccer, they are no rule about that. You do not need to give the play back to other team if something similar happened.

However it's the sign of sportsmanship. Sport is suppose to be an event to promote friendship among peoples of the world but what Barca did is destroying that.

SO, FOR ME, THEY CHEATED IN A LEGAL WAY

I remember few years ago, Serie A match between Roma and Sampdoria (if my memory served me well). Roma scored but the goal was disallowed. However the goal was clearly legal so Sampdoria player kicked the ball back into their own net. You might say it was a stupid move but i think they rather we a proud and cheered loser than a coward winner.

Apparently, Barca is different!

Another Round Of Rate Cut

Half an hour ago, Federal Reserve announced that the key rate will be slashed by another 50 basis point to 150 basis point. Together with fed are European Central Bank and four other central banks.

Well for those who follow my advice yesterday and bought, take this opportunity to sell.

After 700 billion dollar wasted, Fed continue their hilarious move by cut the key rate by 50 basis point!!! How much more they can cut? Why they cut?

Fed have lowered the key rate from 5.25 to 2.00 in less than 1 year but sluggish economy condition remain and now they hope 50 basis point more will save the economy???????

IT WILL MAKE IT WORST.

If 325 basis point and trillions of dollar didn't help the economy, how can 50 basis point does that? It just can't.

Sure we know the immediate effect of rate cut is jump in stock market and then what? It come down even sharper. The whole problem started when Fed led by Greenspan cut the key rate to 1.00 and created the giant credit bubble and guest what, they repeat the move.

Sometime i feel funny why Those Fed Official can't think logically, are they educated well, are they sane, are they can't handle the political pressure? Are they bought a lot of share? Are they in the short term irrational situation just like everybody else on CNBC and Bloomberg, Are they slave to wall street millionaire?

So many possibility but the ending is the same: another round of down turn.

Remember, take this opportunity to sell for those who bought some yesterday, you might not be so lucky!

Get The New Peter Schiff's Report: The dollar

Just sign in to http://www.europac.net/ and get the free report.

Reminder: don't try to understand stock market before understanding economy. Economy performance is reflected by stock market performance.

I became stock market broker and trader for some time now and i seen a lot of amateur trader lose all of their money because they don't understand what is economy.

So my advise is start reading economy book such as crash proof before reading stock market book such as technical analysis explained or way of turtle.

P/S: Avoid age of turbulence if you know what i mean!!!