U.S. Unemployment Rate at 17.5%

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Last Friday the U.S. Labor Department reported that the 'fake' unemployment rate came in at 10.2%, but every individual who can count to five without using fingers understands that the real unemployment rate clocked in at 17.5%. In case you wonder, that is the opposite of good economic news. The figure will continue to rise and may hit 20% over the next three months.



Keep in mind that roughly 70% of economic activity depends on consumer spending, which now basically means that 70% of the economy can operate at a maximum of 80%, which is not that bad but psychology has a big impact on those 80% of consumers which would be able to spend. It is smart to assume that psychology of most consumers has been hammered by at least 75%. This translates that 70% of economic activity is reduced to a max capability of 80% which only operates at 25%. You may not be confused yet, but wait a few more lines and your brain may freeze. Since 70% of the economy have been crumbled to reach a max of 80% capacity it translates to 56% of may consumer activity, 24% are already absent. The 56% have been crushed by 75% which leaves total consumer activity to 14% and a total economic vacuum of 56%.

The remaining 30% of the economy throttle along at 30% of max capacity or a total of 9%. Add both figures together and you get a total economic output which will be at maximum of 23% while 77% are basically dead. Let's be overly optimistic and take a 'fake headline GDP' growth figure of 3% over the past two decades which translates into a 2010 GDP figure of 0.7%. Keep in mind that the 0.7% is the max possible and only if the economic picture would improve. Since the economic picture continues to deteriorate a 2010 GDP figure of 0.7% is dangerously optimistic and very unlikely. Keep in mind that the GDP figure the majority eats for breakfast is a 'fake' figure and plenty of factors are left out which would cause a figure much lower than reported. The latest example was third-quarter GDP of 3.5%, a figure which would have showed an economic contraction if all factors would be accounted for.

Now that you enjoyed an oversimplified economic outlook for 2010, back to the U.S. unemployment figure of 17.5%. Today's initial jobless claims came in at 502,000 and Dumb Money points to an improvement in the labor market. Wrong! A less worse economic picture is not good by any means. On top of that the Dumb Money camp now launched a new sales pitch that initial jobless figures of 400,000 - 450,000 points to job growth. Wrong again! In 2007 it was well known that a figure above 400,000 points to severe problems in the labor market. In 2009 the pathetic drive to escape reality reshuffled the picture in order to keep hope alive. Pathetic!

Look at it this way:

In 2007 two plus two equaled four, and now in 2009 two plus two all of the sudden equals five. That assumption is plain and simple idiotic. On top of all that, there are plenty more economic problems in the pipeline which continue to deteriorate and should surface as soon as next year.

Could it get worse?

Yes we can...

Posted by Apollo on November 12th 2009.

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Third-quarter 2009 US GDP comes in at 3.5%...

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...so what?


It is as unimportant as the amount of sun shine in the desert is important to global rice harvest. For starters, third-quarter 2009 US GDP was heavily inflated with the brain fart first-time home buyer tax credit which lifted housing activity, and with the socialistic joke cash for clunkers program which gave a boost to production. On top of that the GDP figure benefited from some inventory rebuilding after almost two years of inventory contraction. The reason for the build in inventories was that most have subscribed to the recover illusion and hope for increased demand. A weak U.S. Dollar added to exports, although it was a rather minor contributor.

The third-quarter 2009 US GDP figure was neither a surprise nor a positive report and beyond all that it is history, as always.

Fourth-quarter GDP may show a 0%-1% increase, but do not be surprised to see a negative GDP figure. All current reports point to a contraction or rather a continuation of the recession. A one month increase in GDP does not signal the end of a recession. The real GDP figure is actually negative once you add how much the U.S. Dollar deteriorated during the third-quarter. The real GDP tells the real story while the artificial or inflated GDP figure tells you the fake story the socialists want and need to tell in order to keep the illusion alive. Cash for clunkers is gone, home tax credit will expire, but even with it still intact housing figures contract which shows how pathetic the socialists really are, inventories will not increase that much further and soon the socialists will create a second stimulus in order to stimulate the deficits some more.

Consumer spending will remain absent and so will job growth, regardless of what the socialists come up with. At least it will provide a few with good laughs, but the majority will suffer as a direct result of what they screamed, wanted and in the end voted for. The socialists not only lack the knowledge and understanding, but they also fail to realize that the economy is not something that you play with as it impacts the majority directly and immediately. The last $787 economic cardiac arrest plan and lousy joke of a socialistic attempt to be funny which has been porked up to 'cardiac arrest levels' has created roughly twenty thousand short-term jobs at an average cost of $39,350,000 per short-term job. The socialists will claim that the majority of the funds have not been wasted yet, which is another clear indicator that the $787 economic cardiac arrest plan was stimulated the deficit and nothing more.

Consumer incomes will continue to stagnate, confidence will deteriorate as more and more facts will be evident that there will be no sustainable economic recovery. The housing market will sink to new lows, the credit card crisis has not even ignited yet while the commercial real estate crisis will hit the markets over the next few months. Global equity markets are at least 70% over-valued at current levels and the U.S. economy will deteriorate over the next decade and beyond, while some trading partners will prosper.

The U.S. financial systems is roughly $2 Trillion underfunded, the weak U.S. Dollar pushes commodity prices higher and will further dampen retail sales and crush consumer confidence and sooner or sooner the recovery myth will disappear and reality will set in.

Ignorance towards reality is very expensive, can you pay the bill?

The Dumb Money camp will not be able to, and unfortunately 99.8% are part of that camp.

Could it get worse?

Yes we can...

Posted by Apollo on October 30th 2009.

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A few changes to Bulls versus Bears

This is a short post about a few changes to Bulls versus Bears. The changes should increase the readers experience. Feel free to give me your feedback.


Finally, there was a long overdue update on the direction of the FTSE 100, the S&P 500, the NASDAQ Composite as well as the Dow Jones Industrials for investors and traders alike. There has also been an update on trades and ideas for Bulls as well as Bears which will basically consist of one trade or idea each month for the U.S. and U.K markets. First update will be next week. The Virtual Portfolios for U.S. as well as for U.K. markets has also been restarted as of today, Monday 26th 2009, with a value of $500 and GBP 500 respectively and a 5% margin requirement. The major change to both virtual portfolios is that they will only consist of trades in the S&P500 and NASDAQ Composite for the Virtual U.S. Portfolio and the FTSE 100 and FTSE 250 for the Virtual U.K. Portfolio. Enjoy!

Another minor change was the reduction in the price to advertise on Bulls versus Bears.

Finally, for all EntreCard members, you may have noticed my new picture in the network. Here it is for all of those who did not come across yet:

Feel free to give me your feedback. I also want to thank everyone who supports Bulls versus Bears.

Posted by Apollo on October 26th 2009.

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Five reasons why companies beat analysts' estimates

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Despite the so called Great Recession, which may still metamorphose into a depression for some countries, most companies have no problems to beat analysts' estimates. Before you fall victim to this 'marketing trick', you should look into a few reasons why most companies always beat earnings estimates and why it simply does not matter.


Sure, the price of an equity will move after an earnings release. The downside move on a miss is usually larger than the upward move on a surprise, and there is a good reason for that. Earnings estimates by analysts as well as earnings guidance by companies are almost every time way below what they actually think or even know it should or will be. Keep in mind that the only party which will not be able to make a profit on a decline in the price of an equity is the company itself and therefore most companies will provide a very conservative estimate as far as their earnings are concerned, while other don't guide at all in order to avoid disappointment.

Before we go in a bit more detail as of why companies usually beat estimates we will take one step back and look at analysts. Most analysts are not sophisticated professionals when it comes to equity markets. They are called professionals as they earn money with what they do, they execute their profession, but by no means are they sophisticated. Compare it to a corn farmer who will be paid to be a heart surgeon. The 'corn-farmer-turned-heart-surgeon' will earn money from being a heart-surgeon and can therefore be labeled as a professional, but at the same time the corn farmer will very likely kill each patient as no knowledge and sophistication on the part of the corn farmer is present in regards to heart surgery.

The same holds true for most analysts.

Here are five reasons why companies beat analysts' estimates:

1. Companies start out with ridiculous low guidance in order to make it very simple to beat their own guidance and to cause analysts to start out with very low expectations. In isolated cases guidance is so low that as long as the company will remain in business they have beat expectations.

2. Companies need to beat their own guidance as well as analysts' estimates as companies are the only party which is not bale to profit from a decline in the price of its equity. There are executive bonuses tied directly to the performance of that share price which is another reason PR departments will use every chance to provide a boost to the share price.

3. The price of an equity will move the second earnings are released. The move to the downside on a miss is far greater, in most cases, that the move to the upside on a beat. It is not very hard to initiate a sell-off, since bulls lack sophistication and follow the herd. Convince one bull that the bull was 'full of shit' and the herd will follow, sell-off all the way until the bears start to look for bargains. The most recent example was March 2009.

4. Most analysts have a bullish bias and are tied to the company in one form or another. Since 99.8% of all market participants fall into the Dumb Money Camp, with mutual funds and retail investors as prime examples, they tie their performance, or rather lack thereof, to the state of the equity markets. Most analysts are employed by Dumb Money outlets, such as mutual funds, and portfolio managers, or rather portfolio mismanagers, follow their recommendations which is another reason an analysts is better off to lowball estimates in order for the company to be able to beat expectations and provide a short boost to the price of the equity.

5. Most analysts like to be on good terms with management as they rely on information management provides. Some analysts cling to the hope that they may get timely information a bit sooner than others in order to be able to come up with low estimates which the company will beat. It is a 'win-win' situation for the company and the analysts, at least they like to think so and the markets prove them wrong each time.

The above are just five reasons as of why companies usually beat analysts' estimates, regardless of the state of the economy. Analysts are not sophisticated and do not understand equity markets. They take an uneducated guess at best when they evaluate a company and come up with guidance. It simply does not matter what analysts have to say. Those who follow them around and act on their recommendations should clearly understand by now why their portfolio punishes them year in, year out. Those who are still clueless, load up on a few more mutual funds...

Analysts did not see the meltdown, so why do you even pay attention to their estimates?

One reason is that you have totally subscribed to the illusion they have created and fell victim to themselves. The illusion that analysts have the knowledge and insight required to make an intelligent call. They have created the illusion that they are smarter than the average retail investor and human psychology takes care of the rest. Once an individual or a group of individuals is viewed as smarter than the average they are followed, at least from a bullish perspective.

It takes nothing to be a bull, but it takes a great amount of sophistication to be a bear.

Here is what a beat, in-line and miss really means:

When a company beats analysts' estimates as well as their own guidance it usually translates in an in-line performance. Keep in mind that the individuals at a company which prepare earnings guidance are those who should know how the company will perform. They are aware of what negotiations they are in, what demand looks like, how big cost-cuts will be and are aware to a great degree of all other factors which will directly impact earnings. They should not be surprised. A company which is surprised about their own performance can be compared to a driver who accelerates a car to 100 miles per hour and than acts surprised that the car accelerated to 100 miles per hours. Ridiculous!

When a company's earnings are in-line with estimates it usually translates into a disappointment and really means that the company has missed or underperformed. When a company is in-line with the lowball figure, problems are in the pipeline.

When a company provides an outright miss of analysts' estimates it reflects severe problems, which is why the share price drops rather significantly. Missed estimates is a clear indicator to even the Dumb Money camp that all their 'manipulation of estimates' was not enough to allow the company to beat estimates. Now everyone knows that there are severe problems within the company and it is evident that the reason for the long position is clearly no longer present.

So why does the price of an equity move higher when most are aware that analysts' estimates are lowballed on purpose?

The answer is simple. Portfolio mismanagers have to go along with analysts' recommendations and each party involved will have to go along with their illusion, which is why the majority lost sight of reality and believes the illusion they have create is now the real world, and they act surprised while at the same time use that as yet another sales pitch to pump the price of an equity higher beyond reason or sense. That also explains why the drop after a miss is far greater than the rise after a beat.

Could it get worse?

Yes we can...

Posted by Apollo on October 26th 2009.

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Oil prices grind higher, should reach $100 per barrel by January 2010

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Have you noticed the rise in the price of oil? The Dumb Money camp contributes the rise to an improvement in the economy and discounts the weak U.S. Dollar as the biggest factor which drives the price of oil back above the $100 per barrel mark as soon as January 2010. The increase will impact the already battered consumer immediately and provide further evidence that an economic recovery is as much of an illusion as the assumption that mutual funds are managed by professionals.


The destruction of the U.S. Dollar is directly related to the rise in the price of commodities, especially oil and gold. The sooner the U.S. Dollar will be replaced as a 'commodity currency' the sooner commodity prices will stabilize. There has been plenty of talk about the replacement of the U.S. Dollar, but that has been publicly downplayed in the media. The Dumb Money camp has bought into that idea and hopes that the U.S. Dollar will stage a strong recovery which is as pathetic as the annual returns the Dumb Money camp is able to cough up. The $11 Trillion deficit (give or take a few hundred billion dollars) and the additional $9 Trillion (give or give a few more trillion dollars) which will be added to the deficit ensure that the currency becomes worthless. That alone will cause the replacement of the U.S. Dollar as the prime currency for commodities.

The rise in the price of oil has nothing to do with supply-demand anymore, but is directly related to the drop in the U.S. Dollar. Consumers will soon feel the 2009 highs in the price of oil, first at gas stations and later in grocery stores. Oil prices will creep higher and blow past the $100 per barrel mark over the next 12 weeks. The rise will last until even the Dumb Money camp will realize that the hoped for economic recovery was a short lived myth and that the downward spiral will continue, partially due to the idiotic policy response across the entire spectrum. Once the economic recovery hope busts like the tech bubble did, the price of oil will retreat but remain at an elevated level thanks to the U.S. Dollar, which will continue to shed value over the next decade and beyond.

Increased demand from Asia will put a floor on the price of oil at around $50 per barrel. The U.S. consumer will have very little to cheer about due to the Septic Tank's policy of near 0% interest rates which will ignite a period of super-inflation amid a continue economic deterioration which will make a period of stagflation look like a relief. The period we experience right now is the calm before the storm, we are in the eye of the hurricane.

Oil prices will grind higher and most likely breach the $100 per barrel mark by January 2010. The rise will pressure the consumer even further and choke off any temporary increase in consumer sending, which accounts for roughly 70% of the economy. The increase in manufacturing can be attributed to inventory rebuilding and a pick-up in demand from Asia and even Europe. The rise in the price of oil will put pressure on companies across the board as raw materials will become more expensive and companies can either pass those costs on to the consumer which will pressure inflation upwards and that will be negative for equities, or they can accept smaller profits which will pressure equities to the downside. Either way the rise in oil prices due to the weak U.S. Dollar will have a immediate and direct negative economic impact.

Interest rates are already extremely behind the curve, once again and as always. The Federal Reserve, under the lack of leadership by the Septic Tank, contributed its part to the deterioration of the U.S. Dollar and also assisted in the creation of a future period of super-inflation and economic weakness. The Dumb Money camp hails him as a hero in the worst financial crisis since the Great Depression, but very few understand that he is part of the problem rather than a part of the solution. An increase in interest rates is another negative for the hammered financial system as well as for equities which are extremely overvalued.

Could it get worse?

Yes we can...

Posted by Apollo on October 20th 2009.

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Dow Jones 10,000 and the Bears are back

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The media finally received the headline they begged for and the Dow Jones crossed above 10,000, which was as irrelevant as the color shirt you wore today. Dow Jones 10,000 is nothing more than a great opportunity to sell the entire market which is extremely overvalued. It was a nice run and October was filled with opportunities to get the bear back into your portfolio. As a matter of fact, the Bears woke up and now are ready to take control of this market again. A little too late, but better late than even later.



Dumb Money now licks their wounds as they complain about the lost decade, since the Dow Jones was at 10,000 in 1999. This is very typical of the Dumb Money camp as they ignore reality where they can. It has not been a lost decade for the Dumb Money camp, but they have successfully devalued their portfolios by at least 25%, and even worse they have lost ten years. Dow Jones 10,000 can be compared to Dow Jones 14,000 in 2007, after which the benchmark dropped over 50%. Two years later, same story. Next stop for the Dow Jones will be 5,000 before another failed relief rally will take the Dow Jones higher. Over the next decade the Dow Jones will drift lower towards the 3,000 mark, which will represent fair value for the index.

The same problems which shaved over 7,000 points from the Dow Jones in more than two years still exist today with two differences: they have increased in size and attracted a new wave of counter-productive over-regulation. The same holds true for any other benchmark index, the Dow was chosen since it made the headlines, but otherwise is a very lousy indicator for anything. The S&P 500 came very close to 1,100 (in futures markets) which would represent yet another great opportunity to walk with the strong bear from here on.

Dow Jones 10,000 and the Bears are back, not judged by today which saw a minor drop across the line but rather by the events which will unfold as soon as Monday and throughout the remainder of the year. Next year will make that statement even more obvious. The Dow Jones hit 10,000 and this is about as good as it will get. Sure, it may add a little which is nothing more than another great opportunity to reach out to the bears and smile. What has happened over the past 24 months, give or take a few, is an insight of how the next decade will perform. The markets have basically given it away, but 99.8% of all market participants (the Dumb Money population which ranges from mutual funds to retail investors) will not be positioned on the smart side of the equation.

Dow Jones 10,000 and the bears are back, in the same fashion the bears woke up when the Dow Jones hit 14,000 in 2007. On top of all the pieces which crushed the Dow Jones by over 50% there is an ignored global power-shift, a worthless U.S. Dollar and super-inflation in the economic pipeline as well as a decrease in appetite for U.S. Treasuries and a move away from the U.S. Dollar altogether on a global scale.

Could it get worse?

Yes we can...

Posted by Apollo on October 16th 2009.

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October 2009 Equity Market Crash

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Some of you may remember the post about the June 2009 Equity Market Crash (June 2009 Equity Market Crash; Bulls versus Bears) which was posted on June 14th 2009. The Bulls countered with a hot flash of renewed and unjustified confidence as they slapped the second-quarter earnings season which started in July with their phrase of the year 2009, 'not as bad as expected'. September, viewed by the Dumb Money Camp as a nice pause from the strong bear market rally, delivered a major blow to the technical strength of this tremendous bear market rally. The majority simply ignores that equity markets could rally another 20% and it will still be a bear market rally. The entire picture needs to be viewed in order to understand that aspect and in order to be prepared for the October 2009 Equity Market Crash.

Market participants should not be surprised to see a 10%+ equity market drop in October alone, although the chances may be slim for such a nice move. The Dumb Money Camp claims that there is plenty of money on the sidelines which waits for minor one day corrections in order to get in ans push the markets higher, but that is simply not true anymore. It was the case in May and again in July as well as August but even September showed early signs of a dry up in additional cash. Overall the economic picture has deteriorated further and equity markets have not priced in reality, but rather reacted to an illusion or wishful thinking. 2009 will be a repeat of 2008 as well as 2007 when markets moved the opposite direction of reality.

The current weak will be rather quiet in major economic news but third-quarter earnings season will dominate October. Expectations are too high, especially about the fourth-quarter outlooks and most the positive news have already been over-prized into the markets. Global equity markets were extremely overvalued in March and the March lows, which the Dumb Money Camp labeled a once in a generation opportunity in order to hide their ignorance and lack of knowledge, will serve as a support level for 2010 but eventually those levels will break during the second leg of this huge bear market. The 10-year outlook is even more bearish.

The Dumb Money camp simply does not understand that the direction of the market is 100% irrelevant to any sophisticated portfolio and the performance of such a portfolio. The only importance is that the portfolio is on the smart side of the equation on a constant base. Here is an oversimplified way to view this:

A $1,000 portfolio which is positioned for a 10% bullish move will earn $100 in the same manner a $1,000 portfolio which is positioned for a 10% bearish move will earn $100.

The only importance is that the portfolio is positioned on the smart side of the move. The smart side is the side which enables your portfolio to increase in value and always opposite of the Dumb Money side which is represented by the mutual fund industry. Expect a bearish week and use bullish periods to position your portfolio on the right side of the equation and take full advanatge of the October 2009 Equity Market Crash.

It is not smart to play it safe, but it is safe to play it smart!

Posted by Apollo on October 5th 2009.

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The V-Shape Recovery Hype

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The current V-Shape recovery hype continues to trap the bulls in a three-peat showcase of stubborn stupidity and ignorance. After August 2007 as well as August 2008, recent history repeated itself and repeats itself after August 2009. From incompetent professional investors, or rather so-called professional investors, to misinformed amateur investors and from ignorant analysts to miseducated economists, they all seem to follow the same pattern as of late. This pattern is not a new one, but has been around since those groups have decided to become active as well as passive market participants, but the last three years have increased this pattern, which some may want to refer to a socio-psycho market pattern since the entire society embraces it and it had deep roots in psychology.

99.8% of all market participants have no knowledge about the economy or equity markets which is the reason for the strong pattern which showcases how stupid the majority is. An individual may not be classified as stupid due to lack of knowledge on a particular topic. It is the norm that each individual will lack the knowledge on most topics, but what make an individual stupid is the claim to be a professional despite the lack of knowledge. The ignorance towards reality and the illusion to have knowledge and therefore be classified as a professional in the given market or area of claimed knowledge make that individual stupid. One of the most prominent example of this idiocy can be found in the mutual fund industry and among economists.

The U.S. economy has deteriorated over the past nine months, but the majority has subscribed to the socialistic inspired sales pitch that there has been a sustainable improvement in economic activity. Billions of dollars have been wasted to inject 'tax payer sponsored' bailouts and stimulus packages, which have been ill-constructed and executed for failure, into the economy. The socialists' idea of economic stimulus will only be bale to stimulate the deficit into the wrong direction without a sustainable, positive economic impact. The economy will experience a temporary upswing, but the price for such a temporary and long-term negative upswing does not justify such action. Overall it serves as an addition to the problems which are cramped into the pipeline.

One little fact which increases the fun for those in the Smart Money Camp, the real one in contrast to the fake one which is pitched by business entertainment channels to the general consensus, is that the events seem to unfold during spring and reach their zenith in August. September has served as a key month to break down the stubborn bullish sentiment and more important the technical picture of the markets. The equity market rebound in March was well communicated before it happened and was expected as well as necessary. June saw a breakdown of that pattern, again expected and executed. July and August saw a continued case of BSE in the markets across the Dumb Money Camp with mutual fund managers on the forefront of sheer illusion and supported by statements from economists who failed to see the economic problems.

September 2009 once again sliced the throat of the bulls also known as tauroctomy, but the adrenalin has the dying bulls on ignore for a few more trading sessions.

Look out for more disguised but clear negative reports on the economy, as seen all last week from housing to consumer spending. The U.S. economy will not be able to recover as the path taken by the socialists is irreversible and the damage has been done. Most global equity markets are at a severe disconnect with reality which also creates huge opportunities.

Have you noticed how the Dumb Money Camp always spits the same pile of crap in your face?

They always claim a 'once in a life-time opportunity' which is partially due to their sales-pitch behavior in order to make up for some of the heavy losses faced which were a direct result of their lack of knowledge and partially to hide their embarrassment while at the same time they try to comfort each other that everyone can miss a once in a lifetime opportunity. That statement is among their favorite statements and right alongside the 'better than expected loss', which is another non-existing illusion.

The V-Shape Recovery is nothing more than a hype as well as a desperate attempt from the Dumb Money Camp to create a short-term financial gain which will be wiped out by reality and turn into another heavy loss in their books. There will be a short road bump as viewed from the economic contraction point of view, before the downfall will continue. The only sector which will not receive a short break will be the labor market which will steam ahead and shed jobs on a monthly base. This will neither be a V-Shaped Recovery nor a W-Shaped Recovery but rather a Lightning Rod Contraction which will eventually pave the way for an extended period of stagflation before another powerful hit.

Over the next few decades, stagflation will be as good as it will get for the U.S. economy which has been injected with counter-productive policy making amid a decade long illusion of economic strength. Reality can only be avoided for a certain period of time and the longer it will be avoided the longer it will take to correct such an illusion. In the case of the U.S. economy, a rough 50 years is something to think about.

Could it get worse?

Yes, we can...

Posted by Apollo on September 29th 2009.

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New Post Schedule

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I have to admit that my previous 'I am back' post was a bit too early. A few unexpected things came my way and had my very occupied for a while. I promised changes to the blog and the first change is a post schedule to which I try to stick. Here is the plan and we see how that works:

1. Each Monday, starting on September 28th 2009, I hope to post about the economy in general. The post will be in the typical Bulls versus Bears manner and get the story behind the story and not the garbage which you are fed by the media. The media has taken a bullish approach to just about every economic report and always communicates how much better things are in a desperate attempt to boost confidence which is were the problem starts.

False confidence as well as false optimism ads fuel to the fire. The U.S. economy has lived off of that for over three decades, when the seed for the collapse of the economy was planted. On the surface everything seemed as good as it could be given the severe long-term economic problems. Several pathetic sales pitched to the general consensus and you had what we had which was a well-hidden illusion to the uninformed, uneducated as well as the overeducated and almost everyone else in between. What made things even worse is those who created the illusion and kept it alive believed it as well. On top of that you 'create' a group which you call professionals, which in reality have no idea about their so-called profession and hide it behind the word 'risk', and trick the public to trust this new breed of mismanagement teams.

Failure was 100% programmed and pumped into the economic as well as fiscal pipeline.

2. Each Friday, starting on October 2nd 2009, I hope to post about equity markets, their current stage and why things are were they are right, where they should be and where they are headed. 99.8% of all market participants, amateur as well as professionals or rather so-called professionals, belong in the Dumb Money camp, but the business entertainment channels, which are a goldmine of Dumb Money investors as well as Dumb Money ideas, attempt to deepen the illusion and portrait those as professionals and even, idiotically, refer to them as Smart Money.

The reason for this ridiculous 'phenomenon' is the simple fact they are unaware of the definition and classification of Smart Money versus Dumb Money, in the same manner they confuse assets versus liabilities which equals fiscal suicide.

Bulls versus Bears will try to shed some light into the fascinating and twisted world of the global economy as well as global equity markets.

I want to thank everyone for your patience as well as support. A special thank goes out to all loyal EntreCard Bloggers and everyone else who did not give up on Bulls versus Bears during the past twelve weeks of 'absence'. I hope to implement those changes rather quick and make other improvements in order to increase your experience.

Feel free to send me any ideas that you have or topics you would like to see here on Bulls versus Bears.

Posted by Apollo on September 23rd 2009.

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I am back!

I am sorry that the last six to eight weeks have passed with almost no posts at all and I want to thank everyone who supported Bulls versus Bears during my absence. I plan to modify the blog a little and post three posts each week. I hope to get a schedule going and publish one post each Monday, Wednesday and Friday. A deleted the 'Earnings Buzz' section and will make a few minor adjustments as well. This is just a short update as I work on this blog and I hope that the end result will improve the blog. There will be modifications to the two virtual portfolios as well. Feel free to submit your requests with certain topics you would like to be covered. I try to have Bulls versus Bears back to new normal by September 1st 2009.

Posted by Apollo on August 23rd 2009.

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Will there be a sustainable economic recovery in the second-half 2009?

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Allow me to start with a quick apology for the lack of new posts over the past two weeks and a thank you to all of those who continued to visit Bulls versus Bears. There may be less posts than usual over the next few weeks as well, but I hope that you will continue to support this blog.

You have probably been very excited over the past three weeks as the bear market rally launched one final attempt to make a mark in history. Bulls have stormed out of the gate based on lousy second-quarter earnings reports which managed to beat ridiculously low estimates based on cost-cuts and ignored negative economic reports in the same Dumb Money manner of 2007 and 2008. The term 'not as bad as expected' is a mutual fund hoax in order to have an excuse to enter long positions. The second-quarter earnings season was as bad as expected at best (Q2FY09 Earnings are much weaker than expected; Bulls versus Bears). The majority of Dumb Money investors look for a rally but fail to realize that the bear market rally is almost over. A double top or rising wedge has formed for plenty of major benchmarks and the most recent three week rally was on extremely low volume and rather unconvincing.

The answer to the question about a sustainable economic recovery in the second-half is plain and simple no. There is a 99.8% chance that you missed the point which is equal to the Dumb Money section of the professional market.

Could it get worse?

Yes we can...

Posted by Apollo on July 31st 2009.

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Q2FY09 Earnings are much weaker than expected

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Second-Quarter 2009 Earnings come in much weaker than expected and the five day rally in equities confirms that.

The above statement most likely confuses the majority as strong earnings usually ignite a rally and since the markets have rallied over the past five trading sessions the general consensus automatically buys into the Dumb Money illusion of strong earnings. The five day rally across global equity markets should be viewed as a washout rally. The June Equity Market Crash was extremely silent but yet very strong (June Equity Market Crash was silent but strong; Bulls versus Bears) and as mentioned there would be a bull-trap or a two-tier pull-back due to the high amount of cash on the sidelines as well as false optimism about the economy.

On top of all the above comes one of Dumb Money's favorite practices, besides the constant mismanagement of portfolios, earnings expectations which were curbed lower on purpose in order for a company to beat expectations with ease. That in turn gives Dumb Money an excuse to add to their positions in the particular equity in desperate hope to minimize losses from the previous year. Dumb Money analysts usually get it wrong about 99.8% of the time as they have zero insight into the company and can only take an uneducated guess as far as earnings are concerned. Earnings, or better earnings per share, are a piss-poor indicator when it comes to the evaluation of the strength or health of any company. As a matter of fact, EPS does not tell you anything because it is the easiest figure which can be manipulated, legally manipulated. You may want to check one of the previous posts in regards to earnings season (Second-Quarter 2009 Earnings Season; Bulls versus Bears).

Most earnings released so far have disappointed and so have outlooks with a very few exceptions. Over 75% of those companies who have increased their outlook will cut it during their mid-quarter update in roughly six weeks to eight weeks.

Another favorite Dumb Money engagement is the 'not as bas as expected' or 'better loss than expected'. Both those statements are as dumb as the assumption that a mutual fund is managed by sophisticated market participants. A better than expected loss does not exist, neither does a better than expected economic contraction. Sometimes, even a Dumb Money contributor will get lucky with a report (Bank profits not as impressive as they seem; AP). Right on, but to take it a step further, they are not impressive at all. Those banks are all Dumb Money institutions which require a bull run in equities to turn a profit. Equities rallied during the second-quarter and therefore the investment arm of those Dumb Money institutions got lucky and covered some losses while the consumer side, Main Street, continues to deteriorate.

Goldman Sachs is an exception as is does not rely on consumers, but in a pathetic attempt to secure TARP they reorganized as a bank holding group which displays that you have to be 10% smarter than your 'opponent', in this case the Treasury and Federal Reserve which are headed by two of the least qualified and competent human beings on the planet. Was not hard to fool those two idiots.

One problem, well make that two problems...no, more like three problems...wait, wait...four...no five problems which are totally ignored right now are:

1. Commercial real estate problems which will lead to a collapse of that sector.

2. Credit card crisis which has yet to unfold.

3. Global economic power-shift which unfolds right now and is the biggest in over five centuries.

4. U.S. budget deficit which will continue to explode.

5. The U.S. Dollar which will further deteriorate and lose its global importance.

Could it get worse?

Yes, we can...

Posted by Apollo on July 18th 2009.

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Retail sales dissapoints, Goldman Sachs dissapoints, PPI rallies

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No, the headline is not a typo at all. Investors were anxious about Goldman Sachs Q2 earnings, retail sales as well as the PPI in order to support their case, regardless on which side of the equation they find themselves.

Retail sales offered a huge disappointment (June retail sales rise more-than-expected 0.6 pct; AP). The headline-fake-figure rose 'more than expected', and Dumb Money always falls for those fakes. Core retail sales actually came in less than expected. The only two reasons for the 0.6% increase in June can be attributed to an expected rebound in auto sales and higher gasoline prices. Both factors do not impact overall economic activity to a great degree and are almost irrelevant. Consumers continue to cut back on spending and will do so for quite some time. They will not create the demand which will start a sustainable economic recovery. The retreat of consumers coupled with counter-productive polices from the Obama administration will keep the economy under pressure. The majority has also ignored the yet-to-hit second wave of the financial crisis which lingers around the corner as well as the yet-to-unfold credit card crisis. One reminder of problems in the financial system was thrown at and ignored by Dumb Money came from CIT (CIT shares rally as firm seeks federal aid; AP).

Goldman Sachs offered a slight disappointment in their Q2 results (Goldman profit soars on strong trading gains; Reuters). Sure, Dumb Money points to a blow-out quarter, but expectations were purposely lowered to allow Goldman Sachs to come in with a slam-dunk report. Two competitors were wiped out by the markets, another one was acquired which basically left Goldman will little competition and a bigger share. Given that they were really the only ones out there, they did not take full advantage of the situation and therefore disappointed. Assume that you are at a race but only two other racers show up, all of you will get a medal but by no means have you accomplished anything because only three showed up to the race which automatically qualified you for a medal. The same happened with Goldman Sachs. On top of that, the gains were supported by baillout funds. Dumb Money may ejaculate all over the earnings report, but Goldman executives, those closest to the source, decided to dump Goldman stock worth $691 Million (Goldman Sachs executives sell $700 million in stock: report; Reuters). Enough said.

Wholesale inflation took off in June and surged 1.8% and the core PPI jumoed 0.5% (Wholesale prices rise more than expected in June; AP). It blew past expectation of Dumb Money economists and was in line with Smart Money econmists. Dumb Money begs to ignore the surge in PPI as well as core PPI and slaps it with an insignificant developemnt. By the way, they also missed the surge so only a mutual fund investors would beleive that Dumb Money economists would get it right down the road.

Three develpoments, three red flags and Dumb Money caught in the trap all over again.

Could it get worse?

Yes we can...

Posted by Apollo on July 14th 2009.

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Second-Quarter 2009 Earnings Season

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The much anticipated second-quarter 2009 earnings season was unofficially started less than 48 hours ago with a disappointment by Alcoa which was twisted and turned as a positive surprise by Dumb Money. Earnings season is always fun as it adds some nice volatility and creates even greater opportunities. Do not worry at all as over 99.8% of all market participants will miss the opportunities or are positioned on the wrong side of the equation.

Here are five 'earnings seasons myths' that you should be aware of in order to have more fun during any given earnings season:

1. A better than expected loss does not exist! This is one of the biggest and most widely applied statements across the Dumb Money camp. A loss is a loss, period! Dumb Money investors, namely mutual funds, use that statement in a pathetic yet hilarious attempt to pump the stock price higher. The primary reason for that practice is that their ignorance caused them to go long quite some time ago and they sit on heavy losses on their position. In order to excuse their stupidity, they will explain their natural lack of understanding and continued addition of positions to their loss with the 'better than expected loss' statement.

Dumb Money is also quick, especially after a couple of quarters of heavy punishment by the markets, to lower their forecasts extremely low on purpose in order to allow a disappointment in earnings to be labeled 'as a much better gain/loss than expected' and have another excuse to add to their losses.

A loss is a loss, period!

2. Be aware of stock buybacks by companies. When you look at EPS, which you may as well ignore completely, be very careful and double check how many shares the company has repurchased during the quarter. A significant amount of repurchases will lift the EPS and create yet another artificial positive number which traps Dumb Money each time, one of the oldest 'gimmicks' of earnings season.


3. Expenses. Make sure you understand the impact of cost-cutting programs. They will likely boost the bottom line and increase EPS, but in reality the company may be off worse than their report will outline at first sight. There are plenty of accounting procedures which even allows a company to legally 'hide' losses or delay the recognition of losses. Banks have used those accounting 'tricks' to appear much healthier during the first-quarter of 2009 than they actually were. Dumb Money fell for it and Dumb Money will wonder why they incurred even greater losses as the summer winds down.


4. Forget the 'E' component. This is another favorite Dumb Money illusion which they use on a daily base to reason their idiocy. Anything that has 'E' for 'Earnings' in the equation is as important or significant to the company's future performance as the amount of dirt in your backyard is important to the rate at which the sun uses helium. EPS and P/E ratios rank among the two favorite useless indicators which Dumb Money uses every day.


5. Earnings should never determine your reason to enter/exit a long/short position. The price of an equity always moves once earnings are reported as most of not all in the Dumb Money camp follow the same idiotic pattern. The release of earnings should never determine your reason to enter or exit a long/short position on the company, with very few exceptions. You need to be positioned prior to the release, should the release be in your favor you may decide to reap the profits after a few days and should it be out of your favor you have a great opportunity to add to your position and reap the rewards at a later point. The earnings report will only be a short-term move for the underlying equity and nothing more. It will create an opportunity.

Now, go out there, have fund and don't be dumb. Wait, since you probably hold on to the idea of a 401(k) plan and hold mutual funds as part of your portfolio the above two options are not available to you. In that case, watch a few other have fun while you scratch you silly forehead wondering what went wrong again...

Posted by Apollo on July 10th 2009.

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June job losses clock in less than expected

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Yes, you read that right! The June Employment Report came in slightly better than expected. The most recent 'shock' to those in the recovery illusion was delivered by the June Employment Report which showed that 467,000 were lost (467K jobs cut in June; jobless rate at 9.5 percent; AP).

Most seem to be surprised and claim that the number was much higher than expected. A pathetic statement out of the Dumb Money camp. The problem is that the majority of Dumb Money economists got caught in their recovery hope stupidity and therefore looked for a figure in the mid 300K range. Any semi-intelligent professional had a figure of around 500K in mind and therefore the report actually came in slightly better than expected.

Does that mean that a sophisticated investor bought into the sell-off?

No, of course not!

Why not?

Only Dumb Money would have done something that stupid. The economic situation is bad and it gets worse. Dumb Money gets excited if a figure is better than expected, despite the fact that it points to severe problems, which is pathetic. The June Employment Report may have came in better but a loss or a contraction will always be a loss or a contraction.

A better than expected loss is an illusion and a happy loser is a true loser!








Posted by Apollo on July 7th 2009.

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