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Daniel Frishberg on the Monday Morning Update


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Dan Frishberg Share News On the Monday Morning on the MoneyMan Radio Show!

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Daniel Frishberg on the Monday Morning Update

  1. 1. ATTENTION INVESTORS DROWNING IN A SEA OF BAD ADVICE The MoneyMan Report Monday Morning Update By Daniel FrishbergAs high tech stocks sell off, and I see the usual suspects changing their minds and becomingmore negative, I’m happy to see that the hard hit stock, ANAD, out hiring and looking for newinterns. They don’t expand their payroll when the sales department is reporting reduced demand.Another good sign was a notice in a Dallas business journal that TriQuint Semiconductor(TQNT) plans to hire 130 people for its plant in Richardson, Texas. You aren’t going to hearnews like this when the focus of conventional market news is on a natural disaster and selling ofstocks.Everyone is not a regular listener, so bear with me while I repeat one more time that in the thirdweek of February we had demand at the highest point since the crash of 08, and supply – peoplewilling to sell – at the lowest point, looking at anything but the very shortest term market action.What has changed? I’d say CCJ is not a worthwhile gamble at this time. I can’t see how thenuclear generating plant buildout can do anything but suffer a setback. Certainly according to myrisk numbers, uranium has fallen in risk/reward score.Flash memory demand has been strong, so I think the odds are that well see some supplyshortages in at least the near to mid-term. No one likes to see tragedy, but SNDK, MicronTechnology (MU), Samsung and Hynix will most likely experience more demand and higherprices than they would have otherwise.Uranium’s hit is good news for natural gas, and coal.What about the usual suspects who are now worrying about the end of the bull market, and thebears taking control? The number is growing, and they are so articulate you forget that these arethe people who have lost you money every time you’ve listened to them in the last decade, sohere’s the fact:
  2. 2. At of the end of the third week of February, the demand for stocks was at its highest point sincethe bull market started in March 2008. Also investors’ willingness to sell was at its low point.Obviously there is some selling when the stock market corrects, and some buying is curtailed.Yet, in all of the back testing, and throughout my life there has never been a new bear marketthat started within a couple of weeks of an environment like that. Always, when the markets rollover, sellers have been getting more active and more eager to take profits - get out of the market,and reduce risk - for months and sometimes more than a year before a new bear market hasstarted. I know a lot of people were blindsided by that very intense crash in autumn of 2008.They were blindsided because of the optimistic calls from that same group of usual suspects,who are now calling for the protracted bear market. They didnt get it right then, and they arentgetting it right now.I can give a very simple description of where the stock market is right now. It is in the middle ofthe correction, possibly late in the correction, but I dont believe that correction is over. We are ina long term bull, but in a frightening and pretty painful correction. Each of these swings andvibrations, in either direction, have lasted longer than they used to. I guess I wish we would havethese moves occur sooner and be less intense, but who cares what I think.The trading that is done by big players with quantitative analysis and big computerized programsthat jump onto trends, is probably the difference; and I think thats probably why these trends lastlonger than they would if they were being run by human beings. Nevertheless they have beenconsistent, and so they are getting easier for us to read and anticipate.What each investor has to decide for himself, is does he feel he can be accurate enough to protecthimself, even though we are now most of the way through a correction? The odds are, we godown further. But the odds also are that the new rally starts suddenly, not too long from now, andI would be willing to bet that most people lose money by trying to add short positions to takeadvantage the impending downside. Most of us would be better off to focus on a little further outtime frame, and I see nothing to indicate that the odds dont favor a continuation of the bullmarket.I will remind you of one simple shorthand way that I can see, that we’re not quite done goingdown. It’s always a part of my MARKET X-RAY. I mentioned a week or so ago that one timingindicator is the number companies whose stock prices are below their 30 day average.There are times when you get up way above 80% of stocks above that average. When you arriveat that point stocks start to feel pretty expensive. At the major turning points in early July, andagain in September, 80% of companies were below that average price. That was the moment ofturn, when too many people were leaning to one side of the canoe.When I was explaining this a week or so ago, the number was at about 50%. This morning its atabout 36%.Once the number of companies with prices above their thirty day average moves substantiallybelow 20%, the market is getting extended the downside.If conditions improve, a new round of buying and another leg up could start at any moment. Butgetting below that 20% mark would make for a fairly easy entry point. Since we have come this
  3. 3. far, I would not be surprised if we got there. By the way, in the little correction in November wenever did get down to the 20% mark.People have been asking me forever to explain more about how I calculate the market x-ray. Ihave given general answers for years, and people still want to know more about it. So now thetechnology allows a class on how to do it.Not only will you find out how the professionals, who have tens of thousands or millions ofdollars to spend on their research, do this kind of reality analysis, but I will show you cheap waysto calculate whats going on beneath the surface, so you can make your analysis based on what israther than what a bunch of experts believe should be.Heres what the market x-ray is really going to do for you if you are willing to do a little bitrigorous work. (If you don’t feel like doing this type of work, don’t worry. Most people don’t.They just have no chance to compete using the easy tools they pay so much to learn.In that case, dont waste your time. Just let someone else, who loves the work, do it for you. Inmany of the places where we air, one good way to get this analysis done for you without youhaving to do it is Barrington Financial who is very active in the Sacramento area; also in Miami,Atlanta, and Houston.Many nonprofessionals who are quite smart, and many beginners and novices also, aresubscribers to my INNER CIRCLE, and more people are joining every day. Of course, I updateMARKET XRAY in that forum for subscribers every week.Still many people would like to be empowered, and would like to be able to understand how toknow what is in fact happening in the markets, rather than what a bunch of experts think shouldbe happening.I believe lots of people dont mind doing a little bit of figuring for themselves, and I thinkempowering yourself so that you can act with confidence is important. Even if plan to hirepeople how can check to make sure you agree with what they are doing with your life savings?Heres the reality. Its really very simple. The conventional good deals are easy to identify.Growing companies with a very high return on equity or return on capital. This stat means theyare utilizing their resources well. It helps identify a well-managed company.Buying this well-managed company when it is fluctuating to the cheapside of its range obviouslymeans you get a better deal.How do you know when a company is cheap?A good way to do that is to check the number of years of profit youre paying for it – the price toearnings ratio (P/E).By the way, in some industries, like oil drillers and companies with a lot of depreciation, youwould use price to cash flow.
  4. 4. Anyway buying well-managed companies at the cheap end of their range, with the simple rule ofthumb above will mean that you make twice what the stock market makes over any long periodof time.So how could it be that most people end up losing money in the stock market, if it is that simple?The answer is that sometimes when you buy a stock thats a good deal the price keeps falling -sometimes for weeks. Sometimes for months. And sometimes – not too often – but sometimes,for years.At those times, investors give back all the money they’ve made in rational markets.The one extra skill that is crucial, is to know when - in spite what you think should be happening- the stock market is going to take your money.When buyers are on strike, sellers want to sell, the multiples are shrinking, and investors are lesswilling to assume risk, anyone who recommends buying and holding stocks is an idiot or a liar.And, when the stocks are running - when buyers are extremely eager to assume risk, and sellersdont want to sell - you can make money on momentum stocks that arent even really good deals.Understanding supply and demand in the stock market is the only way to be empowered and tobe able to create reliable results. Nothing else really helps if you lack this one missing piece ofthe puzzle.The stock market is our societies way of financing businesses, and deciding which businesseswill be financed. But the markets are now so big and have some many different forcesinfluencing them, that almost all investors end up losing, because they dont have the skills thatyou will get in my MARKET X-RAY FOR THE WEB CLASS. LEARN MORE HERE!