timing is everything

February 28, 2014February 28, 2014

Will This Stock Go Up 500% Over The Next 3 Years?

Rite Aid Corporation (RAD)

Investment Thesis Summary: Rite Aid is a “turnaround” undervalued stock with a significant upside potential. Due to improved company fundamentals and performance the stock price is up 550% over the last 1.5 years. Yet, I believe the company’s stock continues to be undervalued. It is still far from where it could be if the company continues to execute its turnaround plans. In fact, based on today’s valuation metrics, if Rite Aid is to approach the valuation metrics and margins of its competitors over the next 3-5 years, Rite Aid’s stock should appreciate 2-5X from today’s price.

THE STORY:

Please click on this presentation to learn about the company, future plans and their turnaround story.

The company has a number of things going for it.

1. Aging Population

This is straight forward and self explanatory. According to US Census Bureau the population of those 65 & Older in the US will be at 56 Million by 2020. That is about a 40% increase from today’s levels. It doesn’t take a genius to figure out that these older Americans will be visiting Rite Aid more often to buy larger quantities of drugs as they continue to age. Driving sales and profitability higher.

2. Drug Deal/Distribution

In mid February 2014 The company announced an expanded distribution agreement with McKesson (MCK), a massive drug retailer. While this renewal is technically an expansion of their existing deal into 2019 it gives us an important clue to future growth and profitability.

The drug industry is changing. Today, most drugs are bought in massive quantities by the likes of distributors like McKesson. This gives both McKesson and Rite Aid higher pricing power and flexibility. In addition, the so called “Patent Cliff is in play. It is estimated that between 2011 and 2017 close to $130 billion worth of brand drugs will lose patent protection and become generic. When that happens, the margins for both pharmacies and drug distributors should increase further.

That is already becoming evident at McKesson where operating margins have risen from 1.63% to 2.03% since 2011 and at Rite Aid where operating margins went from (-2.16%) to +3.76% over the same period of time. As you can see a massive jump. As more generic drugs come on the market over the next few years, it is likely the operating margin will continue to expand.

3. Turn Around/Improved performance

Please see the presentation for other data points on turnaround and improved performance. Click Here

4. Undervaluation:

I believe that standard Intrinsic Value Calculation/Valuation will not yield very good results in this case because the company is in the process of a turn around. To determine future valuation and potential undervaluation at this time, we must look at properly run competitors. Walgreen Co (WAG) and CVS Corp (CVS) in particular. We have to look at their existing valuation and assume that Rite Aid will move closer to such industry valuation metrics as it continues its turnaround plans.

The easiest way to do so is to look at Price/Sale Ratio. Again, the assumption here is that Rite Aid will continue to execute on its turnaround plan to reach industry metrics. Walgreen has a P/S ratio of 0.87 and CVS has a P/S ratio of 0.67

What does it all mean?

It means that if Rite Aid continues to execute its turnaround plan and reaches industry metrics over the next 3-5 years, its stock price should be between $17.10 and $22.10. Giving us a respective yield of 158% and 233% over the next 3-5 years. With any other operating or margin improvements the return should be much higher.

FUNDAMENTALS:

The stock is undervalued relative to today’s market.

Valuation Measures

Market Cap (intraday)⁵:	6.48B
Enterprise Value (Feb 25, 2014)³:	12.61B
Trailing P/E (ttm, intraday):	22.87
Forward P/E (fye Mar 2, 2015)¹:	19.71
PEG Ratio (5 yr expected)¹:	0.54
Price/Sales (ttm):	0.25
Price/Book (mrq):	N/A
Enterprise Value/Revenue (ttm)³:	0.50
Enterprise Value/EBITDA (ttm)⁶:	9.28

Financial Highlights

Fiscal Year
Fiscal Year Ends:	Mar 2
Most Recent Quarter (mrq):	Nov 30, 2013

Profitability
Profit Margin (ttm):	1.25%
Operating Margin (ttm):	3.76%

Management Effectiveness
Return on Assets (ttm):	8.32%
Return on Equity (ttm):	N/A

Income Statement
Revenue (ttm):	25.38B
Revenue Per Share (ttm):	28.01
Qtrly Revenue Growth (yoy):	1.90%
Gross Profit (ttm):	7.32B
EBITDA (ttm)⁶:	1.36B
Net Income Avl to Common (ttm):	280.41M
Diluted EPS (ttm):	0.29
Qtrly Earnings Growth (yoy):	15.60%

Balance Sheet
Total Cash (mrq):	183.21M
Total Cash Per Share (mrq):	0.19
Total Debt (mrq):	5.95B
Total Debt/Equity (mrq):	N/A
Current Ratio (mrq):	1.73
Book Value Per Share (mrq):	-2.31

Cash Flow Statement
Operating Cash Flow (ttm):	728.27M
Levered Free Cash Flow (ttm):	161.00M

The company financials are ugly, but getting better. If we are to look at the balance sheet, income statement and the cash flow statement the desire to invest is likely to disappear. However, we must be aware that by the point the financial statements will reflect improvement and return to stability, the stock price is likely to complete most of its climb.

What is the Intrinsic Value? Too many variables and unknowns to calculate here. I believe the values provided in the “Undervaluation” section above make a lot more sense in this particular situation.

TECHNICAL:

As you can see, the technical picture is incredibly strong here. Since its bottom 1.5 years ago, the stock has appreciated over 550% with no signs of a technical slow down and/or a reversal. Giving us an indication that most investors believe the turnaround story is developing (at this time) as this report suggests.

CONCLUSION, TIMING & POSITIONING:

XXXX

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start.

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Will This Stock Go Up 500% Over The Next 3 Years? Google

February 27, 2014February 27, 2014

Real Estate Collapse 2.0 Why, How & When – Infographic

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Real Estate Collapse 2.0 Why, How & When – Infographic Google

February 26, 2014February 26, 2014

Real Estate Collapse 2.0 Why, How & When

If you ever want to ascertain the primary psyche of the American culture, just watch 1 hour of TV, paying particularly close attention to the commercial breaks. Here is what “The Man Behind The Curtain” wants you to do. The worst part is… most people seem to comply.

First, you must go to college, get a massive student loan and get a bunch of credit cards. After you graduate, buy your girlfriend a giant diamond ring, get married and she will love you forever. Then buy a house, a new car, start a family, get a dog and drink a lot of beer. Of course, the overwhelming pressures associated with all of the above will grind you into the ground. But not to worry, our top notch pharmaceutical and medical industry got you covered. Bonner pills, ADD pills, depression pills, high blood pressure pills, surgery and who can forget ….adult diapers. And that’s your future, in a nutshell.

In all of the above, one thing stands out. There is nothing more prevailing in the American culture than the notion that any self respecting, reasonable American with half a brain should own his/her own house. If you don’t, you are viewed as a failure. Now, before I destroy that notion with a few simple calculations and tell you why the housing market is going down the drain again (yes, it’s happening right now), please allow me to destroy the notion of home ownership with some simple common sense.

Reason #1: You Will Never See Your $50-100K Cash Down Payment Again:

Let’s say you are a responsible member of society and instead of getting Interest-Only-No-Down-Payment-I-Am-Never-Going-To-Pay-It-Back Loan, you get a typical 30-Year fixed with 20% down payment. In fact, you have worked incredibly hard and saved up $50,000 – $100,000 to do just that. Congratulations. However, the stupidest think you can do next is to buy a house and get a mortgage. If you do, kiss that money goodbye. Under today’s monetary conditions you are never going to see it again.

“But Alex, my realtor is telling me that buying a house right now is an opportunity of a lifetime….if I don’t do it now, I will never be able to afford it again, recovery is here, the prices are about to go through the roof, blah, blah, blah…” – Everyone.

Well, unless your realtors name is George Soros or Warren Buffett, tell your realtor to go pound sand. What we have experienced between 1994-2007 in the real estate sector is not only atypical, but is truly once in a lifetime. More on that later, but if you are lucky enough to sell the house you buy today at a breakeven, you will still not see the down payment again. It will simply roll over into your next house. From my point of view it is a lot better to invest that money into your future as opposed to park it in an illiquid asset that is likely to lose at least 50% of its value over the next 2 decades.

Reason #2: Closing Costs, Maintenance & Property Taxes:

Finally got that house of your dreams? Great, now bend over and take it like a man. Everything in this house will break down over the next 20 years and it will cost you a boatload of money to maintain. Throw in closing costs and property taxes and you talking about real money. Realtors themselves estimate you should budget about $8,000-$12,000 annually on a $500,000 house. Sure, there is an interest deduction on your taxes, but typically (based on your family’s tax structure) the costs above are never fully recovered.

Reason #3: It’s Not An Investment:

Stop saying that your house is an investment. Just stop. It’s a debt burden, not an investment. Investments produce income and pay dividends. Your house doesn’t do either unless and until you rent it out. Yes, your house can exhibit capital appreciation, but that is not an investment either. That is more accurately defined as a speculation. What we saw during the housing boom was just that. Speculation. Household incomes didn’t go up 500% between 1994-2007, but house prices did. People who were in the real estate sector simply got lucky. Now, it’s time to ride this Cho Cho Train down.

Reason #4: Your House Is A Trap:

Got that house of your dreams in The City of Compton, California? Congratulations, you are now trapped. Even if you get a $100K job offer to wax dolphins in Fiji, you won’t be able to take it. You will be tied down and unable to sell your house at break even. Particularly over the next 2 decades and that is exactly where “Corporate/Government Interests” want you to be. They don’t want you to have the ability to move and get a better job elsewhere. They want you to be tied down, “to have roots”, to be paid less. That wouldn’t be the case if you could increase your salary 25-100% by simply picking up your things and moving across the country.

And that’s just a few of the points. I can keep going, but I think you get the point. The housing myth is just that….a carefully crafted marketing message.

Now, let’s get to the best part.

Here are the reasons why you should be mentally committed if you are even thinking about buying a house. Plus, why you should sell your house NOW if you are misfortunate enough to OWN one.

First, you must understand where we are and the cause/effect behind today’s market.

UNDERSTANDING THE HOUSING MARKET, ECONOMY, SPECULATION AND DRIVERS BEHIND BOTH.

Yes, I called for the real estate crash and credit collapse as early as 2005. While my call was a little bit early and premature, eventually it was right on the money. Now, I am saying that the housing crash is not over.

Before we can understand where we are now and where we are going in the future we must understand where we came from. The Real Estate run up that we have experienced between 1997-2007 has no historical precedent. Real estate data going all the way back to 1890 clearly shows that the US housing market basically appreciated at the rate of inflation. Yes, there were some bubbles and substantial declines, but overall, appreciation at the rate of inflation is an appropriate way to look at the US real estate sector.

A QUICK HISTORY LESSON:

All of that changed in 1997 when Bill Clinton signed The Taxpayer Relief Act into law, basically allowing $250,000 in tax free capital gains in real estate. While real estate was already appreciating at a good clip at that time, that law added fire to the trend.

Later, fearing significant economic slowdown in 2002-2003 the Bush administration added a huge amount of jet fuel to the Real Estate Bubble by cutting interest rates and making mortgage finance available to everyone (yes, even to the dead people). As people used to say, if you can fog a mirror you can get a mortgage. Of course, all of that led to the largest finance bubble in the history of mankind that “kind of” melted down in 2007-2009. I say “kind of” because most of those excesses are still within our financial system and will have to be worked through in the future.

WHERE ARE WE NOW?

Issue #1: US Home Ownership Rate Is Plunging

On historical basis, home ownership rate in the US is in free fall. Take a look at the chart. I think it speaks for itself.

Issue #2: Real Estate Affordability Is Plunging

Take a look at the chart as it speaks for itself. The affordability index is in free fall as well. Most certainly, due to higher interest rates and rising prices.

Issue #3: Interest Rates Are Going Up

The trend has shifted up and the 10-year rate is up 100% over the last 12 months. I gave detailed interest rate analysis here. Please take a look here.

Issue #4: US Economy & The Stock Market Is About To Turn Down (Big Time)

This has been the primary trend in our blog since inception. Based on our mathematical and timing work the stock market will go through a bear market between 2014-2017. Pushing the US Economy back into a severe recession. To learn more about the upcoming bear market please Click Here and read the report. With further job losses , lower incomes and an economic contraction it would be impossible for the real estate sector to sustain any sort of a rebound. On the contrary, as the economy tanks real estate prices are bound to collapse further.

Issue #5: Who Is Buying All Of These Properties For Cash Today?

Chinese buyers, hedge funds, banks themselves, investors, speculators, etc….. Who cares!!! Remember all those Japanese investors buying everything they could in California and Hawaii in the late 1980′s. I wonder how that turned out for them.

In one of my previous reports I have outlined how large hedge funds, including Blackstone Group, are buying tens of thousands of real estate properties across the nation. With some hedge funds and financial institutions going to the extreme and investing in the likes of plumbers and dentist to help them find and manage properties(Click Here To Read). In Las Vegas alone 70% of real estate purchases over the last year have been done by investors. If all of this doesn’t not scream out “Market Top” at you, I really don’t know what will.

On a more serious note, notice that I didn’t say Average American Family. That is the only category that we should track if we want to accurately predict the future trend in the US Real Estate market. Every other category is irrelevant over the long run. And guess what? They are not buying. See the charts above.

Issue #6: Bear Market In Real Estate (sucks people back in)

As I have said in one of my previous posts (US Real Estate At A Turning Point), this is how the bear market works. This is the stage #2 bounce, before the big decline (stage #3). The bear market tends to suck people back in, offer them perceived safety and a high return before slamming the door, ripping their head off, drinking their blood and taking all of their money. The US Real Estate market is topping in Stage #2 run up here. That is why you are seeing so many divergences. The market should turn down soon. Beware.

FUTURE OF REAL ESTATE:

Real estate is not made of Gold. There is a tremendous amount of land available in California, Florida, Nevada and all over the US. There is no housing shortage. As such, expect real estate to decline significantly in order to revert back to its natural inflation adjusted mean. It might take a few years, it might be different for various cities, but one way or another the market will get there.

HOW FAR DOWN?

Let’s do very simple math for the San Diego market. It doesn’t have to be exact for our purposes.

Setup:

San Diego Median Family Income: $61,500
As Per Various Financial Guidelines Families Shouldn’t Spend More Than 30% Of Their Income On Housing. That means a $1,500/monthly payment.
Median Home Price in San Diego: $425,000
Interest Rates: 30 Year Mortgage 4.35% (Rates as of 2/21/2014)

With such fundamental input variables median house value should be $300,000 -OR – A 30% DECLINE ($1,[email protected]%)

What if interest rates go to 7% over the next 5 years, which can easily happen?

The fundamental value of the median house drops further to $225,000 -OR- A 47% DECLINE

Also, don’t forget that markets oftentimes overshoot to the bottom, just as they set blow off tops. In such a case I wouldn’t be surprised to see a median price of $150,000- 200K -OR- A 65%-50% DECLINE

You say impossible….. I say study financial markets. Nothing is impossible. Here is another way to look at this. Have household incomes increased 500% over the last 20 years? Nope. They have barely moved. Therefore, real estate decline in excess of 50% would simply return the prices to their inflation adjusted base.

TIMING:

In one of my earlier reports “I Am Calling For A Real Estate Top Here“ I clearly outlined the fundamental reasons of why the real estate market has peaked and is now in the process of rolling over. I continue to believe that the nationwide real estate prices are in the process of setting in a top. Since real estate is local, it is much more difficult to identify exact tops. As such, we must go back to the stock market in order gage a better understanding of WHEN the real estate market will tank.

Typically, the stock market foreruns the actual economic recession by 6-12 months. In other words, the stock market prices break down 6-12 months before Economic Data confirms a recession. While real estate prices, in theory, should start breaking down in conjunction with the stock market, that is not always the case. As such, it would be prudent for us to say that the housing prices will start breaking down 6-9 months after the start of the bear market in stocks.

As you know, it has been my claim (based on my mathematical and timing work) that the stock market topped out on December 31st, 2013 ushering in the final leg of a cyclical bear market. If such is the case, we can safely assume that we will start seeing drops in real estate prices sometime in the summer of 2014. Once the market rolls over and confirms, we should see a significant acceleration to the downside in real estate price over the next 3 years (at least).

With that said, we already starting to see evidence that the housing has topped. Please see volume data from RedFin.com below. As always, the volume of sales is first to go. Prices tend to follow.

WHAT SHOULD YOU DO?

That part is somewhat simple. If you do not own a home and thinking about buying one…..just DON’T do it. You will save a lot of cash (and your down payment) by renting and waiting for the market to come down over the next few years.

If you already own a home the situation is a little bit tricky. Listen, I am no fool and understand that your house is a home and is important for family formation/structure. If you are happy with you home and could care less what is going on in the real estate market……stay put. However, if you are thinking about selling your home, right now would be a great time to do so.

If you own rental properties that generate positive cash flow and they are not in any way tied into the upcoming real estate decline, keep them. If you are buying investment and/or rental properties as a “speculation” in hopes of capital appreciation or a “flip” you are better off liquidating all of your positions (right now) and getting out.

CONCLUSION:

Now, I understand and agree that there are various market forces at play that make the picture a lot more complicated. Interest rates, timing, mortgage finance, cash buyers, the FED, foreign buyers, speculation, location, supply/demand, etc…. However, fundamentals will always prevail over time. Everything else is just temporary BS.

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Real Estate Collapse 2.0 Why, How & When Google

February 25, 2014February 25, 2014

Make No Mistake, Russia WILL Go To War Over Ukraine. Plus, Market Update

Update: Russian troops and tanks enter Ukraine @ Sevastopol. So it begins.

Well, the American Government and the EU Bureaucrats have done it again. They have “liberated” the people of Ukraine from oppression and injustice. I wonder if there were high fives flying in the Oval Office over the weekend.

Yet, as the Chinese story goes “Maybe it’s good and maybe it’s bad, we shall see”.

I have said it before, but I need to say it again so people have a clear understanding. The US and the EU destabilizing and interfering in the business of Ukraine is equivalent to Russia destabilizing and trying to take over the government of Kentucky. Technically speaking, Russia and Ukraine is a unified state going back thousands of years. I would argue that it is idiotic at best and extremely dangerous at its worst for the western world to interfere in Russia’s and Ukraine’s business.

Luckily, I am not alone in thinking this way. Here is an open letter from Ron Paul: “Leave Ukraine Alone”

What most people don’t understand is this…… Russia and Putin in particular will never allow Ukraine to become a part of EU or worst NATO. They will go to whatever extent necessary to make sure that doesn’t happen. Even if it means going to war. Also, it is only half of the Ukraine (western half, the poorer half) wanting closer ties with the EU. The other half (wealthier industrial eastern part) wants nothing to do with it. They want to have closer ties with Russia. So, when American politicians scream out “Ukrainian People Want Freedom From The Tyranny of Russia” they are talking about 25% of Ukraine’s population. Either way you twist it, this is a ticking time bomb.

With Olympics now over, Russia has a lot more room to maneuver. It will be interesting to see what develops over the next few weeks. I see 2 outcomes.

1. In the past, Russia and Putin have proved to be good strategists. They might give an indication that they are stepping aside by allowing the EU and World Bank to try and bail Ukraine out by pumping billions of dollars into Ukraine’s economy. Over the next few years, through various political actions and economic positioning Russia will, once again, replace Ukraine’s leader with their own “puppet” as they have done so many times before. Of course, Western powers will never see their money again. This is the most likely outcome and exactly what I would do.

2. However, if Russia is pushed too hard and too far, they WILL sanction and execute some sort of a military action in Ukraine. With the EU and the US interfering in its business, Russia might literally have no other choice.

Which option will play out? Only time will tell, but I wouldn’t be surprised to see some sort of military intervention over the next few weeks. Will Obama draw his “Red Line” again and send in the Marines to protect newly liberated Ukrainian people? Yeah right. I truly feel sorry for the Ukrainian people who believe that the West will come to their rescue.

One thing is for sure. Neither the US nor the EU have any business interfering in this part of the world. Doing so might lead to an all out conflict with Russia and a new Cold War. Unfortunately, it looks as if it is exactly what some of our leaders want.

russian022412

MARKET UPDATE:

The market surged higher right at the open with the Dow Jones appreciating +103 point (0.64%) and with the Nasdaq gaining +29 points (0.69%) for the day.

With most speculative issues appreciating the most, the question I see from a lot of the bears anticipating a collapse….. Is this is the “blow off” top? As I have mentioned so many times before, the bear market of 2014-2017 will not be directional. While it will have a general down trend, it will not present us with a directional move as it did between 2007-09. That means a lot of volatility and a lot of powerful ups/downs that will surely confuse and frustrate both bulls and bears. With that said, what does it say of today’s market?

Our last inflection point was located at……. XXXX.

Not quite yet. This market is certainty not making things easy for our trading position as it continues to push upper ranges of what is possible if February XXXX was indeed a turning point.

There is couple of reasons for my hesitation.

1. All indices have opened up a gap in the morning. Typically, the market comes back to close this gap over the next few trading days. While the market can do so during the next leg down, it closes it within the next 3 trading days 70% of the time. Indicating a high % possibility of a short-term decline.

2. My calculations show an alternative top at today’s top of XXXX. It is hard to explain, but at times the market produces gaps within its own mathematical structure. It might be the case here.

In summary, it’s too early to call the market either way. While it is pushing upper boundaries, it is possible….. XXXX.

What are we to do?

Maintain our positions as described below while watching the market on an hourly chart. If the Dow breaks above XXXX we must nullify our XXXX top. If that is the case, the market is likely to continue higher. Not much higher, but high enough to close the gap that was left at 16,400 on the Dow.

If No Position: XXXX

If Long: XXXX

If Short/Trader: XXXX

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start.

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Make No Mistake, Russia WILL Go To War Over Ukraine. Plus, Market Update Google

February 24, 2014February 24, 2014

Warning: The US Economy Is Flying Blind…About To Crash

Over the last couple of years I have argued, sometimes passionately, that the Federal Reserve doesn’t really know what is going on within our own economy and our financial markets. Not only that, but I have also argued that they are a bunch of idiots and fools who believe that they can somehow control our financial markets.

If recently released transcripts, generated during the 2008 meltdown don’t prove my point of view without a shadow of a doubt, I don’t know what will. Here are just a few quick points from the said transcripts.

They didn’t even realize recession was happening until the 4th quarter of 2008. By that point the stock market has completed 80% of its down move. In fact, for most of 2008 they thought the recession “could be avoided”.

—-Hello???? Was anyone home??? Recession started in Q4 of 2007.

Bernanke talked about pent-up demand for housing as late as January 2008.
Bernanke was worried about inflation as late as January 2008.
Throughout Q1 of 2008 they have held a generally rosy view of the world and the US Economy

Here are the links to two great articles about the transcripts if you would like to learn more. Click Here and/or Click Here

The lesson here is twofold.

First, anyone who believes that the FED can either control, anticipate or predict financial markets and/or the economy is even a bigger fool. Neither Bernanke nor Yellen can predict the economy even if it hit them in the face with a brick. All they can do is look at past data and say “Oh, look, according to this data recession started in Q4 of 2007”. What a waste of time and money.

Second, they will always be behind the ball. They will always be a reactionary force as opposed to market makers. Take today’s environment for example. They are cutting QE and talking about raising the interest rates at exactly the wrong time. The damage from their crazy liquidity party has already been done. The worst thing they can do now is cut it. The faster they do it the faster the markets will collapse.

Why is any of this important?

Well, if you rely on FED to make money in the stock market and/or run your own business it becomes incredibly important. As such, no one should rely on any action by the FED as an investment indicator. It is as simple as that.

This brings us to financial markets and my premise that financial markets behave exactly as they should. Many people would argue that it was the FED’s actions that put the bottom in at the March of 2009 juncture, ensuring a subsequent and massive stock market rally.

WRONG.

Don’t confuse cause and effect. It was the market that made the FED’s look good and not the other way around. The market was structured to bottom on March 6th, 2009 at 6,469 and then have a subsequent 5-year market rally. It was the mid-cycle bottom (half point of bear market) and I predicted it as early as January of that year. I was 1 day and 100 points away. Close enough. I know I have shown this chart before, but let’s take another look.

If you perform the type of 3-dimensional analysis that I do you would know that the move between 2003 bottom and 2009 bottom would be IDENTICAL to the move between 1994 bottom and 2002 bottom. And so it was, exhibiting a variance of 22 3-dimensional units (equivalent to a few trading days or 100 points).

Any analyst working with this information would know that as soon as 2007 top was confirmed that the next move down would be exactly 8,130 3-dimensional units. Once the market developed further, the same analyst would be able to pin point the exact bottom with amazing precision and that is what I want you to understand without a shadow of a doubt. The stock market is not volatile or random, it is exact and precise.

Same thing applies to today’s market. In last week’s forecast I identified a turning point in February. While I am not yet at liberty to discuss this turning point (available to premium subscribers only), it clearly explains the market action we have witnessed over the last couple of days. By concentrating on mathematics and 3-dimensional analysis one can pick out turning points with a precision of a surgeon.

It is just my hope that the points above will force you to re-examine your reliance on the FED while eliminating your sense of false security.

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Warning: The US Economy Is Flying Blind…About To Crash Google

February 22, 2014February 22, 2014

Idiots At The Gate. Plus, Weekly Stock Market Update & Forecast

Weekly Update & Summary: February 22nd, 2014

The market remained relatively flat for the week with the Dow Jones losing -51 points (-0.32%) while the Nasdaq gained 19 points (+0.46) Structurally, the market did very well, closing all the gaps during the span of the week. There is still a gap left around 15,500 on the Dow, but it will be closed during the subsequent bear market leg.

Fundamental & Market Analysis:

They didn’t even realize recession was happening until the 4th quarter of 2008. By that point the stock market has completed 80% of its down move. In fact, for most of 2008 they thought the recession “could be avoided”.

—-Hello???? Was anyone home??? Recession started in Q4 of 2007.

Bernanke talked about pent-up demand for housing as late as January 2008.
Bernanke was worried about inflation as late as January 2008.
Throughout Q1 of 2008 they have held a generally rosy view of the world and the US Economy

Here are the links to two great articles about the transcripts if you would like to learn more. Click Here and/or Click Here

The lesson here is twofold.

Why is any of this important?

WRONG.

Macroeconomic Analysis:

In a nutshell, Ukraine, Venezuela, Argentina and China. Argentina is on a verge of another default and I wrote about it before. Ukraine and Venezuela are both in the midst of violent revolutionary uprisings. While Venezuela will not have that much impact either way, Ukraine’s situation will have vast repercussions across the globe. Maybe not in economic terms, but certainly in geopolitical risk. All because of Russia. Having been born in Russia, let me tell you something. Russia is pissed off….big time.

They are pissed at a blatant American and EU interference into Russia’s business. Yes, Ukraine is Russia’s business. Always was and always will be. Just to give you a reference point, there would be a similar type of a reaction from the US if Russia was interfering in governance of Kentucky. Now, let’s take the “Ukranian people deserve freedom too and the US will go to any length necessary to see it happen” bullshit off the table. If you believe this crap, I have a $20 million bridge to sell you (give me a call).

What you see happening is the beginning of the next Cold War where both the US and Russia keep tearing into each other. With the only winners being the politicians and the military industrial complex. This is a negative development that should be watched carefully going forward.

China’s shadow lending system continues to expand at breakneck speeds. No-one really knows for sure how big a problem China’s economy will eventually face due to the massive credit and money supply growth over the last few years. Since 2008 financial meltdown in particular. While no one has the real numbers, some of the estimates coming out of China are truly mindboggling. For instance, that China’s banking sector is now roughly the size of the US banking sector. With one primary difference. It took the US over 100 years of trial and error to get to that size, it took China roughly 5 years. Thus far China has been able to keep trouble at bay, but this is unlikely to continue much longer. Some sort of a blow up in China is imminent.

Technical Analysis:

While the overall technical picture continues to remain murky, the resolution should be just around the corner.

Long-Term: The trend is still up. Market action in January-February could be viewed as a simple correction in an ongoing bull market.

Intermediary-Term: Since February 5th, intermediary term picture shifted from negative to positive. Giving us a technical indication that both the intermediary term and the long term trends are up. Yet, that in itself can be misleading as per our timing analysis discussion below.

Short-Term: Is somewhat bearish. Please view our mathematical and timing analysis below for further understanding and explanation.

Mathematical & Timing Analysis:

(*** Please Note: About 75% of the information contained within this section has been deliberately removed. Particularly, exact dates and prices of the upcoming turning points. As well as trading forecasts associated with them. I deem such information to be too valuable to be released onto the general public. As such, this information is only available to my premium subscribers. If you are a premium subscriber please Click Here to log in. If you would be interested in becoming a subscriber and gaining access to the most accurate forecasting service available anywhere, a forecasting service that gives you exact turning points in both price and time, please Click Here to learn more.Don’t forget, we have a risk free 14-day trial).

Last week we concentrated on February XXXX, as a turning point. Here is the forecast that was provided.

Date: XXXX
Price: XXXX

Thus far, the vertical rally that started on February 5th ran into a brick wall. To be exact, the Dow topped out 1 hour into trading on February 19th at 16,225 and then proceeded to collapse 200 points. Recovering thereafter and subsequently oscillating without going anywhere.

So, what is going on? Have we hit our turning point?

XXXX

Hence, I suggest the following positioning over the next few days/weeks to minimize the risk while positioning yourself for a forecasted market action.

If You Are A Trader: XXXX

If No Position: XXXX

If Long: XXXX

If Short: XXXX.

CONCLUSION:

We have an existing couple of weeks coming up. The week of February 24-28th should finally confirm February XXXX as a turning point. In March, we should see a number of big and very important turning points. I will start talking about them once the current stock market action resolves itself. Those anticipating the moves and those who can time them properly will be rewarded appropriately. Once the moves described above play out in full, the market will be set free to continue its next cyclical bear market leg.

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start.

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February 21, 2014February 21, 2014

Who Is Killing The JP Morgan Bankers? Plus, Market Update

As they say, real life is sometimes stranger than fiction. If you haven’t been paying attention, a number of high profile bankers have committed “suicide” over the last 30 days. Mostly, by “jumping” from the rooftops of their office towers. Seven of them to be exact (please see the list below) With three of them being from the JP Morgan Chase.

So, is there something in the air that is forcing these otherwise wealthy bankers at the prime of their career to commit suicide? Did we have a 1929 style market crash or is that a new termination policy at the major banks? Am I missing something here?

Any notion that all of the said bankers have committed suicide is laughable. Take Richard Talley for instance, who ended up shooting himself 8 times with a nail gun in both torso and head. How is that even possible? Plus, with multiple connections between the dead bankers, particularly those working at JP Morgan Chase, something doesn’t add up.

Recently Madoff acknowledge that top brass at JP Morgan knew about his Ponzi scheme for over 10 years. Letting it go on and collecting massive fees in the process. This was part of a $2 Billion settlement JPM reached a few months back. So, is JPM terminating its own employees or is this a hit ordered by someone?

Here are my two cents. I don’t think JPM has anything to do with this, but I do believe the people in question have found themselves on the wrong side of a trade or they have screwed someone. Big time. Perhaps an organized crime group, maybe a government. Basically, they took someone’s money (whether legitimately or not) and that someone put a hit on them. Simple as that. Just another point of reference that Wall Street is turning into a war zone.

The lesson for Wall Street bankers is as follows. Next time you screw most of the world out of billions of dollars (mortgage backed meltdown), there might be people, organizations or governments out there crazy enough to put a hit out on you.

One thing is for sure, dead bankers don’t talk.

List of dead bankers

-Li Jie – 33 year old investment banker at JP Morgan jumped to his death from the roof of the bank’s headquarters in Central Hong Kong yesterday. Witnesses said the man went to the roof of the 30-storey Chater House in the heart of Hong Kong’s central business district and, despite attempts to talk him down, jumped to his death.

– On January 26, former Deutsche Bank executive Broeksmit was found dead at his South Kensington home after police responded to reports of a man found hanging at a house. According to reports, Broeksmit had “close ties to co-chief executive Anshu Jain.”

– Gabriel Magee, a 39-year-old senior manager at JP Morgan’s European headquarters, jumped 500ft from the top of the bank’s headquarters in central London on January 27, landing on an adjacent 9 story roof.

– Mike Dueker, the chief economist at Russell Investments, fell down a 50 foot embankment in what police are describing as a suicide. He was reported missing on January 29 by friends, who said he had been “having problems at work.”

– Richard Talley, 57, founder of American Title Services in Centennial, Colorado, was also found dead earlier this month after apparently shooting himself with a nail gun.

– 37-year-old JP Morgan executive director Ryan Henry Crane died last week.

– Tim Dickenson, a U.K.-based communications director at Swiss Re AG, also died last month, although the circumstances surrounding his death are still unknown.

MARKET UPDATE:

2/20/2014 – A strong rally from yesterday’s bottom with the Dow Jones appreciating +93 points (0.58%) and the Nasdaq climbing 29 points (0.70%).

Today is the perfect example of why we should wait for a market confirmation before committing to either going long or going short. Has anything changed since our proposed turning date of XXXX…..

Hence, I suggest the following positioning over the next few days/weeks to minimize the risk while positioning yourself for a forecasted market action.

If No Position: XXXX

If Long: XXXX

If Short: XXXX

Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start.

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Who Is Killing The JP Morgan Bankers? Plus, Market Update Google

February 20, 2014

The Bear Market Of 2014-2017 – Infographic

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The Bear Market Of 2014-2017 Infographic Google

February 19, 2014February 19, 2014

Is Obama Causing Ukraine’s Meltdown? Plus, Market Update

Ukraine has two things in abundance. Beautiful women and people stupid enough to believe that the EU and/or Obama will come to their rescue.

Today President Obama warned Ukraine’s government against crossing the “Red Line” against its citizens and using force. Truly, I am in disbelief.

First, Obama administration works behind the scenes (aka covert CIA Operations or some crap like that) to instigate Ukrainian instability and uprising, then Assistant Secretary of State Victoria Nuland says “Fuck The EU” for the whole world to hear.

So, what business does the USA has interfering in Ukraine’s and Russia’s business?

Well, it shouldn’t, but for some reason it does. It is either because the US completely lost all of it’s marbles or because Obama would like to get back at Putin. Apparently, the negative propaganda spin through western media is not doing it’s job. Whatever it is, I think Obama is about to look stupid again. Just as he ended up with Syria and Iran.

The only way Ukraine will join the EU or the West is over Putin’s dead body. Make no mistake, he controls it and he will not let it go. No matter how many protesters they will have to kill. For Russia, losing Ukraine to EU would be equivalent to the USA losing Kentucky to Cuba. Not happening.

I just hope that the situation resolves itself without any further bloodshed. The next few days will be very critical.

MARKET UPDATE:

2/19/2014 – An across the board down day with the Dow Jones down -89 points (-0.55%) and the Nasdaq down -35 points (-0.82%).

The Dow started the day by zooming up into our previously suggested upper range of 16,222 before reversing and subsequently dropping 182 points. In the process confirming a bearish short-term trend on the hourly chart.

Should we celebrate this precise hit as per our earlier forecast?

Not quite yet. I tend to be a little bit more on the safe side and would like to wait for a follow through to the XXXX tomorrow or over the next few days before confirming an exact price/time hit. I did reverse my QQQ position today at $89.71, going XXXX at the same price, with a stop loss @ XXXX. Please check our updated portfolio section within member section.

Other than that, we are right where we need to be in both price/time and in terms of portfolio allocation. Portfolio allocation suggested to all parties on 2/18/2014 is still in effect.

END OF UPDATE: —-Please Note: XXXX is available to our premium subscribers in our + Subscriber Section. It’s FREE to start.

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Is Obama Causing Ukraine’s Meltdown? Plus, Market Update Google

February 19, 2014June 25, 2014

The Bear Market Of 2014-2017 Is Starting. Why, How & When (Revisited)

As markets opened up on January 2nd, 2014, everyone was excited. After all, what was not to like. In 2013 alone, the Dow Jones was in the “new” bull market and according to most people, the rally would continue for the foreseeable future. And why not. After all, the economy was doing better, the unemployment rate was going down to 6.6%, corporate earnings were growing at a good clip. The stage was set for the bull market to continue or so everyone thought.

How little did they know. What they didn’t (and still don’t) know is that the bull market topped out just two days earlier, on December 31st, 2013 at 16,588 on the DOW (Mathematical top, the actual top will come later in the year). Ushering in the final stage of the Cyclical Bear Market that will take us into the final 2017 bottom.

How do I know? I specialize in highly advanced mathematical timing work that can identify turning points in both price and time. It is rarely wrong, particularly over the long-term time frames. Please get the first two chapters of my book CLICK HERE to learn more about the timing work that I do.

This report is to explore the Why, How & When of the subject matter at hand. Particularly, why we are about to go thought a bear market leg, where we are in the long-term cyclical structure of the bear market, how long the final bear market will last, where will the market be at the end of the cycle, when it will end and what to expect thereafter. We will look at the matter from the fundamental, technical and timed value approach to investing.

The WHY?

This is probably the easiest question to answer. However, before I can do so, we must go back a few years to understand what got us into this predicament in the first place.

The tech bubble really took off in November of 1994, culminating with a spectacular blow off and a subsequent collapse in January of 2000. With the Nasdaq collapsing close to 80% and the DOW declining to the tune of 40%, the FED’s were concerned. The country was already in the recession, facing much worse, a deflationary depression.

The FED’s opened up the flood gates by cutting interest rates into the negative category and flooding the market with cheap money. The money flowed into two primary areas of the economy. The stock market and the housing market. Driving up the values of both in a spectacular fashion.

By 2007 we were in a massive speculative bubble. In the stock market, the credit markets and in the real estate market. Not only were we in a bubble of historic proportions, but it was not fundamentally sound. Meaning, it was brought on by massive fraud happening in the real estate sector. Here is a good chart showing overvaluation.

market to gdp

Actually, what surprised a lot of people, including myself, is how long that bubble went on. Even though traditional media would like you to believe that no one saw the bubble or the subsequent collapse coming, that is nonsense. At least a dozen people I know, saw it coming. Some did so as early as 2004-05. Maybe I am hanging out with too many bears.

The 2007-2009 collapse was unavoidable. There was too much fraud, juiced up earnings and bad credit in the system. Just like there is today. When it happened, instead of fearing a deflationary depression, the FED’s where scared shitless, fearing an outright collapse of our financial system and the subsequent “Greater Depression”. Rightfully so.

They proceeded to open the flood gates one again, drowning the market in free cash/credit, providing trillions in bailout money and backstopping the collapse. A little bit later, the FED’s introduced QE to push interest rates into the negative territory while providing “growth credit” to our nearly dead economy. The money flowed mostly to….yep, you have guessed it…….financial institutions (who initiated the collapse), hedge funds and high net worth individuals. Giving them a risk free way to speculate, well, in pretty much everything.

However, such actions do come at a cost and that is where we find ourselves today. That is what you have to understand. The environment we find ourselves in today is not a “unique economic environment” but a continuation of the disastrous policies initiated by the FED against the US Economy since the 1990s. Well, the 1987 crash and Greenspan to be exact.

Today, the US Economy is nothing more than a giant Ponzi scheme, shuffling money around, borrowing from Peter to pay Paul. It is identical to maxing out your credit cards, then getting more cards and maxing them out again just to pay the interest on the first batch. With one primary difference. Thus far, the US has been saved through having a reserve currency, ability to print unlimited amounts of money and most importantly, through having the confidence of foreign investors/creditors. When the trust goes away, and it will, there will be hell to pay.

As 2014 starts we find ourselves in the biggest credit bubble in the history of mankind. It was this credit that drove the stock market recovery from the March of 2009 bottom. It was this credit that drove the housing market recovery and the recovery in corporate earnings. It was this credit that created an illusion of economic growth and recovery. How much credit? Over $3 Trillion in FED printing alone over the last few years.

Yet, if you take the credit away, the underlying economy is nothing more than a giant house of cards on a very shaky foundation. When you take the unlimited credit away or the velocity of such credit slows down, both happening now, the whole house of cards will come down. And that is precisely where we find ourselves today.

What I want you to understand without a shadow of a doubt is this. Today’s economic environment has very little to do with reality. Everything you see, everything that you see doing well, has been driven up by credit and speculation. Eventually, the house of credit collapses and we find ourselves in a midst of an economic disaster. Once again. Unfortunately, just like every Ponzi scheme eventually collapses, so will this one. There is no way to avoid this now.

The HOW?

It depends who you listen to when it comes to apocalyptic views on our Economy and our financial markets. On one extreme, we have hyperinflationist. They believe that actions by the FED will cause a hyperinflationary environment to the likes of Zimbabwe. In their view, the dollar will collapse, the gold will surge and Americans will use barrels full of $100 bills just to buy a loafs of bread in the neighborhood supermarket.

On the other side, you have deflationists. They believe the stock market, the credit market, the real estate market, …..everything will collapse, ushering in the next “Great Depression”. According to them it would be best to accumulate cash, canned food, guns and ammo.

Who is right? No one and everyone. Let me explain.

The massive printing and credit we have experienced over the last couple of years has, indeed, caused massive inflation. But not where you would expect. Yes, there are certain items throughout the economy like food and basic utilities that have appreciated substantially. However, their rise is not nearly enough to account for massive credit infusion and negative interest rates. So, where did all the money go?

The inflation everyone seeks and talks about went straight into various asset classes. Yes, you have guessed it right. Stocks, real estate, junk bonds, etc… Driving most to extreme overvaluation levels. Not only in the US, but worldwide.

Some analyst would argue that today’s stock market is not overpriced based on simplistic analysis such as P/E Ratios. However, such analysis misses the elephant in the room. A large portion of today’s corporate earnings have been driven by the same credit infusion. Without said credit, the real P/E ratio would be astronomical. How high? Based on my conservative calculations, at least 2X and as high as 5X from today’s levels. Meaning the real S&P P/E ratio is somewhere between 36 and 100. Making current stock market not only expensive, but “are you fucking kidding me” expensive.

This is precisely what happened during the 2007-09 meltdown. While the pre bust P/E stood around 20 at the 2007 top, it quickly zoomed up close to 125 as soon as corporate earnings built on credit vanished into thin air. An identical situation to today’s markets.

s&p ratio

So, how will this house of cards collapse? Will we have inflation or deflation moving forward?

I think everyone, including bulls, bears, inflationist’s and deflationists will be disappointed at the end of the day. At least based on my mathematical work. Yes, my work shows a bear market between 2014-17, but not as extreme and not as violent as most people would anticipate. It shows a bear market most closely resembling the bear market between January 2000 and March of 2003 on the Dow Jones (not Nasdaq).

Meaning, a volatile non directional move with a general downtrend. An extremely difficult environment for both bulls and bears to make money in. Those wishing to make money in such an environment really only have two option. Go short at the inception of the bear market move and stay short for the duration of the move. Surely, to be a unnerving experience. The other option would be to try and time the turning points while trading in and out of bull/bear legs. A skill requiring a lot of experience and know how.

Of course, there is another option that might be more suitable for those wanting to avoid the entire mess. That option is to get out now, stay in cash and pick up substantially undervalued assets at the bottom of the bear market in 2017.

The When?

NOW. Based on my mathematical timing work the bull market from March of 2009 bottom has topped out on December 31st, 2013 (Mathematical top, the actual top will come later in the year). Ushering in the last leg of the cyclical bear market leg that started in January of 2000 and taking us into the final bottom of 2017.

What kind of timing work do I use? The chart below is just one data point.

Long Term Dow Structure35

To fully understand the chart above please get and read my book Timed Value. To quickly summarize, I use 3-dimensional analysis that unifies price and time into one value in order to analyze and time the market with incredible accuracy. For instance, the chart above show that between 1994 and 2009, a 16 year period of time, the market exhibited only 22 points of variance. Giving us precise timing and amazing accuracy.

An analyst familiar with this type of an analysis would be able to pick out every single major turning point over the last 20 years. To the day. For example, when 2007 top was reached and confirmed an analyst working with this type of an analysis would know that the upcoming bear move would be exactly 8,137 (3-dimensional units), the angle of the move and it’s exact termination point. So, while everyone was freaking out during the collapse of 2008-09, an analyst performing this work would either be positioned to profit from the collapse or waiting on the sideline for the bottom in March of 2009.

Then, we have cycle work that I talk about in my book as well. While there are a number of important cycles operating in the stock market at any given time, the one we have to take into consideration today is the 5-year cycle. While the 5-year cycle works for both bull and bear markets, it is most easily noticed during the bull moves. For example, 1924-1929, 1932-1937, 1982-1987, 1994-2000, 2002-2007 and now 2009-2014. While these 5-year cycles are the easiest to identify, there are many more. In both bull and bear moves. Plus, such cycles are not arbitrary, meaning they do not terminate at 5 years +/- 6 months. In most cases they terminate at exactly 5 years, with very little, if any, variance.

Taking both, my mathematical and my cycle work into consideration, we can safely assume that December 31st, 2013 was indeed the top of the bull market run (Mathematical top, the actual top will come later in the year). Well, when I take a number of other things into consideration. Things that I do not discuss in this short report.

How Low Will We Go & Exactly When Will This Bear Market Start?

If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE

CONCLUSION:

In this report we have looked at fundamental, mathematical and cycle data points. With the fundamental case being clear cut and to the point, only a few questions remained.

When will the stock market top out and begin its bear market leg? How violent will the decline be and how long it will take? What will the impact on the overall economy be and how low will the market go?

It is my hope that the report above helped to answer all of the questions. The bear market of 2014-2017 will not be the one for the “record books”, but it will server its purpose. Completing the cyclical bear market that started in January of 2000 while ushering in the next bull run. Unfortunately, the next bull run is likely to be based on inflationary pressure as opposed to any sort of true fundamental recovery. More on that in one of my future reports.

If you would like to get more information and more exact forecasts (to the day), please visit us at www.investwithalex.com

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The Bear Market Of 2014-2017 Is Starting. Why, How & When Google

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The Bear Market Of 2014-2017 Is Starting. Why, How & When (Revisited)

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