Sticking to a Dow 20k call

You know what I hate? When people say: At least you don’t have a brain tumor.
For one thing, how do they know I don’t have a brain tumor? Maybe I do have one and it’s worse than their friend/relative/loved one who has a brain tumor. Maybe I’m riddled with brain tumors. What does that have to do with the stock market?

Like everyone else, I was stressed Monday. When SPY bounced from 117 to 118 I thought: Looks like the market is bouncing, maybe it will even close positive. SPY (which is the ETF for the S&P 500), closed at 112. Pathetic. I was wrong. On the day.

And yesterday was the bounce-back. Will the rally last? It should. It will. Here’s why:
- Every piece of government data shows expansion. You can’t find one piece of government data that suggests recession. All the Roubinis of the world are feeding off fear but can’t find one piece of actual data to support their cause.
- Private sector jobs actually grew 154,000 in July (up from 80,000 in June). How do you downgrade that?
- Claims for unemployment insurance fell back to 400,000 in July. Down from 478,000 in June.
- All the “soft patch” caused by Japan’s disaster is coming roaring back.
- Pending home sales? You would think they were crashing just like in 2008. But no, they are up 11% in the past two months.
- Withholding taxes are up about 2% in the last month. Taxes don’t lie. People don’t want to pay them and they are still up. Heck, the IRS seizes my accounts every few years or so. I hate paying taxes but I still do. Eventually.
Anonymous people on message boards get to bring out their full glory now that nobody knows who they are. They say things like, “Hey, James, where’s your Dow 20k call?” They are laughing in their little closets while they type out Twitter messages on the last computer they can afford: a TRS-80 from 1983. Well, “my” Dow 20k call is in the exact same place. In my head and heart and soon to be in the markets. The Dow was cheap two weeks ago and it’s even cheaper now.

You’re going to let some rogue ratings agency like the S&P scare you out of buying AAPL at 10x earnings, MSFT at 10x earnings, INTC at 8x forward earnings when tech is booming more than ever?

Or how about the banks: They can borrow at 0% and lend at 3%. You think that’s a bad business? Maybe you should sell it?

Don’t be scared by ghosts in your closet. You’re not a little boy or girl anymore. This market is going to turn from a ghost into a monster. And then we’re all going to be scared at the destruction among short-sellers it leaves in its path.
By James Altucher

Insiders are Buying : Insiders now consider their stocks to be attractive

All right, all of you who say you’re contrarians: Now’s the time to see if you really walk the walk, not just talk the talk.

You say that the time to buy is when the blood is running in the streets. Well now would certainly appear to be one of those times. How many of you are stepping up to the plate to buy?

Not many, I am sure.

I’m referring to corporate insiders, a group that includes corporate officers, directors, and largest shareholders. You may recall that, three weeks ago, corporate insiders were selling at an abnormally high pace. By one measure, in fact, they were then selling at the fastest pace in the nearly 40 years that insider data had been collected. ( Read my July 29 column: “Insiders selling at unusually fast pace.” )

With the Dow Jones Industrial Average /quotes/zigman/627449/delayed DJIA +2.00%   now more than 1,400 points lower, the insiders appear to be shifting back to the buy side in a big way.

Consider an insider indicator calculated by the Vickers Weekly Insider Report, published by Argus Research. This indicator is a ratio of the number of shares that insiders have sold to the number that they have bought.

For insiders transactions last week, according to the latest issue of the Vickers service, which I received late Monday night, this sell-to-buy ratio stood at 1.68-to-1. That’s bullish, according to Vickers, since the long-term average level for this ratio is between 2 and 2.5 to 1.

To further put the current level of this ratio into context, consider that in the week ending July 22, this ratio stood at 6.43-to-1. And among those companies whose stocks are listed on the NYSE and the AMEX, the ratio during that week stood at 13.10-to-1 — which is the highest, and most bearish, reading for the ratio since Vickers began collecting data in 1974.

Further confirmation that the insiders are responding in true contrarian fashion to the market’s plunge: Vickers’ sell-to-buy ratio steadily improved last week as the market dropped. For transactions just last Friday, for example, the day after the Dow’s 513-point plunge, the ratio stood at an extraordinarily bullish 0.33-to-1.

To be sure, you should never throw caution to the winds when following any one stock market indicator. After all, the insiders aren’t always right. And even when they are, the market doesn’t always respond as immediately as it did following their record level of selling in mid July.

Still, it is comforting that a group of investors who presumably know more about their companies’ prospects that the rest of us consider the low prices of their stocks to represent attractive bargains.

Courtesy : CHAPEL HILL, N.C. (MarketWatch)