February 2007

Wall Street soldiered on Friday as a distraught nation grieved over the mysterious death of its apparent favorite daughter, Anna Nicole Smith. Trying to make sense of it all, the news media pandered non-stop, offering us a minutely detailed recapitulation of Ms. Smith's final days, of her most trivial trials and tribulations, of the sadness that evidently haunted the famously fey blonde voluptuary until her final breath. The former Playmate of the Year's legacy remains unclear at this time, since the legal question of whether she was one of the richest women in America when she departed this world has yet to be settled. But even if it turns out that the iconically buxom Texan went penniless to her grave, blonde bimbos, gold-diggers and binge-dieters everywhere will be forever in Anna Nicole's debt, since no one before her had ever made sheer tawdriness look like so much fun. If bimbo-dom's apotheosis was nigh, investors seemed too glum to be cheered by the prospect. The Dow Industrials closed off 56 points, notwithstanding the fact that a couple of minor players from the Fed were in the news with cryptic statements that on any other day might have been construed as dovish. But not on Friday, when there were only distressing reminders of the unfillable void that Anna Nicole's untimely passing will leave in our lives: a bunny flag at half-mast over the Playboy mansion; a 50%-off sale on lace bras at Victoria's Secret; an apparent commitment by the news media to honor Anna Nicole in death as in life ' i.e., with a relentless stream of tabloid bilge that seems likely to persist until each and every one of us has been eliminated as the possible father of her baby. Given that the news media's obsessive coverage of Anna Nicole's death

After an ugly opening (see chart below), market bellwether IBM valiantly clawed its way back to a small gain at the close, helping the Dow Industrials pare earlier losses by nearly two-thirds. Yesterday's comeback was so very impressive, in fact, that we can only surmise that bulls are about to get their teeth kicked in. To paraphrase Oscar Wilde, a stockbroker would need to have a heart of stone to watch yesterday's rally unfold without feeling the sadistic urge to coax a few clients out onto the ledge. The proximal cause of yesterday's dispiriting first hour was a report from mega-lender HSBC Holdings that its subprime portfolio had taken a serious turn for the worse. It's one thing when some minor-league mortgage player that no one's heard of reports trouble. But when a biggie like HSBC says it's about to increase its bad-loan reserves by 20% more than analysts had recently estimated, investors tend to take notice. Housing Trumps Shopping And boy did they ever! The Indoos were down about 80 points in the early going, even though retailers had reported strong post-holiday sales before the opening bell. It would appear that bad news from an all-important housing sector has come to overshadow whatever good news the retailers have to report. Does that mean the rank imbeciles who have asserted that the housing market has bottomed are likely to change their minds or even throw in the towel? My guess is no, not until the homes they live in have shed 50% of their peak appraisal values. But that day might not be so far off, especially if they live in the overbuilt exurbs, or in 'starter' luxury homes priced in the $800,000-$1.2 million range. Real estate values in those two categories in particular have dropped steeply in recent months,

The fact that the Dow Industrials rose less than a point yesterday hints at the soporific tedium that has gripped the stock market lately. Fortunately, as long as shares are moving even slightly there will always be something to trade. And so there was -- in the E-mini Nasdaq (NQ) futures. Here is the Tout that went out in the chat room early in the session, when the mini-contract was trading around 1818: '[My target for the Mini-Nasdaq} is 1825.75. [It] can be shorted with an 1826.25 stop-loss.' (Click on chart to enlarge) If you look at the chart above, you can see that this projection was not merely close, it actually nailed yesterday's high to the exact tick. As a result, the initial two-tick stop-loss that was advised would have been more than adequate to see the trade through to a profit. Naturally, and as we always like to remind subscribers, our past performance should not be construed as an indicator of future results -- so let the buyer beware. But if you are a lurker who is skeptical that such dead-center bullseyes are possible other than randomly, I would urge you to take a one-month subscription to Rick's Picks so that you can see for yourself how often our targets fall within just a tick or two of actual highs and lows. Coincidentally, a guy in the chat room who reported a profit on yesterday's mini-Nasdaq trade had written me earlier to say that the precision of the Hidden Pivot system was causing him problems. This fellow, John B., who took the Hidden Pivot seminar last fall, says his price forecasts have grown so accurate that he's been having trouble getting filled on trades at swing points. He wrote me as follows: 'Have you ever put in a

Too bad Steve Jobs doesn't have a ready antidote for Microsoft's new Vista operating system, because his latest idea for the music industry is pure genius: Let companies that sell songs over the Internet do away with antipiracy software. His argument has the virtue of simplicity. The software doesn't work to begin with, he notes, so why let 'digital rights management (DRM)' hold back the record business? One reason DRM doesn't work, he notes, is that most of the music sold by recording companies is on compact discs that contain no copy-protection software. Jobs never once mentioned his nemesis in Redmond in the 1800-word essay he posted to the Internet ' 'Thoughts on Music' -- but to many of us the very term 'digital rights management' captures the spirit of Microsoft's business model. Indeed, if the software giant had its way, we probably would not be able pee without activating some sort of digital permissioning system on the rim of household toilets. Do I exaggerate? Not much, as anyone who has used the Windows Media Player will attest. This is a virtual playback device that seems never to have met a third-party encryption it could not do business with. Vista Onslaught Jobs' radical argument could conceivably sway the music moguls in the end, since, unlike Microsoft, they do not have delusions about taking a piece of every digital transaction that is yet to occur in this world. But even Jobs may not be able to thwart the onslaught of Vista, the latest gratuitous upgrade from Windows that requires prodigious amounts of RAM and processing power just to keep it from sputtering and wheezing. Apple has warned iPod and iTunes users of incompatibilities with Vista, but Jobs might have said as much about the thousands of third-party applications that are going

We were offering shares of D.R. Horton short yesterday when the stock turned weak, denying us the fat pitch we'd hoped would start the day. Let's keep at it, though, since there evidently are still a few bulls around to drive the stock higher once this pullback has run its course. How do we know there are bulls, even though the housing market is looking worse than it's looked in more than 30 years? Well, for one, there are always bound to be legions of investors who believe that it is darkest before the dawn. And for two, no less an authority than The Wall Street Journal assures us that any negatives are outweighed by positives. Or am I misinterpreting the lead on this story, from the front page of yesterday's edition: 'Amid brightening hopes that the U.S. housing market is stabilizing, some economists are zeroing in on a piece of data that could augur badly for the consensus view: the homeowner vacancy rate.' Clearly, the Journal is trying to emphasize the good over the bad here. To wit, it is only 'some' economists who feel other than hopeful, and it is but one eensy-teensy little 'piece of data' that has caused them to nitpick the bullish case. Moreover, these dour nitpickers have in no way refuted the 'consensus' view; rather they have merely held up to the light a 'piece of data' that 'could augur badly' for residential real estate. Biggest Glut in Decades As a wordsmith and sometimes-obfuscator of inconvenient facts myself, I can appreciate the pains to which the reporter, one Michael Corkery, has gone to please his editors, the Journal's advertisers, and all others with a vested interest in the status quo. But make no mistake, the actual 'piece of data' would appear quite sufficient to

For those betting on a soft landing, Friday's statistics were the stuff of wet dreams, so blissfully sub-par that you might think the U.S. economy was smoking opium. A slight uptick in joblessness and hourly earnings was gently offset by weak payroll numbers and a six-minute decrease in the average work week. All in all, it was a pretty mellow mix of yin and yang, considering there's a housing bust under way that could implode the U.S. economy and cut global output in half. Such grim prospects obviously were not troubling Wall Streeters on Friday. Far from it. Take a look at what those crazy, zany bulls were doing to the shares of homebuilder D.R. Horton: (Click on charts to enlarge) Quite a spree, eh? As the chart below suggests, this was no one-week wonder either. Horton has been on a tear since November, goosed in perversely contrarian fashion by a steady stream of bad news from the housing sector and perhaps inspired by the old saw that, where wild-eyed investment manias are concerned, too much of a bad thing is never enough. Fortunately, as fatalistic as Rick's Picks has been in forecasting the ugly trend in real estate, we've managed to dodge this bullet and others that have whizzed by as the homebuilders' shares have recovered almost to the threshold of respectability. We were actually long DHI shares before Christmas by way of some January call options, but we exited them for a small profit after misreading an ugly one-day decline as the possible beginning of something worse. Horton's blithe, bouncy demeanor reflects the kind of stupidity that could drive a permabear into therapy. Given the profound weakness of the housing market, shouldn't this stock be plummeting into the low teens by now? Apparently not. Good thing we didn't have a

The Winter Wonderland thing is getting a bit tiresome here in the Denver area, what with the season's seventh snowstorm currently heavily in progress. I drove 15 miles to meet a friend for lunch and the roads were fine in what was light snow. But 90 minutes later, when I returned home, there were white-out conditions along much of the Front Range, and I was once again poking along in traffic that had slowed to a crawl due to spinouts, fender benders and worse. Thursday began with a scintillating Q&A forum at GoldSeek.com, a one-hour event that peaked with about 60 participants. Numerous topics of interest to traders and investors were discussed, including the technical outlook for bullion as well as for certain stocks and commodities. You can access the archival transcript of the session simply by clicking here. I While I was out to lunch the Dow wafted higher -- borne aloft, evidently, by a steady breeze of strong earnings reports. Exxon Mobil topped the list with a $39.5 billion profit, the largest in U.S. history. This seemed to have more than offset a bum report on January sales from GM and Ford ' no surprises there ' and there were yet a few more bullish quarterly announcements from Boeing, AMD and Comcast. All of which should set the stage for a strong finish to the week. Yesterday's Dow close of 12673.68 was a new record, but we shouldn't be surprised to see it broken today. *** Seminars in Atlanta, Boca I've received numerous requests to offer Hidden Pivot seminars in Atlanta, Georgia, and Boca Raton, Florida. I will do so if there is sufficient demand, so please let me know if you would be seriously interested in attending in either place. The two-day class would probably be held

Talk about bad luck! In announcing his 2008 candidacy, Joe Biden managed to pick the slowest news day of 2007 to say something about Barack Obama that was bound to offend the news media's scandal-mongering "Gotcha!" squad. Here's what the senior Senator from Delaware actually said: "I mean, you got the first mainstream African-American who is articulate and bright and clean and a nice-looking guy. I mean, that's a storybook, man." Now, we all know what Biden meant to say ' that Obama is the first black presidential candidate to come along who combines all of these traits in one uniquely appealing package. (Note to Joe: In your groveling apologia over the next few days, do not under any circumstances say that Obama has got all of these qualities 'in spades'.) Biden has never been one of my favorites, and his role as an instigator of the electronic lynching of Clarence Thomas still ranks as one of the most egregious spectacles of hypocrisy in the sordid annals of the Senate. But in this instance, you could practically feel sorry for the guy. Who could have predicted that the TV networks would be so starved for legitimate news Wednesday evening that Biden's 'gaffe' would wind up as their lead story? With all the trumped-up hullaballoo, no one seems to have noticed that even if Obama's reply did not excuse Biden, neither will it have helped solidify the freshman Senator's position in the firmament of dream candidates. 'I didn't take Senator Biden's comments personally,' said Obama, 'but obviously they were historically inaccurate. African-American presidential candidates like Jesse Jackson, Shirley Chisholm, Carol Moseley Braun and Al Sharpton gave a voice to many important issues through their campaigns, and no one would call them inarticulate.' Al Sharpton!?? Does anyone recall this race-baiting weasel's history, starting