Market still in Correction, How to Determine a Market Bottom, European bond Yields irrational, Long term trend lower Oil prices, Caterpillar share buy back, Buy backs distort earnings

Episode 14:  Market still in Correction, indexes remain below their 50 day moving average.  Be patient, don’t buy dips yet.

How to Determine a Market Bottom?  Use the Bill O’Neil Investor’s Business Daily ( method.  Wait till at least the 4th day of recovery off a market bottom.  Follow through days that confirm a market’s change in direction generally occur on the 4-7 days following a bottom.

European bond yields irrational.  France @ 1.46%.  Italy @ 2.8%.  German’s stock market down 11% last week.

Long term trend-  lower Oil prices.  Will result in a lower cost for EVERYTHING…this price deflation will help spur the economy.  All commodities will have a lower or stable price, including Gold.  North Dakota’s oil production is about 70% of Iran, without the turmoil and drama…and without the cost of an army or navy to protect it.

Caterpillar will buy back 6.5% of their shares…will give illusion of earnings growth.

Corporate share buy backs in 2014 are averaging about 4%, this is used as balance sheet engineering to mask stagnant growth.  During a recovery and an expanding economy, companies issue stocks (stock splits).  Buy backs are a form of contractions, NOT growth.


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