NEWS ARTICLES

Enter the Dragon.  Players in the stock market are usually referred to as "bulls" or "bears." The market is usually referred to as being a "bear market" or a "bull market." I would suggest that you LOSE those names from your thought patterns, and replace them with what I use.  When I think of the stock market - I see it as a cunning and vicious dragon.

The Dragon is highly skilled at:  guile, bluff, masquerade, flim-flam, illusion, and dream building.  The objective of the Dragon is NOT to make money for you, but to eat your money. It takes tons of money every day to keep the stock market going. There are thousands of people connected to the stock market and thousands of them make several million dollars a year. Most of that money has to come from the "players" in the market.

The stock market casino is NOT there to make you rich.  Anyone who has fallen for the stock market propaganda line that the market is there to make money for you, is likely the same person who believes that the casinos in Las Vegas are there to give money away.  At the SHOT Shows in Las Vegas, it's always amazing to me the large number of people who think that all of the giant casinos, with massively expensive full time 24/7 staffs, are there to give away money.  Wall Street is the same way.  There are thousands of people on Wall Street making well over a million dollars a year in salary, and much of that money comes from the players - that ‘s YOU.   To make money in the stock market you have to out maneuver, and out think the dragon, who's a highly skilled, brilliant, and ruthless opponent. You have to out maneuver all of the Bernie Madoffs in the investment world, PLUS the market manipulating U.S. government.  The stock market is NOT bulls and bears - it's dungeons and dragons.  It's jungle warfare.

Basically, I dislike giving stock market advice. Most Americans want immediate gratification. Most investors want to buy a stock on Monday and then see it go up on Tuesday.  Investing is warfare, and success requires both time and courage. Most investors are cowards. Most investors are cattle that do not have the courage to be outside of the herd. Most investors follow a "cut your loses" strategy that's almost impossible to make money with in the long run because they're always chasing yesterday's headline. By the time they get into "popular stocks" most of the upside is gone. Just like almost all of the upside in the current stock market run-up is in the past.

I'm a big trend trader. My "investing" is betting on the big trends that have to sooner or later come into play.  I bet on whole markets because individual companies are often manipulated. Even entire markets can be manipulated for a while - sometimes for several years. In my opinion, the U.S. Treasury and Federal Reserve are manipulating the current stock market bubble. When you play the mega trends, in the short term the markets might go against you as the markets try to sucker in as many victims as possible - and that's happening right now. The market (the dragon) is sucking in victims for the next crash. I don't want to recommend selling your long positions and then have people call me and say, "I sold my stocks yesterday and today the market went up by a hundred points." I'm NOT a day trader, or a week trader, or even a month trader. I'm a mega trend trader, and what happens in the short term is not important to my style of trading.

NOBODY, and I do mean nobody can accurately and consistently predict the stock market short term.  By short term I mean anything under a month. In my view "day trading" is driving via the rear view mirror with the dragon having one claw on your steering wheel. Buying what the TV financial stars label as "today's hot stock" is a proven way to lose money.

Always keep in mind that the dragons' biggest helper is the government. For example, the Stock market bubble of 2003 to 2008 was created and driven by the Federal Reserve. It was President Clinton and Alan Greenspan in the late 1990s that laid the groundwork for the current great recession by de facto abolishing bank reserve requirements. Stupid President Bush, and the stupid Republicans, were too busy trying to be Lawrence of Arabia wannabes to see President Clinton's financial trap.

Federal Reserve manipulations going back to the mid 1990s gave lots of financial cocaine to the dragon. Back in 2005, I started writing about the massive fraud within the housing market, but the government could have cared less. The government was making tons of tax money from the fraud, and the "improved" government only thinks short term. It 2005 it was already a market boom based on massive "securitization" fraud from Wall Street, accounting tricks, banks-gone-wild, investment rating fraud, plus pseudo government agencies like: Freddie Mac, Fannie Mae and the FHA being some of the biggest players in the insanity and fraud. I clearly saw the coming disaster in early 2004, but the dragon kept it going for another three years. The dragon suckered in millions of people who lost a lot of money. In other words, the dragon did what it does best, and that's sucking up the wealth of the naïve.

We have to keep in mind that the dragon has the ability to keep irrationality and insanity going for a long time.  As an investor you have to realize that what's good for the government's tax collections is NOT necessarily good for you.  For example, it would be good for the government's tax collections to keep the current stock market bubble going until after January 1st 2010, and I'm sure they're trying. However, sooner or later the real world and the "hand of Adam Smith" will take hold and defeat the dragon's manipulations.

The dragon strikes back. Once again, with the help of it's great allies (the Federal Reserve, the U.S.Treasury, and stealth players like Freddie Mac, Fannie Mae, FHA, etc.), the dragon has manipulated yet another bubble from late March until now.  We are definitely in an illusion-created bubble.

In the real world jobs are still being lost by the tens of thousands. The "corporate profits" of 2009 are mainly coming from corporations (1) firing employees, (2) running down inventory, and (3)Buying nothing.  All of the above 2009 corporate profit makers are one-act-plays. Real estate values are still sinking. Home and office prices are plummeting.  Tens of thousands of people, who took out mortgages in September 2009, will find that in September of 2010 their mortgages are larger than the value of their homes. Manufacturing in America has been in overall decline since 1998, and remains on a steep downward slope since late 2007.  Most U.S. banks are in horrible condition with millions of loans declining in value with each passing week. Freddie Mac and Fannie Mae are de facto "bad banks," guaranteeing the bad loans, but without Freddie and Fannie, over 50% of American's banks would be bankrupt. The real world US economy is still going down EXCEPT for the stock market.

"Trap" written all over it.  In my view the current stock market has "trap" written all over it. The dragon is licking its chops at the thought of the blood feast that's coming. In my opinion the "sting" is not a question of "if," but only a question of "when."

When will this current bubble explode? I have a deep respect for the dragon's ability to keep financially ridiculous situations alive. In pure economic turns, the bubble should explode right about now, and the DOW should go from 10,000 back down to 7,000. However, the Federal Reserve and U.S. Treasury are doing everything possible to keep the DOW up until at least after January 1st.

What are they hiding? There have been repeated calls for transparency by the Federal Reserve, and Treasury Department in regards to their allocation of money.  There has even been a lawsuit to force the transparency.  The Treasury LOST that lawsuit but is stalling with an appeal. Remember, this is taxpayer money (your money) and they're keeping the spending and allocation of the money a BIG secret.  Why are the U.S. Treasury and Federal Reserve fighting tooth-and-claw against all of the calls for "transparency?"  In my opinion, one of the reasons is because the Federal Reserve is propping up the stock market.

Double standards? The Treasury Department fined UBS bank of Switzerland $400 million for keeping accounts secret.  The UBS accounts were not public money like the government's money is 100% public money. Now, isn't the Treasury Department doing what UBS was doing? Keeping its accounts secret?

The core question is, "Who is the dragon going to double cross?"  Knowing the vicious nature of the dragon, my guess is that the dragon will double cross BOTH the individual investors and the government. My guess is that the dragon will try to push the stock markets higher by 500 or 1,000 points, but before the close of the year the markets will crash. With the  dragon, in the short term (under one year) you have to train yourself to expect the unexpected.

What should the individual investor do?  In my opinion, any kind of upside to the stock market is very limited at this time.  Maybe the DOW could go up to 11,000, but that's still only a 10% increase. However, with fundamentals like employment, real estate and manufacturing still deteriorating, the Dow could go back down to 7,000, and that's a 30% loss. Basically, the current bubble (March 20th to now) is being powered by $2 trillion in brand new debts and promises from the government. You cannot run an economy forever by watering down the soup. In my opinion the down side risk at this time is greater than the upside potential. In my opinion, for those who have asked, I told them to give very serious thought to selling their long-term positions. Yes, the dragon could torture you for a time while the markets go up. However, when the bubble breaks, the DOW could go down by 1,000 points in one day. If you wait until the stock market car has clearly driven off of the edge of the cliff, at that point jumping out of the car is still going to put you into a world of pain.

What about shorting the market?  In my opinion shorting the market at this time is playing the odds. Employment and manufacturing are STILL in serious decline. Sooner or later the real economy always makes itself known.

What specifically would I recommend? For those who have asked, I told all of them that in the last analysis only God knows for sure what will happen. However, in my opinion a good short is the ProShares Ultra Short S&P 500 (SDS NYSE.)  The SDS has a "gearing" of 2 X the market.  Or, the regular ProShares Short S&P 500 with no gearing. If your nerves are so-so the regular S&P 500 short moves less either up or down. What I like best is that the ProShares Ultra Short S&P 500 which is highly liquid with up to 60 million shares traded per day.  I do now own SDS shares, and will probably buy some more.

No time to think about it. The ProShares Ultra Short S&P 500 (SDS NYSE) mentioned above is super volatile. Every day, millions of shares are only held for a few hours.   When the market changes the price of the above SDS is going to go up substantially within a very short time. What I'm saying is that if you buy it right now, you might see it go DOWN by 15% (the dragon is a vicious poker player.) Personally I do not care where an investment is at right now. My concern is what I bought it for and at what price I'll eventually sell. In my view, for the best returns you have to already be onboard before it's crystal clear that the current bubble is breaking.

Read the prospectus. You should carefully read the ProShares prospectus. One of the pleasant things you'll discover is that ProShares passes on a large percentage of the dividends that it collects from the stocks that it holds. Since millions of ProShares are only held for a few hours, or a few days, if you do hold the ProShares until the market turns, (and that's in a few months,) then you should be receiving dividends. For the holders of ProShare shorts, it would be good for taxes if the market did not make its big down move until after January 1st.

Grand strategy. For the last five years in the pages of American Firearms Industry Magazine, I have advised my readers that a superior alternative to the stock market is investing in the firearms industry.  Expanding your plant, if you were a manufacturer, or expanding your store if you were a retailer. Most of the manufacturers and retailers over the last five years who have put their money into their own industry (as I consistently advised) have done very well. Firearms and ammunition sales have grown 53% in the last five years. Center fire ammunition factories are still running at maximum capacity. Cerberus investments did a lot better percentage wise investing in firearms and ammunition than it did investing in Chrysler and GM.

I don't want to sound like a bragging "smarty parts."  God gave me the ability to see some things better than most people, and most of the time it has caused me a great deal of pain. However, for the record, ten years ago in one of my long-range prediction articles I for told that by 2025 there would be no mass manufacturing of automobiles inside of the USA. My insight was that auto production would eventually join consumer electronics as, "not made in the USA." In 1998 when I made the above prediction 31% of America's manufactured products were imports, today that number is 37% and it continues upwards. If Cerberus had asked me, I would have told them (and anyone) NOT to touch automotive production in the USA with a 500-mile pole.  After eight years, I stand by my original insight.

The personal "pain" of my insights comes from helplessly watching the government consistently do the WRONG THINGS, thus causing deep pain and suffering to most average working Americans.  My grand strategy overview is that the government MUST stop worrying about how to create a no-fault, socialist, welfare state plantation for the bottom one-third of USA society, and it MUST start to worry about saving the top one-third of American society while there's still a core, classic American society to save.  When the American ship sinks, it will take down everyone - including government workers and government pensions.

What are President Obama's plantation-paradise promises really worth?  As I've pointed out in several other past articles, the old Soviet Union promised its citizens every kind of socialist welfare benefit imaginable. However, when the mismanaged Soviet economy went broke, all of those promises were cut down to almost nothing. The old Soviet government was like the current American government - worried about every damn thing EXCEPT making world competitive jobs and making world competitive products.

President Obama is making giant strides toward the end of work in America.  I call things the way I see them.  Because I predict things does NOT mean I like the outcome of my predictions.  The current popular belief is that "employment" will eventually "recover."  The reality is that hundreds of thousands of "good jobs" are gone forever. U.S. auto manufacturing will NEVER recover.  U.S. auto production is on the road to joining the U.S. production of TVs, radios, binoculars, riflescopes, toasters, large memory computer chips, and 70% of the manufactured products in any Wal-Mart Store, etc., and so forth. Good jobs are in the process of ending in the USA.  Not because people do not want jobs, but because the jobs will NOT be there. Like it or not (I do not like it,) the world today is a world economy.  Mr. Obama's welfare state, his plantation dream economy, is definitely NOT competitive. America already has some of the highest corporate and personal tax rates in the world and President Obama wants to make them much higher.  The brutal reality is that the more welfare America has, and the more de facto taxes it has to pay, (like the so called Obama health care that's really a disguised welfare tax,) the fewer good jobs America will have.  In the real world, hard choices need to be made.

What are you buying in the current stock market?  In my opinion, buying American long-stocks in the market right now means you are putting your money on President Obama (the big 0,) on helicopter Ben, on the U.S. Treasury that's fighting like crazy to KEEP SECRET the destination and location of its funds, and on a Congress peopled mainly by lying crackpots enacting the wrong laws for the wrong reasons. In my opinion, that is unfortunately NOT a good long-term investment.

GRAND SOCIAL TRENDSAND FIREARMS SALES

Mr. Randy Luth, president of DPMS Panther Arms (AR15s,) and apparently a rising star in the Remington "Freedom Group" (to go public soon,) told me that in 2009, over 500,000 AR15-type rifles are going to be manufactured and sold in the USA.  An interesting social question is - why?

Over 500,000 AR15s is a lot of guns being sold, but it's NOT because they are cheap.  A "cheap" AR15 is six hundred dollars with the tax. Probably 65% of the AR15s jump up around one thousand dollars total retail price per gun. If the customer wants the "extras" the gun can go up to two thousand dollars. If the customer wants to pay four thousand dollars for an AR15, there are manufacturers selling four thousand dollar PLUS modes.  At a retail average price of about $1,000 per AR15, the retail sales of AR15s will be in the area of over $500 million for 2009.

Why, in a recession year is the American public buying half a billion dollars worth of military rifles? Why are the manufacturers of AR15 ammo, like Remington, working 24/7, at full capacity, and making billions of rounds of ammunition? The "billions" is no typo.

Political experience. I've been in politics and the firearms business for over a half century. I'm also a gifted social analyst, and I can give you the answer to the above question in one sentence. A large percentage of the voters are profoundly unhappy with the direction of American's laws, morals, values, policies and many Americans are deeply unhappy with President Obama. This is one of the three main forces driving AR15 sales.

Talking heads. The talking heads on TV are blabbing away about the wonderful progress America is making with supreme leader Obama and his family of commissars. However, real world people are voting at their local gun stores. Real world voters are sending a message of profound unhappiness with President Obama, and his gang of plantation builders.

What if the customer does not have enough money for an AR15? In 2009,  American's FFL holders are on track to sell over 14,000,000 firearms. Once again, that's not a typo, fourteen million guns sold by gun retailers in 2009. Americans are voting at their local gun store.

From 1929 to 1939 civilian firearms sales DECREASED during the great depression. So what's different now? The big difference is that in the 1930s the general public trusted the government. However, now in the 21st Century, tens of millions of Americans have a profound distrust of the government in general, and President Obama's government in particular.  In my opinion, it's a justified distrust.

Why in a recession year, when real unemployment is 15%, will America's gun stores sell in 2009 almost as many small arms as America produced in WWII for the American armed forces?" Once again the answer is in part the same. Profound unhappiness with what's happening in Washington D.C., AND at ALL levels of government. The United States Government is FAILING in the number one most important area - trust.

When did the American people become the "enemy?"  You lie to your enemies.  You give disinformation to you enemies.  You give your enemies "doctored" numbers. In America, the government used to give its people the truth, but no longer.  The core problem with President Obama is that he lies. I'm sure he's telling himself that his lies are serving a higher purpose. Hitler and Stalin told themselves the same thing. The bottom line is that lying to the America people is NOT classic American civilization. It's NOT the American way, and President Obama should stop lying. If President Obama cannot sell his welfare, plantation dream, with the honest truth then that means it should not be there. That's what DEMROCRACY is all about.

Guns do not kill people - its people who kill people. Guns also do not vote - it's people who vote. I was born and raised a Democrat in Chicago, in the first Mayor Daley's Democratic Party machine. Here is a political INSIGHT that most left-wing Democratic Party politicians have never understood, and do not to this day want to understand. For decades, left-wing Democrats have told themselves.  "If we could only ban guns then we'd destroy the pro-gun voting block." WRONG - totally wrong.  What Democrats have NOT understood for the last 40 years is confiscating the firearms of gun owners is politically counterproductive unless they could simultaneously and permanently confiscate the VOTES of gun owners.

Niccolo Machiavelli got it 100% correct when 500 years ago he said, "You can kill a person's parents, and kill their brothers and sisters, but someday that person will forgive you. However, if you steal their property, you will have an enemy until that person dies, and that person's children die."

The Republicans should put as much air between themselves and the Democrats as possible. No Republican should vote for the Obama health care fantasy. President Obama's health care exercise in returning to 1960 is a bomb that will explode in the face of everyone who votes for it. The best thing that could happen to the Democrats would be for President Obama's health care mess to fail now.  However, even if that happened, twelve months from now the Democrats will be WACKED at the polls. The left-wing talking heads on TV are saying that everyone in American is happy, happy, and happy with Mr. Obama. However, firearms sales are telling a totally different story.

Confessions. I hope Mr. Obama's health care bill passes, and with a public option, and now. It will be a total disaster, and come November 2010, the Democrats would lose both the House and the Senate. The safest thing for the American people is to have the White House controlled by one party and the Congress controlled by a different party.

If anyone ever wanted to run for political office on the Republican ticket - 2010 is going to be the opportunity of a lifetime. This is a prediction from a person who has a 45-year record of correct political predictions. Eighteen months before the November 2009 presidential election (in writing, in the pages of AFI Magazine) I predicted, 100%, no equivocations whatsoever, that McCain would lose. Now, I'm predicting that the Democrats will lose BIG, very big, a year from now in November 2010. 

Remember, monthly issues of American Firearms Industry are now online exactly as the printed versions.  You can access them at http://www.amfire.com/  

Sincerely

Andrew Molchan
Systems Analyst, Publisher, Novelist, and proud to be a real patriot in the classic American tradition.