– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	Mitek, Inc.	MITK	Holding	1/12/2012	+40%
2	EBAY, Inc.	EBAY	Holding	2/1/2012	+12%
3	Dendreon, Inc.	DNDN	“Toe-In” Today	2/24/2012	-1.5%

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

– Market Trends –

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

– Market Perspectives –

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) –

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

– Today’s Highlights –

So far, the U.S. equities (stock) markets continue to roll higher.

Here’s what’s going on from our perspective –

Greece is embarking on the largest ever sovereign-debt restructuring plan (in the history of the world), offering existing bondholders approx. 46 cents for every dollar invested (face value) and ultimately, possible actual losses as high as 74%.  (Please see this Reuters article for details).  Their objective is to write-off $135 billion in debt and start down a path that leads to paying down their remaining debt over time to 120.5% of GDP in 2020 from today’s 160% of GDP.

In years and decades past, when countries like Brazil and Mexico and Russia and countless others have defaulted, bondholders have walked away with nothing.  So – for many – being able to retain 25% of the original investment AND preserving (at least, for the moment) the integrity of the Euro, this is being looked upon as some kind of victory.  In our eyes at SMC, this is not a good development, but we don’t run the show.  On the other hand, what is a good solution for Greece?  Whether you are an Austrian School or Keynesian economist, there is no good solution.  Greece is over the edge! They spent way too much – when times were good!  It was during those years that Greece (and the USA too) should have been paying down debt.  Instead they were expanding their social network – resulting in a huge public sector employment base and full pensions for relatively young retirees.

In the USA, what we have been doing is increasing government expenditures (by engaging in foreign wars without clear objectives to WIN, and creating unfunded prescription drug programs …) while cutting taxes.   This too is unsustainable.  Best would be to cut government expenditures while cutting those existing taxes that inhibit job creation!

What makes anyone think that Greece is going to be able to carry its new debt burden is a mystery to us.  Remember – Greece cannot devalue its currency and attract investment, because it’s part of the European Monetary Union.  For the same reason, Greece cannot cut interest rates to attract investment.  It can really only try to cut expenses.  In this modern, credit-based world-economy Greece cannot apply Keynesian fixes to stimulate its economy.   Their only choice is to cut expenses and slowly crawl forward, with government revenues being directed to pay down debt – not directed to stimulate the economy.  If the next generation thereby learns frugality, contentment, and to live within their means, there is a reward at the end of the tunnel.  If –  instead – resentment and discontentment boils higher, what may develop in Greece is the fertile soil similar to the conditions found in Weimar-Republic Germany in the 1920’s and the possibilities of a national-socialistic outcome that could shatter peace and destroy generations of wise strategy which balanced Western Europe and Central Asia.

Over the last few weeks, the possibilities of some form of resolution in Europe (concerning Greece)  has resulted in the Euro gaining strength against the U.S. dollar.  Remember that when the U.S. dollar drops in value, the U.S. dollar denominated price of crude oil MUST increase simply to hold parity with its previous price – as long as demand and other supply sources remain constant.  When you add to this mix the idea of increasing uncertainty regarding Iran and its nuclear ambitions, the European Union declaring (finally) that they will embargo Iranian oil, and other uncertainties in the Middle East, you get a sharp rise in the barrel price of oil.  Oil prices has increased +14% in a few weeks’ time!

Meanwhile –  China is targeting a GDP growth rate possibly below their “standard” 8% and the economic picture in Europe is not rosy.

In the U.S., we have had these conditions in place that has resulted in a 5 month rally in the markets and the DOW approaching 13,000 –

Since our special email alert to members on the evening of October 4th, notifying of a possibly strong and positive reversal for the markets in the works and concrete individual stock investment ideas for participating in the rally, we have identified these clear reasons for the strength in the markets –

• U.S. corporate earnings are overall strong
• The markets were valuing equities (stocks) at a strong discount to average prices (based on price/earnings)
• The U.S. economy is continuing to expand, although at very slow pace.  The closest measures that we have – which we can use as forward-looking indicators – have been showing expansion.
• A key forward indicator – for example – is the trend in weekly new unemployment claims (this data is released each Thursday for the previous week).  These absolute claim numbers have been dropping more or less steadily over the last 3 months.
  
• New jobs created – as reported in the U.S. Department of Labor Non-Farm Payrolls have been increasing.
• The Federal Reserve has taken unusual steps at increasing the transparency of their monetary policy and have declared low interest rates as far as into 2014.  While this is a validation of our economy not growing very rapidly, this type of monetary stimulus is favorable for equities (stock) appreciation.
• There has been a concerted effort by European, Asian, and North American central banks to increase liquidity in Europe in the face of almost certain default by Greece.  These measures have reduced (but not eliminated, by any means) the fears – and more importantly, the affects – that a default in Greece could have on the financial markets worldwide.  Each month buys a little time for banks in Europe to participate in unusual central bank programs designed to help them raise cash.  Many of the banks that would have needed to access the financial markets for funds in 2012 have “filled their tanks” at central bank counters and not in the traditional financial markets.
• The markets themselves were so resilient last year in the face of calamities presented by the Arab Uprising, earthquake and subsequent nuclear meltdown in Japan, and the mark-down in the quality of U.S. government bonds to AA+, that many (like us) were anticipating a move higher in the markets.

There is more excitement to come … Please Stay Tuned!

– S.I.M.P.L.E. Stock Investing Method tm –

– (Where each investment begins with a Story and ends with Earnings) –

S.I.M.P.L.E. Stock Investing is built upon these core concepts –

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

For today’s S.I.M.P.L.E. Stock Investing section, we have made these three short videos.  We want you to see several dimensions to today’s market and also a look at a few stocks that have exhibited unusual resilience –

• Video 1 = The broader market, crude oil, and the value of the dollar.
• Video 2 = Crude oil, value of the dollar, EBAY, and Mitek.
• Video 3 = Unusual behavior at Cirrus Logic and Dendreon

We didn’t want to quickly move away from this multi-video review of Cell Therapeutics, so we have left these videos and explanations in place for your review = Please click on this SMC Successful Investing Video to see what the broader market is telling us and a close look at Cell Therapeutics and what we are looking for there. Here is the video link.

From Friday –

Today in our Executive Summary, we mentioned that Seattle-based, Cell Therapeutics (CTIC $1.35)  jumped approx. +25% in value as the European Advisory Council for their FDA-like organization recommended the CTIC drug for patients with late stage Non-Hodgkin’s Lymphoma = a terrible and aggressive cancer.

Let’s quickly apply our S.I.M.P.L.E. investing model to this one –  Please click on these three – SHORT – 5 minute Successful Investing Video segments for this useful analysis and to see what we are looking for next!

• CTIC Video I
• CTIC Video II
• CTIC Video III

– Benchmarks “At a Glance” –