NEWSLETTERS & RECOMMENDATIONS - November 7, 2010

Dear Friends and Fellow Traders,

Just think with the wave of a magic wand Ben B. committed to creating $75 billion a month out of thin air. Combine this coupled with other Fed programs and we're talking nearly $900B over nine months. Don't fight the Fed is our new mantra. Yet, the greatest risk I feel was and is now being too cautious on stocks during the next three to six months. Don't over think the Fed message but remain careful. There are many out there that believe the Fed's actions might not work. However, I believe it will be very clear long before the markets falls apart. I saw the top in August 2007 and the bottoms in Sep/Oct 2008 and the final bottom early 2009 so my economic and market experience is often pretty good.

QE1 saw strong equity and bond markets before QE1 ended earlier this year. QE2 mentioned over two months ago and started Wednesday has opened a door that has juiced risk trades like copper, gold, silver, junk bonds, foreign currencies, equities - whatever. People may even start believing in the former Greenspan "Plunge Protection Team" that bought the S&P futures to rally the markets. GS thinks QE2 will ultimately reach over $2B with no exit until 2015.

Exactly what is the Fed trying to accomplish. I believe number one is to the break the currency links many Asian countries have to the dollar. This will cause our exports to explode, our economy to grow and with nice rallies coming in those S&P 500 companies that sell overseas. Over 90 million Americans with equity ownership will feel better and spend. Just maybe we can reverse the massive exits from stocks into bonds these last two years on the part of Joe Public. Thursday's stock market rally alone added over $300 billion to the pockets of investors. Investors must believe that stocks and not bonds are a hedge against inflation that must eventually follow the Fed's actions.

I believe our stock market is currently one of the cheapest in the world and, if Ben is correct and Asian currencies realign, investing in low cost U.S. plants just may prove the best investment foreigners can make down the road. China will no longer be a cheap source of goods. Furthermore, Ben B. feels that a robust U.S. Economy will support the $ not sink it. Strong economic countries experience strong currencies.

There is no help coming from fiscal stimulus in the near future. Over 1.5M unemployed people start coming off 99 weeks of extended jobless benefits this month and well into 2011. Couple this with state and city workers being laid off next year approaching 2M you begin to glimpse just how bad it can get out there. Good bye Obama in 2012. Hello QE3 and 4 and maybe even 5.

In conclusion Ben B. is setting the stage for events, short and long term that will impact just about everything we do with our money. Short term the economy seems headed in the right direction. I'm guessing upcoming holiday retail sales should be the best in some time. So trade the sea of greenbacks, ignore the data as I'm sure many will until you can no longer then hold your nose and trade some more. It's just a matter of time before we succeed or plain blow-up our bond and currency markets. Who said we don't live in exciting times?

Some Good News on the Political Front:
I have never seen a more secret, arrogant party abusing power as the Democrats did. Team Obama, Reid and Pelosi shattered the bond of trust between the people and their elected leaders. Obama promised so much and delivered only to his friends. Was it worth it? Team Obama believes so. Pelosi has no regrets. The message was loud and clear. My answer was No! The Dems lost 61 seats in the House, 6 in the Senate over 7 governorships and best of all over 500 state legislators. Eleven states completely flipped to the GOP. Even Alabama went Republican for the first time since 1868.

The best of the election gives the GOP control of the House and by threatening to block funding on key Obama programs could put pressure on the President to work with them to lower business taxes and pursue many other pro-growth policies. There are many state and federal road blocks that can be replaced with less cumbersome licensing and review process to jump start growth in currently weak economic states.

Lastly, 10 of the 23 Democratic senators up for re-election in 2012 are from states the GOP blew-out the Dems. The country is awash in a sea of red. The GOP has some leverage this time. I hope they don't drop the ball. It took the Republicans time to break from the negativism of the Bush era. Don't go back to earmarks.

There were no great option trades this week but if you can hedge the rewards were returns of over 3-4X on 2 separate occasions late in the week.

Keep those cards and letters coming as I love hearing from you even if we've been out of touch for over 5 years. I always love to hear for any of you. I'm still working with students now friends for over 20 years. I will be in NYC visiting with some of you early December.

Good trading,

Stan Moore
702.558.1814