My Fellow Friends and Traders,

The market had every reason to sell off hard Friday with GE, BAC and IBM declining and canceling out a great GOOG beat. Every stock (AA, INTC, GS, JPM and IBM) that beat EPS expectations closed well off their highs. The market was in a mood to protect profits.

Now that we are through the two worst months of the year I know everybody is expecting a sharply higher market into early 2010. Most believe that professional money managers are under-invested and not performing well this year. Nothing could be further from the truth. We've had one of the broadest rallies in recent decades so that the average portfolio manager is beating the indexes by 5% points.  The same goes for the average long/short hedge funds according to Lipper, a fund tracking firm. I believe the majority of managers can't wait for this year to be over, collect their bonuses and go home. I can see the market going higher but protecting those gains makes sense. Sell stock and buy calls if you want to stay in the game.

Stocks continued straight up while the USD has declined to a 14 month low.  Current USD weakness has reignited a sharp rally in gold, oil and commodities. I still believe the USD’s decline and the much oversold nature of the USD cannot be sustained given the next two quarters of expected 3-4% GDP growth. Oil pushing hard through $80 won't help an already beat-up consumer. We shall see.

Furthermore, Wall Street is gearing up to offer a ton of new issues in the next 6-7 weeks. Blackstone, the "Buy Out King", alone plans 8 filings. Great for WS, bad for the markets as market money gets diverted elsewhere. The last three months tell us $11 in net cash inflows have gone into bond funds for every $1 into equity funds. This market has really gone up on fumes and lack of sellers more than anything else. The investing public is still very cautious and doesn't look to leave the safety of a fixed return to speculate just yet.

Right now I expect large sellers to emerge as we retest the 1095-1100 level. I also believe any sell-off should be well contained for now. However, there may be a slight difference this time as the October puts protection expired. Buying protection has been the mantra for the last three months and has negated any need to sell and hit bids during the brief declines. This time traders and investors are forsaking rolling over the puts and are now selling calls. Yes, the returns may be better but real downside protection is gone. Traders are much too comfortable as a 21 VIX reading tells. Just be careful out there.

I will continue to buy BTIM lower or until I run out of money first. I’m hopeful that Biotime CEO Dr. West’s new product podcast will be available shortly on their website (www.Biotimeinc.com).

Keep those cards and letters coming.

Stan Moore
Ph 702.267.0396

NET Weekly Money Chart 2009-10-16 - 2X in 5 Hrs

P.S. The new USD.

For now, weak USD = strong stocks.  Randall Forsyth says Obama may find it easier to bring about peace than to steady the greenback.  Quotes Barclays Capital, "Since 2003, dollar weakness has gone hand-in-hand with equity rallies" and concludes, "As long as there is no ready substitute for the dollar, Wall Street can celebrate the currency's steady decline.  This cannot go on forever.  However, the dollar's fall may not have started on Obama's watch but it may become his problem.  And, it will take more than high-minded gestures and diplomacy to solve it."