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[Joshua Brown]

If you really want to get a read on how ?the 1%? are faring these days, take a ski vacation to the tony hamlet of Incline Village on the pristine shores of Nevada?s Lake Tahoe.

Each morning, I trekked to Starbucks, one of the few local sources for the Wall Street Journal and the New York Times. There, trophy wives line up to buy their chai tea lattes, all tall, thin, and blonde, wearing designer sunglasses and snow boots, as if produced from a Gucci cookie cutter. The parking lot is jammed with Range Rovers and Cadillac Escalades.



Keeping up with the Jones?s here on fabled Lakeshore Drive can be quite a task, especially when they are populated by such names as Oracle?s Larry Ellison, casino mogul, Steve Wynn, and Saudi arms dealer, Adnan Kashoggi. Ellison alone is thought to have poured $200 million into his mountain retreat. Some of these compounds offer private beach lodgings for bodyguards and dog groomers. Junk bond king, Michael Milken, springs for the cost of the town?s annual Fourth of July fireworks display as it coincides with his birthday.

In the ultimate feat of hubris one upsmanship, one billionaire is converting the profits from his check cashing business to build a $150 million, 36,000 square foot residence that looks like a convention center. He has ruffled the feathers of locals by chopping down every ancient pine and cedar tree on the property to max out the square footage, violating multiple town ordinances. Who knew that cashing checks was so profitable?

[Joshua Brown]

?America?s colleges and universities churn out lots of liberal arts graduates?.By and large, the economy doesn?t need all these generals. We?re not training enough scientists and engineers. The high schools used to churn out enough people with technical skills in the fifties and sixties, but not so today. It?s cheaper just to prepare everyone to go to college and pretend that a liberal arts education is going to solve everyone?s problems,? said Professor Peter Morici at the University Of Maryland School Of Business.

[Joshua Brown]

The Chart of the Day is Kona Grill (KONA). I found the stock near the top of the New High List after I sorted for frequency. The stock hit 18 new highs in the last 20 sessions. since the Trend Spotter signaled a buy on 9/20 the stock is up 36.13%.

Kona Grill restaurants offer freshly prepared food, personalized service, and a warm, contemporary ambiance that creates an exceptional, yet affordable, dining experience. Kona Grill restaurants serve a diverse selection of mainstream American dishes as well as a variety of appetizers and entrees with an international influence.

[Joshua Brown]

Coming out of World War II, few Americans could have known about the great era of prosperity soon to arrive.

From 1946 through 1973, our economy expanded by a 3.8% annual pace. Sure, there were a few recessions along the way, but the rapid rise of the middle class, which enjoyed a rising standard of living, helped set the stage for the world's greatest economy. Roughly one-fourth of all global economic activity takes place on U.S. shores.

But as I noted last week, the U.S. is now in its sixth year of weak economic growth. Economists are growing increasingly concerned that we've entered into an extended period of anemic growth. Indeed, the sole purpose of the Federal Reserve's massive stimulus programs was to revive the economy's "animal spirits." But the economy has yet to respond. The Fed is pushing on a string.

Investors may have a hard time seeing this notion as the stock market moves steadily higher. Profits are still rising, thanks to lean corporate expenses, but fully half of the companies in the S&P 500 are expected to boost sales by less than 5% next year.

[Joshua Brown]

Last week, stock prices reacted to the news. Stock picking could become more important as the market reaches new highs, and one technical indicator could be helpful to traders looking to avoid downside surprises.

It Is Becoming a Market of Stocks
Fed chair nominee Janet Yellen confirmed that quantitative easing and low interest rates should continue for the foreseeable future. Traders seem to believe this is good news, and SPDR S&P 500 (NYSE: SPY) gained 1.56% last week.

The ETF has now closed up six weeks in a row. SPY has had a winning streak of this length 15 times in the past 20 years. In the short term, this winning streak offers us little information. The next week closed up seven times and lower eight times. Longer term, SPY was up six months later 80% of the time.

The winning streak is interesting, but in the long run, stock prices are driven by earnings, and the trend in earnings is likely to determine whether prices are higher or lower six months from now.

Earnings season came to an unofficial end when Wal-Mart (NYSE: WMT) reported last week. On this front, the results were mixed. Among the large-cap stocks in the S&P 500, Standard & Poor's reports 66.59% beat earnings estimates, the best beat rate in at least six quarters.

For the broader market, according to Bespoke Investment Group, only 58.6% of 2,268 companies beat expectations. Bespoke noted, "Since the bull market began in March 2009, this is the second worst earnings beat rate we've seen. Only Q1 of this year was worse."

This mixed picture is typical of the challenge confronting investors. Success requires sifting through data that can be conflicting to find what matters the most to traders at any particular time. This week, earnings seemed to drive the price action in specific stocks, but the general trend in the market may have been set by comments from Yellen, the woman who will replace Ben Bernanke as head of the Federal Reserve.

Yellen is expected to be much like Bernanke from the perspective of investors. As she explained in testimony to the Senate, interest rates should remain low and quantitative easing will continue in an effort to lower unemployment.

This environment is generally good for companies, and earnings are likely to continue drifting higher, but in an unpredictable way. Investment success will most likely come from getting the larger trend right and being in the best stocks. Relative strength (RS) can be a valuable tool in this market environment.

Cisco Systems (NASDAQ: CSCO) missed estimates and fell more than 10% the day after the announcement. Prior to the announcement, RS indicated the stock was weak and should be avoided.

[Joshua Brown]

Markets were headed higher on Monday; the Dow has officially hit a record high of 16,000 while the S&P 500 surpassed the 1,800 mark. These new highs were hit as the economy has continued to improve throughout the year. Following suit with the upbeat economic news, the National Association of Home Builders announced the U.S. homebuilder confidence remained steady in November after a decline of two months in a row. The NAHB/Wells Fargo Housing Market Index reported 54 for the month of November. This followed 54 for October. Economist were expecting a slightly higher 55. Rick Judson, head of the Federal Housing Finance Agency, said, ?Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending issues down the road.? Readings that come in above 50 for the index show that builder confidence is positive and the index has sat above 50 for the past six months. David Crowe, NAHB Chief Economist, said, ?The fact that builder confidence remains above 50 is an encouraging sign, considering the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline.?

While you?re here, be sure to read our latest options trading article on NYSE:TLT, MBIA, and trade ideas for readers


Shares of Boeing Company (BA) were up over 2% on Monday morning after the company received nearly $106 billion in orders at the Dubai Airshow. The company is redesigning their long-haul jet, the 777. They will be deciding on where they will be producing the new jets in the next 2-3 months. Jim McNerney, Chairman and Chief Executive, said ?We will be announcing within the next 2-3 months very specific plans for manufacturing. We have a number of alternatives and we are in the process of considering them.? The new plane will be called the 777X and is said it will be, ?the largest, most efficient twin-engine jet in the world,? the company said. The 259 orders placed and order commitments for the new jet is the largest in history for a plane of similar size.

Shares of General Electric (GE) were trading higher after the company announced their plans to spin off their North American consumer lending program through an initial public offering. They have filed necessary paperwork with the Securities and Exchange Commission to be able to begin the process in the first quarter of 2014. The finance arm of the company provides store credit cards through retailers. In the filing GE said that they will sell up to 20% of the new company through the IPO. They will then distribute the remaining stake to GE stockholders in exchange for GE common stock.

[Joshua Brown]

It?s tough to watch the market rise sharply if your portfolio has been treading water.

That?s the reality facing many investors that stepped to the sidelines earlier this year after seeing their portfolios soar in value since the bottom in March 2009.

But it could have been worse. You could have invested in some absolute duds.

Morningstar keeps track of the performance of all major exchange-traded funds (ETFs) and calculates a major loss for hundreds of these funds in 2013. The key question for investors: Which of these 2013 duds will morph into 2014 heroes? Let?s take a closer look.

Leveraged Gold? Yikes!
It hasn't paid to be bullish on gold this year, as the yellow metal lost its status as inflation hedge. But it?s proved to be downright foolhardy to buy leveraged ETFs that move at two or three times the rate of change in gold prices. These gold leveraged ETFs lost most of the money tied up in them and are clearly too risky to own.

If you are bullish on gold for 2014, you may be better served by buying gold miners or straight-up gold funds that simply move in tandem with gold prices. No need to be greedy with such a speculative and risky asset.



The Factor Shares fund has the ignominious distinction of going long gold (with leverage) and shorting the S&P 500. That was a lousy idea and should be shut down by the fund sponsor. Factor Shares, incidentally has tried this approach elsewhere, with similarly dismal results. The FactorShares 2X: Oil Bull/S&P 500 Bear (NYSE: FOL) and the FactorShares 2X: TBond Bull/S&P500 Bear (NYSE: FSA) are both down more than 60% this year.

Notice the fourth name in this group (which is not comprehensive and merely a sampling). The Global X Gold Explorers ETF (Nasdaq: GLDX) had the bad timing of owning miners in a year when mining economic turned south. But that doesn?t mean this ETF will always be a loser. This fund owns mostly Canadian miners, and in this cyclical industry, lean years are often followed by better subsequent years, as lower prices lead producer to curtail output down to the levels of demand.