What is for sure is that the credit market problems that surfaced in June will take at least a year and require agreements between the major banks of the world to resolve. In the interim, despite the helping support of central bankers to provide additional liquidity, many financial institutions will fail and/or be taken over by stronger ones.

Muddling through the process, central bankers will try to ensure enough liquidity to help private equity companies to complete the deals they lined up and those that will become available under the present circumstances, and they want to help those financially strong corporations interested in taking on more debt to pay out higher dividends. These deals contribute to what people call the Wealth Effect.

‘Wealth effect’ is an expression that is akin to little more than taking money out of one pocket and putting it into another to induce them to do something they ought not to.

In being aware of the money and handling it, to paraphrase the dim-witted TV commercial of one of Canada’s biggest banks, “you are richer than you think you are”. I say it is dim-witted because it is an obvious attempt to get people who cannot afford to borrow to do so anyway in order to spend on things they may or may not need.

It’s kind of like saying to an alcoholic that it is ok to have a drink after five years absence of substance abuse. The drink may calm the person’s nerves for an hour, and destroy their psyche. In the context of commercial lending, does the bank really care as long as somebody is there to make the payments or collect the loan collateral in the event payments are not?

In other words, ‘wealth effect is part of the psychology of credit markets, a creation of the Sell-side. Just another challenge in the daily life of the Buy-side.

Now we are told that one of the largest and strongest banks of the world, UBS, is going to write off $3.41 billion in loans. I don’t know if that actually means the bank will be taking provisions for loan losses, which is a deduction from earnings and in effect sets the special loans department into action to try to collect on the collateral (meaning tough times for the bank’s customers) or whether it is actually a write-off meaning the bank has decided it cannot collect these debts, or sell them to others who will try to collect, which in effect lowers the shareholders’ capital in the bank.

Usually, when you see one or more of the major banks talking like this, it means they all will, and that means that all bank customers are going to get squeezed, and in the process end up having banks seize assets where loans are not being repaid as per earlier agreements. Typically these things happen in Bull markets. They happen once every 10 or 15 years and in my whole life, I haven’t seen it happen in a Bull market yet.

Credit squeezes by banks are bad for embattled home-owners too because high bid prices for homes are the result of the bidders being able to finance the purchase through available credit. When credit of a part of the market is squeezed, like for sub-prime borrowers, it is almost always the case that there is a squeeze on the borrowing practices of the typical prime rate borrowers as well. That is what is happening today.

So, what happens is that asset prices fall quickly when potential buyers cannot borrow enough to complete the deal. In 1990, my parents bought the country home and property of their next-door neighbor for $300,000 cash that until the credit squeeze a few months earlier held a $1.1 million mortgage against it. In a credit squeeze, cash is king.

For a couple years, I could see that cash would be king because I saw too many dumb TV commercials like, “You are richer than you think you are!” That was just a different slant than the years 1999-2000 when the discount brokers were running TV ads about truck drivers using their market winnings to buy Caribbean islands – one little old lady even bought a country!

Well, you know the rest of that story. The truck drivers and little old ladies were then roundly criticized for being stupid enough to day trade their stocks. The industry took no responsibility. While the pickings were good, they did take their bonuses.

Same thing today. Billions of dollars in bonuses are being paid by banks to bankers while new home-owners and real-estate investors are being criticized for the lying part of the banks’ “Liar Loan” problem.

You see the reason for my analogy to the banker giving a drink to an AA member? At the end of the day, we all must take responsibility and pay the piper. But, banks will continue to bonus bankers, and when there are subsequent losses from the business these bankers initiated, the shareholders will take the hit.

Moreover, if Banks A and B operated foolishly, Bank C will buy them out at fire-sale prices. The rich will get richer. In a horse race, I say always find the best horse and jockey – not the best story in the newspaper, but the principals with the superior trackrecords. That’s because, in life, what goes around will come around.

My son and new daughter-in-law were married on the weekend. It is a new life but for them to succeed in the future they must learn from the mistakes others have made in the past. Same thing applies to traders.

If you continue to act like traders who were losers in the past you too will be a loser in the future.

If you thought that watching a couple years of “You are richer than you think you are” TV commercials was interesting and informative, then you are a loser. If you thought that the Government of Canada, as an example, was doing the right thing in their TV commercials by telling young people to sign up for the fun and travel of the armed forces then you are a loser. The government stopped running those “fun” commercials when the nation’s young people started to come home in body bags.

There is a reality to life, and you are at risk if you choose to ignore it, and instead believe the stories of goldilocks and make-believe. Credulity syndrome is the term I use for losers. Too many people are afflicted.

When banks tighten, and central banks liquefy, as they are doing today, having cash is an important asset, but there is nothing so important as having gold and silver money at times like that. The more paper money that is printed, the more it is depreciated (because much of it is misspent/wasted), and the higher the value of gold and silver, and the bigger are the winners who hold it. The losers will continue to be those who borrow to spend unnecessarily – individuals, corporations and governments alike.

Losers in the markets will be traders who do not recognize that this is a bad time to be investing in companies that make or sell goods and services that are not essential to sustaining life, or on financial institutions that lend (since this is a time these companies are bent on collecting and having to write off bad debts).

I will sum up that this was a week in transition. People, like my son and daughter-in-law, were married with great hopes for their future, but also with the need to stay grounded by learning from the past mistakes of others. Traders who are new at this, let this be the first week of the rest of your life. Keep your dreams alive, but don’t ignore the lessons of the past.

For sure, Sell-side lenders and dream merchants are not going to tell you that. They are too busy trying to get theirs. That’s life.

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International Economics Review

Econoday Weekly International Report

US Economic Calendar for next week

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US Equity Markets Review

DJIA (interactive) chart

Traders are taking note of a possible double top.

On Friday, the DJIA lost -17 points (-0.12 pct) to close at 13895, up +75 points from the previous Friday’s 13820.

The broad market indexes are now well above both the 50-day and 200-day Moving average technical lines of resistance, and the volume is picking up, which means that traders are generally less cautious. The Daily RSI-7 data (see from Chris) shows the market is over-bought. This combo warrants close monitoring.

We have to watch the post-quarter trading for signs of a market sell-off. As I pointed out a week ago, selling into strength the stocks in your portfolio that have already had a Sell Alert and then a subsequent big run-up in price to a second Sell Alert is usually the right decision.

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NASDAQ Composite (interactive) chart

On Friday, the Nasdaq Composite had a loss of -8 points (-0.30 pct) to close at 2701, which is a gain on the week of +30 points.

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Table 13: International equities via an ETF perspective (ie, $USD)

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
EWZ	74.09	-0.49	-0.66%	6.88%	15.59%	24.92%	58.65%	21.78%	52.73%	95.59%
FXI	180.00	-2.09	-1.15%	6.84%	15.54%	23.27%	54.64%	39.55%	75.95%	121.54%
IFN	54.30	-0.23	-0.42%	6.76%	9.26%	19.81%	19.76%	27.61%	35.51%	23.41%
TRF	68.67	-0.83	-1.19%	6.19%	11.42%	11.97%	-22.45%	2.66%	-2.32%	1.78%
EWJ	14.32	-0.03	-0.21%	3.92%	5.45%	3.99%	0.85%	-0.56%	-2.98%	6.15%
QQQQ	51.41	-0.17	-0.33%	2.08%	4.45%	6.37%	18.89%	8.14%	16.89%	26.25%
EWC	32.73	0.06	0.18%	1.77%	5.28%	11.25%	32.51%	11.21%	25.07%	36.15%
EWU	25.80	0.15	0.57%	1.48%	4.39%	6.68%	9.54%	1.40%	7.17%	17.52%
IEV	118.79	0.14	0.11%	1.18%	4.92%	6.58%	12.49%	2.37%	10.14%	22.71%
SPY	152.58	-0.51	-0.33%	0.40%	2.48%	4.40%	7.93%	1.40%	6.80%	14.09%

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Japanese equity market ETF: EWJ

Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:

Interactive EWJ Monthly data:

Interactive EWJ Weekly data:

Interactive EWJ Daily data:

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U.K. equity market ETF

Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:

Interactive EWU Monthly data:

Interactive EWU Weekly data:

Interactive EWU Daily data:

EWU Daily data:

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Canada’s equity market

Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:

Interactive EWC Monthly data:

Interactive EWC Weekly data:

Interactive EWC Daily data:

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The US equity market Sector ETF Summary

The tables I show are for ten (GICS) Sector Index Funds (ETF’s) only, but they cover the full spectrum of the equity market.

This week it was a case of 4 sector ETFs up, 1 flat and 5 down. Basic Materials (XLB) was #1 again, but Energy (XLE) dropped from #2 to #9. Financials (XLF) dropped from #6 to #10.

Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
XLB	42.12	-0.37	-0.87%	1.32%	6.44%	8.70%	21.70%	5.04%	10.64%	32.33%
XLP	27.94	0.05	0.18%	1.01%	2.05%	4.14%	6.32%	3.21%	5.51%	9.53%
XLI	41.00	0.14	0.34%	0.91%	3.69%	5.59%	16.38%	5.18%	14.24%	23.23%
IYH	70.79	-0.29	-0.41%	0.08%	1.64%	3.78%	6.52%	0.91%	5.81%	8.31%
IYZ	33.85	-0.18	-0.53%	0.00%	3.74%	2.76%	14.13%	0.39%	8.77%	22.73%
SMH	38.30	-0.06	-0.16%	-0.73%	3.12%	2.41%	14.09%	-0.75%	11.86%	12.12%
XLU	39.93	-0.50	-1.24%	-0.97%	0.58%	3.34%	8.45%	1.47%	-0.08%	15.94%
XLY	36.73	0.08	0.22%	-1.00%	-0.05%	0.58%	-4.65%	-6.68%	-3.92%	4.50%
XLE	74.94	-0.56	-0.74%	-1.00%	3.04%	8.77%	32.45%	9.00%	23.36%	40.34%
XLF	34.20	-0.26	-0.75%	-1.16%	0.97%	2.55%	-7.37%	-6.15%	-4.47%	-1.16%

You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance. XLE XLB XLI XLY XLP IYH XLF SMH IYZ XLU . You can also add more ETF’s – up to 30 in total.

For a list of components to any ETF, go to the AMEX.com web site, and click on ETF’s.

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10 (energy: XLE)

15 (basic materials: XLB)

20 (industrial: XLI)

25 (consumer discretionary: XLY)

30 (consumer staples: XLP)

35 (healthcare: IYH)

40 (financial: XLF)

45 (technology, semiconductor: SMH)

50 (telecom: IYZ)

55 (utilities: XLU)

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Individual Sector ETF Review

Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)

Here’s the XLE Monthly, Weekly and Daily data charts:

XLE Monthly data:

XLE Weekly data:

XLE Daily data:

Energy (XLE) was the #9 performer this week, down -1.00 pct, closing at 74.94. A week ago, it was #2, up +4.08 pct. XLE was #1 performer for three weeks in a row before that, and I started to say I thought the price was over-bought.

China National Offshore Oil Co (CEO +7.50 pct) was the big winner again this week, as it was over the past 4 weeks (+42.13 pct). Smart traders will be watching for a Sell-alert to realize their gains, and move into cash (or into over-sold but recovering stocks).

For the past year (52-weeks), CEO is up +101.3 pct.

Table 2: Senior oil & gas equities

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
CEO	166.43	3.24	1.99%	7.50%	25.47%	42.13%	76.55%	51.99%	98.39%	101.34%
PBR	75.50	-1.41	-1.83%	3.28%	12.50%	27.34%	51.52%	25.29%	58.98%	84.82%
XOM	92.56	-0.41	-0.44%	0.27%	4.39%	8.38%	24.90%	10.88%	22.26%	37.88%
TOT	81.03	-0.77	-0.94%	-0.50%	3.98%	9.93%	14.18%	4.17%	17.78%	23.75%
IMO	49.56	0.45	0.92%	-1.16%	4.34%	16.01%	38.98%	8.35%	33.01%	48.61%
SU	94.81	-0.62	-0.65%	-1.16%	-1.57%	8.73%	28.28%	8.45%	27.72%	32.38%
ECA	61.85	0.51	0.83%	-1.21%	0.18%	6.55%	36.41%	-0.48%	21.51%	31.96%
CVX	93.58	0.07	0.07%	-1.33%	3.23%	7.33%	31.86%	11.55%	26.17%	45.76%
STO	33.92	0.46	1.37%	-2.02%	6.47%	20.24%	32.04%	14.75%	26.57%	37.72%

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Integrated Oil & Gas - Canada

Oil & Gas Exploration & Production -Canada

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Sector 15 (basic materials: IYM, XLB, IGE and VAW)

Here’s the XLB Monthly, Weekly and Daily data charts:

XLB Monthly data:

XLB Weekly data:

XLB Daily data:

XLB (Basic Materials) gained ++1.32 pct on the week to close at 42.12.

Base metal miners like Brazil’s CVRD (RIO) were strong. RIO jumped +11.43 pct this week, and +24.51 pct over two weeks. Yes, the fundamentals are improving, but those kind of gains must be realized or else they might be given back.

Table 3: Senior metals and steel equities:

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
RIO	33.93	-0.05	-0.15%	11.43%	24.51%	-29.27%	17.73%	-23.58%	-8.32%	60.73%
BHP	78.60	0.95	1.22%	8.37%	19.20%	27.16%	102.21%	35.85%	62.50%	104.47%
GGB	26.22	0.00	0.00%	4.88%	13.21%	14.40%	59.68%	5.22%	47.14%	96.11%
AA	39.12	0.12	0.31%	4.60%	10.26%	8.22%	33.38%	0.38%	15.06%	40.97%
RTP	343.40	4.80	1.42%	4.51%	14.91%	29.88%	68.25%	14.70%	51.28%	80.08%
MT	78.36	-0.19	-0.24%	2.96%	14.81%	21.58%	92.06%	26.55%	49.43%	131.63%
TS	52.62	-0.26	-0.49%	1.49%	13.72%	12.99%	8.45%	7.83%	19.46%	47.15%
NUE	59.47	-1.07	-1.77%	-0.05%	4.21%	14.63%	9.12%	3.09%	-9.48%	21.02%
TCK	47.71	0.15	0.32%	-0.65%	11.34%	16.28%	-31.10%	11.08%	-32.91%	-24.39%
PKX	178.77	-2.36	-1.30%	-1.78%	8.77%	20.72%	125.07%	50.84%	79.27%	176.73%

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Sector 20 (industrial: IYJ, XLI, VIS, and IYT)

Here’s the XLI Monthly, Weekly and Daily data charts:

XLI Monthly data:

XLI Weekly data:

XLI Daily data:

Table 4: Senior capital goods makers and transportation:

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
ABB	26.23	0.32	1.24%	2.54%	10.21%	9.06%	47.19%	18.15%	51.97%	98.56%
BA	104.99	-0.47	-0.45%	2.34%	5.68%	8.40%	17.74%	10.92%	15.99%	32.21%
MMM	93.58	0.19	0.20%	2.07%	5.12%	4.72%	19.58%	7.40%	21.26%	25.36%
HON	59.47	0.27	0.46%	1.33%	5.37%	5.65%	31.86%	5.61%	27.26%	44.94%
UTX	80.48	-0.21	-0.26%	1.32%	5.70%	8.99%	28.13%	12.56%	21.74%	27.46%
FDX	104.75	0.11	0.11%	0.62%	-4.06%	-3.87%	-4.57%	-6.14%	-4.82%	-4.95%
GE	41.40	0.01	0.02%	0.36%	2.60%	7.81%	9.03%	8.78%	15.67%	17.15%
CAT	78.43	0.96	1.24%	0.35%	7.20%	5.05%	28.24%	-1.36%	17.27%	19.41%
ERJ	43.92	-0.05	-0.11%	-0.30%	5.05%	-0.14%	7.70%	-9.80%	-1.94%	10.02%

XLI (Industrials) gained +0.91 pct this week to close at 41.00.

Switzerland’s answer to General Electric is ABB, which was up +2.54 pct W/W and +10.21 pct over two weeks. That is a huge increase for a mature large cap company. Is global forex that good? Certainly I like the business this company does, and its management, financial strength, and operating metrics, but the stock is very expensive now.

Selling, however, is best done with the help of Sell-alerts.

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Sector 25 (consumer discretionary: XLY, IYC and VCR)

Here’s the XLY Monthly, Weekly and Daily data charts:

XLY Monthly data:

XLY Weekly data:

XLY Daily data:

Consumer Discretionary (XLY) was another weak performer this week, losing -1.00 pct W/W to close at 36.73.

Nike (NKE) was strong (+2.44 pct W/W), whereas the losers were Whirlpool (WHR), Starbucks (SBUX) and JC Penny (JCP).

Table 5: Senior consumer discretionary equities

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
NKE	58.66	0.49	0.84%	2.44%	2.50%	5.20%	20.13%	0.63%	10.10%	33.14%
BC	22.86	-0.09	-0.39%	2.19%	3.86%	-8.12%	-28.38%	-30.50%	-28.14%	-28.38%
TM	116.86	0.98	0.85%	1.56%	3.25%	3.15%	-13.63%	-5.64%	-10.97%	7.61%
EBAY	39.02	-0.25	-0.64%	0.05%	3.20%	16.13%	29.33%	21.63%	17.11%	43.46%
DIS	34.39	0.18	0.53%	-0.61%	2.47%	2.75%	0.56%	0.35%	-0.78%	10.79%
CCL	48.43	-0.66	-1.34%	-1.59%	8.73%	7.62%	-4.95%	-0.14%	2.22%	4.47%
WHR	89.10	0.83	0.94%	-3.37%	-2.30%	-6.36%	5.24%	-20.91%	4.38%	4.52%
SBUX	26.20	-0.77	-2.86%	-4.62%	-5.21%	-4.20%	-25.67%	0.27%	-17.43%	-23.99%
JCP	63.37	-0.44	-0.69%	-4.68%	-1.32%	-3.97%	-18.82%	-11.68%	-22.58%	-8.33%

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Sector 30 (consumer staples: XLP, VDC, RTH and IYK)

Here's the XLP Monthly, Weekly and Daily data charts:

XLP Monthly data:

XLP Weekly data:

XLP Daily data:

Table 6: Senior consumer staples equities

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
WFMI	48.96	0.82	1.70%	8.73%	12.86%	10.89%	7.65%	26.02%	8.87%	-20.35%
WAG	47.24	-0.69	-1.44%	4.03%	4.33%	5.87%	2.54%	7.19%	0.64%	4.40%
PEP	73.26	0.64	0.88%	2.55%	5.32%	7.96%	16.80%	12.41%	16.38%	11.15%
KO	57.47	0.14	0.24%	1.63%	1.90%	7.62%	18.30%	9.59%	19.68%	28.54%
MO	69.53	0.05	0.07%	1.44%	3.73%	0.40%	7.10%	-0.95%	8.90%	19.88%
PG	70.34	0.24	0.34%	1.37%	3.73%	8.20%	8.99%	14.50%	11.17%	12.13%
DEO	87.73	-0.07	-0.08%	1.15%	4.35%	4.88%	10.31%	3.07%	10.27%	22.29%
ABV	73.13	0.83	1.15%	0.92%	6.03%	8.47%	48.94%	7.06%	37.62%	62.15%
BUD	49.99	-0.27	-0.54%	-1.15%	-0.38%	3.29%	1.56%	-2.89%	-0.85%	5.42%
WMT	43.65	0.04	0.09%	-1.31%	0.76%	0.76%	-8.20%	-9.93%	-8.09%	-11.82%

XLP (consumer staples stocks) were a relatively strong #2 performer, gaining +1.01 pct W/W to close at 27.94.

Whole Food Markets (WFMI), having cleared some legal issues related to a take-over, was up +8.73 pct W/W (+12.86 pct in two weeks).

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Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)

Here’s the IYH Monthly, Weekly and Daily data charts:

IYH Monthly data:

IYH Weekly data:

IYH Daily data:

Table 7: Senior healthcare equities

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
AET	54.27	0.27	0.50%	3.69%	5.42%	7.53%	26.56%	8.32%	21.36%	40.52%
AMGN	56.57	0.01	0.02%	2.08%	0.44%	12.96%	-17.30%	1.93%	0.55%	-21.58%
JNJ	65.70	0.16	0.24%	0.89%	3.96%	6.66%	-1.05%	6.92%	9.45%	1.36%
BMET	45.99	0.06	0.13%	0.24%	0.31%	0.48%	10.90%	1.05%	8.47%	41.68%
NVS	54.96	0.29	0.53%	-0.25%	1.14%	5.23%	-5.47%	-0.94%	-2.95%	-6.16%
BMY	28.82	-0.19	-0.65%	-0.62%	1.55%	0.07%	9.25%	-10.08%	3.67%	15.28%
PFE	24.43	-0.32	-1.29%	-0.65%	0.58%	-0.49%	-7.07%	-4.61%	-4.16%	-14.01%
DNA	78.02	-1.05	-1.33%	-1.71%	-1.23%	6.11%	-4.62%	4.95%	-5.49%	-6.42%
GSK	53.20	0.02	0.04%	-1.90%	-0.39%	3.87%	-1.13%	1.01%	-2.62%	-1.10%
UNH	48.43	-0.83	-1.68%	-2.97%	-2.97%	-1.26%	-7.88%	-6.42%	-13.29%	-1.32%

IYH (healthcare) gained +0.08 pct W/W to close at 70.79, a gain of six cents. Yet, IYH was performing leader #4.

Aetna (AET +3.7 pct W/W) and United Health (UNH -3.0 pct) were going in opposite directions.

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Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)

Here’s the XLF Monthly, Weekly and Daily data charts:

XLF Monthly data:

XLF Weekly data:

XLF Daily data:

Table 8: Senior financial company equities

Sorted by 1-Week Price Performance

Symbol	Close	1Day Change	1Day %Change	1W %Change	2W %Change	4W %Change	YTD %Change	3M %Change	6M %Change	12M %Change
GS	216.74	-0.04	-0.02%	3.22%	13.72%	26.47%	7.98%	-1.18%	3.27%