Dallas, TX
June 28, 2010, 08:00 EST		 Dr. Joe Duarte's Market I.Q.


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Money Express Takes Unexpected Turns
What's Hot Today:

Investors will have to digest the G-20 promises to cut deficits and deal with the rest of the upcoming political agenda. This Friday is also an employment report week.

Today's Economic Calendar



News For Thought

Health insurance pools ready in 20 states. According to The New York Times: "The Obama administration is poised to award contracts worth hundreds of millions of dollars to about 20 states to run new insurance pools for people with serious medical problems." According to the report: "In another 20 states, where local officials chose not to participate, the federal government will run the pools through a private nonprofit entity. Applications will be available to the public in many states on Thursday, and coverage could start as early as August." It's not certain how physicians and hospitals will participate, or whether any will participate.

The report added: 'A new study by the Congressional Budget Office says the money will “not be sufficient to cover the costs of all applicants.” If more than 200,000 people participate, the budget office said, “the available funds will probably be exhausted prior to 2013.” Consumers or states could then be left in the lurch, seeking other sources of coverage. Some governors cited this concern in deciding not to apply for federal money.'

And, despite what some believe, the program is not free. The New York Times reported: "Kären J. Larson, executive director of the Washington State Health Insurance Pool, estimated that 2,300 people would qualify. But she said premiums could be high — $800 a month for a 45-year-old buying a policy with a $500 deductible."

Chinese mutual funds invest in U.S. According to The Wall Street Journal: "Chinese investment funds are tiptoeing into the U.S. stock market, raising their holdings of U.S. companies as they seek diversification from their volatile home market and see better prospects in the U.S. than elsewhere in the world."

Money Express Takes Unexpected Turns
From Kabul To Who Knows Where The U.S. Money Is Moving
The mainstream media and the political class worry about deficits, laws, and who wins the election. But behind the curtain money moves in mysterious ways. And 2010 is no different than any other time in history.

The Wall Street Journal reported $3 billion have shipped out of Kabul in the last three years and eyebrows are rising, while it sounds as if public anger should rise as well.

According to The Journal: "The cash—packed into suitcases, piled onto pallets and loaded into airplanes—is declared and legal to move. But U.S. and Afghan officials say they are targeting the flows in major anticorruption and drug trafficking investigations because of their size relative to Afghanistan's small economy and the murkiness of their origins."

According to the report: "Officials believe some of the cash, if not most, is siphoned from Western aid projects and U.S., European and NATO contracts to provide security, supplies and reconstruction work for coalition forces in Afghanistan. The North American Treaty Organization spent about $14 billion here last year alone. Profits reaped from the opium trade are also a part of the money flow, as is cash earned by the Taliban from drugs and extortion, officials say."

And oh, yes, it gets worse. The Journal reports: ' More declared cash flies out of Kabul each year than the Afghan government collects in tax and customs revenue nationwide. "It's not like they grow money on trees here," said a U.S. official investigating corruption and Taliban financing. "A lot of this looks like our tax dollars being stolen. And opium, of course." Most of the funds passing through the airport are being moved by often-secretive outfits called "hawalas," private money transfer businesses with roots in the Muslim world stretching back centuries, officials say.'

And who's doing it? The Journal notes: "The officials believe hawala customers who have sent millions of dollars of their money abroad include high-ranking officials and their associates in President Hamid Karzai's administration, including Vice President Mohammed Fahim, and one of the president's brothers, Mahmood Karzai, an influential businessmen."

Mahmoud Karzai, brother of Afghanistan's president was interviewed on the subject by the Journal and told them that "millions of dollars are leaving this country but it is all taken by politicians. Bribes, corruption, all of it..." He also noted that the investigation should not be based on "rumors."

President Karzai, in a press conference allowed that "there's a possibility of corruption."

Officials say there is probably much more money leaving Afghanistan through its porous border.

Conclusion

O.k. we just fired a general for insubordination. And that's a good thing, from a constitutional stand point. But he, or his staff, reportedly called those in charge of U.S. policy in Afghanistan "clowns." Wonder if he knew anything about the money spigot in Kabul?

President Obama is about to raise American taxes significantly, by increasing health care costs, and by letting the Bush tax cuts expire, and by who knows what else. But in Kabul, they seem to be taking the money and running.

Meanwhile the answer to his deficit seems to be right under his fingertips in Afghanistan where a wealth of riches passes through the airport on a regular basis for points unknown.

Maybe President Obama should start figuring out how to tax the currency being trafficked. He set up a nice restitution fund for BP with the oil spill, so there is precedent for it now.

A billion here, a billion there, pretty soon you've got some real money and maybe we can apply what we collect toward the spiraling U.S. debt, being fueled by government spending.

We'll be on Twitter some time today before the market closes with some updated comments.

Know when to sell and how to make money when the market falls. Get a detailed trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for All Seasons. Also Available As Kindle Books.

 

Market Moves - Stock Of The Day
Are Shares Of Costco (Nasdaq: COST) Undervalued?
Shares of Costco (Nasdaq: COST) are testing their recent lows, but one store seemed packed to the rafters on a recent drive-by. Retailing stocks are getting hurt along with the market, but some may be doing better than others. And Costco may be one of them given the crowd of cars that we witnessed in the parking lot of the one near the Arboretum in Austin, TX.



Chart Courtesy of StockCharts.com


To be sure, translating a full parking lot into a rising stock takes some research. But, it can happen. When the recession was at its low-point, we started taking note of the number of cars in the drive-through window of a Starbucks (Nasdaq: SBUX) in the University Park, Northpark Mall area of Dallas.

It made no sense to us to see more and more cars waiting for expensive coffee as the econonmy worsened and the shares of the company made new lows.

But it kept on happening. It wasn't totally busy every time we passed by. But it became busy more often as time went by. So we started watching the stock. And after a few weeks, we noticed that shares of Starbucks began to move sideways.

The drive-through window remained busy. And the shares of Starbucks started to rally. After a while the company stopped closing stores and shares began to rise. Then came a couple of good earnings reports, and the shares really took off.

What's the moral of the story? Sales have to start with people coming to your store. And if Costco's parking lots are full, it stands to reason that some of those people in the store are buying stuff.

The key is to start watching the parking lots, go into the stores, see how many people are buying things, and what they're buying. Then start watching the stocks.

If you're doing your homework, chances are that the mutual funds and hedge funds are doing the same. Peter Lynch made a fortune in the 80s kicking the tires.

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