Bloomberg reported “Lehman Says It Bailed Out Money Market, Cash Funds.” (sorry, I misplaced the link) Here are some highlights:

Lehman Brothers Holdings Inc. bailed out five of its short-term debt funds, joining a growing list of securities firms and asset managers that have propped up investment vehicles crippled by frozen credit markets.

Managers of money market funds have spent more than $4 billion to prop up money funds that were supposed to have investments that were the safest outside of bank deposits and government debt.

This is the latest update I have found in a follow up to my previous post about the questionable security of high yielding money market funds.

Remember, the biggest investors in Subprime garbage were money market funds trying to enhance their yields. Again, if you haven’t done so, look into a U.S. Treasury money market option at your custodian. The Subprime mess is not over yet contrary to what you might think based on recent stock market behavior.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

General Electric’s report card pulled the rug out from the market today. All major indexes lost for the week.

Our Trend Tracking Index (TTI) for domestic funds/ETFs has moved now +0.19% above its long-term trend line (red), which means we are close to slipping back to the middle of the neutral zone.



The international index dropped to -5.65% below its own trend line, keeping us in a sell mode for that arena as well.



For more details, and the latest market commentary, as well as the updated No load Fund/ETF StatSheet, please see the above link.

Reader Mr. G had this to say about my post from last Tuesday:

Ulli: Yesterday you wrote, “Other asset classes have rallied strongly above their respective trend lines issuing a buy of their own. Today, we added a small holding in Latin America and in an Intermediate-term bond ETF.”

Please advise; thanks!

To clarify, I have always said that most country funds are a leveraged play on the United States. As such, I have used my domestic TTI, currently slightly above its long-term trend line, as my guide to determine whether to be invested in that arena or not.

Additionally, in my advisor practice, I also look at how an individual country ETF is situated in regards to its own long-term trend line and how it has performed in the past. Let’s take a look at a chart of ILF, in which now we have a small position:



Click to enlarge

As you can see, the price of ILF (green) has broken above its trend line (red) and pierced the upper envelope line (yellow) designed to minimize (but not eliminate) whip-saw signals.

Looking back over the past 4 years, we had 6 buy signals, of which 3 of them (50%) turned out to be profitable. In addition, the ratio from average wins to average losses was 1.9. In other words, for every dollar we lost, we gained almost two.

While it’s too early to tell how this position will work out, it details some of my thoughts and discipline I use to determine if a trend is in place or not. In this case, our sell stop is set and, if it gets triggered, we will head back to the sidelines.

The Fed released it March 18 FOMC minutes, and it was revealed that many Fed officials were of the opinion that an economic contraction was “likely.” This is not earthshaking news especially in view of the fact that Fed Chairman Bernanke has since uttered the “R-Word.”

The Fed is usually behind the curve with its facts and announcements as Calculated Risk recently reported when reviewing historical statements:

For the recession that started in April 1960:

“By and large, however, the economy seems quite solid.”
Federal Open Market Committee, May 1960

“[Chairman Martin] was by no means convinced that the situation was serious.”
Federal Open Market Committee, July 1960

“The Chairman reiterated his views … There was a declining picture, … but the economy was not going over a precipice by any means.”
Federal Open Market Committee, October 1960

For the recession that began in July 1990:

“In the very near term there’s little evidence that I can see to suggest the economy is tilting over [into recession].”
Chairman Greenspan, July 1990

“…those who argue that we are already in a recession I think are reasonably certain to be wrong.”
Greenspan, August 1990

“… the economy has not yet slipped into recession.”
Greenspan, October 1990

There you have it. It pays to make up your own mind and not to listen to at times undecipherable Fed speak, which seems to be in no way related to reality.

Bill Fleckenstein had some interesting thoughts in his piece titled “Our housing-bubble hangover.” Here are some highlights:

The market has been bouncing around on misplaced hopes that the Federal Reserve will somehow save the day. Beyond the din, it’s important to focus on one overarching fact: The fundamental problem in our country is the aftermath of the housing bubble.

We don’t need more regulation to solve the financial system’s problems. What we need is enforcement of the rules and laws already on the books. Had that occurred and had the Fed not pursued its practice of setting interest rates too low, this debacle could never have reached the mammoth size it did. But we are where we are: staring down a recession that intervention will not silence.

While this is a good analysis, we can’t ignore that fact that the market has a mind of its own and rarely acts in a way that is expected or pleases most investors. Given all the negative economic news of last week, including UBS’s $19 billion write-down, the market averages ‘should be’ down, but they’re not, and we find ourselves within shouting distance of a domestic buy signal.

This is why continue to advocate getting away from trying to analyze facts and opine about them as opposed to simply following price trends.

With that in mind, we got stopped out of our gold position last week. Other asset classes have rallied strongly above their respective trend lines issuing a buy of their own. Today, we added a small holding in Latin America and in an Intermediate-term bond ETF.

If the market holds at these levels, I suspect that we will get more buy signals in other areas as well, probably before our domestic buy is generated. We will ease our way carefully into those areas with upward momentum by using only a small exposure and adding to it once the trend has been confirmed.

As of yesterday, our Trend Tracking Indexes (TTIs) retreated slightly and are positioned as follows:

Domestic TTI: +1.13%
International TTI: -3.07%

Income investors looking for a higher yield are having a tough time since high yield equals high risk. Bloomberg reports that “Junk Bond Losses Top $35 Billion.” Here are some highlights:

High-yield, high-risk bonds are off to their worst start ever, and the biggest investors say there’s no recovery in sight.

The Cary, North Carolina-based company’s bonds plunged 24 percent in February, more than all but one other top-50 issuer in the high-yield market, according to Merrill index data.
…
The $3.4 billion Fidelity Advisor High Income Advantage Fund, which invests in high-yield bonds, preferred shares and convertible securities rated below investment grade, lost 7.52 percent this year. The $2.1 billion Oppenheimer Champion Income Fund, which mainly buys high-yield debt, has tumbled 13.1 percent.

The lesson here is that junk is junk. In today’s environment, it simply does not pay to take chances on getting a high yield and then seeing your principal drop precipitously. As I said before, if you need income, use a combination approach of selecting no load mutual funds/ETFs with acceptable dividends, but make sure that they are trending up.

How can you do that? Look at my weekly updated StatSheet, section 10 on Bond and Dividend paying ETFs, and examine those with a positive %M/A, which means closing prices are above their long-term trend lines. Click here to view the latest issue. Then use your favorite financial site to see what the current dividend payout is.