Investors 411 Blog

by Barr Jozwicki
November 28, 2008

Market Update – Citigroup Bailout

Author: Barr Jozwicki - Categories: Bailout/Stimulus - Tags: , , , , , , , , , , , , , , , , ,

Citigroup Debacle/Bailout

Why is Citigroup getting such a favorable deal in their 2 bailouts? – $45 billion plus a 300+ billion guarantee against bad loads (CDS’s).

No restructuring.
No new business plan.
No executive jobs lost.
No one held accountable.

AIG, Fannie & Freddie didn’t get this kind of sweetheart deal and relatively the auto industry is being raked over the coals for their bailout. John Podesta, the head of Obama’s transition team says Citi should be held "accountable "

A firestorm of controversy has erupted. On the surface Bush’s Secretary of Treasury Paulson looks like he’s giving sweetheart deals to his fellow bankers. (Paulson former CEO of Goldman Sachs.) He is. These were the crooks or idiots who got us into this whole mess in the first place.

But if you look beneath the surface the major players of the newly appointed Obama Economic team are up to their eyeballs in this mess.

Robert Rubin, who sat directly next to Obama when his first economic advisory group was announced is directly involved in the Citi sweetheart give away. Rubin was Clinton’s former Sec. of Treasury and the mentor for both Larry Summers and Tom Geithner. They hold the #1 and #2 positions in Obama’s new economic team. Rubin also holds a major post on Citigroup’s Board of directors – pay $15 million a year

  • Both Summers and Rubin endorsed moves that allowed Citi and so many others to merge and become "too big to fail."
  • Summers (Rubin’s protegee) endorsed and fostered the Credit Default Swaps and leverage schemes that are the root causes of the credit crisis.
  • Geithner who Rubin supported for his post at NY Fed was supposed to oversee Citigroup a NY bank.
  • Rubin talked directly to Paulson about the bailout of Citigroup, who has paid him $107 million over the years.

This is a blatant case of the foxes guarding the hen house. The Feathers are Freshly Falling From Feeding Foxes.

From the right a slash and burn by NY Post "Bounce These Bozo’s "
From the left a more responsible attack on Rubin and friends "Obama chooses Wall Street over Main Street "
From NYT’s Tom Friedman a broader explanation of the Citigroup failure and the breakdown of almost every level of the financial chain "All Fall Down ."

These giant monopolies that are too big to fail need to get broken up into pieces that can fail and do not require a taxpayer bailouts to survive. What’s happened to accountahbiltilty? Will Obama’s team institute the right regulations to govern financials? Time will tell if Citi & others will be held accountable, but right now the foxes are feeding.

We all hope Obama will bring change on January 20th. About the best you can say is Rubin does not have a major formal post on Obama’s team and there is opposition within Obama’s administration.

NB – Ex Fed Chair Paul Volker was put in charge of another Obama Economic committee. Volker is a great choice unlike the foxes involved in the Citi debacle.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Another Obama Rally

Index % Change Volume

Dow +2.91% down
NASDQ +4.60% down
S&P500 +3.27% down
Russell2000 +5.79% –

US Market & Foreign Markets

Technicals

Big rally in light reduced volume. Volume did NOT confirm the move higher.

Technically the volume behind the first few days of the rally is encouraging. Dow at 8,443. Dow 8923 is the first minor resistance level and the falling 50 day moving average at 9287 is the next. 9654 is the major resistance level (see chart of Dow below).

India markets gained almost 1% despite terrorist attack in Mumbai.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

- Obama holds a press conference on the Economy and the markets rally.

Today is a 1/2 day for the markets. Historically this 1/2 day has usually been good for the markets. Also November/December are usually good months for stocks.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a five weeks ago to @2 .17 LIBOR inched lower Wednesday. LIBOR rates have flattened over the last two weeks. LIBOR is the rate banks charge each other, not businesses. LIBOR 2.217 the AM.

The 3MTB fell from 0.10% yesterday and closed at a rate of 0.05% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – The situation is beyond dismal.

Sure looks like PANIC has returned to the credit markets again (check out chart)

3 MTB chart

LIBOR chart (3 month)

Spread sheet listing all the Treasury bonds traders of last 15 days. This gives a broader picture of the panic or lack of panic over US financial systems. This We will use the 3 MTB as a benchmark, but notice the 1 month MTB is down to 0.02% Not good.

Daily Treasury Yield Curve

Bottom Line – LIBOR (Interbank lending rate) falling helps Main Street’s a bit – Credit cards to adjustable mortgage rates are often tied to LIBOR. These is simply NO confidence in the credit markets. PANIC RULES

OIL

Chart of oil (WTIC)

The Dollar

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook

Reading the Tea Leaves – italics = same comments as yesterday.

Best guess – Rally looks to have legs to take out some minor resistance levels. We did take out some minor resistance levels Wednesday and historically today’s 1/2 day is usually positive. PANIC RULES the credit markets and its hard to see money flowing into stocks while so many potential investors are putting $ in treasuries at ridiculously low rates.

Going Out on a Limb – We will probably move higher in the short term. Dow at 8726. But, its hard to see the major 9654 resistance level fall and perhaps some of the more minor resistance levels will reverse the rally.

Long term – Bears Rule Trend is still firmly in place. When it looks like the sky is falling nibble a little. Even if you think Obama can walk on water this is one hell of a mess and there is NO quick fix.

The established technical trend is Bears Rule – A long term series of lower lows (in price) and lower highs. Until this pattern is broken, Shorting (See ETF’s suggested below) as markets get closer to old highs is recommended.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded

Technicals – Series of Lower Lows and Lower Highs = Bears Rule

Reading tea leaves – Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought.

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance – Long Term Investors (up to 15+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY.

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area

*5% Gold
GLD is the ETF for gold

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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November 26, 2008

Market Update – More Turkey’s

Author: Barr Jozwicki - Categories: Bailout/Stimulus - Tags: , , , , , , , , , , , , , , , , ,

Turkey’s of the Year (Decade?)

This elicited a whole bunch of email responses from you – Thanks for the email. More economic TURKEY’S OF THE DECADE – from you

  1. Most mentioned – 911 "Bush was caught with his pants down and stocks went up in flames."
  2. The housing bubble
  3. The internet bubble
  4. The growing gap between rich and poor
  5. Katrina’s "economic and human devastation"
  6. Bailouts – "The $6 trillion amounts to $24,000 for every citizen" (bailouts = tax dollars, sovereign wealth funds, takeovers, mergers, & biggest – Fed printing $)
  7. Trying to privatize Social Security and not fixing other future unfunded mandates.
  8. Alan Greenspan and the Fed

Bailouts and Stimulus

Many of you are extremely frustrated at the way government and the Fed is dishing out the dough. – You should be – We failed to properly regulate the credit system and now we and our children will be paying for it.

First it is important to remember that the Fed is NOT a government agency, but a group of banks that work with the government .

The main rational behind these bailouts and stimulus packages is at the start of the Great Depression President Herbert Hoover did nothing and banks collapsed left and right. This and the lack of stimulus caused/intensified the Great Depression. Roosevelt took many actions that diminished the Great Depression and the ultimate public works/jobs program – WW 2 ended the Great Depression. The Bush and Obama administration are trying to prevent another Great Depression.

Not All Stimulus Packages Have the Same Impact.

  1. Tax Cuts – Across the board tax cuts obviously benefit the wealthy more than everyone else (see countless past Updates). They do have a positive impact – the middle class goes out and spends the tax cut money and that stimulates the economy. During war you are supposed to increase taxes. During good economic times you are supposed to decrease deficits.
  2. Rebate Checks – This is a one time tax cut and has the same stimulative impact. Great positive impact for politician who voted to give you money.
  3. A Jobs Based Stimulus Program – Hopefully, Obama Stimulus Package – This is as close as you get to consensus among Economists.

According to a Univ.of MD. prof on ABC when you give a taxpayer cash he/she goes out and spends it and stimulates the economy. Not always the case with wealth individuals, but this economist put the true value of money given by the government at $125 for every $100 given. However, if you create a job, the true value of the same $100 dollars given becomes $325. – The worker builds a bridge and it has a much larger ripple effect from subcontractors getting payed, commodities being used to the fact that transportation flows better over the new bridge.

Economists might differ on the figure, but JOB creation is far more important economically than giving you your tax dollars. A second factor in this – unemployment compensation and lack of tax revenue from a jobless person. This increases the burden on those who hold jobs/pay taxes. Example auto makers and related industries loose their jobs it ends up costing you $200 billion in unemployment compensation, aid to the states involved & lost tax revenue. (see past Updates.)

(More to come on this)

Note #1 – The big downside of all stimulus and bailout plans is it adds to the deficit and/or long term inflation.

Note #2 – The only entity betting on America is YOU (the government/taxpayer) – If this all works we actually make money on all these loans. We need luck, new paradigms, new regulations, and enough people to believe Obama can walk on water to pull it off.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Happy Thanksgiving!

Index % Change Volume

Dow +0.43% down
NASDQ -0.50% down
S&P500 +0.66% down
Russell2000 +1.46% –

US Market & Foreign Markets

Technicals

US markets held onto their huge gains of the previous days yesterday and the benchmark Dow inched forward. Holding onto gains is a technical bullish sign.

Technically the volume behind the rally is encouraging. Dow at 8,443. Dow 8923 is the first minor resistance level and the falling 50 day moving average at 9337 is the next. 9654 is the major resistance level (see chart of Dow below) There is also a technical resistance level at around 8550 to 8600. This is the midpoint between the last high and low of the Dow. If you want to learn more about this 50% technical retracement theory (Fibonacci retracement ) being a resistance level.

What resistance levels are barriers that hinder the movement of prices going higher. They are called support levels as prices move down.

What needs to happen is for us to break the series of lower highs and lower lows that began over a year ago. Dow 9654 is that line in the sand.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

- Jobs data is going to get worse and this in the short and long term will drag markets down. This economic downturn is going to get worse before it gets better.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a four weeks+ ago to @2 .20. LIBOR inched higher yesterday. LIBOR rates have flattened over the last two weeks. LIBOR is the rate banks charge each other, not businesses.

The 3MTB fell from 0.13% yesterday and closed at a rate of 0.10% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – The situation is still dismal.

Sure looks like PANIC has returned to the credit markets again (check out chart) It eased a bit last two days

3 MTB chart

LIBOR chart (3 month)

New added spread sheet listing all the Treasury bonds traders of last 15 days. This gives a broader picture of the panic or lack of panic over US financial systems. This We will use the 3 MTB as a benchmark, but notice the 1 month MTB is down to 0.04% Not good.

Daily Treasury Yield Curve

Bottom Line – LIBOR (Interbank lending rate) falling helps Main Street’s a bit – Credit cards to adjustable mortgage rates are often tied to LIBOR. But by no means is credit back to normal.

OIL

Chart of oil (WTIC)

The Dollar

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook

Reading the Tea Leaves – italics = same comments as yesterday

Overall strategy remains in place – buy big dips, sell of short into major rallies. The current two day rally, while impressive has a ways to go before reaching a major resistance level (see above) The rally has a strong base (big volume) to build on.

Remember, more often than not new lows are tested

Short term – We are nearing the midway point of the technical trading range and this is often a resistance area. We do have at least a bear market rally that seems to be based on a more competent administration solving the greatest financial crisis since the Great Depression.

Best guess – Rally looks to have legs to take out some minor resistance levels.

Long term – Bears Rule Trend is still firmly in place. When it looks like the sky is falling nibble a little. Even if you think Obama can walk on water this is one hell of a mess and there is NO quick fix.

The established technical trend is Bears Rule – A long term series of lower lows (in price) and lower highs. Until this pattern is broken, Shorting (See ETF’s suggested below) as markets get closer to old highs is recommended.

NB – Will be adding GLD (gold) on dips to recommended sector. (More Later) Technically its chart has broken out of a trading pattern and fundamentally investors are thinking of it as a hedge against inflation. Market Updates held GLD for years and its time to bring it back.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded

Technicals – Series of Lower Lows and Lower Highs = Bears Rule

Reading tea leaves – Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought.

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to looks like the recession might will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance – Long Term Investors (up to 15+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY.

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5% + Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) (Obama administration will focus on this area )

*5% Gold
GLD is the ETF for gold

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 8,500 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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November 25, 2008

Market Update – Obama Rally

Author: Barr Jozwicki - Categories: Bailout/Stimulus - Tags: , , , , , , , , , , , , , , , , ,

Turkey’s of the Year (Decade?)

In honor of the upcoming Thanksgiving holiday – there have been two major blunders that easily qualify for Turkey of the year and also could make it into the top five economic blunders of the decade.

  1. Failure to Bailout Lehman Brothers – This spread $365 billion dollars of toxic debt (credit default swaps) throughout the world and shook financial markets to the core.
  2. The Paulson Bit and Switch – We were told that the financial system would meltdown unless we spent $750 billion to take "toxic debt" out of the financial system. Instead the money was used to bailout financial companies History will tell if this was the right move. However bait and switch destroyed any credibility that investors had that the Treasury and the Fed knew what they were doing or had some sort of coherent long term plan.

Three major economic blunders of the last decade do overshadow this.

  1. The massive growth of the unregulated and over leveraged credit in the USA
  2. The huge growth of Federal and trade deficits.
  3. An unnecessary "for profit" (Iraq) war that will end up costing tax payers $3 trillion dollars.

Citigroup’s Second Bailout

Obviously, some sort of bailout was needed or else the mother of all financial company’s meltdown would have caused financial markets across the world crash and burn. You (your tax dollar) have again bailed out and international company. Remaining questions:

  1. Citi still has an unknown and huge amount of over leveraged debt. Will they need another bailout?
  2. What other major banks and companies that traded CDS’s will need bailouts.
  3. Where is the transparency? Where’s the plan that this failed company is going to have for the future?
  4. Why did Warren Buffett get a better deal than US taxpayers?

Some decent editorials with more positives and negatives -
Another Crisis, Another Guarantee NYT
Citigroup Flop Exposes Folly of Empire- Building Bloomberg
Thumbs Up For Citigroup Bailout WSJ

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Obama Rally

Index % Change Volume

Dow +4.93% down
NASDQ +6.33% down
S&P500 +6.47% down
Russell2000 +7.44%–

US Market & Foreign Markets

Technicals

As predicted. the Dow support levels fell and all major US markets made a lower lows last week. (see charts) We have had a very significant two day "Obama" rebound The two day rally has had strong volume behind it. Therefore volume confirmed the move higher and we could see the rally get extended.

Technically the volume behind the rally is encouraging. Dow at 8,443. Dow 8923 is the first minor resistance level and the falling 50 day moving average at 9337 is the next. 9654 is the major resistance level (see chart of Dow below)

What needs to happen is for us to break the series of lower highs and lower lows that began over a year ago. Dow 9654 is that line in the sand.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

- Obama rally – In the last 1/2 hour of Friday US markets staged a major rally on the news that NY Fed Chair Tim Geithner would become Treasury Secretary. News that Obama’s news stimulus package would be bigger than expected, the announcement of his economic team, and another bailout for Citigroup added fuel to the rally.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a four weeks+ ago to @2 .17. LIBOR inched down yesterday. LIBOR rates have flattened over the last two weeks. LIBOR is the rate banks charge each other, not businesses.

The 3MTB bounced back some from 0.02% yesterday and closed at a rate of 0.13% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – The situation is still dismal.

Sure looks like PANIC has returned to the credit markets again (check out chart) It eased a bit last two days

3 MTB chart

LIBOR chart (3 month)

New added spread sheet listing all the Treasury bonds traders of last 15 days. This gives a broader picture of the panic or lack of panic over US financial systems. This We will use the 3 MTB as a benchmark, but notice the 1 month MTB is down to 0.01% Not good.

Daily Treasury Yield Curve

Bottom Line – LIBOR falling helps Main Street’s a bit – Credit cards to adjustable mortgage rates are often tied to LIBOR. But by no means is credit back to normal.

OIL

Chart of oil (WTIC)

The Dollar

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook

Reading the Tea Leaves – From last update – "Perhaps this week, maybe next week, maybe later but the major Dow support levels (8000 or 7800) are in trouble" The support levels did fall last week to 7449

Dow rebounded inhuge rally. Dow at 8443 – a little less that 1/2 way back toward the major resistance level at @ 9650 We have a another 500 points on the upside before we reach the first resistance level.

Overall strategy remains in place – buy big dips, sell of short into major rallies. The current two day rally, while impressive has a ways to go before reaching a resistance level (see above) The rally has a strong base (big volume) to build on. Remember, more often than not new lows are tested

Short term – We are nearing the midway point of the technical trading range and this is often a resistance area. We do have at least a bear market rally that seems to be based on a more competent administration solving the greatest financial crisis since the Great Depression.

Best guess – Rally looks to have legs to take out some minor resistance levels.

Long term – Bears Rule Trend is still firmly in place. When it looks like the sky is falling nibble a little. Even if you think Obama can walk on water this is one hell of a mess and there is NO quick fix.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded

TechnicalsSeries of Lower Lows and Lower Highs = Bears Rule

Reading tea leaves – Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Hopes of a more competent Obama administration have rallied stocks.

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance – Long Term Investors (up to 15+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY.

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*10%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 8,000 and uncertainty clouds the future.

The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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November 19, 2008

Market Update – Obama’s Personality

Author: Barr Jozwicki - Categories: Obama - Tags: , , , , , , , , , , , , , , ,

Big week in local politics and an art show = very few Market Updates this week. LAST UPDATE TILL TUESDAY.

Obama’s Character

Turning rhetoric into reality – You all remember Obama’s speech’s closing line – after pointing out divisions that separate Americans the it ends … this is the UNITED States of America. After 8 year of "your either with us or against us" Cheney/Bush Obama’s speech resonated. You can argue that this is a better or worse approach. Perhaps he should be a little more partisan or hard line. But his presidency is already taken three major steps to heal wounds and he certainly has a different vision.

  1. Invited McCain (former opponent) for a well publicized sit down
  2. Advocate Liberman (Dem. who publicly turned against him in election) keep his most important post
  3. Offered Secretary of State job to Clinton (former opponent)

Of course there are those that disagree. 5 reasons why Clinton should not be Secretary of State . (thanks for the email on this)

The Economic trends

Your jobs, your house’s value, Your money (stocks) – Job losses are feeding stock losses that are feeding falling home prices. In the last sentence you can put jobs, housing, and stocks in any order you want. Underlying this spiral is those Financial WMD’s- Credit Default Swaps

The status quo – Governments and other entities have thrown, printed, borrowed (your tax dollars) money. Paulson says his $750 bailout bait and switch has "stabilized financials." However, the financial group as a whole stocks are falling far faster than the DOW. Add to this housing prices continue to decline – relatively meager financial efforts to halt housing and foreclosure problems. Stocks have fallen to near lows of year. Unemployment is rising.

The entire auto sector and related industries are about to loose some or most of 3 million job – A bailout, Chapter 11, or Chapter 7? Banks are hoarding cash and not making anything close to normal amount of loans – this negatively impacts auto’s and all business throughout the USA.

We have two months of limbo before Obama takes office. Sure seems that this situation can and will deteriorate. The more it deteriorates the harder it is to fix.

The good news – Gas prices and a new administration (hope). Will Obama’s middle class tax cuts, a stimulus package and a proposed auto bailout turn the tide? Lots depends on the details of these plans.

So You’re an Environmentalist

Don’t need to tell you about the last eight years under Cheney Bush and the lack of progress on everything from pollution to global warming. But have you considered another group of politicians who have put major road blocks to environmental progress and in doing so lined the pockets of petro dictators. – The entire (mostly Democrats) Michigan political delegation. Tom Friedman editorial

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow +1.83% up
NASDQ +0.08% up
S&P500 +0.98% up
Russell2000 -0.84%–

Headline – (Still) Support Challenged

US Market & Foreign Markets

Technicals

Number to watch is Dow 8,000 support level

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

- See Economic Trends above.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a three weeks ago to @2 .2 LIBOR inched down yesterday. (sorru do not have exact figure)
LIBOR at 2.13% according to talking head on financial channel this AM. – Moving in right direction.

The 3MTB bounced back some +22.22% yesterday and closed at a rate of 0.11% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – A little stability, but situation is still not good

Sure looks like PANIC is starting has returned to the credit markets again (check out chart)

3 MTB chart

LIBOR chart (3 month)

Bottom Line – LIBOR falling helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Chart of oil (WTIC)

The Dollar

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook

Reading the Tea Leaves – Perhaps this week, maybe next week, maybe later but the major Dow support levels (8000 or 7800) are in trouble Jobs, Housing and stocks are all in a downward spiral.

Personally – For now – I’m making sure my long term positions have some sort of protection. (leaving for art show and downside risk of Dow 8000 falling too great)

Shorting rallies with ETF’s listed below

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded

Technicals – Double bottom has formed, advance in strong increased volume,. Technically all this = at least a short term rally and maybe a long term bottom.

Reading tea leaves – Look for range between 8000 and 10,000 for rest of year. Very concerned 8000 Support level will NOT hold

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance – Long Term Investors (up to 10+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%

For now - PROTECT ANY LONG POSITIONS.

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*10%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 8,000 and uncertainty clouds the future. The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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November 17, 2008

Market Update – Duck and Cover

Author: Barr Jozwicki - Categories: Bailout/Stimulus - Tags: , , , , , , , , , , , , , , , , , , ,

Big week in local politics and an art show = very few Market Updates this week

Duck and Cover

Taking Your Job, Your Home, & Your Money

Aside – Note well the correlation between falling stock and home prices. As stock prices fall investors have less money to buy homes and fewer homes get sold. Also the more unemployment rises the greater the foreclosure rate and stocks get toasted too. All three are tied together.

July & October 2007 Dow goes over 14,000 – Then -

  1. Investors slowly began to realize that the goose that had laid the golden eggs has died and the housing bubble has burst.
  2. Slowly again investors realized there were "Financial WMD’s" (Warren Buffett’s words for Credit Default Swaps – CDS) out there deeply over leveraging the subprime mortgages.
  3. Next we learned the unregulated $50 to $70 trillion CDS market involved not only on mortgages, but everything from car loans to credit cards.

The FIX is in as Dow falls to @11,000

The Fed Prints money, Sovereign Wealth Funds buy, Mergers, Your bailout tax dollars, Lower interest rates and a whole lot more occurs globally to fix the housing and unregulated CDS problems

One Big hole in the Dike.

Opps, Nobody comes to the rescue of Lehman Brothers and the 4th largest investment bank goes into bankruptcy. They are so loaded with WMD’s or CDS’s that Lehman Brother’s bond is only worth 8.675 cents on the dollar. LINK $365 billion of over leveraged debt (CDS) is released throughout the world. Immediately London goes limit down (8.9) before stocks open in mid October. Two days after the dust clears the Dow looses about @ 900 points. Investors still believe that the $750 taxpayer bailout will take toxic debt out of system.

Bait and Switch Taxpayer Bailout

Secretary of Treasury Paulson instead of using money as intended to take toxic debt out of the system gives it to mostly big banks. There is no oversight, little transparency in this move which oversteps Paulson’s authority. The banks hoard the $ instead of making new loans. Even Barney Frank who should be and busting blood vessels screaming about this, is just saying "this is not what we intended this money to go for." Brain dead american public/media is busy watch pretty pictures of Obama family and following Brittany Spears Sarah Palin adventures.

Why is there so little objection to Paulson’s probobly criminal move? Probably because without the infusion of your tax dollars (bailout money) these financial stocks would crash and burn because they are loaded with CDS’s. This would send stocks into a massive fall and the 8,000 Dow technical support level would now be a cinder.

Last two weeks – Dow fall @ 12+% from its high

Three HUGE companies that lead three major sectors of the economy are slammed. They all have one thing in common. They are loaded with financial WMD’s of CDS’s.

  1. GE – chart falls @25% twice what the Dow fell in last two weeks. GE Financial is loaded with CDS’s or WMD’s
  2. Citigoup – chart falls @35% The mega bank loaded with CDS’s announces 40,000 jobs cuts today
  3. GM – chart falls over 50%. GMAC – their financial division is loaded with CDS’a or WMD’s. Will the entire auto sector go bankrupt like Lehman Brothers?

Jim Cramer (CNBC Mad Money Friday night) computes that Lehman’s Brothers bankruptcy cost the Dow about 15% and a GM bankruptcy would cost the Dow down another 30%.

Would you lend money to any of these companies? Warren Buffett loaned billions to GE, but since then their stock is down @35%

Fear Returns to Credit Market

See LIBOR and 3 Month Treasury Bill commentary below.

Standing on the Edge of a Cliff

Bottom Line – We’re standing on the edge of a cliff. Technically we are @500 points away from the last line in the sand support level for the Dow at 8,000. There s one ledge on the cliff that says nasty long recession. The abyss is a depression.

This is not the time to be Long Stocks, unless you have short positions that protect these long positions. There are just too many things that have to go right for us to fundamentally hold the 8,000 support level. Who were the institution(s) that bought the last time at 8,000. one totally wild proposition is the Treasury or the Fed somehow stepped in and bought or encouraged (twisted arms) institutions to buy at Dow 8,000.

Please somebody talk me down from the edge. Till then BEARS RULE and at some point in time the 8,000 support level will collapse. Housing will continue to decline. Even if Obama can walk on water (he can’t) his administration is two months away. The worst is yet to come.

I know I’m sounding like Dr Doom, (Nouriel Roubini) so let me put the icing on this dark cake. Scroll down a little and look at this chart of consumer spending since 1993 to present.

When we fall which ledge will we hit?

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -3.82% down
NASDQ -5.00% down
S&P500 -4.17% down
Russell2000 -7.07% –

Headline

US Market & Foreign Markets

Technicals

[From Friday -"Yesterday's rally was all about the technical aspects of the market and had little to do with fundamentals."]

About 2/3 of Thursday’s gains were wiped out (in lower volume) = Bad news for Bulls – Benchmark Dow down 5% for week.

Asia closes slightly higher overnight. China leads up + 2.22%

Futures on the Dow down about -2% at 9:00 AM EST.
Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

See above editorial.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the tail won’t wag.

Real progress WAS being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a three weeks ago to 2 .24. However, The last four days the LIBOR has started to rise again. This rise is accelerated. NOT good news for Bulls

LIBOR at ___? this AM. # comes out at 9:00AM EST.

The 3MTB fell -31.58% yesterday and closed at 0.130% The Fed rate is 1.00% The rally is good news, but it is well below the 0.20% support level. A normal 3MTB would be just under the Fed rate.

Sure looks like PANIC is starting to envelop the credit markets again

3 MTB chart

LIBOR chart (3 month)

Bottom Line – LIBOR falling helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX
Short Term Outlook
= NASDQ broke support and closed at a new low. Other major indexes within 2% of closing lows

[Repeat] The overall problem that America has is consumers and government are over leveraged. American’s have borrowed and spent their way into massive debt.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded .

Technicals
- Double bottom has formed, advance in strong increased volume. Technically all this = at least a short term rally and maybe a long term bottom.
Reading tea leaves
- Look for range between 8000 and 10,000 for rest of year. Very concerned 8000 Support level will not hold.
Fundamentals
- Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing.

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance – Long Term Investors (up to 10+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10% PROTECT ANY LONG POSITIONS .

*5%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*10%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 9,000 and uncertainty clouds the future. The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do – Long term traders should use these ETF’s when markets get close to major resistance levels.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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November 14, 2008

Market Update – Happiness

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , ,

Your emails – Thanks for all the emails and I will reply to each one. Sometimes it takes a while. The following is from one of your emails.

Keith Oldberman on Happiness

This editorial is about being less alone in the world, compassion, love and the human heart. The world is so full of hate and meaningless division – why not spread happiness. This YouTube video really is worth the six minutes video.

This editorial is to powerful to write about anything else.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING
Index % Change Volume

Dow  +6.67% up
NASDQ  +6.50% up
S&P500  +6.92% up
Russell2000 +8.48%

Headline – Fear and Greed
Anatomy of a HUGE Technical Rally

US Market & Foreign Markets

Technicals

Note – if you do not understand any of the terms used go to Investopedia.com’s dictionary and look them up.

Yesterday’s rally was all about the technical aspects of the market and had little to do with fundamentals.

Markets began the day oversold. They began to drop. One by one key support levels for the four major indexes began to fall. (see yesterday’s Updates for details) The NASDQ broke support levels yesterday, New lows for small caps, then new lows for the "old benchmark" S&P 500. When the S&P support level broke there was a lot of automatic sell orders that flooded the market. These are called stop/loss orders. Fear flooded the market and there was almost an immediate drop. By 1:00 PM EST the Dow had fallen 300 points.

However, at Dow 8000 (the Dow is the new "benchmark" because all the media uses it to define what’s happening) which was just about the last line in the sand or support level  – major institutions started to buy at about 1:00 PM EST.  The fear had all been washed out of the market and when this support was established a rally occurred because no sellers were left Within 45 minutes stocks were back to even.

Technical investors realized that the lows had been tested and held. Then in an instant like that greed took over. By 2:00 the Major indexes were back to flatline or zero losses.  Technical traders realized that the major players were willing to support the market at Dow 8,000 and jumped in to get aboard the rally/greed train. They realized that everyone who was going to sell had already sold panicked and sold when the markets dropped 300 points. So from 3:00 to 4:00 PM EST the Dow moved from 8350 to 8835 as everyone jumped on the rally train.

Volume was increased and well above average.  This confirms the move higher and means there should be some sort of follow through to this move.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

Have NOT changed! Who knows what the jobless picture will be in 2009 (somewhere between 7% and 10%) Housing prices have fallen about 20% and have perhaps another 15% to go (guesstimate of compilation of experts out there) There are a mountain of negative fundamental factors out there. In the long term fundamentals move the market.

Obama brings with him the hope of change, Hope is great, but trust in fundamental substance and don’t get too excited about one or two day massive moves. Especially moves that are technically based.

Big G-20 (USA and 19 other countries on economics) conference over weekend.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a three weeks ago to 2.15% yesterday. However the last two days have seen a very slight rise in LIBOR.

LIBOR at___? this AM.

The 3MTB rose +35.17% yesterday and closed at 0.190%  The Fed rate is 1.00% The rally is good news, but it is still below the 0.20% support level. A normal 3MTB would be just under the Fed rate.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – LIBOR falling helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Oil prices rose with stock prices +5.16  Oil is now at $59.06 a barrel.

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook = NASDQ broke support and closed at a new low. Other major indexes within 2% of closing lows
Reading The Tea Leaves  – Big volume rally changes short term momentum to bulls

Going out on a Limb – All the other major indexes did break support, but the Benchmark Dow held.  First crucial resistance level is 9764.

Today is a confirmation day of yesterday’s rally. If we loose less than 1/2 of gains that’s still acceptable, especially if volume is light. If we close flat that’s good. If we rally that’s better. If we have another huge rally to the 9764 resistance level that’s great.

But in the long term you need fundamentals to confirm the rally. When we get close to 9764 it will be time to add short positions.

Traders -   Buy the Dip & Sell the Rallies – Selling short positions proved to be the right move. [From yesterday "why be greedy" - sell 1/2 short positions]

Long Term Investors = Buy the Big Dips – [From yesterday - "Time to start thinking about nibbling a little"]

[Repeat] The overall problem that America has is consumers and government are over leveraged. American’s have borrowed and spent their way into massive debt.

FXI The ETF for China has been added to list of recommended ETF’s

China was able to offer a 20% of GDP stimulus package, has no debt and should recover from an economic meltdown far faster than the USA. This country is not over leveraged. Their chart (technicals) shows a breakout from a consolidation pattern in huge volume.

The downside of a China investment is they are huge polluters.

EWZ (Brazil) This chart is looking better than US markets. Notice Brazil unlike the USA was not even close to testing its lows yesterday. The chart is not as technically sound as China’s. Caution here is Brazil is going to be far more volatile than the USA.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line section bolded .

Technicals -  Double bottom has formed, advance in strong increased volume,. Technically all this = at least a short term rally and maybe a long term bottom.

Reading tea leaves – Look for range between 8000 and 10,000 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

Fundamentals -  Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing

We are in a recession.  How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50%  to 90%  Cash – This depends on your risk tolerance – Long Term Investors (up to 15+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%

*10%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)

*5 10% + Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
FXI (China ETF)

*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 9,000 and uncertainty clouds the future.  The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more.  Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do – Long term traders should use these ETF’s when markets get close to major resistance levels.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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November 13, 2008

Market Update – Bailout is a Mess

Author: Barr Jozwicki - Categories: Bailout/Stimulus - Tags: , ,

The Inspector General of the Treasury Department says the bailout "is a mess."

Treasury (Paulson) has taken "no formal action" to fill any of the oversight posts that congress mandated. Story LINK

Paulson (former chair of Goldman Sachs) seems to just be throwing $ at his buddies sot they can get big bonuses and pay shareholders big dividends.

Barr

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November 12, 2008

Market Update – Hot Flat and Crowded

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

"Hot, Flat and Crowded"

The World is Flat helped millions o Americans see globalization in a new way. Now Tom Friedman (NYT’s 3 time Pulitzer Prize winner)brings a fresh outlook to the energy and climate crisis. Hot, Flat and Crowded defines why America must lead the world in energy technology.

Bottom Line

We either lead the world in creating alternative energy solution and technology – This will create wealth, jobs and make us lessen our dependent on petro dictators
or
We fight an endless series of unilateral oil wars (like Iraq) that further bankrupts our nation and makes us enemies with the rest of the world.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -1.90% up
NASDQ -2.22% up
S&P500 -2.20% up
Russell2000 -2.19% –

Headline – Support Levels Will Fall

For Long Term Investors

The technical range of the DOW is between 9764 and 7774 . (see chart) Right now we are at 8694. The lower the DOW (and other indexes) goes the better the "Buy the Dip " strategy becomes. Right now we are a little closer to the 7774 number. Yes we could break down through that number. However, if you are holding onto stocks for many years the closer we get to 7774 the better the long term buy.

Remember this is going to be at best a recession that will probably extend at least through 2009. It’s going to get worse before it gets better. The Doom and Gloom crowd is no longer talking about 8% unemployment next year, but 10%.

What generally to buy is economies (those with little debt and stronger growth) and sectors that are going to lead when a recovery occurs. (more on this later)

Best guess is that we re going to retest lows.

US Market & Foreign Markets -

Technicals – [From Tuesday - Major support level S&P 900 and 8637 Dow ] Major support levels were breeched interday, but markets closed almost directly on these levels S&P at 899 and Dow at 8694.

All markets are interconnected . Asian markets flat overnight

Volume was higher,but still well below average. Therefore volume only partly confirming the price move lower. This also indicates that the retail investor wants absolutely nothing to do with stocks.

Fundamentals -

Fannie Mae and Freddie Mac (quasi government agencies) yesterday combined with private banks to "accelerate anti foreclosure efforts". This announcement was worth 300+ points on the Dow. Good to see government and finally private banks starting to work together (Hope Now Alliance) to solve housing subprime problem. Bloomberg news LINK

We are beginning to see a little dribble of help from major banks – good news

The major problems with constructive moves that help troubled homeowners is that they take TIME to work.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.18% yesterday.

That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR at 2.133% this AM. Again good news for credit and stock markets. This has to be about 20 days in a row that LIBOR has fallen. The rate of change (how fast LIBOR is falling) is decreasing = not good news

The 3MTB stabilized right at its support level. This time a significant -0.05% to +0.195%. The Fed rate is 1.00% A falling 3MTB is NOT good news. If the 3 MTB falls significantly from this support level it indicates investor panic has returned and is bearish news for stocks. Translation potential investors are willing to pay 0.195% to have a safe place for their $ for 3 months.

It is critical that this support holds

3 MTB chart

LIBOR chart (3 month)

Bottom Line – This helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Oil prices fell -4.94%. Oil is now below $59 a barrel. Perhaps 75% of oil move is Dollar goes higher = Oil goes lower.

There is a short squeeze on in oil – futures expire next Monday and traders could try to push oil prices lower (below $55).
Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX obviously moving back up

Chart of VIX.

Short Term Outlook = Technicals – support levels held as S&P and DOW closed at or above major support. NASDQ did break support level.

Reading The Tea Leaves – Today AGAIN is one of those days that could define the near term trend. The 8637 is the Dow support level (last week’s low) that has to hold The benchmark S&P 500 support level is 900 and the S&P closed at 899 (see charts) If these levels fall we will probably retest the 7800 lows.

The technical 9764 resistance level held and the predicted post election dip materialized yesterday. Failure to break out through Dow 9764 (see chart) resistance level means new range for stocks is between 9764 and 7774.

For now support levels have held. This is good news for bulls. However it is impossible to predict hedge fund redemption. Hedge funds like everyone else are having problems borrowing $ and when fat cat investors ask for redemption they have to sell stocks. This is a fundamental that is killing rallies.

Going out on a Limb – Too much technical downside momentum – looks like support will NOT hold.

Traders – Buy the Dip & Sell the Rallies

Long Term Investors = Buy the Big Dips

[Repeat] The overall problem that America has is its consumers and government is over leveraged. American have borrowed and spent their way into massive debt. The shop till you drop consumer was too dependent on the credit card and all this debt (card, mortgage, federal ™) has got to face reality.

Economically, Main Street is no where near out of the woods. But there is hope.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

Changes to Bottom Line Section Bolded

Technicals – Double bottom has formed, advance in strong increased volume,. Technically all this = at least a short term rally and maybe a long term bottom.

Reading tea leaves – Look for range between 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook. Dow close Below support of 8637 or 900 on the S&P = BEARS RULE Long Term Outlook

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance Long Term Investors (up to 10% stocks – only buy big dips) Wait for the next big dip to add 5%

*10%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)
*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 9,000 and uncertainty clouds the future. The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do -
TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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November 11, 2008

Market Update – Economics 101

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

Obama Across the World

The following link is the front pages of over 800+ newspapers across the world on Obama’s historic victory . You can click on each front page to enlarge that specific front page.

Enjoy this now, because the economic problems out there are huge, and its going to get worse before it gets better.

If link does not work try – http://obama2008.s3.amazonaws.com/headlines.html

Screaming at the Tube Doesn’t Work.

Secretary of State Paulson’s hidden $140 billion dollar tax shelter for banks received minimal coverage in mainstream media. Instead of the hidden $140 billion dollars big banks received the media focused on the photo the Bush’s and the Obama’s meeting and touring the White house. Screaming at the TV did not seem to change this.

A Deal?

Rumors that Bush will support a government auto loan/bailout and a stimulus package if a Columbia free trade agreement is included. (NYT) The Dems are idiots if they do not accept this. The quicker any stimulus and loan plan is put in effect the sooner more jobs will be created and the sooner we have a chance of getting out of a recession.

Everybody from auto Unions to the Politicians need to bend. (see weekend’s Updates)

Here’s a problem – The Wall Street bailout is not working like it was suppose to. US banks are hoarding the cash not making loans. Guidelines on forcing baks to make loans are being finalized – but it need teeth. Bailing out Main Street with a stimulus and auto loan package could suffer the same fate. Speed is essential, but so are the details.

Economics’ 101

Why are almost universally developed countries across the world creating stimulus packages, printing money, cutting taxes, and lowering interest rates? This is basic economics 101. It is what you do to prevent a recession. In good times you reduce the deficit like Clinton did. Over the last 5 years we have had economic good times and Cheney/Bush increased the deficit. Add to this the Cheney/Bush unjust and unnecessary Iraq war will end up costing trillions.

China just put $600 billion into their stimulus plan. That’s 20% of their yearly GDP. That would be like an almost $3 trillion dollar stimulus plan in the USA. Why aren’t we offering Main Street huge sums like this? One major reason is that Cheney/Bush have created a huge trade and government deficit. China can throw another $600 billion at their problem because they have a surplus and not a debt.

Deficits like credit card debt are bad. But right now its a question of do you let the economy collapse into another Great Depression or stimulate it and get a nasty recession

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -0.82% down
NASDQ -1.86% down
S&P500 -1.27% down
Russell2000 -1.51% –

Headline – Will support hold?

US Market & Foreign Markets -

Technicals - [From Monday - Mea Culpa -"Stocks and commodities will climb on the huge China stimulus plan."] Major US markets rallied in the AM and fell in the PM in extremely light volume. Volume is NOT confirming any price moves. The only people that are in this market are short term traders and long term investors who simply refuse to sell.

All markets are interconnected. Asian markets last night – China down – 1.66%, Korea -4.77%, & Japan -3.00%. Europe is down -1% to -2%

Fundamentals – Looks like the GM and Jobs news overwhelmed the huge China stimulus package. What’s happening is all the talk of new stimulus plans, more tax cuts, a GM bailout has a negative short term impact. You retail investor (you and me) gets really worried when it sees all that’s being done and our confidence in the future (consumer confidence) falls.

Bond markets are closed and stock market is open. Sometimes this can lead to major swings.
Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.235% yesterday.

That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR at 2.175% this AM. Again good news for credit and stock markets. The rate of change (how fast LIBOR is falling) is decreasing = not good news

The 3MTB fell again. This time a significant -31.03% to +0.200%. The Fed rate is 1.00% A falling 3MTB is NOT good news. Danger Will Robinson Danger Danger +0.20% is a major support level and if this falls today it means panic is back in the credit markets.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up especially in Europe. This helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Oil prices rose a rose +2.24% . Most of this movement is related to short term traders making bets on of the dollar. Dollar goes higher = Oil goes lower.

There is a short squeeze on in oil – futures expire next monday and traders could try to push oil prices lower (below $55). Oil is down below $60 this AM.

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX obviously moving back up

Chart of VIX.

Short Term Outlook = Technicals show uncertainty (low volume) = the two week long rally is in trouble.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves – Today is one of those days that could define the near term trend. The 8637 is the Dow support level (last week’s low) that has to hold Dow is now at 8760 The benchmark S&P 500 support level is 900 and the S&P closed at 919 (see charts) If these levels fall we should retest the 7800 lows.

The technical 9764 resistance level held and the predicted post election dip materialized yesterday. Failure to break out through Dow 9764 (see chart) resistance level means new range for stocks is between 9764 and 7800.

It looks like the bears have a shot at regaining control.

Traders – Buy the Dip & Sell the Rallies

Long Term Investors = Buy the Big Dips

The overall problem that America has is its consumers and government is over leveraged. American have borrowed and spent their way into massive debt. The shop till you drop consumer was too dependent on the credit card and all this debt (card, mortgage, federal ™) has got to face reality.

Economically, Main Street is no where near out of the woods. But there is hope.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

Changes to Bottom Line Section Bolded

Technicals – Double bottom has formed, advance in strong increased volume,. Technically all this = at least a short term rally and maybe a long term bottom.

Reading tea leaves – Look for range between 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook. Dow close Below support of 8637 or 900 on the S&P = BEARS RULE Long Term Outlook

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance Long Term Investors (up to 10% stocks – only buy big dips) Wait for the next big dip to add 5%

*10%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)
*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 9,000 and uncertainty clouds the future. The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do -
TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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November 10, 2008

Market Update – China’s 600

Author: Barr Jozwicki - Categories: Uncategorized - Tags: , , , , , , , , , , , , , , , , ,

How to Fix The Economy

Best editorial out there on how to fix American economy by former Labor Secretary Robert Reich. Reich, one of Obama’s advisors, is a dark horse candidate for Treasury Secretary who should be one of the favorites.

Obama should add a few people to his economic team like Nobel prize winners Joe Stigletz and Paul Krugman. Also, George Soros, (hedge fund manager) who wrote a book predicting the financial meltdown would add diversity to this group. What’s wrong with nobel prize winners and a someone who had the foresight to predict what would happen?

Really hope you read Reich editorial so here is complete email address – http://tpmcafe.talkingpointsmemo.com/2008/11/09/the_mini_depression_and_the_ma/

Bank’s "Quiet" $140 Billion

Wa Po front page has a focus on how Sec. of Treasury Paulson, in the middle of the bailout crisis, snuck in an extra $140 billion for big banks .

Meanwhile In Iraq and Afghanistan

Iraq and Afghanistan used to be the focus of this political section. Will get back to these issues this week

Rambo and the Internet

Rahm Emanual is an excellent choice for Obama’s chief of staff. Center/left Democrat who held the#4 position in the House. Nicknamed Rambo because he gets results and many Dems owe their election to him. In getting legislation passed he is a valuable asset.

Obama’s secret weapon is the Internet. His list of 3.2 million donors is also a huge asset in getting things done/legislation passed. Imagine a congressman getting pressure from 10,000 Obama supporters in her/his district from Obama’s internet list. More on Obama and Internet at BusinessWeek and NYT

Lots of you have sent in emails with links on various issues to try to influence Obama and his folks. Main LINK to Obama site is http://change.gov/page/s/yourvision

One on foreign policy
One on the environment

Pentagon Board – "Cuts Essential."

The current military budget is "not sustainable" (Defense department Business Board) and suggest cuts in "costly troubled weapons systems." Boston Globe story

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow +2.85% down
NASDQ +2.41% down
S&P500 +2.89% down
Russell2000 +2.01% –

Headline – $600 Billion/China

US Market & Foreign Markets -

Technicals – [From Friday - "Bottom Line - This is a major support level that should hold."] Friday’s technical price support level did hold despite some extremely bad news (auto & jobless data)

All markets are interconnected. Japan +5.81% Korea +3.52 China +7.27%

Europe is up 3 to 5 % on the China Stimulus news. (see below) This should rally American markets

Friday’s rally almost all came in the last 1/2 hour of trading. The volume was weak and less than the day before. Volume did not confirm the move higher.

Fundamentals – China joined Japan and announced a stimulus package. China’s $600 billion stimulus plan relative to the size of their economy is much larger than ours. Of course, China did not run up the huge debt that the US did under Cheney/Bush. They built up a surplus during good economic times and when times get tough you borrow/stimlate. (Economics 101)

Sometimes it takes time for bad news (auto and jobless #’s) to sink in. Having a weekend for investors to think about how bad/long the recession might be may discourage some more long term investors. However, the volume figures indicate that right now only traders are playing the market. Investors have shown no signs of having retuned.

AIG got a new loan bailout package – the terms are much better for AIG. Good for AIG, their creditors & stock markets. The $40 billion more shows just how bad the AIG (credit default swaps) problem was. They must have read the Market Updates Sunday editorial that advocated a change of terms (a joke). AIG up 20 to 30% in pre market trading. This is really a bailout/loan of AIG creditors, not just AIG.

GM way down 20% this AM in pre market trading.

NB – Mea Culpa – In weekend editorial I put auto company closing at a 1 to 2+ million job loss. Right wing commentator on CNBC, Joe Kernan, put the number at 3 million jobs. Gov. of MI (pro auto bias) says auto industry impacts 1 in 10 jobs.

Bottom Line – Put your rally caps on. Stocks and commodities will climb on the huge China stimulus plan

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.29% yesterday. That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR at 2.24% this AM. Again good news for credit and stock markets.

The 3MTB fell -7.11% to +0.290%. The Fed rate is 1.00% A falling 3MTB is NOT good news,but a -7.11 fall is minor relative to recent volatility.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up especially in Europe. This helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Oil prices rose a fell +0.27% and consequently the dollar rose. Most of this movement is related to short term traders making bets on of the dollar. Dollar goes higher = Oil goes lower.

Oil up +5% in pre market trading (again China stimulus package the reason for this jump)

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX obviously moving back up

Chart of VIX.

Short Term Outlook = Rally goes on until it hits resistance Resistance Levels.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves – Once again its foreign markets (China’s huge stimulus plan) that’s leading US markets higher. Emerging markets led US markets throughout the Cheney/Bush administration.

The technical 9764 resistance level held and the predicted post election dip materialized yesterday. Failure to break out through Dow 9764 (see chart) resistance level means new range for stocks is between 9764 and 7800.

Personally "my long term investments are now 10+% stocks. .

Traders – The spreads in the credit markets are narrowing and another stimulus package is probably coming. = Buy the Dip & Sell the Rallies

Long Term Investors = Buy the Big Dips The overall problem that America has is its consumers are over leveraged. American have borrowed and spent their way into massive debt. The shop till you drop consumer was too dependent on the credit card and all this debt (card, mortgage, federal ™) has got to face reality.

Economically, Main Street is no where near out of the woods. But there is hope.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

Changes to Bottom Line Section Bolded

Technicals – Double bottom has formed, advance in strong increased volume,. Technically all this = at least a short term rally and maybe a long term bottom.

Reading tea leaves – Look for range between 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

Fundamentals - Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

50% to 90% Cash – This depends on your risk tolerance Long Term Investors (up to 10 to 15% stocks – only buy big dips) Wait for the next big dip to add another 5%
*10%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk

*5%+ Alternative Energy

GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 9,000 and uncertainty clouds the future. The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do -
TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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