Investors 411 Blog

Obama’s First major address/interview since the inauguration is to the Muslim world. Bravo. Finally we have the beginning of a serious effort to improve the lives and win the hearts and mind in the Muslim world.

A quotes from the address on terrorist groups -

"…their ideas are bankrupt. There’s no actions that they’ve taken that say a child in the Muslim world is getting a better education because of them, or has better health care because of them.

In my inauguration speech, I spoke about: You will be judged on what you’ve built, not what you’ve destroyed. And what they’ve been doing is destroying things. And over time, I think the Muslim world has recognized that that path is leading no place, except more death and destruction.

Now, my job is to communicate the fact that the United States has a stake in the well-being of the Muslim world, that the language we use has to be a language of respect. I have Muslim members of my family. I have lived in Muslim countries…..

what I want to communicate is the fact that in all my travels throughout the Muslim world, what I’ve come to understand is that regardless of your faith – and America is a country of Muslims, Jews, Christians, non-believers – regardless of your faith, people all have certain common hopes and common dreams.

And my job is to communicate to the American people that the Muslim world is filled with extraordinary people who simply want to live their lives and see their children live better lives. My job to the Muslim world is to communicate that the Americans are not your enemy"

To read the whole interview, click Obama’s address to Muslim world .

Going to London and Paris over holidays. May be able to send abbreviated Updates from Europe. Otherwise no Updates till Jan 5th.

HAPPY HOLIDAYS!

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Santa is Applying for a TARP Loan

Index % Change Volume

Dow -1.18% down
NASDQ -0.71% down
S&P500 -0.97% down
Russell2000 -1.35% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

The Dow fell for the fifth day in a row and took out its support level of 8500. Dow at 8419 The other indexes are still above their respective short term support levels. Volume was weak/decreased and therefore did not confirm the fall.

Historically light trading for this and next week. Still if the Dow drags the other indexes along with it we are looking at challenging last years lows.

Foreign markets are reflecting the fall in the Dow.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals-

Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’ economic team & his proposed stimulus package.

Holiday’s – Bah Humbug

From Reuters a consensus outlook . US GDP down 6% in this quarter. Down 2% next quarter and a weak recovery at the end of 09.

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 is being made. LIBOR has fallen from 3.4% two months ago to about 1.47% LIBOR rates are on their second leg down and have again fallen significantly. LIBOR is the rate banks charge each other, not businesses. Some credit cards, loans and mortgages are tied to LIBOR so this is good news. Some credit cards & mortgage rates are tied to Fed prime rate.

LIBOR chart (3 month)

Treasury Bonds

The 3 month has basically flatlined at 0.01% Longer term rose yeilds rose slightly. The 3 year fell slightly.
Fearful investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks. Investors are willing to pay an unbelievably low 2.17% for a ten year treasury bond.

Yields keep falling = Continued deterioration of credit market. Low Yields = There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg data and chart (If the link does not work Google – bloomberg baltic dry index) Set range indicator to one month and you will see this chart.

BDI fell about 2% yesterday to 784. We have had a significant rally off the lows of @660 two weeks ago week, but again have started to fall again.

Long term picture The BDI had seen an almost 90% loss since June. It seems, a least for a week international trade has picked up but has again begun to slowly fall. These shipping figures confirm world wide recession.

Dollar Falling

Dollar was flat again yesterday.

Wild ride over the last three weeks- especially last week. Basically, the dollar has gone from a high of $88 to low of $78 and at the end of the last two days setteled at $81. Chart of the dollar .

The dollar is falling because of the low US interest rates and it looks like the Fed will bee printing a whole lot of $ to keep the financial system liquid. Other countries are doing the same thing. This collective devaluation of currencies can lead to a worldwide deflation if it continues. This is not what we want to have happen.

Short Term Outlook

Reading the Tea Leaves-

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. Long term stock rallies simply do not have the money supply to exist as long as the credit panic continues.

Dow 8500 support has been broken. However in the short term the Dow is a bit oversold. The other major indexes are still hanging in above support. However the uptrend has been broken in the Dow.

How markets react to news is out #2 forecasting tool after volume. Bad news seems to be impacting stocks more that it has a week ago. Then bad news had little impact a week or two ago. Therefore, the shorter term uptrend is showing some signs of cracking.

Another major dip would be a buying opportunity

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. Obama/stimulus rally may be starting to fade

Look for range between 7449 and 9654 for rest of year.

Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought.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 – Long Term Investors (up to 15 to 25+% stocks – only buy big dips ) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally

*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 and dependent on oil prices

FXI (China ETF) should outperform USA

*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 huge 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 and/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 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

"Too Big Not to Fail"

Bailouts of Big Insurance, Big banks, Big Financials, Big Fannie & Freddie, and now Big Autos. The problem here is in the word BIG. All these companies,industries have been deemed too big to fail without catastrophic results and you know who bails them out – YOU And you know what started this disastrous economic snowball rolling the unregulated financials full of over leveraged debt.

He’s back. Elliot Spitzer has an editorial in Slate based on the unregulated bailouts of giant financial companies that have presented NO new business plans. What we really need is smaller institutions. Do we keep bailing out the giants and/or make them part of the government. There is a different path. Spitzer – "The better policy is to return to an era of vibrant competition among multiple, smaller entities—none so essential to the entire structure that it is indispensable. "

Especially with financials all we are doing is rebuilding the same edifices that have so horribly failed and helped push many other industries into failure.

Competitive Advantage

Other countries have 4 major advantages over American companies that compete with them.

1) They get government subsidies. (latest example – GE buys 5 midsize planes from China’s sponsored CACC)
2) Other developed counties have universal health care and our companies have to pay for this.
3) We have much freer trade policies than other countries. Jobs and $ are flowing out far faster than they are coming in.
4) Other countries are increasing their support for education and science while we focus on tax cuts and wars.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Volatility

Index % Change Volume

Dow -2.51% down
NASDQ -3.14% down
S&P500 -3.21% down
Russell2000 -3.14% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals-

Major reversed the previous days gains. Volume was down. A good technical sign for bulls. Dow closed at 8376 . Dow upside resistance level is 8831 and downside support at Monday’s low @8175

Technically, bulls still have the short term momentum.
Chart of the benchmark S&P 500
Chart of the Russell 2000
Chart of the NASDQ
Chart of the Dow

Fundamentals-

Auto executive continue hearings in front of congress. This time in front of the House.

Unemployment numbers for last month are the what everyone’s watching – The expectations – 350,000 loss The results -533,000 HOLY SH_T Largest monthly loss since 1974. September revised up to 403,000. Oct. up to 320,000

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. LIBOR has fallen from 4.8% six weeks ago to @2 .2% LIBOR rates have flattened over the last three weeks. LIBOR is the rate banks charge each other, not businesses. LIBOR is the rate banks charge each other. LIBOR has flatlined.

LIBOR chart (3 month)
Treasury Bonds

Again 3 Month Treasury Bond held steady at 0.01%. 6 Month, 2,3,5, 10 & 30 year all fell again.
Example – a 30 year Treasury Bond fell from 3.53% last week to 3.15% two days ago to 3.04% yesterday – Fundamentally BEAR’s RULE

If investors are putting their money in Treasury bonds for 3 months to 30 years, they are NOT investing in stocks.

Yields keep falling = Continued deterioration of credit market. There is simply NO confidence in the credit markets PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Set range indicator to one month and you will see this chart has dropped to 661 – @7% loss this week on top or a 13+% loss last week – An over 90+% loss since June. This is a clear indication that worldwide recession is growing.

Short Term Outlook

Reading the Tea Leaves-

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. The Balitic Dry Index chart another major concern. Oil prices fell to $43.67 a barrel – another indication of economic deterioration. Fundamentals continue to show worldwide recession growing.

Fundamentally its hard to see any extended stock rally if fundamentals keep getting worse. Technically, a short term rally seems possible.

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
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.
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 – 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 (use ETF’s that short major indexes) when stocks have a big rally

*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 and dependent on oil prices
FXI (China ETF) should outperform USA

*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 and/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 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

Mumbai

Obama can say I told you so – The center of terrorism is located in Afghanistan and Pakistan not Iraq.

Hopefully, India will not repeat the same mistakes the US did and over react. Still the best site/blog for information that is detailed and certainly is much more accurate in analysis than American Corporate Media is Informed Comment . You have to scroll down to Dec. 1. for India.

Green

If Spain can generate 30% of its electric power from renewable sources by 2010. Why can’t we do the same by 2020. = See Wikipedia

Deficits and the Future

Every right wing commentator and stock analyst loved to bash NTY’s Nobel Prize winning economist Paul Krugman (like other Nobel Prize winner he does make mistakes) But he was out in front of the current financial crisis. His latest editorial – LINK

Conclusion- "The best course of action, both for today’s workers and for their children, is to do whatever it takes to get this economy on the road to recovery."

"American’s Look for Next Bubble to Invest In."

The Onion headline from yesterday (above) Updates labeled the "shadow" banking system – the bubble folks were investing in last week.

In one sense the financial sector with all its toxic debt desperately needs investors. If it does not get investors the giant financials crash and the taxpayers will again have to bail them out with loans. The trouble here is who wants to invest in something that is not transparent and full of "toxic" debt.

Volatility

It’s almost impossible to recognize any trend when stocks take such huge moves. Fundamental economic factors like peak oil and globalization become less relevant in the face of a growing long term recession.

The technical series of lower lows and lower highs (on price charts) certainly is still in place creating one clear trend = Bears Rule

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Volatility

Index % Change Volume

Dow -7.70% -
NASDQ -8.95% -
S&P500 -9.93% -
Russell2000 -11.85% –

US Market & Foreign Markets

Technicals

US markets got clobbered again with another one of those major meltdowns. Volume the chief confirmation factor was below average. Friday was a 1/2 day so volume was obviously up relative to Friday.

The massive flight by Americans and foreigners to US Treasury bonds (See chart of 3MTB and other Treasury bonds listed below.) shows potential investors are willing to to put their $ in other places than stocks in some cases for a long period of time.

Still a massive sell off in weak volume means volume did NOT confirm the rally. Therefore, a wild swing in any direction is possible likely today and for the rest of the week.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

Citibank and other financials led a rally – but no other indicators followed. You can have a technical rally for so long, but if major fundamental factors don’t follow the rally will run out of steam. Too many people were putting their $ in treasuries, not stocks. There are only a very limited amount of investors out there and most folks playing the markets are short term traders.

Its official – we’ve been in a recession for a year.

Auto makers are back in front of congress asking for $ this week.

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 .2 LIBOR rates have flattened over the last three weeks. LIBOR is the rate banks charge each other, not businesses. LIBOR is the rate banks charge each other.

The 3MTB fell -50.0% yesterday and closed at a rate of 0.01% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – The situation is beyond dismal.

PANIC REIGNS in the credit markets again (check out chart)

3 MTB chart

LIBOR chart (3 month)

Treasury Bonds

All yields fell dramatically from 3 MTB to the 30 year treasury bond. If investors are putting there money here for 3 months to 30 years they are NOT investing in stocks.The silver lining in this panic to find a safe place for money is people all over the world are choosing the USA. This is part of the $ we use for bailouts or loans.

{Now using data from Yahoo financial – In part because it also lists municipal and corporate bonds.}

These is simply NO confidence in the credit markets and a massive flight to US Treasury bonds at all levels. PANIC RULES

Baltic Dry Index

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg has a good interactive chart on this. You can see how this measurement of goods shipped throughout the world has dramatically dropped. Its fallen over 90% this year.

Set range indicator to one week and you will see this chart has dropped from 825 to 715 or a drop of @ 13%.. So while stocks rallied 15+% last week the amount/ price/measurment of raw goods shipped around the world fell dramatically. This is a clear further indication that worldwide recession is growing.

Short Term Outlook

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

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. The Balitic Dry Index chart alsois a major concern

Going Out on a Limb – Dow at 8929. We could rally some more. But, its hard to see the major 9654 resistance level fall and perhaps some of the more minor resistance levels will reverse the rally.
Start thinking to adding SHORTS (see list of ETF’s that short) to protect any long term gains you made when stocks had their last major dip. Best guess – today up tomorrow down in wild swings.

Looks like adding shorts to protect gains was the right call – However in the short term (today +) Volatility Rule. There are no logical long term positive trends. Short term traders are going to swing the market up and down.

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 (15% Longs ) when stocks rally

*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 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

Brooksley Born

Who is Brookksley Born? She was the Chair of the Federal Trade Commission in the Clinton administration.

She stood up against The Republican mantra of less regulations and bigger unregulated banks that began under Ronald Reagan. She stood up against Graham and all the Republicans who promoted fewer regulations and greater "toxic" leverage. She stood up against Summers, Rubin, and Geithner who endorsed the spreading over leveraged financial WMD’s. She stood up against Alan Greenspan and said NO.

Where is Brooksley Born? Like UN inspector Scott Ritter who accurately predicted there were no WMD’s in Iraq she is not playing a major or any role in the Obama administration. One contrarian Paul Volker does have a major role with Obama

The blog TruthDig.com has an expansive graph and video compilation of the financial crisis all the way back to the Great Depression, mostly focused on recent events. Brooksley Born is included.

Green

Some positive news and sites.

1. New ways to harness tidal energy
2. LA big new solar proposal
3. GreenChipStocks.com is an excellent site whose feature story this week is Israel going to electric cars within 10 years
4. Should TESLA (manufactures successful but $100,000+ electric car) get a bailout to produce a less expensive model?

Shadow Banks

It would be wonderful if all Obama had to do was hold a press conference and stocks would rally. To his credit he did show clarity about the financial situation.

But the hidden story of this rally is the shadow banking done by financial giants and hedge funds. Nobel Prize winner Paul Krugman first used this term – Shadow Banks – to describe unregulated institutions loaded with WMD’s of over leveraged toxic debt.

Latest market rally has been lead by Citigroup (up about 150%) and related financials.

The last Paulson/Rubin bailout/give away was incredibly favorable for them. Most major financials have two banking systems. A more normal system and a shadow banking system that is way over leveraged with toxic debt. Citigroup, the mother of all shadow banks, got the sweetheart bailout (see Friday’s update) Also, no forced regulators looking over their shoulders like in England.

Few are complaining about this because stocks are up 15%. Few complained about the tech bubble or the housing bubble either because they were making $.

Basically Obama’s boys (see Friday’s Update) like Bush’s boy’s have given a free ride to financials with no mandate or oversight to clean up their act.

We seem to be throwing dirt (money) on a leaking radioactive nuclear bomb (leveraged toxic debt) and hoping that if we throw enough dirt no radioactivity will leak out to the surface. We have to hope that the leak will not get larger or the bomb explode. Anything could cause the radioactive leak to grow from growing unemployment to international trade collapsing (See Baltic Dry Index below)

BottomLine – The public sector and the Fed is going to continue to pour money into this situation. Keep your fingers crossed. The positive side of all this is that Obama has a huge amount of international credibility and so does Obama’s economic team despite their questionable past and the current Citigroup bailout.

There is a chance that public/stock investors can keep these shadow banks afloat. If they come back for more $ nationalization and an oversight board has to be the answer.

American’s Look for Next Bubble to Invest In.

The above was a headline from the humor newspaper The Onion. – The internet bubble, the housing bubble and last week Americans began investing in the shadow banks bubble.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Another Obama Rally?
Another Obama News Conference

Index % Change Volume

Dow +1.17% down
NASDQ +0.23% down
S&P500 +0.96% down
Russell2000 +0.91% –

US Market & Foreign Markets

Technicals

US markets were open for a 1/2 day and rallied as they usually do. Volume figures are not too relevant because of the i/1 day.

Technically the volume behind the first few days of this week long rally are encouraging. Dow at 8,829. Dow 8923 is the first minor resistance level and the falling 50 day moving average a a mores significant resistance level 9244 is the next. 9654 is the major line in the sand resistance level (see chart of Dow below). The S&P 500 has a similar chart, but is a bit further away from the same type of resistance levels.

After a massive 5 day rally its time for consolidation.

Asian markets mixed and European down 2 to 3% this AM.

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. (See above)

Looks like Black Friday was at least decent for stores

Credit cards may pull back $2 trillion over nest 2 years – story
Bottom Line credit cards are going to cost a lot more to use.

From Friday -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 33.3% yesterday and closed at a rate of 0.02% 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% Conflicting data in two charts. The yeild curve chart says 0.01% Very bad news.

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

Baltic Dry Index

For Now dropping Oil, The Dollar and the VIX to focus on this Index you probably never heard of.

It is perhaps the best indicator out there to predict world wide recession

The Baltic Dry Index is a forward looking indicator that measures pre production materials that are shipped around the world.

Bloomberg has a good interactive chart on this. You can see how this measurement of goods shipped throughout the world has dramatically dropped. Its fallen over 90% this year.

Set range indicator to one week and you will see this chart has dropped from 825 to 715 or a drop of @ 13%.. So while stocks rallied 15+% last week the amount/ price/measurment of raw goods shipped around the world fell dramatically. This is a clear further indication that worldwide recession is growing.

Short Term Outlook

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

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. The Balitic Dry Index chart alsois a major concern

Going Out on a Limb – Dow at 8929. We could rally some more. But, its hard to see the major 9654 resistance level fall and perhaps some of the more minor resistance levels will reverse the rally.

Start thinking to adding SHORTS (see list of ETF’s that short) to protect any long term gains you made when stocks had their last major dip. The higher we go the more short positions become palatable.

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 (15% Longs ) when stocks rally

*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 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

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

"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

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

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

Bailout Detroit. (or OMG this economy is in deep do do)

The American car industry came out with an absolutely dismal earnings results and forecast on Friday. GM alone is burning though $2.3 billion a month over the last 3 quarters and has $15 billion in reserves (the figure was actually 14.2 or 16.2 billion, but I forgot) That gives GM about 6 to 8 months before they go belly up.

The old problems – Detroit went for the gas guzzlers and the fuel efficient car are the future. The foreign companies all enjoy universal healthcare while GM has to foot the bill for this and other financial considerations.

The new problem – GM, Ford and Chrysler can’t get loans and neither can many of their customers. This is the Credit Default Swaps problem moving from subprime to the car industry.

Obviously these companies are going to get some sort of a bailout. Democrats are in charge, an election was won, and promises were made. The wimpy CEO of GM came on CNBC and gave a really weak rational as to why there should be a bailout. No wonder they are in such trouble.

Here’s the main three reasons we be bail out GM.

* The loss of 1 to 2+ million jobs. Not only do all auto company workers loose their jobs. But the ripple effect is huge from part manufacturers to advertisers.
* Bond holders. Even a bigger impact. All those bonds (100′s of billions – I’m guesstimating) that come due in the next 30 years go up in flames.
*Huge amounts of American wealth will get sent abroad. We are already sending hundreds of billions to petro dictators each year. Now the future fuel efficient/electric cars and parts will all be imported from Japan, Korea and probably China who can easily undercut the prices of any startups here in the USA.

What’s needed in a bailout for American auto industry. Some ideas

*Get it in writing – "Must build fuel efficient cars."
*Unions and management need to financially bend.
*Temporary partial ownership of US auto industry should be considered. If American’s know that they have partial ownership they are far more likely to buy.
* Pass universal health care so our auto industry and other businesses can compete on a level playing field.
* Get banks to participate in bailout.

What to watch out for

The intent of the bank bailout (your tax dollars) was that banks in good faith would make loans. They don’t and are hoarding the cash. Example – to auto companies and their customers.

Unlike other countries that got this in writing we did not. You can understand Paulson and Cheney/Bush giving $ to banks/business without conditions, but Democrat Committee Chairs Barney Frank and Chris Dodd let huge blunder go through too. They should not have made banks promise to give out loans in writing, they should have got the commitment it in BLOOD.

The AIG bailout terms were way too oppressive. Something like 8% and then 2% above LIBOR. AIG can’t survive if it has to pay 11% to 14% interest on $85 billion To their credit they did pay back $2.3 billion this week, because they could now borrow from Fed discount window. Terms have to be palatable for auto industry and AIG

When you add the 6.5% and growing unemployment rate plus the loss in jobs that a collapse of the auto industry would bring you = well beyond an 8% unemployment rate. We will probably get to 8+% anyway. The loss in bonds who be devastating on the overall bond market and spread to stocks. Still to come is credit card companies & others who will get impacted by the unregulated Credit Default Swaps market.

The downside to all of this is what is happening to the growing national debt.

Bottom Line – This is NOT going to be your typical 8 month long recession, but something far worse even with an ideal bailout plan of the US auto industry.