Palin -

It is now 25 days since her nomination and Sarah Palin has still failed to hold a single press conference. This is unheard of. Other candidates from Mitt Romney to Hillary Clinton begged for press conferences almost daily while they were running. Yet Palin/McCain is afraid of the press.

It is now 40 days since McCain has held a press conference Is he just too old and frail to stand up to the press. No wonder conservative Icon’s like George Will are saying he may be unfit for the presidency. (see yesterday’s Updates) Washing Post keeps a record of McCain failing to hold a press conference.

There are a lot of people out there who are sometimes not too bright. (including me) but you have to be a total idiot to realize that Palin is all packaging and no substance. Why is she and McCain afraid of the press. If she is so afraid of the press how afraid of the rest of the world will she be.

Problems with the Bailout.

Thanks for all your emails on this. Lots of the below comes from your emails.

1) We’ve all been fooled by the government before (WMD’s, Iraq was behind 911, there were al Qaeda in Iraq) Why should we believe Fed chair Bernanke, Treasury Secretary Paulson, and Bush now?.

For over a year they have been telling us everything is fine and now they tell us unless we get bailed out Armageddon will follow tomorrow. One should certainly be skeptical especially of Paulson because he formerly led Goldman Sachs – one of the major players in in this whole mess. Does anyone still trust Bush? Bernanke is like Colin Powell and has a certain amount of credibility. Powell lost a lot of that credibility over Iraq.

Things could get a lot worse and there obviously could be a run on the banks and money market funds. This began before the bailout of AIG as people had already lined up in Asia and Europe to cash in their insurance policies. Money markets failed and investors started withdrawing funds from all banks, and stocks hit new lows. (down 25%+ from their highs)

Last week it did look like we were on the brink of the sky is falling panic . How close are we today? Best barometer is the 3 month Treasury Bill

Link to chart of 3MTB

Notice that at the hight of the panic investors were willing to basically accept nothing in return for a 3MTB – 0.01% was the return (you have to add another zero to the chart to get the actual percentage). Yesterday ended at .875% which is considerably better but still below the basic Fed rate of 2.00%. So thee is not yet the kind of panic there was last week.

You can also watch gold prices as a barometer.

There is a huge amount of toxic debt out there, but panic makes things worse. It is very possible that panic could set of a depression – pension plans, housing values, employment, growth, stocks, and the kitchen sink could take a huge hit. It is impossible to calculate just how many banks would fold and businesses would go under this would be.

Bottom Line – Best read of the the leaves there is a huge problem and it did spill over into the general economy last week. Remember the media hypes everything – The resulting panic could set off a major depression Barometer’s show we have at least some time before that panic returns. (see above)

2) Collective outrage over bailing out wealthy CEO’s and others who created this mess. Why should they be rewarded.

3) Paulson or the next Secretary of Treasury becomes GOD over the bailout plan and nobody, no court and no official can even challenge him. What happens to democracy and our system of checks and balances when we create a dictator/God. – See The dirty 32 words no one wants you to read – link

4) Why is this a bailout for Wall Street and not for Main Street? A stimulus package for middle and lower class Americans would help, but there are holes in this. If there is a run on banks, money markets, insurance companies Main Street is going to get the crap kicked out of it.

There are more points but, I’ve run out of time.


Index % Change Volume

Dow -3.27% down
NASDQ -4.17% down
S&P500 -3.82% down
Russell2000 -4.82% –

US Market

Massive down day, but decreased, below average, volume. For the first time in three weeks volume on the stock exchange was below average. We’ve had some days where the volume was massive – @ 2X the 50 day moving average. Volume is the chief confirmation factor behind any price move.

This tells you lots of the major money (institutions is staying in the markets.

This also,in part could be due to the rule that now investors and traders are not allowed to short – link over 800+ stocks. I’m just not knowledgeable enough to tell you exactly how much volume was diminished because of the rule that short trading is no longer allowed. Best guess is that it is significant and volume would have been 50% higher

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

OIL no longer RULES

Oil prices close up +6.64% at $109.37 The WTIC is the continuous contract. The price for October oil whose contract closed yesterday reached over $120.00 dollars. This was a classic short squeeze, so the hue hike up was probably artificial.

Chart of oil (WTIC)
Oil prices are moving higher primarily because the dollar is moving lower. (See Updates #2 from yesterday)

The Dollar

The US dollar plunged the most it has in one day in at least 3 years (that’s how far back the chart linked below goes) Dollar down -2.13% This amount looks small, but it is really huge. Imagine the money in your back pocket just became 2.13% less valuable vs, the other currencies in the world. As stated yesterday, the reason behind this is the fact that the USA because of the rescue/bailout plan will have to go further in debt. Sure looks like the fall will continue.

Chart of Dollar

The dollar is plunging because the 700 billion rescue plan/bailout puts the USA in that much more debt and therefore,makes the USA weaker. When you put this all together any bailout is going to increase oil prices and force the dollar to decline in price.


Still the best indicator of market bottoms in bear markets. However since you are no longer allowed to go short on 800 stocks this messes up the VIX. How much is beyond my pay grade.

The VIX moved up +5.55% and closed at 33.85 and when markets reached their lows last week its lowest point was 42.16. The higher the VIX goes the more fear/volatility there is out there.

Again the no selling of short’s rule, seriously impacts this volatility/fear measurement of the SPX. It would have probably spiked much higher and the markets fell significantly more if the rule had not been in place.

Chart of VIX.

Short Term Outlook – It certainly looks like stocks are going to fall until there is a bailout plan.

NB – Warren Buffet is buying . He is buying companies at a discounted price.


Long Term Outlook BEARISH -

Technicals -
Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought.
(Caution – this “Outlook” is based on US equities and while US markets greatly influence other markets it is not necessarily the outlook for recommended sectors.)

People feel like we are in a recession. The actual strict definition – 2 quarters of negative GDP growth has not occurred. How bad the recession will be is be is the major question.

Asset Allocation/Recommended Sectors (long term)

* 85% to 100% Cash

* 10% US Index Funds
UWM (2x what Russell 2000 does) & QLD (2X what the NASDQ does)

*5% Emerging Markets
EEM (emerging markets)

Chief Strategy – Buy the dips of trending sector You have to have a strong tolerance for risk and belief that the bailout will work to jump in now.
Changes to Bottom Line Section Bolded .

As Always Do Your Own Research Before Investing

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