Alaska Senator Guilty

Ted Steven’s, the Senates longest serving Republican senator was found guilty on all seven counts. Sevens was Sarah Palin’s mentor and she was director of a 527 for him. What is a 527? It’s a political group that can can take huge donations from fat cats and on their own bash opposition politicians. Example the Swift Boat organizations and MoveOn.Org used to be 527′s.

Devolution of Our Media Politics..

American media has devolved into extensions of of campaigns. FOX News, the Drudge report, and all of right wing radio have all acted as 527′s for McCain while the Democrats this year have countered with their own cable news MSNBC channel (Matthew’s, Olberman & Madow) and have their own web sites like the Huffington Post.

Major networks will still not take non political adds on solar and wind power from groups like We can solve it because some of their major add buyers would get angry.

Almost all news has to be taken with more than a grain of salt. You have to consider the source. The media has changed because bias sells and objectivity doesn’t. The media has become the campaigns and more than dwarfs campaign spending.

McCain – Dr Jekyll and Mr Hyde

Almost 40 newspapers have switched sides from 2004 from Republican to Democrat . See LINK

Collectively these and other papers all recognize the past achievements of Senator McCain, but most of those who have changed see a dramatic shift in McCain from the man he was to who he would be if chosen President.

1) Palin – In choosing a candidate who is obviously not qualified to be president he put politics in front of what was best for America.
2) Economic Crisis – Colin Powell called McCain "unsure." other’s called him "erratic" and worse. In the face of a major crisis McCain changed his position constantly and grandstanded (flew to DC and rescue plan collapsed, refused to debate – then debated, was against then for AIG bailout and so many other constantly position) This made him look weak, and inconsistent is a crisis.
3) The debates – McCain’s need for "Anger Management" as David Gergen ( a member of past Republican administrations) stated after the last debate stuck a chord . McCain obviously shares the "you’re either with us or against us" views of President Bush that has torn this country in half and hurt us throughout the world. His temper in any future crisis is a major liability.

This was not the elder statesmen and independent thinker that McCain was at the beginning of the century. In contrast, Obama has seemed more like the elder statesman – calm cool and collected. Under fire from debates (Clinton & McCain) and the economic crisis Obama has shown the leadership and maturity that you expected from McCain.

If this were the McCain of 2000 (Dr Jekyll) everything would be different. But, it is not the past but the future that matters.

Yes McCain did vote with Bush 90% of the time. But even more troubling is – choosing unqualified people to fill government positions, "unsure" behavior, and a need for "anger management" These are all characteristics of the Cheney/Bush administration that McCain has wrongly embraced .



Index % Change Volume

Dow -2.42% down
NASDQ -2.97% down
S&P500 -3.18% down
Russell2000 -4.82% –

Headline – Asia Meltdown Intensifies

US Market & Foreign Markets -

Technicals - Another big hit in low volume. Therefore, volume did not confirm the move lower. Actually the vast majority of the losses occurred in the last 10 minutes of trading. Each day we close lower is a new closing low. We still have not reached interday lows for the year on the DOW and S&P 500.

After huge losses the Asian markets rebounded overnight. Japan up +6%. Hong Kong +12% A few smaller Asian markets were down. European markets are up. So. American markets should rebound today. This looks like a technical, oversold bounce.

Fundamentals – The Fed meets Wed. and will probably lower interest rates significantly. Major earnings week for stocks. GDP #’s come out for the quarter this week.

(Worth repeating from yesterday) Three huge storms have combined into the biggest hurricane since the Great Depression.

1) The US housing bubble has burst.
2) A $50 to 70 trillion dollar unregulated Credit Default Swaps does not have the capital to back its assets
3) The problems in the US is causing a decoupling of of global markets and a worldwide recession.

Two positive impacts -

1) Fed banks across the world have made a clear commitment to keep banks open even if it means nationalization.
2) Lower oil prices

Jim Cramer – The last 10 minutes/ 200 point Dow drop was probably due to hedge fund redemption. Cramer from CNBC describes what is happening as hedge funds selling. Since they can not borrow $ the only thing left to do is sell commodities and stocks to satisfy investors that want to liquidate holdings. All this forced selling is taking place because the government programs are not yet functioning.

Consumer Confidence #’s coming out today and Fed Wednesday should lower interest rates. The later should help US equities.

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.

The 3 MTB moved lower -10.98% yesterday to an interest rate of 0.73%. After 4 straight days of moving higher it does technically look like we have started a reversal of the trend. This is the forth day in a row that the 3MTB has fallen. Translation fear is returning to the markets and the major move higher after worldwide intervention and a bank rescue plan is in trouble. These rates may also be falling in front of an expected Fed cut to 1.00%. Relative to a 1.00% rate 0.73% is not such a bad figure.

As the chart shows the LIBOR, while still very high but taken a dramatic drop since the revised rescue/bailout plan of buying equity in banks has been accepted) LIBOR in a week+ has dropped from 4.8% to below 3.5%. Again the rate of change has diminished. We still have a long way to go. LIBOR should be a lot closer to the 1.5 % Fed rate but the trend is very clear. LIBOR has basically flat for the last four days. Down to 3.46% this AM.

NB – The LIBOR rates Updates has been tracking is London’s and the US rate has actually decreases somewhat more over the last 4 days.

Translation – The lower the gap between the 3MTB and LIBOR the more it shows credit markets returning to normal.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is slowly opening up. This helps Main Street’s access to credit cards to adjustable mortgage rates.


Basically stocks go up so does oil. Stocks go down so does oil

Chart of oil (WTIC)

The Dollar

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

Chart of Dollar

The dollar rose sharply Friday (+1.05%). But notice the dramatic spike in oil over two and three days ago was inversely correlated with the big fall in the dollar.


The VIX (measures amount of fear/volatility in S&P) . The VIX is at or near its highest levels ever. This indicates a rebound is possible.

Chart of VIX.

Short Term Outlook = Rally.

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

Reading The Tea Leaves – We’ve already had a 35 to 40% stock losses. Most of rest of the world has had bigger drops. How low can it go? Certainly below the 7800 Dow interday low. . Could we loose another 30% to 6000? Its possible. I don’t think we’ll loose another 30%, but I do think the will see us at least test 7800 low and probably get below that.

However -The VIX is at an all time high = the level of fear is higher than its ever been. This usually means you get at least a short term RALLY. Asian markets have rebounded – it may be a dead cat bounce, but a rally is a rally. The question that no one can answer is how many hedge funds will be forced to sell into the rally.


Long Term Outlook – Bear’s Rule

Technicals – Double bottom has formed, advance in strong , increased volume, and a new high on VIX -Technically all this = at least a short term rally and maybe a long term bottom.
Fundamentals – financial mortgage transparency problem 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

People feel like we are in a recession. The actual strict definition – 2 quarters of negative GDP growth has not occurred. How bad 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)

* 80% to 100% Cash – This depends on your risk tolerance

* 10+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X what the NASDQ does) DDM (ETF that does 2X what the Dow does)
*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 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. (less than 5%) 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

Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

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