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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