Auto Loans/Bailout

The major hypocrisy here is financial institutions have received trillions in loans without having to restructure, regulate or even go in front of congress (etc.) They get sweetheart deals with little to no scrutiny. Now congress deservedly is putting the auto industry through far greater scrutiny for what will probably turnout to be a relatively meager $25 billion now and more later.

The year+ long alternative of bankruptcy court is simply not an option. There is a great danger American auto companies would collapse during bankruptcy. The additional chaos it would create in the middle of the worst recession since the Great Depression would be devastating. What entity besides the Federal government (again your tax dollar) would step in bankruptcy court to try to pick up the pieces. (See past Updates)

NYT Story

Green

* As gasoline prices fall under $2.00 a gallon, now is the time to put an additional progressive tax on gasoline – Use these funds to develop alternative energy. Example oil prices below $50 a barrel = tax of $1.00 a gallon. Oil prices below $75 a barrel = $.50 a gallon tax. Lots of folks have suggested something like this.

* Green Bailouts and Stimulus could be on the way when Obama takes control.

Lashkar-i-Tabi

This is the name of the terrorist group that is behind past and probably the recent Mumbai attacks. You’re going to be hearing a lot more about this group and area of the world.

Their overall strategy is to get India and Pakistan into a war. The more the Pakistan/India relations deteriorate, the less Pakistan will focus on the terrorists in their own country. Lashkar-i-Tabi is located in Pakistan and Kashmir. Both countries have nuclear weapons.

Two of the best web sites that give information outside of standard American corporate media on this is WarInContext.org and AntiWar.com Their focus is more oriented on diplomatic solutions.

Warning – This is a Gathering Storm – Events could easily spin out of control.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Volatility

Index % Change Volume

Dow +3.31% up
NASDQ +3.70% up
S&P500 +3.99% up
Russell2000 +5.93% –

italics = same comments as yesterday.

US Market & Foreign Markets

Technicals

Volume moved slightly higher as stocks regained 1/3 to 1/2 the previous days losses. 80+% of the gains happened in the last hour of trading. Technically after a big loss a recovery like yesterday’s is tantalizingly close to being called bullish. The volume was up, but not a lot and you’d like to see 50% of the losses erased. Sorry no clear technical direction has emerged and yesterday’s call " a wild swing in any direction is possible likely today and for the rest of the week". is still in place.

China was up overnight 4+%


Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

Auto makers are back in front of congress and this should be the focus of the rest of the week. It’s hypocritical to focus so much attention and analysis in this area (25+ billion bailout) and so little attention to the financial sector bailout (trillions – when you count taxpayer, sovereign wealth funds Fed intervention, other countries interventions etc.) Why was there not the same scrutiny given the financial sector who unregulated Ponzi schemes caused the meltdown.

This guy John Challanger just came on CNBC and announced big increased job cuts for November . His group does a respected independent survey that forecasts the gov’t. announcement. Biggest level of unemployment in 7 years. Government job #’s come out Friday.

We focus way too much on the USA. This recession has spread to the world. Weaker and some emerging economies are going to do much worse than the USA

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 chart (3 month)

Treasury Bonds

If investors are putting their money in Treasury bonds 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.}

Most treasury bonds fell yesterday.

There is simply NO confidence in the credit markets – Americans and foreigners are investing in US treasuries and paying ridiculously low interest rates.. Yields falling at all levels = 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 data and chart .

Set range indicator to one month and you will see this chart has dropped to 684 – a 4+% 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

Going Out on a Limb Best guess – today up tomorrow down in wild swings. Was right about yesterday’s rally. Will stick by that prediction for today.

Daily forecasts/guesses are very minor and what’s important is to short the big rallies and buy the big dips. The closer you get to the low of 7449 – go long. The closer you get to 9654 – go short. The long term trend down – Bears Rule Therefore, getting close to or breaking 7449 is the place to nibble a little long. Anything close to 9000 is a place to short.

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.

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
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

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