Palin

It is now 26 days since her nomination and Sarah Palin has still failed to hold a single press conference. She’s had only 2 milk toast "deferential" interviews vs. 80 for Joe Biden. Palin is billed as a tough pit bull with lipstick yet the sexist lobbyist/men running the McCain campaign are making her look like "a delicate flower that will wilt at any moment" One that is too afraid to hold a press conference. See CNN Campbell Brown CNN anchor on this video.

Mother of All Bailouts

Almost everyone is against or putting conditions on the mother of all Wall Street bailouts. Everyone is against giving $ to those who created the fiscal mess. The Paulson/Bernanke/Bush proposal in its current form is DOA. There is also almost a universal feeling that we are being fear mongered just like we were into Iraq. One feels like a cow being stampeded off a cliff.

About the best case for a bailout was told by a Columbia economist about the Great Depression. His great grandfather owned and Army and Navy store and was actually happy when Wall Street had its Black Monday in 1929. Those greedy bastards got what was coming to them. A year later his great grandfather had to close his store and went broke.

After getting blurry eyed watching this proposal being debated my best read of the tea leaves was a proposal by NY Senator Schumer – He said you’re not going to spend the $700 billion all at once. It takes time to get it started and estimates were that they would spend $50 billion a month as they went through each problem or asset group. Let’s try $150 billion and if that works come back to congress for more.

Here’s different editorials on the bailout – see RealClearMarkets . This site is the best I’ve seen on giving different views from all sides on Wall Street. It has a pro Wall Street bias because most of the financial sources out there are pro Wall Street. Yet it attempts to give the other side too.

Best editorial out there is from Obama economic advisor and former mucky muck (think it was Sec.of Treasury) in Clinton administration Robert Reich . Hope he takes his advice.

His "Bottom line: Unless Americans on Main Street have more money in their pockets, Wall Street’s bad debts will continue to rise — which means the Bailout of All Bailouts grows even larger, which means taxpayers take on even more risk and cost."

McCain/Obama politics of Bailout

The absolute best political position to be in is make sure the bailout has enough votes to pass and then oppose it because it does not give enough help to Main Street.

Bottom Line

Democracy and free markets work better than anything else. The problem is that both democracy and free markets need enforcement and regulations. Greed is a powerful force and it will overwhelm the basic principles that make both democracy and free markets work.

Stocks

Index % Change Volume

Dow -1.47% down
NASDQ -1.18% up
S&P500 -1.56% down
Russell2000 -1.56% –

US Market

Major US and most global markets fell yesterday. The losses were moderate compared to some of the wild swings that we have been having. The volume was well below average. Again this is probably due the fact that short selling is no longer allowed on 800+ Wall Street firms.

Technically, the new abolishing of shorts makes volume comparisons difficult. If shorts were still in place the losses of the last two days would have probably been far greater. The markets went from flat to down @1.5% in the last 45 minutes. This is a short term bearish sign.

Warren Buffet is buying. He is buying companies – Latest acquisition at least $5 Billion of Goldman Sachs. See story link
His eal is far bette than the one you and I would get (like a 10% dividend etc). Like Constelation Energy deal last week.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

How Close is Credit to Freezing UP?

The 3 Month Treasury Bill is the barometer that gives some indication of the level of panic out there. It shows the rate below 2.00% (Fed rate) people are willing to pay to have a safe place for their $) Yesterday the 3MTB fell -8.57% to 0.80%. This may seem like a big number, but it is not relative to last weeks low. Last week the low was 0.10%. See chart.

3 MTB chart

Bottom Line – Nothing coming close to last week’s wild moves. At least not yet.

OIL no longer RULES

Oil prices close down -2.76% at $106.61 .

Chart of oil (WTIC)

Right now the inverse relationship between the dollar and oil prices is driving the price of oil. The bigger the bailout, the higher the price of oil. (see below.

The Dollar

The US dollar rebounded and gained +0.49% Technically is stabilized right above its 50 day moving average. Fundamentally, there are growing doubts over the bailout plan.
Chart of Dollar

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

The VIX

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 another +5.52% and closed at 35.72. When markets reached their lows last week the VIX high was 42.16. The higher the VIX goes the more fear/volatility there is out there. A closing of 35.72 is the second highest closing in 3 years (how far weekly chart goes back) and probably the 2nd highest closing since 911.

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.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

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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