Big week in local politics and an art show = very few Market Updates this week. LAST UPDATE TILL TUESDAY.

Obama’s Character

Turning rhetoric into reality – You all remember Obama’s speech’s closing line – after pointing out divisions that separate Americans the it ends … this is the UNITED States of America. After 8 year of "your either with us or against us" Cheney/Bush Obama’s speech resonated. You can argue that this is a better or worse approach. Perhaps he should be a little more partisan or hard line. But his presidency is already taken three major steps to heal wounds and he certainly has a different vision.

  1. Invited McCain (former opponent) for a well publicized sit down
  2. Advocate Liberman (Dem. who publicly turned against him in election) keep his most important post
  3. Offered Secretary of State job to Clinton (former opponent)

Of course there are those that disagree. 5 reasons why Clinton should not be Secretary of State . (thanks for the email on this)

The Economic trends

Your jobs, your house’s value, Your money (stocks) – Job losses are feeding stock losses that are feeding falling home prices. In the last sentence you can put jobs, housing, and stocks in any order you want. Underlying this spiral is those Financial WMD’s- Credit Default Swaps

The status quo – Governments and other entities have thrown, printed, borrowed (your tax dollars) money. Paulson says his $750 bailout bait and switch has "stabilized financials." However, the financial group as a whole stocks are falling far faster than the DOW. Add to this housing prices continue to decline – relatively meager financial efforts to halt housing and foreclosure problems. Stocks have fallen to near lows of year. Unemployment is rising.

The entire auto sector and related industries are about to loose some or most of 3 million job – A bailout, Chapter 11, or Chapter 7? Banks are hoarding cash and not making anything close to normal amount of loans – this negatively impacts auto’s and all business throughout the USA.

We have two months of limbo before Obama takes office. Sure seems that this situation can and will deteriorate. The more it deteriorates the harder it is to fix.

The good news – Gas prices and a new administration (hope). Will Obama’s middle class tax cuts, a stimulus package and a proposed auto bailout turn the tide? Lots depends on the details of these plans.

So You’re an Environmentalist

Don’t need to tell you about the last eight years under Cheney Bush and the lack of progress on everything from pollution to global warming. But have you considered another group of politicians who have put major road blocks to environmental progress and in doing so lined the pockets of petro dictators. – The entire (mostly Democrats) Michigan political delegation. Tom Friedman editorial

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow +1.83% up
NASDQ +0.08% up
S&P500 +0.98% up
Russell2000 -0.84%–

Headline – (Still) Support Challenged

US Market & Foreign Markets

Technicals

Number to watch is Dow 8,000 support level

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

- See Economic Trends above.

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. The credit spreads are tightening and LIBOR has fallen from 4.8% a three weeks ago to @2 .2 LIBOR inched down yesterday. (sorru do not have exact figure)
LIBOR at 2.13% according to talking head on financial channel this AM. – Moving in right direction.

The 3MTB bounced back some +22.22% yesterday and closed at a rate of 0.11% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – A little stability, but situation is still not good

Sure looks like PANIC is starting has returned to the credit markets again (check out chart)

3 MTB chart

LIBOR chart (3 month)

Bottom Line – LIBOR falling helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Chart of oil (WTIC)

The Dollar

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) .

Chart of VIX

Short Term Outlook

Reading the Tea Leaves – Perhaps this week, maybe next week, maybe later but the major Dow support levels (8000 or 7800) are in trouble Jobs, Housing and stocks are all in a downward spiral.

Personally – For now – I’m making sure my long term positions have some sort of protection. (leaving for art show and downside risk of Dow 8000 falling too great)

Shorting rallies with ETF’s listed below

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook – BEARS RULE

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 8000 and 10,000 for rest of year. Very concerned 8000 Support level will NOT hold

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 to 10%

For now - PROTECT ANY LONG POSITIONS.

*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)

*10%+ 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) (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 8,000 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

  • Share/Save/Bookmark