Mumbai

Obama can say I told you so – The center of terrorism is located in Afghanistan and Pakistan not Iraq.

Hopefully, India will not repeat the same mistakes the US did and over react. Still the best site/blog for information that is detailed and certainly is much more accurate in analysis than American Corporate Media is Informed Comment . You have to scroll down to Dec. 1. for India.

Green

If Spain can generate 30% of its electric power from renewable sources by 2010. Why can’t we do the same by 2020. = See Wikipedia

Deficits and the Future

Every right wing commentator and stock analyst loved to bash NTY’s Nobel Prize winning economist Paul Krugman (like other Nobel Prize winner he does make mistakes) But he was out in front of the current financial crisis. His latest editorial – LINK

Conclusion- "The best course of action, both for today’s workers and for their children, is to do whatever it takes to get this economy on the road to recovery."

"American’s Look for Next Bubble to Invest In."

The Onion headline from yesterday (above) Updates labeled the "shadow" banking system – the bubble folks were investing in last week.

In one sense the financial sector with all its toxic debt desperately needs investors. If it does not get investors the giant financials crash and the taxpayers will again have to bail them out with loans. The trouble here is who wants to invest in something that is not transparent and full of "toxic" debt.

Volatility

It’s almost impossible to recognize any trend when stocks take such huge moves. Fundamental economic factors like peak oil and globalization become less relevant in the face of a growing long term recession.

The technical series of lower lows and lower highs (on price charts) certainly is still in place creating one clear trend = Bears Rule

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Headline – Volatility

Index % Change Volume

Dow -7.70% -
NASDQ -8.95% -
S&P500 -9.93% -
Russell2000 -11.85% –

US Market & Foreign Markets

Technicals

US markets got clobbered again with another one of those major meltdowns. Volume the chief confirmation factor was below average. Friday was a 1/2 day so volume was obviously up relative to Friday.

The massive flight by Americans and foreigners to US Treasury bonds (See chart of 3MTB and other Treasury bonds listed below.) shows potential investors are willing to to put their $ in other places than stocks in some cases for a long period of time.

Still a massive sell off in weak volume means volume did NOT confirm the rally. Therefore, a wild swing in any direction is possible likely today and for the rest of the week.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

Citibank and other financials led a rally – but no other indicators followed. You can have a technical rally for so long, but if major fundamental factors don’t follow the rally will run out of steam. Too many people were putting their $ in treasuries, not stocks. There are only a very limited amount of investors out there and most folks playing the markets are short term traders.

Its official – we’ve been in a recession for a year.

Auto makers are back in front of congress asking for $ this week.

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 five 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.

The 3MTB fell -50.0% yesterday and closed at a rate of 0.01% The Fed rate is 1.00% . A normal 3MTB would be just under the Fed rate. – The situation is beyond dismal.

PANIC REIGNS in the credit markets again (check out chart)

3 MTB chart

LIBOR chart (3 month)

Treasury Bonds

All yields fell dramatically from 3 MTB to the 30 year treasury bond. If investors are putting there money here 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.}

These is simply NO confidence in the credit markets and 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 has a good interactive chart on this. You can see how this measurement of goods shipped throughout the world has dramatically dropped. Its fallen over 90% this year.

Set range indicator to one week and you will see this chart has dropped from 825 to 715 or a drop of @ 13%.. So while stocks rallied 15+% last week the amount/ price/measurment of raw goods shipped around the world fell dramatically. This is a clear further indication that worldwide recession is growing.

Short Term Outlook

Reading the Tea Leaves – italics = same comments as yesterday.

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 alsois a major concern

Going Out on a Limb – Dow at 8929. We could rally some more. But, its hard to see the major 9654 resistance level fall and perhaps some of the more minor resistance levels will reverse the rally.
Start thinking to adding SHORTS (see list of ETF’s that short) to protect any long term gains you made when stocks had their last major dip. Best guess
– today up tomorrow down in wild swings.

Looks like adding shorts to protect gains was the right call – However in the short term (today +) Volatility Rule. There are no logical long term positive trends. Short term traders are going to swing the market up and down.

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.

We are in a recession. How bad/long the worldwide recession will be is be is the major question. 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 – This depends on your risk tolerance – 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 (15% Longs ) when stocks 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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