All three major US news  networks led with stories on the economy and the falling stocks market. Obama in his first month is caught like Bush was in the last six months of his administration between a rock and a hard place. Whose going to pay to make up for the trillions in massive over leveraged toxic debt created by unregulated financial institutions? – YOU or Wall Street.

 

Joe Stigiltz

Nobel Prize winning economist Joe Stigiltz guesstimates (“no one really knows’) there is at least $2 to 3 trillion dollars of debt out there and this figure grows every time a mortgage goes under.  Stigiltz points out that “ If our government were playing by the rules–which require shutting down banks with inadequate capital–many, if not most, banks would go out of business. But because faulty accounting practices don’t force banks to mark down all their assets to current market prices, they may nominally meet capital requirements–at least for a while.”

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What Makes it Worse.

Under Bush our national debt soared from $5.7 to $10 trillion dollars and we all know how phony the $10 trillion is because it excluded unfunded liabilities,wars, unfunded mandates and used the social security tax to count against the deficit. No wonder Bush is  hiding. Stigiltz reminds us that “Argentina, Chile and Indonesia spent 40 percent or more of their GDP to bail out their banks.”

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CNBC Goes Ballistic 

The major financial channel,CNBC, is throwing the mother of all hissy fits because they want YOU the taxpayer to pay for what they did. Comedy Centeral’s Jon Stewart absolutely eviscerated CNBC’s, who cheerled us right into this financial crisis. Scroll down on this LINK for the video. Pass it onto any of your friends who watch this channel.

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Here’s the Deal

Wall Street is going to continue to implode, led by the financial sector till YOU cough up the money, to fix it.  Bush administration promised to get rid of the toxic assets (TARP) but we got a poorly constructed bank bailout instead. Obama is trying to come up with some compromise as the anger/frustration grows. Wall Street is in meltdown mode because many  or perhaps most banks/financials are insolvent (unless you allow for crooked accounting)

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But it Gets Worse

The damage that began here has spread to the rest of the world and especially Europe. Particularly impacted are all those counties that used to be part of the Soviet Union who embraced American capitalism and credit default swaps. Most of these countries are in a financial meltdown far worse than the USA. Unlike China and the USA, they don’t even have a stimulus package to offer some support to their working class.

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Solutions

You’ll have to read Joe Stigiltz editorial, A Bank Bailout That Works  -he’s clearly with the working class Americans

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Index Percentage % Volume
Dow -4.09% down
NASDQ -4.00% flat
S&P500 -4.25% flat
Russell2000 -5.88% -

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Technicals & Fundamentals

We’re back at new decade long lows for the 3 major indexes and the Russell 2000 is close.  As mention once the mother of all support levels fell on the benchmark S&P 500 it is like blowing up a huge whole in a wall and the enemy (bears) are flooding though the gap.

Our best technical hope is for a capitulation where everyone throws in the towel. This will be a day (several) of huge declines in huge volume.  Fear will have to explode.  

The VIX is out measure of fear for the benchmark S&P 500. Back in November it peaked at @90 interday and 81.48 as a closing high. Yesterday it closed at 50.41 and its declining.  You need real fear to wash out nervous investors and  50 is a long way from 80.  Translation, the VIX is usually a reliable indicator in bear markets = More downside to follow

From Yesterday -”The monthly jobless report is big news (announced Friday) and its going to be hard to see stocks move higher today in front of the jobs report.  In this case traders (there are very few investors left) may sell the rumor (worse than expected jobs report) and buy the news (an in line with expectations jobs report)  This could extend Wednesday’s bullish reversal. I’m trying to be optimistic.”

Jobs Number

651,000 jobs lost in February (as estimated) Dec revised up to 681,000 and January up to  655,000. Jobless rate 8.1%Ugly ugly ugly Because of revisions – Double digit unemployment likely.

Reading The Tea Leaves – Both technicals & fundamentals (see Stigiltz stuff above) show winter for the stock markets or money being taken from your back pocket to pay for their mistakes is far from over. Protect any long stock positions.

Long Term Outlook BEARS RULE

See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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