Market Updates – That Dirty Word

 

Index Percentage % Volume
Dow -1.04% down
NASDQ -0.48% down
S&P500 -1.00% down
Russell2000 -0.46% -

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Trends, Politics & Economics

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“Vengeance is Mine…”

“saith the Lord.” Another list of the top 25 people to blame for the financial crisis from Time magazine. Here’s the top 5:

 

  1. Angelo Mozilo- CEO of Countrywide. America’s biggest mortgage leander popularized exotic mortgages.
  2. Phil Gramm-  Head of Senate Banking wrote the infamous 1999 legislation and championed deregulation
  3. Alan Greenspan- Fed chair who admitted his mistake “that financial firms could regulate themselves.”
  4. Chris Cox- SEC chair whose  hands off attitude  and lax enforcement  failed to act against over leveraging and fraud.
  5. The American Consumer-  Borrowing, borrowing, borrowing.

 

That Dirty Word – Nationalization

First it starts as a whisper then the voices grow.  Now more and more from every political and economic stripe are considering controlled reorganization under the government – Nationalization The unlikely trio of R – Phil Graham, D Maxine Waters & R Peter King have all used the N word. Obama has left the door open. Harvard’s ultra bear Niall Ferguson Economist Nouril Roubini makes the case for nationalization and so does Joe Nocera of the NYT business page. So has Simon Johnson from MIT’s Sloan Business School.

Who is going to pay for all this hell our deregulated, over leveraged financial/banking industry has brought down on us? Bank bond holders, shareholders, China,management, employees, pensioners, taxpayers(you). How big a haircut is each group going to take? How many of you want just your tax dollars to go to bailing out banks?

The Roubini and Nocera editorials bring up all the times we have successfully temporarily reorganized banks or put them into “receivership.”(why not include GM)

 

  1. The USA in the 1980′s – called “bridge banks”
  2. Sweden in 1992
  3. The International Monetary Fund – This is exactly what the IMF tells emerging markets to do
  4. Indy Mac – A 9 billion dollar bank was recently taken over by the FDIC and emerged far more solvent 6 months late

 

The downside here is Wall Street doesn’t like the idea because bond, shareholders, and management would take a hit.  So would the stock market. Many banks in Europe are already being temporarily nationalized.

 

 

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

 

Short Term Outlook

Danger Will Robinson Danger Danger - The growing threat of nationalization is going to start taking its toll on stocks – especially financials. (see above)  Even though volume was low (volume not confirming downside price move) technicals especially on the Dow are deteriorating. Sort of like a death of a thousand cuts (See Dow chart on right)

Its time to bring out the old Lost in Space robot with all its bells and whistles shouting Danger Will Robinson Danger Danger. – The threat of nationalization could cause another leg down in the markets.

Our Positions

These are listed under Recommendations or Stocks Picks on the Blog. Also the strategy of when to buy is listed under the strategy section on the blog.  Why fundamentally were these Exchange Traded Funds chosen?

 

GLD (Gold) – Investors usually buy gold when everything else is going bad. The second reason is all the stimulus plans around the world in the long run means inflation and that’s also good for gold.

FXI (China) Simply relative to the USA China is far better off.  They have a surplus of money while we are massively in debt. Their stimulus plan is is a greater percentage of GDP than ours. Our military costs are huge and w are deeply involved in wars/conflicts throughout the world. China is far less involved militarily. Vhina has a growing middle class and our is shrinking.

EWZ (Brazil) Brazil simply has an abundance of natural resources – Both oil and alternative energy.  About 5 years ago a left wing government took over and spread the wealth to more middle class working families. Even more so than China they are vulnerable to the worldwide recession because oil prices fall in recessions and they have lots of oil.

GEX – (Alternative Energy)  If we do not start developing alternative energy resources then our future as an industrial, economic power will decline even faster.  Obama was elected, in part, because of his belief in alternative energy.  The stimulus plan begins to deliver on this commitment to energy indpendence and America’s economic well being.

UWM (small caps) & QLD (mostly technology) over  SDS (S&P 500) and DXD (Dow).  The later two are short positions and the first two long positions.  Small caps and technology are less impacted by the financial crisis.  The are far less likely to be over leveraged. (See strategy section of blog)

Cash is king.

Long Term Outlook Bears Rule

(see strategy section of blog for more)

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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