Government rejects GM/Chrysler bailout plan. The G 20 meets. Asking the wrong questions – What’s wrong with our prisons/justice system? The real question - What’s wrong with the USA? The “Quiet Coup’s”  ominous forecast referenced in Sunday’s blog deserves further consideration. One solution that prevented/delayed the downfall of the Roman Empire.


Rejecting Autos & G 20

(see  fundamental section below)

What’s Wrong with the USA?

Parade (the Sunday news magazine/supplement in many newspapers) headlined What’s Wrong with Our Prisons? Investors411 asked what’s wrong with our Justice System Friday?

Yes our justice system is a “national disgrace” (Sen. Jim Webb)   Our rate of imprisonment is “5 times the world’s average… Either we are the most evil people on the earth or we are doing something very wrong.”  (headline from front page of  Parade) The real question is what wrong or what’s happened to America’s culture? Webb has some good ideas, but the roots of this problem go well beyond the justice system. 

  • Why are we so violent, 
  • Why are we so fearful?
  • Why are we so focused on me instead of we?  
  • Why do we focus on retaliation instead of mediation?
  • Why is mob mentality growing and individual accoutability vanishing?

I’m sure you could add to this list. 

The Quiet Coup

Here’s the conclusion of the MIT professor Simon Johnson’s editorial

What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

How a Roman General Beat the Terrorists.

Pompey in 67 BC beat the terrorist pirates who threatened to destroy Rome. Here’s how






Index Percentage % Volume
Dow -1.87% down
NASDQ -2.63% down
S&P500 -2.03% down
Russell2000 -3.66% -


Technicals & Fundamentals

Technically,The price decline may look bad and Friday’s loss was almost as large as Thursday’s gains for the major indexes.  But volume fell well below average.  That’s good technical news for bulls 

In fact if you look at the leading index , the NASDQ (click on chart at side of blog) you’ll notice that there are at least three days in the past few weeks that had both big rallies and big + increased volume (those vertical green bars on the chart).  Technically, this is a about as good a sign as you can get that markets will move higher.  So buying into dips seems to still be a good strategy even though we are close to Dow 8,000 (See Positions section of blog)

The NASDQ is at 1545 (the leading index)and the two resistance levels that need to get taken (see chart) out are 1587 and 1598 to make bulls happy.  On the downside the S&P 500 is at 815  (the lagging index) with its support levels 50 day moving average at about 791 and the big 741 support level.

So technically things are looking good. but unfortunately …

Fundamentally, globalization has made this a worldwide recession.  

G 20 (basically top 20 economic countries that make up 85% of worlds GDP) meet Thursday and it sure looks like its not going to be pretty or coordinated.  The discord among these nations on how to collectively reply to the recession has sent the Japanese stocks (world’s #2 economy)  down 4.5% Monday and there were similar Asian losses. Europe down 2% to 2.5% on this and auto news.

Europe is going to call for more regulations, the US more stimulus, and China more power.  The biggest problem would be more worldwide  PROTECTIONISM. How markets move on news is one of the top two (the other is volume) indicators of market direction.

Auto’s - Stunning news as Obama administration gets tougher with autos. The GM CEO is falling on his sword - .  

Both GM or Chrysler’ s plans were rejected. Majority of GM board member will be replaced.  Debt holders, unions and others are going to have to give more.  Looks like government is going to stand behind GM cars, but the restructuring is going to be a lot tougher than originally expected –  ”pre packaged bankruptcy possible. Gov’t will stand behind warrantees  on cars. Message to Chrysler – you’re NOT too big to fail. See BusinessWeek story

The 11:00 AM Obama announcement is going to be a market mover.

This could become a bigger mess because many bond holder’s bonds were bundled and sold as credit default swaps.

Looks like the government is going to try to run a “surgical” bankruptcy on GM.

Here’s why this news is so bad for the markets short term - All the financials are now worried that they too will get treated like Autos. After all, Obama/Democrats are suppose to be pro union. So far financials have been treated with kid gloves. See Investors411 posts over the last few weeks. Financials are going to be worried that Obama administration will get tough with them too.

Reading the Tea Leaves – Good technicals, but overbought markets, G 20 discord and rejection of auto bailout sure looks like its going to overwhelm markets. S&P 500 741 support level is the line in the sand.  If we close below 790 we will probably test 741. This is not shaping up to be a good week for stocks. The icing on this collapsing cake is the monthly jobs # at end of week.

Potential new guidelines for Mark to Market come out on Thursday. This could turn around what’s setting up to be an ugly week. 

For Longer term Outlook – see Thursday’s blog.

Short Term – Time for more caution and to start protecting some of the gains over the last three weeks. 


See Changes in STRATEGY, POSITIONS, & OVERVIEW sections of blog 


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