Investors 411 Blog

Big week in local politics and an art show = very few Market Updates this week

Duck and Cover

Taking Your Job, Your Home, & Your Money

Aside – Note well the correlation between falling stock and home prices. As stock prices fall investors have less money to buy homes and fewer homes get sold. Also the more unemployment rises the greater the foreclosure rate and stocks get toasted too. All three are tied together.

July & October 2007 Dow goes over 14,000 – Then -

1. Investors slowly began to realize that the goose that had laid the golden eggs has died and the housing bubble has burst.
2. Slowly again investors realized there were "Financial WMD’s" (Warren Buffett’s words for Credit Default Swaps – CDS) out there deeply over leveraging the subprime mortgages.
3. Next we learned the unregulated $50 to $70 trillion CDS market involved not only on mortgages, but everything from car loans to credit cards.

The FIX is in as Dow falls to @11,000

The Fed Prints money, Sovereign Wealth Funds buy, Mergers, Your bailout tax dollars, Lower interest rates and a whole lot more occurs globally to fix the housing and unregulated CDS problems

One Big hole in the Dike.

Opps, Nobody comes to the rescue of Lehman Brothers and the 4th largest investment bank goes into bankruptcy. They are so loaded with WMD’s or CDS’s that Lehman Brother’s bond is only worth 8.675 cents on the dollar. LINK $365 billion of over leveraged debt (CDS) is released throughout the world. Immediately London goes limit down (8.9) before stocks open in mid October. Two days after the dust clears the Dow looses about @ 900 points. Investors still believe that the $750 taxpayer bailout will take toxic debt out of system.

Bait and Switch Taxpayer Bailout

Secretary of Treasury Paulson instead of using money as intended to take toxic debt out of the system gives it to mostly big banks. There is no oversight, little transparency in this move which oversteps Paulson’s authority. The banks hoard the $ instead of making new loans. Even Barney Frank who should be and busting blood vessels screaming about this, is just saying "this is not what we intended this money to go for." Brain dead american public/media is busy watch pretty pictures of Obama family and following Brittany Spears Sarah Palin adventures.

Why is there so little objection to Paulson’s probobly criminal move? Probably because without the infusion of your tax dollars (bailout money) these financial stocks would crash and burn because they are loaded with CDS’s. This would send stocks into a massive fall and the 8,000 Dow technical support level would now be a cinder.

Last two weeks – Dow fall @ 12+% from its high

Three HUGE companies that lead three major sectors of the economy are slammed. They all have one thing in common. They are loaded with financial WMD’s of CDS’s.

1. GE – chart falls @25% twice what the Dow fell in last two weeks. GE Financial is loaded with CDS’s or WMD’s
2. Citigoup – chart falls @35% The mega bank loaded with CDS’s announces 40,000 jobs cuts today
3. GM – chart falls over 50%. GMAC – their financial division is loaded with CDS’a or WMD’s. Will the entire auto sector go bankrupt like Lehman Brothers?

Jim Cramer (CNBC Mad Money Friday night) computes that Lehman’s Brothers bankruptcy cost the Dow about 15% and a GM bankruptcy would cost the Dow down another 30%.

Would you lend money to any of these companies? Warren Buffett loaned billions to GE, but since then their stock is down @35%

Fear Returns to Credit Market

See LIBOR and 3 Month Treasury Bill commentary below.

Standing on the Edge of a Cliff

Bottom Line – We’re standing on the edge of a cliff. Technically we are @500 points away from the last line in the sand support level for the Dow at 8,000. There s one ledge on the cliff that says nasty long recession. The abyss is a depression.

This is not the time to be Long Stocks, unless you have short positions that protect these long positions. There are just too many things that have to go right for us to fundamentally hold the 8,000 support level. Who were the institution(s) that bought the last time at 8,000. one totally wild proposition is the Treasury or the Fed somehow stepped in and bought or encouraged (twisted arms) institutions to buy at Dow 8,000.

Please somebody talk me down from the edge. Till then BEARS RULE and at some point in time the 8,000 support level will collapse. Housing will continue to decline. Even if Obama can walk on water (he can’t) his administration is two months away. The worst is yet to come.

I know I’m sounding like Dr Doom, (Nouriel Roubini) so let me put the icing on this dark cake. Scroll down a little and look at this chart of consumer spending since 1993 to present.

When we fall which ledge will we hit?

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -3.82% down
NASDQ -5.00% down
S&P500 -4.17% down
Russell2000 -7.07% –

Headline

US Market & Foreign Markets

Technicals

[From Friday -"Yesterday's rally was all about the technical aspects of the market and had little to do with fundamentals."]

About 2/3 of Thursday’s gains were wiped out (in lower volume) = Bad news for Bulls – Benchmark Dow down 5% for week.

Asia closes slightly higher overnight. China leads up + 2.22%

Futures on the Dow down about -2% at 9:00 AM EST.
Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

See above editorial.

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 .24. However, The last four days the LIBOR has started to rise again. This rise is accelerated. NOT good news for Bulls

LIBOR at ___? this AM. # comes out at 9:00AM EST.

The 3MTB fell -31.58% yesterday and closed at 0.130% The Fed rate is 1.00% The rally is good news, but it is well below the 0.20% support level. A normal 3MTB would be just under the Fed rate.

Sure looks like PANIC is starting to envelop the credit markets again

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

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

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

Chart of VIX
Short Term Outlook
= NASDQ broke support and closed at a new low. Other major indexes within 2% of closing lows

[Repeat] The overall problem that America has is consumers and government are over leveraged. American’s have borrowed and spent their way into massive debt.

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% 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 9,000 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 – Long term traders should use these ETF’s when markets get close to major resistance levels.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

Your emails – Thanks for all the emails and I will reply to each one. Sometimes it takes a while. The following is from one of your emails.

Keith Oldberman on Happiness

This editorial is about being less alone in the world, compassion, love and the human heart. The world is so full of hate and meaningless division – why not spread happiness. This YouTube video really is worth the six minutes video.

This editorial is to powerful to write about anything else.

Stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING
Index % Change Volume

Dow  +6.67% up
NASDQ  +6.50% up
S&P500  +6.92% up
Russell2000 +8.48%

Headline – Fear and Greed
Anatomy of a HUGE Technical Rally

US Market & Foreign Markets

Technicals

Note – if you do not understand any of the terms used go to Investopedia.com’s dictionary and look them up.

Yesterday’s rally was all about the technical aspects of the market and had little to do with fundamentals.

Markets began the day oversold. They began to drop. One by one key support levels for the four major indexes began to fall. (see yesterday’s Updates for details) The NASDQ broke support levels yesterday, New lows for small caps, then new lows for the "old benchmark" S&P 500. When the S&P support level broke there was a lot of automatic sell orders that flooded the market. These are called stop/loss orders. Fear flooded the market and there was almost an immediate drop. By 1:00 PM EST the Dow had fallen 300 points.

However, at Dow 8000 (the Dow is the new "benchmark" because all the media uses it to define what’s happening) which was just about the last line in the sand or support level  – major institutions started to buy at about 1:00 PM EST.  The fear had all been washed out of the market and when this support was established a rally occurred because no sellers were left Within 45 minutes stocks were back to even.

Technical investors realized that the lows had been tested and held. Then in an instant like that greed took over. By 2:00 the Major indexes were back to flatline or zero losses.  Technical traders realized that the major players were willing to support the market at Dow 8,000 and jumped in to get aboard the rally/greed train. They realized that everyone who was going to sell had already sold panicked and sold when the markets dropped 300 points. So from 3:00 to 4:00 PM EST the Dow moved from 8350 to 8835 as everyone jumped on the rally train.

Volume was increased and well above average.  This confirms the move higher and means there should be some sort of follow through to this move.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Fundamentals

Have NOT changed! Who knows what the jobless picture will be in 2009 (somewhere between 7% and 10%) Housing prices have fallen about 20% and have perhaps another 15% to go (guesstimate of compilation of experts out there) There are a mountain of negative fundamental factors out there. In the long term fundamentals move the market.

Obama brings with him the hope of change, Hope is great, but trust in fundamental substance and don’t get too excited about one or two day massive moves. Especially moves that are technically based.

Big G-20 (USA and 19 other countries on economics) conference over weekend.

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a three weeks ago to 2.15% yesterday. However the last two days have seen a very slight rise in LIBOR.

LIBOR at___? this AM.

The 3MTB rose +35.17% yesterday and closed at 0.190%  The Fed rate is 1.00% The rally is good news, but it is still below the 0.20% support level. A normal 3MTB would be just under the Fed rate.

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

Oil prices rose with stock prices +5.16  Oil is now at $59.06 a barrel.

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

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

Chart of VIX

Short Term Outlook = NASDQ broke support and closed at a new low. Other major indexes within 2% of closing lows
Reading The Tea Leaves  – Big volume rally changes short term momentum to bulls

Going out on a Limb – All the other major indexes did break support, but the Benchmark Dow held.  First crucial resistance level is 9764.

Today is a confirmation day of yesterday’s rally. If we loose less than 1/2 of gains that’s still acceptable, especially if volume is light. If we close flat that’s good. If we rally that’s better. If we have another huge rally to the 9764 resistance level that’s great.

But in the long term you need fundamentals to confirm the rally. When we get close to 9764 it will be time to add short positions.

Traders -   Buy the Dip & Sell the Rallies – Selling short positions proved to be the right move. [From yesterday "why be greedy" - sell 1/2 short positions]

Long Term Investors = Buy the Big Dips – [From yesterday - "Time to start thinking about nibbling a little"]

[Repeat] The overall problem that America has is consumers and government are over leveraged. American’s have borrowed and spent their way into massive debt.

FXI The ETF for China has been added to list of recommended ETF’s

China was able to offer a 20% of GDP stimulus package, has no debt and should recover from an economic meltdown far faster than the USA. This country is not over leveraged. Their chart (technicals) shows a breakout from a consolidation pattern in huge volume.

The downside of a China investment is they are huge polluters.

EWZ (Brazil) This chart is looking better than US markets. Notice Brazil unlike the USA was not even close to testing its lows yesterday. The chart is not as technically sound as China’s. Caution here is Brazil is going to be far more volatile than the USA.

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. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

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 15+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%

*10%+% 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 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 9,000 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 – Long term traders should use these ETF’s when markets get close to major resistance levels.

TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

"Hot, Flat and Crowded"

The World is Flat helped millions o Americans see globalization in a new way. Now Tom Friedman (NYT’s 3 time Pulitzer Prize winner)brings a fresh outlook to the energy and climate crisis. Hot, Flat and Crowded defines why America must lead the world in energy technology.

Bottom Line

We either lead the world in creating alternative energy solution and technology – This will create wealth, jobs and make us lessen our dependent on petro dictators
or
We fight an endless series of unilateral oil wars (like Iraq) that further bankrupts our nation and makes us enemies with the rest of the world.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -1.90% up
NASDQ -2.22% up
S&P500 -2.20% up
Russell2000 -2.19% –

Headline – Support Levels Will Fall

For Long Term Investors

The technical range of the DOW is between 9764 and 7774 . (see chart) Right now we are at 8694. The lower the DOW (and other indexes) goes the better the "Buy the Dip " strategy becomes. Right now we are a little closer to the 7774 number. Yes we could break down through that number. However, if you are holding onto stocks for many years the closer we get to 7774 the better the long term buy.

Remember this is going to be at best a recession that will probably extend at least through 2009. It’s going to get worse before it gets better. The Doom and Gloom crowd is no longer talking about 8% unemployment next year, but 10%.

What generally to buy is economies (those with little debt and stronger growth) and sectors that are going to lead when a recovery occurs. (more on this later)

Best guess is that we re going to retest lows.

US Market & Foreign Markets -

Technicals – [From Tuesday - Major support level S&P 900 and 8637 Dow ] Major support levels were breeched interday, but markets closed almost directly on these levels S&P at 899 and Dow at 8694.

All markets are interconnected . Asian markets flat overnight

Volume was higher,but still well below average. Therefore volume only partly confirming the price move lower. This also indicates that the retail investor wants absolutely nothing to do with stocks.

Fundamentals -

Fannie Mae and Freddie Mac (quasi government agencies) yesterday combined with private banks to "accelerate anti foreclosure efforts". This announcement was worth 300+ points on the Dow. Good to see government and finally private banks starting to work together (Hope Now Alliance) to solve housing subprime problem. Bloomberg news LINK

We are beginning to see a little dribble of help from major banks – good news

The major problems with constructive moves that help troubled homeowners is that they take TIME to work.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.18% yesterday.

That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR at 2.133% this AM. Again good news for credit and stock markets. This has to be about 20 days in a row that LIBOR has fallen. The rate of change (how fast LIBOR is falling) is decreasing = not good news

The 3MTB stabilized right at its support level. This time a significant -0.05% to +0.195%. The Fed rate is 1.00% A falling 3MTB is NOT good news. If the 3 MTB falls significantly from this support level it indicates investor panic has returned and is bearish news for stocks. Translation potential investors are willing to pay 0.195% to have a safe place for their $ for 3 months.

It is critical that this support holds

3 MTB chart

LIBOR chart (3 month)

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

OIL

Oil prices fell -4.94%. Oil is now below $59 a barrel. Perhaps 75% of oil move is Dollar goes higher = Oil goes lower.

There is a short squeeze on in oil – futures expire next Monday and traders could try to push oil prices lower (below $55).
Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX obviously moving back up

Chart of VIX.

Short Term Outlook = Technicals – support levels held as S&P and DOW closed at or above major support. NASDQ did break support level.

Reading The Tea Leaves – Today AGAIN is one of those days that could define the near term trend. The 8637 is the Dow support level (last week’s low) that has to hold The benchmark S&P 500 support level is 900 and the S&P closed at 899 (see charts) If these levels fall we will probably retest the 7800 lows.

The technical 9764 resistance level held and the predicted post election dip materialized yesterday. Failure to break out through Dow 9764 (see chart) resistance level means new range for stocks is between 9764 and 7774.

For now support levels have held. This is good news for bulls. However it is impossible to predict hedge fund redemption. Hedge funds like everyone else are having problems borrowing $ and when fat cat investors ask for redemption they have to sell stocks. This is a fundamental that is killing rallies.

Going out on a Limb – Too much technical downside momentum – looks like support will NOT hold.

Traders – Buy the Dip & Sell the Rallies

Long Term Investors = Buy the Big Dips

[Repeat] The overall problem that America has is its consumers and government is over leveraged. American have borrowed and spent their way into massive debt. The shop till you drop consumer was too dependent on the credit card and all this debt (card, mortgage, federal ™) has got to face reality.

Economically, Main Street is no where near out of the woods. But there is hope.

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 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook. Dow close Below support of 8637 or 900 on the S&P = BEARS RULE Long Term Outlook

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%

*10%+% 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
*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 9,000 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

Obama Across the World

The following link is the front pages of over 800+ newspapers across the world on Obama’s historic victory . You can click on each front page to enlarge that specific front page.

Enjoy this now, because the economic problems out there are huge, and its going to get worse before it gets better.

If link does not work try – http://obama2008.s3.amazonaws.com/headlines.html

Screaming at the Tube Doesn’t Work.

Secretary of State Paulson’s hidden $140 billion dollar tax shelter for banks received minimal coverage in mainstream media. Instead of the hidden $140 billion dollars big banks received the media focused on the photo the Bush’s and the Obama’s meeting and touring the White house. Screaming at the TV did not seem to change this.

A Deal?

Rumors that Bush will support a government auto loan/bailout and a stimulus package if a Columbia free trade agreement is included. (NYT) The Dems are idiots if they do not accept this. The quicker any stimulus and loan plan is put in effect the sooner more jobs will be created and the sooner we have a chance of getting out of a recession.

Everybody from auto Unions to the Politicians need to bend. (see weekend’s Updates)

Here’s a problem – The Wall Street bailout is not working like it was suppose to. US banks are hoarding the cash not making loans. Guidelines on forcing baks to make loans are being finalized – but it need teeth. Bailing out Main Street with a stimulus and auto loan package could suffer the same fate. Speed is essential, but so are the details.

Economics’ 101

Why are almost universally developed countries across the world creating stimulus packages, printing money, cutting taxes, and lowering interest rates? This is basic economics 101. It is what you do to prevent a recession. In good times you reduce the deficit like Clinton did. Over the last 5 years we have had economic good times and Cheney/Bush increased the deficit. Add to this the Cheney/Bush unjust and unnecessary Iraq war will end up costing trillions.

China just put $600 billion into their stimulus plan. That’s 20% of their yearly GDP. That would be like an almost $3 trillion dollar stimulus plan in the USA. Why aren’t we offering Main Street huge sums like this? One major reason is that Cheney/Bush have created a huge trade and government deficit. China can throw another $600 billion at their problem because they have a surplus and not a debt.

Deficits like credit card debt are bad. But right now its a question of do you let the economy collapse into another Great Depression or stimulate it and get a nasty recession

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -0.82% down
NASDQ -1.86% down
S&P500 -1.27% down
Russell2000 -1.51% –

Headline – Will support hold?

US Market & Foreign Markets -

Technicals - [From Monday - Mea Culpa -"Stocks and commodities will climb on the huge China stimulus plan."] Major US markets rallied in the AM and fell in the PM in extremely light volume. Volume is NOT confirming any price moves. The only people that are in this market are short term traders and long term investors who simply refuse to sell.

All markets are interconnected. Asian markets last night – China down – 1.66%, Korea -4.77%, & Japan -3.00%. Europe is down -1% to -2%

Fundamentals – Looks like the GM and Jobs news overwhelmed the huge China stimulus package. What’s happening is all the talk of new stimulus plans, more tax cuts, a GM bailout has a negative short term impact. You retail investor (you and me) gets really worried when it sees all that’s being done and our confidence in the future (consumer confidence) falls.

Bond markets are closed and stock market is open. Sometimes this can lead to major swings.
Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.235% yesterday.

That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR at 2.175% this AM. Again good news for credit and stock markets. The rate of change (how fast LIBOR is falling) is decreasing = not good news

The 3MTB fell again. This time a significant -31.03% to +0.200%. The Fed rate is 1.00% A falling 3MTB is NOT good news. Danger Will Robinson Danger Danger +0.20% is a major support level and if this falls today it means panic is back in the credit markets.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up especially in Europe. This helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Oil prices rose a rose +2.24% . Most of this movement is related to short term traders making bets on of the dollar. Dollar goes higher = Oil goes lower.

There is a short squeeze on in oil – futures expire next monday and traders could try to push oil prices lower (below $55). Oil is down below $60 this AM.

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX obviously moving back up

Chart of VIX.

Short Term Outlook = Technicals show uncertainty (low volume) = the two week long rally is in trouble.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves – Today is one of those days that could define the near term trend. The 8637 is the Dow support level (last week’s low) that has to hold Dow is now at 8760 The benchmark S&P 500 support level is 900 and the S&P closed at 919 (see charts) If these levels fall we should retest the 7800 lows.

The technical 9764 resistance level held and the predicted post election dip materialized yesterday. Failure to break out through Dow 9764 (see chart) resistance level means new range for stocks is between 9764 and 7800.

It looks like the bears have a shot at regaining control.

Traders – Buy the Dip & Sell the Rallies

Long Term Investors = Buy the Big Dips

The overall problem that America has is its consumers and government is over leveraged. American have borrowed and spent their way into massive debt. The shop till you drop consumer was too dependent on the credit card and all this debt (card, mortgage, federal ™) has got to face reality.

Economically, Main Street is no where near out of the woods. But there is hope.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

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 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook. Dow close Below support of 8637 or 900 on the S&P = BEARS RULE Long Term Outlook

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%

*10%+% 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
*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 9,000 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

How to Fix The Economy

Best editorial out there on how to fix American economy by former Labor Secretary Robert Reich. Reich, one of Obama’s advisors, is a dark horse candidate for Treasury Secretary who should be one of the favorites.

Obama should add a few people to his economic team like Nobel prize winners Joe Stigletz and Paul Krugman. Also, George Soros, (hedge fund manager) who wrote a book predicting the financial meltdown would add diversity to this group. What’s wrong with nobel prize winners and a someone who had the foresight to predict what would happen?

Really hope you read Reich editorial so here is complete email address – http://tpmcafe.talkingpointsmemo.com/2008/11/09/the_mini_depression_and_the_ma/

Bank’s "Quiet" $140 Billion

Wa Po front page has a focus on how Sec. of Treasury Paulson, in the middle of the bailout crisis, snuck in an extra $140 billion for big banks .

Meanwhile In Iraq and Afghanistan

Iraq and Afghanistan used to be the focus of this political section. Will get back to these issues this week

Rambo and the Internet

Rahm Emanual is an excellent choice for Obama’s chief of staff. Center/left Democrat who held the#4 position in the House. Nicknamed Rambo because he gets results and many Dems owe their election to him. In getting legislation passed he is a valuable asset.

Obama’s secret weapon is the Internet. His list of 3.2 million donors is also a huge asset in getting things done/legislation passed. Imagine a congressman getting pressure from 10,000 Obama supporters in her/his district from Obama’s internet list. More on Obama and Internet at BusinessWeek and NYT

Lots of you have sent in emails with links on various issues to try to influence Obama and his folks. Main LINK to Obama site is http://change.gov/page/s/yourvision

One on foreign policy
One on the environment

Pentagon Board – "Cuts Essential."

The current military budget is "not sustainable" (Defense department Business Board) and suggest cuts in "costly troubled weapons systems." Boston Globe story

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow +2.85% down
NASDQ +2.41% down
S&P500 +2.89% down
Russell2000 +2.01% –

Headline – $600 Billion/China

US Market & Foreign Markets -

Technicals – [From Friday - "Bottom Line - This is a major support level that should hold."] Friday’s technical price support level did hold despite some extremely bad news (auto & jobless data)

All markets are interconnected. Japan +5.81% Korea +3.52 China +7.27%

Europe is up 3 to 5 % on the China Stimulus news. (see below) This should rally American markets

Friday’s rally almost all came in the last 1/2 hour of trading. The volume was weak and less than the day before. Volume did not confirm the move higher.

Fundamentals – China joined Japan and announced a stimulus package. China’s $600 billion stimulus plan relative to the size of their economy is much larger than ours. Of course, China did not run up the huge debt that the US did under Cheney/Bush. They built up a surplus during good economic times and when times get tough you borrow/stimlate. (Economics 101)

Sometimes it takes time for bad news (auto and jobless #’s) to sink in. Having a weekend for investors to think about how bad/long the recession might be may discourage some more long term investors. However, the volume figures indicate that right now only traders are playing the market. Investors have shown no signs of having retuned.

AIG got a new loan bailout package – the terms are much better for AIG. Good for AIG, their creditors & stock markets. The $40 billion more shows just how bad the AIG (credit default swaps) problem was. They must have read the Market Updates Sunday editorial that advocated a change of terms (a joke). AIG up 20 to 30% in pre market trading. This is really a bailout/loan of AIG creditors, not just AIG.

GM way down 20% this AM in pre market trading.

NB – Mea Culpa – In weekend editorial I put auto company closing at a 1 to 2+ million job loss. Right wing commentator on CNBC, Joe Kernan, put the number at 3 million jobs. Gov. of MI (pro auto bias) says auto industry impacts 1 in 10 jobs.

Bottom Line – Put your rally caps on. Stocks and commodities will climb on the huge China stimulus plan

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.29% yesterday. That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR at 2.24% this AM. Again good news for credit and stock markets.

The 3MTB fell -7.11% to +0.290%. The Fed rate is 1.00% A falling 3MTB is NOT good news,but a -7.11 fall is minor relative to recent volatility.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up especially in Europe. This helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Oil prices rose a fell +0.27% and consequently the dollar rose. Most of this movement is related to short term traders making bets on of the dollar. Dollar goes higher = Oil goes lower.

Oil up +5% in pre market trading (again China stimulus package the reason for this jump)

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX obviously moving back up

Chart of VIX.

Short Term Outlook = Rally goes on until it hits resistance Resistance Levels.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves – Once again its foreign markets (China’s huge stimulus plan) that’s leading US markets higher. Emerging markets led US markets throughout the Cheney/Bush administration.

The technical 9764 resistance level held and the predicted post election dip materialized yesterday. Failure to break out through Dow 9764 (see chart) resistance level means new range for stocks is between 9764 and 7800.

Personally "my long term investments are now 10+% stocks. .

Traders – The spreads in the credit markets are narrowing and another stimulus package is probably coming. = Buy the Dip & Sell the Rallies

Long Term Investors = Buy the Big Dips The overall problem that America has is its consumers are over leveraged. American have borrowed and spent their way into massive debt. The shop till you drop consumer was too dependent on the credit card and all this debt (card, mortgage, federal ™) has got to face reality.

Economically, Main Street is no where near out of the woods. But there is hope.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

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 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

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 to 15% stocks – only buy big dips) Wait for the next big dip to add another 5%
*10%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk

*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 9,000 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

Bailout Detroit. (or OMG this economy is in deep do do)

The American car industry came out with an absolutely dismal earnings results and forecast on Friday. GM alone is burning though $2.3 billion a month over the last 3 quarters and has $15 billion in reserves (the figure was actually 14.2 or 16.2 billion, but I forgot) That gives GM about 6 to 8 months before they go belly up.

The old problems – Detroit went for the gas guzzlers and the fuel efficient car are the future. The foreign companies all enjoy universal healthcare while GM has to foot the bill for this and other financial considerations.

The new problem – GM, Ford and Chrysler can’t get loans and neither can many of their customers. This is the Credit Default Swaps problem moving from subprime to the car industry.

Obviously these companies are going to get some sort of a bailout. Democrats are in charge, an election was won, and promises were made. The wimpy CEO of GM came on CNBC and gave a really weak rational as to why there should be a bailout. No wonder they are in such trouble.

Here’s the main three reasons we be bail out GM.

* The loss of 1 to 2+ million jobs. Not only do all auto company workers loose their jobs. But the ripple effect is huge from part manufacturers to advertisers.
* Bond holders. Even a bigger impact. All those bonds (100′s of billions – I’m guesstimating) that come due in the next 30 years go up in flames.
*Huge amounts of American wealth will get sent abroad. We are already sending hundreds of billions to petro dictators each year. Now the future fuel efficient/electric cars and parts will all be imported from Japan, Korea and probably China who can easily undercut the prices of any startups here in the USA.

What’s needed in a bailout for American auto industry. Some ideas

*Get it in writing – "Must build fuel efficient cars."
*Unions and management need to financially bend.
*Temporary partial ownership of US auto industry should be considered. If American’s know that they have partial ownership they are far more likely to buy.
* Pass universal health care so our auto industry and other businesses can compete on a level playing field.
* Get banks to participate in bailout.

What to watch out for

The intent of the bank bailout (your tax dollars) was that banks in good faith would make loans. They don’t and are hoarding the cash. Example – to auto companies and their customers.

Unlike other countries that got this in writing we did not. You can understand Paulson and Cheney/Bush giving $ to banks/business without conditions, but Democrat Committee Chairs Barney Frank and Chris Dodd let huge blunder go through too. They should not have made banks promise to give out loans in writing, they should have got the commitment it in BLOOD.

The AIG bailout terms were way too oppressive. Something like 8% and then 2% above LIBOR. AIG can’t survive if it has to pay 11% to 14% interest on $85 billion To their credit they did pay back $2.3 billion this week, because they could now borrow from Fed discount window. Terms have to be palatable for auto industry and AIG

When you add the 6.5% and growing unemployment rate plus the loss in jobs that a collapse of the auto industry would bring you = well beyond an 8% unemployment rate. We will probably get to 8+% anyway. The loss in bonds who be devastating on the overall bond market and spread to stocks. Still to come is credit card companies & others who will get impacted by the unregulated Credit Default Swaps market.

The downside to all of this is what is happening to the growing national debt.

Bottom Line – This is NOT going to be your typical 8 month long recession, but something far worse even with an ideal bailout plan of the US auto industry.

Treasury Secretary

The worst possible choice among those that are being considered for this crucial post in the Obama administration is is former Clinton Treasury Secretary Larry Summers. He’s a smart guy but -
*was one of the top ten people most responsible from deregulating the credit default swaps market.
*got in to such problems as Harvard President that all that almost all the Deans pushed him out of office. A sexist who has little verbal discipline
*the Obama campaign is about change and he is the past.
Also important is who runs Office of Management and Budget. For more on Summers and other choices see excellent article on this from Steve Clemons

Economic Molasses

Lowering interest rates has done nothing to help Main Street because banks are NOT passing on the savings. Have you seen mortgage rates fall?

Other countries have forced their banks to make loans as a condition of their bailout, but our government has not. Paulson, Bush, Democratic leadership and Republican leadership have showered money on specific financial institution and they are hoarding it. In fact, the government is secretive about the details of these transaction as several folks (Dillon Radigan) on CNBC (the financial channel) point out. There is a major major problem here.

It’s hard to understand why credit markets (LIBOR) are moving in the right direction. Perhaps its because European banks are starting to make loans. Something has to happen on this side of the pond. If banks don’t loan what good is the bailout except making profits for banks? Naomi Klein has an article on this in the Rolling Stone. Here’s a shortened version "Stopping the Bailout Profiteers "

The focus should now be on job creation in the private sector.

Republican Cannibalism

The chief political corespondent (Carl Cameron) on right wing FOX news said McCain big wigs called Sarah Palin a "Wasila Hillbilly," that she thought Africa was a country not a continent, and she could not identify the 3 countries in North America. In turn, right wing blogs have launched "operation leper" excommunicating those Republicans who criticize Palin

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -4.85% up
NASDQ -4.34% up
S&P500 -5.03% up
Russell2000 -3.65% –

Headline – Jobs jobs jobs

US Market & Foreign Markets -

Technicals – ( From yesterday) – "We could have another really nasty day."

We did have another nasty day and this time volume increased and therefore confirmed the price move. The volume wasn’t huge but substantially more than the previous day. Mantra = Volume is the #1 confirmation factor of any price move.

We have now lost a wee bit over 1/2 the gains we made in the major indexes since we retested the lows two weeks ago. That 50% figure s big in technical analysis (for those who want to understand more look up Bollinger Bands or Fibonacci retracements at investopedia.com for very short explanation) That’s not good news for us bulls. However a 50% retracement is a big support level and holding on here could would be very bullish for stocks.

We are technically just above the 50% level when you use the yearly low of 7800.

Bottom Line – This is a major support level that should hold. If it does not, this market will probably at least retest Dow 7800 low next week.

All markets are interconnected. So let’s look at what happened in Asia overnight. This will give us some idea how the US markets will might trade. Japan -3.55% Korea +3.29% China +1.75%
Europe is up +1 to +2% and that’s good news.

Fundamentals – All week investors have focused on the monthly jobless data. Expectations of a bad number (-200,000) are a chunk of the reason stocks have fallen dramatically the last two days.
NB -Everything else was written before this job’s number came out Job’s number for October =-240,000 Unemployment at 6.5%, Last two months revised down. = Real bad news for Main Street economy because its going to get worse. Also politics. These numbers got massage in previous month by the current administration and the bad news was announced after the election.

(repeat) Historically November starts a usually very bullish period for stocks. December is historically the best month of the year.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.38% yesterday. That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR at 2,.29% this AM. Again good news for credit and stock markets.

The 3MTB fell -17.11% to +0.315%. The Fed rate is 1.00% A falling 3MTB is NOT good news.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up especially in Europe. This helps Main Street’s – Credit cards to adjustable mortgage rates are tied to LIBOR. But by no means is credit back to normal.

OIL

Oil prices rose a fell -4.53% and consequently the dollar rose. Most of this movement is related to short term traders making bets on of the dollar. Dollar goes higher = Oil goes lower.

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX obviously moving back up

Chart of VIX.

Short Term Outlook = Rally goes on until it hits resistance Resistance Levels.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves –

The technical 9764 resistance level held and the predicted post election dip materialized yesterday. Failure to break out through Dow 9764 (see chart) resistance level means new range for stocks is between 9764 and 7800.

Longer term investors buy the big dips.

Personally "my long term investments are now 10% stocks. .

Traders – The spreads in the credit markets are narrowing and another stimulus package is probably coming. = Buy the Dip

Long Term Investors – As we approach Dow 7800 another opportunity to buy. Those of you who missed out when markets went well close to or below 8500 have another opportunity to nibble

Economically, Main Street is no where near out of the woods. But there is hope.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

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 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

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)

*10%+% 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
*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 9,000 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

Overview (for new readers)

If you do not understand a market term look it up on investopedia.com Happy to answer any email questions on markets or politics, but first look up a term you do not understand.

Two mega trends dominate worldwide economics and greatly influence politics – Peak Oil and Globalization. Right now the direction and impact of these trends are being significantly impacted by worldwide recession

Long Term Investors = Buys and holds a stock for years.
Traders = Hold stocks for less than a day to a month ( A trader can also turn his/her trade into a long term investment)

Polls and Election Analysis

5-30-8 Of all web based companies out there that did polls fivethirtyeight.com offered the best analysis of what was happening and was pretty close to the actual vote count. They too (like Market Updates) predicted a tighter race than than others.

Today 5-30-8 questions the irregularities in Alaska where convicted felon Ted Stevens (R) narrowly leads in a Senate race. See above link. Alaska even though Sara Palin was running had a 14% decrease in votes over 2004 where every other state in the union has an increase in turnout. This includes the 40,000 votes that have not been counted.

Poll compilations got all other states right or were within 5% of actual vote. Here Republicans got 12 to 14% more votes than polls predicted and far less people voted. Something smells fishy in Alaska

Throwing slime – The questioning of Obama’s character (he pals around with terrorists, is a socialist, McCain not Hussein, Reverend Wright, Obama would cause a holocaust etc.) did have some impact. Obama lost 20% to 50% of his lead in many battleground states. Final results (there still are some votes to be counted) from CBS this AM.

Obama 7.6 million votes more than McCain
Obama 53-% vs. McCain 46+% (6.3% victory)
Obama 349- McCain- 162 Electoral votes.
4 Senate Races and 4 House races still too close to call
Senate Dems+5,
House Dems +20

Mea Culpa – I thought all the negatives swift boating adds would hurt Obama more. They did have an impact, but that impact stabilized in the last three days of the campaign. The last minute multi million dollar national and targeted Rev. Wright adds seemed to have little impact. I was wrong.

One Really Unexpected Result – People making over $200,000 a year favored Obama by +6%. In 2004 they went for Bush by a 2 to 1 margin. Obama has proposed raising their taxes. Looks like there are a lot of Warren Buffett’s out there.

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -5.05% flat
NASDQ -5.53% down
S&P500 -5.27% flat
Russell2000 -5.74% –

Headline – Reality Strikes

US Market & Foreign Markets -

Technicals – The predicted post election dip happened. However it turned into a meltdown (down 5% across the board) Volume was below average. Therefore, volume did NOT confirm this move. However it sure looks like move down will continue. Another nasty day may be ahead.

Asian markets which had rallied more than American markets also took profits today (overnight) European markets are also down. The losses range from 3% (European) to 7 (Asian)% across these markets.

Fundamentals – (repeat from yesterday) " There will be some selling into the Obama election news."

Toyota had a mega disappointing earnings report after Japan’s market closed.. The Toyota news is really significant for markets across the world. We could have another really nasty day.

Historically November starts a usually very bullish period for stocks. December is historically the best month of the year.

Jobless numbers come out on Friday and they and future numbers are not going to be good.

Big surprise just in – England just lowered interest rates a whopping -1.5% (0.75% expected). The European Union as expected lowered rates -0.50%. All this says to investors is things out there (in Europe) are worse than expected

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.48% yesterday. That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR at 2.38% this AM

The 3MTB fell -18.28% to +0.38%. The Fed rate is 1.00% A falling 3MTB is NOT good news and +0.38 is too low but if you look at the charts investors have not panicked.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up. This helps Main Street’s access to credit cards to adjustable mortgage rates. But by no means is credit back to normal.

OIL

Oil prices rose a fell -7.42% and consequently the dollar rose. This wiped out 3/4 of yesterday’s huge gains. Most of this movement is related to short term traders making bets on of the dollar. England and European Union to lower interest t rates today.

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX was at or near its highest levels ever early last week and is now dropping like a stone = bullish

Chart of VIX.

Short Term Outlook = Rally goes on until it hits resistance Resistance Levels.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves –

The technical 9764 resistance level held and the predicted post election dip materialized yesterday. Failure to break out through Dow 9764 (see chart) resistance level means new range for stocks is between 9764 and 7800.

(from yesterday) "Wall Street likes to buy on the rumor (in this case Obama is going to get elected) and sell the news."

The fall was bigger than expected and volatility retuned to trading.

Longer term investors buy the big dips.

Personally "my long term investments are now 10% stocks. I am trading a lot on dips and will probably sell at 9764" (I did not sell enough so got caught in part of yesterday’s meltdown)

(repeat from yesterday) The fundamental that could stimulate a rally is a second stimulus package that creates more private sector jobs. However short term selling the election and a bad Friday employment # for the month of October should hurt stocks.

Traders – Technically the move higher looks to be too powerful not to get extended after a dip. The spreads in the credit markets are narrowing and another stimulus package is probably coming. = Buy the Dip

Long Term Investors – As we approach Dow 7800 another opportunity to buy. Those of you who missed out when markets went well below 8500 may get a

Economically, Main Street is no where near out of the woods. But there is hope.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

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 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

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)

*10%+% 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
*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 9,000 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

All of us old timers who had fought for equal rights in the 60′s erupted last night in rivers of tears. What we had taught our children and believed in so strongly about America came to pass last night as a black man, Barack Obama was elected President of the United States. What a phenomenal message Obama represents for the USA and the world. What’s unique is he is first our president who happens to be black. This is the only country in the world that this would happen.

Last night -

*Hope won out over fear
*Competence over ideology
* Working together over unilateralism

In watching Barack’s campaign over the last few years you have to be inspired by his managerial skills and competence. He started from nothing and took everything that the far more experienced Clinton and McCain campaign’s threw at him. Barack adapted, organized, counter punched and won. What’s most impressive is the ability of Barack (and those close to him) is his creative competent managerial skill.

The torch has been passed to a new generation. The war in Iraq is over and the "you’re either with us or against us era." has at least for now come to an end. Yet, if you are our enemy we will still "fight you and defeat you."

Hillary Clinton – Proved she is the energizer bunny of American politics. What a positive Hillary is for women everywhere who have fought for so long and so hard to break the glass ceiling. Even after defeat she didn’t whine but worked her heart out for the Obama campaign (68 trips).

John McCain – Where was the man who gave that gracious conciliation speech in the campaign?

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow +3.28% up
NASDQ +3.12% up
S&P500 +4.08% up
Russell2000 +1.39% –

Headline – Amazing Rally

US Market & Foreign Markets -

Technicals – The predicted "Amazing Rally" happened – it just took three instead of one day to materialize. The folks at the right wing financial channel may finally begrudgingly admit that a chunk of this rally was because Obama was going to be our next president (consistently led in the polls) and the nation would move forward is hope not fear.

Volume did move higher confirming the price move. However, volume was average at best.

We’ve had two Amazing rallies. and that’s a long term bullish sign.

Reaction from Asia was positive over night Korea +3% Japan +4.5 and China +3. European markets are down@ -2% this AM

Fundamentals – We did NOT get a filibuster proof Senate senate and that’s good for Wall Street. There will be some selling into the Obama election news.

Historically November starts a usually very bullish period for stocks. December is historically the best month of the year.

Jobless numbers come out on Friday and they and future numbers are not going to be good.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.7% this AM. That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR down another 0.20% this AM.

The 3MTB rose +10.71% to +0.465%. The Fed rate is 1.00%

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up. This helps Main Street’s access to credit cards to adjustable mortgage rates. But by no means is credit back to normal.

OIL

Oil prices rose a huge +10.36% and consequently the dollar fell. Things should move in the opposite direction today

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX was at or near its highest levels ever early last week and is now dropping like a stone = bullish

Chart of VIX.

Short Term Outlook = Rally goes on until it hits resistance Resistance Levels.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves –

(repeat) traders should lock in (sell) gains at or near technical resistance levels of 9764 or 10,000 and wait for a dip to buy.

(repeat) Holding stocks through Tuesday is risky because of the elections according to CNBC’s Jim Cramer.

We did basically hit the 9764 resistance level yesterday (within 20 points) . Wall Street likes to buy on the rumor (in this case Obama is going to get elected) and sell the news.

Longer term investors buy the big dips.

Personally my long term investments are now 10% stocks. I am trading a lot on dips and will probably sell at 9764 or 10,000 depending on the volume figures. Breakouts through these resistance levels in big volume would be bullish and a reason to hold on to short term trades.

The fundamental that could stimulate a rally is a second stimulus package that creates more private sector jobs. However short term selling the election and a bad Friday employment # for the month of October should hurt stocks.

Technically the move higher has be too powerful not to get extended after a dip. The spreads in the credit markets are narrowing and another stimulus package is probably comming. = Buy the Dip

Economically, Main Street is no where near out of the woods. But there is hope.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

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 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

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% 60% to 90% 95% Cash – This depends on your risk tolerance

*10%+% 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
*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 9,500 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 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

The Republicans have launched the biggest negative, fear mongering, character assassination attack adds in history against Obama in the last 48 hours of American Politics.

Massive buys from Republican 527′s the RNC and McCain/Palin adds have thrown every piece of slime possible at Obama. This has been augmented by the Republican blogs right wing media,leaflets and mailings. Obviously campaign finance reform is at best a joke in front of an onslaught like this.

This election is going to be a lot closer than you think!

Obama’s compilation poll numbers actually improved from +6.9 to +7.3% on RealClearPolitics.com yesterday. But elections are not held nationwide. Forget this number!

The negative adds attacking Obama have been targeted to battleground states, NOT the nation. These statistics are nationwide and include the huge populations of California and NY where Obama has 20%+ leads. When you factor that in the race becomes much closer. The character assassinations are working. The question is how well.

Example – New Hampshire is a battleground state. UNH has a daily tracking poll and five days ago it was at +16%, two days ago it was at +11%. Nothing measures the last 48 hours. But other more major polling outfits have this race two days ago at about +7%.

This is happening through out all battle ground states as Obama’s once commanding lead in battle ground states has been cut in about half over the last week.

If McCain /Palin are successful with this attack instead of going after issues this country will be torn in two and all politics and the media will become is negative, slime throwing, character assassinations. – because it works/sells. Fear mongering has made us a truly weaker and divided nation. If you think America was divided in "you are either with us or against us" under Cheney/Bush years – you haven’t seen anything yet.

Instead of dying down as they usually do the media outlets on both the left and right will hyper charge the negativity. – It works/sells. Minority groups will feel that they were cheated by lies and charter assassination and react. If you even associate with a Muslim you too will be labeled a friend of terrorists by our government. The right wing whites will just arm itself more in response. Because of the weak economic situation that already exists the situation could rapidly deteriorate.

The Good News for Obama – Yes there has been a significant impact in McCain’s mud slinging. Throw enough slime and some is bound to stick on some folks. But 4 factors are in Obama’s favor.

1) early voting has softened the impact of the last minute swift boat adds. Perhaps 1/3 of Americans have already voted and missed most negatives.
2) Obama has reached above 50% of the vote in the polls of some critical battleground states for over a week. This means that the vote is pretty solid here and the slime will not stick as much on these voters.
3) Obama supposedly has a superior ground game – he is going to really need it today.
4) Obama has a lead in the polls of @7% and most voters know this. This will encourage Obama supporters and discourage McCain supporters.

What to watch for election night

Virginia – Polls close early here (7PM EST) and if Obama wins in this Republican state, its going to be real hard for McCain to win. Latest polls suggest a +4.3% for Obama two days ago.

New Hampshire – Again polls close early too. If McCain wins or is within 5% of Obama it means that the character assassination or the last 48 hours is working and you will see these numbers reflected throughout the country.

Therefore, you should have an idea of what’s going to happen by 8:00 EST just by watching these two states. This will tell you how all the other battleground states will turn out.

Pennsylvania – A must for Obama – A loss here and its going to be real hard to see Obama win. Obama up +4.4% two days ago.

All the other battleground states.

Obama’s Grandmother Dies

What a devastating blow for the Obama family on election eve. His mentor and perhaps the person most responsible form making Obama who he is yesterday died from Cancer. More on Madelyn Dunham .

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -0.06% down
NASDQ +0.31% down
S&P500 -0.25% down
Russell2000 +0.18% –

Headline – Holding Steady

US Market & Foreign Markets -

Technicals – Markets traded within a normal 125 range yesterday in light volume. This, for the first time in months was a normal light volume day.

Japan was up over +6% in trading last night (stimulus package and they were closed Monday) Other Asian markets fell @ -1 to 2+%

Fundamentals – Manufacturing activity in the USA fell to a 26 year low and the auto industry got decimated in its monthly report . GM car sales dropped -45% for the month. Despite these horrible numbers stocks barely moved yesterday. In the long run this means massive layoffs in the US auto industry and related companies.

Example of how the unregulated Credit Default Swaps market is impacting this is you had to have a credit score above 700 to use GM financing. Other manufacturers loss less Ford 30% but it was really bad news.

The fact that markets held up so well despite the bad news is a bullish sign. Looks like the meltdown of our auto industry is already baked into stock prices.

Earnings season is now 80% over

Historically November starts a usually very bullish period for stocks. December is historically the best month of the year..

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is slowly opening up. This helps Main Street’s access to credit cards to adjustable mortgage rates.

OIL

Basically stocks go up so does oil. Oil also has an inverse relation to the dollar. Oil prices fell -5.57%. Stocks should have shot up on this, but didn’t. The GM news probably acted as a counter weight.

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The dollar rose significantly Friday (+0.67%). The major move higher in the dollar (almost 2% in the last two days) is forcing oil prices lower.

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX was at or near its highest levels ever early last week and is now dropping like a stone = bullish

Chart of VIX.

Short Term Outlook = Rally goes on until it hits resistance Resistance Levels.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves – (Basically same message as yesterday)

Best guess- traders should lock in (sell) gains at or near technical resistance levels of 9764 or 10,000 and wait for a dip to buy.

Holding stocks through Tuesday is risky because of the elections according to CNBC’s Jim Cramer.

Longer term investors buy the big dips.

Personally my long term investments are now 10% stocks. I am trading a lot on dips and will probably sell at 9764 or 10,000 depending on the volume figures. Breakouts through these resistance levels in big volume would be bullish and a reason to hold on to short term trades.

The fundamental that could stimulate a rally is a second stimulus package that creates more private sector jobs.

Economically, Main Street is no where near out of the woods, but the stock market is oversold and emotionally ready to rumble.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

Changes to Bottom Line Section Bolded

Technicals – Double bottom has formed, advance in strong increased volume, and a new high on VIX . Technically all this = at least a short term rally and maybe a long term bottom.

Reading tea leaves – Look for range between 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

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)

* 60% to 95% Cash – This depends on your risk tolerance

*10%+% 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
*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 9,000 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