Jobs Jobs Jobs
The Jobs report comes out at 8:30 EST this AM. Right now there seems to be no end in sight for job losses MSNBC story . Jobs are central to how fast and how deep the recession progresses. Current unemployment stands at 6.7% and consensus figures have this rate rising to 8% by years end. Layoffs are going to grow. Its one thing to know this and another to live through it. -525,000 jobs and 7% rate are the expected numbers
Waiting for announcement… and the number is -524,000 and unemployment rate at 7.2% – a huge 0.5% increase in just one month. Last two months revised down add to the +0.5 increase. Total job loss for 2008 was 2.6 million.
Bad, but could have been worse. Probably will not negatively impact stocks because the private ADP report earlier this week was much worse. (see previous Updates) Major question – will this 524k number get revised downward at the next report. Sure looks like we will reach 8% sooner rather than later.
Imagine This
What if Bush plan to tie social security to the stock market had passed? How much worse off we’d all be now – especially seniors.
23 Electric Cars of the Future
Treehugger.com has a photo and well referenced presentation of 23 electric cars. You can skim through the presentation or follow some of their links – LINK
Project Better Place
This Israeli company just keeps growing. Better Place has introduced an entire electric car system and its partners include Renault, Nissan and A123 Systems. They are launching systems in Israel, Denmark, Australia and Hawaii. A123 has applied for $1.84 billion in loans to build its lithium ion battery plant in the USA.
Good Economic News
Everywhere you turn you get the bad news – Let’s focus on some positives.
#1 Oil prices have fallen from $140 to $40 a barrel
#2 Mortgage rates are now at or near all time lows (30 year fixed – 5.01% and 15 year down near 4.70%)
#3 We have the mother of all stimulus plans about to be launched.
#4 An administration that is less likely to waste $ in Iraq and pork spending.
Stocks.
AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING
Headline – Job’s Report
Index % Change Volume
Dow -0.32% down
NASDQ +1.12% down
S&P500 +0.34% down
Russell2000 +0.91% –
italics = same comments as yesterday.
US Market & Foreign Markets
Technicals – Major US markets were mixed yesterday as volume fell. Markets did well despite Wal Mart and Intel coming out with negative news. The Dow is at 8742 almost exactly midway between its consolidation range – 8500 to 9000.
Bottom Line – The jobs news is going to impact markets at 8:40 this AM (see above). However yesterday US markets held up pretty well despite some bad economic news.
Chart of the benchmark S&P 500
Fundamentals – See above editorial. ADP numbers take investors by surprise. 8% unemployment seemed built into stocks, but the rapidness of the decline has caught everyone with their pants down.
Obama Rally = HOPE A whole bunch of stimulus that has already been thrown at stocks, plus the composition of Obama’s economic team & his proposed stimulus package.
Earnings season begins in a week.
Forecasting Future Trends
The following is a group of indexes that are all interrelated and strongly influence how stocks moves. At different times one index may be more influential than the other.
LIBOR – LIBOR is the rate banks charge each other. It price has fallen from 3.4% three months ago to about 1.40% (good news for stocks)
Treasuries – T Bills yields show how fearful investors are. The lower the rate the more the fear. Short term yields – 3 month fell to 0.04% and longer term 10 year fell to 2.44% (low yields show fearfull investors flooding to Treasuries instead of stocks)
Baltic Dry Index – Measures flow of goods between countries. Yesterday it rose 4% yesterday. Almost 90% drop since June.
Strategy and Recommended Sectors (Listed below)
Buy the dips.
US Indexes (ETF’s) – Buy the ETF that go long when there is a 5 to 10% drop in the Dow and short of sell them when prices rise. Volatility is he recognizable trend and shorter term traders shout
use it.
Emerging Markets – China (FXI) technically is the best play. China is economically better off than the USA – Better growth and less debt. Brazil (EWZ) Solid economy – tied to oil and alternative energy (sugar cain ethanol). If/when the US recovers Brazil will outperform, but right now more volatile than US stocks.
Alternative energy – (GEX &PBW) These two market baskets of alternative energy stocks should outperform because of Obama’s economic stimulus plan.
Gold – (GLD) Technically still in a negative pattern, but fundamentally countries are devaluing their currencies and printing money. This should keep gold prices high. If gold can break out of its trading pattern is could explode higher.
Short Term Outlook
Reading the Tea Leaves-
PANIC STILL RULES the credit markets and trade markets
Without credit (treasury bills/bonds) and goods (BDI) flowing, a long term stock rally is unlikely.
Strategy – Shorting rallies to protect gains is working. (see below) Until we some light at the end of the recession tunnel VOLATILITY continues to be the most predictable major stock market trend. Obama rally (stimulus package) is holding up equities right now.
Best guess – We should again challenge 9000 next week.
AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING
Long Term Outlook – BEARS RULE
Changes to Bottom Line Section Bolded
Technicals – Series of Lower Lows and Lower Highs = Bears Rule. Obama/stimulus rally phase 2 is underway. Technical Range for 2009 – 7449 (low) and 9654.- This is a wild guess. Any sustained move above Dow 9650 is bullish.
Fundamentals – Financial transparency problem is far far far far far far far far far bigger than anyone thought. It’s looks like the recession will last through 2009 – perhaps longer Hopes of a more competent Obama administration have rallied stocks.
Asset Allocation/Recommended Sectors (long term)
50% to 90% Cash – Long Term Investors (up to 15 to 25+% stocks – only buy big dips) Wait for the next big dip to add 5 to 10%
Be Cautious and PROTECT YOUR MONEY (use ETF’s that short major indexes) when stocks have a big rally
*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk and dependent on oil prices
FXI (China ETF) should outperform USA
*5%+ Alternative Energy
GEX(Alternative energy ETF) Obama administration will focus on this area
*5+% Gold
GLD is the ETF for gold-
Chief Strategy – Buy the DIPS of trending sector – This is not your father’s buy and hold market – over the 8 Bush years the Dow has gone from 11,000 to 9000 and huge 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 and/or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.
Shorting – Three ETF that short 2x what the major indexes do.
TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500
