Complete and Utter Suprise

I would be in total awe if the markets closed up today after the news we got. 6.2 percent contraction in GDP, GE slashes their dividend, Eastern Europe needing a bailout, Citigroup needing to be bailed out AGAIN. I guess stranger things have happened though...like wearing big yellow rubber pants and playing hopscotch with flying pigs.
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Russian Roulette with Barrack Obama

Obama is okay with raising taxes in a recession. He claims that he is not because they don't start until next year and by then the recession will over. Raising taxes in the middle of ANY recession is a bad idea. Businesses are already struggling to get by as it is. How in the hell does someone double our nations budget, earmarking it for programs that encourage complacancy, and then chance a TRILLION dollar tax hike on the hope that we will pull out by then? We need to unclogg the markets Mr. President! Unclogg the Markets! Then lending will resume and we will pull out of this recession. However, we cannot keep lying to ourselves that we don't have to pay the piper and take the consequences. Quit making my kids indentured servants to your programs and bailouts. I want the consequences, I want to fix this, don't leave this debt for them. If states need money, they can raise their own damn taxes for the money they spent wastefully. I have never seen traders so polarized against a president. Tax everyone making over 75k per year every dime of income and we still can't pay for this budget. Obama is being this drastic in order to make a quick fix on things before the election in 2012. Just as we created the housing bubble to correct 2000-2002 recession, Obama is creating the government bubble for this one...accept his spending isn't doing a damn thing. Is anyone else pissed out of their minds?
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Wow, What a Set Up

It is rare indeed to see a short play forming up as well as Visa (V) and Master Card (MA).
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Untold Fixed Income Activity

A small story blipped accross the AP today about the possibility of Moody's downgrading approximately 680 billion dollars in corporate debt. I know that doesn't seem like a whole lot of money, what with dollar bills growing on trees lately. However, in normal terms, you could buy your own country with it. The credit markets are much more sensitive to credit risks than equity markets. Last September corporate bonds devalued a few days before the market sold off. In the last week, corporate bond etf's such as LQD have broken their uptrends and are currently pricing in some substantial potential risk. At this point, the markets really want to rally though so we will see what happens. Love or hate these volatile markets!
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Rally or Dead Cat Bounce

It's a very busy week this week as Bernanke testified to congress today, and Obama is slated to speak to the nation tonight. Although we did cross below our previous lows on the Dow, this rally today could be the beginnings of something more. We have had some very bearish news today in home prices, and unemployment is coming out Friday which always seems to drive the market down. A lot of the movement this week will depend on whether Obama and Bernanke and whoever else that has a microphone in government gives us hawkish or dovish commentary. I am not convinced this rally is real yet. If Friday comes around, and the market is still moving up then I might consider participating in a decent rally. Until then I am being very carefull, it's a dangerous week to swing trade. It's a fabulous week to intraday trade.
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Overstimulation; Overload

Ever lost control of your vehicle, swerved the wheel the other way and then found you turned the wheel way to much. Often times it is because you over corrected the vehicle. This can often result in losing control of your vehicle. Ladies and Gentlemen, it seems as though the democrats in Washington have just gotten their licenses. They are like kids who have just won the lottery and go on a shopping spree in a candy store. Mark my words, this country is going to have a really bad tummy ache by the time we get done. Please note the following points over corrections:

1. Fed lowered interest rates to 0-.25 percent; Sounds great right? How about all the financial institutions that make money based on spreads in money market accounts etc? Aren't we trying to help financial institutions?

2. All the stimulus bills that do nothing but spend money, devalue the dollar, increase the money supply; can you say major long term inflation effects?

3. Job creation; Attention all professionals, don't worry! You can find work! There is always a government career in construction!

4. Double taxation bill for trading; Congress is proposing a .25% tax for every trade. Similarly to the mark to market rule, this will have some major major negative effects on financial institutions. Results will include but not be limited to less trading, failure of many black box trading funds, higher fees, less liquidity, and a more difficult environment for hedging portfolios with derivatives (the only thing that works right now).

5. Mortgage bailout; Encourages bad behavior. Did you hear about the bus driver that is begging Barrack Obama to help her keep her 800k home?

6. Washington playing bookie with wall street. I can't tell you how many swing traders are frustrated with wall street trying to play the markets. As soon as the market makes up it's mind, some fed banker, or SEC chairman stands up and talks about a new program, bailout, or bullish commentary. They are not letting the market take it's natural course. This market needs to exhaust itself before it starts turning around. Washington in this way is prolonging this.

Well...it's been one month...only 3 years, 11 months to go people!

Chaotic Fixed Income Markets

Interest rates are tough enough to forcast without all of this chaotic credit mess. Word is that hardly any bids are being met for bonds under Merrill Lynch, Bank of America, Ford and the likes. There is a lot of uncertainty about what the government is going to do. All we have heard is short statements all day that contradict themselves. Dodd comes out and says we might have to nationalize. Then there is a short statement from the white house that they support a private banking system. They just need to put everything on the table.
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Nationalizing Banks

Well, if they weren't seriously considering nationalizing banks and giving shareholders the finger, I think they probably would have said so by now. Chris Dodd said today concerning nationalizing some banks "I'm concerned that we may end up having to do that, at least for a short time.". Can you feel the tingles going up your legs now Obama voters? I know...I've been getting those since the democratic primarys.
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SPX Support Levels

Everyone is saying the S and P hasn't broken support levels yet. Does anyone else remember several companies being added to the S and P replacing financials? The valuations for the SPX are totally different now anyway. I just wish people would accept the fact that we are in a recession so that the system can clean itself out. Housing and stock prices must reach levels where MOST people feel like they are a great deal. Once that happens, I think the market has a great chance at a decent rally Q2 and Q3 as all the government squander money is infused and wasted....err...I mean spent...on a rail from Disney Land to Las Vegas.
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I Don't Prefer the Preferred Shares

Tuesday financials closed below their November lows, Wednesday transportation indexes closed below their November lows, today Preferred stock indexes closed below their November lows. Electronically Traded Fund PFF, which is an Ishares fund, closed a whole 1.47 below it's 19 dollar November loan. I swear, if the government nationalizes my bank, there is no way I am keeping my money there. Maybe Bermuda or the Caymens...or a credit unnion...nah...just under my mattress.
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Morningstar

Morningstar is coming out with earnings later today. I don't think their earnings are going to be so hot. My reasoning...financial institutions are looking for all kinds of ways to cut back on expenses. Morningstar can't be immune and negatively correlated to the financials too much, they are attached at the hip. Also, over the past 2 months, executives have been disclosing sell order after sell order of personal MORN shares..
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Home Shopping Spree

My wife and I have been shopping for a new home. We have always wanted our dream home. Oh how joyous it would be to slip out of an indoor pool only to find ourselves bowling in our basement 5 minutes later. Unfortunately there was just no way to afford it. I would like to thanks Barrack Obama however, his kindness to our plight has been so deep and rich. Without him, we would never have found anyone to make half half the payment for our life long dream.

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European Nastiness

There is some really nasty nasty news going on in Eastern Europe. Reports are starting to creep out in Western Europe this week. It won't be another 3-5 business days before the main American presses start publishing the foreign headlines. Some Eastern European countries are basically on the verge of monetarily collapsing and will need to be bailed out by larger countries.

The fact that oil has broken below previous lows as well as financials leads me to believe that the rest of the market (now at its support levels) will soon follow. Obama is coming out with details for another bailout tomorrow however, so the markets may attempt a small rally on that news before the big boys sell into it.

Also, inside track...remember Oct and Nov of 08? Remember all the forced hedge fund liquidations that sent the markets sprawling? A report came out today that brokerage houses are reducing funding and cranking up pressure on hedge funds. More forced liquidations will be gasoline on this fire.

Sorry for such a long post but there is going to be a lot of stuff hitting the fan this week.
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War

Washington and Wall street are at war. Washington wants to spend, Wall street wants to unclog the credit system. This week will tell us a lot about whether the market is going to head down for another leg of selling. There is a lot of both governmental and economic information coming out. I am expecting trading to be very volatile and schizophrenic. The feds are long the market as it is imploding, get ready for a crazy week.
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Story Time! ...Chapter 11

Nancy Pelosi and Barney Frank sent GM and Chrysler some parental reminders on Friday the 13th, chiding them of their responsibility to protect American jobs in preparation for the plans they are to provide congress on Tuesday. Ceo's Rick Wagoner and Robert Nardelli are going to try to get the cold hard facts on the table. After they explain to Nancy Pelosi something to the effect of "Look, your unions tack on an extra 2k cost to each of our cars above our competitors, your restrictions restrict our ability to build real environmentally efficient cars, and the current economic conditions are sucking our cash dry". Nancy Pelosi or her colleagues might then say something constructive like "How could you let your employees down like this!!!! (rage building), How could you come here asking for more money when you came in a private jet!!!! (getting..harder..to..control..) How could you lay people off!!! (turning..green..rage..no..) There are harvest field mice dying out there!! (incredible..hulk..arrgh!..)" To which GM and Chrysler Ceo's Rick and Robert might reply "Yeah...um...well...we need 5 billion dollars".

The truth of the matter is, we can't keep throwing money at a bad business model. There is a reason private capital is not investing very much right now, because many business models are siphoning cash flow. The government should assist GM and Chrysler in backstopping and declaring chapter 11 bankruptcy. Just as it is nature's duty to burn a Forest when it is overgrown, so should bankruptcy purge the governmental and entitlement business models at GM and Chrysler.

Government Squander Plan

I wrote a letter in my journal last night to my future grand children apologizing for the Government debt we will be gifting them. I also apologized for the sweat and toil they would have to pay their taxes with as it would mostly just go toward interest payments to China. I Then put a short P.S. note at the bottom of the page..."Went on a cruise with the bailout checks your mom and I received, had a great time, thanks so much...well...see ya later!"

I also think Lockheed Martin is starting to rollover into a decent sell off.
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Markets on the Precipice

The major indexes are dangerously close to breaking south of key support levels. They closed just barely above them this afternoon. Geithner pretty much said it...money isn't getting to economy fast enough, despite fed's best efforts, markets are still deteriorating. With all of the statements that have been made from Obama and Geithner and the likes as of late, we might do well to read in between the lines and prepare for another shoe to drop in the financial markets or somewhere else. Get set for a 5th wave sell off at some point this week.

Tech will not lead us out

A whole constituency of investors are now saying that tech will lead us out of this deep recession. I know that tech hasn't been hanging around. The major indexes for too long but I seem to recall 2 points of interest. First, sentiment was very bullish just before the bubble burst millenial year. Second, tech had a really nice run 06 and 07. To me that says that tech is a trailing indicator. Companies only upgrade when they have cash to blow. Technological genius is glorified only when it is scaled with buko bucks. Weird how when Bill Gates stated that MSFT was not immune to current market conditions and then sold 3 mil shares to put his stock where his mouth was, people started recommending Microsoft. That laggard, he is so behind the times.
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Hedge Yourselves!

I really hope you don't suppose me the pessimist. I really do wish the best for the economy...but...we are all going to hell in a hand basket!!!! Aaaahhhhh!!!!! I don't know how long the market will rally, or if, or when it will sell off, so let's look at risk to reward. What are the chances of hearing good news in 2009 on a regular basis? So far the only good news has pretty much been bad news that was better than expected. So if you like staying in the market then just hedge yourself. In 1930 the market rallied for most of the year before a huge sell off near year end. Implement close to the money covered calls, or collars on your long term portfolio holdings.
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Proceed With Caution Value Investors

I would like to remind investors out there buying stocks because they are cheap...AIG was an absolute bargain at 20. I wonder if treasury secretary Geithner has something up his sleeve for Bank of America though. Our former secretary Paulson just about twisted BAC's arm to buy Merrill Lynch. I mean, who in their right mind (not BAC CEO Ken Lewis) would want to offer to buy a company in such bad shape, that the buyer becomes insolvent. Ken Lewis! Over here! That hippo is drowning in a bottomless pit of quicksand, quick, here is a life jacket, go save it!...
That said, there are some whisperings of some stimulis news coming in the next week that would help banks not have to mark to market so much. This could spur lending as banks won't be stuck with loans 75 cents on the dollar as soon as they extend credit. BAC traded almost 750 million shares today and corporate insiders bought substantial holdings as well. I think with that info, plus the fact that the feds owe Bank of America a solid makes me long BAC for a quick swing trade.

Uhhhh...Whoa....

Chart number 1 reflects lending by the federal reserve through Dec 2007.






Chart number 2 reflects lending by the federal reserve to U.S. banks through Dec 2008.

I am pretty sure we will be seeing the affects of inflation at some point in the next 15 years. Might be good to diversify into Gold, Commodities, or Treasury Inflation Protected Securities at some point! eek.

On a lighter note, over the last few weeks many companies such as Microsoft and Kraft Foods have said that many of their retailers are cutting back their inventories to cut costs. According to most of these companies, wholesales are struggling due to cutbacks, but retail sales are still pretty good. Keep your eyes on consumer spending reports coming out over the next few months as they will really move the markets one way or the other.

Where is the Market Heading?

In the great depression people were borrowing upon borrowed money to buy stocks. When everything started crashing in 1929 people and companies had to start deleveraging themselves. When our wonderful government whom we must rely on to survive and prosper (cough cough) decided to force banks to loan money, they of course created the housing bubble, which in turn popped...I am sure you are all personally familiar by now with the initial aftermath of the credit crisis. blah blah blah right? Well, remember how long the great depression lasted? Quick recap...1929 -17.2%, 1930 -33.8%, 1931 -52.7% 1932, and 23.1% in 1933 before bottoming out. All in all the market declined almost 90% during the great depression as the stock market deleveraged itself. So how much do we have to deleverage ourselves this time as compared to last time? 1930's debt represented almost 160% of the U.S. economy while in 2008 total economic debt represented close to 350% of the U.S. economy. Hello! So this time around what are the market returns that will be etched into the history books? 2007 -6.57% from its high, 2008 -33.87%, 2009 -7.91%...so far....