This Is Where People Get Ripped Off

The so called stress tests are accounting for 8.9 percent unemployment for 2009. To cap unemployment at 8.9 percent we would need to only lay off 300k people per month. We have been laying off about 500k people per month in the United States. Everyone is starting to get really excited by the 30 percent rally we have had in the last 7 weeks. Be very very carefull about buying at this time, you could be buying at a big top.
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Have To Be Long

The feds have been way too meticulous in planning the announcement of the stress tests. I have to be long Citigroup going into tomorrow.
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Why I Agree With Paul Volcker

Paul Volcker stated the other day that the future unemployment rates could stabilize at 7-10%. I agree whole heartily with his assessment. There is one major reason for this...Retirement. More than 40% of workers over 50 years of age have saved less than $25,000. Pension plans have multi billion dollar shortfalls and will either have to get the money from somewhere...hehe...or bridge the gap by negotiating pension benefits to the down side. Beyond that, since the government is spending to their limits, inflation will be very very prevalent. By the time this market reaches negative credit crunch returns of 80-90% within the next few years, most people will be holed up in a cash bunker. Their fear and emotions will keep them from investing and miss out on the coming recovery rallies. As they sit in cash, inflation will start to go haywire and they will be losing inflation minus their money market rates. example: 18% inflation minus 7% money market is a net loss of 11% per year. Long story short, retail investors will not be able to buy a bucket and many will remain in the workforce well past the ever retreating age of retirement.

Right In Step

I Like Pfizer

I am really liking health stocks right now. The health czar will be announcing where 19 billion will be going "very soon". I wouldn't be suprised if that happened to be on Thursday with the stress tests. GE is also coming out with a big announcement Thursday...what a coincidence!
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Why Keep Pushing the Stress Tests Back?

The government stress tests have been pushed back several times in the last month. Why do they keep pushing them back when we keep getting snippets of "light at the end of the tunnel" from various veteran news sources? The previous administration would leak bad news just after the close on Friday afternoons. The current Obama administration has trended toward releasing small parts of bad news, and letting the news pick them apart. Then after the "snippets have been reported to death, the real news is released, watered down and accompanied by several dovish Fed chief speeches. Here are my theories as to the reasons of delay for the stress tests...

1. They want the markets to slowly digest the horrible news as to not start a panic.

2. They want low volume markets to allow for easier and less expensive market manipulation. (See previous posts)

3. Banks need more time to enter massive insider trades in various derivatives markets that will give financial institutions more record earnings Q2. We are seeing some big activity in CDS trading as of late.

4. They want more time to disinterest the viewing public in current financial events. I.E. Swine Flu, Afghanistan, and Iraq, and pirates.
All of this is a smoke screen. The fact that they have reason to delay test results at all speaks volumes.

Nevertheless, markets continue to rally on very low volume. Many traders are hesitant to short as the market vector is following Washington and their lies and manipulation. If this type of government communism continues, it's not if there will be a revolt, it's when. The people of the United States are starting to reach their boiling points. How many years till it boils over?
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Get It?

Geithner "The vast majority of U.S. Banks have more capital than regulatory guidelines indicate". Ken Lewis "We absolutely don't need more capital". Citigroup "Regulatory capital base is strong"....and then the story from bloomberg this morning..."At least 6 banks require additional capital, according to preliminary results of Government stress tests".
So on one hand, the feds think that regulatory capital standards are great, but on the other hand, they don't. The private institutions don't seem to think they need more capital, but the feds have blatantly threatened to fire private CEO's if they don't.

Long story short, estimates put banks at another 1.1 trillion in losses and shortfall, and Bank of America at 60-70 billion. The government is at this point, politically unable to give more money away. Bank of America could convert 27 billion from preferred shares to common. However, where then does the at least 33 billion dollar shortfall come from for BAC, and where does the trillion come from for the rest of the industry?

Where will it come from? Lies. That's where it has been coming from for the last 6 weeks anyway.
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Black Gold

Should have a decent day in the energy sector tomorrow.
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All Hail The Feds!

Who will be meeting on wednesday. Yesterday the futures were down 165 points pre-market, and yet the markets only managed to drop 48 points. Usually when the futures have moved pre-market more than 120 or so points or so, the day will be very directional. This morning the futures are down a little over 100 points but I think the markets will end up relatively flat today as well in light of upcoming announcements. The markets are really looking for a reason to sell at this point, but the volume has been light so far. Watch for one or two more punches to the upside courtesy of the feds this Wednesday and this Monday. Monday, May 4th is shaping up to be a pretty big day for "selling the news".
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Stress Tests

Who wants to bet that the government stress tests will beat expectations today. Aacording to "their" stress tests all 19 of the big financial institutions will be in great shape under the worst of possibilities. It will be interesting to see if the markets decide to wave the bull crap flag on that one and sell into it.

There was no news the last 10 minutes of trading yesterday to cause the massive jump we had. Whoever put the massive order in, put it in at the market. Most institutional trades are worked in using trading algorithims and programs. The buying yesterday near the close was dropped on the market. Either they knew something no one else did, or they wanted to have a green day, or both. Either way, this market is giving me the creepers.
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No Rationale

I am telling the banks and the government are mixing it up with investors. I have not seen indicators denoting short plays as obvious in a long time. Yesterday General Motors defaulted on 1 billion dollars in notes. The IMF came out and said we are in a deep recession not seen since the 30's. Bad news is being completely ignored and snippets of good news are put on a pedestal. Volume is really low. People aren't trading because the market rally's on bearish technical and fundamental plays. Everything is drastically overbought and overdone on the buy side. The markets are no longer free. The financial power houses and the government are manipulating this market.
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No Head Fake Here!

Well, so much for the head fake before continuing down. This market wants to rally so...I'm not going to get in the way of tha freight train. Amazing how resiliant capitalism is regardless of the corruption and fundamentals!
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Whew! That Stinks!

Something smells really really bad. David Kellermann, the acting CEO of Mortgage giant Freddie Mac, was found dead on Wednesday in his home. The death was "unintended" said a Fairfax County Officer. In light of all the corruption and blatent lying to the public as of late, I wonder if there wasn't something that he knew...and wanted to come clean with....(Twilight Music in background) dodododododododoooooo.....
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Head Fake

Rally this morning is a head fake. I would like to see more volume in this sell off though. The fact that volume has thus far been relatively low supports the assumption that we are forming a "head and shoulders" bottom pattern. This means that we could see an upside starting at around 740-760 on the SPX. The next leg up would probably carry the markets to the 40-60 percent rally targets I mentioned in earlier posts.
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Nationalization Of Banks

I woke up this morning and realized that our banks have been nationalized for quite some time. A government official said this morning that they will need to "determine whether repayment (of TARP funds) is in the nation's economic interest".

I realize that this will shed more light on bad banks...good. Let the markets and the American people take this problem head on. My grandparents fought in WW2 and suffered through the great depression, we are borrowing our children's money to avoid the consequences of our own actions. Capitalism is the best way by far to improve the overall quality of life for a nation. Over the past decade we have witnessed crony capitalism. Congress and the senate accept monies from constituancies and then provide political favors in return. Our government is broken as a purely democratic institution.
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Where Is The Volume Going?

The trin, an indicator which tracks directional volume in stocks has been denoting a bearish attitude in stocks for about the past week. A sell off is coming soon. I don't know when but it is still a good idea to hedge your positions with covered calls.
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Up, Down....Up Down Up Down...Ahhhhh!

Credit Derivatives Research came out with a report today. Here are some interesting quotes I gleamed from it....

"The recent U.S. Stock rally has been sustained by small trades pushing up prices, rather than large block trades that have traditionally supported share moves"

"This equity rally has manipulative activity fingerprints all over it"

"Most of the momentum pushing shares prices higher has been made in small, after hours trading"

"Without these trades the S and P index, for example, would be around 60 points lower"

"What this means is that marginal market participants, such as mutual and pension funds, and retail investors who are really just beneficiaries of the liquidity chain, are about to get a very rude awakening"

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The Status Quo Has Changed

The attitude toward financial stocks changed today. Goldman Sachs came out of the gate early with their earnings just as Wells Fargo did. However, the market was more prepared for sky high earnings and, what's more important, had a general consensus as to why (see previous posts). There is now talk of federal investigations into Goldman Sachs and their dealings with AIG. There is also talk of investigating former Treasury Secretary Henry Paulson about possible conflicts of interest he may have had with the firm he was formerly CEO of (Goldman Sachs). All I can say is puts on Morgan Stanley and Goldman never looked better.
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Sell Calls

Sell calls on most of your long positions. The market is preparing for a decent retracement to the downside.
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That Was A Close One!

Financials were all set to sell off big time with fears of commercial real estate write offs potentially being worse than the residential CDO's were. Out of no where the CEO of Wells Fargo made an appearance on CNBC disclosing their quarterly profits 2 weeks early! Financials are now protruding a classic breakout to the upside. They should continue to show more strength as more financial institutions release their earnings. I wouldn't be suprised if more of these types of suprise anouncements surface pre-earnings for this quarter. All in all one might say we have begun the second bullish leg of a massive bear market rally. With financials however, don't forget the commercial real estate and swap exposure. Tread financials careful once the rally puckers out.

On a side note, shorting treasuries and the dollar are both plays that we can rely on long term. I picked up some TBT and some UDN as medium to long term holdings the other day.
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Free Market Capitalism!

Amidst all this talk of nationalizing everything and creating a huge government infrastructure I thought Milton Friedman said it all!

Banging The Pot

U.S. Officials and company CEO's have been banging the pot for weeks now stating that earnings could be horrible this quarter. Just in the last week or two Alcoa came out and forwarned horrible earnings. Their earnings will be horrible, but since really really low expectations have been set, I think many companies will beat expectations. Because of this we just may see stocks rally on bad earnings and outlooks. I'm telling you, this market is rigged and they will play every trick in the book to rally this market. But what can we do? It's the only game in town.
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Government Insider Manipulation Trading

Remember when the big bank CEO's came out and said the first few quarters were very good? Then, despite interest rates continuing to fall and refinances continuing to rise, they alluded that March wasn't as profitable. Why? AIG. The government has been playing games behind our backs. AIG is dead, it is a shell company. The government has given them over 170 billion dollars thus far. During January and February AIG unloaded a bunch of toxic debt at next to nothing prices to companies like Bank of America, Citi Group, JP Morgan, Goldman Sachs and the like. These companies turned around and sold those same assets at the market for billions in profits. How is that disparity legal? A trading policy was changed one month before to allow them to do so. Guess what, the tax payers took the loss on the difference between the rock bottom prices AIG sold at and the market prices the other institutions sold at.

Oh wait, there's more! Wonder why banks are buying more toxic assets now after we had to bail them out for having too much toxic crap on their balance sheet in the first place? Geither's 2 trillion dollar "asset relief" plan is going to bid market prices up on the toxic stuff. These institutions and the feds are going to make a lot of money on our tax dollars. Now we see that Obama's meeting with all the bank CEO's last week wasn't just political, it was collusion.

As a side note, this type of market manipulation is illegal.
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Great Opportunity

To go short on JP Morgan Chase. They are topping out in a big way. The big money was selling yesterday when the rest of the market was buying. Might just be a short play but I am expecting some retracement to the downside for JPM and his friends (Wells Fargo etc.) In the next day or two.
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Bought Some QCOR

Picked up some Quescor Pharmaceuticals today. They had a lot of excitement last year pending the developement of a new drug. The made a mistake in the paperwork they filed so the FDA returned it. The stock consequently got hammered before leveling off. When QCOR refiled their application it was largely ignored. Their new drug application is solid I think. We could see some great upside activity in the coming months.
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Does Anyone Else Feel Like They Have Just Been Taken

Mr. Wagoner, CEO of GM was fired over the weekend. He was not fired by the company board, nor the shareholders. He was fired by the government, more specifically Barrack Obama. Barrack Obama is a politician! He has never run a company in his life and he fired the CEO of a private institution. So much for all the "anti nationalization" rhetoric. Wake up Americans, bank CEOs are next. We are now officially a socialist nation. Taxation without representation, corruption, power conolidation, nationalization...is anyone else's blood boiling?
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Pending Volatility

It's going to get pretty dicey today and next week. This next week will decide whether we do a 50 percent retracement or a 5 percent retracement. The bulls and bears will be battling it out. I am hedged or cash to protect my profits.
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We Aren't Too Far Behind

Herd Mentality And The Market

The top reasons people are saying we have hit bottom:

1. Stocks are grossly undervalued
2. Housing is showing signs of improvement
3. Commodities are rallying
4. Massive government stimulis
5. Dovish commentary from Fed

This rally is going to be a very fun wild ride to the upside. People are euphoric! Just a few short weeks ago most market sentiment was sidingly bearish. Now, with a sudden 22 percent rally, market sentiment is decidedly bullish. When this thing starts to fizzle though in the next 3-6 months, watch out. The bear market rally in the midst of the great depression went for a good 50 percent. The market we live in today is full of black box electronic trading strategies, swing traders, and hedge funds. This market rally will way over react to the upside. It is a great time to buy, but watch out once we top out. Allow me to debunct the bull market pundits.

1. Stocks are undervalued...These companies are not undervalued just because you can buy a slushy for the same price as a citi group stock. Current earnings per share put the SPX at 600 or 650, not it's current 812 mark. Forward earnings aren't looking too hot either. Financial institutions are estimated to reduce earnings estimates by as much as 60 percent aggregated over the next few quarters alone.

2. Housing is showing signs of improvement...Housing prices gapped down in price and therefore enticed investors to buy in. The forclosures are still rising and unemployment is still rising steadily, the extra housing supply will keep coming. We are still in a housing bubble as the average salary can't afford a home for another 30 percent price decline. Sure, you can lower interest rates to 3 percent to make houses more affordable, but then we are recreating another bubble.

3. Commodities are rallying...Commodities are rallying because of inflation. We buy oil with the U.S. Dollar. When we spend ridiculous amounts of money to "spendulate" the economy into submission, we create an inflationary environment. Oil supplies remain relatively consistent with demand. Oil therefore isn't rallying based on fundamental economic numbers...just the weakness in the dollar.

4. Massive government stimulis...I have to admit, trillions and trillions and trillions and trillions of dollars created out of thin air and given away doesn't escape notice or market inflection. In my view however, this is just another bubble we are creating that will eventually pop. The generation that lived through the depression had to learn to scrape and save and repair their shoes. We just borrow more money. This free money is not free. We will eventually have to pay the piper and face the reality that huge amounts of debt is never going to substitute for a decent savings account. Plus, it took Uncle Sam over a year and a half to throw the money that is supposed to turn the economy on it's heels. Tough to stop a rolling semi truck once it gets going.

5. Dovish Commentary From Fed...Weren't they long the market end of 07 and 08?

Going up? Which Floor?

We are most likely in a bullish trend for a quarter or two. After borrowing trillions and trillions of dollars, and flooding the market with unprecedented amounts of money, the markets are predicting some form of stabilization. This rally has a lot of room to run, we might go as high as 50-60 percent rally. We already have 22 percent in two weeks. We are for the short term overbought so I would wait for a decent retracement first before buying in.
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Light Volume So Far

As traders digested Geithner's plan today, the markets rallied over 300 points! Volume is pretty light so far. I wouldn't be suprised to see a sell off into the close or tomorrow but there was definately some great long positions to take early this morning. This is that retest of the highs I blogged about last week. If we do start to get a sell off then I really like buying shares of FAZ.
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Okay, Now That That's Over

We will be looking for one of 3 things. We had a really really powerfull rally. I have said in previous posts that I expected the market to find a really nice 3-6 month rally in the eye of the storm. Although I didn't expect this to come until Q2 or Q3, it could be upon us already, and it would be dumb not to be open minded to it. Next week we will be looking for the market to have a major reversal day on great volume. This could happen either at our previous lows or by setting a higher low from the one previous. If the market makes a really week bounce off of the previous lows over the next week or two, then there is nothing to this rally. Our if we can't make new highs better than last week then forget it. Be ready though to buy some stocks if this thing is for real though, depression rallies have gone for as much as 50 percent or more.

Also, I think that real estate is an absolutely fantastic investment right now. It is a great play against the 800 pound inflation gorrilla sitting in Obama and Bernanke's offices right now.
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Inflation Is Now Aflame

Beyond their already oversized balance sheet, the fed anounced another 1.15 trillion dollars in spending. The markets were at major resistance levels and the fed knew they had to make a bold statement to drive the markets above these levels. They certainly took bold action today. Actually, they took such bold action that many are asking if they are crazy. If their plan works...great. One thing is for sure though, if it doesn't this country will be going to hell in a hand basket. If I was running a business, I would never ever take those kinds of risks. Now we are taking major risks with the United States of America. The U.S. Dollar got hammered today, gold was up in a big way, and oil even ended up on the day. This government isn't playing with fire, it is playing with a nuclear bomb. But hopefully they can stave off a recession...btw, the market was up 90 points today. YAY! 90 points for 1.15 trillion dollars in printed money!
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AIG and Hypocricy

Treasury Secretary Geithner told congressional leaders that "the U.S. Would recoup executive pay by deducting the amount from the next 30 billion dollar installment". What!? Does that make sense to anyone? This company should be allowed to fail. I would take a 2000 point drop in the market any day rather than pay 30 billion a quarter to keep AIG alive for the rest of it's life. Can you say corruption? Yes, the executives do not deserve the bonuses. However, if you signed a contract with your company, and it was still in business and you had fullfilled your obligations...would you expect fullfillment of your contract? Instead of spending all this smoke screen time taxing their bonuses without representation and saying that this is an outrage...why aren't we pissed that we have given a company over 170 billion dollars that is dead 5 times over. GM is a black hole, AIG is a black hole, Citigroup is a black hole. If we don't let things fail we will just create another huge bubble. The next bubble will be worse than the tech or real estate bubble...way worse. It's the old fashioned phrase "you get what you pay for"
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Flat

Markets will most likely be trading flat today, saving their energy for the fed policy announcement tomorrow at about 2:00 est. I wouldn't be suprised though to see some continued profit taking and see the markets close a little down today. Tomorrow should trade a little up in early morning trading before choosing a direction.
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The Mountains

I love the mountains, I love the rolling hills, I love the praries, I love the dafadills...well...anyway...In the past week the market has certainly climbed a very very high mountain. The rally we experienced was very powerfull. We rallied near 1000 points on the Dow before topping off today. Can you believe in this financial crisis tha JP Morgan Chase for a short time today traded at 30 times earnings! This when most bank stocks are trading in the low teens if not single digit P.E.s. FAZ, a 3X bearish financial etf is looking very very tempting right now. It traded more volume than ever before today and closed with a bullish japanese candle (hammer). Still, a trend this powerfull doesn't just turn on its heels and run without the greed seekers at home watching cnbc buying into the last eeks of the rally. That, plus the fed meeting coming up on wednesday could push this market to retest it's highs tuesday or wednesday before plummeting again. Keep you posted on the FAZ trade.
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Stress

Markets will probably end the day just a little to the upside. Monday the govenment stress tests will be done on all the major banks to see if they would make it through "worst case" scenarios. I think the markets will initially rally at the results of the stress tests. Once the details are hashed out, and everyone remembers that economic conditions remain pragmatic. By wednesday of next week we will know if we are in a 1-3 month bear market rally or a dead cat bounce. My personal feeling is that late next week we will be well on our way to testing the previous lows set on the DOW. Markets don't just go crazy bullish without retesting their lows in times like these.
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Tradable Rally?

Retail sales figures were much better than expected. GE debt did not get downgraded nearly as much. Pfizer came out with a really sweet cancer drug. Will we have a sustainable bear market rally? Personally, I think we are going to need to see more good news to continue this rally. Although there are some signs of things bottoming out, I am going to wait and see if this isn't just the eye of the storm. The next week to week and a half will tell a lot.
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Been Nice Knowing Ya Dollar

The U.S. Dollar has been showing some major weakness as of late. If you want to buy TIPS, today would be a great day to buy in.
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Trade Alerts

Buyers are scared out of their minds, costs to insure corporate debt skyrocketed tuesday even as the market rallied 380 points. LQD has continued to sell off, pricing in more credit risk. I am short ABT and XOM for a quick swing trade. We will at least test the previous low within the next few weeks.
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Market Bottom

Yesterday enbattled and beleagured Citigroup came out and said that they were profitable profitable for the first few months of 2009. That is excellent, and here I was thinking they were dead 3 times over on their balance sheet. However, I guess if you get bailed out and get billions and billions of dollars in bailouts you would think that money could turn a profit at some point or another. I am not convinced we have hit a market bottom. We are at least going to test the previous lows. At the same time if this does turn out to be a powerful rally then I will be perfectly fine with changing my bias toward the market and participate in some bullish trades.

On another note we are seeing that pullback in oil I mentioned in previos posts. I will be ready to buy into USO or ERX with about 1/5th of my portfolio soon. Chances are that oil has hit bottom and will trade flat to up until the market turns around. Then prepare yourself for big gains in oil. The pending inflation and the increasing demand in developing countries will send oil screaming to higher levels than 2007 even saw.
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No Buy Plays

I have been searching all day for a decent long position for an expected relief rally. I sold my BGU holding this morning when the market broke it's uptrend. I have not seen one bullish play I am confident in, nor do I think there will be one until a possible capitulation. The corporate bond indexes are down 2.5 percent plus today. There is a lot of risk now being priced into fixed income that has not yet been priced into equities. Be very very carefull taking on any new long positions.
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Follow Up

You may recall a few posts ago when I said that GE might carry the markets on its back into the close. It looks like I was right, only a day late. The last 30 min of trading today was very very bullish. The markets were starting to get very oversold. Pretty easy to do when you have 4 straight down weeks. GE rallied 6 percent in the last hour and dragged the rest of the market up with it. I think the first part of next week we could see some good days trading to the upside. I picked up some BGU at the close (leveraged Drexion Large Cap Bull ETF) to hedge against short positions I have (and am still confident owning) in Visa and now Walmart. Oil is starting to show some real strength. I may buy in on the next dip and start selling covered calls on it.

On a side note I am thinking about making some T-Shirts that say "Obama, A Short Seller's Dream Come True". What does everybody think?
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Yellow Smiling Face and Falling Prices

Time for Walmart to start showing the falling price commercials for their stock. Too many people think it is immune to the recession. It's getting some pretty decent selling pressure on it. I picked up some puts on it today.
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GE and The TRIN

I don't know if you have ever heard of the TRIN before? A man named Richard Arms developed it many years ago. It is basically an indicator that publishes the ratio between up volume buying and down volume selling. A ratio above 1 is typically bearish, while a ratio below 1 is bullish. Today, when the market is down 200+ points the "TRIN" ratio is .63. This may be due to the GE activity going on today. The GE CFO was on TV this morning going over the specifics of their balance sheet. There is a whole lot of volume either covering short positions or buying long value today on GE. My theory is that this"up" GE volume is influencing the TRIN to the bullish side of the ratio. It is possible we could see this market rally a tiny bit off it's lows into the close on the back of GE...so watch GE stock today as I think the market tries to go where it goes.
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Oil

If I was a gold digger, I would marry oil. I am very very long oil. More specifically, I am waiting for just the right moment to buy a substantial percentage of my accounts into United States Fund (USO). I like a commodity play better than an oil company. I expect oil companies to be blamed, taxed and punished by the government many times over as oil prices rise. Although I am bullish long term on oil, my goal is to be surgical in my entry. I can see an entry point possibly coming to surface at some in the near future. Today...is not that day...I could be wrong. There are still many resistance levels above oil however, and we are still in a so called "deflationary" environment as the stock market continues to sell off.
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Prediction

GE is leveraged 140 times liquid capital. Dow Chemical has just about every single business unit for sale so that they can aquire Rohm and Haas company. I don't see either company's chances of raising money from a business unit sale very good in these markets. I could see either company getting a bailout at some point in the near future. Gosh I am so negative. I do see some hints of positive buy signals from Bank of America again, though. Nothing sure, but something to keep an eye on.
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Get Used to This People

Last week the feds gave 25 billion dollars to Citibank. They also began negotiations for 18 billion dollars to the league of companies that manufacture parts for the car companies. The latest? 30 billion dollars for AIG. My prediction...amidst all these bailouts there is not yet one that fixes the problem. Until that happens, have fun keeping track of all the bailouts that have occured, because they will continue to be diluted by many more bailouts.
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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....