As I indicated if we could not hold support that vacuum to the downside would be fast and hard. Volatility still lurks beneath the market and will continue to surface and take a bite out of the market. The uncertainty in the market is reflected in the Political Race and even after super Tuesday the future candidate for each party is still uncertain. Hillary won California, but Obama outpaced her on the number of states and on the Republican side Mr. IRS-Terminator-the-earth-is-only-2000-year-old, Huckabee surprised EVERYONE and captured several states. However, McCain “seems” to be the winner of the GOP (remember only a few months ago they thought he was bankrupt and was not even going to make it out of the gate). One thing IS for sure – this is a WIDE-OPEN Race with all types of candidates. I think political races like this are great for this nation – because there is a candidate for almost everyone’s view and voice.
Regardless of the political race and where we stand now as far as WHO is going to win for their party – the market doesn’t seem to care at this point. We are in store for lots more speeches about WHAT each candidate WOULD do for the economy – the reality however is RIGHT NOW THEY CAN NOT DO ANYTHING. So right now the current administration and FED are holding the reigns, while we have all ignored Bush and the administration (hoping for a brighter tomorrow) – they still have almost a year left and we can NOT wait and hope for the next candidate – action needs to take place now. So far – the rate cuts are just pouring gasoline on the fire. The $650 dollar per family stimulus will certainly boost Sizzler and Red Lobster shares for a month – we might also see a surge in Budweiser and Miller sales – and a boost in Lottery Tickets, but one thing for sure it doesn’t solve the problem. The FED can only pull off another 125 bps rate cut before he has blown his load and there is nothing left to do. I expect retest of the lows – and possibly breaking them to new lows – as we have yet to see blood in the streets and the current administration (being a lame duck) cannot do anything – even if they wanted too. Hang on – it is going to continue to be a wild ride (both up and down). You can bet on volatility – which is the only sure thing.
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Super Tuesday – less exciting than Super Sunday
I don’t want to waste to much time on this – since every cable channel and “talking head” has talked this to death and at this stage it’s all just speculation. The press and polls have been completely wrong on everything (both Democrats and Republicans) – from McCain being bankrupt at the beginning, Huckabee not picking up a single state, Hillary sweeping to dropping out after Iowa, Giuliani sweeping, and the Man with the hair (Mitt) being the back marker. The press and poll track record – SUCKS! I think the people of this country have something to say – regardless of party.
Personal note – I watched the speeches last night. The worse speech was Mitt (he sucks as an orator) and the best was Obama (man he can really charge his followers) – Hillary and McCain have been in politics WAY TOO LONG – that they just sound so boring. If I hear Hillary say we want CHANGE one more time I think I will puke – no shit we all want change, isn’t that the point of every candidate. McCain needs to get a little more charisma – he is a classy guy and not the mud slinger that we have seen in the Obama vs. Hillary (fly-weight division) – but he too needs to get charged up and invest is a rock-star speech writer. I guess if I was Republican – I would vote for McCain (he can cross the isle and has stood up to the Republicans and is more moderate). If I was a Democrat – I would vote for Obama (He IS change – where Hillary is more big business– her contributors from major pharmaceutical companies to the CEO of several large corporations – not to mention how polarizing she is – I don’t think she CAN cross the isle even if she HAD to!). I think both Obama and McCain appreciate the need to bring this country together (both Republicans, Democrats, and Independents). That is my .02 cents. However – as most of you know – I am the minority Free Market and Constitutionalist – so I don’t have a candidate! Who has a chance of winning – I guess Ron Paul was the closest thing and my long shot (gone shot).
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Worker Productivity Rises – Not a good economic sign!
The Productivity (a measure of employee efficiency, rose at an annual rate by 1.8%). Some of the talking heads on TV would have us believe that this is a good sign for the economy – since it reflects increase in efficiency – which translates to increased margins and/or savings. I fully agree and also believe this should be the goal (from the day one of every company). However, living in the real world we all know how companies traditionally get FAT when times are good and LEAN when times are bad. So – while it is a good sign that a company is getting it’s SHIT together to trim costs and increase margins – it is not necessarily a sign that the economy is getting better.
For anyone that acts surprised that Productivity rises in this economy – well I think them a fool – of course it would rise when you start laying off lots of people, less people can slack off. The financial, lending, building, and several sectors are is massive lay-offs – so it is rather obvious that productivity measures would rise. Not to mention many companies are working to reduce employee work hours – which additionally increases Productivity. I for one would wonder what the CEO of a company was doing during the good times, if now they are actually showing an increase in corporate productivity and increase savings – which equals increased margins (more profits). It’s like the person that says, “I am going to give it 100 and 10 percent!” – I always hated that saying – first you can’t give it 110% and you should have been giving it 100% to begin with. Or something like “We are going to focus our efforts and put our nose to the grind stone!” – I am wondering what they were doing before that? Seems that people LOVE to get FAT and LAZY in the good times and now they have to hunker down. Anyway – enough of my rambling – times are tough and productivity (if we just do the math and not make stupid speculation) is a clear sign that companies are laying people off, cutting the fat, and reducing the hours – why you ask – because times are NOT so great.
This will sink in after a while – and the talking heads that think this is a sign of a bottom will quickly be scratching their heads when other economic data shows the increase negative pressure on the economy. These are not the times to be an optimist or pessimist – we need to be realistic when invested in this market.
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Futures Pre-Open
The small knee jerk to the up-side on the “Great” productivity numbers (which are a GOOD thing for companies) really reflects that companies are trying to CUT costs and hunker down because we are in a Shit-Storm – will again set-in. The futures are already retreating after the pop. I am not saying we could not rally – I am just saying that any rally off these Productivity numbers is based on Optimistic Hope that things are better – instead of the reality that companies are shedding jobs and cutting costs – which equals increased productivity. The ARB traders are no dummies and are shorting into the opening – getting ready to buy the cash basket to capture the spread. We are going to see the futures take a little sell pressure from the news release because of the ARB traders. However – we are going to see a boost in stocks at the opening – as they will need to buy the baskets to cover the spread. After the opening it is anyone’s guess.
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Support / Resistance
What supports you ask – I agree. I mentioned yesterday that if ANY supports (where I would NOT get long) don’t hold we would see a free fall – which is what we saw yesterday. I think we could test the lows be weekend.
INDU 12,000 / 12,500 (we broke 12,500 yesterday like it was butter – a place that I mention NOT to get long at but it was more of a pause area that needed to hold. We could see 12,000 again and if you were ballsy to get long there make sure to hedge 100%, because if that puppy doesn’t hold – well it could get even uglier and faster. It would be nice to get above 12,500 today – but I think that could be hard – even with the optimistic productivity numbers.)
NDX 1700 / 1800 (1800 came and went so fast that it made your head spin yesterday. Not a good sign. We are in no man’s land now.)
SPX 1300 / 1350 (It would be nice to see this get above 1350 – but I think 1300 is going to be visited sooner than latter)
RUT 700!!!! (If we can hold and CLOSE above 700 – which I don’t think we can – then it’s 650 time and fast)
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Conclusion
The political race is fun and exciting – but right now it is only entertainment – since they really can’t do anything. I feel for whatever candidate wins the presidency because they are going to inherit a bankrupt system and a economy that is in the toilet. I can see Bush existing the White House now, with the door slamming on the ass of the newly elected president “F### ya latter!” he says as he exits. Bush was the worse Democratic president we have had, I would love to bring back Republican President Bill Clinton (do I have that backward? – the fiscal responsibility of the two should not escape you – if you can see humor in it).
The 125 bps rate cut reminded me of a 24 hour “Stay of Execution” for the economy. It didn’t solve anything and is only delaying the problem – which so far is not addressed. The Democrats want to raise taxes and increase spending with a est. $800+ billion a year health care package. The Republicans want to keep the tax cuts permanent (which does solve the problem today – since the tax cuts end in 2010). The problem right now is we are in or headed into a recession – which I think is going to last a while. I don’t see where the NEW money to revive the economy is going to come from. 2001-2007 was just massive borrowed money from people tapping their homes – not real EARNED money.
Stay hedge – and expect more volatility.
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