Another free fall in a government intervened market? Wonder what it would look like if the shorts were let back in? Notice that all the finger pointing at the Naked Short Sellers and even the Short Sellers have calmed down. How come the market is going down if there are no shorts? It's cause people need capital NOW.
The additional problem is that when we DO find a bottom it might see a small rebound when it does happen - but we are not going to see the kind of growth we have in the past. Sure we are going to see some huge banking and market reforms. A recession is here or on its way (depending on who you ask).
Continue to expect more volatility and don't expect an extended bull market or a quick turnaround from this mess anytime soon.
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Kumbaya Rate Cut!
The Fed, Treasury, and Congress have done EVERYTHING from bailing out companies, loaning money at the discount window, flushing 100s of billions more into the market, lowering interest rates from over 5% to 2%, even banned short-selling in over 1200 issues and the market still goes down. What next?
Now in a Kumbaya Effort - central banks around the world join hands and cut rates together. However, unlike the U.S., the ECB and London have lots of powder to cut rates - remember they were between 4-5%. The U.S. is now at 1.5% great and Bernanke will be meeting in late October for the FOMC meeting - I wouldn't be surprised if he CUTS again at the FOMC meeting. 1% is in the cards - it just a matter of time - could we get to .5% - sure.
This Kumbaya Rate Cut is more of an intervention, rather than a group effort. They foreign nations eyes are all on the failing U.S., the deleveraging, and the U.S. government printing 100s of billions. Sort of like the alcoholic that doesn't KNOW they are an alcoholic - all the friends (and acquaintances) get together and have an intervention and all collectively agree not to drink in front of the alcoholic that has NO SELF CONTROL. They all rely on the alcoholic to some extent - so maybe this intervention is needed. Bernanke you are out of control.
What does piss me off is Bernanke actually issued a statement that they acted due to a weakening economy, and inflation pressures have been reduced. Inflation Pressures Reduced? Are you kidding me! It's amazing that when inflation was going UP - he tried to focus our attention on the CORE as if fuel and food didn't matter. Now as gas prices have come off he is trying to get us to focus on head line inflation. Which is it Ben - the Core or Headline, - oh wait - I get it now - it's which everyone fits your decision making. Come on Ben, Cowboy-Up, Cut the rates and don't blow smoke up our butt about reduced inflation. We all KNOW that the printing presses are smoking and inflation is here to stay!
So the question everyone is asking - "Is the worst behind us?" - well the futures popped hard at the announcement - but this doesn't really solve the problem. Remember the Target Rate is just that - a suggested level to lend to each other. But if they are not lending to each other - it doesn't really matter. Sure we could see a big rally out of this, but not because of the fundamentals - but rather a just a knee jerk effort - much like this Kumbaya Rate Cut.
Of course the cheerleading on CNBC is going on in full force with New Music and Graphics. So I guess that does mean it's the bottom right?
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Wall-Mart a survivor
If one company was built for a recession / depression it is Wall-mart and their "rolling back the prices". You may not like Wall-mart for whatever reason, but the business model in a failing economy works - it's a one stop shop for food, clothes, hardware, pharmaceuticals, toys, electronics, tries, even banking in some locations. With gas prices still high, inflation, and everyone's wallet's getting squeezed - it's Wall-mart that is the one-stop shop. While even Wall-mart is seeing a slowdown in some of their sections - it's their other vertical markets that are keeping them moving forward in tough times. Sales climbed 2.4% helped because of their diversification.
Does that mean we should be investing in Wal-mart? Well - I am not sure about that - however, unlike the banking sector, automotive, or airlines - you can pretty much bet that they are NOT going out of business and in this economy that is saying something. Wall-mart is here to stay and is a survivor - if you are looking to add a stock to your portfolio that does NOT have the possibility of going out of business - well I guess you could do a lot worse than Wal-mart.
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Futures Pre-market
The futures were down hard in the pre-market looking bad as the world markets continued to tumble, then in a global effort the world central bankers joined hands to cut rates together. At first the euphoria of seeing Bernanke and Trichet joining hands to bring confidence created the mother of all spikes to the market - then reality sat back in and the markets futures markets began to sell off again. Oh well...
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Supports / Resistances
There are no supports as I said the other day - just psychological levels of hope.
INDU 9,000 ??? / 10,000 (We closed below 9,500 - next is 9,000. At this point it's really anyone's guess. Picking a bottom is just foolish. As I have been saying to the long and wrong crowd - make SURE your hard deltas are hedged! It's just a ride now.)
NDX 1300 ???? / 1400 (At this point a bottom is just a shot in the dark - 1300 - maybe - but who knows?)
SPX 950 ??? / 1050 (Again the bottom - it's a guess.)
RUT 550 ???? / 600 (It's a guess.)
The shorts are not even playing in the sand-box right now - can you imagine how much FURTHER down we would be if they were allowed to play.
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Conclusion
The Kumbaya Rate cut was embarrassing. I felt Bernanke is now being steered by foreign central banks that are intervening because the U.S. Fed, Treasury, and Congress are a bunch of tools. Our Congress has run AMOK no doubt. They have given all Paulson and Bernanke full power and all they are doing is flushing money into the toilet - which is not stopping the deleveraging. It would be nice to finally get the flush we needed to just wash out all the crud - but the government is doing everything it can to protect failed businesses and continues to put the dollar at risk.
The next big crisis (mark my words) is the dollar. That crisis when it hits will make the housing market and the credit crisis look like a joke. It's too bad that neither McCain or Obama were questioned about what they will do or their concerns about the massive dollar crisis that is mounting. Just like it was simple to see the housing market and credit crisis mount to a point of breaking - I don't know why people seem to be blind to the mounting dollar crisis that is happening. Maybe not tomorrow, next month, 6 months, or a year - but no doubt during the next president's term we will see the dollar crisis surface and unless they can do something (anything) to get in front of that - it will make the housing and the credit crisis pale in comparison. You have been warned - just like the coming housing crisis and credit crisis - you can choose to ignore it and react latter.
Expect MORE volatility.....I hope you have been listening when I have been hammering on the table "HEDGE THOSE HARD DELTAS!"
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