Traders,
"Sitting here in limbo" seemed to be the standard of the day. The world waited to hear President Obama’s first press conference. He did well – the debate is should the government be on the bailout train. He mentioned this in the course of the Q&A session, including FDR. He made it clear – regardless of what some economist or others feel – the government is not going to sit by and they ARE going to spend money bailing out companies and create social “shovel ready” programs. Obama used the words, “if”, “hope”, “we will see” several times. No proof was offered (rightly or wrongly) that previous New Deal programs worked – however as he said this time it MAY work. The cautious overtones did not go unheard. It is no doubt a difficult time and I am not one to scorn Obama for trying – I have no complaints with the man – I have issue with the approach. Our government has proven that it can NOT manage business.
"Sitting here in limbo" seemed to be the standard of the day. The world waited to hear President Obama’s first press conference. He did well – the debate is should the government be on the bailout train. He mentioned this in the course of the Q&A session, including FDR. He made it clear – regardless of what some economist or others feel – the government is not going to sit by and they ARE going to spend money bailing out companies and create social “shovel ready” programs. Obama used the words, “if”, “hope”, “we will see” several times. No proof was offered (rightly or wrongly) that previous New Deal programs worked – however as he said this time it MAY work. The cautious overtones did not go unheard. It is no doubt a difficult time and I am not one to scorn Obama for trying – I have no complaints with the man – I have issue with the approach. Our government has proven that it can NOT manage business.
Yesterday on Bloomberg – Donald Trump said, look at our government as a big business – if you look at the balance sheet it is awful (trillions in debt and trillions more in new deficit spending). We will spend in 6 months 5 times MORE than the entire Iraq and Iran war. The question that Obama could not answer, is WILL the stimulus package and more spending work? They simply don’t know. One question that was aimed at Obama is that recent studies have shown that the $350 billion balance of the TARP will fall way short of the money needed to deleverage the banking sector. An additional $1 trillion will be needed. When Obama was asked if he would spend another $1 trillion in bailout money – he skirted the question by saying his first job is to spend the $350 billion wisely and then we shall see. The hint was YES – he will be spending more.
I seriously don’t believe Obama is on a spending spree as many of the far Right are saying (as if he came with open checkbook). I think he believes that he would rather NOT spend this money on bailouts. That is not to say I agree with his approach – I don’t.
The world markets jolted with his cautionary speech and questions – will the Sec. Treasury speech and plan bring new “hope”. Let’s hope so.
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As Predicted – Freddie and Fannie with hand out again….
I thought these two companies went bankrupt were nationalized and looking to pay down debt. Guess not – they have been continuing as normal. I have even heard they are still collateralizing NEW FHB loans with no money down and questionable credit. The belief – even after they have failed – is that they need to continue to lend money to keep everything going.
Crazy…..well now they need MORE money….and not just a little, they will need more than another $200 billion dollars of your tax payer money. Remember when the Director of Federal Housing said (after seizing control) that they STRESSED TESTED the balance and risks and that they will NOT need any more money? Great – another government employee that fails math 101. His new excuse is that there has been some “significant” events that were not in their forecast. Are they kidding me? Isn’t that what stress testing is trying to show?
However that has not stopped my good friend, Barney Frank for moving full steam. The Chairman of the House Financial Services Committee said last week that the companies will be used “very aggressively” to help reduce record foreclosures. Remember he is the same person that suggested and allowed Freddie and Fannie to increase their leverage (after being warned not to because they will collapse) – which they did 6 months later.
Now these companies are being run by the government and because they have a printing press – what’s another $200 billion?
Oh wait – I think that is YOUR money.
Will this crazy train never end. I seriously think this train to a dollar collapse is picking up speed.
As well known economist, Nouriel Roubini, said: Where are we going to get the money? We are going to print it – but we will not be able to finance it. China being the biggest holder of U.S. Treasuries is scaling back their position. We are going to create hyper inflation if we continue. While we may not see it today – it doesn’t mean it is NOT coming!
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Rohm & Haas – getting in on commodities early!
It seems they continue to pop up as an acquisition target – and in this market it is something to notice. Dow Chemical stalled the $15 billion dollar merger a couple of weeks back. It seemed that Dow Chem was having some issues. I speculated that they had some currency trade issues – as the currency market was pretty volatile and they have a rather large currency trading desk. Rohm started the law suit route (of course) and combined with the 4th quarter profits falling based on the short-term pull back in Gold, Silver, Copper, etc – they got worked over pretty good.Now the Kuwait Investment Authority is in play – looking to rework a deal with Dow Chemical to help in the acquisition of Rohm & Haas. Kuwait would increase the funding of the acquisition (after some terms were changed). Of course this is just rumor out of the Financial Times – but I think something is a foot.
Commodity prices came off hard at the end of last year as the recession and slow down expanded. However, I think the key now is the fiat currency risk and the increase value of hard assets (soft and hard commodities). If hidden inflation IS ramping from the excess of printing money without financing. The world still needs to eat – and that means that while we might not see a increase in demand for commodities – we might see an increase in price as more of those on the supply side will not be interested in paper money (non-backed) to pay for goods. This could just be an inflation play.
China with gold and now the Middle East. Rohm is not the only one getting some low attention sizzle. Rio Tinto has also seen some interesting moves (both up and down).
Interesting sector to watch for sure.
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Futures Pre-market
Obama’s speech might have been received well (depending on who you ask) – but again we haven’t seen action yet. It’s like a staging area and we still need to take the beach front. The futures are coming off – they were down a lot lower last not when Obama was speaking – but have gained some ground going into the morning. The spread is in – expect the ARB traders to buy futures to short the cash – creating downside pressure at the opening.
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Support / Resistance
We didn’t get any follow-up move – my friend send it is the typical buy the rumor and sell the news situation. I think I agree.
INDU 8000 (8250) 8500 (We are at that 8250 holding pattern – waiting. Futures are looking lower – does the 8250 hold?)
NDX 1200 / 1250-1300 (We broke up out of that 1250 range on Friday – do we revisit it?)
SPX 800 (850) 900 (We are still just above the mid-pivot point. Going higher or coming back to 850?)
RUT 400 (450) 500 (A little above 450 – we did see the boarder RUT pull back yesterday and looking lower this morning. Does it pull the rest down?)
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Gold 800-850 / 900+ (We either move up fast to 1000 or pull back to 850 – it is the “does Obama sell the faith in the dollar after printing a ton of it” play. All eyes are watching.)
Silver 10 – 14+ (Same thing for Gold’s little brother)
Oil 35-40 / 50+ (I think 35-40 could be an interesting support area on two levels – one the need to start over hedging futures (as they current inventory comes due) AND if we see the dollar weaken we could also see a run up. It could be a one-two punch from this support up to 50+ level.)
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Conclusion
It seems we are waiting – we have heard the talk and now it is about walking the walk. The question is does the world have faith in Obama’s walk? We are no doubt – as he has stated – going to print billions if not trillions more. The treasury markets can NOT really absorb that kind of paper – that means NO FINANCING and massive printing. It now moves from the math world of financing debt to the world of FAITH. Does the world have enough FAITH to support the dollar as we move from financing it to just printing tons of it? That is the magic question. If anyone can sell it in Politics it is Obama – he almost a deity among his devoted followers (as if he can’t do no wrong) – let’s hope that has rubbed off on the rest or the world. This is crunch time and we REALLY need to sell the faith. Watch Gold as it is really on the tipping point or ramping to 1,000 or pulling back to 850 (or 800) – this is probably the biggest spin job in history. Obama sold us on Hope, let’s Hope he can sell the rest of the world.
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