2/2/09 (Steelers Win! GM lobbies, Spending Down!)

Traders,

Well – that was some Super Bowl – while I was not really cheering on either team (just wanted to see some great football – which it delivered) – I was kind of hoping to see Kurt Warner win – oh well. Rumor has it that Obama had a Super Bowl party in the White House screening room – and invited guests from both side of the aisle – would have been an interesting event.

The Congress passed (without a single Republican vote) the $800 billion plus stimulus, now it goes to the Senate – it will be interesting to see how that vote goes down. Charlie Gasparino (CNBC editor) made and interesting observation, while President Obama was bashing Wall Street Execs (in many cases rightly so) – his team was in talks with Wall Street Execs about help with the “Bad Bank” and economic stimulus. Front of the house remaining populous, while the back does the dealing – I guess nothing REALLY changes in Washington.

http://www.thedailybeast.com/blogs-and-stories/2009-02-02/stop-bashing-wall-street/

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Consumer Spending down!

Fell 1% in December, larger than forecast, for the 6th consecutive month (November was -.8%) – note: it rose 3.6% for all of 2008 (smallest gain since 1961). Consumers are tapped out of credit lines – their home values are down, they have moved over to their fantastic plastic (but banks are lowering credit balances and raising rates) – add to that the ramping in job losses – things are going to continue to be difficult.

Many report that deflation (in the short-term) could ramp and prices come off and money (via credit) becomes tight. It is certainly rather alarming with the money being poured into the system – yet none of it is getting out. With that, President Obama, is suggesting more lending be instituted as a requirement for further financial bailout funds. While it would be nice to have more credit available, wasn’t that the problem that got us here in the first place? Giving banks money and then requiring them to lend more money is not addressing the balance sheet, default, or for that matter any of the risk that bank has (or will expand with lending). Sounds good on paper – but I think you set more banks up for nationalization if that program is instituted.

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GM lobbying for more?

GM is facing a $7 billion tax bill, maybe they could borrow tax payer money to pay their taxes? With already $13 billion in aid – it looks like it is not enough. Now GM is spending some of the $13 billion in government aid in lobbying efforts for more. The more I read, the more silly it sounds. Yet, the saddest part, is this government is not going to let the UAW, sorry I mean GM fail. It will be interesting to sift through the $800 billion stimulus and see how much MORE is granted to GM.

Remember the $700 billion TARP, it had millions for Samoan Enlightenment, Wood arrows for Boy Scouts, Improvements for NASCAR, etc. You name and some pork or earmark went into that bill. Expect more of the same. While it makes me sick that Lehman, Bear, etc (along with John Thain’s spending spree) – it doesn’t seem like anyone has a problem with the government doing the EXACT SAME THING – spending OUR tax money. So while people (including our government) bash Wall-Street (and rightly so in most cases) – no one seems to have a problem with the government Porking Up!

UAW and GM – I guess when you spend 100s of millions in donations and election contributions you get a little grease.

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Futures Pre-market

The futures getting hit in the early session. Congress/Senate are dealing with the new $800+ billion bailout (which the Dems can pass – but the Republicans are standing pat) – add in the drop of Consumer spending and increase loss in jobs – the market is not taking it very well. Expect Arb traders to buy the futures to short the cash at the opening.

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Support / Resistance

Well last week seemed about testing resistance, this week test supports?

INDU 8000 / 8500 (We closed right at 8000 and futures are pointing to a 100 point lower opening. It will be about the close – can we close above 8000?)

NDX 1100-1150 / 1200-1250 (We are right in the middle of the support and resistance band – it looks like we will be testing the upper part of the support band today 1050)

SPX 800 (850) 900 (Friday say the pivot point break to the downside – 800 is in the cards – to we hold there?)

RUT 400 (450) 500 (The RUT has been stronger than the narrow based indices – it is closer to the pivot point, but will be down today.)

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Conclusion

All the political talk in Congress and the Administration is about getting MORE credit to the people (let’s keep the party going). We have seen several forums of stimulus, yet all have failed (Stimulus 1st quarter last year, TARP, FED, Bailouts, Discount Window) – so far none of it has worked – more people are out of work, housing prices are down, and spending is tapped out. Our government believes printing MORE money and dumping into the system is the answer. I repeat (and often) that while it may SEEM like deflation (or dis-inflation) and it might even BE that right now – since money is not getting through to the spenders (or credit anyway) – that there is only so much money you can print before you break the bank.

China is our biggest creditor (over $2 trillion is U.S. debt) – they are also on the “supply” side of the trade equation. Thus they are lending us money and selling us junk – right now (even though we slow down) they are IN the driver’s seat. Obama called the President of China to discuss issues – including (or so I am told via NPR) a heavy handed comment about the trade balance and that it needs to get in-line. It’s like the drug users asking the drug dealers for a break. Why would the drug dealer give the users a break? I am sure many will have answers – and of course moral justification (right and wrong) will come into the debate. I don’t see China having or wanting to do anything for us – they have their own issues and they certainly are not looking to give us a break.