2/25/09 (Bernanke, Obama, Jindal?)

Traders,


Yesterday was marked by Bernanke testimony and President Obama’s first speech to a joint session of Congress. Let’s review them both – as per the economy and market impact. Please note I am a member of neither party (but I am in the Chicago/Austrian economic camp and believe that Keynesian economics has failed in the hands of both parties – or at least the math has shown that).

The most surprising element yesterday was Ben. He only got better as more questions were hurdled at him and he most certainly has grown into his role. Three years of experience has done wonders for his ability to get his hands dirty and realize that while academia alone has value, it can hardly replace hands on experience. His confidence in the handling of the bailout, FED policy, Citigroup, and dealing with the “N” word (nationalization) was impressive. While I might not agree with ALL of Ben’s ideas or views, he is taking charge and bringing clarity and confidence to the Fed. The market responded very favorably as all eyes were on him.

Obama on the other hand scores an A+ in his delivery. He will be remembered as a great orator and his ability to bring Hope and Optimism to the people is awe inspiring. However, the speech was full of more questions than actual substance. He made some bold accusations (Cutting $2 trillion in the budget by 2010, more healthcare reform in the last 30 days than in the last decade, and that NO bailout money would go to those that were speculator home buyers or the neighbor down the street that bought what he could not afford!) – I think he might have been addressing Rick Santelli. However, those 3 big issues he brought up have been picked apart and even by NPR (which some of you consider pretty LEFT leaning). NPR said this morning that they didn’t know where the $2 trillion was going to be cut or that it is even detailed (I would add that he is also ADDING to the budget deficit so to cut what he is adding would really not be actually cutting). NPR said that it is very questionable that there has been that much healthcare reform in the last 30 days (he did sign in the children extension medical policy that would add about 5 million more children) – however even NPR said that Bush made some rather large healthcare reforms (surprisingly). And lastly, to address Rick Santelli, NPR said that it would be impossible to separate out the speculators or neighbors that couldn’t afford a home from those that are actually in trouble to determine who gets the money. In fact even Sheila Bair said that even if they DID check everyone’s mortgage’s it would be impossible to separate them out.

Obama also hinted that MORE money will be spent – but so far we don’t know what that limit is. Also higher taxes ARE coming – to pay for all this. I did find it ironic that he bashed the CEO’s and Exec’s (and rightly so) – but at the same time he is giving those companies and EXEC’s more money. Of course I doubt the government has really looked at the books – or even KNOW the liability they are taking with your money.

Obama, as with saying there was no pork in the Stimulus (not true) – made some rather bold statements that even NPR has shown to be questionable. However, that is not to take away anything from Obama (all presidents like to juice the story and bring hope). Obama DID deliver on an important aspect – OPTIMISM. It’s important to keep the faith.

However – all that aside – Bernanke did a good job, Obama gave a good inspiring speech (with a little fudge factor), the only disappointment of the night (for me anyway) was the media’s attention was not on Bernanke or Obama – but was on the bashing parade of Bobby Jindal (the Republican governor of Louisiana).

His speech was a RESPONSE to Obama, yet it got more attention than the President’s. I thought his speech was fine – he praised Obama, he blamed big government, he said his party screwed up, he blamed the past administration (his own leader Bush) for screwing up with Katrina, etc. Ok I buy all that. He then went on to give his view and opinion of how the Federal government should respond. (Remember this is a two party system – should be 3 or 4 but we only really have two). It was a good response speech, it made a point, he stated his view – but REALLY the night should have been focused on Obama and to a lesser extent Bernanke’s testimony.

It was appalling to see the media aim their guns on the governor – and start on the name calling. The Democrat’s have won both houses and the administration – Bush is gone. Just because a governor doesn’t agree with the Democrat’s agenda – doesn’t mean he is necessarily wrong - it certainly doesn’t mean he should take a tongue lashing!

What is bothersome – is that whether you agree with the Democrats or Republicans – they need to work together. Jindal made such a statement that Republicans do need to work together with the Democrats. However, if the media is any measure of bi-partisanship it showed last night that there is NO working together.

I guess it is back to reading the FT, Economist, and watching Bloomberg and BBC America – because CNN, MSNBC, FOX, ABC, CBS – have all turned into OP ED shows – injecting opinion and picking sides. They are as much to blame in dividing this nation as any politician. Really just sad.

At least NPR was objective this morning.

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Commodities on the rise?

Soft commodities are on the rise – and continue from last week. The dollar has stalled after a good run and has slide a little. Corn and Soybeans are on the rise – helped by crude as it pushes that 40 barrier. Sugar output and supplies are seeing larger deficits (one of the largest drops on record) – which is creating more speculation on higher sugar prices which could trickle over to pre-packaged food/drinks market.

Hard commodities are also on the rise – not just gold and silver. Zinc, steel, and other metals are seeing a rise – as China and a few other nations are stockpiling supplies (as continued uncertainty about the global and US economy remains high). Supply channels are running low.
Whether this is a basing area for commodities is uncertain. One could argue that a drop in consumer spending and credit means less consumption – however commodities need to be measured in two ways (Society Needs vs. Wants) and (store value / perishable). Supply and demand will do the rest.

Keep an eye on the dollar strength and watch supply channels. If supply continues to decline and outpaces demand – prices will rise.

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Futures Pre-Market

Well the market liked what Bernanke had to say and it seemed that Obama was more about the Hope than the substance. Futures are getting a little kick in the teeth this morning – if the spread remains expect some downside pressure at the opening.

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Support / Resistance

Nice rally!

INDU 7000 / 7500-8000 (Could we get to 7500, sure. However we could revisit 7000. We are now just absorbing the speech.)

NDX 1100-1150 / 1200 (Who knows – middle ground at this point.)

SPX 750 / 800 (735 is the really big support area that we can’t not let fail – that would not be good.)

RUT 400 / 450 (Nice to get above that 400 level.)

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Gold 900-950+ (We are seeing a pull back to 950ish, sure 900 could be in the cards. All eyes are on the dollar and faith.)

Silver 14+ (Following gold)

Oil 35-40 / 50+ (We are still in that building staging area of 35-40 – today we are testing that 40 area again.)

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Conclusion

Obama gave a good speech – A+ delivery. I would admit if I was there I might even be caught up in the euphoria. However, I was really hoping for a little more meat and less about giving out more money. Obama does have leadership qualities – but he really doesn’t have a handle on his party. Too many politicians are giving their view, ideas, and 2 cents. There is not ONE story – but many. There is little unification. I don’t know if this is a testing period for Obama and how far he can drive his party or if after so long away from power the all the Democrats are trying to get a little of the lime light. What all this talk and in partying jockeying does is create more uncertainty.

I think Obama also wants to reach across the aisle to work with Republicans. He has said as much and he has made an effort to talk with them and listen to them. I think they appreciate that. However, the Democrats in the Congress want NOTHING to do with them. Pelosi, Dodd, Frank, Reid, and the leaders when they have the opportunity blame everything on them and have given them no ear. Not that they have too – and not that they shouldn’t (if you believe in their message). But then what is Obama doing saying that he wants bi-partisanship and meeting with them. As you can see the Administration is saying and doing one thing – and the rest of the party is doing another.

The media bashing last night was appalling and disappointing. They should have been focusing on Obama’s speech and Bernanke (since both those people are running the country) – analyze the policies and the plan. Instead the bashing train the ensued on the governor made the media seem partisan and full of hate. What is funny is the governor even blamed his own party, the previous administration, and praised Obama – yet they still took a stick to his hide. I bet he didn’t even have to say anything and they would of made some negative comment. It is like having the R after your name is a scarlet letter.

Oh well – I guess nothing really changes in Politics or the media.