Traders,
Yesterday the market got a big boost at the opening and into the early session – lots of the talk on the T.V. was about Obama capping the Exec pay for those companies that received TARP money to $500k. It was certainly the popular thing to do – but is it really going to make a difference to the bottom-line? It may create some positive perception to stock price – but that would be a short-term bump (if anything – maybe we already saw it.)
When I got home, my wife who watched CNBC/Bloomberg mentioned that is ALL they talked about on TV – the Exec Pay. She mentioned the ONE thing they did NOT say was how it would affect PERFORMANCE by the EXEC and what kind of EXEC are you going to hire if you cap him at $500k way below the industry standard?
It’s a good question – what would happen if Ferrari said we are only going to hire a driver for $500k, they certainly wouldn’t have Michael Schumacher that won them 5 or was it 6 World Championships.
What would happen if a Golf tournament would only pay out a sub-par amount, they certainly wouldn’t draw in the Tiger Woods.
What would happen if a football team wouldn’t pay up for a Tom Brady, they certainly wouldn’t have gone to the Super Bowl.
What would happen if Apple wouldn’t pay Steve Jobs what he asked for, would we have a Ipod, Iphone, or Imac?
Business is about competition – and get the best competition you HAVE to be willing to pay. Now I certainly am NOT giving these Execs (CEO or for that matter CFO) a free pass. If they SUCK, fire them – set up bonuses based on performance – there are MANY ways to do it. However, once you CAP something you know the following is bound to happen, you are only going to maintain or attract sub-par performance, those that are already there and getting a pay cut are less incentivized to do anything, and the great talent will move on. However, isn’t that the case with Socialism – these companies who had (and will) receive government money are now changing their structure – being black mailed to run the government way. This is another reason I am against bailing these companies out – the government doesn’t KNOW how to run business and they companies will never be able to get off the government nipple – if the government intervenes. Let them stand on their own merits. Maybe that is why Goldman wants to give back the TARP money – they don’t want to be run by the government, they thought it was a loan – not an entitlement for the government to start dictating how the business should run. If the government is going to invest, they do it because they BELIEVE it can be a good company – if they don’t think it can be and need to intervene, then WHY did they invest in the first place.
Yesterday the market got a big boost at the opening and into the early session – lots of the talk on the T.V. was about Obama capping the Exec pay for those companies that received TARP money to $500k. It was certainly the popular thing to do – but is it really going to make a difference to the bottom-line? It may create some positive perception to stock price – but that would be a short-term bump (if anything – maybe we already saw it.)When I got home, my wife who watched CNBC/Bloomberg mentioned that is ALL they talked about on TV – the Exec Pay. She mentioned the ONE thing they did NOT say was how it would affect PERFORMANCE by the EXEC and what kind of EXEC are you going to hire if you cap him at $500k way below the industry standard?
It’s a good question – what would happen if Ferrari said we are only going to hire a driver for $500k, they certainly wouldn’t have Michael Schumacher that won them 5 or was it 6 World Championships.
What would happen if a Golf tournament would only pay out a sub-par amount, they certainly wouldn’t draw in the Tiger Woods.
What would happen if a football team wouldn’t pay up for a Tom Brady, they certainly wouldn’t have gone to the Super Bowl.
What would happen if Apple wouldn’t pay Steve Jobs what he asked for, would we have a Ipod, Iphone, or Imac?
Business is about competition – and get the best competition you HAVE to be willing to pay. Now I certainly am NOT giving these Execs (CEO or for that matter CFO) a free pass. If they SUCK, fire them – set up bonuses based on performance – there are MANY ways to do it. However, once you CAP something you know the following is bound to happen, you are only going to maintain or attract sub-par performance, those that are already there and getting a pay cut are less incentivized to do anything, and the great talent will move on. However, isn’t that the case with Socialism – these companies who had (and will) receive government money are now changing their structure – being black mailed to run the government way. This is another reason I am against bailing these companies out – the government doesn’t KNOW how to run business and they companies will never be able to get off the government nipple – if the government intervenes. Let them stand on their own merits. Maybe that is why Goldman wants to give back the TARP money – they don’t want to be run by the government, they thought it was a loan – not an entitlement for the government to start dictating how the business should run. If the government is going to invest, they do it because they BELIEVE it can be a good company – if they don’t think it can be and need to intervene, then WHY did they invest in the first place.
Damn…now my wife has me fired up….she’s right.
Ask yourself this – would you go work for a company – knowing that you could never get a raise, bonus, etc and your salary would be capped? I sure wouldn’t – if there is no incentive for you to perform better, then why should you? Socialism breeds complacency and mediocrity.
_______________________________________________
Rate cuts across the pound?
Bank of England cut their benchmark rate .5 to 1% and the ECB leaves theirs unchanged at 2%.
The ECB had been standing pat and didn’t want to cut rates – as it will and does affect their currency rates – and helps fight inflation. Lately we are seeing and/or experiencing the opposite of inflation, rather deflation (or even dis-inflation) – the cause is that the money is used to deleverage the economy. However, that doesn’t mean that the losses are going away – they are just shifting to the government’s books.It’s simple – we created wealth out of thin air and government incentivized leverage wealth with their mandates, charters, lobbyist friends, and belief in spending (regardless of party). They had their hand on the printing press – and that meant only one question – HOW MUCH DO YOU WANT? Once off the gold standard, the checks and balances of controlling money flow (M1 – M3, ironic that the FED doesn’t even want to measure them anymore) – we tried to print our way to prosperity and now we are trying to print our way out of debt. Will we foolish arrogant sheeple ever realize that. We certainly don’t like studying history – what is that famous saying – history is doomed to repeat itself?
Oh well.
________________________________________________
CISCO forecasts are bleak
CISCO rallied at the close from 15.40 to 16.40 and as people absorb what Chambers (CEO) was saying it quickly fell back down to 15. If there was ever a whipsaw at the close – CISCO was doing that dance. The company said 3rd quarter sales will drop at least 15%.
“It is very difficult, given all the uncertainties going on in the market, to provide a forecast, it continues to be the most difficult time in my career in the comfort level of my forecast.” Said Chambers.
We are seeing more and more companies offer NO FORECASTS and actually not even confirming earnings date releases. The future is no doubt very uncertain for many companies and as they struggle to bring costs in line – in order to keep margins in the black – trying to predict the future or offer any guidance is going to be difficult. I expect the rest of 2009 to be more foggy and that will make analyst’s job even more difficult.
CISCO is putting pressure on the futures this morning.
___________________________________________________
Futures Pre-open
The futures had gotten hit after the close as CISCO lead investors to the grim reality that the market is not going to turn around in a day. The future got hit after the close and have stayed down. Bank of England cutting and indicating the recession is ramping and not subsiding is keeping the negative pressure on this morning. The spread is in, that means that the ARB traders will purchase the futures and short the cash at the opening – thus putting negative pressure on the market.
____________________________________________________
Support / Resistance
INDU 8000 / 8500 (Again we close below 8000, just below it – can we rally into the close to get above it. I still think it is a support AREA – remember my numbers are NOT lines in the sand but rather areas to be concerned about.)
NDX 1100-1150 / 1200-1250 (We are just above the support range in the upper band of 1200 – If we crack below that a visit to 1150 is in the cards.)
SPX 800 (850) 900 (Again we are below the pivot and above support – this morning we will move lower – but will we touch 800?)
RUT 400 (450) 500 (So far that magnet at 450 has been strong we are still right there. If the broader market can hold then we are just seeing noise in the narrower band indices.)
====(the metal / oil – support/resistance: Note: for disclosure I do own metals)=======
YG 850 / 950 (850 is an area that I personally would get long, for sure at 800. My last buying area was in the 750 range and if we get back there I may buy more)
SI 10 / 14 (I think we could have a serious pop to 14, I am a massive buyer of anything physical below 10 – no questions ask. If we get a pop we could see some resistance at 14 and if it comes off it may be a short time buying indicator.)
CL 35-40 / 45 (35-40 is a nice support area – my prediction is we will see a huge ramp in oil futures as soon as current inventory of future delievery is unwound. Then the cycle of OVER hedging begins which will start the hyper rally.)
____________________________________________________
Conclusion
Gold has made a good move back up to the 900 area and Silver is rallying well off the 9-10 area and getting to a breakout. If we see that we could see another run in commodites and not just precious metals. Oil as well – the over hedged future inventory is depleteting every expiration. As companies hedge unwinds via each expiration cycle it would a “dumb if you don’t” buy situation soon if not right now.
Prediction – oil will make a big rally (not because of inventories) but because of price and the need to over-hedge positions. If we also see a good pop in the SI and YG continues we could see more pressure on the dollar. The ECB remaining pat can (and will probably) put more pressure on the USD. As I have said and will continue to say – hidden volatiilty and hidden inflation is building into this bubble – it is not IF, but rather WHEN!
DISCLAIMER: http://marketpreview.blogspot.com/2008/03/disclaimer.html
INFORMATION: http://marketpreview.blogspot.com/2008/01/what-is-market-preview.html
Market Preview is Archived at: http://marketpreview.blogspot.com/
No comments:
Post a Comment