Traders,
Some of the worse employment data in history, consumer credit declines more than expected, banks are now really tightening down lending – but the government is going to spend another $1 trillion to save us – YEAH – let the market rally and hard. It was a shocker no doubt – again a optimistic euphoric rally. Does it have legs – sure why not. We could get some follow through – but fundamentally speaking it’s not good. I did some research and it is very interesting to note that one of the biggest rallies in the market was during the depression, right before it came down. It too rallied on the perception that New Deal Programs were going to save the country – 6 years later unemployment was even higher (19%) and taxes went over 70%.
We did have some rather large short-covering on Friday as well – it would seem, just like the previous week of buy the rumor and sell the news – might just play out here. Don’t put too much faith into the rally – on weak fundamentals. Sure – it may have legs, but I wouldn’t want to stand on THOSE legs.
I’ll never deny the market moves on perception and in many cases has nothing to do with the balance sheet. Just ask David Einhorn (or read his book). ________________________________________
GM & Chrysler = bankruptcy IS an option
After we foolish gave them MORE money, allowed GMAC to become a bank accessing TARP and Fed Discount window – it may NOT have been enough. Bloomberg reports today the government may FORCE GM and Chrysler into bankruptcy to protect and assure repayment of the $17.4 billion bailout loan. Great – again the shareholder and tax-payer both get screwed.
http://www.bloomberg.com/apps/news?pid=20601087&sid=atjQ8fjgT.kY&refer=home
The irony is that the bailout money we gave them takes a backseat to the creditors. See GM has borrowed a LOT of money and has a LOT of bills. They have monthly payments to make. Now the U.S. Government wants to be at the HEAD of the line in the payback, but by doing so they screw over all the other companies that do business with GM.
Some of the worse employment data in history, consumer credit declines more than expected, banks are now really tightening down lending – but the government is going to spend another $1 trillion to save us – YEAH – let the market rally and hard. It was a shocker no doubt – again a optimistic euphoric rally. Does it have legs – sure why not. We could get some follow through – but fundamentally speaking it’s not good. I did some research and it is very interesting to note that one of the biggest rallies in the market was during the depression, right before it came down. It too rallied on the perception that New Deal Programs were going to save the country – 6 years later unemployment was even higher (19%) and taxes went over 70%.
We did have some rather large short-covering on Friday as well – it would seem, just like the previous week of buy the rumor and sell the news – might just play out here. Don’t put too much faith into the rally – on weak fundamentals. Sure – it may have legs, but I wouldn’t want to stand on THOSE legs.
I’ll never deny the market moves on perception and in many cases has nothing to do with the balance sheet. Just ask David Einhorn (or read his book). ________________________________________
GM & Chrysler = bankruptcy IS an option
After we foolish gave them MORE money, allowed GMAC to become a bank accessing TARP and Fed Discount window – it may NOT have been enough. Bloomberg reports today the government may FORCE GM and Chrysler into bankruptcy to protect and assure repayment of the $17.4 billion bailout loan. Great – again the shareholder and tax-payer both get screwed.
http://www.bloomberg.com/apps/news?pid=20601087&sid=atjQ8fjgT.kY&refer=home
The irony is that the bailout money we gave them takes a backseat to the creditors. See GM has borrowed a LOT of money and has a LOT of bills. They have monthly payments to make. Now the U.S. Government wants to be at the HEAD of the line in the payback, but by doing so they screw over all the other companies that do business with GM.
Let’s look at this example to see the problem.
Company A – builds a widget
Companies B & C – sell Company A parts to build the widget
Companies D – loans Company A money (for various reasons).
Companies B, C, D are creditors, Company A owes them money.
Now Company A screws up (regardless of WHY).
The Government gives Company A money to get back on their feet. Problem is that Company A owes B, C, & D as well (and they are first in line).
Now the Government finally realizes how stupid it was to loan a company that owes so many other people money – with a failed business plan and other problems. They force Company A into Bankruptcy.
Now the dominos begin to fall – Company B, C, & D stop getting paid ANYTHING – and guess what they now have to lay off people because their BIGGEST client Company A got the squeeze play by the Government who went into the deal eyes wide shut – and wants to protect their loan.
If the Government can’t “re-neg” on the deal (getting first in line on the credit train) – they WILL force it into bankruptcy – thus costing other companies money and more layoffs.
Please send “Thank You” cards to your Congressman for bailing out GM and Chrysler (and soon to be Ford) – you tax payer money hard at work creating more bankruptcies and more layoffs.
Government’s do NOT know how to run business and they are taking shots with YOUR tax payer money.
Let’s keep score:
Fannie Mae (-1)
Freddie Mack (-1)
AIG (-1)
Lehman (-1)
I could go on all day – I think the list would be too long.
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Defense Department to the Rescue
I had a funny talk with a Democrat friend of mine (he is for “shovel ready programs”). I said – if you are for WORKS programs (socializing jobs), what about the Defense Department? I could tell in his voice he was shocked. We don’t need a bigger military he said. I’m not talking about a bigger military, I am talking about upgrading or replacing existing technologies. The government could make money selling off the used equipment to allies and build new ones to replace them (creating jobs and business) – just like your “shovel ready programs”. That was Check-Mate. He didn’t really know what to say – since I have known him he has been for reducing the defense budget and smaller military. (please don’t read into that I am for a large military – I am not – I was just making a point about “shovel ready programs” and socialism is really no different that defense government contracts building a military. They both create jobs and use tax payers dollars to do so. In the Defense case they have the added bonuses of defending the nation but also some top-dollar used military equipment that can be sold to allies to generate so revenue!Well – I guess my conversation did NOT go unheard by the current administration (just kidding – it was just ironic I was talking about it and the following story came out).
Boeing – just received a $2.95 billion contract from the Defense Department to build 15 C-17 transport planes.
Maybe it IS time to look at defense contractors for some “shovel ready” programs.
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Motorola – insider buying
No doubt the stock price LOOKS cheap, but is it CHEAP? This is a value call – don’t be fooled by price when determining value. The CEOs of MOT bought $2.7 million in company stock last week – sending the stock back above $4. Maybe the now something we don’t, are they in it for the long haul, or is this just some saving “face” in these market conditions. Expect to see Motorola higher at the opening – we may see the rest of the sector get a little boost as well.
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Futures Pre-Market
Friday was short-covering into the weekend expecting to hear the big economic stimulus package and the new Sec. Treasurer. Now that has been delayed and political games are all the rage on the hill. Future are seeing some pressure in the morning - as Europe and Asia are mixed. The spreads are in – so expect some ARB traders to buy the futures and short the basket at the opening.
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Support / Resistance
INDU 8000 / 8500 (We had a good rally on Friday – but looking into the short OI numbers – there was some serious short covering. Is 8250 a pivot point or a mid-range resistance. The futures are looking slightly lower in the pre-market, but anything can change.)
NDX 1200 / 1300 (We broke through the 1250 upper resistance on Friday – there was some heavy covering in the tech sector which help drive it higher. 1300 is in the cards, but so is a serious retracement. Expect to see some volatility. Futures are off slightly at the am.)
SPX 800 (850) 900 (We had a god move up and through the 850 line, but not enough to get too excited – 875 is a short-term resistance before we even get to 900, and 875 didn’t play out. Watch the close, above or below 850)
RUT 400 (450) 500 (It would seem that 450 is really becoming a consolidating support area, rather than a pivot point. It has held up well and we saw a good move up on Friday. 500 doesn’t seem that far away – but at this juncture who really knows.)
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Gold 850 / 900 (Gold is up around 900 and (as pointed out this morning on CNBC) is certainly the FAITH test. If we don’t see some serious optimism and MATH behind the next round of government spending – as it pertains to getting to the bottom of this problem – a move towards 1000 is in the cards (a loss of faith of the fiat currency). China is ramping up on gold now. If we see some mild optimism we could see Gold retrace to 850 – but for how long and can it get through 850 to 800 again easily. I would say this is the single best indicator of fiat currency faith right now.
Silver 10 / 14+ (I am a “all-in” buyer at anything below 10. Why not – a historical world storage currency that is also a widely used commodity. If I could back up the truck at $10 I would. It would seem that it’s Gold’s little brother.)
OIL (CL) 35-40 / 50+ (I think it will be hard press to get oil down below 35-40. Soon the companies will be spent on their futures as they come due and I think over-hedging is in the cards again as we could see 50 sooner – rather than later. Regardless of U.S. consumption rates.
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Conclusion
I received more email last week about my CEO compensation response – I obviously hit a nerve with some people and others seemed to be as angry as I am (not with the CEO’s – but the misdirection of attention off the trillions we are spending bailing out companies and putting our fundamental core system at risk). One person even called me a “raving right wing lunatic” – I guess he doesn’t read my blog and he certainly doesn’t know me very well. Of course this was also the same person that said, Socialism isn't a bad word” with a follow-up sentence “Free Enterprise without a social net is the same as Nazism.” – obviously he forgot his history – since NAZI is short for Nationalsozialismus – which is the National Socialist German Workers Party, the NAZI’s were the Socialist Party – which later became Fascist. Also – this is a Republic, not a Socialist state – for now anyway or so we hope. For the record – I am neither a registered Democrat or Republican. I also didn’t vote for Obama or McCain, please feel free to call me a kook – I voted for Ron Paul (but then please don’t believe I blindly follow his ideology either.)
This nation has become bi-polar, if you are not with me, you must be against me has become the motto of the Democrat and Republican parties. Why can’t someone be Prolife and a Democrat, or for Same Sex marriage and a Republican? Why does one issue have to define you politically. Why is it that if I am not for the big Stimulus or for the CEO pay cap, that makes me a “raving right wing lunatic”?
This is not about Left or Right, Democrat or Republican. It is simply about Constitutional rights and freedoms! It’s about national debt and deficit spending! It’s about spending TAX payer’s money responsibly! It’s about our economic future!
I am a big believer in Declaration and Constitution – something that BOTH sides of the aisle have obviously not read in the last decade. I am for more State’s rights and less Federal government intervention. I believe in regulation, but not MORE regulation – rather the regulators NEED to REGULATE. Rules don’t mean anything if we don’t follow them or enforce them – just look at the FED, FDIC, SEC, Senate Banking committee, Senate Finance committee, the Treasury, etc. Have we really NOT been paying attention.
We have a national debt that exceeds $10 TRILLION dollars, a $750 billion TARP, $800+ billion Stimulus Package, $1 trillion special lending at the Discount Window. All backed by a FIAT currency. Bailing out banks, auto companies, mortgage companies, etc – with YOUR money, your kids money, your grandkids money. Taxes will HAVE to go up to pay for it – or we will NOT get out of this hole (which I think is almost too deep to get out of) – one of the reason I don’t want all this bailout help (on my kid’s tax paying back).
I welcome criticism, but not ad hominem attacks. I have many Democrat and Republican friends that give me fair and decent criticism – it is FINE not to agree – but it is important to have the debate. These are serious times – we should ALL be thinking and discussing these issues. Whether you like it or not your job, the value of your dollar, your retirement, your future is on the line RIGHT NOW!
If I can spark debate and conversation that is the first step.
Thomas Paine wrote a simple, clear, and incredible pamphlet (Common Sense) - that is as important as the Declaration or Constitution – it was the catalyst that woke up the colonies and got people to think, talk, debate – it is said that single document did more to inspire this nation and the revolution than any other single event. That is a pretty powerful document, it was latter referred to for the Declaration – declaring independence. It was – as Tomas Paine put it – Common Sense.It is time to start being an American and not a Democrat or Republican – it is NOT about the Left or Right anymore. It is about Liberty! Stop marching the party line and think for yourself. It is OK to agree with a Republican or Democrat on any single issue, as it is ok to disagree with a Republican or Democrat. – don’t blanket yourself in any party – then you’ll surely be lost, just as each of those parties are lost.
I welcome criticism – but bring some meat and substance to the table.
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