Dec 15 Post Game

We ended down 65 points and that is flat. Not a shock at all. The market is waiting for the FOMC announcement tomorrow, Goldman Sachs quarterly report tomorrow and everyone wants to know what the White House is going to do with the bankrupt 3 and the TARP money. I find days like today boring and not worth reading anything into. The volume was extremely low. We did have a couple interesting stories (on the blog) but nothing that will move the market.

Goldman Sachs quarterly report will be very closely watched by the market. The analyst are expect Goldman Sachs to report their first loss ever. The question will be how bad will it be. Based on what Jamie Dimon, JP Morgan CEO, said it could be really bad. It will take a lot to shock this market right now. If it is inline, the market will rally. If it is really bad, the market will sell off. I can't wait to see their report and hear the conference call.

The market is expecting the Fed to cut the interest rate 50 BPS. I will be surprised if that doesn't happen. The market has baked in a 50 BPS rate cut (the cut will do nothing since we are in deflation) but the market likes to get rate cuts. The real news will be in the report after the announcement. The market will be listening for clues or down right say that the Fed is going to use Quantitative easing (in other words print money out of thin air and buy Treasuries). This would be a big move and kill the dollar. Let's see what they do.

I wouldn't expect much until the Fed announcement in the middle of the day. Stay short!!

This is my last email.  Please start going to the blog for these reports.  www.moneytalktoday.com

Stock Market Recap

The Government didn't come out with another multi-billion dollar program and guess what.....the market went down. What a shock!! I wanted to see a bigger selloff then just 243 points but I will take it. I honestly can't find a reason to buy any stock in this market. The best stock in the market is Wal-Mart and they suspended their repurchase program today. If they don’t want to buy, who does? Based on the 0.00% 1 month T-Bill and the 3 month T-Bill going negative today….I would say nobody.

Every single story that comes out is shocking and down right depressing. Our great Government is changing the rules everyday and finding new and creative ways to screw up. They will not be able to fix any of these problems. All the Government can do is throw more credit at the problem. Credit is the problem. It is going to take time and a lot more pain in the economy to fix the fact that every household in America and maybe the world had way too much credit. Our Government put in programs that made it easy and cheap to get credit. They didn’t take into account human behavior and thought that giving people something without earning it would be a good idea. Now they are working really hard to come up with a way to give people that haven’t earned it a 4.5% mortgage. That will not work either. They don’t know what to do and I see true fear in their eyes.

Obama wants to create 2.5 million jobs in two years building roads and bridges. That is nothing. We will lose that in a couple months. We lost 533,000 jobs in November and I wasn’t seeing anywhere near the job loss stories that I’m seeing now. I wouldn’t be shocked to see 800,000 jobs lost in December. One day this month I counted 30,000 jobs lost. That is just the headlines I saw. I saw three stories today of companies going bankrupt. I have no idea how many jobs are lost in these companies. Plus the headlines I see are mainly from public companies that have to report.


With all these headwinds I don’t understand what the “experts” on TV are talking about when they say this is a great time to buy. They have no idea what is going to happen to millions of American households when you take away the credit drug. I don’t think the withdrawals will be pretty or the recovery quick. I think the “experts” are being reckless with other people’s money just to support their positions.




We just had a major short covering rally with some help from Government programs and talk of Government programs. I believe that is over but who knows what those jokers will come up with tomorrow. I’m short and can’t find a reason to go long.

I just want to give you guys an idea of how quick the job loss headlines are coming. All of these headlines came across as I was writing this.

Hutchinson Technology To Cut 20%-25% Of Jobs, Reduce Pay 5%

Praxair Cuts Jobs, 4Q View After Demand Falls Off In Nov >PX

Electronic Arts To Miss Expectations,Sees More Job Cuts

3 month T-Bill

I hope you guys are sitting down. The 3 month T-Bill is at a negative rate. People are paying the government to hold their money!!! Unbelievable!!

Dec 9

It’s time for the short squeeze to stop. With the terrible news from FedEx, Texas Instruments, Sony, Con-Way, Sirf and National Semi after the closing bell yesterday, I can’t see how anyone would buy a stock today. Let’s not forget that we are up 1000 points on the Dow. Only someone forced to buy (short squeeze) or someone that just doesn’t get it would buy today. Plus we are at the top of a range. I added to my shorts after the bell yesterday and I’m looking for a sharp turn. Let’s see if the Government comes out with another billion dollar program to blow my move out of the water….for a couple days.

Dec 8 Post

If you've never seen a short squeeze before, you are in luck. Take a look at the 298 point gain today. Obama talking about a big stimulus plan over the weekend really moved the market today. China and India also announced huge stimulus programs over the weekend. Australia started putting stimulus money into accounts today. This moved up stocks that would benefit from infrastructure. US Steel was up 31% at one point today. Plus the financials kept the Friday squeeze going.
This just in....
FedEx revised its fiscal 2009 earnings forecast to no more than $4.75 a share from as much as $5.25, blaming the “significantly weaker” economy. This is huge!!
Texas Instruments cut its Q4 revenue guidance by 20% and profit guidance by 60%.
Con-way Inc. reduced its work force by 8% in response to "unprecedented economic conditions" that has business volumes back down to roughly 2003 levels.
Advantage Rent A Car Files for Chapter 11
These stories just came out. Almost everytime I look at my news ticker another bad story is coming out. This is only picking up speed.
There is no way the market will blow off the FedEx news. They move markets. The futures are already showing weakness. I think the short squeeze is over and the shorts will be loading up tomorrow. Stay short!!

Dec 8

Over the weekend: laid off factory workers did a sit in to get money they were promised, another bank went under, Chris Dodd said that Rick Wanker should go and Chrysler should merge, and Obama said he doesn’t want the bankrupt 3 to go bankrupt and he wants cars to run on unicorn kisses. Obama also outlined a plan to build more bridges and roads, the Tribune may file for bankruptcy and is trying to sell the Chicago Cubs, New York Times is trying to borrow $225 million to keep going, Toyota is talking about cutting capex by 40%, 3M is cutting 1,800 jobs and is asking workers to take vacations or unpaid time off, the huge hedge fund Citadel is closing some of its Asian operations, and Anheuser-Busch InBev is cutting UK jobs. Boy I can’t wait to buy a stock with this news.

Is anyone else worried about Chris Dodd telling any company what to do? I think Rick Wanker should go but I don’t want the government to do it and especially Chris Dodd. Dodd took more money from Fannie and Freddie than anyone else in Washington. He is one of the main reasons why this subprime mess happened at all. I wouldn’t look to him for great judgment.

I think the market is going to continue the bad news is good news rally that started Friday. I don’t believe it for one second. I think the shorts are getting squeezed and will drive the market up. The low volume on Friday and the low yields on T-Bills do not make me think the market is turning up. I’m going to be very interested in seeing how the market reacts to 900 on the S&P 500. That has been the top of the range and if we blow through 900 we will have a serious short squeeze on our hands and the market will rally hard. I will look at a rally as an opportunity to sell some of my long positions and add to my shorts.

Dec 5 Post Part 2

I had a hard time sleeping last night because I was trying to figure out exactly why the Dow went up 500 points from the lows of the day to end up 259 points up. Why exactly did the financials rally? Why did oil fall off a cliff? Why did the market shrug off all the bad news this week to end flat? What am I missing and how can I make us more money? I think I figured some of it out.

First of all, the economy is falling apart at a very fast rate of speed. Every CEO is shocked and scared by what is happening. In every Q3 conference call, every interview and the actions CEOs are doing right now only points one direction…..DOWN. So why is the market starting to level off? I started thinking back to November and December 2007. At that time the market was going up on bad news. It was very interesting. Shocking news would come out and up the market went. The reason that was happening than was because the market wanted the Fed to cut the fund rate. Any news that would be interpreted by the FOMC as a reason to cut was looked at as good news for the market and especially financials. The Fed Fund Rate was at its peak Aug 17th at 5.25%. Sept. 18th they cut 50 BPS, on Oct 31st they cut 25 BPS and Hoening dissented because he wanted no change. The next meeting wasn’t until Dec 11th. During November and December leading up to the meeting the market knew that some people on the FOMC board didn’t want to cut rates. Bill Poole didn’t want to cut back in Aug. All the way up to Dec 11th, the market loved bad news. Then the FOMC only cut 25 BPS and down the market went. For the rest of December, bad news was still looked as good news but that stopped in January. We lost 1,500 points on the Dow before the FOMC had an intermeeting rate cut of 75 BPS to 3.50%. Bill Poole dissented then saying that emergency action was not required (what is this guy on?) The current Fed Fund Rate is 1.00%. The Dow went from 13,600 at the start of Dec 2007 to 7,800 last month. All the rate cuts did nothing.

I believe we are in the exact same situation. The market knows that the economy will keep falling apart without help. They want to the US Government to step in and cut rates to 0.00%, come up with a huge stimulus package, manipulate mortgage rates to 4.5% and get the banks to lend. We are back to bad news is good news. As much as the market wants all of this, the US Government can’t stop what is happening. This is a global meltdown. As I said yesterday, oil was the only thing that got it right. Oil takes the global economic temperature. Oil went down 25% this week. The S&P 500 was pretty much flat. This is also very interesting because oil for about 3 months has been going up and down with the market. This is the first week it has been completely disconnected this year. Back when oil was going up the market was reacting to it in an inverse way. When oil was going up the market would go down….then when oil went down the market would go up. This week they had no connection. I think oil is right. People are trying to say that low gas prices are a good thing and that will help the economy. It’s like a tax cut some “experts” say. I think that is true but the reason the gas prices are so low is because the economy is bad. Therefore, oil can’t lift up the economy because it will just go up with it. It stays level. If any of you guys don’t believe that, I will make another bet. When the Dow hits 14,000 again I bet oil will be higher then $40.81.

Now I want to break down the things the market wants:

Cut Fed Fund Rate to 0.00%: This will do nothing. This rate doesn’t mean anything when banks are not lending and people don’t pay. That will not save us.

Stimulus Package: Obama wants to build bridges, roads and make buildings more green. This is not the type of stimulus we need. We need new technology. We need a go to the moon project to develop technology for the future. This will not help us.

Manipulate Mortgage rates to 4.5%: This will be for new home buyers not refi. Right now in America 10% of all mortgages are either late or in foreclosure. This number is going up everyday and home prices are going down everyday. We have 10 months of home inventory on the market and builders are still building houses only at a very slow rate. I don’t think mortgage rates are keeping people from buying a house. I think it is banks going back to real lending practices of asking for down payments. When my parents purchased the Grapevine house the mortgage rate was around 10% and they had to put 20% down. I’m thinking that coming up with $40,000 on a $200,000 house will stop some buying.

Banks lending: This one drives me the craziest. People act like banks don’t want to lend and they want to hold onto the TARP money. That makes no sense whatsoever. That would be like Grubbs Infiniti not wanting to sell a car. Let’s not forget that these banks are paying for this money. Just like Grubbs Infiniti is paying for the cars on the lot. Banks make money by selling money at a higher rate then what they pay. They are not lending because banks have raised their standards and the cost of the money. Individuals and companies either don’t meet the higher standards or it costs too much for the money. The cost of money is something nobody is talking about and will hurt profits. The cost of money is going up. The days of cheap and easy credit are over. This will greatly affect a company’s bottom line.

We are in a bad news is good news world right now. This will not last long. I still believe with all my heart and a lot of my money that the market is going down. I don’t believe any of the rally Friday on low volume. I actually added more to the short side. Economic data is weak this week and it will be interesting to see how the market reacts. I’m thinking a slow downward slide. Stay short!!!