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

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 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!!!

Dec 5 Post

Today has to go down as the craziest day I’ve ever seen. We had an awful jobs numbers and we rallied 259 points. The only thing in the market that got it right was oil. Oil dropped 6% to a 4 year low and ended the day at $40.81. Just to give you an example of the craziness of stocks today….I own an oil tanker company, Frontline, and it was up 5%. We got the bad news about China’s low car sales in Nov. this morning and during the day we found out that Venezuela car sales dropped 68.1% in November. Frontline shouldn’t go up on that news especially with oil down 6%.
Job loss in November was -533K. To give you an idea of how many people that is….Oklahoma City has a population of 531,324. Job losses in September and October were also revised. Sept. was -284K revised to -403K and Oct was -240K revised to -320K. That is 1.25 million jobs lost in 3 months. That is equivalent to everyone in Dallas losing their jobs in just 3 months (population is 1.21 million). The ‘experts” are doing their best to put a positive spin on the -533K loss today. One positive is this loss as a percentage is only the 40th worst (tell that to the 533K that lost their jobs). Another is that this will force the government to bailout the bankrupt 3. Another one was the government will bring out a huge stimulus plan. Lastly, this will force Obama to not raise taxes. I guess the government will save us all….but aren’t we the government?
Daily Job Loss Update:
GM cuts 2,000 jobs
Legg Mason cuts 200 jobs
Worthington Indus cut 300 jobs

Here’s more bad news that came out today. Late mortgage payments and the rate of home loans in foreclosure rose to record highs in the third quarter. Every state but Alaska had an increase in the 90 days or more delinquent category.
With the increase of job losses, growing number of people unable to pay their mortgages on time, record high loans going into foreclosures, 1 month T-Bill at .01%, 3 month T-Bill at .01% and 6 month at .18%, and all T-Notes are at record low yields….I find it hard to get interested in buying any stock. I took this as an opportunity to started scaling into SKF (double short financials).
Oh by the way….Chrysler hired Jones Day to prepare for possibility of bankruptcy

Dec 4 Post

Dow down 215. We had an interesting day. Oil was absolutely taken out back and beaten. Oil went down 6.88% and is currently at $43.70. I see no reason for oil to go up. We could see a 2 handle on oil in no time. It’s so interesting that two months ago people were chanting “Drill Baby Drill” and now oil tankers are being used as storage and Opec’s capacity cuts can’t stop the drop. This is just amazing!!

Financials did pretty good today until the last hour. They did good because many traders are just programmed that rate cuts are good for financials so they buy financial stocks. For the most part that is true but the BOE and ECB cut from a very high base. It would be like Grubbs Infiniti marking up a $40,000 car up to $80,000 and then cut the price 40%. You’re still overpriced by $8,000. Why would someone get excited about that?

We did have a big selloff at the end of the day because people wanted to get ready for the Jobs Report tomorrow. Everyone knows it will be bad and it will have to be really bad to shock the market. If it is inline, the market will rally (yes, that is stupid but that is what the market does). I think it will be really bad. Consensus is -350K at 6.8% unemployment rate. I wouldn’t be shocked with -500K.

I said this morning….. “all day long I see stories of companies cutting thousands of jobs around the world. It is just picking up speed.” I did some homework and made a list of companies that cut jobs in just the past two days!!

AT&T cut 12,000 jobs

Telecom Italia SpA cut 4,000 jobs

Windstream cut 170 jobs

Credit Suisse Group cut 5,300 jobs

State Street Corp. cut 1,600 to 1,800 jobs

Japan's Nomura Holdings Inc. cut 1,000 jobs

Sanofi-Aventis SA cut 6,500-person U.S. sales force.

GlaxoSmithKline PLC cut 200 jobs

Vale do Rio Doce cut 1,300 jobs,

Adobe Systems Inc. cut 600 jobs

Jefferies Group Inc. cut 400 jobs

DuPont Co., cut 2,500 jobs

Viacom Inc., cut 850 jobs

NBC Universal cut 80 jobs

Steelcase Inc. cut 900 jobs

Belden Inc. cut 1,800 jobs

RealNetworks cut 130 jobs

That’s right…..this is just TWO DAYS!! Guys I hate to say it but we are in a depression. Stay short!!!

Dec 1 Post

Dow down 679…..7th worst day in history!!! I nailed that one and yes, I am patting myself on the back. We broke 820 on the S&P 500 and we went straight down. I thought I was going to get this day last Wednesday but the new government program and low volume on Wed and Friday pushed that plan to today. To give you an idea of low volume….on Black Friday it was .4 billion shares vs. 2.4 billion shares the Friday before that. Hedge funds love low volume because they can move the market.

This sell off isn’t over. This week is going to be painful for the longs. We haven’t even started getting the terrible November data. Tomorrow we will get the auto and truck sales numbers. Plus the bankrupt 3 are going to provide our government with a plan tomorrow. This will be entertaining in a sad way. They will get our money and they will not pay us back. The government will tell them to make greener cars that run on unicorn kisses and butterfly dreams and they will say ok. At the end of the day, GM, Ford and Chrysler will not make greener cars. They will put energy efficient light bulbs in all their factories and call themselves green companies. This is a joke!! The market will sell/short everything connected with these businesses….I will be with them. I predict GM down 50% days after they get our money. Anyone want to bet me on that one? Stay short!!

Nov 28 post

Five straight days up. We haven’t done that since July 2007 and the best 5 day rally since 1933. The thing I noticed today is….if you want your stock to go up, you need your company to be going bankrupt and have the government bail them out. Days like today are just embarrassing!! Just look at the winners of the day….Citigroup up 18%, GM up 10.81%, Ford up 27.44%. Now look at these losers….Wal-Mart down 1.31%, Apple down 2.64%, Research in Motion down 4.74%. I guess if you make really good products that people want to buy and you actually make a profit your stock is a sell. This tells me that people are still covering shorts. I really wanted to buy more SDS but I’m going to sit on my hands and see what happens over the weekend and Monday.

I’ve been trying to figure out how I missed the last couple of days of this rally and I didn’t put into account the level of excitement about buying automakers and suppliers stocks before the government bailout money. Looks to me like a buy the rumor and sell the news situation. I’m waiting to short auto suppliers once the bankrupt 3 get some money. When this market turns it will be brutal.

The only silver lining right now is gas with a 1 handle and mortgage rates with a 5 handle. That is an awfully weak ray of hope. People are not going to buy a house just because mortgages are in the 5% range. First of all, only the smart buyers will know that and if you’re a smart buyer, you will also know that if you buy today your house may go down 5% or more in value in a year or two. As far as gas having a 1 handle, we all know it will not stay here forever. Most people are worried about their jobs not fuel prices and small mortgage rate movements. This all seems pretty weak to me.

Nov 25 Post

It was a real tug of war today in the market. We had the financials on one side and everyone else on the other. With the new bailout plan (second bailout in two days) the Federal Reserve is pumping $600 billion into a program to buy mortgage-related debt and should lower interest rates somewhat and thus spur lending and support the troubled housing market. This gave financials a boost. You may be asking where did this $600 billion come from and that is a very good question. The answer is simple….they are going to print it out of thin air. You don’t have to be economist to know that his will bring on inflation without growth…better know as stagflation.

Now let’s look at why we are here and how this bailout will fix the economy. We are here because people borrowed too much and can’t pay it back. The government’s answer to this is to make it even easier to borrow money. 50% of the reworks on mortgages are still going to foreclosure. There is a reason why David Ramsey has a show. I listen to his show every once in awhile just to laugh at how stupid people can be. Let me give you a typical caller…..caller makes $50,000 a year and thought it would be a good idea to run up his credit cards $50,000 at 20% interest, have a $200,000 house with an interest only loan and two brand new cars worth $25,000 each at 18% interest. Then he wants Ramsey to come up with a magic trick to fix this. Now the government’s answer is to print money so this caller can borrow more money. Only this time it will be for a motorcycle or a boat. This is straight out of SNL.

If anyone thinks this economy is turning around or we are near a bottom, just read the list of terrible data from this week.

Three banks were taken over this weekend. The most in one day ever.
FDIC number of problem banks has surged from 117 to 171
Bank industry income plummeted 94% (yes that is right….94%)
Import car makers are paying extra to park cars at Long Beach port
Porsche is slowing production
Nissan is slowing production
BHP Billiton and Rio Tinto merger isn’t going to happen
· Cisco is shutting down from Dec 29-Jan 2 because of weaker than expected demand
· HP is shutting down extra days in Dec because of weaker than expected demand

Does this sound like growth to anyone? I don’t think we are even close to the bottom. With guys like the Ramsey’s caller and our government feeding him the credit drug, we are going to see more pain in the market. There will be more foreclosures, repos, bankruptcies and bank failures. Unfortunately, these are the only things with growth in this economy.