Sunday, November 30, 2008

Market outlook for week of Dec. 1st, 2008

Last week we saw a rising market as I said there would be and many were thrilled to see the Dow, S&P500 and the Nasdaq Composite Index. I have been asked through email and calls whether that rise was to be believed. Well of course it was to be believed any who bought ETF's or stock like Ford Motor, will tell you they made good money last week, especially if they sold to take the profit. But I think the real question which was behind their curiosity was whether the market rise was going to continue this week too?

No one can say with authority and certainty, what the week will do. But here are some facts about last week which should not be forgotten going into the week. First, even though there was a great rise in the 3 indexes mentioned above, 2 of the 3 did not go over the 20 day Moving Average. Only the Dow managed to close just above its 20 day Moving average. Secondly, if you look at a chart of the indexes along with a volume chart, you will notice the volume dropped off daily. When the price of a stock (or Index) goes up successively each day and volume drops off, it is usually an indicator of a change in direction, and in this case, down. If it rises for the week then the following week has an even higher probability of a pullback.

So, will the market rise this week? Well maybe early in the week yes but later in the week it may drop back. Remember the range of this channel from the bottom goes from about 7,300 to 9,500 on the Dow and we closed at 8,829 which is more than the mid point of the range. So the probability favors a pullback. My guess is that over time the range will tighten as many more play the spread like me. So we may have a new range of between 8,000 and 9,000 for a while before there is a breakout either to the upside or the downside again. That still is an 11% range and most can buy near the bottom of that range and sell near the top and repeat this many times. Those more skilled can not only buy at the bottom of the range individual stocks or Indexes but can also use ETF ULTRA Pro shares and ULTRA SHORT shares when the indexes are near the either end of the range.

In addition, this week we will know the Unemployment numbers for November and they will not be good. We will also get better info on Retail Sales. Early reporting suggests that Retail Sales are 3% above last year. I don't believe it and you shouldn't either. Many I have spoken to have cut back significantly on their purchases and I even saw reported that the wealthy have also cut back in expensive items. So, believe a 3% gain in Retail Sales at your own peril.

For example, as the market was rising I kept riding my ETF Ultra Pro shares of SSO until on Friday I sold them. At the same time Friday, the value of the ETF Ultra Short shares of SDS had dropped in price to below $90/share so I bought them. If the market goes up additionally in the first few days of this week, I will buy more shares of this at $88 and $86/share if the opportunity arises. I still own my shares of Ford and I see the stock continuing to rise right through the week. I see this stock going to $3-$4 in relatively short timeframe like 2 months. Did you know that 77% of Ford Motor shares are owned by Institutional Investors? So there is money to be made in the markets, but you must do it wisely, never committing cash you don't have to risk. All market "investing" is truly gambling. Any rational human being knows that and, like the Casino's, the game is rigged against the individual in favor of the house. The house here are the big boys who sleep every night because they have significant wealth and influence.

Good luck this coming week.

UPDATE Monday morning 6:45am.

Well the answer is in. Market is down over 300 points in the first 15 minutes of trading. Unrest and comments from China have fueled this early drop, as have comments that shoppers on Black Friday say they are done shopping and have completed their purchases by a whopping 36%. So the season may not be bailed out for Retail sales after all. I said if you believe that we are ahead of last year you do so at your own peril. SDS has risen sharply, up 8 plus points now to $96.35 which I bought for an average price of $89 last week and the SSDO I sold is down to $24.15. Ford continues to rise even with the Dow down 353 now as Ford is currently at $2.84.

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It's time for all to focus on SEC Chairman Christopher Cox!

Back on November 23rd, I wrote that we need the SEC to reinstate the "Uptick Rule" to prevent those who short the market and stocks to do so at this time which will exacerbate the problems. It is in part why Citigroup stock fell so sharply and why it was bailed out a week or so ago. The quote back then was, "One of the reasons Citi finds itself in this situation is the loss in their stock value at $3.94. One thing which would help is if the SEC re-instituted its Uptick rule to prevent continued shorting of the stock by speculators. It was the worst decision in SEC recent history to abandon the rule. Many have called for the head of Christopher Cox, head of the SEC and a Bush appointment. It seems too late for that but Cox could reinstitute the Uptick rule and help minimize a further slide in the share price. I just don't have any confidence in him doing that. It would be admitting he made a mistake and that is something the Bush Administration will not consider."

Well it is time for all to put the light back on SEC Chairman Cox, because what he is doing by not re-instituting the Uptick Rule is to give favored interest (he worked for the international law firm of Latham and Watkins) where the law firm defended many Hedge Fund cronies. The Hedge Funds are getting their payback and favored interest, as long as the Uptick Rule has been made void. Hedge Funds are not regulated and they like it that way and use firms like Latham and Watkins to help keep it that way. So let's all write to our Congressional leaders and local newspapers calling for Cox's head and possible indictment. He was appointed by President Bush and is in his final days in this Administration but one could argue what he has done is criminal and minimally requires more investigations by Congress.

You see my friends these people can take the markets down further below to 7,000 at any moment and they will clean up with your Retirement accounts going lower in value. This rule needs to be put back in play as soon as possible. Wake up to Chairman Cox and do some research on his background and see who are his special interest buddies. He most likely will return to work for this Hedge Fund firm in 60 days. Putting him in as SEC Chairman was like putting the fox in charge of the hen house or putting Chemical company management, Mining executives and other toxic producers in charge of the EPA.

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Saturday, November 29, 2008

Helping to reduce foreclosures is possible with compromise by all affected parties.

I have been giving some thought recently about what to do about those who had sub prime mortgages and find themselves facing foreclosure. The object being how to do the best to keep the most number of people in their homes and the fewest foreclosures, all this without having to lower the value of the home. It is a monumental task indeed, but it is a huge problem facing the very survival of our economy and financial institutions.

So I have made some assumptions necessary for the solution to be acceptable to all those involved, including the Homeowner. Here are the assumptions I made:

• The mortgage amount of the loan stays intact at what the purchaser borrowed.
• The length of the loan terms would be extended to the maximum.
• The originator of the loan must only repackage the loan and sell it either to Freddie Mac or Fannie Mae and would be owned by the Government similar to FHA loans.
• The percentage interest of the loan would be set the lowest interest rate from the past 25 years.
• The owners must be occupants of the homes. No subletting or renting allowed.
• Down payments on these homes were 15% on average.
• The length of the loan terms will be extended to 50 years from the current 30 years.
• Medium Home prices by region are assumed to be as follows:
West $253,600
Northeast $246,800
Midwest $152,500
South $167,200. All these figures were as of Nov. 4, 2008 and can be checked here.

So if one assumes thew average price of a home to be $200,000 for loan calculations and that no principal has been paid on these loans, then various monthly payments can be calculated.

Here are some possible mortgage payments:

This would compare to 6.5% for 30 year current mortgages for a loan of $200,000-$30,000 (15% down payment) or $170,000 mortgage of a monthly payment of $1,074.52

With these sub prime loans set to 4.3% for 50 year mortgages for a loan $170,000 mortgage of a monthly payment of $ 689.83.

When I look at these numbers it would make a significant difference to a home owner facing foreclosure, because it is a reduction of $384.69/month in the payments or a 35.8% reduction in monthly payments. I picked the 4.3% interest rate because back in the mid 90's banks had interest rates that low on mortgages. This reduction could make all the difference in the world, to a struggling homeowner and their family.

I know the homeowners will never pay off their homes here, but if they can still occupy them, and, given time, with house appreciation, they could sell their homes for some money back some day. Besides, how many of us really pay off our mortgage before we are ready to sell and move to another home? Not many I assure you. At least this is a solution. You have any better ideas? I am open to hear them.

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Wednesday, November 26, 2008

Best 4 days in a row in the stock market in a long time.

I was very, very pleased to see the markets rise again today for a 4th straight day. I find myself wrestling with my Ego here wanting to say it was inevitable, given my earlier premise that Wall St. wants the consumer to forget about their stock portfolio's and go shopping. But on the other hand just happy I was able to point the way for some to make money this week. It was the best week in a long time.

Here's what I did today. I wanted to report that I sold my Ultra Pro ETF shares, symbol, SSO, for average price of $25.10/share. These are the shares bought at $19.35, so I have a lot to be thankful for a 24% profit in less than a week. Also I purchased 20,000 more shares of Ford Motor Co. at the open for $1.70. And lastly, I was able to buy the ETF Ultra Short of the S&P 500, symbol SDS, for $90.50/share. The idea here is that if the market drops next week due to very poor Retail Sales, I will make money on these shares. These are the same shares I bought at $88/share and sold at $118 last Thursday. The idea here being to make another round trip if the market goes down.

With the additional major news item of the day being a terrorist attack in India, the markets have a lot of pressure to go down next week. On Friday, you might consider buying this same ETF, symbol SDS. The Dow closed at 8,726 today. If you believe we are in a trading range and most likely will stay in that band, then playing it to your advantage is important. I believe the top of that band on the Dow is about 9,500 and the bottom is at 7,000, the half way point is 8,250 and we are above that point. That would mean there is better than a 50% chance we will pull back some. However, we are not that much above the mid point so it can just as easily continue up for a few days but we are still just below the 20 day Moving Average on the Dow and S&P 500. What I do in that case is to start buying 1/3 of the total shares I want to purchase of SDS at $90/share and buy 1/3 more at $88 and another 1/3 at $86/share.

Happy Thanksgiving.

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Should you start buying stock now?

That seems to be on everyone's mind. Durable Goods orders were bad this morning but this indicator tells you what happened last month as does the unemployment numbers. But to determine if this is the time to get back into the market one has to ask 2 questions. First, can you afford to buy stock given your individual financial condition? I can't answer that for anyone but myself. The second question is this. What has the U.S. Government been doing with their money? Well from what I see they are throwing as much money as they can print into solving this problem. And they are "investing" significant amounts of money into the financial sector and most likely will bail out the auto industry as well. So if the government thinks banks and auto companies are a good investment at this time, why don't you?

I think it is a very good time to be buying back into the market selectively. I have been suggesting to my readers to buy Ultra ETF funds, as a way of getting in. I was asked by a reader if I sold my SSO yesterday and the answer is No. Even though pre-market looks like a down day, I am semi confident we will finish the day positively. I will either sell it near the close, hold it till Friday or Monday and see what transpires. I could take the profit and most others should have, but I tend to be patient and wait till I know more clearly the market's direction. Besides SSO is down from the closing price yesterday, BUT it is up from pre-market price, even though the market is down at the open.

I ventured into Ford Motor company at $1.49 on Friday and Monday and may buy more going forward. I like the way the chart looks these past 4 days. It hit $1.80 in pre market so we will see where it ends today. Good luck and Happy Thanksgiving.

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Tuesday, November 25, 2008

Market does what is expected. Lucky guess again.

Ok, I think I got it right as we have had 3 days in a row of a positive uptick in the market. This is the first time since August. Unless tomorrow's Dow drops 1,000 points, we most likely will close the week up, which is what I predicted back on Friday and yesterday. Here's a check of my theory. How are you feeling now that the past 3 days have been positive in the market? Nervous it will drop? Happy it has gained ground? Hoping it will continue? You see most Americans are rooting for the market to rise, as there are few that want it to drop. If your mood is better, how will you be on the day after Thanksgiving, the most important day of the Christmas season for Retail Sales? I am hoping positive and that you consider spending a little money in thanks for what you have. Remember, it helps save jobs and can give you some joy if it is a present for someone you care about.

Those who purchased the Ultra Pro ETF of the S&P 500, symbol SSO, when I suggested and I did around $19.35, enjoyed the shares rising to a $24.37 at the close with a high for the day at $25.13. The gain so far is 25.8% For those who sold today, congrats on a nice gain.

I have an order in for the Ultra Short of the S&P 500, symbol SDS, at several prices: $90.50, $89.50, and $86.75 as a hedge for a market pullback.

Wanted to also wish everyone reading this Blog a very Happy Thanksgiving day and weekend.

Oh, I almost forgot that I wanted to tell you one other action I took and why I took it. I bought Ford Motor Co., symbol F, at $1.49 on Friday and Monday. Why you might ask. Because I believe that there will be a rescue plan for the auto industry and Ford is the stronger of the 3. Besides that stock is so cheap right now and 3 years from now when you look back you will be asking yourself why you didn't buy it here. That's my story and I'm sticking to it!

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Monday, November 24, 2008

The reasons the stock market will rise this week!

Ok, this is what you have been waiting for, the resons the stock market will rise this week. First, President-Elect Obama officially announces his economic team today. This will boost confidence. In addition, the government has agreed to guarantee the Loan portfolio of Citigroup to the amount of $300 Billion and added $20 Billion additional funds from TARP. It makes Paulson look ridiculous because he had said there wasn't a need to spend any more TARP funds and that the he was successful in stemming the financial crisis and calming down markets. He now has to eat his words. But that is a small price to pay for getting it right.

Also, reason this week will see markets rising is that this is Thanksgiving week, and the last thing Retailers want is to see the stock market go down just before Friday, the biggest shopping day of the Christmas holiday.

And finally, markets abroad in Europe are showing very positive gains in premarket action here as did Asian markets last night. The world is linked together more now than ever.

So sit down and watch the markets rise this week and hopefully see your portfolio a little fuller than it was last Thursday.

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Sunday, November 23, 2008

THe financial crisis slowly plods along. We're lucky it is giving experts time to think about solutions!

Main Street media is reporting that the government is considering a bailout of Citigroup. Citigroup also has already received a $25 Billion package from the TARP funds, so many wonder what Treasury is now considering as its options. Citi lost its bid for Wachovia to Wells Fargo. While at the same time the Administration and those of the Obama Administration are trying to calm and stabilize markets here and abroad. All this while many are ambivalent about a bailout of the Auto Industry and specifically GM. This is leading to our friends abroad in Europe and Asia wondering whether the U.S. is going to have an unfair advantage over rivals, many of which are made in those regions.

They will not let Citigroup fail. So right now it's all about speculation. One of the reasons Citi finds itself in this situation is the loss in their stock value at $3.94. One thing which would help is if the SEC re-instituted its Uptick rule to prevent continued shorting of the stock by speculators. It was the worst decision in SEC recent history to abandon the rule. Many have called for the head of Christopher Cox, head of the SEC and a Bush appointment. It seems too late for that but Cox could reinstitute the Uptick rule and help minimize a further slide in the share price. I just don't have any confidence in him doing that. It would be admitting he made a mistake and that is something the Bush Administration will not consider.

But in spite of it all, I believe this week ahead will be good for the markets. I'll state why tomorrow. Come back then.

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Saturday, November 22, 2008

Was yesterday's market rise an anomaly or did it mark a market turning point?

That seems to be the big question of the day for investors large and small. I took a look at my usual data sources and came to the conclusion that not enough is really known yet to fully answer the question but, indicators are strong that we bottomed on Thursday. Here's some facts.

Volume yesterday was higher than the day before when the market dropped 444 points. The volume was the highest in over a month. The Put to Call ratio on Equities rose 3 days in a row, to near yearly highs for a 3 day period. This suggests a reversal in trend to me. However, the volume was not convincing as to whether we reached that climax called "capitulation". Insiders were Buying yesterday in large numbers. With over 200 companies reporting Insider Trading yesterday, over 175 companies reported Buying by Insiders, verses only 25 Insiders reported Selling.

As I have stated a number of times, we can still go lower and may go down as low as 7,000 on the Dow. Whether we were at 7,500 or 7,000, we are for all practical purposes at the bottom. However, this may be an unusual time and the signs of capitulation may look different this time, compared to past analysis. For one thing, there will not be the heavy buying many expect. The reason is quite obvious, there isn't a lot of cash ready to come into this market. Confidence has been damaged, most likely for good. It will not return for a very long time. So any market rise will be tempered by some selling into any rally. Fear is still the dominant emotion, and not until greed finds its way back again, will this market rise and then only slowly. It most likely will get knocked down on any substantial gains. So don't expect the Dow to go over 10,000 again, anytime soon. We are talking years in my view. And the reason compounding this will be the continued bad news around unemployment and the usual cutting of revenue and earnings estimates by companies for a long time to come. Some companies are in denial and not taking appropriate cuts given such a dramatic occurrence in the credit markets, Wall St. and now Main St. It is to their peril if they ignore the facts and the indicators of what is coming over the next year.

I am convinced that money can be made by buying ETF Indexes and trading them as stocks. When the Dow, S&P 500 and Nasdaq all are near bottoms, it is wise to buy Ultra Pro shares of these indexes. Similarly when the market rises and nears the recent highs of 9,500 on the Dow it is recommended to sell them and buy the Ultra Short ETF's at the same time. I will continually give buy and sell signals of these ETF's over time so check here if you own any.

As I said on Thursday, I sold my SP 500 ETF Ultra Short shares, symbol SDS, as well as my Dow ETF Ultra Short shares, symbol DXD. I also bought the SP 500 Ultra Pro shares, symbol SSO at the same time.

President-Elect Obama will announce his team in the coming week or two and that should give some confidence that we have a group of smart, capable and experienced people going to be assisting our new President, immediately when the transfer of power happens on Jan. 20th.

In the meantime, think about what you are grateful for in the midst of the worse financial and economic crisis since the Great Depression and give thanks this coming Thursday. Think of those suffering in silence and pray for them. Think about how you are going to help contribute to a better America. The place to start is where you live and look around at your neighbors, your churches, your local government and your local businesses. You can make a difference and you will make a difference. It only depends on whether you choose to help or not.

Happy Thanksgiving week to you all.

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Friday, November 21, 2008

Stock market update Nov. 21st: We hit bottom yesterday!

For all practical purposes, yesterday's closing 444 point drop to 7,552 and an intraday low of 7,507, satisfied my conditions that we hit the bottom of the drop in the stock market. I had said we needed to go to 7,300 plus or minus about 150 to hit the bottom, back in September when the market first dropped. Can we go a little lower and test 7,300? Yes, absolutely. But now you believe me when back in September many were skeptical of my market prediction. This is the time to start buying stocks again, well, at least ETF Indexes like the Dow, S&P, and Nasdaq. It was painful getting here for everyone I know. No one was sparred except those who were in cash only and not many went to total cash. Some symbols to look at buying SSO for one.

Some individual stocks are vulnerable as are some sectors, to further declines at this level. However, when you buy an Index, it minimizes the risk. But let me say again, we may go lower on the Dow, S&P and the Nadsaq but it is only to find the exact bottom. We will not go below 7,000 on a sustained basis and there is greater probability that we will go up from here and retest sometime over the next month or two and then we are done. By that time we will have a new President, the worst of the fears for the Auto Industry will be decided in favor of saving the industry and we will all feel much better. Don't miss this time to start to get back into the market as it is a once in your life opportunity! Good luck and be hopeful for beter days ahead!

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Thursday, November 20, 2008

Jobless Rate of 4 Million people: Let's put that into perspective

Can you even imagine how many people are 4 million people? It's unimaginable! For example, they are predicting that about 4 Million people may show up for the Inauguration of President Obama on Jan. 20th and they have no idea how to manage that crowd size. Here's another way to consider it. Think about where you live, the town, or city or county and think of how many people live there and then imagine they were all unemployed. Imagine if all the people coming to the Inauguration are all unemployed when you watch it on TV to get a sense of the impact of this many Americans looking for work.

NOW THINK ABOUT THE FACT THAT MOST OF THESE PEOPLE ARE PART OF A FAMILY OF ONE OTHER ADULT AND, MOST LIKELY, 2-3 CHILDREN. Then imagine their extended family of maybe 20 other family members who are struggling and want to help that unemployed family but find themselves struggling too.

You see now why we can't let the Auto industry collapse during this financial crisis brought on precipitously by Wall Street greed. The rescue won't be enough, as the industry needs to go through massive change. But this helps us by some time and get focused on a job stimulus by President Obama.

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The most dangerous times for our fragile economy: The next 60 days!

This has been the most vulnerable period of this market crash and financial institution conundrum these past 2 months, but we are about to enter its most critical and dangerous period. That time is bounded by Congress going home on recess and doesn't reconvene until the next Congress reconvenes and the January 20th Inauguration of President Obama. The country has lost total confidence in Bush and Cheney and now Hank Paulson, just as we did with Katrina's "Brownie". This is the time of year we are to give thanks for our blessings and the only thing I can think we collectively are thankful for is that Bush et al will be finally gone!

God help this country in the interim. The Congress needs to make their recess short and get back to work soon after, as it is all about confidence right now and we are facing a collapse of GM and possibly their suppliers. This could precipitate the other 2 U.S. Auto makers having exaggerated problems and more layoffs. The unemployment figures today didn't help pushing the unemployed now to over 4 Million people, not including their families.

Art Cashin of USB Warburg was on CNBC this morning and said we need to hold the intraday low of 7,882 today with a meaningful bounce up off it. That is still over 100 points from the close yesterday. As I have said since September, the low for this market is around 7,200-7,300 on the Dow. There is a 20-year uptrend line that crosses at about the 7,200 level that if broken we all should pray, as we then would be headed down into the abyss. Let's hope this does not happen. Sorry for the gloom but that's where things really are. Cash is King!

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Tuesday, November 18, 2008

Opponents of Auto Industry bailout are trying to have it both ways and America loses

Opponents of an Auto Industry bailout, who asked for the Banking and Insurance bailout, are scoffing at an Auto Industry bailout, even if preceded by a Bankruptcy filing to reorganize. Just weeks ago, all Americans were in fear that we were going to face a collapse of our system and Free Enterprise. No one who really saw the magnitude of the problem argued with the bailout request by the Republican Bush Administration. Many argued against the bailout by the Republican minority but many signed on after they got some changes within the legislation which was passed in a bipartisan way.

Many still fear the further collapse of the system and see the Auto Industry as a key legacy of the U.S. manufacturing sector. And since it represents about 1 out of every 10 employees in manufacturing. Is it true that the Auto Industry management has failed their workers and the country? Absolutely yes! Has the Congress failed us, especially within the State of Michigan, by going along with the Auto Industry Management in not raising mileage standards? Absolutely yes! Which is why any bailout must have as a requirement that any bailout by preceded by bankruptcy filing, the elimination of the current leadership, a requirement to be a leader in higher gas mileage and alternative energy sources for a Greener environment.

It's time to come together and do what is right for America. We don't have a lot of time to get this right. We voted for a new President and with him, a new direction. The burden of failure here for the Auto Industry will lie with the remaining Republican Congress and Senate, not exclusively with the Auto Industry Management, given their strong opposition to any bailout on any conditions of the Industry.

If it was in America's interest to bail out the Financial system and their Insurance Industry, it makes sense to bailout the Auto Industry conditional on the needed guarantees from that Industry.

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Monday, November 17, 2008

Monday Nov. 17 Stock market view and strategy

Market action today will be down, as not much really came out of the G 20 meeting of world leaders in Washington, hosted by President Bush. If it were President Obama much would have been accomplished but there still is lacking confidence in the markets so that what we have is mostly sellers and no buyers.

My strategy today is to sell my Ultra Short ETF's if they hit my target price. For SDS that is $113.75 and for DXD my sale price is at $93.75. I also have an order of the market hits those lows to Buy an Ultra Pro longs on the S&P500 symbol SSO for $21.75/share.

I do not see the market rallying up. Much news over the weekend and the main story was not the G 20 meeting as much as the question as to whether the Congress will bail out GM and the Auto Industry. It didn't look good when I listened to the Sunday talk shows. That will cause the markets to drop significantly, most likely to the bottom where I see the Dow at 7,200 plus or minus 150 points.

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Sunday, November 16, 2008

Have we all contributed to Detroit's problems?

This morning on Meet The Press, Tom Brokaw asked his guest T. Boone Pickens if he had any regrets having been an oil man and that Detroit built large cars that were gas guzzlers. Pickens said back to Brokaw, "Well Tom you drove those cars as I did and there's plenty of blame to go around because we all had a part in it."

My answer: The Amish people didn't!

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Saturday, November 15, 2008

To bailout or not to bailout the Auto Industry? UPDATE

I wrote a recent post, Nov. 8th, on the proposed bailout of the Auto Industry (see post below). In summary I had said that while initially I didn't think it was a good idea, when you look into the issue in more detail, a bailout is a good thing as long as it is conditional that first the company had to file for bankruptcy but were required to have all the workers own the business. All non employee shareholders would lose their equity under the new restructuring but the employees would be given some % of the shares of the new company. Their elected Union representatives would be on the Board with an equal vote on where the business was going and had to approve of the plans. What this industry needs is accountability across Labor and Management. They must bury their past grievances and agree to a true partnership. Their Benefits would need to be trimmed significantly in a cost cutting measure, and they would need to equally share the pain. The government would act as the Arbitrator of last resort if issues remained and would have final say over ultimate decisions, as a condition for the billion of dollars given in the bailout.

This morning several experts on the Auto Industry are quoted in this article (worth your time to read fully) on that "GM Collapse at $200 Billion Would Exceed Bailout Tab". Quoting further from the article, "A GM collapse would mean 'more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,' Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said yesterday in an interview.

Behravesh's projection of $100 billion to $200 billion in costs dwarfs the $25 billion industry bailout plan that will be debated in Congress next week to prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC. The drain on taxpayers from a rescue or a GM failure is a central issue for U.S. lawmakers."

So it seems a no-brainer we must rescue the Auto Industry after any like GM declares bankruptcy or we are cutting our nose to spite our faces. No one wants socialism. We all want Free Enterprise to return. But we are in a world wide crisis of historic and epic proportions which require unusual, once in a lifetime remedies. The article did not include the costs of default Mortgages by Auto industry workers unable t pay for their mortgages. But we have a chance to create an Auto industry that leads us into the future where we do not burn fossil fuels to run our autos. You see even cheap gas is bad, as it does nothing but add to our problem with Global Warming and that has catastrophic consequences for the entire planet.

President-Elect Obama will lead us into becoming the leader of Green technology on the planet with jobs that make people feel good about what they are working on, similar to when people like myself worked on the Apollo Moon program under the Kennedy Administration. It was a glorious time and nothing like that has been offered by any President since. There is no option here. We must save the Auto Industry and an additional $25 Billion is a paltry amount compared to not bailing them out.

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Friday, November 14, 2008

Energy policy in troubling times: Should we buy cheap oil?

So here's what I am wondering about. We have all benefited by the drop in Gas prices from the mid $4/gallon now down to $2.50/gallon. It has helped kill any worry about inflation creeping back into our economy anytime soon. Oil prices have dropped from a high of $147/barrel to today's closing price of $57/barrel. So we are all happy about that, right? Prices are dropping dramatically. They say we need to drill for oil. Because of that and as a bridge, until we become energy independent, why isn't the Bush Administration buying Oil at this time and putting it into the Strategic Petroleum Reserves? It is not in the Oil industry's interest to buy oil, unless it is $147/barrel, which the Bush Administration did this year? How would they make such large profits if we just bought it cheap?!

Everyone says we need to drill for oil, and open up Alaska's Arctic National Wildlife Refuge (ANWR). And they are saying we need to open up millions of offshore acres for drilling, all with the potential problems of oil spills on our shores and into our beautiful Wetlands. But why drill?

So getting back to my initial question: Why isn't the Bush Administration buying oil at this time and putting it into the Strategic Petroleum Reserves? If we buy the oil, it will stabilize the oil markets around $55-$60/barrel. We will have millions and millions of barrels of oil from this strategy. It helps with our supply of oil when we are in 2 wars. And, we know, when this economic crisis ends in the next year or two, oil will be more expensive. It seems like a very good investment at this time to me. I wonder what President-Elect Obama will do when faced with this opportunity? Your thoughts?

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Art Cashin called yesterday Capitulation! But is it?

Art Cashin of UBS and a guest on CNBC said that yesterday's action was as close to Capitulation as it gets and he thought the bottom has been put in. Share volume was about 2 Billion shares yesterday which gave Cashin his confidence level. I am not as sure, as he is, that the bottom has been put in. I still believe we are headed to a Dow of 7,300. Even with yesterday's huge rally, we closed below the 20 day Moving Average on the Dow.

If Art is correct that the bottom is in, I think we are staying in this range between 7,990 and 9,700. That's a nice range to make some money if you are willing to get in. Play this range as it should last for a long time. Remember the wise investor is Buying when others are Selling, and Selling when others are Buying. If the market does go to the level of 7,300, I am confident it will hold and rally up a lot so be willing to buy anywhere near those levels.

Art Hogan a frequent guest on CNBC also said we have retested the lows and we will be in a range of 8,000 to about 9500 for a while. He was the first to call the bottom back in October. So there you have it from 2 real good pros.

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Thursday, November 13, 2008

Post Market analysis Nov. 13, 2008

The market did what I had expected it to, it went down below 8,000 and quickly bounced back up and the market closed up about 550 points to 8,800. This was simply amazing. There are several pieces of information which tells me that the market is not ready to go lower at this time.

The first piece of data was that the Volume today was significantly higher than yesterday and ending on a high note, which is a good thing. Secondly, the ratio of Insider Buying to Insider Selling was significantly higher today. This has not been the case for weeks. Also there seemed to be a positive reaction when it was announced that Sen. Chris Todd said there were no votes from Republicans in favor of a rescue for the Auto makers. I do not agree with the Republican rejection of a bailout. I have clearly stated a number of conditions for a bailout, the first being GM files for bankruptcy and the shareholders lose their investment, management loses their jobs and their is a government oversight of the company with conditions favoring more environmentally responsive measures.

Getting back to the market. We will stay between the low of 7,965 to the recent high of about 9,700. To make money you will need to play the range and when the Dow Index approaches either end of the band, take an action to buy or sell. I tried to sell my Shorts but failed to do so. I should have had an order in that executed without my need for a manual trade. I learned my lesson and it won't happen again. I also was preparing a trade to Buy an Ultra Long ETF of the S&P500, symbol SSO, but I didn't make it in time. Lesson learned, move on. :yeah:

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Wednesday, November 12, 2008

My take on today's market action and looking forward.

Today the markets confirmed what I have predicted last week. I said the rally last week was a Bear market rally and not to be fooled by jumping back in. I suggested buying Ultra Short ETF Funds such as DXD and SDS. Both are up now. In the case of SDS which is a short on the S&P 500 closed Friday at $89.89 and closed today at $104.75. That is a $14.86/share gain for a 16.5% gain. When I asked readers to buy this it was at $87.55. Overall it is up now 19.6%. Looking at DXD, which is an Ultra Short Fund of the Dow, it closed Friday at $79.31 and today closed at $86.20/share. That is a gain of $6.89/share for a 8.7% gain. I recommended buying this Fund at $70.50/share. It is up now 22.2%. Normally I would sell these with these gains, but the market closed at near the lows and I believe we are in for another drop tomorrow. We have gone below the recent lows on the Nasdaq, which is not a good sign for those wanting a rally. Also, the ratio of Insiders Buying is overshadowed by Insider Selling, in terms of actual dollars.

There are no good news stories on the immediate or near term horizon, and in fact, there was one negative news item today, as Hank Paulson, Treasury Secretary, announced he is changing the actions he had announced regarding the TARPS (Troubled Asset Rescue Plan which Congress finally approved prior to the election) "because the facts on the ground require a change in strategy," he said. This did not give confidence to the market. Many now believe he has not foreseen some of the current problems and has lost some credibility with the market. The markets function based upon confidence levels of investors and there appears to be less and less each day.

We are getting close to the 8,000 level and without some encouraging news in the days ahead, I fear we may take a run at the real market bottom, which I have said since September, is at about 7.300 on the Dow. If we do go there, that will be capitulation and we should not go lower.

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How can we turn the ship of this economic crisis? Some suggestions.

As a result of the election of Barack Obama, a new day of hope has been realized. Most Democrats, many Independents and some Republicans now are wishing the President-elect all the best and are wiling to get behind his leadership that will help us out of this Financial and economic meltdown. So we all look for leadership. But we must now start to look within, as the Consumer, that's you and me, can either help resolve these problems or contribute to magnifying them. This can happen when we are not aware of how our individual collective decisions or "herd" mentality is at play.

Right now, no matter where I go, I am asked how I am viewing the economy and financial crisis from my client interactions, business associates, neighbors, friends and family. What I see as a common thread is the fact that fear is present to different degrees by individual, but it is there and influencing daily and future decisions. Some are looking at household expenses and tightening their family's financial belt, Some have choices to make in there daily business decisions, which affects spending patterns now and plan changes in the future that all cut back and contribute to a tightening on a National level. This in turn affects a Global economy.

So how can we all help ourselves out of this mess and give the Obama Administration a better chance of success in getting this ship turned in the right direction? First, being aware of what decisions you are making and how they affect you and your family is the first step. Some do need to cut back as they are spending much more than they are earning. But some that have plenty are also cutting back unnecessarily as it is the herd mentality at work, affecting the economic environment additionally. If you make a good salary and have enough to carry you through some tough times, consider continuing with your current habits as if nothing is really wrong. You will be helping some businesses survive, as well as your community, State and Country. If everyone stops spending any money, the entire system will grind to a halt and it will get much worse.

So as we are approaching a dismal holiday for retailers in general, it is important that the Consumer consider the consequences of their actions and think broader about how they can affect things more positively. Those of us who make contributions to Charity at year end need to do it again, especially this year. The most needy among us will need our help. Research into the elimination of disease still needs our help by our donations. It can help reduce medical costs and health insurance. Public radio will still need your donations as will the Museums.

So as we approach our first holiday of Thanksgiving, there is much to be thankful for. A new President, the first African American to be President, and a change from the Bush Administration policy's is surely something to be thankful for. A family where love is present and learning abounds is a blessing. Having a roof over one's head where you don't have to worry about foreclosure, is a blessing. We can make a big difference with our collective actions but we all need to start being aware of how every decision we make or choose to defer has a consequence for the economy and the well being of our Nation. We can make this holiday season better than what most had expected and this would be a great gift to give the Obama Administration. A few gifts are in order this Christmas and if we all do some shopping rather than a total cutback, it will be a wonderful gift to our new President and the Country. Choose wisely!

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Tuesday, November 11, 2008

Today's market comments

Well day 1 of the week did reaffirm my expectation. The Dow closed today at 8693, down 177 points. It was down lower today but recovered. The dow was down over 276 points at the low of the day. There isn't much good news in the economy, so sell into any rally's. The interesting thing is that if we could get this over and go down as I think we need to, we could rebound and be on our way back up. But the market won't be rushed. It was another day when the Dow was below its 20 day Moving Average.

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Saturday, November 08, 2008

Market analysis for week end Nov. 7th 2008

The Dow closed at 8,944 or up 248 points. I had expected a drop on the Unemployment news yesterday as the rise in the market seemed disconnected from the reality of this bad news. I expect that drop to occur this coming week. While the Dow did close up on Friday, it closed below its 20 day Moving Average. To me this reaffirms that expected drop. Add to that Obama's comment in his News Conference that there can be only one President at a time, it is obvious little can be done between now and January 20th by Obama and his advisors. They can try to get passed some bailout/rescue of the Auto Industry if the Republicans will go along with it as well as the President. But one can't be sure.

Look for this coming week the Dow to go back near 8,000.

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To bailout or not to bailout the Auto Industry?

A few words are in order regarding the idea of a rescue of the Auto Industry. On the face of it I am opposed to it because it seems we are rewarding an Industry which never really got it this past 20 years and allowed companies like Toyota to capture market share by building cars Americans really wanted which were more energy efficient. Having said that, when I pull the onion layers back a bit, I realize that this problem is not the workers fault, but its leaderships. They build the cars they are told to build. But if we let the likes of GM fail, we will hurt all the auto workers, and they would add to the unemployment lines, as well as increasing Home Foreclosures, just when we are trying to stabilize markets. So it could create an even worse scenario. So what to do is the real question?

I have a solution that many may find appealing. What if the government did agree to bail out the company but as a condition of the agreement, the company had to file for bankruptcy but were required to have all the workers own the business. Non employee shareholders would lose their equity under the new restructuring but the employees would be given some % of the shares of the new company and their elected Union representatives would be on the Board with an equal vote on where the business was going and had to approve of the plans. What this industry needs is accountability across Labor and Management. They must bury their past grievances and agree to a true partnership. Their Benefits would need to be trimmed significantly in a cost cutting measure, and they would need to equally share the pain. The government would act as the Arbitrator of last resort if issues remained and would have final say over ultimate decisions, as a condition for the billion of dollars given in the bailout.

I am open to ideas about this as I am no expert on how to do this effectively. But I do like to see some accountability by everyone and for shareholders to not be bailed out. Share your views and let's begin a discussion. Thanks. And if you like the idea let's pass it around and get it to our Representatives, Senators and especially Obama. We all need to help and think about this as if we were all auto workers. I invite auto workers to add in the comments and please identify the fact in your comment that you are an auto worker.

And by the way, I have just sent this idea to Barack Obama via his web site for the Transition period. We all need to help solve Americas problems and be individually accountable for doing something to make things a little better.

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Friday, November 07, 2008

Today's post market analysis

Well, I was correct that the market started selling off when Barack Obama started his news conference. The Dow was up to 253 when he began speaking but then quickly dropped to up only 90 points. After he finished his news conference the market went back up and ended at 248. This was very close to where Barack Obama started his speaking. What does this mean. Well, first, it was very predictable that the powerful don't like the idea of an Obama Administration. Secondly, with such terrible Unemployment numbers today, the market rally did not make sense and we know it is going to much worse.

So if I were any of you today, I would have been buying more Ultra Short ETF Funds on the S&P 500 Index, symbol SDS, and on the Dow, symbol DXD. The fact you ventured in today shows your courage. My goal is to have you preserve capital and at the same time use the trend as a friend. The trend now is down or flat, not really up.

One indicator I thought particularly illuminating was Insider Trading. I have been watching this indicator the past few weeks and have noticed that the ratio of Insiders Buying vs Selling favored the Sellers. The ratio was that for every Dollar Insiders were using to buy shares of their company, there were 3-4 dollars in selling of shares. Today was much more dramatic but that is only because 5 Insiders sold 7.5 Million shares of Marriott International Inc. today That made the ratio over $15 of Sellers to every Insider buying with $1 dollar.

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Stock market : Don't be fooled twice!

Today the Government of President Bush reported the Jobs Report at 5:30am PST and it was worse than expected, as I heard it reported on CNBC. Panelists said it was worse than expected and it didn't look good going forward. But as they watched the Futures market, they didn't see a sell-off. The market then opened an hour later and it is up right now 150 points. My friends, don't believe the market. If you have made a profit, take advantage of the move up and sell into it. The market is headed lower. There is no escaping it. Don't try to outsmart the pro's.

Think about it for a moment. We have lost 1.2 Million jobs in 2008 so far. The Unemployment rate jumped today from 6.1% to 6.5%. What is it in the numbers you don't get? Bad news is bad news. So this market in my view will sell off later in the day. If I were to pick the precise timing of the sell-off I would guess just about when Obama speaks at 11:00am PST. Why then, you ask? Because the power folks who are threatened with regulation by an Obama Administration want to make a point that they don't approve. I say "Tough, you made this mess and we are going to clean it up! So go cry in your soup. You have no idea what the average American family is going through because of your shenanigans these past 8 years." That's what I would tell them if they would listen. But they don't and won't, will they? Will you listen?

UPDATE: 11:55am PST.
Barack Obama started his news conference at 11:50am with the Dow at 253, as soon as he started with his first sentence of welcoming the Dow started to drop. In those 5 minutes the Dow has dropped to 170. It will be interesting to see what develops by the end of his News Conference.

UPDATE: 12:00pm
Dow is at 117

UPDATE: 12:05pm
Dow is at 95

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Thursday, November 06, 2008

Market update - Where are we going short term?

It looks to me reading the charts we are still headed lower short term. For the Dow that means going back to 8,000, for the Nasdaq it means 1500 and for the SP500 it means 850. That's about another 8% drop from here. That is the bottom of the range we hit in this Sept./Oct crash. We will bounce off these lower levels but will be testing them. Don't be fooled again when they bounce back up, as we will drop down on the Dow to about 7300 before we can truly say we are at bottom. That is where real capitulation is and I have been saying this for a couple of months now. So on rises sell, and repurchase at the lows of this band. The Dow will stay in this band of 8,000 to 9,700 for a long time or until we go down to the 7,300. If we do that money will come back into the market on much heavier volume than has been attracted back. However, longer term, volume will be a casualty of the market crash and loss of confidence in Banking, Insurance and the Government.

Bill Seidman, the man who was in charge of the Savings and Loan rescue plan back in the late 1980's, early 90's, was asked on CNBC this morning, when he thought this Mortgage crisis will get resolved. He said he hoped maybe by 2010 but there was serious doubt it would be resolved by then. That means we are in for a turbulent time.

Making money in the stock market is only going to come with increased trading in positions for smaller percent gains. You can get 5% gains with this volatility but then you must consider taking your profit. Hedging with Shorts is also something that can help stabilize the large moves. But those too must be traded when gains appear. The days are gone when the average investor hoped for a 8-10% gain in a year. Be happy now with 3-4%. That will be terrific if you don't have the time or skill to trade.

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Wednesday, November 05, 2008

Market action the day after an Obama victory.

I wrote the post below on Oct. 30th and warned that there was some monkey business going on in the stock market and not to be fooled by the rally. Well, because Obama won and the wealthy see their grip on the economy as their last vestige of power, they are shaking the trees trying to scare everyone even more from the changes which were voted on in overwhelming numbers. But we knew we had a mess on our hands. Nothing has really changed except the wanted to lull everyone into voting for the Republican candidate. Well if we had, we still would be in a bad mess created by the so called professionals who created the idea of Credit Default Swaps, now a 56 Trillion dollar turd sitting on our economic table.

So what to do? Well, today as I had suggested to others, I put some money back into the local community bank I use, and bought some stock after it dropped in price. I ask those reading this not to panic as we did last time. Save cash, be optimistic about the future and wait for Obama in just 2 1/2 months. You will see that the Unemployment rate will go up on Friday as they factor in all the job losses. We have changed our future for the better but it is going to take time to feel it. This bad market is on George Bush's watch and Dick Cheney's as well as Hank Paulson and the Investment Banking community or should I say "Casino". Good luck in trying to weather this storm. I will let you know what I see as it becomes clearer in the stock market right here on my Blog.

October 30, 2008 post:

Markets point up but don't be fooled!

GDP for the 3rd Quarter was announced this morning and not surprisingly it was down -0.3%.This was not as bad as some had predicted with many expecting -0.6%. However, there were 2 good months with Sept. being the bad month. Markets appear to be set to open higher, but that doesn't really make sense does it. So this is a continuation of a Bear market rally. The Fed is lowering Interest rates but it doesn't and won't have any effect because no one is lending credit. So it's like the Butcher shop that advertised hamburger for $0.99/lb and when you ask for it the butcher says we don't have any. :)

Those invested in the stock market right now would be wise to take any profits they have in some stocks as one can predict without much effort these markets will pull back again soon and maybe deeper than before. My advice for those in cash is to use some cash to buy Ultra Short Funds of Indexes like the Dow or S&P500, as they are very cheap right now.

Things are not looking better in the economy even with all the actions of the government to mitigate the financial crisis. Therefore a stock market, which is rising is counter to the real conditions present. save yourself some pain and heed my advice. When might this pullback happen? My guess is just after the election. This rise may be to help give the Republicans a chance to win or keep some seats and so some Hedge Funds and investment bankers are pumping up the Indexes.

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Is Obama's victory a turning point for the World?

This is the morning after the greatest election in 221 years. We are a young Nation since our Founding Fathers vision set us on a course of action that would forever change history and the planet. By electing Barack Obama as President, we have done what Great Britain and our Nato Allies have never been able to do. We elected, one of our minority citizens of African decent, our President of all the people. While we celebrate this as a Country, I hope that other nations will examine how they have treated their minorities and will ask their minorities to examine themselves as to whether they are investing in their own education and embracing an imperfect society by being a part of it and a part of the societal change in a non violent way. Is it possible that Great Britain could achieve this? Yes, but it might take them another 221 years. But at least they now have an example to follow.

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Tuesday, November 04, 2008

Obama wins! It took all of us to put the Country back on track

This is an emotional evening for me as I wasn't sure where the voters were going to hang their hats. Survey's are one thing but the actual vote is the ultimate decider. Were they going to disappoint me again, or were they going to return home. Not since JFK have I been excited in a Presidential election. What has haunted me is this? Even as the country has experienced a stock market crash, and a financial crisis in the Banking and Insurance industry, 28% of the American people approve of the job Bush has done as President. That is an amazing statistic even though he has the lowest approval ratings in history of this survey. Who are these 28% and where do they live? Are they concentrated in one State? Do they live all in a specific area of the Country or are they in fact our neighbors? It is a very scary thought.

It is my State of California which now puts Barack Obama over the necessary 270 Electoral College votes to a total of 275 votes to victory. This election is as much of a mandate for Barack to implement his promises during the campaign. Those commitments include the following:

Getting our troops out of Iraq
Healthcare for everyone
Raising up the Middle Class by creating jobs
Reducing Global warming

God watch over Barack Obama and Joe Biden and God Bless America.

I just received an email from Barack. Here is what he said:

Charles --

I'm about to head to Grant Park to talk to everyone gathered there, but I wanted to write to you first.

We just made history.

And I don't want you to forget how we did it.

You made history every single day during this campaign -- every day you knocked on doors, made a donation, or talked to your family, friends, and neighbors about why you believe it's time for change.

I want to thank all of you who gave your time, talent, and passion to this campaign.

We have a lot of work to do to get our country back on track, and I'll be in touch soon about what comes next.

But I want to be very clear about one thing...

All of this happened because of you.

Thank you,


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Been waiting 8 very long years for today! VOTE!

This day hasn't come soon enough for me. Have you ever waited 8 years for anything, let alone replacing a President? These past 8 years have been an exhaustive and often demoralizing period of time in my life. In this country I love so much, I thought I would never see a President choose a war that was really an unnecessary misadventure, over a diplomatic solution. The costs alone were staggering and will be paid off in my children’s lifetime. That doesn't even come close to the cost to the families who lost a loved one unnecessarily or had a family member maimed for life.

Then there was the arrogance our President showed to everyone here and abroad. He didn’t need the world to support our invasion of Iraq basically alone. I am so tired of a cocky President and Vice President. Self-confidence is one thing, but arrogance is totally intolerable, especially for a President or Vice President.

The last straw for me was when President Bush and his inner circle decided on their own to redefine torture in such a way that they were then justified to do what they wanted to do with those in the grasp of their clutches. Sure we had some really bad, nasty guys. But we as a Country swore an oath to uphold the Geneva Convention, not because it was trying to appease others but rather it was agreed to, to help protect our troops if caught by an enemy, should they be captured. I was so angry when McCain, who was tortured, caved under pressure from President Bush and Vice President Cheney and went along with them and dropped his objection to legislation, which would provide cover to the both of them.

Yes, I have been waiting for a very long time to be able to listen to the TV and the words of a President I could once again respect, instead of muting the sound when they spoke. I have been waiting to hear words of honesty where I could once again believe what they said. I have been waiting a very long time to break the secretive nature of this Vice President and President and once again to obey and respect the Constitution, rather than looking for ways to go around it or suspend some of its protections for our rights hard fought.

Yes, it’s time for a change all right. The excesses of the past 8 –20 years have caused our economy and stock market to crash. Yes the Middle Class will be hurt a lot by more unemployment. But we will get through this and be a better people. We will watch over the weakest among us. We will provide charity to the needy as individuals because we know we are all in the same boat and those who have been blessed will step up to the plate. It’s a new day. It’s your new day if you choose it. Vote, as the well being of you, your family and your country need you to vote. This election is the most important election since the 1930's.

I know we will still have 2 1/2 months before the actual change of President and Vice President takes place on January 21st. But I have waited for 8 very long years, I can wait 2 1/2 more months, but today we take the first giant step.

There was one good thing that these past 8 years have initiated for me. It started me blogging as I was so frustrated I needed a way to release my feelings. Blogging helped me do that and find a new joy: writing!

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Saturday, November 01, 2008

Being a Class Act and doing the right thing for Hillary

Well we are in the final days before a historic election of epic proportion. We may see a reenergized youth the likes of which we haven't seen since JFK. In examining why Barack Obama has done so well, there are several important events that have shaped his ascendancy. The first was the writing of his book, The Audacity of Hope. My wife and I listened to his book on tape several years ago and I was impressed with several things. The first was how well he spoke with confidence, but in a quiet, peaceful tone. Secondly, I was surprised at his openness, vulnerability and the detailed revelations he decided to include in the book. I strongly recommend reading it if you haven't already. I was so impressed with him and what he said, it lasted me for months.

The other major event that shaped and honed his skill, as a new politician on the National scene, was his debates with Hillary Clinton. She helped him hone his message, handle difficult and skilled assaults, which would prepare him for his campaign against John McCain and the Bush Administration.

Hillary could have packed up and retreated in the past months as well as Bill Clinton, but they didn't. They have done all they could, especially Hillary, in helping bring supporters to Barack Obama. She has done everything asked and more. Now those here who have read my many posts know that I have never been a fan of Hillary Clinton. However, I feel much is due her and the best thing that Barack and the rest of us can do is to help her now and pay off her debt from the Primary. I am not sure how this can be done legally, but I am sure there are ways. One of Barack's first actions after the election should be to help her with her debt. It will pay off in the healing in the Democratic Party and show Hillary there Are rewards in life for doing the right thing. She did the right thing and that has caused me to reevaluate my view of her in a much more positive way. Thanks Hillary!

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