Saturday, January 31, 2009

Mini Poll on When you think recession will end

This is the last day of January and I will be summarizing the data tomorrow and comparing it to December's outlook to the question. Take the poll on the right side of the page if you visit here today.


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Political and Market Outlook for week of February 2nd, 2009

I have taken a look at the charts and I still believe a few things about it. First, I don't see us breaking below the lows of the market. That is important because every other view is based up that one. Secondly, we have been in a relatively tight range for 12 consecutive days (7,850 and 8,450) and that it is at the bottom of the larger range of between 7,300 and 9,300 on the Dow. Thirdly we are setting up a "W" pattern on all 3 major Indexes. This would suggest to me we are in for a rally to go back up to the higher end of the range of the Dow (8,500-9,300) soon. Much of the earnings announcements are now in with almost 1/2 of the earnings announced. There are still 149 companies yet to report.

So here is my strategy. First regarding ETF's, in hindsight, it might have been a good move to take the profit on those two I have, SSO and TNA at the top, but I didn't so I missed a round trip profit and the time for a profit will be delayed. Some of you may have already sold them and taken a profit and I say good for you. No excuses here. Having said that, if the market goes down any lower I will add to my positions, especially TNA, as I wanted more shares when I recommended it but trying to manage cash flow in tax deferred accounts can be difficult when you can't just write a check when you want. So my plan is to add more shares on any pullback. I would also like to add to my Ford shares as well as Apple shares on pullbacks.

This week we will know if we are forming the second leg of the "W" pattern and whether I have read this market correctly.

On a pure political note, rumors are spreading that President Obama may offer Commerce Secretary to New Hampshire's Republican Senator Judd Gregg. This has been confirmed by Gregg. The fascinating part of this story as it is explained is that President Obama wants to have a BiPartisan Cabinet and that would help by having Gregg. However, if he does that, the Democratic Governor of New Hampshire most likely will pick a Democrat to fill the Senate seat guaranteeing the Democrats a 60 vote filibuster proof majority in the senate. Does that sound like a bipartisan move to you? Don't misunderstand me, I like the idea, but it is not bipartisan. It is very partisan.

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Friday, January 30, 2009

The economy: Lest we forget how scared we were just a few months ago.

Yes, it hasn't been that long ago when we were having a run on banks and Lehman Bros. went bankrupt, AIG, the insurance giant, also faced failure and we all saw the sky falling. As a matter of fact it was Sept. 15th to be exact. But here we are this morning with a new President who wants to change the politics of the past and get a more bipartisan spirit going in the country and both Party's haven't gotten the message, as the House bill on the stimulus passed with not one single Republican vote. In addition, today the Michigan Consumer Confidence number for January came in at 61.2%, up from a December number of 60.1%. GDP for the 4th Quarter was down 3.8%, the biggest drop in over 25 years and the stock market doesn't know which way to go. It was up at the open about 35 points and now is down 55 points but it is anyone's guess where it is going to wind up today. So what's going on?

In my view, we aren't as afraid as we were back in September and October. Call it the Obama Effect or just fatigue, but there is less fear today than there has been. This is compounding President Obama's effort to get everyone behind the much needed stimulus and may be partially the reason why so many Wall Street Exec's got big bonuses which Obama is all upset about. Would they have dared do this if fear was the dominant emotion. Unfortunately greed returned. In order for president Obama to really get the country behind him in solidarity, there must be a higher degree of fear present than there is today. That means more pain may be needed for all of us.

It certainly would shut the Republicans up, as everyone would be clamoring for President Obama to act, just as they did with President Bush and former Treasury Secretary Paulson and even the Democrats led that fight in a bipartisan way. Again it was the Republicans complaining about Bush's actions and being idealogues rather than offering better suggestions than just let everything fail as that is the Free Enterprise market. If they had done that everything would have been lost and we would have been entering a worldwide Depression instead of a bad recession.

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Thursday, January 29, 2009

Market outlook: Now what?

The stock market pulled back today. The Dow closed at 8,149, the Nasdaq at 1,507 and the S&P 500 at 845. And while the pullback seemed strong, the volume was lower than yesterday's volume. The big question for me is, Now what? I still own all my shares of the ETF's TNA and SSO and did not sell any. If the market drops back down to the 7,900 level I will add more shares. If it goes back up I will wait to sell when the market is close to the upper bands of the range. For the Dow that would be 7,300 to 9,300 and for the S&P 500 that would be from 750 to 950.

It seems that from the run-up to the Stimulus package being approved yesterday by the House of Representatives, the market was rising. But as soon as the vote was in where not one Republican voted for the Bill, the market started to pullback. Much of the discourse by Republican leaders is that the package is not going to stimulate the economy, which has sewn doubts about its effectiveness in the general public. As I said in an earlier post, was it necessary to get a compromise in this package between Republicans and Democrats in a watered down version of a Bill that both sides would lose something or should the Democrats go it alone. It seems that the republicans left in Congress have decided that they have a better chance at personal survival by opposing the Bill, than by supporting it. It's the old Washington at work. Democrats too have used their recent gains at the polls for guaranteeing that the old politics is played out. Nancy Pellosi is at the heart of this old politic on the Democratic side. President Obama has his hands full here.

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Wednesday, January 28, 2009

UPDATE: TNA is strong today.

For those getting excited about the increase in share price today off TNA, I see the target price to sell it at between $40-$45/share. Current high today has now reached $28.88/share. That is a 5.52/share gain from purchase recommendation price or a 23.6% paper gain. If the stock reached $40/share you will be looking at a 71% gain! Keep the faith!

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Market Update: ETF Ultra Pro shares SSO and TNA

I wanted to update my readers on my two recommended ETF Ultra Pro shares, SSO and TNA. Both are now up and profitable at this moment. SSO in pre-market is up to $23.93 and that would be 11% gain since I purchased the shares on January 21st. TNA in pre-market is up to $26.67 for a 14% gain since my purchase. I do not plan to sell at this times as it appears the markets are preparing for a rise.

At the end of last week I thought we were heading lower and said so in my post. It appears, even with the really bad news of layoffs on Monday, that the market was able to hold here. When I look at the charts for the Dow, S&P500 and the Nasdaq, these indexes held a very tight range and weathered the bad news better than certainly I had expected. This has set up a possible significant rally which many, including Art Cashin of UBS, have said on CNBC is possible from here. By holding both TNA and SSO you should benefit a more significant gain that what already has materialized.

A quick, cheap investment right now could be Ford Motor company, symbol F. The current price of Ford is $2.03/share. This stock could easily gain 10-15% and more on any significant market move. There has been 12 consecutive days of Distribution of Ford shares and we are due for a change.

Also, Apple, Inc., symbol AAPL, is up to $92.70 in pre-market and as you know I recommended these shares back on January 7th at $86.50/share and again after the Steve Jobs health scare at $78/share. If you bought the shares when I first did at $86.50, you have made a paper gain of 7% and if you purchased shares at $78/share you are almost 19% on paper. I will stay with this stock and will not sell these shares.

UPDATE: 7:30am PST

It looks as though there is a reason for the market's optimism. It is because there are stories out that the Obama Administration is considering taking the troubled assets off the books of the Banks and have "Good banks" and "Bad banks". This rumor has spurred the market rise and indicates Wall Streets approval of the idea. Additionally today it is expected that President Obama's much heralded Stimulus package will win House approval today. This all making for 4 days in a row of an up market.

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Tuesday, January 27, 2009

As expected, more bad news in January

Headline reads: "Consumer confidence darkens further in January" and we aren't surprised by it, are we. The article is written by ANNE D'INNOCENZIO, AP Retail Writer. Here are a few excerpts from newly released numbers this morning.

"The Conference Board said its Consumer Confidence Index edged down to 37.7 from a revised 38.6 in December, lower than the reading of 39 that economists surveyed by Thomson Reuters had expected. In recent months the index has hit its lowest troughs since it began in 1967, and is hovering at less than half its level of January 2007, when it was 87.3.

The Present Situation Index, which measures how shoppers feel now about the economy, declined slightly to 29.9 from 30.2 last month. The Expectations Index,which measures shoppers' outlook over the next six months, decreased to 43.0 from 44.2.

The downbeat report prompted Wall Street to give up an early advance. The Dow Jones industrial average was down 17 points at 8,098 after being up as much as 85 points."
I will add that since the article has appeared, the Dow is now up 67 points.

There was IBM news of expected layoffs today of about 2,800 adding to an already bad week of announced layoffs. Corning announced layoffs of 3,500 jobs as well.

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Monday, January 26, 2009

Surprised by today's market action

Yes, I was surprised by the market action today. With so many layoffs and missed earnings by Caterpillar, I thought the market would take a step down. Volume was lighter than Fridays so we will know more by Wednesday, when the Fed completes its 2 days of meetings. Maybe many believe the bad news is already baked into this market, but I doubt it is. I am willing to be a believer with real data. I did not sell TNA nor SSO as I was looking to add to my positions on any drop. But it didn't happen today. I truly think we will all make at least 20-25% on this round trip for these ETF trades and I predict, again, within a 6 week period. That does not preclude a trip lower. If you are smart, buy on dips down and accumulate, because I think this next move up will be more like a sling shot, quick and far. Predicting the market direction means being in tune with the news and predicting outcomes there as well.

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More layoffs announced today and it's only Monday morning

News of the morning is that Caterpillar is cutting 20,000 jobs, Home Depot is cutting 7,000 jobs and exiting the expo business, Pfizer will buy Wyeth for $68 Billion and layoff 19,000 people while closing 5 factories and Starbucks is talking about 1000 additional layoffs at its headquarters, as well. And this is just Monday morning!

Click on any company name and be taken to the story source.

UPDATE: 7:10am PST

Additional layoffs announced are from Sprint, 8,000 jobs, ING, 7,000 jobs, Phillips Electronics 6,000 jobs and GM laying off 2,000 jobs. That is a heck of a start to the week!

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Sunday, January 25, 2009

Is Bank TARP money being used to stop judges from resetting mortgages?

Headline reads: "Fight building over judges redoing mortgages." According to the article, "A bill to give judges authority to alter loan terms for primary residences may be the quickest way to arrest the housing market's collapse. Most Democrats in the House and Senate support that plan. President Barack Obama told Democratic leaders Friday he also backs it.

But 10 groups representing the lending industry and other businesses are fighting back fiercely. Several have engaged portions of their lobbying machines to stop the legislation. The groups spent $83 million in lobbying on multiple issues in 2008, a figure that shows the power of the banking and investing industry and their business supporters."

My question is this, when money was given to the banks in the form of TARP Funds, was any of that money used for Lobbyists to mount a battle to stop the legislation? If it was the Banks should be required to give the money back to the government and the taxpayers. It is not beyond their audacity to do so. But this is a good reason why the money should be tracked and accounted for by those receiving it.

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Your Guide to Leading Economic Indicators announced this coming week

This will be a big week for the release of government data. Here is a summary day by day of the expected government data for the week on Housing, GDP, Consumer Confidence and other significant data, which measures the health of the economy. You'll want to check this post daily to see what data will be released for that day. To read the rest of the news on earnings expected this week click on the link at the end of this post thanks to Alexandra Twin, senior writer.

On the docket
Monday: December existing home sales are expected to have fallen to a 4.40 million unit annual rate from a 4.49 million unit rate in November.

The December index of leading economic indicators (LEI) is expected to have fallen 0.3% after falling 0.4% in November.

Tuesday: The January consumer confidence index from the Conference Board is expected to hold steady at an all-time low of 38.0, unchanged from December.

Also due Tuesday is the S&P/CaseShiller home index for November, expected to show steep declines.

Wednesday: The Federal Reserve concludes its two-day policy meeting with an announcement on interest rates due at around 2:15 p.m. ET. No change is expected in the fed funds rate: The central bank lowered interest rates to nearly zero in December and hinted it would keep them there for some time.

As always, the statement accompanying the decision will be critical, as it offers the Fed's assessment of the economy, now in its second year of a recession. (Full story)

Also on Wednesday, the World Economic Forum kicks off in Davos, Switzerland. It runs through Sunday.

Thursday: The December durable goods orders report is due before the start of trade. Orders are expected to have dropped 1.8% after dropping 1.5% in November.

December new home sales are due after the start of trading. Sales are expected to have fallen to a 400,000 annual unit rate from a 407,000 annual unit rate in November.

Friday: Fourth-quarter gross domestic product (GDP) is expected to have fallen by an annual rate of 5.2%, after falling by an annual rate of 0.5% in the third quarter. That would be the biggest quarterly decline in roughly 26 years.

The January Chicago PMI, a regional read on manufacturing, is expected to have fallen to 34.2 from 35.1 in December.

The University of Michigan releases its revised January consumer sentiment index, which is expected to hold steady at 61.9.

Here's the link to this week's earnings announcements.

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Saturday, January 24, 2009

Stocks to watch in the coming week

Another look back of the trade of the ETF Ultra Shorts, SDS and TZA, shows the day to sell it was Wednesday, as yesterday both stocks did not reach the Wednesday's highs nor my sell price. Yesterday, SDS reached a high of $86.18 and I had sold my shares at $86.65 and TZA reached a high yesterday of $66.88 and my sell price Wednesday was $67.24.

I am holding and accumulating shares of TNA as they drop and the same with SSO. I did not venture in for a day trade of TZA nor SDS.

I continue with my recommendation of Apple, symbol APPL. I am watching Ford Motor, symbol F, as it has dropped now to $1.80/share. I believe this stock will drop further and there will be a buying opportunity again at lower prices. I would stay away from GM as I see this stock dropping significantly more from the $3.49/share price. Given its current condition and even with a bailout, the chance to fail, this stock is overvalued and investors need to be wary. Ford is the better to invest in for the long term.

I had told a number of close friends and relatives that MGM Mirage, symbol MGM, was going to drop when it recently was at $14/share and I said it would have been a good one to short as I saw the price dropping below $10/share. Well this week it dropped as low as $8.80 once again. Reports I get from Vegas is that rooms are a plenty and gaming is not attracting the usual wealthy groups of Asians once a significant revenue stream for the Casinos. The next big event to try to draw crowds is the Super Bowl. Early estimates of group size may disappoint, resulting in another check on revenue for the Casinos.

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Yes We Can: How You can help turn the economy around.

That's right, "Yes We Can" collectively turn this economy around almost without even President Obama's help or that of the Congress. How can we do that? By having some faith that you truly can make a difference. Look, the economy is driven mostly by Consumer Spending, 70% to be exact. I know that about 10% of our citizens are unemployed, while many are currently worrying about their job security as well. But the 90% of us, who are employed, can help the country and our citizens by deciding not to stop our purchasing all together or eating in instead of going to a restaurant. Look around where you live and ask yourself if you want to see all the businesses close shop or restaurants go away. I don't. We can all turn this economy around, if we believe in our own power and spend again. I'm not saying spend with abandon, but what I am saying is to get back to a more normal and healthy lifestyle, rather than being so afraid.

Here's an example from my own experience. Our 12 year old refrigerator had a problem this past week. We were weighing whether we should get it fixed of buy a new one. We can think of good reasons for choosing either side of the choices. But when we add in the mix that it is good for the economy to buy a new one to help manufacturing jobs, to help a shipping company deliver it and a store that sells it, we have decided to buy a new one. Then the question is what to do with the old one? We have decided to give it away to someone, or charity, who might want it, or need it, or could get it fixed and use it, for another 12 years, as refrigerators have an expected life of 25 years.

Another example is choosing to eat out in some of our favorite restaurants. Every neighborhood has a favorite restaurant they take the family to or go to on a special evening. If those restaurants weren't there anymore, it wouldn't be the same living there any more. So choosing to go out to dinner helps support those restaurants keep surviving and helps those people who work there keep their jobs. Even some of the upscale restaurants, which have Valet parking service, can help a kid have a job.

The American people are a generous people and give freely to charity. We need to also think that charity also begins in our neighborhoods. We collectively can turn this economy around, but it starts with each of us as individuals deciding we are going to help President Obama with his most difficult job. When America is back the world will come back too. Right now they are scared too. Scarcity begets scarcity, but abundance begets abundance. Which mindset do you want to bring forth? Take accountability for getting out of this recession and preventing us from a Depression. Yes We Can!

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Friday, January 23, 2009

The stimulus proposals: Should there be any compromise?

Question of the Day: When one negotiates with an opposition position, should the solution which emerges be a blend of both viewpoints? Let me tell you why I think this is an important question. It appears that President Obama is in the middle of opposing strategies, between Democrats and Republicans, on how to fix the economy and ease credit. It seems there were 2 views from Republicans when President Bush and Paulson were running the show. One view was let them do whatever they wanted and we have confidence they will do the right thing. That resulted in a 3 page proposal, proposed by Treasury Secretary Paulson, which basically said "Trust us." Then there was another group of Republicans that said, "Don't spend the money to rescue. Let em fail and file for bankruptcy."

Just looking at those 2 positions seems to make any compromise from these extreme positions make both positions not work. That is the essence of the problems facing President Obama. That is with not even including the Democrats position on the matter. It seems to me that if everyone was truly scared again we might just forge ahead with one position in a strong way, be committed ti it and it might work. The other possibility is that we compromise each position to guarantee failure.

What do you think?

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Market outlook for Jan 23rd and into next week: The first dose of fear

Markets are set to go down today. The Dow is down about 137 and the S&P500 is down 13 at 4:30am PST. It appears to me that we are going to go try another retest of the lows of 7,300 on the Dow and 750 on the S&P500 starting today and going into the coming days next week. The fear level is rising about the economy, the banks and what's happening to constrict the economies in Europe and China. Some are predicting instability in China because of the slowdown in the economy and the possibility of social unrest.

It is too late to venture in and buy the ETF Ultra Shorts SDS and TZA in my opinion because this market can turn the other way on a dime. Volatility has been rising since the beginning of January, as measured by the VIX. It was at 39 and closed yesterday at 47, for a 20% increase and I expect it to go higher.

The Put to Call ratio closed yesterday at 0.88 and I expect it to go lower to 0.80 or lower which would be a signal to sell more. We are now in a cycle, where bad news does drive the market lower. A few weeks ago many had declared that the market was handling bad news very well. That has now changed. Fear is starting to come back again. Gold is rising again. In my view this is not bad as I wrote earlier in the week. We need a little fear right now so President Obama can get his changes approved by Congress. I also wanted to report that my read on the charts for the Dow actually shows a distinct sloping uptrend lines starting with the low in the year 1988 and going to 1995. This line crosses the axis today at 7,300. But if you go back to 1983, which is the year the Dow started to rise after the recession of 1982 and connect that point with the 1988 data point, you get an uptrend line which crosses today at about 5,200. If we break the 7,300 level on the Dow and can't get above it, we will be heading for a Depression, not just a bad recession. Let's all hope this 7,000 level can hold. As we get close to it fear will rise almost to a panic state again. When you watch the financial news on outlets such as CNBC, you will start to hear the fear bounce between hosts and guests. Sorry again for the gloomy outlook but in a way we need this fear to help get the changes implemented. Otherwise it will be business as usual.

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Thursday, January 22, 2009

Nouriel Roubini, renowned economist from NYU, predicts more bad news

I usually don't copy and paste a news article on my site but this one merits I change that position as it is about the economist, Nouriel Roubini, who predicted the mess we are in years ago The article comes from and here it is:

Roubini, Edwards Predict Slump in S&P 500 on China (Update1)

By Michael Patterson and Adam Haigh

Jan. 23 (Bloomberg) -- Stocks will retreat around the world because of shrinking demand from China as growth in the third- biggest economy slows, said Nouriel Roubini, the New York University professor who predicted last year’s financial crisis.

Global equities will fall 20 percent this year from current levels as China, which contributed 19.5 percent to total growth in 2007, contends with its slowest expansion in seven years, he said. Wall Street strategists predict the Standard & Poor’s 500 Index, down 8.4 percent so far, will rise 17 percent in 2009.

Roubini, an economics professor at NYU’s Stern School of Business, said China already is in a “recession” despite government data showing a 6.8 percent fourth-quarter growth rate, as power output declines and manufacturing shrinks. “Demand is falling in China, they’re over-invested in capacity and there’s a global supply glut,” Roubini, 50, said in a telephone interview. “It has very, very important implications.”

Roubini’s view is shared by Societe Generale SA global strategist Albert Edwards, who was correct in forecasting in March that a U.S. contraction would spur a bear market in equities. Edwards says the China slowdown will reduce earnings at industrial, energy and raw-materials companies, sparking a selloff in emerging and developed-market stocks that may send the S&P 500 down 40 percent to 500.

Emperor’s Clothes

“People should be thinking really hard about this rather than sticking their heads in the sand,” said Edwards, a London- based strategist and member of the top-ranked global investment strategy team in Thomson Extel’s surveys the past three years. “We’re just pointing out when the emperor doesn’t have any clothes on.”

The consensus among 11 strategists surveyed by Bloomberg is for the index to end the year at 1,056. The S&P 500 fell 1.5 percent yesterday to 827.50.

China’s economy grew 9 percent for all of 2008 after a 13 percent expansion in the previous year, the fastest in the world. China’s CSI 300 Index retreated 0.3 percent to 2,037.63 at 11:09 a.m. in Shanghai, after falling as much as 1 percent. Commodity producers led declines after Aluminum Corp. of China Ltd. and Yunnan Copper Industry Co. reported lower profit.

Chinese shares traded in the U.S. tumbled to their lowest level in two months yesterday. The Bank of New York Mellon China ADR Index, which tracks American depositary receipts, fell 4.8 percent to 236.43, the lowest since Nov. 20.

Rogers, Mobius Buying

Economists at JPMorgan Chase & Co., Citigroup Inc., the World Bank and the International Monetary Fund all predict China will grow at least 7 percent this year, while investors Jim Rogers and Mark Mobius are buying Chinese shares on expectations the government will bolster economic growth with interest-rate cuts and fiscal stimulus. The IMF said China’s contribution to global growth increased to 19.5 percent in 2007 from 17.2 percent in the previous year.

China, which has $1.9 trillion set aside in the world’s largest reserves, plans to spend at least 4 trillion yuan on bridges, housing and tax breaks to boost the economy. Chinese President Hu Jintao has pledged further measures to maintain stable growth in the face of “serious challenges and difficulties.”

Rogers, who predicted the start of the commodities rally in 1999, recommends investors buy China’s agriculture, water treatment, power generation and infrastructure stocks because the companies won’t be hurt by the nation’s slowing economy.

China Recession?

“China could be in recession, I have no idea and it’s not relevant to me because I’m using my judgment as to what will happen six months from now,” said Rogers, who authored books on investing including “A Bull in China: Investing Profitably in the World’s Greatest Market.” “There is a lot happening in China and there will be those that will hold up well.”

China’s economy will grow 6.3 percent this quarter from a year earlier, according to the median estimate of nine economists surveyed by Bloomberg News after yesterday’s GDP report.

China’s electricity output declined 7.8 percent in November from a year earlier and fell 3 percent in October, the first declines since February 2002, according to China Economic Information Net data compiled by Bloomberg. Manufacturing shrank for a third month as the deepening global recession cut demand for the nation’s toys, clothes and electronics.

‘Manipulating’ the Yuan

Edwards said rising unemployment among factory workers will fuel social unrest, threatening the Communist Party’s survival and increasing the risk authorities will devalue the yuan to boost exports.

The yuan appreciated about 19 percent against the dollar between 2005 and July 2008 as China redressed what U.S. officials saw as an unfair price advantage for exports. The yuan has since stabilized at about 6.85 per dollar. Timothy Geithner, President Barack Obama’s nominee for Treasury secretary, said yesterday the new U.S. administration believes China is “manipulating” its currency.

“If you amble your way through the analysis, you realize if push comes to shove they will devalue,” Edwards said. That may spur lawmakers in the U.S. and China to increase trade barriers, he said.

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Take my Poll on how long you believe the recession will last

Please take a brief moment to make your choice on the right side of this page. The Mini poll has one week left before I summarize the data and compare it to last month's summary.

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TZA and SDS: Looking back to yesterday's decision to sell.

The day after my recommendation to sell TZA and SDS, the market dropped today going as low as 7,957 on the Dow, but then recovered to close at 8,123, down 105 points. The question now is should you have sold yesterday or not. I can't say for sure as we will need time to reflect back, but as far as today is concerned, the data on TZA is as follows, and then SDS.

Closing price yesterday $56.71. High of the day was $67.93
My price sold $67.24
Closing price today $61.41. High of the day today was $64.31

Closing price yesterday $79.43. High of today was $87.09
My price sold $86.65
Closing price today $81.61. High of the today was $84.84

With the data we have today it is clear that yesterday was a better day to sell both of them. Tomorrow is yet another day.

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Robert Gibbs does a great job as Press Secretary for President Obama

His first Press Conference had the feel of disclosure, honesty and no spin. What a refreshing change from the past. I remember when George Stephanopoulos was Press Secretary under President Clinton. He had a very tough time in the beginning, but Robert Gibbs was a pro. He is serving the President well and is a good tell of just what people President Obama has surrounded himself with during the campaign and it gives us some insight as to how the campaign was so successful. Bravo! Take a bow.

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Market outlook for Jan. 22, 2009: Down, as Microsoft laying off 5,000

Microsoft came out unexpectedly with their earnings a few minutes ago and they are down 8%. They also announced they are laying off 1,400 people today. The weaknesses in the Global economy is definitely a shock to investors. Revenues were down more than expected to 16 Billion. It looks like today will drive markets lower.

Also, just out, E-Bay is also down about 8% for its first loss.

Jobless Claims increased by 62,000 and were higher than expected raising the total Jobless Claims to 589,000. Housing Starts were even lower than expected, down 16%, including New Housing permits also down significantly.

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Republicans criticize Obama's, yet to be announced, recovery plan

Has the politic changed in Washington with our new President Obama having taken office? Unfortunately, no, it hasn't. Critics are lining up and speaking of how spending is not the way out of this economic mess. Where were they the last 8 years. It seems to me they need some medicine to help them see the light. I know exactly what is a required in a medicine for this group of skeptics. You see what we have had with Obama has been "hope" and while there have been naysayers these past 2 years on his road to the White House, even within his own Democratic party, there is one cure to their skepticism. What is that medicine? FEAR!

It seems that the "hope" brought in by his election allowed the naysayers to gather strength and now seem to have their voices back. A good dose of fear is due again to get them back in line and to get back onboard to the change needed. When there was a run on the Banks, people were very scared. They hoped even the Bush Administration would do something to fix the problem, anything. Well Paulson and Bernake started to do what they could to stemming the panic. No one was telling them to stop. The naysayers wanted even more done without even thinking about any consequences. We now find ourselves a long way from that moment.

But we do need a dose of FEAR again because we have to marshall now a Nation to do the right thing and to once again "trust" our new leaders and ourselves that, "Yes We Can," do the right thing. I know it's a lot to ask of politicians this "trust" thing. It's a lot to ask of politicians to allow a different way of doing things gain their acceptance. I know it's a lot to ask of politicians to allow a contrary viewpoint by a new President to get their vote, but they must! Fear is our friend right now and is Obama's key ally in this process of change to move swiftly. He needs to allow for it to express itself and then to seize the moment.

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Wednesday, January 21, 2009

Apple UPDATE #2 re Earnings

First the headlines: "Apple Inc's quarterly profit beat expectations on strong iPod and Mac computer sales, and the company gave an outlook that cheered investors, sending its shares up 9.5 percent on Wednesday. Apple said its net profit in the fiscal first quarter ended December 27 rose to $1.61 billion, or $1.78 a share, from $1.58 billion, or $1.76 a share, a year ago. Analysts were expecting a per-share profit of $1.40, according to Reuters estimates. Revenue rose 5.8 percent to $10.2 billion, beating the $9.74 billion average Wall Street estimate. Shares in After hours are at $90.70/share. Here's the complete news release.

So I still have my shares and did not sell them even though many were scared about the news of Steve Jobs taking a leave of absence for 5 months. The stock got hammered and I even posted an apology, as I had recommended the stock at $85/share. When I issued the apology, it was in reaction to the stock dropping to the $78.20, a 52 week low on Steve Jobs news. However, my recommendation still stands and the stock is still a buy here at $90.70 in my view.

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More purchases today

I decided to Buy the ETF's SSO, which is a Long of the S&P 500, as well as TNA, which is a triple of the Small Caps Long. They are usually good to buy near the low of the range and ride them up to the top of the range and unload them buying the Shorts at that time.

I will fell great if I can make a round trip again in 6 weeks. My purchase price for SSO was $21.57 and TNA was purchased at $23.36/share.

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Summary of a recommended roundtrip trade

Summarizing the trade roundtrip for the ETF Ultra Shorts, SDS and TZA, shows the following analysis. Starting with a recommended purchase of SDS was made on 2 dates and prices. The first was made on Dec. 6th at a price of $70.50 and the second was made on Jan. 5th at $65.70. The sell price today for me was at $86.90. My average price was $67.75 so I made a 28.3% profit on SDS and if you followed me yours is close depending on your average price per share. If you only made the initial purchase at $70.50 then your profit was 23% and if you made all your purchases at my second recommended price then you did even better with a profit of 32.3%. Not bad for a 6 week investment.

As for TZA, I recommended it also on Dec. 6th for $53.50/share and recommended another purchase on Jan. 6th when price was $42.86/share. I sold my shares today at $67.24/share. The profit on an average price of $53.50/share is 26% and if you added shares at the lower price of $42.86/share then your profit was 56.9% profit.

Today I started buying the ETF Ultra Pro fund, SSO for $21/share as I am expecting that after we retest the lows we will snap back to go to the top of the range again. On the Dow that would be going back to 9,300.

We are in a tight low range and may continue in that tight range for some time.

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Recommend selling the ETF Ultra Shorts now

I am selling my SDS and TZA now as the testimony by Tim Geithner, nominee for Treasury Secretary, seems to have weathered the storm and in my view the markets will reverse the trend as we are near the low of the range of the Dow from 7,300 to 9,300 currently at 7,975. There is better than a 50/50 chance the market will reverse and go more towards the high end of the range again.

You might be able to see these rise ETF Ultra Short shares gain more if we break below 7,900 but that is being greedy in my view and you may be left hanging on too long.

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Pre-market Wed. Jan. 21st, 2009. It's anyone's guess today

The market dropped significantly yesterday resulting in my two recommended ETF Ultra Shorts moving significantly. SDS closed yesterday at $86.88, up 10.3% and TZA closed at $66.60, up 20.3%. These were impressive gains and many most likely cashed in yesterday for a nice profit. Some are still holding on to these ETF's including me. I will be watching the action today closely and may sell myself, as now these 2 have had very respectable returns.

The Dow did break below 8,000 yesterday closing at 7,949 and just off the low of 7939 while the S&P500 closed at 805 within 0.5 points of the low of the day. Volume was not ahead of Friday's volume and both indexes did not make a Hammer Candlestick pattern, so my initial thoughts are we still may go lower than where we closed yesterday. We can still go back to the previous lows to 7,300 on the Dow and 750 on the S&P500.

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Tuesday, January 20, 2009

The magic of this moment: Our hopes and dreams are coming true!

The anticipation of the inauguration of President Barack Obama has many forgetting about their problems and instead has us caught up in the majesty of the moment. We are focused on "hope" and this African American of a simple beginning has us believing once again in ourselves. When I was a young adult I hated the bigotry all around me for the Black community or any other ethnic minority. I chose to go to Boston English High School, which was made up of 30-40% black students instead of all white Dorchester High School, to make a small statement to myself and shape who I have become. After High School, I was affected by the voices within SNCC (The Student Non-Violating Coordinating Committee) from the South demonstrating by sit-ins in Raleigh, North Carolina, and across the South.

America is once again the great hope for the world with the election of President Obama and the promise of change. "Ideology" is out and "Practicality" is in! "Red States vs. Blue States" are out and "The United States of America" is in. "Blaming others" is out and "taking personal responsibility" is in. "Lobbyists" are out and the "American people" are in. "Greed" is out and "personal sacrifice" is in. "Politics as usual" is out, and the politic of "Community organizing is in, hopefully forever!

It is with great pride in our Country that I present to you today the 44th President of the United States, President Barack Hussein Obama!

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Friday, January 16, 2009

Setting the record straight on my recent stock market predictions

So here I am looking back at my recommendations going back to December. I wrote the following post on Jan. 5th as I was looking at my ETF Ultra Short Fund recommendation of SDS and TZA. Here is what I said:

"So I am taking the heat over my recommendation to buy the ETF Ultra Short SDS. Since I recommended the purchase the ETF around Dec. 6th the price was $70.50 (adjusted for the $11.50/share payout). Today the ETF closed at $65.70. Yes, it is down about 7%. But we are near the top of the range of the highs of the market in the Dow and SP500 as well as the Nasdaq and there has not been a clear breakout on strong volume. So I am still holding those shares. I have added to them several times since the beginning of December. The same is true for TZA, except it has lost more, because of its tripling effect. I had bought my shares at $53.50 and it closed today at $42.86. That's a paper loss of 20%. But I am willing to hold both of these 2 ETF's which Short the market because I fundamentally do not believe we are over the worst. There has not been a believable breakout, as I review the charts, and it is more like a creep up than a step up. You need to do what's right for you. I am doing what I believe will still be a profitable trade. Time will tell."

Well, I was looking at the current price of SDS and TZA and here's where they are now to close the loop on this recommendation. SDS is currently at $80/share and TZA hovering around $60. If you sold SDS now you would still have made over a 10% gain and same with TZA. I am choosing to continue to hold my shares because I think I can do better, but my commitment to try to get you at least 10% profit has been fulfilled today if you sold or are selling.

On Jan/ 7th I wrote:
We closed yesterday at 9015 on the Dow, 934.70 on the S&P500 and 1652 on the Nasdaq Composite. I expect us to go lower over the coming days. Expect the Dow to go down at least another 500 points this week, from where we are now (8777). I expect the S&P500 to go down below 880. The Dow has gone down to 8200 and the S&P has gone down to 840 currently.

I had said I thought MGM was overbought at $14/share recently and said it would go back down to $9.95/share and guess what? It has hit $9.95/share today.

So stick with me and bring your friends here. You can check out my predictions very easily, as I post often and my predictions and recommendations are Public record now. My style is different, but I share one thing in common with Jim Cramer of CNBC, I desire to help you preserve capital and grow back your nest egg. I get nothing out of this but the sheer pleasure of helping others. All the best!

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Market outlook Jan. 16 2009: Is this the Obama lift?

Is this the Obama lift we experienced yesterday and will it continue? It could be but news continues to be very dismal and for most investors it is very difficult to part with dollars right now and put them to work in the stock market and into an uncertain future. The psychology of Americans is still fear based and greed seems a long way off as survival reigns the day. This is true except when it has come to Banks benefiting from TARP funds from us, the taxpayer. Things look worse to me now than they did a month or two ago. The reason is that more information is now known that should give us pause.

For one thing, we now know that the first release of TARP funds didn't work to stabilize the banking system, because Bank of America and Citigroup are needing more money and are trying to restructure. Remember Citi was given a guaranteed 300 Billion in loans from the government and now they are still in trouble. Bank of America said they didn't need TARP money and now are asking for it and taking it. To me this all means that while Billions sounds like a lot of money, and it is, the magnitude of our financial problems must be in the Trillions and that is very scary, as WE MAY NOT HAVE ENOUGH MONEY TO SOLVE THIS PROBLEM AND STILL HAVE OUR CURRENCY HAVE ANY INTRINSIC VALUE. There are cracks in State governments financial well being and some are amassing huge debt. Pension funds aren't being funded like they used to be for employees and the Governments Insurance of Pensions is in trouble. Governor Douglas from Vermont says that it looks like there will be increased unemployment for at least 2 years and States need to plan for this. Did you read that correctly, 2 years minimum?! Yes, all the while many have said the recovery will happen in the second half of 2009. As the Godfather would say, "Forget about it!"

So even an Obama rally today or next week will inevitably give way to the reality of our current and expected future economic condition. It will be difficult to time the bottoms and tops of the markets but I am convinced we are in a long term trading range of 7,300 to 9,300 on the Dow and 750 to 950 on the S&P 500. So when we don't go near the extremes of these ranges don't fight the trend. To put it simply, the risks of market indexes going down are much greater than they are going up. If you are fortunate enough to catch the extreme of the bands in your trades, you will be rewarded with 25% gains on market rises and 21% on market drops. These are worth waiting for even if you must wait an entire year to complete the round trip of the trade. Worst case you will do a 10% trade in either direction if you get close enough. For the Dow, that would mean buying ETF Longs at 8,000 and selling them at 9,000 and buying ETF shorts at 9,000 and selling them at 8,000 on the Dow, For the S&P 500 it would mean buying ETF Longs at 825 like SSO and selling them when the S&P 500 hits 900.

Hope this helps you think about these trades in a little longer timeframe. I would love a rally for Obama so let's all celebrate the hope of our future with a man who has the right temperament, right mindset and is in good physical condition. We all need him to be successful so give hope a chance. Good luck Mr. President. We're pulling for you and your team and let's not let him down as citizens with our tend to be negative when we need to help turn this around.

Markets are closed Monday for the Martin Luther King holiday. See you back here soon.

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Thursday, January 15, 2009

Pre-market outlook Jan. 15th 2009: Market Indexes will drop again today

Lots of news this morning and I will try to state major items of interest affecting your portfolio. The net effect of the news is that today will be another down day for U.S. markets. Here's the summary:

- Jamie Dimon of JP Morgan says worst is yet to come in the financial crisis
- Microsoft is seriously considering layoffs
- Motorola is looking at more cost cuts in 2009 including cutting 4,000 jobs
- The Eu Central Bank has lowered interest rates 50 basis points to a rate of 2%
- Russia has devalued its currency for the 4th time in 5 days.
- Nissan to reduce US Mfg. Plants to a 4 day work week

You can do a search on any of these items today and get the detailed news story.

I looked for some good news today but couldn't find any. The effect on the stock market futures is predictable with Dow Futures dropping over the past hour and the Nasdaq Futures were hit by the Apple news as well as the fact that Microsoft considering layoffs.

I would still hold on to the ETF Ultra Shorts SDS and TZA but by tomorrow the market may be down enough that selling some of your shares from your positions could be warranted. Currently SDS is at $81.30 in pre-market and TZA is currently at $61.49. I am still thinking these shares will rise substantially. If they don't rise enough by tomorrow I will still hold all shares. The reasoning there is that on the day of Barack Obama's Inauguration the markets may rise from the optimism of a new President and it may linger some days next week. However when reality sets in we are headed down to retest the lows and that is where you will want to sell these two ETF's.

Depending on the severity of the drop in Apple stock, symbol AAPL, I may add to my position again in the coming days.

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Wednesday, January 14, 2009

Apple UPDATE re Steve Jobs

Steve Jobs, Apple CEO announced after the close that he is taking a medical leave till June, while dealing with the hormone imbalance issue he cited in earlier press releases, during the Mac World Conference. He said it turns out that it was more complicated a problem than earlier reported and he will use the time to deal with it, but will stay involved in Apple on strategic issues for the next 5 months.

Sorry I didn't see this coming and had recommended the stock at $85-$86/share. In after hours the stock has slumped on the news to $79. I still believe the company is a good investment but we need to digest the news and the timing of the current market drop. Sorry on this one and hope you didn't jump in with both feet as I had advised only a 1/3 investment of the shares you were thinking of purchasing. I will watch the action over the next few days to see the fallout and let you know what I am doing with the stock. I may add more or I may sell. Can't say at this moment.

I know we all wish Steve Jobs the best and for a speedy recovery.

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Market closing comments for the day Jan. 14th, 2009

The markets closed down today. The Dow closed down 249 to close at 8199 and the Nasdaq closed down to 1489. The ETF Ultra Shorts did well today. SDS closed at $80.30, up 6.7% and TZA closed at $60.24, up 13.1% and did not disappoint those who also own them.

Apple stock closed at $85.43, down 2.6% and I took advantage of the drop to add more shares at $85.42 today.

I see the markets continuing the decline tomorrow and Friday as well. The volume was light today so many may be awaiting other financial data updates the next 2 days. I can see the Dow going below 8,000 possibly this week.

Also earnings continue to be announced, as well as additional layoffs. Today, Pfizer announced about 800 research scientists being let go. Be a survivor, plan for the worst and feel good when it isn't as bad. Good luck.

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Pre-market outlook Jan. 14 2009: Retail Sales numbers are terrible!

Today's pre-market is focused on Retail Sales and how to get the consumer to go out and shop again. Retail experts on CNBC thought it was a significant change in the psychology of Americans that needed to change and while many don't want to shop, retailers needed to think of creative ways to get them into the stores again by inventing new and better products that made people feel good about themselves, the experts thought. Actual Sales numbers were worse than expected at down 2.7% and terrible. December year on year Import prices are lowest drop on record at 4.0%

I hate to tell them this but shopping is the last thing on their minds. Survival is at the top of their list and takes precedent over anything else. In pre-market all 3 indexes are down and you can expect the day should be down as well. Yesterday's action was a failed attempt to turn the week around by Bulls, but clearly the Bears are in charge this week. In pre-market Apple, symbol AAPL, is down over another $1 to $86.65 and is we are close to a price where buying should start ($86.25). I would put in an order today for 1/3 of the shares you want to own and if the price drops down to go below $86/share I would put in another order $85.50 and wait to purchase any remaining shares until the market is at the lows. Apple is in the retail business so that is why they are getting hit today but they have a following that will capture more market share over time as people turn away from PC's and embrace their computers as they continue to invent new products and applications for their iPhone and iPods.

Keep your ETF Ultra Shorts SDS and TZA as they will continue to gain momentum this week and next.

One month from today is Valentine's Day so don't forget your sweetheart.

UPDATE: 8:00am PST.
Dow dropped as much as 300 points and all 3 indexes are doing poorly. ETF Ultra Short SDS is now up to $80.30 or 5% and TZA is up to $59.70 or 12% so far today. Keep holding them and do not sell as there are more gains to be had on these 2 over the next week or so.

I also took my own advice and bought more Apple shares at $85.80/share a few minutes ago.

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Monday, January 12, 2009

The morphing of language by President-Elect Obama's writers.

So I went to President-Elect Obama's transition page and saw a piece on the "deepening recession". Please do not use this language as it is easily morphed and reminds people of "Depression" The alliteration is too anxiety producing. Some suggestions you might try are the "worsening recession", or the "continuing recession" and you might try some messages which don't define the problem, but instead, give us some suggestions as to how we can help slow it down or reverse it. In those situations feel free to use some positive alliteration. Thanks!

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Jan. 12th market closing action

Well the market closed down on all 3 indexes today as predicted. The Dow was down 125 closing at 8473 for the day. SDS did gain, closing at $75.35 and TZA closed at $55.50 today. Both were healthy gains from the close Friday. Remember, I still believe they were worth buying today as they are still going to go up as the market goes down.

Apple stock, symbol AAPL, dropped to a low of $87.55 and closed at $88.66/share. I expect tomorrow to also be down as earnings start to be reported. Alcoa reported an unexpected loss of $1.2 Billion for the quarter, reporting after the bell today. It has lost 68% of its stock value in the past year and they expect continuing decline in Aluminum prices. Alcoa is a Dow component. There is a real concern they may not be able to continue paying its dividends.

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Sunday, January 11, 2009

What to add to your portfolio on a market pullback?

I bought Apple Computer a few weeks ago, symbol AAPL, at $86.50 and the stock rose in anticipation of Mac World, to about $93 but has pulled back to $90/share on Friday. If the market drops again, as I anticipate it will, I would recommend either buying the stock or adding to your current position. I am looking to buy more shares anywhere around $86 or lower, if possible.

Hold on to the ETF Ultra Short of the S&P500, symbol SDS and TZA, the ETF Ultra Short of Small Caps. These shares should start to rise with a market pullback. SDS closed Friday at $71.95 and TZA closed at $51.25 and is up in pre-market futures this evening.

UPDATE: Jan. 12 5:00am PST

3 Month Libor rates are now at a new recent low of 1.16%. Hard to believe with numbers as low as this that there is still tight credit, but the fact still remains, either credit is tight or people aren't wanting to borrow and no amount of available funds is going to change that, until investors psychology turns from fear to greed.

European markets are also down in pre-market.

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Market outlook for week of January 12th, 2009

We seemed to slowly climb to a high in major indexes this past week culminating Wednesday at its peak. We were closer to the high of the range of 7300 to 9300 on the Dow since September. According to a Raymond Meriman of StarIQ quote, in his Market Outlook for the week of January 12th, he states the following: the high of Wednesday was at least a major cycle crest (a major cycle crest is the one-third phase to the longer 18-week primary cycle). At the major cycle phase, a “normal” corrective decline is healthy in bull markets, and is the pause before the next surge up begins. In bear markets, however, the major cycle phase can be more than just a “normal” retracement. It can be the resumption of the bear market. So the extent of this decline is important in the determination of whether or not the recent rally was just a “bear trap” or that pause that refreshes the market before the next rally to new monthly highs.

So the question is, Where are we headed? I believe we will start a return to the Bear Market and this was the last major rally before the next storm. In part, it is why I have asked my readers to stick with SDS and TZA, the ETF Ultra Shorts, SDS on shorting the S&P and TZA shorting the Small Caps x 3. I agree with Meriman, that this is all occurring at the time President Obama is sworn in and there are signs the Republicans all of a sudden have religion about fiscal restraint and watching deficits. They must have been given new GOP Financial Bibles or something to read. Where have they been the last 8 years? Asleep at the wheel and complicit in everything which was wrong with the last 8 years, that's where, and by the way lest we forget, one additional reason they lost the election.

I have heard more layoffs are scheduled this month, adding to the unemployment numbers. Expect even more in February. This will ensure that the first week in February creates another blow to the psyche of the public, not only here but around the world. I spoke to an financial expert I can't name, who told me that "most people have no idea how bad things are going to get and that people in the 30's and 40's especially have no idea how to weather the coming storm." I said "coming?" He said "Yes, and 2008 was nothing compared to what the next few years will bring." That matches what I have feared and warned about here with just an intuitive sense fueled by observations and market trend analysis. I have also spoken to someone who travels in the high circle of the Executive Search firms and was told there are few if any senior positions available now, where there was always an abundance of openings and those wanting change. That has changed and things have gotten much tighter.

So how are you coming in putting together that financial plan I discussed in a previous post? Have you gotten more serious and active to give what I have recommended some chance to help you manage the storm? If not, still have those excuses you hold on to like a tight pair of shoes? I have given all here some very sound advice. For new readers I suggest reading the following Blog posts by just clicking on them.

Nov. 12, 2008 How can we turn the ship of this economic crisis?

Jan. 3, 2009 Trading strategies to weather the continuing and worsening financial storm.

and, in my view, my best one recently,

Jan. 9, 2009 When will you know the economy is getting better? A look at the psychology of the current financial storm.

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Friday, January 09, 2009

When will you know the economy is getting better? A look at the psychology of the current financial storm.

Most individuals and media outlets have been looking at outside factors to give a signal as to which direction we are headed, in the financial and stock markets. When the fact of the matter is, that the information you need to look at, is right in front of you. You see the changes which have taken place since September, have created a loss of trust and confidence in these markets by most Americans. It started with a stock market drop and then a run on Banks, followed up by the greatest intervention by our government since the Great Depression. This will truly be seen by historians as transformational period in our society.

For the past 40-50 years the messages we get from television advertising and newspapers all were focused to tempt us to shop to buy these great things. There was never any focus or messaging about saving. We were encouraged to borrow to finance our shopping. We were told that 70% of our economy depended on the consumer, even though our tax system was based upon our income, not our consumption.

We embraced the psychology of greed along with the underlying fear that if we weren't in the game, we would lose out on our share of the pie. So we thought we could use "OPM" for everything. What is "OPM?" It stands for "Other People's Money." Many a seminar has been conducted these past 20 years by real estate experts with keynote speakers like Donald Trump and others hyping OPM as the way to become rich. The theory was to put as little, to no, cash down as possible, and borrow the remaining balance from the bank to buy property and then rent them out to have a positive cash flow and use "OPM" to own the property. This was the early hype that caught up so many speculators who wanted to get rich quick. The game worked until the banking industry was also caught up in the idea, overextended itself and ultimately created the Sub-prime mess.

You never saw advertising to encourage consumer saving. Just think about how we define ourselves, "Consumers". That should have been a clue if we paid attention to the use of our language. Occasionally, we would hear that we Americans had one of the lowest savings rates in the world. We did hear that Japan had the highest savings rate in the world and often also heard their economy was "stagnant", that was a "bad" thing and they needed to encourage spending.

We have been heading from the psychology of "abundance" these past 40 years to the psychology of "scarcity" now. Fear has gained the upper hand in our society today. We placed our faith in all banking and insurance institutions. We placed our faith in our government and we thought we had proper oversight and regulations to ensure there was no wrongdoing and we blindly followed as individuals, by trusting people we hardly knew, to manage our money for us. We took little to no responsibility for ourselves and thought everything would be fine as everybody was doing the same thing.

Now we just don't trust anyone anymore. We hear of people like Madoff who used Ponzi schemes to bilk Billions from charitable trusts and philanthropists, who thought they were going to make huge gains by investing with Madoff. When you think about this more deeply one comes to the question as to how did smart people make such stupid mistakes? There is an expression, "If it's too good to be true, it most likely isn't true." But these so called smart people never questioned the reality of the basis of the investments and allowed themselves to be swept up by the gains they saw were possible. Greed ruled the day.

So now fear grips the Nation. We are awaiting the unemployment rate numbers today which most likely will show a 7% unemployment and an acceleration in the unemployed. Many are waiting on the sidelines to catch the "bottom" of the stock market so they can get back in and make a killing on the gain, as a once in a generation opportunity. But what if it doesn't come back for a long time?

Trust has been broken and while some may be waiting for any sign the markets will be turning back up soon, the psychology of our Nation doesn't support this scenario happening any time soon. As I stated in the beginning of this post, "When the fact of the matter is that the information you need to look at, is right in front of you." And what is that information? It is how you are feeling! As long as fear grips you, it most likely is gripping others as well. And no change in the stock market is going to convince you to jump back in until you feel more secure and less afraid. The answer is this. You must start with living within your means all the time going forward. If something seems too good to be true, it probably is too good to be true. Buy only what you can pay for with cash or pay off within a very short period of time, like 30 days. Lend a helping hand to others still trying to recover from the loss of wealth and confidence in themselves and start being more trustworthy to others. It is up to all of us to restore confidence in our fellow citizens. We will need to go from exclusively a Consumption society to a more balanced society, where we consume what we can afford and save a portion of our income regularly. We stop living from paycheck to paycheck. We stop getting caught up in instant gratification. Some things are worth waiting for rather than buying something on impulse. We hopefully wouldn't shop for a spouse that way, as it is too important a decision. Would we?

So we will know things are turning around when we individually are feeling more secure. It takes one person at a time to get there, so you be responsible for getting yourself there first and watch others follow. It starts with you!

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Thursday, January 08, 2009

Market outlook Jan. 8, 2009

Key numbers were announced this morning in pre-market. First, WalMart Sales were down from expectations. Analysts had expected 2.8% increase in Same Store Sales but instead they announced 1.7%. That's much less than expected. Another piece of data announced was the Weekly Unemployment Claims. That number showed a reduction of 27,000 jobs lost from the previous week's report. But Continuing Claims rose from 4.5 Million jobs lost to 4.6 Million Jobs lost. That is the most important number and it is showing a worsening situation, even though the weekly numbers seemed contradictory indicators. To me, one explanation is that Retailers may not have hired as many workers for the holiday season, as they knew it was going to be a poor retail shopping season. This would explain the contradiction of data, since there would be less people have to be let go after the holiday.

But think of this, if people didn't shop WallMart where did they shop? That is why WalMart, symbol WMT, is down about 10% in pre-market from yesterday's close of $55.54 to a low of $50.65, so far.

I have been observing the number of trucks on the highways as I drive to clients and there is a significant reduction. I also paid attention to the what businesses the trucks seemed to support. I noticed Waste/trash collection trucks, trucks hauling containers from China, Medical Supply trucks, Food chain store trucks, Beer trucks, Utility trucks and an occasional cement mixer. What didn't I see? Trucks hauling cars to dealers, trucks carrying lumber or carrying trees from logging, trucks carrying paper products, Rental trucks, which often pick up slack and are usually independent drivers, and technology truck suppliers. It seems to me there are about 35% fewer trucks on the roads in my area, than what I used to see. I have talked to both UPS and FedEx carriers and they say things are slow. I have talked to restaurant owners that usually have high traffic and they also report a significant drop in customers.

So, you want an early signal on how the economy is doing? Start looking at the traffic and what is happening. To me it looks bleak, although driving is a lot more pleasant.

Markets will most likely be down today and tomorrow. Keep your SDS and TZA!

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Wednesday, January 07, 2009

Market Outlook Jan. 7th, 2009

Well, I guess those who have the ETF Ultra Shorts SDS and TZA are backing off of their complaints. Today SDS has gained back about 5.7% and TZA has gained back 10.5% today. I would not sell either of these as we are headed down. We closed yesterday at 9015 on the Dow, 934.70 on the S&P500 and 1652 on the Nasdaq Composite. I expect us to go lower over the coming days. Expect the Dow to go down at least another 500 points this week, from where we are now (8777). I expect the S&P500 to go down below 880 and we may test the lows at the bottom of all indexes in the next few weeks. For the S&P 500 that would be 750 at the lows. On the Dow that would be 7300. When these Indexes go much lower, look to start selling SDS if it hits 95 or above. I calculated that sell price by looking back at the charts and subtracting the $11.50/share (pay-out they made to shareholders in the past few weeks) and looked at a reasonable return from the previous highs of $130/share when the market bottomed. I don't know what your average price per share is and so assuming it is about $75 for some of you, if you could sell at $95 that would be a 27% return. If you added to your shares it will be even lower in price due to averaging your costs down, it will an even larger rate of return.

TZA is similar in that the profit potential is even greater. If your average price is about $60 you would consider selling this ETF at about $85. That would yield a 42% gain minimum. Today the share price has gone from its close yesterday of $42.86 to currently at $47.82 at 11:45am PST. for a gain today of 11%.

I purchased Apple Computer stock when it was $86.50 and while it has gone up to $93.02 at the close yesterday, I will be adding more shares if it goes back down to my initial purchase price or lower.

Good fortune and keep checking back, as I try to update daily.

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Buy and Hold strategy won't work any more.

I have been saying for 8 years that Buy and Hold strategy doesn't work any more for investors. Now here a professional discuss the same thing on this link to a video clip at CNBC.

Click here to hear it.

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Tuesday, January 06, 2009

Paul Krugman warns us. Is anybody listening in Congress?

An article appeared today written by Paul Krugman of the NY Times and recent Nobel Laureate. I have taken the liberty to select portions of his piece and copy them below. It is must reading.

Krugman: Staving off a depression

By Paul Krugman

"If we don't act swiftly and boldly," declared President-elect Barack Obama in his latest weekly address, "we could see a much deeper economic downturn that could lead to double-digit unemployment." If you ask me, he was understating the case.

... Banks aren't lending; businesses and consumers aren't spending. Let's not mince words: This looks an awful lot like the beginning of a second Great Depression.

...It turns out, however, that preventing depressions isn't that easy after all.

The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Obama's plans to rescue the economy. But these plans may turn out to be a hard sell.

News reports say that Democrats hope to pass an economic plan with broad bipartisan support. Good luck with that.

In reality, the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful congressional deliberation — which is pretty rich considering their party's behavior over the past eight years.

Here's my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it's only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going.

So this is our moment of truth. Will we in fact do what's necessary to prevent Great Depression II?

If you want the entire article from the San Jose California Mercury News, click here.

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Thrilled about President-elect Obama's pick of Leon Panetta

On Oct. 25th I put together a list of people I would like to see the new president pick to surround himself with. Leon Panetta was on that list. Panetta has been a class act and the controversial comments that some don't think he has the background and experience to be head of the CIA, I disagree with. He is a great administrator and leader and has been in some difficult situations as he was White House Chief of Staff under President Bill Clinton. He will surprise many and be considered one of the best heads of the CIA when the history is written. Congratulations Mr. Panetta. As a Californian, I know you have been on the right side of issues since I came to California in 1986. Your integrity is your best asset but not your only one. I wish you the best if this is true and you are selected to be the head of the CIA by President Obama. And once again I am thrilled at how President Obama and his team can think outside the box.

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Taking the heat.

So I am taking the heat over my recommendation to buy the ETF Ultra Short SDS. Since I recommended the purchase the ETF around Dec. 6th the price was $70.50 (adjusted for the $11.50/share payout). Today the ETF closed at $65.70. Yes, it is down about 7%. But we are near the top of the range of the highs of the market in the Dow and SP500 as well as the Nasdaq and there has not been a clear breakout on strong volume. So I am still holding those shares. I have added to them several times since the beginning of December. The same is true for TZA, except it has lost more, because of its tripling effect. I had bought my shares at $53.50 and it closed today at $42.86. That's a paper loss of 20%. But I am willing to hold both of these 2 ETF's which Short the market because I fundamentally do not believe we are over the worst. There has not been a believable breakout, as I review the charts, and it is more like a creep up than a step up. You need to do what's right for you. I am doing what I believe will still be a profitable trade. Time will tell.

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Sunday, January 04, 2009

Stimulus package? "What's the hurry" Senators tell America

Well we got our answer today regarding the stimulus package a President Obama was expected to have ready to sign on Inauguration day, Jan. 20th. According to Sen. Harry Reid and his Republican counterpart, Sen. Mitch McConnell of KY, they will most likely need to call hearings on proposals as the Republicans and some Democrats are a acting a bit cautious about giving a blank check to President Obama. The Democrats just don't have the votes to get something passed and won't unless they can get it to look more bipartisan.

I think the markets will react more negatively to this news, especially as we get closer and closer to Inauguration day without an approved stimulus package. Most economists believe we need a package now and we can't wait a minute longer than necessary. This is going to negatively affect investor psychology.

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Tax loss selling in early 2009? Bet on it!

That's correct! Expect some tax loss selling over the next few weeks, especially from those who believe the markets will do better in the last half of 2009. Not many had profits last year to take losses against but there is hope that this year will turn around by yearend. This will be the catalyst for selling of stocks in the next few weeks. I am out on a limb here but I do believe it makes sense, especially given the last run up over the holiday on low volume.

This makes those very cheap ETF Ultra Short funds more attractive now than ever, like SDS and TZA. It will be a very interesting thing to watch unfold. If people sell now they can repurchase those same shares in early February, after President Obama has released his stimulus package and we can see the market reaction. If the market has a negative reaction and drops, those who sold can just wait until the bottom is in, as they will have cash, and can repurchase those shares cheaper.

If you hadn't thought of it, this might be the best time to consider it. Tax loss selling now may make the best sense of all for a strategy for 2009.

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The Recession about to show up in a Shopping Mall near you!

News from the front page of the San Francisco Chronicle states today that Shopping Malls across America will be closing in droves in 2009. You will be shocked when I tell you their predictions. According to Burt Flickinger III, managing director of New York consulting firm Strategic Resource Group, at least 200,000 stores and 2000 to 3000 Malls will close in 2009, the bulk of them in the next few months!

Have you ever seen these scale of cutback in your lifetime? That gives you an idea of the implication on the unemployment rate. Simply unbelievable and scary.

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Saturday, January 03, 2009

When will the Recession end? Here's a collection of opinions.

This is the subject of my Mini poll which I invite you to vote in just below my Web site clock to the right. I did a search on the question and I have compiled a file of opinions on the subject by a variety of sources and experts. If you are interested in these opinions I have selected some of the more interesting ones and will insert them below in Italics. They are listed in Chronological order starting in March 2007 and ending with an entry from today. I have underlined key phrases to help you get through it more quickly.

March 7, 2008
If Recession Is Now Here, When Is It Going to End?
By: Reuters | 07 Mar 2008 | 02:48 PM ET

A second straight month of job losses all but ended the debate over whether the US 
economy has slipped into recession. Now the question is how to get out.
"Turn out the lights. The party's over. We are in a recession," said Joseph Brusuelas, chief U.S. economist at IDEA global in New York.

Don't count on debt-laden households to spend their way back to growth. As for banks, they are preoccupied with cleaning up their balance sheets after seven months of credit turmoil, which means they are unlikely to throw open the cash spigots. The federal government is mired in debt as well.

All that adds up to a protracted period of deleveraging -- a fancy word for paring debt -- and perhaps an equally long period of subpar U.S. economic growth.
While most economists still believe that the economy will rebound in the second half of this year as U.S. Federal Reserve interest rate cuts and government tax rebates kick in, some are
starting to push back the recovery date into 2009.
U.S. employers cut 63,000 jobs last month, according to Labor Department data released Friday. That followed a loss of 22,000 jobs in January. December's job growth was only half
as big as the government had earlier reported.

Economists even found bad news in the fact that the unemployment rate fell to 4.8 percent from 4.9 percent, noting that this was merely the result of a steep drop in the size of
the work force because more people gave up looking for jobs.
Employment holds the key to the U.S. economy because jobs mean paychecks, paychecks mean consumer spending, and spending accounts for about 70 percent of the economy.
"The debate should no longer be about whether there is or is not a recession, only about how deep it will be," said Nigel Gault, chief U.S. economist with Global Insight in Lexington,

Consumers were already under strain from the slumping housing market and rising costs for food and energy. A report Thursday showed that household net wealth fell for the first time in five years. The savings rate has hovered around zero for several months.
With credit market turmoil prompting banks to tighten lending standards, consumers have had a tougher time qualifying for cheap mortgages, auto loans and home equity lines. That suggests households will cut spending.

Later on Friday, the Federal Reserve will release data on consumer borrowings and interest rates for January. Borrowings had been on an upswing for much of 2007 but the growth rate 
abruptly slowed in December, heightening concerns that consumers may be tapped out.
The White House acknowledged that the U.S. economy was stuck in a period of "low growth", and pointed to a recently passed $168 billion stimulus package as a way to address it.
Lehman Brothers economist Ethan Harris said the rebate checks would not be enough to prop up the economy.

"We now believe the tax rebate checks will arrive too late to prevent an outright recession," he said, adding that he expected the economy to dip into negative territory in the first and second quarters of the year.

"While we are penciling in a very mild recession, it is important to not get hung up on the 'recession, no recession' debate. The more fundamental point is that the economy is 
likely to experience an extended period of very weak growth, a rising unemployment rate and significant further Fed rate cuts."

The best hope for the federal stimulus package may be a less-discussed provision that gives companies a tax incentive to make purchases this year. That may boost corporate spending, 
cushioning the downturn.

There was one small silver lining in the ugly employment report. A sluggish labor market eases inflation pressures, making it easier for the Fed to lower interest rates.
The central bank has already cut rates by 2.25 percentage points since mid-September, and another cut of at least a half-point is widely expected when its policy team meets on March 18. Goldman Sachs economist Jan Hatzius said an emergency rate cut before that meeting was not out of the question.

J.P. Morgan's chief economist, Bruce Kasman, said he expects the Fed to cut by three-quarters of a point at the March meeting, and another half point in April.
"It is appropriate to characterize the U.S. economy as having entered a recession in the first quarter," he said.

Nov. 5, 2008
When Will The US Recession End?
By Brian Kelly on November 5, 2008
Now that the election is over, President-elect Obama has a tough economic road ahead. The advanced GDP report of -0.3% suggests that the US is in a recession. The $64,000 question is how long will the recession last. An examination of a few economic forecasting tools gives an approximation of when then recession began and likely end points.

A widely used index of economic activity is the Chicago Fed National Activity Index (CFNAI). The index is released monthly and is a weighted average of 85 indicators of economic activity. Since the index is calculated using monthly data it can be used as a leading indicator for quarterly GDP. The foll0wing chart shows the CFNAI since 1967 with recessions in red.

The Chicago Fed produces two indexes, a monthly index and a 3 month moving average of the monthly index. The 3 month moving average index smooths any volatility in monthly numbers and is used for economic forecasting.
A zero value for the 3 month CFNAI indicates that the economy is expanding at rate of growth that is consistent with its historical trend. An index reading below -0.70 following a period of expansion indicates that a recession may have started. A reading above 0.70 two years into an economic expansion indicates increased probability that a sustained inflationary period has begun.
The 3 month CFNAI crossed below -0.70 in December of 2007 and is therefore the likely start date of the current recession. According to the NBER, since 1967 there have been6 recessions. The longest recessions lasted 16 months and occurred from November 1973 to March 1975 and July 1981 to November 1982. The shortest recession started in January 1980 and ended in July 1980, for a total of 6 months. The average recession lasted for 10.8 months.
Using the NBER figures and a start date of December 2007, the following recession window can be interpolated:
Recession Start Date: December 2007 Possible Recession End Dates
Long Recession: 16 months April 2009
Short Recession: 6 months May 2008
Average Recession: 10.8 months mid-November 2008

From this table it is clear that the US will not experience a short recession since that would have been completed in May of 2008. The most recent advance GDP report of -0.3% suggests that the recession may not end in mid-November 2008. The only end date left is a long recession with a potential end date of April 2009.
The start date of the recession is consistent with Federal Reserve models of the probability of recession. In a 2006 report, Jonathan Wright a Fed researcher, developed a model for predicting the probability of a recession using the Treasury yield curve. The model developed used the 10 year - 3 month spread and the effective fed funds rate.
The Federal Reserve Bank of Philadelphia also publishes the probabilities of a recession in its Survey of Professional Forecasters (SPF) report. This data goes back to 1968 and shows the probability of a recession occurring in the next quarter. (Recession in red)
With this series it appears that 40% probability is the critical level in predicting a decline in GDP in the next quarter. Interestingly, the probabilities breached the 40% level in the first quarter of 2008. While not an exact match with Wright’s Model B or the CFNAI data it is fairly close and can serve as additional evidence that the current recession began near the end of 2007 and the beginning of 2008.

After falling below 40% for one quarter, the Anxious Index breached the 40% probability mark again in the 3rd quarter of 2008. This suggests that forecasters are expecting a decline in GDP for at least one more quarter. This projection means that the recession will last until March 2009 which is consistent with the long recession projection of April 2009.
The next CFNAI report will be released on November 24th and could provide clues as to the duration of the economic malaise. As well, watching the 10 year - 3 month spread and effective rates will be of utmost importance.

Nov. 6, 2008
Economist: Recession will end, but not for a while
by Brad Carlson

The U.S. economy will recover eventually, in part because of recent federal government intervention in the financial sector, said Quincy Krosby, chief investment strategist for The Hartford. “Even if the government gets 50 percent of it right, we will get through this,” she said in a keynote address at the Nampa Chamber of Commerce annual economic outlook breakfast Nov. 6. Andy Dodson’s Edward Jones Investments office hosted the event at Nampa Civic Center. 

Krosby said the U.S. economy “is in recession and will continue to be in recession before we see the sunlight. ”The economy must deal with collateral damage from the collapse of the subprime mortgage market, now “unwinding” into many sectors, she said. 

Unemployment will keep rising, and businesses will keep delaying capital expenditures until operators gain confidence in the economy, she said. Credit markets remain tight for businesses of all sizes, and consumers are spending less, she said.

 The current downturn could last 14 to 16 months, depending on when it started officially, compared to the average recession of about 10 months, Krosby said.

Unemployment could hit 7.5 percent or 8 percent in the U.S., she said.

 “What they’re trying to do is keep the damage to a minimum, but unfortunately we have been hit and hit and hit,” she said.

 The Hartford had expected the U.S. to skirt recession despite the high oil prices seen for much of this year, but the credit-market freeze had huge impacts, Krosby said. Banks must continue to clear their books of houses and non-performing mortgages, she said.

 Problems with subprime mortgages and with excess housing inventories could have been confined to local economies and resolved fairly quickly if the banks had kept the mortgages on their books, she said. Wall Street investors bought the mortgages and demanded more of them as a way to create bonds that paid higher yields – a key reason that the subprime mortgage problem’s impacts spread throughout the economy, she said.

 Federal investment in money-center banks aims to make sure the banks remain strong and to keep customers confident that the banks will be there long-term – even if they remain tight with credit now, Krosby said. 

“Confidence has been the missing factor for so long,” she said. She added: “The good news is we get through this, and pent-up demand is going to be created.”

Nov. 14, 2008
Colleges, Take Note: The Recession Will End on August 3, 2010

New York — Predictions of the next turn in this financial crisis are worth, well, little more than the predictions that led us to this point, but that still doesn’t stop economists from looking into the crystal ball.
That’s what Mark M. Zandi, chief economist and co-founder of, did on Thursday during a luncheon speech to a group of college money types at a conference held here by Moody’s Investors Service and The Chronicle.

His prediction on when the recession will end? August 3, 2010, he said to a few laughs for naming such a specific date. Of course, he admitted that he didn’t know exactly which day the recession would end, but he was confident that the downturn would be “more severe than any recession” since the Great Depression.

“We are going to be less wealthy for a long time,” said Mr. Zandi, author of Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis.

The next six months, he said, are going to be “very painful.” The following six months will be just “painful,” as house prices begin to stabilize in the summer of 2009. The subsequent six months will be “comfortable,” before the country begins to emerge from the crisis in 2010.

Despite painting such a bleak picture, Mr. Zandi said he had three reasons for optimism. One: House prices will begin to stabilize in the middle of 2009. Two: Gas prices are falling. Three: The federal government will provide some sort of stimulus package in the coming months. “The government will be the only institution to get us out of this mess,” he said. —Jeffrey J. Selingo

Dec. 1, 2008
When Will It End?
by Zubin Jelveh Dec 1 2008
Okay, fine. Economists made it official: We're in a recession. Deeply. When might it end?

As if you didn't know yet, the United States is in a recession. 

The nation's business cycle tracker, the National Bureau of Economic Research in Cambridge, Massachusetts, announced anticlimactically today that economic activity peaked in December of 2007, right around the time employment numbers started to head south and four months after the start of the credit crunch.

 The Bush expansion—as it may come to be known—does not stack up well against the Clinton boom of the 1990s on many measures. For one, the economy grew for 120 straight months in the 1990s versus 73 this decade. Incomes also grew under Clinton while they remained stagnant under Bush.

 Gross domestic product per capita, a rough measure of living standards, grew by 51 percent during the tech boom under Clinton versus 33 percent during the real estate boom under Bush II. (But if you compare the average monthly gain in G.D.P.-per-capita, Bush squeaks out a win: 0.45 percent versus 0.42 percent.) 

But the main question on everyone's mind now is when will our bust come to an end? 

If you look at the yield curve, historically a very reliable indicator of swings in the business cycle, activity should pick up by the end of 2009.

That would mean that the recession will be longer than many professional economists are forecasting. Which shouldn't be a surprise to anyone, considering what a bad job forecasters did with predicting this recession. 

Another recent reliable indicator is actually the N.B.E.R. recession announcement itself. During the two previous downturns, in 1990 and 2001, the N.B.E.R. made its recession call after the actual downturn had ended. Unfortunately, a global financial disaster makes the chances of that good fortune happening this time around close to zero. 

In fact, November marks the eleventh month of the current retrenchment, beating the average length of post-World War II recessions by one month. And if the recession lasts past April, it'll be the longest downturn since the Great Depression.

 With the N.B.E.R.'s announcement, the U.S. joins a growing group of rich countries that are also in official recessions—a list that includes Japan, New Zealand, and the 15 countries of the euro zone.

Dec. 2, 2008
The recession: When will it end?
Posted by Harriet Brackey on December 2, 2008 at 10:18 AM

The recession is here to stay. Already longer than the average recession, it will hang around through most of 2009. “It looks like (the recession) will last at least through the middle of next year,” said Wachovia Corp. Senior Economist Mark Vitner. “Probably it will bottom out then but the recovery process is likely to be very long and agonizing.”
He said that typically after a recession ends, unemployment tends to continue rising for at least a year.
“We are not likely to see a return to good economic times until late 2010 or early 201l,” he said Monday.
Florida, he said. “may take longer than the rest of the country.”
Florida’s recession started about six months earlier than the nation's recession.
University of Florida Economist David Denslow says the state’s economy started declining during the summer of 2007. The National Bureau of Economic Research said yesterday that the nation entered a recession one year ago, last December.
Denslow expects the downturn to continue through 2009. “My guess is we’ll see declining output in the first half of 2009 and essentially flat in the second half,” Denslow said Monday. Recovery, he says, may come for Florida in the first half of 2010.

Dec. 24, 2008
When will this recession end?
By Walter Derzko

When will this recession end? Are we really in a depression ? (an extended recession)? When will we get back to good times? These are questions that are on the minds of most people today, as we near the start of 2009. If you remember a year or even six months ago, many main stream economists were in denial. Many said that we should be out of this downturn by the end of 2008 or first half of 2009. It's not happening.

The Globe and Mail newspaper in Toronto two days ago featured a story called Taming the unwelcomed beast. In it, they included the following chart -A history of bear markets in US stocks (don't know why they missed 1980-81?, anyway, using their data you immediately notice a few interesting patterns. The two rows that I highlighted in red are considered Great Depressions)

A history of bear markets in U.S. stocks
Based on monthly U.S. dollar returns.
Peak-trough Months to Months to
Start End decline trough recovery
March 1876 Feb. 1879 - 33.11% 15 20
Sept. 1882 Nov. 1885 - 20.76% 21 17
Jan. 1893 Aug. 1897 - 25.12% 4 48
Sept. 1902 Nov. 1904 - 25.79% 13 13
Sept. 1906 Dec. 1908 - 33.97% 14 13
Nov. 1916 May 1919 - 27.98% 13 17
Oct. 1919 Apr. 1922 - 22.78% 22 10
Aug. 1929 Jan. 1945 - 83.41% 33 151
Nov. 1947 Oct. 1949 - 21.76% 6 35
June 1962 Apr. 1963 - 22.28% 6 10
Dec. 1968 Jan. 1972 - 31.45% 19 19
Jan. 1973 Sept. 1976 - 43.34% 21 24
Sept. 1987 July 89 - 30.21% 3 20
Sept. 2000 March 06 - 43.26% 25 42
Oct. 2007 ? ? ? ?
AVERAGE - 33.23% 15 31

Note: All returns assume full reinvestment of dividends.

In almost every case (except for 1906) the months to trough (the bottom from the previous peak) was a lot quicker then the leg back up. Months to trough range from 6 months in 1962 to 33 months in 1939.

The loss in stock value today (over 50% in S&P 500) has already outperformed each of the above bear markets except 1929, which saw a 83% drop in value and took 15 years to recover
I'd say we are closer to the 1929 example because we have a number of consecutive leveraged bubbles (close to 15 by my count) still to burst.. the next most dramatic being the commercial mortgage crisis bubble in 2009 and the start of a number of US state governments going bankrupt-watch for California to lead the pack.

The longer it drags out, the less we'll be able to deal with some of our more pressing societal problems, such as energy security, switch to alternatives, peak oii and peak gas, climate change in the form of global cooling (not global warming) and "strategic materials" and water shortages in the next 2 decades....On the upside, the recession / depression may force us to adjust and live in a zero growth sustainable economy...but I digress...back to the analysis.

On the way up, we see that the months to recovery (bottom back to the previous peak) could stretch from 10 months to 151 months (or 15 years and 4 months as we saw during World War 2.
If you add up the two columns (months to trough + months to recovery ) you get some indication of the range of when we could be out of a recession / depression (R/D) (pick your label)
Assuming that the downturn started in Oct 2007 in the USA, a 1962 like (R/D) recovery will take 16 months out from Oct 2007 or Feb 2009 (that's definitely not happening)
A mild 1906-like (R/D) recovery will take 27 months or Jan 2010
The average for the chart was 46 months or 3 years and 10 months. That puts us into Aug 2011
A more extreme (R/D) recovery will stretch us out 53 months to Feb 2012 like the recession of 1893 did or 77 months like the 2000 (R) recovery did to March 2014, just to the point where NASA says we may be feeling our first bout of global cooling due the low sun spot projections. Great ..hit us while we're down !!!

At the worst case scenario, we could mirror the 1929 depression (punctuated by the World War),which lasted 184 months or 15 years and 4 months putting us one and a half decades away, topping out in Feb 2023 ( the start of the next solar sun spot cycle minimum)
Notice that bear markets tend to cluster and get progressively worse (longer time for recovery). ie the 3 bear markets at the end of the 1800's lasted 35, 38 and 52 months respectively. The 5 bear markets before 1929 lasted 26, 27, 30, 32 and 184 months. The pre-oil shock bear markets lasted 16, 38 and 46 months and the post 73 bear markets were 23 and 77 months long.
How long will it take today’s dozen or so over-extended credit bubbles to burst and de-leverage? Your guess is as good as mine, but it won't be soon. Prepare for the long haul and watch/anticipate opportunities arising out of crisis. The best case, as far as I can see, will be a long anemic decade of no or limited GDP growth (in the US and a few more percent in China or India), financed by your individual savings or what you earn (like in my parent's days) and not unbridled credit (natural 100 year credit expansion/contraction cycle).

Walter Derzko is a futurist and business development consultant interested in strategic planning and thinking, futures research, emerging smart technologies, scenario planning, issues management, environmental scanning, opportunity recognition and lateral thinking.

Jan. 2, 2008 From Smart
When Will This Recession Finally End?
THERE'S REALLY JUST one question that matters this new year. When will the recession end?
OK, I lied. There's another question that matters even more. Will the recession ever end?
I have a lot of institutional clients who take very seriously the idea that this recession could be permanent. In their minds, it could turn out to be more like a depression. Even when we pull out of the worst of it, we'll be stuck with year after year of slow growth.
Pretty much no one thinks this recession could possibly already be over. And only a few brave souls dare to consider that it might only take another quarter or so to hit bottom. So it's just a matter of, how bad is it really?

Call me crazy, but I actually think we could all end up being pretty pleasantly surprised. I admit I was one of the last people on earth to agree we were in recession in the first place. So let me make up for that mistake: I'll be the first person to say it's over.
I don't mean to get carried away on wings of optimism here. But there really are some hopeful signs. Some of the same symptoms that, earlier this year, gave us an early warning that recession was lurking are now pointing in a more hopeful direction.
Let's remember what caused this recession in the first place. It started out as just a slowdown. But then over the summer, one by one, giant financial firms blew up -- not without a little help from some particularly incompetent government interventions. By the end of September, with Bear Stearns, Fannie Mae (FNM: 0.73, -0.03, -3.94%), Freddie Mac (FRE: 0.73, +0.00, +0.00%), Lehman Brothers, Merrill Lynch, AIG, Washington Mutual and Wachovia all in the graveyard, or at least on the embalming table, the global economy suddenly hit the brakes.
It's been three months now since all that happened. In case you haven't noticed, giant financial firms have stopped blowing up. Or at least when they threaten to now, the feds step in and kiss their boo-boos and makes everything good again. In late November, Citigroup (C: 7.14, +0.43, +6.40%) was rescued by the Treasury Department and the Federal Reserve. In December, it was the Big Three auto makers, and critically, General Motors' (GM: 3.65, +0.45, +14.06%) GMAC financing arm.

So suddenly markets have stopped going down. In fact they've started going up. Oh sure, after a catastrophe like we had during most of 2008, the rally in stocks off the November bottom doesn't mean all is forgiven. But emotions aside, the reality is that from the November nadir stocks, on average, are up something like 20% now. By most reckonings that's a whole bull market. But I can understand why nobody is particularly thrilled about it.
At the same time, the volatility of stock prices has started to come down. We haven't had one of those awful stomach-churning days where stocks swing as much as 10% in a single trading session for quite a while now. There are still too many moves bigger than 1% in a single day, but at this point that feels like nothing. And it is an improvement.

There are some important signals along the same lines coming from bond markets. The extremely high yields on corporate bonds have started to come down, indicating that investors no longer think they need extraordinary interest rates to compensate for lots of expected defaults.
And in credit markets, closely watched indicators of default risk such as the TED-spread, the swap spread and the price of credit default swaps have all relaxed considerably over the last few weeks.
None of that means we're out of recession. I'm not saying that bedrock indicators of economic vitality, such as payroll jobs growth, are going to instantly turn away from the Dark Side of the Force. But it means that the thing that caused the recession -- the collapse of the world banking system -- is no longer causing the recession. As an issue, it's now on the sidelines, which means the economy can begin to heal the way it always does.

Don't worry that we're now in a vicious cycle in which consumers will stop spending and borrowing, and will become "scrimp and save" misers -- which would lead to slower growth, few jobs, more scrimping and more saving, and so on until the economy utterly grinds to a halt and we all starve. That's not going to happen.

Remember, as soon as one person decides to stop consuming and start saving, that person's money needs to be invested somehow. And ultimately it's investment that leads to long-term growth.

How often over the last 10 years have you heard that Americans don't save enough? That we're going to starve investment and growth because all we do is consume? Now the same people who've been saying that all this time are saying that we face a permanent recession because consumers will save. Huh? How can the economy be doomed when consumers don't save, and also when they do save?

That's the kind of silly thing that people are taking seriously now. And why not? We've all been through hell the last year. Show me someone who didn't lose money last year and I'll show you a liar.

So everyone is willing to believe the worst, even if it doesn't make sense. I could make a contrarian argument that all this negative sentiment is, in itself, enough to make a credible case that we've seen the worst. Maybe that's true, but it can still take a while for a big, complex machine like our economy to recover once it's been as damaged as it was last year.
But markets are another matter. When stocks have gone down enough to cover the worst-case scenario, then even if the recession drags on longer than I expect you can still make money. Suppose you bought stocks in 1932. The Great Depression went on for many years after that. But you made money on stocks from the get-go.

So let's approach this new year with at least an open mind. Stocks are cheap, that's for sure. And there are signs of healing in the credit markets, and that's the key prerequisite for economic recovery. So don't blind yourself to the opportunities that may be out there.
Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. You may contact him at

Jan. 3, 2009
Papademos Says ECB to ‘Act Appropriately’ in Slowdown (Update2)
By Simon Kennedy

(Bloomberg) -- European Central Bank Vice President Lucas Papademos said an economic recovery may not begin until next year and that policy makers have the scope to cut interest rates if inflation slows further.
“The economic outlook is unusually uncertain,” Papademos said in an interview with Germany’s WirtschaftsWoche magazine published today. “It is quite possible that the recovery will not start until the beginning of 2010.”

Having reduced their key interest rate by 175 basis points since early October to 2.5 percent, ECB policy makers enter the new year under pressure to cut more deeply amid Europe’s first recession in 15 years. Retail sales fell for a seventh month in December, manufacturing shrank at a record pace and lending to the private sector stagnated, reports showed this past week.

The economy may be even weaker in 2009 than the ECB’s prediction of last month for a contraction of about 0.5 percent, Papademos said. The Frankfurt-based central bank will “act appropriately” and has room to do so if the slowdown threatens price stability, which the ECB defines as inflation just below 2 percent in the medium term, he said.
“If, in our assessment, the risks to price stability change further in the coming months, monetary policy could be eased further and we will act appropriately,” Papademos said.

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