Thursday, December 4, 2008

Its All about Jobs Tomorrow!

Hello all!

Just a few comments today. Before I get started I wanted to share a great clip from CNBC today that featured Hugh Hendry from Electica Asset Management. Hugh's fund is currently up 40% this year. According to Hugh, stocks won't get back to the highs until 2025!

I thought this was great analysis from Hugh. There is currently a huge disconnect between the credit markets and the equity markets. The credit market is basically pricing in a deflationary depression folks. We are seeing 50 year lows on yields in treasuries. Short term treasuries are now paying .005% yields! Investors in the credit markets could care less about the returns on their money. They want safety! Meanwhile, the bubbleheads on the equity side are out there screaming that the bottom is in.

I have always said since day one on here that the traders in the credit markets run circles around the traders in the stock market. Always stick with the bond boys. Until these two are on the same page in terms of where the market is headed, I wouldn't go near stocks!

Bottom Line:

The market continues to bounce around like a pinball. The big three were in Washington again begging for money. I wouldn't give them a dime until they slash costs and prove they can make money. Detroit autoworkers get paid $72 per hour including benefits. The autoworkers in the southern US that make the japanese cars make $44 per hour including benefits.

Uhh hello! Houston we have a problem! The big three will never make money as long as there is this type of gap in costs between the two.

The Market

Its all about the jobs number tomorrow folks! I am going to make a small play on this news. This is a risky one and I will have a stop on it.

My guess here is the bulls already know this number will be awful. If the jobs number comes in at or a little below expectations I plan on buying a small position in SSO which is long the S&P 500 AFTER the gap down in reaction to a jobs report that is guaranteed to be ugly.

If the jobs number comes in way below expectations then this trade is off the table. I will have a tight stop on this if I place it because the market has been acting goofy. I also plan on selling on any bounce.

My guess here is the bulls will be prepared for the number tomorrow. Lets see what happens.


Jeff said...

A big warning tonight to all:

There are rumors floating out there that China may devalue their currency within the next 2 weeks.

We are in big trouble if this is true. China would then be able to increase exports to other countries.

This is a game changer if its true folks. You could see a huge trade war with China. This could cause an economic meltdown if its true.

Treasuries would be screwed and we would lose the ability to finance our debtload by selling treasuries.

This is earth shattering news if it turns out to be accurate.

Jeff said...

Uh oh

Now its hit the press. This could be disasterous!

The central bank has shifted the central peg of its dollar band twice this week in a calculated move that suggests Beijing aims to offset the precipitous slide in Chinese manufacturing by trying to gain further export share abroad.

The futures markets are pricing in a 6pc devaluation over the next year. "This is clearly a big shift in policy and we are now on alert," said Simon Derrick, currency chief at the Bank of New York Mellon.

The move follows a Politburo speech by President Hu Jintao warning that China is "losing competitive edge in the world market".

China has allowed a crawling 20pc revaluation over the past three years. Any reversal risks setting off conflict with the incoming team of President-Elect Barack Obama in Washington. Mr Obama called China a "currency manipulator" during the campaign, a term that carries penalties under US trade law.

Uncle Joe said...

up 268 today? Did I slip into some other dimension and not notice?

ZMonet said...

Quite a show today. I wish I had taken your advice on SSO but the large unemployment number scared me away. It would have been a hour(s) trade for me, but it sounds like it would have been the same for you. Did you pull the trigger.

I'm not totally convinced about this rally because of the light volume. We may go higher, but I bought some QID at the close. It has been good to me so far and has been the only thing that has made me money. I'll have a tight leash and sell quickly if I see some decent gains. I think you have to be in and out in this market and need to lower expectations. If you can make 5% in a day, take it -- just my opinion, but I'd love to get your thoughts.

Anonymous said...

Thanks for the info, Jeff.

Jeff said...

Uncle Joe

Crazy isn't it. You can't fight the tape though. This crazzy puppy wants to move higher.

ZMonet said...

Jeff, If you liked SRS at 120, you must love it at $96, no?

Jeff said...


I took a shot with SSO today and it worked out. I got spooked by the number too and shrunk my position.

It still worked out. Held into the close.

I am working on a post right now. I actually sold all of my shorts today except BEARX which I have been holding for two years.

I still have my UYG.

The REITS rolled this week ZMon.

I will hold off on picking up more

Jeff said...


Your welcome. Glad you are enjoying the blog