Thursday, December 11, 2008

Some Holiday Cheer from Fred Thompson

Good Evening Folks!

Since its the holiday season I figured it was time I put up a holiday video from former presidential candidate Fred Thompson. Please watch this. Its both brilliant and hilarious at the same time. I couldn't have summarized the idiocy of our government response to this economic crisis any better.

I will have some comments on today's market action below.

Enjoy!

Having technical trouble with putting the You Tube video up today. Please click on the link!

http://www.youtube.com/watch?v=7IrR3o7x1ps


My Take on Today:

Isn't that a classic? You gotta love it.

Just a few quick notes on today. Stocks were down sharply today on worries that the auto bailout may be in trouble. Adding to the troubles today were our usual doses of horrific economic data.

US jobless claims soared 58,000 to a 26 year high:

"Dec. 11 (Bloomberg) -- The number of Americans filing first- time claims for unemployment benefits surged more than forecast last week to a 26-year high, a sign companies are stepping up firings as the recession deepens.

Initial jobless claims increased 58,000 to 573,000 in the week ended Dec. 6, the highest level since November 1982, from a revised 515,000 the previous week, the Labor Department said today in Washington. The number of workers staying on benefit rolls reached 4.429 million, also the most since 1982.

Employers are slashing payrolls as consumers retrench and credit stays frozen. Mounting job losses and falling home prices increase the likelihood that the U.S. recession will extend well into 2009, adding impetus to President-elect Barack Obama’s call for an economic stimulus package of unprecedented size."

Quick Take:

Our economy is shredding jobs at a pace that I have never seen. Bank of America came out late today and announced they will be laying off 30,000 as they absorb the aquisition of Merrill Lynch.

I don't know about the rest of you, but for the first time I am seeing family and friends begin to lose their jobs. This crisis in now getting personal. Many of the major companies in the Baltimore are cutting including Legg Mason. I guess many investors decided to move thair money out of there after famed Legg investor Bill Miller lost 60% in the market this year. The fund he manages has shrunk from $16 billion down to $4 billion this year due to losses and redemptions. Ouch! Thats going to leave a mark.

Auto Bailout

I thought this was a done deal but apparantly there aren't enough votes in the senate to pass it:

"Dec. 11 (Bloomberg) -- A $14 billion automaker bailout plan and other alternatives lack the votes to pass the Senate, as lawmakers seek to beat a deadline to keep General Motors Corp. and Chrysler LLC from collapsing.

GM and Chrysler are in a race against the clock as they need federal aid to keep from running out of cash early next year. Pressure is mounting on GM as a small number of partsmakers ask for payments in advance, people familiar with the matter said.

“It’s going to be really hard for anything to get to 60” votes needed to overcome delaying tactics, said South Dakota Republican Senator John Thune.

Senate Majority Leader Harry Reid said he’s working on an agreement that would let the Senate consider Democratic legislation approved yesterday by the House, as well as a slightly different version by Senate Democrats and a Republican alternative. The George W. Bush administration has endorsed the Democratic plans it helped negotiate.

The Republican alternative, offered by Senator Bob Corker of Tennessee, would require bondholders to take 30 cents on the dollar and would set wages similar to foreign companies such as Volkswagen AG."

Bottom Line:

I am with the Republicans on this one. You all know my thoughts on the bailouts. Enough is enough. These companies must be shredded and put back togetether with a chance to be profitable before I want my taxdollars going anywhere near them.

As of right now, the big 3 are filled with more fat than Oprah Winfrey before she starts her next diet. Its time to get lean GM or face the consequences! I am tired of throwing money into black holes. Lets get this bailout straight before we give them a dime

Trading

My purchases of FAZ and SRS worked very nicely today. Both were up around 20%. I decided to hold them into the close. Many of the traders that I follow think the market is going to retrace back higher upto 1000 on the S&P and then nosedive early next year. I personally don't see that happening folks. The economy is literally disinigrating and I the news flow keeps getting worse.

I mean The New York Times is in trouble for crying out loud! How can you buy equities when the gloom and doom is now threatening US instutions like the Times, the Tribune, and GM?

I think the 20% retrace we just saw was about it. I could be wrong. A lot of smart people think there is more to go. I just don't see it. I think many of these retrace calls are based on looking at the massive retraces that were seen during The Great Depression.

In my view, the market moves much faster today, and trying to compare trading patterns from 1929-32 doesn't work. There is too much fast money flying around from day traders and hedge funds. Retraces that took months in the '30's take a few weeks in this day and age.

Will we have more bounces? Of course. Could this one continue? Its possible but I doubt it. I believe we retrace back down to the lows. I don't believe the market has priced in an economy that has come to almost a complete hault.

A great example of what has happened in the economy in the 4th quarter was described by Nucor's CEO on Cramer's show last night(Disclaimer: I am not a Cramer fan). The CEO explained that they were running at full capacity and had everything sold for the first 3 quarters of the year. Orders then fell off a cliff in Q4. Nucor only had to run at 50% capacity in order to to satisfy their orders for the last three months of the year.

Thats a 50% drop in one quarter. Thats absolutely devastating folks! Many companies will be toast if they see a few quaters like the one Nucor had.

One thing to note on the bullish side today is its the week before OpEx. Usually the market moves in the opposite direction of what happens on this day. Since we were red today, the indicator says you should see green going into OpEx. If we get hammered with a deep drop tomorrow I may cover some of these shorts and take profits because this indicator is often accurate.

Lets see what happens tomorrow. There were whispers on the street according to Bloomberg that the retail number that comes out tomorrow is going to be a disaster. If this is true and the senate disses the bailout, it could be a historic day.

Enjoy the fireworks tomorrow.

15 comments:

Growler said...

Nice job on the SRS & FAZ plays.

Over-all I'm at parity with regard to Index plays and bullish energy & commodities (due to the USD rolling-over).

Actually, I happen to also and unfortunately know a family member about to be laid off: My Wife. She told me a few hours ago. It's a shame because the start-up she worked at was really innovative and had a ton of potential ('Green' Industry).

Anyhow, it's not the end of the world, no one is dying. One of the great things about my wife and I, is we work (not only metaphorically) extremely well together. We'll get through it no prob.

Besides, how cool would it be to default on the mortgage and get a lower rate and/or principal balance!

Sigh....so, I tell you (& readers) this not out of seeking pity but rather out of optimism & hope. Yes, this is gonna suck...bad....real bad.....but! When we come out of this as a country, there's gonna be some really cooooool new innovations.

Growler said...

and yes, I was high when I wrote the above.


: )


Best,

G

Jeff said...

Growler

Thanks.

Sorry to hear about the wife. I wish her the best of luck in finding a new job.

My dad lost his 2 years ago and now pedals FHA loans. My aunt and uncle are in dire straights and taking money out of their 401k's to live. This whole thing sucks and its going to get worse.

Your right, I think its time to stop paying the mortgage and qualify for the loan modification!

Get your government bailout.

Good luck with the trades. I hope you nail a few bigs ones while the wife gets another job.

I love your weak dollar play. I am thinking the same way. If we go deep red tomorrow I am going to dabble in some calls on a few commodity stocks.

Good luck with everything Growler!

Growler said...

LOL... (not in mockery but as in "oh the irony") Since we're being so forthcoming; My first wife past from illness a few years ago. As you can imagine, the medical bills were outrageous. So, I'm not the man I was financially adding that much more salt in the wound. : )

But, I'm still smiling. We'll get though it. Always do.

Although I will say, I never thought at age 34 I'd feel like 64.

Best Jeff, et al.

G

Jeff said...

Growler

Keep up the great attitude!

Hopefully you will be able to short yourself back to financial prosperity.

You might as well make some money on the bear side while the whole country swirls down the toilet bowl!

I have a similiar attitude. Regarding the economy, this too shall pass.

I think this may have some positive effects on people. Many will be humbled and brought back to earth. Hopefully we will all learn to share and help one other as things worsen.

Jeff said...

Anyone holding SRS will be happy campers tomorrow.

GGP a REIT filed for bankruptcy after hours. SRS went over 100 on the news. This sucker should scream higher tomorrow.

Futures are down huge 22 handles. DOW futures down 200.

We could very well see the market plunge tomorrow. GM bailout still in question.

Hold on tight tomorrow!

Jeff said...

God check this out.

Man the news flow is bad tonight. $50 billion Ponzi scheme was just taken down tonight.

Anyone starting to believthat all of Wall St. is a giant ponzi scheme???

"Dec. 11 (Bloomberg) -- Bernard Madoff, founder and president of a New York firm that invested funds for wealthy individuals, hedge funds and other institutions, was charged with operating what he told employees was a long-running $50 billion Ponzi scheme in what may be one of the largest frauds in history.

Madoff, 70, head of Bernard L. Madoff Investment Securities LLC, was arrested today at 8:30 a.m. by the FBI and appeared before U.S. Magistrate Judge Douglas Eaton in Manhattan federal court. Charged in a criminal complaint with a single count of securities fraud, he was released on $10 million bond guaranteed by his wife and secured by his apartment. Madoff, wearing a white-striped shirt, dark-colored pants and no tie, looked down as he left the courtroom with his wife, declining to comment.

“It’s all just one big lie,” Madoff told his employees on Dec. 10, according to the government. The firm, Madoff allegedly said to them, is “basically, a giant Ponzi scheme.”

http://bloomberg.com/apps/news?pid=20601087&sid=anWXzISP4XCg&refer=home

Jeff said...

BAILOUT OFFICIALLY DEAD

They do not have the votes. DOA...They may not meet again until after the holidays.

Reid: "I dread watching WAll St. tomorrow"

Look out Loretta...Blood tomorrow!

Avl Guy said...

I was telling a pair of late-20-something newlyweds-to-be (Aug 2009) today that there's a lot of potential to use this crisis to put a deathnail in all the financially & environmentally unsustainable business models (i.e. consumer debt-driven shop-til-ya-drop), business practices (JIT transoceanic delivery of offshore manufactured products), and lifestyles (suburban auto-centric built environments), and ...reduce the scale of financially unsustainable careers (Realtors, Quants, Investment Bankers, Realtors, RE Attorneys, HGTV Cable Program Writers/Actors, tenured professors who teach no students and collect fed tax $ via grants to study 12th century Irish literature; to name a few).
I'm geeked and pumped to bulldoze all that crap aside and be a part of creating new business models, practices, and built environments that are sustainable.
YYYeeeeoooowwwwwwwwaaaahhhhhh!!
(imitation of John Dean's 2004 Primary Scream).
The 20-somethings are geeked too. We feel like it’s GroundHog Day everyday we endure the drip-drip of layoff news, congressional hearings on unsustainable bailouts, and vacuous political promises to ‘fix foreclosures’ and ‘get banks lending’ and ‘restore market confidence’.
Enuff already....let’s get real and tell the aging boomers they’re never getting their excessive asset valuations back, tell FIRE employees that 60% of them will never return to their field, tell retailers and mall operators that 'Shopping Til U Drop From Debt' has died, and tell our awfully delusional overseas creditors “ ‘Our Bad’, Truth Is That None Of Us Our Going To Repay You! We Default !”. And Stop The Useless Bailouts.
Then start the honest national dialogue, planning and hard work at living within our means, local production for local consumption, and adaptive re-use of our unsustainable mis-built environments and infrastructure as needed, in a methodical manner using creditworthy projects. We’re ready to roll!!!

johndaniels said...

tomorrows gonna be ugly...for everyone :(

jeff said...

Avl

What a rant!!

Couldn't agree more. Listening Fred Thompsons rant on you tube made me think about the whole baby boomer thing..

these bastards are trying to rob the system for their own good via bailouts.

Its obvious to me they only care about themselves.

The next couple of generations will be left to clean this mess up but what do they care? they will be dead!

I can't wait to get rid of this rot as well!!

Good riddens!

jeff said...

JD

Tomorrow scares me.

Futures are fugly fugly fugly. I plan on hiding under a chair tomorrow.

Minton Mckarkquey said...

Great post and some interesting comments.

1. Fred Thompson - great vid but I bet his voting history doesn't support his rant!

2. I'm starting to see a *lot* of people I know without jobs. And we're talking about professional folk with families who just saw their 401Ks hit the fan. It's truly scary and I really feel for these guys.

3. I think it was pretty obvious the bailout was going to get killed by the Senate, so I'd be surprised if that's not factored into the market's thinking. Actually, cancel that - nothing surprises me now. The Senate just want some pork added and then they'll pass it ($700 billion bailout, anyone?).

4. My friend's son - who's 13 - noted with some irony that the rapper '50 Cent' is now only worth 0.37 Euros. :-)

See you tomorrow everyone..

Mberenis said...

Most people are surprised to hear the bailout's are affecting insurance rates. Insurance is changing as we know it due to the economy and bailouts. Since then the rates have drastically changed. All leading companies have changed lots of policies. When was the last time you researched insurance rates? You'd be surprised what recently changed!!!

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http://quote-insurance-online.blogspot.com
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jeff said...

Minton

Sure is scary isn't it? I do not look forward to tomorrow.

It appears the TARP may be used as a sticksave for the big 3 according to CNN. Reuters is not confirming.

The unions are suposedly what killed the bailout negotiations at the last second. What a surprise. I don't see any unions in the future. They have done nothing but destroy every industry they touch.

HEre is the TARP story:

"WASHINGTON (CNN) -- The proposal to loan $14 billion to Detroit's struggling automakers collapsed late Thursday night but the Big Three may get some money anyway.

Bush officials warned wavering GOP senators that if they didn't support the legislation, the White House will likely be forced to tap the Wall Street bailout to lend them money, two Republican congressional officials told CNN earlier.

This is a noteworthy change since the White House and Treasury Secretary Henry Paulson have previously refused to use bank bailout funds to help General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC.

The sources asked not to be named because of the sensitivities of private conversations.

The White House negotiated a deal with Democrats to give Detroit a short term $14 billion loan with strings attached, including a so-called "car czar" charged with helping the companies draw up restructuring plans."

http://money.cnn.com/2008/12/11/news/companies/whitehouse_warning/index.htm?postversion=2008121123