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