Tuesday, April 7, 2009


Good Afternoon Folks!

Its great to be back today!

Stocks pulled back today as traders got prepared for what is likely to be an awful earnings season.

Alcoa kicked off the earnings season today with big a swing and a miss after announcing a $497 million dollar loss. What a shocker eh? NOT! Get prepared for lots of misses folks because I think you are going to see further signs that our economy is completely collapsing at a frightening pace.

Why do I say this?

Well, just look at the news. Moody's announced today that default rates surged to the highest since The Great Depression:

"April 7 (Bloomberg) -- Thirty-five companies defaulted in March, the highest number in a single month since the Great Depression, according to Moody’s Investors Service.

The rate at which speculative-grade corporate borrowers worldwide failed to meet their obligations rose to 7 percent from 4.1 percent at the end of last year, Moody’s said in a report today. So far this year, 79 companies rated by Moody’s have defaulted, the New York-based ratings firm said."

After this kick in the balls we got some horrific news around credit and the consumer:

"WASHINGTON (MarketWatch) -- The balances on American consumers' credit cards fell at a 9.7% annual rate in February, the fastest rate of decline since late 1976, the Federal Reserve reported Tuesday.

Total outstanding consumer credit, including both revolving and nonrevolving credit, fell at a 3.5% annual rate, or $7.5 billion, to a seasonally adjusted $2.56 trillion, the Fed said.

Credit has declined in five of the past seven months. Prior to that, credit had declined in only one month in the previous 15 years.

"No other recession has seen monthly changes in consumer credit contract this many times or so deep before going back to January 1943, which is how far the data go back," wrote Young Kim, an analyst for Stone & McCarthy Research. The retrenchment reflects "less available credit, less consumer demand for credit, and consumers' new found propensity to pay down debt."

Credit expanded by $8.1 billion, or 3.8%, in January, revised up significantly from a $1.8 billion estimate, highlighting the risk of large revisions. Credit has grown 1.1% in the past year, the slowest growth since 1992."

Quick Take:

As you can see above, we have nothing to worry about folks the economy is fine! We should be back to strong growth in a quarter or two. I mean that's what they say all day on CNBC right? Now I can see why the average GDP growth estimate by economists for 2010 is 3.8% after reading articles like the ones above.(sarcasm off) .

Are these economists smoking crack? I am amazed we have bounced as high as we have from the 600's on the S&P. Buying any stock seems like financial suicide to me after reading these types of articles. Every time I think the news can't get worse it does.

Question here: If all of the economic data seen today can only be compared to what was seen in the depression then shouldn't we all be expecting to head into a depression?

I mean am I actually supposed to believe that things will be ok after watching our panicky government throw money out of helicopters right into the bankers pockets? I would love to ask Tim and Ben: Do I look that stupid?

These idiots are doing nothing but throwing trillions of dollars into financial black holes. You might as well have taken the money out into the backyard and burned it. The result would be the same.

If we were smart, we would have taken this bailout money and thrown it into the real economy instead of the bankers. This money could have been used to help create jobs. We could have used it to feed the millions that will be starving as we head straight into our own generation's great depression.

What angers me here is none of this had to happen. What makes me even angrier is when it did happen the money was thrown to the bankers instead of to the people. It went down the wrong hole folks and now its gone! Whats sad is if GREED and FRAUD hadn't consumed Wall St and the rest of our nation we wouldn't be in this predicament.

Now that the money is gone here is the reality that we are left with:

The consumer which represents 70% of our economy is collapsing. Credit card balances are falling at the fastest rate since 1976. A credit contraction like the one described above has never ever been seen in this country since they started keeping records in 1943.

35 companies defaulted in March which was the largest number seen since The Great Depression.

The bottom line here is the economy isn't slowing down folks: Its coming to a complete halt!

I expect to see a failed bond auction within the next 3-6 moths. Mark my words here folks. You read it here first: All hell is going to break lose WHEN(not if) we see this failed bond auction.

This will then become the "come to Jesus" moment for our government and the economy. WAshington will then have to come to terms with the fact that their debt game is over.

When this occurs they can go one of two ways:

1) We print our way out of the debt and head down the hyperinflation route.


2) We severely slash spending and grind our way out of this for several decades similar to what was seen in Japanese deflation scenario that's gone on from the '80's until today..

Either option is going to be extremely painful. I am hoping when push comes to shove our governments picks option #2. History has shown us that governments do not survive hyperinflation. This is how Hitler came to power in Germany back in the '30's. One thing is for sure here folks, either way this game is just about over.

I wouldn't be surprised to see this correction continue. Stocks became way oversold. I continue to be short treasuries and the S&P.


Check out these two videos that I picked up from The BNN(Business News Network) from Canada.

They feature some of key bear heavyweights from around the world: Noriel Roubini, Meredith Whitney, Ian Gordon, and Eric Sprott.

There are some wild predictions along with some top notch research. Ian Gordon actually predicts the DOW will bottom out at 1000! If you look at the charts its very plausible by the way IMO. This is the where the DOW was when this debt party got started in 1982.




Until Tomorrow!


johndaniels said...

Theres not much to figure out with the markets.

It is a traders market, the "long" positions are basically 24 hours, short positions are at most 1 hour. It will be 1 step forward, 2 steps back; thats how its been since last summer; why think it will be any different? The same question remains: why go long on anything in this environment?
traders are degenerate gamblers; unless you know someone deep inside then your just another sheep, on the outside and you WILL get fleeced.

Jeff said...


There is an old saying on Wall St: "traders die broke".

I have always stated on here that my trading is a very small piece of my portfolio. I just think its fun to speculate.

I agree with you for the most part. Only a very few are disciplined and good enough to be profitable traders.

Usually the really good ones in the trading pits hearing the inside info or "rumors" that put you in the know.

Anonymous said...

"traders die broke" Broke or not we all die, why not have some fun;)?

Jeff said...


I hear ya!

Futes are down. Geithner's now bailing out insurance companies.

Is there anything we arn't going to bailout?