Monday, February 23, 2009

Tons to cover...

But my wife's in NJ this week and my oldest just fell asleep, so bear with me while I try to run down the highlights.

The markets traded lightly throughout the day, but the "Sunday Surprise" (a new Washington tradition to goose the markets with a "plan" on Sunday night) fizzled before the markets opened. I think it's clear that the markets are not happy with a semi/partial/kind of/sort of nationalization. The markets need clarity - force Citi into bankruptcy or nationalize them. In a weird twist, despite the weakness in the markets today, the financial stocks actually acted well. However, I remain convinced that buying most of these stocks is akin to gambling. In 6 mths they are a double or $0.

On a separate note, my opinion is consistent on the issue of bankruptcy. If it's good for GM/Chrysler it's good enough for Citibank. Unfortunately, for GM they don't have any highly placed friends inside the beltway.

The technical levels that everyone was watching were 7,500 on the Dow, 752 on the SPX and 1310 on the NASDAQ. We've taken out two of these technical supports - the next stops technically are around 6,500 on the Dow and 700 on the S&P. We're now back near the prices last seen in 1997.

Like the cousin in the Dominican Republic that eventually blows your cover, AIG is the thorn in our side that won't go away. The joke of the day circulating on trading desks is that AIG is waiting to hear what the banks want, what the car companies want and then they'll just ask for the rest.

AIG should have been put out of its misery in September (disclaimer - I worked for AIG back in the early 90's when we were viewed as being masters of creative financing) but because no one can figure out what they owe or who they owe it to - the word was "They'll crash the financial system". Now AIG is facing another $60billion loss next Monday and is apparently ready to come back to the taxpayer with their hat in hand. Any thoughts on what we should put in their hat?

Microsoft, Intel, GE, Alcoa.
Alcoa - Back below prices last seen in 1987 - 22 yrs ago.
GE - Back below prices last seen in 1994 - 15 yrs ago.
Intel - Back below prices last seen in 1996 - 13 yrs ago.
Microsoft - Back below prices last seen in 1998 - 11 years ago.

I don't really have any comment other than to say, wow. GE and Alcoa are victims of the credit crisis and global slowdown. Intel and Microsoft are just victims of falling tides sinking all ships.

Miles of Idle Trains in the Midwest.
I've touched on this a couple of times, but the 30% reduction in railway cars in use speaks to the sharp fall in goods being shipped around the country. Some of this decline is due to falling diesel prices, but I think it's clear that the economy isn't rebounding until we see some of this railway capacity comeback online.

I don't offer specific investment advice, but when everyone on talk radio is hawking gold and someone goes on TV predicting gold is going to $3,500 an ounce - it's time to be suspect. This feels like gold might be the new oil of 2009. I think the natural price of gold could be $600/oz right now. We're near $1,000 today. This doesn't mean the market for cold can't remain irrational for awhile and if the stock market continues to melt, expect more people to chase the only thing that's working which is gold right now.

Tiger video
Finally......Tiger's Back. Nike's got a great new ad out welcoming Tiger back. I haven't seen it on TV yet, but it's on youtube. Welcome back!


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