2.17.09 Market Commentary

Basically, the way I'm going to structure these posts about market commentary will be something set up like this: First part of the post will be Commentary on the PREVIOUS day, followed by commentary on the current day. When I am able to get to a computer and/or have time, I would essentially like to post the previous days commentary before the markets open, because a lot of the stuff seems pointless.... Anyway, any comments on the structure/content are welcome.

Tuesday Morning Commentary:

-Seems like the UK and Europe in general are hurting or are set to hurt worse than the United States has. The dollar is currently the highest its been all year. The Euro and the Pound are hurting due to the financial crisis sweeping across Europe (keep reading for more)
-Countries like Spain and Ireland's debt rating are under question and even have been lowered. The Euro could retest recent November lows.
-Gold has rallied, and many view this as simply a flight to safety. Historically, the dollar and gold move in opposite correlations, however recently (including today) they rallied together.
-Japan's GDP has been contracting over the past few quarters.
-Even with the stimulus plan attempting to provide confidence, US equity markets still face pressure, due to the downward pressure and forecasting of earnings.
-After Geither gave us the "financial stability plan" to help ailing banks, the markets still hated on the fins and they continued their plunge towards ZERO.
-Even though people are hopping on the Tech/Health Care bandwagon, dont leave out the Global Defense stocks. There will definitely be tensions that arise during economic downturns widespread throughout the world.
-The Government (as part of the stimulus?) is going to force lenders to modify loans, and even allow bankrupcy lawyers to modify loans if banks refuse... --- I smell nationalization
- Another part of the stimulus--- limiting executive pay, is arguably unethical and will cause an exodus of talent to smaller firms. Reading about this brought up the point that a lot of charities and non-profit firms will hurt because of this as the wealthy execs won't donate money like before
-With the stimulus, will there be a sustained growth and acceleration in the level of economic activity the government is trying to achieve? Or not, with the enormous wealth contracting in houses and retirement plans that the US has just gone through.
- General stimulus thoughts: "Something is better than nothing" & "the consensus is there is no consensus on the expected results of the stimulus"
- Although the general public may gain confidence because of the stimulus, its hard for industry professionals and economists to keep an open mind, because honestly how can $8 per paycheck really "stimulate" the economy.
-A lot are arguing a brief spurt of growth followed by a relapse in the economy

Brief summary of key points of stimulus:
Parts of stimulus
-Housing ---8k rebate (doesnt have to be paid back) to first time home buyers
-Auto--- will be able to deduct the purchase's sales tax from taxable income
-Clean Energy sources- weatherizing homes, buying hybrid cars
-Environment-- clean water systems, flood control, pollution cleanup
-Technology- getting broadband in rural areas
-Homeland Security- in Airports
-Infrastructure- transportation projects, highway construction/repair, mass transit, high speed rail
-State governments receiving aid


Nighttime Highlights from Tuesdays Headlines

-Stimulus overall plan: stabalize the banking system and cut back the number of foreclosures, in the longer term cut the budget deficits
-Save/Create jobs

-Stanford firm shutdown on another SEC fraud case. Apparently they defrauded customers using CDs and quoting unrealistic returns. If you can't trust CDs, what the hell can you trust?

Economic Crash in Eastern Europe- fast falling market for exports... drop in currency value
Downgrade banks active in easten europe
Possible EU aid package
- banks in the EU more leveraged than the US was
-the amount of money banks in Austria invested represents 70% of their GDP

-Chrysler asks for 2 billion more in loan from government

-Flight to safety in gold--- reached 7 month high

-Gold is reaching close to platinum price.... major institutions and governments hold gold

-Global economy and US indexes weigh on price of oil

My Personal Comments

- On Tuesday Obama signed stimulus bill ---To me this happened to fast and is simply "rapid fire" legislation
- Who are these guys (in the government) at just a random point in time to make this big decision and pass this stimulus bill so fast?
- People in the industry with Phds dont exactly know what to do so how can we put faith into
the politicians.
- Restructuring/Cost cutting of the auto-makers
- The stimulus to me represents false hope--- a hope to increase confidence a quick fix
- I would say the people hurting the most are going to benefit the most, however they are so far in debt or in such trouble I doubt they
are going to go out and spend that money they are receiving no matter how big or small increments the payments are
- Treasuries seem popular right now, I guess cause the US is apparently incapable of defaulting
- Job creation is a good thing with the stimulus, what happens when the projects are over?

- No real consensus on the economic implications of the stimulus.

-All markets seem broken on worries of the turmoil to worsen--- so I'm sitting on the sidelines