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Thursday Thump

I'll keep calling the Thursday wrap-up "Thursday Thump" until everyone starts recognizing a pattern!

Last week it was the St. Valentine's Day Massacre that caused the drop as we fell from 12,550 at the open to 12,350 at the close while people talked about how crappy the economy was.  Today we fell from 12,500 to 12,250 as the Philly Fed Index fell to -24, the lowest reading since 1991.  It was far worse than the -10 expected but only a little worse than last month's -21.  Leading Economic indicators also declined but that was expected and Jobless Claims FELL 9,000 to 349,000, still a good 51,000 off "recession levels."

Unfortunately, since it was Thursday the market was in no mood for good news so we fixated on the bad with a very broad sell off on low volume – which is in line with my theory that we are clearing out the last of the suckers this week.  If people were looking to get out of the market you would expect a little more volume on the 250-point rallies as people take the opportunities to get out while the getting is still good…

Energy traders were gettin' today with a quick pullback to $98 and I never mind a market sell-off that is led down by the energy sector (especially when we've been shorting them).  Other commodities started falling as well but we are very unlikely to get follow-through into the weekend and we'll very likely finish this short week pretty much where we began it and pretty much exactly were were were last Tuesday, when we last ran the big chart:















Dow 12,284 -44 10,644 11,354 11,808 13,373
Transports 2,606 90 2,336 2,491 2,591 2,844
S&P 1,342 -3 1,182 1,261 1,311 1,488
NYSE 8,977 -109 7,790 8,310 8,642 9,775
Nasdaq 2,299 21 2,146 2,289 2,380 2,614
SOX 351 4 419 447 465 472
Russell 696 3 642 684 712 800
Hang Seng 23,305 -384 24,000 25,600 26,624 24,364
Nikkei 13,500 -479 13,725 14,640 15,226 16,729
BSE (India) 17,349 -741 15,900 16,960 17,638 16,545
DAX 6,828 -11 6,088 6,494 6,753 7,704
CAC 40 4,847 -96 4,626 4,934 5,132 5,752
FTSE 5,913 -136 5,066 5,403 5,619 6,435

That's right you wimps, while we added a red box to the BSE, the Nikkei and the Hang Seng, Europe held their levels and NONE of the US levels fell.  NONE!  I read the very entertaining comments about bearish wedges forming "everywhere" with no comment of my own in last night's chat as I'm not really a TA guy and I do respect the charts but I also think fundamentals do trump squiggly lines over time, it's just the short-term we have to worry about.

Have no doubt about it, the Hang Seng and the Nikkei are in very bad shape and if the CAC crossed that last line I will be VERY concerned about the international trend but our premise for being bullish is that the US, despite all it's problems, is still not looking too bad to international investors, who have very few "safe" places to park their capital.  This is why commodities are out of control, they also appear safe for now.  Should money come out of the commodity sector, once the US markets recover from the energy sell-off, techs and transports are going to start looking pretty darned good to global investors.

Speaking of global investors, in one of the most embarrassing financial moments in US history, it looks like Russia will have to bail US out as they are announcing that they will use their Sovereign Wealth Fund to buy bonds in FRE and FNM.  Arkady Dvorkovich, President Vladimir Putin's chief economic adviser, told financial officials that "Russia can attract investments and can also use this opportunity to expand Russian investment abroad and stabilize the situation in other countries with our money."  That's right, Time's Man of the Year is buying US bonds – praise the lord and disarm the ammunition!

I guess what we never imagined when we demanded the fall of communism for all those years was the the Russians and the Chinese would end up being better capitalists than we were and end up with all the money!  Ha ha, very funny, joke's on us – can we go home now?

Like China, Russia is sitting around with Billions of US dollars (in Russia's case it's oil and commodity money) and needs to diversify their virtual portfolio and, since their trading styles are not driven by fear and ignorance and since they don't speak hyena, they are happy to put some capital into our beaten-down financial sector, which promises them many years of good, steady returns with relatively low risk (US investors already took all the risk, and losses, out of the equation).  Just like the carpetbaggers in the old south, sovereign wealth funds can now rummage through the wreckage of the US markets and pick up our stocks for pennies on the dollar while US investors just stand there shocked and demoralized by their crushing defeat at the battle of the bubble.

Meanwhile, our convicted LACK of a coherent energy policy insures we continue to send Russia and other nations $90+ per barrel for oil while taking that same $90 out of the hands of US investors so that we are unable to effectively compete when bidding for the same assets.  It's like going to an auction with $10,000 and giving $100 to everyone who walks in the door – once the bidding starts, you're broke and everyone else buys the stuff you wanted with your money!  Actually it's worse, because we still NEED the oil, even after we're broke, so we now have to go back to those 100 people and borrow back our $10,000 which we will then immediately turn around and give back to them for more oil (which we burn), forcing us to borrow more money just to pay the interest on the last batch of money we borrowed and, OOPS, we need more oil again…

This is the insane US policy that has driven the value of a Euro up to $1.485 today, a new record, while the dollar sets up to retest a record low of 74.50.  Russia's willingness to step in and help us is a good sign that they really don't want one of their best customers to go bankrupt (but then again, who does) but notice the direction of the bailout is to place themselves firmly into the lending loop as, like any good capitalist, they have learned the value of playing the banker.


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  1. GM all….

    But we have a “strong dollar policy” ! I heard that on TV.

  2. Phil: Russia & China out capitalism the USA – LOL you crack me up. You also unknowingly make a VERY good point. Russia and China even though commie/socialist/whatever spend far less per capita on government services then the “capitalistic” USA. Look at our public school spending per student and compare their return on investment to ours. We should be ashamed. Look at all the other social programs we have and compare to what Russia and China spend per capita on the same social programs and tell me who is more efficient. If we could get rid of the Public employee unions, including teachers union. If we only provided the level of health care they do. If we got rid of the trial lawyers and set reasonable caps (do Russia and China even have any sleazy trial lawyers), if we eliminated all the government regulation and interference that the Russians and Chinese don’t have to spend money dealing with, if Americans actually were as interested in how much they can work (like the Chinese) instead of how much time off they get. Maybe we would be competetive. Thanks to the crooks in both parties we are out socialisting the Russians and Chinese while they out Capitalist us. It is a sad situation, I would even trust you (a DEM) to fix it because you are not a partisan politician (I actually like a lot of your ideas if you can believe that, as they are innovative and not designed to benefit your political party more then the citizens they are meant to help). I am begining to lose faith in our ploiticians (even my party), and also losing faith in our citizen voters (are they really just too stupid to vote responsibly?)

  3. Do they really spend far less as a percentage of their economy? Regardless of that answer, they feed the hungry and heal the sick and educate the young. That’s all I’m asking “the leader of the free world” to do as well.

    It’s very easy to agree with limiting legal actions as 90% of them are BS but when a company like Merck can literally murder hundreds of people and cover it up putting thousands more at risk with no fear of government oversight, unfortunately the lawyers are the last line of defense the people have. In China the state EXECUTED the guy who made bad toys and another one committed suicide to avoid execution and we don’t even think they did it on purpose!

    No, we don’t need communism but Europe is kicking our asses doing all that humanitarian stuff AND watching the environment AND protecting consumers AND their corporations are out earning ours (and then paying more taxes!).

    The problem is we’ve developed a culture of take, take, take – every man for himself, effectively erasing 40,000 years of social development that turned us from mindless savages into “social beings.”

    Watch the British Parliament Sakiko posted at 1:51 on Friday and try to imagine Bush even caring about the issues Brown is discussing, not to mention how funny it would be to watch him have to actaully answer questions on the fly like that!

    That’s not a one-time thing, they do this every week and the Minister is held accountable for following through on what they say they’ll do. People matter in Europe, I really don’t think you can say that about US and that’s a very sad thing.

  4. Phil: I don’t know if you will ever get back to read this, but thanks for your reply to my comments. Even though you are hard DEM and I am hard GOP, I don’t think you and I are very different in our core values. We probably agree in what we want for America, just differ on political policy to get us there.

    I see the culture of “take take take” being the government taking what I earned away from me. I fear the politicians who feel it is their right to take take take from me just because I have it to take, and then incite the masses with their class warfare retoric.

    I work in government (county level currently and state level previously) and see on a daily basis how our tax dollars are wasted and misspent by idiot politicians of both parties and lazy bureaucrats, but my experience is that the DEMs are expotentially worse stewards of the tax revenue the then GOP. I work in the thick of it and that is how I see it. The most corrupt special interests at work today influencing our politicians are the public employee unions and the teachers unions. The leadership of these groups are the worst kind of thugs! They pretty much run the Democrat party.

    Just so you understand, I work in government to help influence change for the better (not for the paycheck which amounts to about 5% of my family’s taxable annual income).