Monday Mop-Up

Well the day didn't go as bad as we thought it would!

We held up well despite the steep declines in Asia and Europe but there was little conviction t the buying and no particular "good" news.  On the whole, I'd say it was just a frustrating day for the bears but no kind of bullish victory. 

Financial and Technology sectors still dragged the market with the financials dropping another 1.2% and tech down about half a point.  We had two bad bits of news in real estate; One was a slowdown in commercial real estate as nonresidential construction spending turned down for the first time since 2003 as there seems to be an oversupply of shopping malls and office buildings.  The other bit of bad news for real estate is FRE and FNM settling their issues with Andrew Cuomo by agreeing to enforce stricter appraisal standards.  While this sounds like a good idea, it simply translates into fewer loans and will hit homeowners with declining home values very hard.

"In my opinion, 70% to 80% of appraisals that were done during the housing boom are probably not worth the paper they're written on," said Jonathan J. Miller, a New York appraiser and longtime critic of industry practices. He estimates that home values are overvalued nationwide by at least 10% because of inflated appraisals.  Mr. Cuomo said he is still investigating the practices of Wall Street firms involved in creating mortgage securities, as well as ratings companies.

Commodities continued to rally as the dollar continued to weaken and I've never seen a currency crisis like this where neither the Fed or the Treasury take any action whatsoever to support the currency (although I do think I heard Paulson say we favor a "strong dollar" but it comes off more like a punch-line now.

Going over the Big Chart we are still fairly flat for a week's move:

We lost 2 critical levels on the Transports as oil broke through $100 and stayed there.  The Nasdaq fell back below our 20% Horror line and the Russell is testing it.  The Hang Seng and the Nikkei are still looking hopeless and India seems determined to join them with a 1,000-point drop for the week.  We'll watch the Russell very closely this week as it could go either way and the small caps will probably take the markets with them.

US automakers got killed again with GM posting a 13% decline in January sales.  Shockingly, people don't want large gas-guzzling cars and trucks and favor the smaller, more efficient Japanese models.  WHO COULD HAVE EVER GUESSED THAT?  This is what happens when the government steps in to help failing industries, these auto companies should have died 30 years ago and have been on life support ever since and STILL haven't learned to make cars like the rest of the world.  It's pathetic!

GM's truck sales were off 20% overall and sales of Ford's flagship Explorer dropped 27% and Dodge Ram dropped 20%.  Even the Toyota Tacoma got hit with a 13.9% decline.  The category of "Large" cars dropped 26.4% and Large and Small SUVs were off about 25% each.  Minivan sales were off 20% as well.

Come on America, this isn't rocket science – people want smaller cars becuase gas is 3x more per gallon than it was last time they bought a car.  Get a clue, buy a vowel, it's been 30 years since the Japanese started taking over the market by offering smaller, more efficient cars – perhaps it's time to stop being niche players in the Global market and start making cars that make sense…