You know I dont buy these indicators so...

Consumer sentiment has not been this low since 1982 just before the start of the 190’s -1990’s Great Bull Market!

Oliver Twist

Like Oliver Twist once said,”I want more”, first there were maze riots in Mexico now there is rice hording at Sams Club,I haven’t had this much fun since Johnny Carson started the toilet paper shortage rumors in the 1970’s …yikes and just like the seventies “the Saturday Night Fever’ portfolio is staying alive set up to take advantage of raising inflation a weak currency ,more onerous and stupid regulation and higher taxes. The sector focus is and should remain Energy, Precious Metals, Commodities and Agriculture .There is nothing as much fun as making money of other people’s foolishness especially when there is so much foolishness to go around, it looks like easy pickings. Again stick with the “Saturday Night Fever”, portfolio which is made up of sectors that thrive in a higher inflationary environment and the self inflicted shortage that over regulation, higher taxes and price controls always brings about.

Short term in an odd twist the US dollar has staged a rally today, my guess is that the FED is about to curtail its interest rate cuts which as I have stated time and time again were the wrong medicine applied to the current banking crisis. Since the Bear Stearns debacle the FED seems to have sharpened its focus on the secondary market for mortgage backed securities which is the real center of the problem.

In the short term you may want to lock in some gains on Ag ,Energy and Precious metals as the dollar rallies, or use the weakness as a buying opportunity depending on your portfolio and cash situation. Banks and financials have also started a counter rally though it still seems like a bounce and again the road to recovery is littered with “almosts” so its best to do a lot of home work.Remember commodity cycles are punctuated with enormous corrections along the way.

The strong Euro is also killing European manufactures and curtailing EURO exports as wells as the tourist trade which Europe is so over dependent on. The ECB may soon be facing a slowdown of similar magnitude to the US so it’s not much of a stretch to expect significant rate cuts. I think the ECB is a bit behind the curve and should have been cutting rates already.

“what were they thinking”?

We seem to be hearing the words earning surprise way to often, in fact so much so that this blogger is often left wondering “what were they thinking”? But last nights earning announcement truly was a surprise to virtually all market observers. After being written off and maligned the previous day Google knocks the cover off the ball with home run numbers and with a little help from Citi and Caterpillar are giving the market a huge boost this morning. Again I have always been a bit skeptical of the recession is going to slow down internet traffic. I hold a counter theory which is that inflation and economic slow down coupled with higher energy prices feed the very strengths of the internet and give the net an even greater competitive advantage. The internet is low cost interactive entertainment, it creates customized solutions of a mass produced scale and it clearly saves on energy costs because you don’t even have to leave your house, finally business gain and enormous amount of information about their customers or lack of customers.

While the shorts stampede like elephants running around a bath tub the big picture suggests that there is even more evidence that the US economy is moving form the global buyer of last resort to the global producer of first resort. I know the current political landscape seems more suited for 1977 than today but that trend and its coming failure should only be seen as a bump in the road. The unintended consequence may even speed the process of the US moving from net consumer to net producer. The embracing of information and communication technologies continues to reshape the US business environment even though the media and government seem totally unaware. The new model has man merged with and using technology to find business opportunities in a more fulfilling self employed business structure. We are becoming the land of independent business technology contractors and wealth is know being created from a kitchen table with a lap top and a website.

Be very quite it’s earning season heheheheheheheheh

Be very quite it’s earning season heheheheheheheheh and so far it has brought us much disappointment, with the economy slowing you would be wise to expect earning to slow, but in the usual fashion many annalists are surprised by this very fact. GE falls short; it happens to the best of us from time to time. The question remains as to why GE has so underperformed and underperforming market since 2000. American Airlines ground even more flights, and the real question is why would anyone use that airline for any reason what so ever? Even before this incident their customer service makes getting an IRS audit looks inviting. I mean lets face American Airlines has ranked lower than the IRS in customer satisfaction for over 20 years running and it is also considered one of the top 5 worst run companies by this blogger for well over 20 years.

Saturday Night Fever

With the continued creep of the idea that protectionism more regulation and more taxes are “good” and the specter or raising inflation and a slowing to morbid economy I continue to recommend the Saturday night fever portfolio which worked well the last time the erge to over regulate and over tax were in vogue in the 1970’s: focus on commodities, agro ,energy and precious metals. Look to ad on weakness!

April 15

Remember all 2007 IRA contributions are due by April 15, 2008 !

it is just not feasible in most areas to cut back on driving

It continues to amaze me when many analysis’s in the mainstream media site the mantra that a slowing economy is going to cause a significant decrease in demand of energy, barring a major depression in America most people need cars to manage there everyday lives, it is just not feasible in most areas to cut back on driving, the car is a necessity not a luxury. Sure higher fuel efficiency helps but the fact of the matter is that most people drive to go to work and drive to go to the grocery store ,so unless there are massive layoffs and unemployment jumps into the 30% level or everyone goes on the zone diet ,demand for gasoline is simply not very elastic.

to be or not to be ........

The obsession over weather to call the current stage of the US economy a “recession” is reaching epidemic proportions; news flash if the past is any indication by the time the Government pronounces a recession, the recession is already over. Remember the market trades on future economic activity not present; the old saw being that the markets trades 6 months head of the general economy.

Mr Bernanke goes to Washington

So the question of the day is, till now after every time the FED chair has testified before congress the market has sold off within a day or so. No sell off could imply the “bottom” or as I would prefer to say the lack of a sell off my signal that the steps being taken are truly the right steps to stabilize the financial system. Not the bottom but the beginning of the end of the banking crisis.The FED, the market, wall street and the regulators look like they are finally applying the right medicine to the crisis . Early efforts by the FED looked misplaced but recent events seem to be addressing the problem.

As for the economy I don’t want to rain on anybodies parade but employment is a lagging indicator not a leading.

The Quarter is over and once again now for the kitchen sink…

European banks look to take some major write downs today, while the US ponders trying to “manage” ie…socialize the financial system. The increase in Commodity margin requirements may take some of the froth out of surging commodity pricing but let’s face it in a higher inflationary environment commodity prices will continue to increase and any short term drop in pricing still suggest a buying opportunity . For the investor looking to play it safer the treasury TIPS and Municipal Bonds look to be of good value. I still like energy, mostly natural gas, agro, commodities and metals and some transports like rails. Banks and financials remain under suspicion, at the moment I am willing to let the “John Reed” effect continue to work its way through the financial system ,but again I caution its not over till everyone stops saying its over .

May I remind you ,'it aint over till its over"

What continues to make me very edgy is the concerted effort of the business media (CNBC) to talk up the market. The funny thing was not matter how many times they said oil and gold had turned and the commodity bubble was over virtually all of my commodity and energy plays were up. Have we turned a corner yes, it seems so the latest FED action is more targeted to the problems at hand ,,but the road to recovery can be littered with failed rescue attempts . The fact of the matter is the real estate bottom is yet to be seen.

All this brings little joy to my eyes because the bigger picture still suggests higher inflation, higher commodity prices, bad government, higher taxes, protectionism, and more onerous regulation. I am still waiting for the jimmy carter resurrection and with it those failed foolish policies of the past will bring about exactly the same results in the present. The scary thing is that everyone knows it and yet the move toward collectivism seems unstoppable.

So for now I would suggest using any sell off in commodities, metals, ag and energy as long term buying opportunities and keep looking toward financials for short term and intermediate term longs and shorts.

$2 well maybe more

Rumors continue to circulate that JP Morgan is going to up its offer for Bear Stearns ,look for around $10 a share . Look for around $10 a share . This would be a nice boost for the financials and may signify the bottom.

the "up tick" rule

There is much rumbling about the abolition of the up tic rule by the SEC .This rule put in place in the 1930’s protected investors against savage shorting. Many credit the recent extremes in volatility to the run away no holds bar shorting of stocks. Turning even the slightest rumor into a self full filling prophesy. Although I do think the “up tick” rule as it was called was valuable in the functioning of orderly markets I am still on the fence as to weather its abolition has greatly increased volatility. Yes since the rule change volatility has grown but we had just passed through a period of almost no volatility that many investors have mistaken for normal, this is simply not the case. This period of no or little volatility was more a symptom of an uninspired stock market. In my view the current banking and liquidity crisis that coincided with the rule change has greatly exacerbated market volatility with or with out the up tick rule change. The weakness in the market can also be credited too raising inflation, lack of leadership, populist politicians, anti business and anti individual freedom attitude, lack of confidence and in my view the coming reemergence of the jimmy carter years take 2.I guess my point is that with a credit crisis of this magnitude ,I am not sure I’d look to the reinstitution of up tick rule to turn the market around or repair bad managements or stupid politics.

$2 broker

JP Morgan looks to have made one of the great deals of all times, buying Bear Stearns for $2 a share. The question now is with Bears book value of over $80 per share what does that mean for the value of other Investment Banks ? The Bear take over sends a strong little noticed signal, the signal is that if you “step up” as the buyer of very troubled assets the FED will grant you a prize.

JP Morgan Buys Bear Stearns for $2 bucks a share

and you think you lost money look at the holdings and not just the big guys looks at the mutual funds

MAJOR DIRECT HOLDERS (FORMS 3 & 4)

Holder Shares Reported
BEAR STEARNS COMPANIES INC. 2008 TRUST 27,316,339 14-Feb-08
CAYNE JAMES E 5,612,922 21-Dec-07
SCHWARTZ ALAN D 1,026,680 21-Dec-07
GLICKMAN CARL D 291,542 31-Jan-08
MINIKES MICHAEL 250,000 21-Dec-07

TOP INSTITUTIONAL HOLDERS

Holder Shares % Out Value* Reported
BARROW, HANLEY MEWHINNEY & STRAUSS, INC. 11,485,058 9.73 $1,013,556,368 31-Dec-07
MORGAN STANLEY 6,335,729 5.37 $559,128,084 31-Dec-07
Legg Mason Capital Management, Inc. 5,721,010 4.84 $504,879,132 31-Dec-07
PRIVATE CAPITAL MANAGEMENT, INC. 5,541,259 4.69 $489,016,106 31-Dec-07
Barclays Global Investors UK Holdings Ltd 4,245,451 3.60 $374,661,050 31-Dec-07
STATE STREET CORPORATION 3,550,715 3.01 $313,350,598 31-Dec-07
VANGUARD GROUP, INC. (THE) 3,149,691 2.67 $277,960,230 31-Dec-07
JANUS CAPITAL MANAGEMENT, LLC 2,765,699 2.34 $244,072,936 31-Dec-07
FMR LLC 2,359,011 2.00 $208,182,720 31-Dec-07
PUTNAM INVESTMENT MANAGEMENT, LLC 2,242,980 1.90 $197,942,985 31-Dec-07

TOP MUTUAL FUND HOLDERS

Holder Shares % Out Value* Reported
VANGUARD/WINDSOR II 8,358,352 7.08 $949,508,787 31-Oct-07
PUTNAM FUND FOR GROWTH AND INCOME 2,350,605 1.99 $267,028,728 31-Oct-07
LEGG MASON VALUE TRUST 1,600,000 1.35 $196,496,000 30-Sep-07
JANUS TWENTY FUND 1,496,429 1.27 $132,059,859 31-Dec-07
VANGUARD 500 INDEX FUND 1,100,046 .93 $135,096,649 30-Sep-07
PUTNAM VOYAGER FUND 965,300 .82 $109,658,080 31-Oct-07
American Beacon Large Cap Value Fd 862,450 .73 $97,974,320 31-Oct-07
PUTNAM INVESTORS FUND 742,700 .63 $84,370,720 31-Oct-07
VANGUARD TOTAL STOCK MARKET INDEX FUND 702,594 .59 $86,285,569 30-Sep-07
COLLEGE RETIREMENT EQUITIES FUND-STOCK ACCOUNT 696,560 .59 $85,544,533 30-Sep-07

Bear Moves toward Shot Gun Wedding

FYI on Bear Stearns,

Yes crazy day…we deal with Bear Global Clearing and Prime brokerage services, Bears investment banking uit was a lead underwriter for mortgage backed securities, which are at the center of the sub prime lending credit crisis. Bear experienced a crisis of confidence with some of its hedge fund customers ,soto sure up its cash position Bear turned to the Federal Reserve and JP Morgan Chase. Unlike banks the securities industry looks to preempt any problems, so Bear went to Chase and Chase went to the FED to alleviate the cash crisis. YOUR FUNDS ARE SAFE AND INSURED UP TO $500,000 by SIPC.



From Bear:

12:56pm 03/14/08


Bear able to do business as usual with new credit : CFO - MarketWatch




12:54pm 03/14/08


Bear saw no big withdrawals after bailout announcement - MarketWatch




12:53pm 03/14/08


Bear went to Morgan because it knew firm's holdings:CFO - MarketWatch




12:53pm 03/14/08


Morgan was able to quickly decide on helping Bear : Bear CFO - MarketWatch




12:50pm 03/14/08


Bear CFO:Firm has had no big mark to market hits since Feb - MarketWatch




12:48pm 03/14/08


Bear CEO says he believes book value in the $80s a share - MarketWatch




12:46pm 03/14/08


Bear had big cash outflows on Thursday from hedge funds:CFO - MarketWatch




12:45pm 03/14/08


Bear shares fall 41% as CEO begins conference call - MarketWatch




12:44pm 03/14/08


Bear will continue to explore alternatives with Lazard:CEO - MarketWatch




12:44pm 03/14/08


Bear comfortable with current range of Q1 estimates : CEO - MarketWatch




12:42pm 03/14/08


Bear Stearns had explored alternatives with Lazard : CEO - MarketWatch




12:43pm 03/14/08


Bear will give more detail on its positions on Monday : CEO - MarketWatch




12:41pm 03/14/08


Bear Stearns clients' withdrawls accelerated quickly: CEO - MarketWatch




12:41pm 03/14/08


Capital ratios remain in good shape: Bear Stearns CEO – MarketWatch





This is what I know so far



James

Citi bank Picks Up John Reed...waspbuzzzzz

Looking for a bottom or near bottom in banking Citi bank always the fountain head of every banking crisis, has just picked up John Reed as an advisor. Folks start the count down.Don’t underestimate the John Reed Factor.

the USA no longer the buyer of last resort

For Kristine the call girl that was implicated in the New York Governor, client number 9 scandal I have one question, do you have a stock broker?

Although there is still suspicion out there that the current financial crisis in the credit markets has more to go.The FED move has managed to shift fears from financial crisis more to an inflationary spiral, with a plunging dollar leading to higher energy and food prices. Inflation seems to be a global contagion manifesting itself from many quarters especially China.

While most are focused on the dollar, with booming middle classes in China, India and Brazil this blogger has long felt that there is a global shift where the USA is longer global buyer of last resort and will for the first time since world war two become more of an export and production story.

the end of the road for client # 9

Spitzer Resigns Market Rallies

net out flows from equities markets because of a short term lack of confidence in those markets

A disturbing trend has been the recent run up of many commodities without the corresponding run up in the stocks that are involved in the same sector. Gold and oil are hitting records yet oil and gold stocks have been sinking of late. Many pundits presume this market action demonstrates a short term market top ,but I am more leaning to the camp that worries that this is more of sign of net out flows from equities markets because of a short term lack of confidence in those markets.