“A little less talk and a little more action”
Dow Jones down 105 @ 8,122
Gold up $4.95 @ $859.20
Oil down 61 cents @ $42.94
Copper down $.40 @ $138.95
CRB Index down 1.26 @218.69
SPI down 24 @ 3420
The Hindsight
The Dow recovered from its low of 7,940 on nothing. The 8,000 level is being looked at as a line in the sand and we need to get a confirmation on whether it will hold and rally or just collapse through it…time will tell. The “Talking Heads ” will cite housing starts falling 33%(worst on record) , weekly unemployment claims rising 589,000 (expected 527,000) and Microsoft saying not only are they cutting 5,000 jobs but they just simply have no idea on future earnings! Er, can’t you even hazard a guess? Or is it really that bad! Again markets hate uncertainty and if they don’t know then nobody does. Incidentally to all those of you who think you can’t go wrong by buying and holding “Blue Chips” then spare a thought for the investors who bought Microsoft shares in 1988…yep, we hit that same level today!
Tim Geithner (New Treasury Secretary)
This guy is dangerous. Ignoring the fact that he is running the country’s finances despite admitting personal income tax evasion(Obama wasn’t there someone else you could have picked?) this ex Fed Governor needs a lesson in diplomacy. Saying publicly that China is “manipulating” its currency isn’t going to exactly encourage them to continue to invest in U.S bonds and so finance the monster deficit; you don’t bite the hand that feeds you! I distinctly recall the main reason/trigger for the crash of 1987 was the then Treasury Secretary James Baker saying exactly the same thing about the Germans and their foreign exchange policy on the Deutschmark. Who said history is bunkum!
Anyway,certainly the bond traders agreed by selling the 10 yr bond and pushing its yield up 8bp to 2.63%. As I highlighted all week selling 10 year bonds is the trade as yields will hit 3% soon. I like hearing the bulls say “this isn’t a bubble as investors don’t care about returns ,just safety”, keep talking…….you guys still long that other bubble? Oil @$147 a barrel.
Tim did say something good when he said no banks are presently seeking new help nor do any need nationalising, those words caused the market to rally off their lows. However, the markets needs actions not words and very, very soon so my advice to Obama is stop talking to our Middle Eastern friends and decide exactly how you are going to spend $880 bln.
The Foresight
Our share market was hardly convincing yesterday due to the news from China. This is an economy which will continue to contract and even “implode”, there are already signs of mass unemployment and social unrest…all this will be a major drag in the future. My favourite “Kevin” said it could cost Australia $5bln in exports alone and make this year “ugly and tough”(sounds like my ex). So what do we do trade wise?
1/Avoid the banks. Even sell them via futures/CFD’s. If the UK and U.S banks are losing $50bln plus , do you really believe the likes of ANZ and NAB(huge UK exposure) are going to write down say just 500 mln?(add another 0!). they will get cheaper until we hear from them and their confessions.
2/Sell 10 year bonds in any country(again via futures, its easy)
3/Wait. We need to see how the Dow Jones treats the 8,000 level. Will it be a launch pad or a precipice?
Have a great Australia day.
QUOTE OF THE DAY “I feel sorry for non- drinkers as imagine wakeing up knowing thats the best you are going to feel all day” Frank Sinatra.