Wednesday, January 20, 2010

Business As Usual?

Here is the message to Washington from the election last night – either you fix it, or we will fire you and find somebody else who will.

Politicians have one objective – to make themselves more powerful and wealthy. They cannot do this if they get voted out, so expect things to change soon in Washington. Somebody will go under the bus before they do…

What Change?
Let’s start with Bernanke. Bernanke is a pseudo-politician and he wants a new term. He changed his toon over the weekend on AIG. He is now calling on Congress’ investigation arm, the GAO (Government Accountability Office), to “conduct a full review” of the Fed’s role in the AIG CDS scandal – the one where the NY Fed told AIG to pay its counterparties 100% of their claims (versus much lower market prices) and then to not disclose this information in the SEC filings.

At some point, somebody will ask “who is responsible for this decision”? That person will be trotted out before Congress or a judge and he will then tell us that his superiors told him to do it, and uphill things will flow.

http://abcnews.go.com/Business/wireStory?id=9603552

Geithner is to testify next week about what knows of the AIG free lunch. Expect more than one Congressman to call for his immediate resignation. Also expect Mr. Change (Obama) to seriously consider it. Obama is a politician, and he wants to get reelected too…

Goldman isn’t announcing its bonuses until after everybody else does. I think the country wants Llyod Blankfein’s head on a stick.

http://www.nypost.com/p/news/business/goldman_delays_its_bonus_announcement_bgKqMde8xUn6OcxftrqxUJ

Healthcare “reform” is toast. That means no new handouts to healthcare companies and that Unions will not be able to pawn off the responsibility for the healthcare of their members onto the US Taxpayer.

The Markets Were Either Overbought Or They Are Scared
Yesterday, they took the QQQQ above an obvious breakout level (Green Line and Arrow), to suck a lot of new buys in. I didn’t buy, because the QQQQ was very overbought on the hourly chart (Black Arrow). This morning, QQQQ gapped down hard and are now below support (Blue Arrow). Trading ranges can be painful…


Here is the daily chart for QQQQ. 4 of the last 5 trading days have touched the 20-day (Dashed Line) and the uptrend from the November 1st bottom (Blue Dashed Line). It is no secret that when that line is broken, we get a short term correction (or worse – do not know for certain). Unless there is a huge rally this afternoon, the line is broken – be on the lookout for gap up openings tomorrow…

Obvious support is that $44.5 range. I will be watching this chart closely today.


The Euro Is Broken!
The uptrend (Blue Line) from the March low was broken in December. It is now crashing. It fell right to the 200-day (Purple Line), had a weak rally and then broke the 200-day this morning. That is very bearish.


Gold
Gold peaked the day the Euro peaked. It had a better rally that The Euro, but it is now breaking down out of this wedge as well.

I am now out of 65% of my Gold holdings, having sold 1/3 last week. I sold all of my Silver last week as well. GLD retraced 38% of its April to December rally (Blue Arrow), just like The Euro did. GLD then retraced 50% of its selloff (Black Arrow). It has now broken down below the recent trading range (Green Line and Arrow). I’ve been telling you that this is a really technical market and that these key levels are in play.

Next support on GLD might be the 200-day (Purple Line and Arrow). I’ll look to buy down there.


Young versus Old
The American People aren’t stupid and they don’t like what is going on in Washington. Obama was elected to change the way things are done. He was elected by the youth to take care of our future. Last night, Brown won the youth vote. Before it is all over, the youth will win this battle. The country will decide to focus on its future and not its past.

That means austerity – sacrifice. Stop borrowing and start living within your means. Are you listening California? I know that it sounds revolutionary, but it is the essence of this entire battle since the Credit Crisis started in 2007. The economy is broken – 17.3% U-6 Unemployment, a net loss of manufacturing jobs over the last 10 years, a crashing US Dollar, falling Real Wages, massive Taxes, future Government Promises 8 times larger than GDP…

Wall Street wants to save that model, because it makes them rich. It focuses the resources of the country on producing money via financial alchemy and is driven by exporting jobs to China, versus actually making stuff here, growing stuff and producing stuff here , then saving and using those savings to fund future investments.

The average American wants lower Unemployment, more manufacturing jobs, rising real wages, lower inflation and a Balanced Budget. Brown won yesterday to send a message to Washington that they had better start siding with the populace and stop siding with the bankers.

When the politicians finally do listen to the voters, there will be major changes for the markets. The most obvious is that we will want to get our money back from the banks. That are still lying about the values of their holdings and a new credit crisis is guaranteed. The Dollar will have to fall to bring those jobs back home. Interest Rates will have to go up significantly as the Fed will ultimately not be allowed to print piles of new money to support bond prices. It’s going to hurt.

For those of you who think you were geniuses for riding stocks all the way down and then back up again, remember that at the end of the day, it is not what you make, but what you keep. So when this sucker rolls over again, are you going to go back down on the roller coaster ride? Because, keep in mind, that the next sell off will probably be the last big one and if you get blown out, then you will miss the turn for the next Secular Bull Market- think 1982 - 2000.

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