December 4, 2008

Global Market Comments for December 4, 2008
Featured trades: (VIX), ($GOLD), ($SPX), (BAC), (DD), (T)

1) The relentless drumbeat of layoffs continues. United at SFO 500, DuPont (DD) 2,500, AT & T (T) 1,200, and Bank of America 30,000! Many of the BAC cuts will be at its newly acquired Merrill Lynch subsidiary. If the Big Three auto makers go under, add another two million to these figures. Overnight the ECB cut interest rates by 0.75% to 2.50%.

2) Historically, recessions end right after the government announces them. The most powerful leading indicator, the stock market, understands this and enters a bull market soon after. Employers, the most pitiful lagging indicator, start hiring about two years later.

3) It looks like the Volatility Index (VIX) is heading into a new, permanently higher range. When the VIX was at 15%, it created a daily Dow range of 1%, or 140 points. At 60% it creates a 4% daily range, or 350 points. Fasten your seat belts!

4) Hawaii has adopted the Better Place exchangeable battery program for cars you were so interested in. The state is an ideal location for such a program because the island limits most car trips to less than 40 low speed miles. Gas is expensive there, because it all must be imported from the West Coast. It will cost $1 billion to build the initial recharging network, and fleets are expected to be the initial users.

5) Famed short seller Bill Fleckenstein, author of Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve, has made a killing in this year's melt down. Bill is such a serious short seller that he keeps a seven foot tall stuffed bear in his office wearing a 'Dow 10,000' hat. Bill has just covered his stock shorts because the government has created just too much liquidity to justify the risk. And maybe he looked at the chart of the S&P 500 below. He is, however, keeping a core long in gold because the current massive reflationary campaign will eventually come back to bite in the form of much higher inflation.

SPX122008.png picture by sbronte