February 17, 2009

Global Market Comments for February 17, 2009
Featured Trades: (TM), ($GOLD), ($SSEC)

1) In three short weeks we have gone from an administration that had a political interest in portraying the economy as not as bad as it really was, to one that paints the economy as worse than it really is. The markets don't like it. It says a lot that the Dow is taking a run at a new six year low, and is perilously close to a 12 year low, the day Obama signs his stimulus package.

DowLong.png picture by sbronte

2) Gold continues to move from strength to strength, hitting a new high for the year of $972 today, up 22% from my recommended entry point.  In January, gold ETF's bought a record 104 tonnes of the yellow metal. Last week alone, purchases soared to an astonishing 110 tonnes. There has also been huge buying of December, 2009 1,000 calls, suggesting that some players are hoping for a melt up if we break the old highs at $1,050. Looks like we have found our new bubble. Let the games begin!

GOLD2.png picture by sbronte

3) Nobel Prize winning economist Paul Krugman published a blistering editorial in the New York Times yesterday where he makes the shocking observation that there has been no increase in Americans' net worth since 2001. The entire surge in asset prices this century was nothing more than a Madoff style illusion. This is what we should have been expecting all along, since as a nation, we have been spending more than we have been saving for a decade. Krugman uses the just released Federal Reserve Survey of Consumer Finances to support his position. Housing has another 10-15% to drop, and the fall is unstoppable. The just passed $787 billion stimulus package is only a quarter the size of the reflationary program that ended the Great Depression, known as WWII. All sobering food for thought. Now we have to restart the century all over again!

4) I thought you'd be interested to know the top 20 websites visited on the internet in December. No big surprises here.

Rank     Website     Market Share

1.     www.google.com     6.38%
2.     mail.yahoo.com     4.7%
3.     www.myspace.com     3.71%
4.     www.yahoo.com     3.65%
5.     mail.live.com     1.74%
6.     www.facebook.com     1.65%
7.     www.ebay.com     1.64%
8.     search.yahoo.com     1.52%
9.     www.msn.com     1.17%
10.     www.youtube.com     0.98%
11.     www.gmail.com     0.93%
12.     images.google.com     0.55%
13.     www.amazon.com     0.5%
14.     www.wikipedia.org     0.5%
15.     mail.aol.com     0.44%
16.     my.yahoo.com     0.4%
17.     www.pogo.com     0.4%
18.     search.msn.com     0.4%
19.     www.craigslist.org     0.37%

5) According to the New York Stock Exchange, the five largest shorts in the market are: Ford Motor (F), Citigroup (C), General Electric (GE), American International Group (AIG), and Wells Fargo (WFC).

6) Japan's Q3 GDP shrank 3.3%, worse than expected, and the current quarter may show a greater decline. Exports fell a stunning 45%. The country's finance minister, Shoichi Nakagawa, appeared drunk at a press conference, then resigned. The Tokyo stock exchange is off 14% YTD, making it the world's worst performer. Toyota has chopped the price of a new Prius to $20,000, with 0% financing, to clear an enormous backlog of unsold vehicles to make way for the launch of the new plug-in version at the end of this year.

7) One of the few mustard seeds out there continues to be the Shanghai stock market, up 32% YTD, and the best performing stock market in the world. Pundits with short memories are rehabilitating the 'decoupling' theory again, which so far has only 'decoupled' investors from their money. While the Middle Kingdom's growth rate has backed off from a torrid 13% to probably 5%, it is the only major economy that is actually growing. The bet is that their stimulus package, which has a much higher component of infrastructure as opposed to social spending and tax cuts, will work better than ours. Betting against China has been a loser for 30 years now.

ShanghaiNew.png picture by sbronte


'Stocks have reached a permanently high plateau,' said Irving Fisher in 1929, one of the founders of the science of economometrics. Fisher lost a $10 million personal fortune in the 96% collapse in the market that ensued.