February 24, 2009

Global Market Comments for February 24, 2009
Featured Trades: (GOLD), (GLD), (SPG)

1) The Senate Banking Committee holds hearings while Rome burns. The S&P Case-Shiller Home Price Index showed a Q4 fall of -18.2%, the sharpest decline in its 21 year history. Prices in San Francisco fell by 31.2%. We got within 100 points of a 6,000 handle on the Dow this morning, and a print there would have sparked a global stampede to the restroom. But Bernanke managed to assuage fears today, prompting a 234 point rally in the Dow. All ears are on Obama tonight.

2) Gold finally hit a wall just above $1,000, and instantly melted $50. For many traders who got in just above $700 three months ago, it's time to say thank you very much to Mr. Market and either wait for a substantial pull back, or go on to the next trade. It was taking increasingly larger purchases of physical gold by ETF's and coins by individuals to push the price up. CME statistics showed the speculators' position soared to a net long of 215,661 contracts ($21.5 billion). The SPDR Gold Trust ETF (GLD) added five tonnes of the barbaric relic to 1,029 tonnes in just one day. The turnaround neatly sets up a double top on the long term charts with the high set last year. It may take a couple of more runs, and more bad news, which seems in abundant supply, to get the yellow metal to a true new high.

GoldToday.png picture by sbronte

3) The forecasting firm Macroeconomic Advisors says that we are going through the 'epicenter' of the recession right now. They see Q4 GDP being revised down from -3.8% to -6.0%, and that Q1 will come in at -5%. These numbers fall somewhere in between the 1974 recession and the Great Depression in terms of their severity, and are double the worst case scenario offered only three months ago. A tsunami of infrastructure spending, stimulus, and newly recapitalized bank lending will bring positive growth of 2% in the second half. Lower interest rates are slowing down the home foreclosure rate. Many states and municipalities, like Denver, started shovel ready projects the very second that Obama signed the stimulus bill, but it will take months to see the impact on the data. In layman's terms, thing are about to get a lot worse, then a lot better pretty quickly, giving us a classic 'V' type bottom for the economy.

4) With many analysts expecting commercial real estate to be the next shoe to fall in the financial crisis, there is already maneuvering to get a bail out in place before the sushi hits the fan. 'Ghost malls' now widespread around Michigan are spreading to the coasts like a highly contagious plague. Simon Properties (SPG) and Westfield have gone to the extremes of shortening hours to save money on staffing costs and electricity. The trigger will be impending failed rollovers of the debt of a couple of big REITs, of which over a $1 trillion are coming due. The Treasury's TALF program will be expanded from CDO's backed by student loans, car loans, and credit cards to include commercial real estate loans, giving the industry the safety net, and the breather it needs.

Simon.png picture by sbronte


"There is only one side to the stock market, and it is not the bull side or the bear side, but the right side," said Jesse Livermore, the famed stock speculator of the 1920's.