February 6, 2008

1) Hillary won California, leaving her with 830 delegates vs. 740 for Obama. 2025 are needed to win, and 750 will go into the August convention uncommitted. Hilly could lock this up with the Texas and Ohio primaries on March 4.

2) Candidate Economic policies:

Hillary: more spending, universal health care, freeze interest rates on sub prime loans, raise capital gains tax from 15% to 20%, extend estate taxes.
Obama: raise capital gains taxes, stimulate economy through an increase in tax rebates.
McCain: Lower corporate tax rate from 35% to 25%.

3) Toll Brothers announced its seventh consecutive quarterly loss. Chairman is 'not seeing the light at the end of the tunnel.' 28% of recent purchase contracts have been cancelled.

4) Small regional bank lending is not as weak as portrayed. Lending rates are up 50 basis points while costs are down 1.75% so the profitability of new loans has increased tremendously. There is a surge of refi activity which started two weeks ago. Bond holdings are being sold off to take advantage of record prices and tax refunds are due soon so these banks will be flush with cash which they want to put to work with the right borrowers.

5) Futures prices are discounting a 100% certainty of another 50 basis point cut in the Federal funds rate on or before its March 13 meeting.

6) Some 60 cents of every dollar spent in the US is on imports, so any stimulus package will help China more than the US.


Get ready to short 30 year Treasury bonds ($USB). The inevitable government stimulus package will cause the US budget deficit to go through the roof, forcing the Treasury to run their printing presses 24 hours a day. M1 will skyrocket and inflation will once again rear its ugly head. The US has become such a massive borrower in an ever weakening currency it's just a matter of time before they have to pay the piper. All very bad for bonds. The 30 year Bond has just had a great 17 point run which is begging to be sold. If you can sell bond futures above 120 you might be able to take in ten points quickly.