January 30, 2009

Global Market Comments for January 30, 2009
Featured Trades: (AMZN), (GOLD), (AEM)

1) Q4 GDP came in at -3.8%, the worst in 26 years. The only buyer right now is the Federal government. What private spending there is can be found online. Amazon (AMZN) announced December sales up 18% YOY, sparking a 14% jump in the stock. This also shows the consumer preference for discount buying. The mice certainly roared for Jeff Bezos. The stock market just suffered its worst January in history.

2) If the Chinese think they are going to get 8% growth in 2009, then they are smoking their former largest import, Opium. I think they are totally unaware of the ton of bricks that is about to land on them in the form of the extinct American consumer. China has spent 30 years building a giant export machine, for which there are currently no buyers. Take a look at Japan's statistics, which are far more reliable than China's, which show exports falling off a cliff, machine tool orders evaporating, and once a half century losses for leading exporters like Toyota. These are numbers far worse than we saw during the depths of their lost decade. Of course, China has the money, and certainly the need, for a massive domestic infrastructure build out that can offset the disappearing exports. But this is not an economy that can exactly turn on a dime, and the transition will be painful. China can always report 8% GDP growth this year. Another problem is that modern China has never faced a recession, and defensive business strategies are essentially unknown. One of the advantages of a centrally planned totalitarian economy is that if you don't like the economic numbers you are getting, just make up some better ones. Personally, I think 5% growth is more realistic, but then you have always known me as a shrinking, subdued, conservative kind of guy. If I wanted headlines I would be shouting 2% growth, or perish the thought, negative growth, from the rooftops, as some China watchers are. The implications for the global economy are huge.

3) Every night the evening news in Japan refers to the 'Great American Depression'. Do they know something we don't? I hear largely inaccurate comparisons to our current economic debacle to Japan's lost decade on an almost daily basis. But there is one thing both have in common. Nobody believes for a second the securities the banks own are worth what they say they are worth. That's what bank hoarding of capital is telling you. The question here remains, how quickly can the banks be forced to face the music?

4) The Pope activated his MySpace page today. How many friends do you think he has, and are they all of the earthly kind?

5) Pundits have suggested calling the aggregator bad bank that would buy up illiquid assets 'Crappie Mae'. I like it. The ticker symbol can be 'CRAP'.

6) With gold surging $50 today to a six month high, and 30 year Treasury bonds down a whopping six points in two days, there is little doubt what's driving this market. Russian selling of bullion reserves to finance last ditch support of the Ruble knocked gold down to $875 this week. But when they didn't show at the Thursday morning fix, it was off to the races. Here is yet another bullish argument for you gold bugs out there. In 1974 the yellow metal peaked at four times the S&P 500, and in 1980 it peaked at six times. On Wednesday they were equal at $876. Technical analysts are getting excited that gold's 200 day moving average will soon start sloping upward. Two more gold stocks to add to your gilt edged portfolio are Rangold Resources (GOLD) in West Africa and Canada's Agnico-Eagle Mines (AEM).

Agnico.png picture by sbronte

Rangold.png picture by sbronte

QUOTE OF THE DAY

'A year ago there would be 30 people looking for one airplane. Today, there are 30 airplanes looking for one buyer,' said Jay Mesinger, an airplane broker in Carlsbad, California. Congressional chastising of big three execs who flew to Washington in their corporate jets put a dagger through the heart of this business. A Gulfstream V which cost $48 million a year ago can now be had for only $25 million, stewardesses included ?.