March 10, 2009

Global Market Comments for March 10, 2009
Featured Trades: (GE), (ABX), (SPX), (WTIC), (OIL)

1) It only took a few dew drops of good news for the Dow to recover from its near death experience and rocket 350 points. The 'I love America trades' of long bonds and Treasuries came back with a vengeance. The 'short America trades' were last seen running down the street with their tails between their legs, with gold breaking key support at $900. News that Citigroup was profitable in 2008, and rumors of the suspension of the uptick rule and mark-to-market accounting were enough to do the trick. It also helped that every technical analyst on the planet was screaming 'Buy!'Although this may not last, even a single day of fresh air is welcome.

2) While most industries are facing the worst conditions in 70 years, the market for business journalists is booming, who investors increasingly look to for advice on how to save their last dollar. During the first two months of this year the financial network CNBC, a subsidiary of General Electric (GE), averaged 282,000 home viewers, compared to 264,000 last year and 233,000 in 2007. The financial crisis is boosting profits there, much as the Gulf War did for CNN in 1991. The network is now increasingly becoming the story itself, offering a rallying point for criticism of the Obama administration as it plays to its overwhelmingly conservative audience. Anti bailout comments by futures markets reporter Rick Santelli, who called those behind on mortgages 'losers', sparked nationwide 'tea party' rallies. The theatrical Jim Cramer accused Obama of causing 'the greatest wealth destruction of any US president,' inviting a White House counterattack. Convincing people they are sick, and then offering to sell them the medicine for a cure, has always been a great business strategy.

3) There is one canary in the coal mine that was squawking loud and clear yesterday. Chinese stockpiling, hedge fund short covering, and rebel interruption of exports from Nigeria drove crude to a two month high yesterday at $48.50, up 50% from its December low. The huge contango, where far month futures contracts traded at enormous premiums, has shrunk dramatically, taking selling pressure off of the front month contract. Perish the thought, but could this be an early indicator of an economic recovery? Today's stock market action certainly says so. Go buy that Smart car!

Crude.png picture by sbronte

3) The Financial Times printed a great interview with Peter Munk, the visionary chairman of Canada based Barrick Gold (ABX), the world's largest gold producer. He says that it will only take decisions by a few central banks to move gold up to $2,000 an ounce. The feeling of insecurity is here to stay, and the appeal of gold as a hedge has broadened enormously. With a new floor of gold at $800, the profitability of gold mining companies is soaring. Gold is a win-win play because if financial distress continues, so will gold's flight to safety bid. If the economy recovers, jewelry demand will come roaring back. The world's gold supply is constrained, as miners are having to dig deeper and deeper. Send me another sack of American eagles!

GOLD-1.png picture by sbronte


'If I had only followed CNBC's advice, I'd have a million dollars today, provided that I'd started with $100 million,' said John Stewart of the comedy program, The Daily Show.