March 19, 2009

Global Market Comments for March 19, 2009
Featured Trades: (C), (GE), (USO), (TBT)

1) Way to go Ben! If pouring gasoline on the fire doesn't work, try nitroglycerine! Some $1.2 trillion in new agency and bond purchases, including previously untoucheable long term treasury bonds. Goodbye dollar, hello 4% home mortgage rates. Just tack on another 3% to the 2010 inflation rate. The bond market had its biggest up day in history, gold soared $50, the euro gapped up 4%, and commodity prices roared. Citigroup (C) has quadrupled from $1 to $4 since last week, while General Electric (GE) has doubled from $5 to $10! Just when you think this guy has thrown in the kitchen sink, he shows up another truckload of kitchen sinks. I guess this is what a 1590 SAT score gets you.

2) I have a question, Mr. Market.  If General Electric (GE) got down to $5, Bank of America (BAC) to $2, and Citigroup (C) to $1, where were the share buybacks? Are these companies too broke to buy their own shares, or do they think a few bucks over zero is too much to pay? I'm not sure I like either answer, or even my own question.

3) Early data show that the economy was getting traction even before B-52 Ben launched his carpet bombing campaign. Some $45 billion poured out of near zero yielding money market funds last week. Fannie Mae financed $41 billion in new home loans, the most in a year. Bring on the 'V' recovery!

4) This could be the year of the Exchange Traded Fund (ETF), which was one of the few growth products in an otherwise disastrous year for the brokerage community. Asset allocators are attracted by the ability to make single sector bets, like in oil (USO), leveraged short plays that would otherwise be banned, like the 200% short long Treasuries fund (TBT), intraday trading, and low fees. The only thing missing is liquidity, which is still inadequate in all but a few of the biggest ETF's. There is now thought to be $400-$500 billion invested in these funds, compared to $4 trillion plus in mutual funds, and the rate of innovation is accelerating. The early entrants in the field, like Vanguard and Barclays Bank, are raking in the cash, leaving more conservative families of funds like Fidelity in the dust. Expect to start seeing more ETF's in your 401K's and pension holdings.

USO.png picture  by sbronte

5) President Obama is getting 40,000 letters a day from individuals and small businesses complaining that their credit has been cut off. He reads a sampling.

6) There is now the equivalent of 60% of the US stock market capitalization sitting on the sidelines in minimally yielding money market funds. What else will Bernanke do to entice this money out of its bunker?


'An investor has to guard against many things, and most of all against himself,' said Jessie Livermore, a legendary stock speculator of the twenties.