September 16, 2009

Global Market Comments
September 16, 2009

Featured Trades: (SPX),
(NATIONAL IGNITION FACILITY),
(ECONOMICS BLOGS)

1) Fed chairman Ben Bernanke says the recession is 'technically' over. This will be great news for the homeless living in the tent city under short finals who I fly over when I land my plane at Buchanan airport. It means 'technically' they will eat tonight. It will also be welcome to the 18% of the workforce who are now unemployed in California, the 1.5 million who are losing unemployment benefits in the next three months, and one million college students who ran up and average $30,000 in debt to graduate this year so they could sleep on their parents' sofa. Traders celebrated the news by running the S&P 500 up to 1,054, a positively nose bleeding 58% above the March 9 low. Apparently, the stock market thinks Obama is the greatest president in history, rising some 40% since the inauguration, compared to a 30% drop during the eight years of Bush rule. That is some report card I wonder what the results will be by 2012 and 2016? The only thing I approve of today is that this love fest took silver to a new high this year of over $17. Wake me up when the party is over, and I'll drag your drunken carcasses into the car and drive you home. Then I'm going to cash in a couple of my silver dollars and take my significant other out for a Corona and some vegetarian burritos.

corona3.jpg image by madhedge


2) Traditional brokerage houses are ditching in-house research as fast as they can in their desperate effort to cut costs. No one ever paid for it anyway. The trend is driving masses of individual investors to the blogosphere for their investment advice, creating a new generation of online superstars. Without clients to offend or an investment banking department to kowtow to, you get an independent view that is often unavailable anywhere else. With most still mired in the collapse of business, blogs about the economy, in particular, have been catapulted into the limelight, some seeing their online traffic soar to 100,000 page views a day. If you want to reliably cover all the bases, then http://blogs.wsj.com/economics offers the collective effort of Rupert Murdoch's conservative Wall Street Journal writers. Another conservative view can be found at http://gregmankiw.blogspot.com , prepared by Bush's chairman of the Council of Economic Advisors, Harvard professor Greg Mankiw. If you want to see Obama lambasted for not being liberal enough, visit Nobel Prize winner and ardent Keynesian Paul Krugman's http://krugman.blogs.nytimes.com . A former IMF economist now at MIT, Simon Johnson launched http://www.baselinescenario.com last year, and it became an instant hit. For great macro analysis, go to www.econbrowser.com, written by the original James Hamilton at the University of California at San Diego (where I attended summer school one year to check out Black's Beach). If you are a neophyte to the economics world, and no one will think less of you if you are, then go to http://economistmom.com . I suggest visiting these sites, finding you comfort level, and tracking them over time, as I would with any new research source.

3) Expect to hear a lot about ignition in the next year. No, I don't mean the rebuilt ignition for the beat up '68 Cadillac El Dorado up on blocks in your front yard. I'm referring to the inauguration of the National Ignition Facility next door to me at Lawrence Livermore National Labs. The home of the hydrogen bomb was set up amid the vineyards and cow pastures of this bucolic California suburb, so if someone accidently flipped the wrong switch, it wouldn't blow up San Francisco, or more importantly, Berkeley. The $5 billion project aims 192 lasers at a piece of frozen hydrogen, using fusion to convert it to helium and unlimited amounts of clean energy. The heat released by this process reaches 100 million degrees, hotter than the core of the sun, and will be used to fuel convention steam electric power plants. There is no need for a four foot thick reinforced concrete containment structure that accounts for half the construction cost of conventional nuclear plants. The entire facility is housed in a large warehouse. The raw material is seawater, and a byproduct is liquid hydrogen, which can be used to fuel cars, trucks, and aircraft. If this all sounds like it is out of Star Trek, you'd be right. I worked with these guys in the early seventies, back when math was used to make things, and before it was used to game financial markets, and I can tell you, there is not a smarter and more dedicated bunch of people on the planet.  If it works, we will get unlimited amounts of clean energy for low cost in about 20 years. Oil will only be used to make plastics and fertilizer, taking the price down to $10 for domestic production only. The crude left in the Middle East will become worthless.  Coal will only be found in museums, or in jewelry. If it doesn't work, it will melt the adjacent Mt. Diablo and take me with it. If you don't get your newsletter tomorrow, you'll know what happened.

QUOTE OF THE DAY

'We have gone from discounting everything that could possibly go wrong, to discounting everything that could possibly go right,' said Bernie McGinn, CIO of McGinn, McKean, & O'Neill.

Discount.jpg picture by madhedge