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).

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 ?.

Global Market Comments for January 29, 2009 Featured Trades: (GOLD), (AEM), (TBT), (HYG), (PHB), (NS) 1) December new home sales fell to a stunning 331,000, 100,000 less than the most dire forecasts.?? Average monthly home sales for 2008 were the worst since 1982. Homebuilders are getting absolutely killed by competition from foreclosures. Every real estate indicator is in free fall, and in fact, seem to be accelerating. Expect house prices to continue their relentless downward march. Brace yourself for tomorrow, when the Q4 GDP to be announced may be the worst in 30 years. 2) One month into the new year, my best call clearly has been to buy the Lehman High Yield Bond Fund (TBT), which offers investors a 200% short bet that long Treasuries are going down. A move in the long bond futures contract from 142 to 126 has taken the TBT up 35%, from $35 to $47. My recommendation to buy corporate junk bonds has done similarly well, with the PowerShares Corporate High Yield Bond Fund (PHB), and the iShares iBoxx Fund (HYG) up large. Treasury/junk spreads are shrinking at a tremendous pace, indicating that a healing of the credit markets is underway, although the stock market and the real economy can't see it yet. In December, junk bonds were priced at levels anticipating a default ratio worse than seen during the Great Depression. This trade probably has more to run, but the easy money has been made. It does show that there are great money making opportunities out there, even while the newspaper headlines are awful. 3) There is one sector of the business condominium market that is doing well, while the rest of the industry languishes. Demand remains healthy for medical condominiums being snapped up by doctors looking for an equity participation in their places of business. Medical condos in Manhattan in the 2,200 to 5,700 sq ft range are selling out at prices ranging from $1,075 to $1,350 /sq ft. This market caters to a trend of doctors moving from the old neighborhood small private 1,000 sq ft offices into larger 8,000 medical groups. This enables them to profit from economies of scale and to deal more efficiently with the byzantine new ways they are being reimbursed by providers. This is one area where financing is still easy to get because lenders see doctors as recession proof, offering constant cash flows and historically minimal default rates. People always get sick, don't they? 4) One way to play the current crude glut is to buy San Antonio, Texas based NuStar Energy (NS). A spinoff of Valero Energy's asphalt division, the company boasts 58.5 million barrels of storage facilities around the Gulf. The stock has already doubled since crude prices collapsed big time in October. The company has also been buying up asphalt production from other companies like CITCO, and may offer an additional infrastructure play, once Obama's $30 billion road rebuilding program starts in earnest. NuStar pays a hefty 8.6% dividend at an attractive PE multiple of 11 X. 5) The 170 room Pleasanton Sheraton, next door to the Stoneridge mall, has defaulted on its $12.2 million mortgage. Despite spending $3.5 million on renovations and upgrades last year, owners said that business travel to the Tri-Valley had 'virtually vanished.' The former Washington Mutual is emptying out 1,200 former employees from a nearby office complex, and remaining local firms like Chevron, AT&T, and Safeway have drastically cut back on travel to cut costs.

QUOTE OF THE DAY

'With gas at $2 a gallon, I have fuel efficient cars parked as far as the eye can see', said Mike Jackson, CEO of AutoNation, the country's biggest car retailer.

Global Market Comments for January 28, 2009 Featured Trades: (TM), (GM), (GDX), ($GOLD), (ABX), (NEM) 1) The Fed leaves interest rates unchanged, at close to zero. Like they were really going to make them negative? All they can do now is to accelerate quantitative easing measures by buying boatloads of home mortgage, credit card, car loan, and student loan backed CDO's. They can also talk, a lot. 2) Weekly crude inventories showed a build of 6.2 million barrels, more than double what was expected, knocking front month futures prices down $7 from yesterday's high. Severe storage shortages are now driving owners to keep the excess supplies in railroad tank cars. 3) Although the family only own 2% of the company, Toyota Motors (TM) has appointed Akio Toyoda as its new president, grandson of the founder. He takes the helm just as Toyota's production last year of nine million cars makes it the world's largest producer, a title General Motors (GM) held for 77 years. Toyota introduced its Corolla model in 1966 for $1,200 and eventually sold 32 million. The 36 MPG car now sells for $15,000. 4) Gold's upside breakout through $900 on big volume last week is creating a lot of chatter among the trading classes. Historically, investing in gold came at a big opportunity cost because it didn't pay interest or a dividend, and you had to pay the cost of storage and insurance. With short term Treasuries now yielding zero, this opportunity cost is now, well, zero. There is a new profusion of gold proxies trading on financial markets where you can open an account for free, eliminating all other costs. I found five listed gold futures contracts with 50 and 100 ounce specs, and six traded gold ETF's worth $32 billion, like the Market Vectors Gold Miners (GDX) traded on the NYSE. For the past year there has been a nearly perfect inverse correlation between gold and long Treasury bonds. Does this make it the new deflation play? No matter how inflationary the long term impact of Obama's programs may be, the fact is that everyone is staring at deflation on the plate in front of them right now. And let's face it. Investment in any other instrument, be it in stocks, bonds, commodities, currencies, and real estate, pretty much sucks right now. Finally, take a look at the charts for two leading gold stocks below for Barrick Gold (ABX) and Newmont Mining (NEM), and see how they anticipated the barbaric relic's recent up move. The only thing missing from the bull case for gold is a collapsing dollar. Could that be the next shoe to fall? Many believe that a retest of last year's all time high of $1,050/oz?? is a chip shot, and a move to the inflation adjusted all time high of $1,500/oz is doable.

Global Market Comments for January 27, 2009 Featured Trades: (CAT), (CCTYQ) 1) The performance of heavy equipment maker Caterpillar (CAT) is one of the best leading global economic indicators out there. Poor earnings have taken the stock behind the woodshed for a severe whipping, taking down from $85 to $32. So when CEO Jim Owens says that 2009 will be the company's worst year since WWII, with sales plummeting from $51 billion to $40 billion, traders in all markets take note. Owens believes that global confidence is shot, prompting them to freeze or cancel capital projects with the speed of a mouse click. But Caterpillar believes that the worse 2009 is, the better 2010 will be. He is a strong believer of the FIFO theory, that since the US was first into recession, it will be the first out. In a year, stabilized credit markets will spark an explosion in restarted capital projects. This will take hold just as stimulus infrastructure projects in most major countries break ground. Business should recover sharply. 4) With the US consumer on life support, China watchers are competitively ratcheting down their forecasts for growth this year. I thought I was the uber bear, expecting real GDP of only 5%, versus a consensus of 8%, and an actual rate of 13% a year ago. Now I find that I am being underbid by analysts predicting only a 2% growth rate for the Middle Kingdom. Layoffs, bankruptcies, and a real estate crash are accelerating there, and it is clear that the country is facing its worst economic crisis since Deng Xiaoping adopted capitalist ways in 1978. This scares people, because in the last crisis during the Cultural revolution of the sixties and seventies (I was there), 50 million died. Not good for commodities. 5) High end discretionary retailers are at the epicenter of the consumer spending meltdown, with jewelry taking the biggest hit. Sales are down 30-70% and with the peak Christmas selling season now behind us, companies will have to cross an eleven month desert until the next cash inflow. Until then, they will have to live off of credit lines for working capital. While these were abundant a year ago, they are not to be found now. Friedman's Jewelers is in liquidation, Shanes Company is in chapter 11, and Zales is on life support. The disease is metastasizing to all types of discretionary spending as the Great Emptying of America's malls accelerate. The liquidation of Circuit City Group (CCTYQ) is the writing on the wall. Can wine sales be far behind?

SCARY THOUGHT OF THE DAY

Just in case you didn't have enough reasons to lie awake at night tossing and turning, here is another one. There is a hulking great 800 pound gorilla sitting on the floor of the New York Stock Exchange right now. Past stock market crashes in the thirties and the seventies produced market price earnings multiples of seven. Today it is 11. Does this mean that the Dow has one last 40% down leg left in it before we bottom out? That would take us to a 5,500 Dow, or a 570 S&P 500. Maybe the old PE benchmarks have been rendered meaningless by zero interest rates. Maybe so many single digit stock prices and trough earnings are skewing the numbers. Or, maybe nothing makes any difference anymore, and everything is just driven by the sentiments of attention deprived traders on steroids. But if I am right, look for a few more weeks of Obamaphoria supported stock prices, followed by a long, frightening plunge in the down elevator. The tipoff this is coming is all the discussion about ex-Merrill Lynch CEO John Thain's $35,000 commode, and Citicorp's new $50 million private jet. These people aren't talking about how wonderful stocks are right now.