DougD

November 26, 2008

Global Market Comments for November 26, 2008
Featured trades: (HCBK), (BRK/A), (WB)

1) The relentless drumbeat of dire economic data continues. October consumer spending was down 1%. Durable goods shrank by 6.2%, the lowest since 9/11. Sales of single family homes?? collapsed, -5.3%, a 17 year low. Will the last person leaving the stock market please turn the lights out?

2) Tom Barrack, CEO of Colony Capital, with $39 billion in assets, dumped most of his commercial real estate portfolio at the market top in 2005. He sees the next big financial disaster occurring at the regional and community banks, which so far have been too small to attract the attention of regulators. The problem with real estate is that you usually don't know you have a default until a year after it started, because the information flow from tenant, to mall owner, to lender, is so slow. He now sees the best investment opportunities in The US, Europe, and Russia.

3) The only financial in the S&P 500 that has gone up this year has been New Jersey based Hudson City Bancorp.?? (HCBK). The bank only lends money to local people it knows, and then keeps the loans on its books, neatly side stepping the valuation crisis plaguing the industry. It figures that you had to go to a museum of banking practices to find an institution that was prospering in this environment.

4) The Treasury's cash tsunami finally hit the mortgage market. The interest rate for 30 year, fixed rate mortgages has fallen from 5.62% to 5.30% in a week. You can count on them to drop a lot further.

5) Warren Buffet's Berkshire Hathaway (BRK/A) shares have dropped by 49%, from $148,000 to $76,000, in the past month. Investors fear that his fund will blow up because of a massive, ultra long dated, short put position he wrote, covering $37 billion of underlying stock index exposure. He made a bet that indexes would not fall more than 50% for 20 years. But the sage of Omaha was able to dictate terms that none of us could ever see. He is not required to put up any collateral as the put approaches the strike, even if Berkshire is downgraded. The put is European style, meaning that there is a one time only exercise date in 20 years. The S&P 500 has never fallen even 1% over any 20 year period. All the buyer, probably a large life insurance company, really got here was bragging rights. This has all driven BRK/A's stock price down to an enormous discount to underlying high grade assets, and makes the stock a screaming buy. A rare chance to tap into the Oracle of Omaha's mind on the cheap.

6) One novel theory I heard last week about stock market bottoms was that the Dow would drop to the value of one once of gold. It last traded there during the late 1970s, when the Dow and gold were both trading at $700. By 2000, the Dow was trading at 45 times an ounce of gold. If the Dow plunges to 5,000, and hyperinflation causes gold to rocket to $5,000/ounce, we might see parity again. But as much as I am a bull on inflation, I think this is a stretch, at best.

7) The number of people receiving food stamps surpassed 30 million for the first time. This is our modern equivalent to soup lines. Expect the numbers to rise dramatically.

8) The top ten executives at Wachovia Bank (WB) ran their bank into the ground, wiped out the shareholders, and then paid themselves $100 million in bonuses. I would have done it only for $50 million, and saved the shareholders $50 million. Really.

/by
DougD

November 26, 2008

Global Market Comments for November 26, 2008
Featured trades: (HCBK), (BRK/A), (WB)

1) The relentless drumbeat of dire economic data continues. October consumer spending was down 1%. Durable goods shrank by 6.2%, the lowest since 9/11. Sales of single family homes?? collapsed, -5.3%, a 17 year low. Will the last person leaving the stock market please turn the lights out?

2) Tom Barrack, CEO of Colony Capital, with $39 billion in assets, dumped most of his commercial real estate portfolio at the market top in 2005. He sees the next big financial disaster occurring at the regional and community banks, which so far have been too small to attract the attention of regulators. The problem with real estate is that you usually don't know you have a default until a year after it started, because the information flow from tenant, to mall owner, to lender, is so slow. He now sees the best investment opportunities in The US, Europe, and Russia.

3) The only financial in the S&P 500 that has gone up this year has been New Jersey based Hudson City Bancorp.?? (HCBK). The bank only lends money to local people it knows, and then keeps the loans on its books, neatly side stepping the valuation crisis plaguing the industry. It figures that you had to go to a museum of banking practices to find an institution that was prospering in this environment.

4) The Treasury's cash tsunami finally hit the mortgage market. The interest rate for 30 year, fixed rate mortgages has fallen from 5.62% to 5.30% in a week. You can count on them to drop a lot further.

5) Warren Buffet's Berkshire Hathaway (BRK/A) shares have dropped by 49%, from $148,000 to $76,000, in the past month. Investors fear that his fund will blow up because of a massive, ultra long dated, short put position he wrote, covering $37 billion of underlying stock index exposure. He made a bet that indexes would not fall more than 50% for 20 years. But the sage of Omaha was able to dictate terms that none of us could ever see. He is not required to put up any collateral as the put approaches the strike, even if Berkshire is downgraded. The put is European style, meaning that there is a one time only exercise date in 20 years. The S&P 500 has never fallen even 1% over any 20 year period. All the buyer, probably a large life insurance company, really got here was bragging rights. This has all driven BRK/A's stock price down to an enormous discount to underlying high grade assets, and makes the stock a screaming buy. A rare chance to tap into the Oracle of Omaha's mind on the cheap.

6) One novel theory I heard last week about stock market bottoms was that the Dow would drop to the value of one once of gold. It last traded there during the late 1970s, when the Dow and gold were both trading at $700. By 2000, the Dow was trading at 45 times an ounce of gold. If the Dow plunges to 5,000, and hyperinflation causes gold to rocket to $5,000/ounce, we might see parity again. But as much as I am a bull on inflation, I think this is a stretch, at best.

7) The number of people receiving food stamps surpassed 30 million for the first time. This is our modern equivalent to soup lines. Expect the numbers to rise dramatically.

8) The top ten executives at Wachovia Bank (WB) ran their bank into the ground, wiped out the shareholders, and then paid themselves $100 million in bonuses. I would have done it only for $50 million, and saved the shareholders $50 million. Really.

/by
DougD

November 25, 2008

Global Market Comments for November 25, 2008
Featured trades: (GE), (FSLR), (SPWRA), (CCC)

1) The Fed announced the bail out package du jour, $200 billion for Asset Banked Securities for car loans, credit cards and student loans. They are using a ten to one debt to equity formula, which is absolutely the most efficient use of federal funds. The US government is rapidly turning into the world's largest hedge fund.

2) I am only writing this so I can tell you 'I told you so' in three years. The spike in gold since last week from $685 to $830, and the sell off in the dollar from $1.22 to $1.30, is telling us that the enormous liquidity being creating by the Fed and the Treasury now, are going to be a really BIG problem down the road. One estimate puts the total cost of the many bail outs announced so far at $4.3 trillion, and there are much higher estimates out there. To give you an idea of how much money this is, Hoover Dam, the Panama Canal, the Marshall Plan, the Louisiana Purchase, the New Deal, the S & L crisis, and the space program only cost $2.1 trillion in inflation adjusted dollars. The government's budget deficit could hit a staggering $2 trillion next year. Obama has made it clear that he is not afraid to borrow his way out of the current crisis. Go short 30 year Treasury bond futures, now at 127, down from 130 last week.

3) Treasury Inflation Protection Securities (TIPS) are now trading at levels implying that we will have negative inflation for the next ten years. Another example of a broken market.

4) Q3 GDP was revised down from -0.3% to -0.5%. Given the economic data we have seen in the last two weeks, you can pretty much count on negative?????????? -4%-5% for Q4. This is the worst since 1980, when we saw a -8% quarter in the wake of the Iranian revolution caused second oil crisis.

5) With crude at $50, threatening $40, alternative energy plans are in tatters, again. Boone Pickens, who will not receive a single one of his giant wind turbines from General Electric until 2010, is slowing down his natural gas based program. Bill Gates has written off his research on the Athabasca tar sands. But this time I don't think renewable energy will become the government subsidized orphan it became after past crude crashes. This year's near death experience with $148 crude was too close for everyone.

5) Total job losses in the financial community world wide may soar from 170,000 this year to 320,000 by 2009, about 20% of the total work force. Expect to start getting free stock tips from your male nurse, taxi driver, moving specialist, prison guard, and roto rooter man.

6) That must mean that sifting through the wreckage of this year's alternative energy plays must be a profitable enterprise. One area to focus on is the integrated solar names that have the ability to cut upstream and downstream costs, like First Solar (FSLR), down from $320 to $85, and Sun Power (SPWRA), which vaporized from $160 to $18. Another would be environmental clean up carbon recapture plays like Calgon Carbon (CCC).

7) On October 10, 404 stocks in the S&P 500 hit new lows for the year. Last Friday, only 303 hit new lows. Back in the days when technical models actually worked, this would have told you that the October 10 bottom held.

/by
DougD

November 25, 2008

Global Market Comments for November 25, 2008
Featured trades: (GE), (FSLR), (SPWRA), (CCC)

1) The Fed announced the bail out package du jour, $200 billion for Asset Banked Securities for car loans, credit cards and student loans. They are using a ten to one debt to equity formula, which is absolutely the most efficient use of federal funds. The US government is rapidly turning into the world's largest hedge fund.

2) I am only writing this so I can tell you 'I told you so' in three years. The spike in gold since last week from $685 to $830, and the sell off in the dollar from $1.22 to $1.30, is telling us that the enormous liquidity being creating by the Fed and the Treasury now, are going to be a really BIG problem down the road. One estimate puts the total cost of the many bail outs announced so far at $4.3 trillion, and there are much higher estimates out there. To give you an idea of how much money this is, Hoover Dam, the Panama Canal, the Marshall Plan, the Louisiana Purchase, the New Deal, the S & L crisis, and the space program only cost $2.1 trillion in inflation adjusted dollars. The government's budget deficit could hit a staggering $2 trillion next year. Obama has made it clear that he is not afraid to borrow his way out of the current crisis. Go short 30 year Treasury bond futures, now at 127, down from 130 last week.

3) Treasury Inflation Protection Securities (TIPS) are now trading at levels implying that we will have negative inflation for the next ten years. Another example of a broken market.

4) Q3 GDP was revised down from -0.3% to -0.5%. Given the economic data we have seen in the last two weeks, you can pretty much count on negative?????????? -4%-5% for Q4. This is the worst since 1980, when we saw a -8% quarter in the wake of the Iranian revolution caused second oil crisis.

5) With crude at $50, threatening $40, alternative energy plans are in tatters, again. Boone Pickens, who will not receive a single one of his giant wind turbines from General Electric until 2010, is slowing down his natural gas based program. Bill Gates has written off his research on the Athabasca tar sands. But this time I don't think renewable energy will become the government subsidized orphan it became after past crude crashes. This year's near death experience with $148 crude was too close for everyone.

5) Total job losses in the financial community world wide may soar from 170,000 this year to 320,000 by 2009, about 20% of the total work force. Expect to start getting free stock tips from your male nurse, taxi driver, moving specialist, prison guard, and roto rooter man.

6) That must mean that sifting through the wreckage of this year's alternative energy plays must be a profitable enterprise. One area to focus on is the integrated solar names that have the ability to cut upstream and downstream costs, like First Solar (FSLR), down from $320 to $85, and Sun Power (SPWRA), which vaporized from $160 to $18. Another would be environmental clean up carbon recapture plays like Calgon Carbon (CCC).

7) On October 10, 404 stocks in the S&P 500 hit new lows for the year. Last Friday, only 303 hit new lows. Back in the days when technical models actually worked, this would have told you that the October 10 bottom held.

/by
DougD

November 24, 2008

Global Market Comments for November 24, 2008
Featured trades: (C), (GS), (MS), (NVDA), (GLW), (BRCM)

1) OK, so it was a tough week! Quit whining! Wipe you nose and get back out there and put some trades on! No one ever said this was going to be easy. If it was, your cleaning lady would be running a hedge fund for minimum wage, for cash payments only. After a Marine crashes, the first thing they do is stick him back into a plane (Semper Fi!). I tell investors that if you use limited risk options strategies along with stops you can make a living at this business being wrong 40% of the time. If you are wrong 30% of the time, you are considered talented. If you are wrong 20% of the time, you are promoted to the head of the proprietary book at Morgan Stanley. The people who are wrong 10% of the time, you only read about in the newspapers when they buy a piece of modern art for $100 million. Only God is never wrong, and even Him, you have to cut some slack once in a while.

2) In the past year, the market cap of Citibank has dropped from $200 billion to $20 billion. This is what happens when the Treasury forces you to bring toxic, off balance sheet liabilities back on to your balance sheet. The Treasury's TARP initially gave C $25 billion, then another $20 billion with today's bail out, with $306 billion in loan guarantees. It really is too big to fail, so the question is, what form will it take in any restructuring? A merger with Goldman Sachs or Morgan Stanley, who could use C's deposit base, is the most likely scenario. At $5/share the stock has essentially become a cheap, perpetually dated call, and is worth a gamble here.

3) There are now 105 companies in the S&P 500 with share prices under $10, the most in history. The 1987 record was 59 companies. The incredible thing is that several of these, like NVIDIA (NVDA), Corning Glass Works (GLW), and Broadcom (BRCM) are trading at 75% of cash on the balance sheet. I saw the same thing in Tokyo in the late nineties, and they all turned out to be huge buys.

4) William Safire believes that the new English language word of the year will be 'frugalista', defined as 'a person who lives a frugal lifestyle, but stays fashionable and healthy'. Says a lot about our times. I've added it to my spell checker.

5) My old cleaning lady called me last night for a job. She said all of her employers had recently let her go because they couldn't afford her anymore. Another sign of the times.

6) The National Association of Realtors says that October existing home sales fell by 3.1%, to 4.8 million. The median home price dropped by 11.3%, to $183,000, the sharpest plunge on record. Foreclosures accounted for 45%, a figure that in itself does not inspire conference. Expect the economic data for October and November, which will dribble out over the next few months, to be some of the worst in the economic history of the US.

/by
DougD

November 24, 2008

Global Market Comments for November 24, 2008
Featured trades: (C), (GS), (MS), (NVDA), (GLW), (BRCM)

1) OK, so it was a tough week! Quit whining! Wipe you nose and get back out there and put some trades on! No one ever said this was going to be easy. If it was, your cleaning lady would be running a hedge fund for minimum wage, for cash payments only. After a Marine crashes, the first thing they do is stick him back into a plane (Semper Fi!). I tell investors that if you use limited risk options strategies along with stops you can make a living at this business being wrong 40% of the time. If you are wrong 30% of the time, you are considered talented. If you are wrong 20% of the time, you are promoted to the head of the proprietary book at Morgan Stanley. The people who are wrong 10% of the time, you only read about in the newspapers when they buy a piece of modern art for $100 million. Only God is never wrong, and even Him, you have to cut some slack once in a while.

2) In the past year, the market cap of Citibank has dropped from $200 billion to $20 billion. This is what happens when the Treasury forces you to bring toxic, off balance sheet liabilities back on to your balance sheet. The Treasury's TARP initially gave C $25 billion, then another $20 billion with today's bail out, with $306 billion in loan guarantees. It really is too big to fail, so the question is, what form will it take in any restructuring? A merger with Goldman Sachs or Morgan Stanley, who could use C's deposit base, is the most likely scenario. At $5/share the stock has essentially become a cheap, perpetually dated call, and is worth a gamble here.

3) There are now 105 companies in the S&P 500 with share prices under $10, the most in history. The 1987 record was 59 companies. The incredible thing is that several of these, like NVIDIA (NVDA), Corning Glass Works (GLW), and Broadcom (BRCM) are trading at 75% of cash on the balance sheet. I saw the same thing in Tokyo in the late nineties, and they all turned out to be huge buys.

4) William Safire believes that the new English language word of the year will be 'frugalista', defined as 'a person who lives a frugal lifestyle, but stays fashionable and healthy'. Says a lot about our times. I've added it to my spell checker.

5) My old cleaning lady called me last night for a job. She said all of her employers had recently let her go because they couldn't afford her anymore. Another sign of the times.

6) The National Association of Realtors says that October existing home sales fell by 3.1%, to 4.8 million. The median home price dropped by 11.3%, to $183,000, the sharpest plunge on record. Foreclosures accounted for 45%, a figure that in itself does not inspire conference. Expect the economic data for October and November, which will dribble out over the next few months, to be some of the worst in the economic history of the US.

/by
DougD

November 21, 2008

Global Market Comments for November 21, 2008
Featured trades: (GS), (GOOG)

1) The Cassandras had a field day yesterday after the decisive break of the 2002 low in the Dow at 7,700, hitting the lowest level since 1997. It seems they were competing with each other to see how dire their downside targets could get. 7,000, 6,000, 4,000, 2000? The market seems to be discounting a permanent cut in the US long term growth rate to an anemic, Euro style 2%/year, down from the torrid, artificial, debt fueled 5% rate seen earlier this decade. I think the final bottom may be dictated not by levels, but by time. The candidates? End 2008, when hedge fund and mutual fund redemptions finish. Tax loss selling to beat Obama guaranteed capital gains tax increases will also be done. After that, the next window will be the Obama inauguration on January 20, when the US officially no longer becomes leaderless, and the new president shows his true hand with new policies. A major tradable rally will almost certainly spring off of these two dates. A Fed interest rate cut of 50 basis points at its December meeting is now a sure thing.

2) At 3.7%, the S&P 500 dividend yield now tops the 30 year Treasury bond yield for the first time in 50 years. Stocks are back to 1950s valuation parameters, when the Great Crash was still a recent memory, and equities were considered too risky for most investors. The melt up in the Treasury futures bond markets were truly of Biblical proportions. The long bond ($USB) gapped up eight points in two hours to 130, the sharpest move in the 30 year history of the contract. The Merrill Lynch US High Yield Index surpassed 21%, the highest in history, and a move right off the top of the charts.

3) Pit bull Henry Waxman overthrew Michigan's legendary John Dingel to become chairman of the House Energy and Commerce Committee in a palace coup. This is big, and shows you that these are not your father's democrats. If there was one person who helped Detroit shirk from producing safe, well made, fuel efficient, clean burning affordable cars, it was John Dingle. The air cover he provided virtually assured that the US auto industry would eventually disappear up its own exhaust pipe. Shifting control of this key committee, from the main car producing state, to the largest car consuming state, hints at the new priorities of a harsher, more realistic Democratic Party. Kiss the Big Three goodbye.

4) According to MDA Dataquick, the October San Francisco Bay Area median home sales price was $375,000, down 45% YOY, and lowest since 2001. Foreclosures account for 45% of sales. The highest price fall was in Contra Costa County, down 49%, while the lowest was in Marin, down 13%. The greatest foreclosure rate was 68% in Solano County, and the lowest was in San Francisco at 10.6%. More losses are to come.

5) One of the lead stocks in this leg of the downturn has been Goldman Sachs (GS), whose shares have dropped 64% from $140 to $50 in the past month. The investment bank is staying mum, but the stock is acting like something ugly is going on behind the curtains. When Hank Paulson became Treasury secretary, his stock in GS, worth $900 million, was put in a blind trust where he couldn't touch it. It is now worth only $180 million. If GS doesn't reverse its slide soon, the Treasury secretary may be looking for a bail out for himself.

MEA CULPA OF THE DAY

I have to tell you that in all honesty, I don't think I could have come through this dreadful week without losing money. It wasn't that one thing blew up, it's that everything blew up. I went into the week with a recommendation for just one small, limited risk bet that the S&P 500 would not drop more than 10% by Friday. I was short the November 780 puts which expired today. It just made it there. Having shorted the puts at $10 I would have stopped out at $20. But I almost certainly would have taken a hit on a short position in 30 year Treasury bonds as it powered its way up through my cost at 124, though a stop out at 125 for a loss of a point, and eventually to an unbelievable high of 130. All in just an hour! And how much would I have nibbled on my favorite stocks on the way down this week, like Goldman Sachs, as it went from $63 to $49, and Google (GOOG) on the way from $325 to $260? I have always worked with risking controlling hedges and tight stop losses, which always cost me a lot of money in bull markets, but left me still standing after bear markets. Trading the Japanese stock market from ??3,000 to ??39,000, and then back down to ??7,000, and the yen from ??360 to ??79, and then back to ??160, no other philosophy could evolve over a 35 year career. It's all about risk control, something the major investment banks apparently forgot to do, and was one of the reasons I left Morgan Stanley 19 years ago.

/by
DougD

November 21, 2008

Global Market Comments for November 21, 2008
Featured trades: (GS), (GOOG)

1) The Cassandras had a field day yesterday after the decisive break of the 2002 low in the Dow at 7,700, hitting the lowest level since 1997. It seems they were competing with each other to see how dire their downside targets could get. 7,000, 6,000, 4,000, 2000? The market seems to be discounting a permanent cut in the US long term growth rate to an anemic, Euro style 2%/year, down from the torrid, artificial, debt fueled 5% rate seen earlier this decade. I think the final bottom may be dictated not by levels, but by time. The candidates? End 2008, when hedge fund and mutual fund redemptions finish. Tax loss selling to beat Obama guaranteed capital gains tax increases will also be done. After that, the next window will be the Obama inauguration on January 20, when the US officially no longer becomes leaderless, and the new president shows his true hand with new policies. A major tradable rally will almost certainly spring off of these two dates. A Fed interest rate cut of 50 basis points at its December meeting is now a sure thing.

2) At 3.7%, the S&P 500 dividend yield now tops the 30 year Treasury bond yield for the first time in 50 years. Stocks are back to 1950s valuation parameters, when the Great Crash was still a recent memory, and equities were considered too risky for most investors. The melt up in the Treasury futures bond markets were truly of Biblical proportions. The long bond ($USB) gapped up eight points in two hours to 130, the sharpest move in the 30 year history of the contract. The Merrill Lynch US High Yield Index surpassed 21%, the highest in history, and a move right off the top of the charts.

3) Pit bull Henry Waxman overthrew Michigan's legendary John Dingel to become chairman of the House Energy and Commerce Committee in a palace coup. This is big, and shows you that these are not your father's democrats. If there was one person who helped Detroit shirk from producing safe, well made, fuel efficient, clean burning affordable cars, it was John Dingle. The air cover he provided virtually assured that the US auto industry would eventually disappear up its own exhaust pipe. Shifting control of this key committee, from the main car producing state, to the largest car consuming state, hints at the new priorities of a harsher, more realistic Democratic Party. Kiss the Big Three goodbye.

4) According to MDA Dataquick, the October San Francisco Bay Area median home sales price was $375,000, down 45% YOY, and lowest since 2001. Foreclosures account for 45% of sales. The highest price fall was in Contra Costa County, down 49%, while the lowest was in Marin, down 13%. The greatest foreclosure rate was 68% in Solano County, and the lowest was in San Francisco at 10.6%. More losses are to come.

5) One of the lead stocks in this leg of the downturn has been Goldman Sachs (GS), whose shares have dropped 64% from $140 to $50 in the past month. The investment bank is staying mum, but the stock is acting like something ugly is going on behind the curtains. When Hank Paulson became Treasury secretary, his stock in GS, worth $900 million, was put in a blind trust where he couldn't touch it. It is now worth only $180 million. If GS doesn't reverse its slide soon, the Treasury secretary may be looking for a bail out for himself.

MEA CULPA OF THE DAY

I have to tell you that in all honesty, I don't think I could have come through this dreadful week without losing money. It wasn't that one thing blew up, it's that everything blew up. I went into the week with a recommendation for just one small, limited risk bet that the S&P 500 would not drop more than 10% by Friday. I was short the November 780 puts which expired today. It just made it there. Having shorted the puts at $10 I would have stopped out at $20. But I almost certainly would have taken a hit on a short position in 30 year Treasury bonds as it powered its way up through my cost at 124, though a stop out at 125 for a loss of a point, and eventually to an unbelievable high of 130. All in just an hour! And how much would I have nibbled on my favorite stocks on the way down this week, like Goldman Sachs, as it went from $63 to $49, and Google (GOOG) on the way from $325 to $260? I have always worked with risking controlling hedges and tight stop losses, which always cost me a lot of money in bull markets, but left me still standing after bear markets. Trading the Japanese stock market from ??3,000 to ??39,000, and then back down to ??7,000, and the yen from ??360 to ??79, and then back to ??160, no other philosophy could evolve over a 35 year career. It's all about risk control, something the major investment banks apparently forgot to do, and was one of the reasons I left Morgan Stanley 19 years ago.

/by
DougD

November 20, 2008

Global Market Comments for November 20, 2008
Featured trades: (VNO), (MSW), (SPG), (GM)

1) Weekly jobless claims soared by 27,000 to 542,000, the highest since 1992. Unemployment appears to be going parabolic. It is clear that the consumer rolled over and died in October, and talk is now rife of deflation. All Treasury instruments exploded to the upside, and are at maximum crisis levels. The ten year Treasury yield hit a 50 year low of 3.11%, and the 30 year yield melted to 3.60%. Now that congress has taken an auto industry bail out off the table, the bankruptcy of GM appears imminent. When we broke through the 2002 low, trap door, stop loss selling ensued. Citicorp plunged 25%. The Dow got off cheap, only down 444. Next stop, 7,000 very quickly. You can always tell when the stock market hits a new low because the CNBC anchormen look like they have just been kicked in the balls. Think of GE stock cratering. Brace yourself for tomorrow!

2) Yesterday, they really took the REIT's behind the woodshed and beat them senseless with the ugly stick. Two commercial real estate CDO's defaulted, and credit spreads blew out on all fronts. Vornado Realty Trust (VNO) dropped from $55 to $45, Mission West Properties (MSW) slid from $7.50 to $6.20, and Simon Property Group (SPG) tumbled from $50 to $40. The fear is that if GM goes under, there will be massive dumping of commercial real estate on the market by the dealer network. There is more pain expected in this sector, which until now has been largely spared. New lows were set today.

3) Everyone is now a Keynesian, with supply siders in total disarray. Congressmen are competing with each other to see how much they can spend to cure the economy. To see where this can lead, look at Zimbabwe, which currently has the highest inflation rate in history, and where prices are doubling every 1.3 days. Weimar Germany only saw prices double every 3.7 days during the early 1920s. Most shops in the capital, Harare, will only accept US dollars or South African rands, spurning Zimbabwean dollars.

4) I attended a book signing for Ted Turner yesterday, which was an absolute riot. To describe him as a larger than life figure is an understatement. The secrets to business success are to 'rise early, work like hell, and always advertise', and 'he who has the most friends, wins'. He quit taking his anti anxiety drugs because his psychiatrist was a 'quack'. The AOL-Time Warner merger was the worst in history, and personally cost him $8 billion. I sent him a resume in 1980 when he was setting up CNN and never got a response because?? I 'didn't try hard enough.' I met him as a Morgan Stanley client a few years later when he was fresh from his America's Cup win. Some 25 years later he has mellowed, but not by much. His chief passions now are his new buffalo restaurant chain, and chasing his three girlfriends.

5) The Bay Area Council says that 40% of local companies plan to lay off staff, while only 13% plan to hire. Two thirds of companies say that the credit crisis is affecting their business. The little hiring that is going on is in the health care and alternative energy areas.

6) Wholesale gasoline futures crashed to $1.03/gallon today, meaning that the local retail price could fall under $1.50/gallon by early next year!

7) If the auto industry does get a bail out, the first $60,000 will cover the cost of the private jets the CEO's chartered to go to Washington to beg, wearing their custom made suits, tin cups in hand. What dodos! Later we learn that the GM retirees health care organization is the world's largest buyer of Viagra.

8) PC Magazine, which I have been reading for 20 years, will stop publishing its print edition in February. This is just the latest example of a business wholly migrating its business entirely to online.

QUOTE OF THE DAY

'There is no asset class that too much money can't spoil', said Barton Biggs of Traxis Partners, a global hedge fund.

/by
DougD

November 20, 2008

Global Market Comments for November 20, 2008
Featured trades: (VNO), (MSW), (SPG), (GM)

1) Weekly jobless claims soared by 27,000 to 542,000, the highest since 1992. Unemployment appears to be going parabolic. It is clear that the consumer rolled over and died in October, and talk is now rife of deflation. All Treasury instruments exploded to the upside, and are at maximum crisis levels. The ten year Treasury yield hit a 50 year low of 3.11%, and the 30 year yield melted to 3.60%. Now that congress has taken an auto industry bail out off the table, the bankruptcy of GM appears imminent. When we broke through the 2002 low, trap door, stop loss selling ensued. Citicorp plunged 25%. The Dow got off cheap, only down 444. Next stop, 7,000 very quickly. You can always tell when the stock market hits a new low because the CNBC anchormen look like they have just been kicked in the balls. Think of GE stock cratering. Brace yourself for tomorrow!

2) Yesterday, they really took the REIT's behind the woodshed and beat them senseless with the ugly stick. Two commercial real estate CDO's defaulted, and credit spreads blew out on all fronts. Vornado Realty Trust (VNO) dropped from $55 to $45, Mission West Properties (MSW) slid from $7.50 to $6.20, and Simon Property Group (SPG) tumbled from $50 to $40. The fear is that if GM goes under, there will be massive dumping of commercial real estate on the market by the dealer network. There is more pain expected in this sector, which until now has been largely spared. New lows were set today.

3) Everyone is now a Keynesian, with supply siders in total disarray. Congressmen are competing with each other to see how much they can spend to cure the economy. To see where this can lead, look at Zimbabwe, which currently has the highest inflation rate in history, and where prices are doubling every 1.3 days. Weimar Germany only saw prices double every 3.7 days during the early 1920s. Most shops in the capital, Harare, will only accept US dollars or South African rands, spurning Zimbabwean dollars.

4) I attended a book signing for Ted Turner yesterday, which was an absolute riot. To describe him as a larger than life figure is an understatement. The secrets to business success are to 'rise early, work like hell, and always advertise', and 'he who has the most friends, wins'. He quit taking his anti anxiety drugs because his psychiatrist was a 'quack'. The AOL-Time Warner merger was the worst in history, and personally cost him $8 billion. I sent him a resume in 1980 when he was setting up CNN and never got a response because?? I 'didn't try hard enough.' I met him as a Morgan Stanley client a few years later when he was fresh from his America's Cup win. Some 25 years later he has mellowed, but not by much. His chief passions now are his new buffalo restaurant chain, and chasing his three girlfriends.

5) The Bay Area Council says that 40% of local companies plan to lay off staff, while only 13% plan to hire. Two thirds of companies say that the credit crisis is affecting their business. The little hiring that is going on is in the health care and alternative energy areas.

6) Wholesale gasoline futures crashed to $1.03/gallon today, meaning that the local retail price could fall under $1.50/gallon by early next year!

7) If the auto industry does get a bail out, the first $60,000 will cover the cost of the private jets the CEO's chartered to go to Washington to beg, wearing their custom made suits, tin cups in hand. What dodos! Later we learn that the GM retirees health care organization is the world's largest buyer of Viagra.

8) PC Magazine, which I have been reading for 20 years, will stop publishing its print edition in February. This is just the latest example of a business wholly migrating its business entirely to online.

QUOTE OF THE DAY

'There is no asset class that too much money can't spoil', said Barton Biggs of Traxis Partners, a global hedge fund.

/by

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