Dow -45.24 at 8077.56, Nasdaq
+11.80 at 1477.29, S&P
+4.45 at 831.95
Bank failures are caused by depositors
who don't deposit enough money to cover losses due to
mismanagement.
-- Dan Quayle
On the blog is a posting of an article where the
bow-tied financial commentator Jim Rogers is asked if he
thinks if Bernanke is just going to become another
Greenspan? He replied, "He’s worse. All he knows
is to print money. His whole intellectual career has
been spent studying the printing of money. America’s now
given him the printing presses and all he knows to do it
to run them. He doesn’t know about markets. He doesn’t
know about foreign currencies. We know now he doesn’t
even know about economics. I mean, he’s got a PhD in
economics and he was a professor of economics, but he
doesn’t have a clue about economics."
The Fed and bail out team have been giving money and
loans and buying stock in the worst run banks. The ones
who have lost billions of dollars and have hurt millions of
people in doing so. Meanwhile there are some banks, who
it seems for the most part, stayed pretty honest during
the last many years and have managed their depositor's
funds well and have made profits. If you Google on
increased bank earnings you will find many small banks
who have had increases in earning of over 50% compared
to a year ago. NTRS is one we mentioned recently
on a big gain one day. Guess it would seem to make too
much sense to help back these banks so they could really
grow and replace the mismanaged ones. The Fed is a
private corporation run by member banks so they do not
want competition it seems. Until the government finally
devolves the Fed we will keep having these situations.
Well, if they are unwilling to work with the good banks
than why not just distribute personal printers to all
households? Over the last decade the price has dropped
considerably and the quality has increased
exponentially. By distributing printers set up to print
money you could sell the special paper and that would
probably pay for the program and maybe even turn a
profit. No need to bail out banks or have lengthily
congressional meetings or even worry that people would
not be able to make their mortgage payments. No more
foreclosures! We could go to a flat rate tax system and
everyone would pay with no complex forms to fill out.
Car sales would boom and there would no longer be a need
for car companies to offer 0% loans as no loans would be
required. We would all pay cash and our savings accounts
would really grow. This would also take care of worry
over health care and medical insurance as insurance would
not be needed. Heck you could buy your own personal MRI
if you wanted! No worry about oil prices and airlines
and resorts would be having turn-away business. There
are really a huge number of advantages using my plan but
we do not want to get too far off topic. You may however
imagine just how strong a rally we could have if we all
had unlimited funds to buy the stocks we liked. So we encourage you to write
your government
representatives and President Obama and let them
see how a printer in every home is a much better plan
than having the treasury continue with its losing ways.
Many of us have wondered how the Dow stays so
high while the financial stocks in it have made such
huge declines. There are some interesting points
in notes from John Mauldin that can show in part how
this is. The
Dow is a price-based index rather than a market cap index..
This means that the lower priced stocks affect the Dow
price less than the higher priced stocks on the same
percentage move. Now that the financial component stocks
on the Dow are at such low prices they do not change the
Dow overall very much individually. The formula is for
every $1 a Dow component stock loses, the Dow will lose
7.96 points regardless of the market cap of the company.
He used an example of MSFT that has a market cap
higher than IBM yet if MSFT when to zero the Dow
would fall 136 points but if IBM
went to zero, the Dow would lose over 700 points. With
the Friday closing prices of these four stocks GM,
C, BAC and AA totaling 21.53, if
they all went to zero the Dow would drop only 171 points.
That is why there is a non written rule to remove stocks
from the Dow when they trade below $10. So the
answer is that the highest priced stocks in the Dow are
what are keeping the Dow at this level. He points our
that if GE, C, BAC, AXP and
JPM all opened at aero on Monday the Dow, based
only on those five, would be down less than 500 points.
The committee who is charged with
deciding which stocks are on the Dow are clearly not
doing their job as perhaps they fear how it looks to
removes the stocks under $10. But now the situation is
that a 10% positive move for IBM would move the Dow up
by over 60 points while a 10% move by Citigroup would
increase the Dow by less than 3 points. Politics seem to
be playing a major role here and it seems Dow Jones &
Co. has no plans to change the companies in its
industrial average according to John Prestbo,
executive director of indexes at the Wall Street
Journal parent.
Friday the market opened lower but it looked like a a
day that could reverse as it had been back and fourth this
week and GOOG had reported better than expected
earnings. We did get a reversal and indexes closed on
the green side for he day except the Dow down a bit.
Gold and oil were the best for the day and may continue
in the week ahead.
Housing starts declined 15.5% month-over-month to a seasonally
adjusted annual rate of 550,000 in December. Economists estimated housing starts
of 610,000 for December. year-over-year basis, housing starts plummeted 45%.
Meanwhile, building permits, an indicator for future housing activity, fell
10.7% to a seasonally adjusted annual rate of 549,000. Annually, building
permits were down 50.6%.
First-time claims for unemployment
benefits rose in the week ended January 17th to 589,000 from the previous week's
revised figure of 527,000. Economists had been expecting an increase in claims
to 548,000 from the originally reported figure of 524,000 for the previous week
The Labor Department also said that the less volatile four-week moving average
remained unchanged at the previous week’s revised average of 519,250.
The number of continuing claims rose by 97,000 to
4,607,000.
.
The National Association of
Home Builders index gauging current sales conditions fell 1 point to a
record low of 8, while the index gauging sales expectations for the next six
months slipped 2 points to 16. The index gauging prospective buyers held at a
record low of 7 for the month. On Tuesday, a panel of housing experts
projected that builders' woes will deepen this year, pushing the prospect of a
recovery into 2010 at the earliest.
"We do expect '09 to be the down year, to be the
bottom," David Crowe, chief economist for the National
Association of Home Builders.
Gold and oil were the gainers for the
week from the major indices.
This shows farming and fishing led the sector
list for the week but it does not show up in the list
below.
The top and bottom industries this
past week.
NOTE: Due to travel next
week there will be no newsletter next weekend and
probably no video for Tuesday or Wednesday of that week but we may
post on the blog.
Noticed that
MSFT made a
new low for this century and see the support at the next
level down.
The multi index
chart show the Bollinger bands and how al the indexes
have been hugging the lower bands with partial moves
under them intra day. On weekly chart stochastics, RSI
and MACD are giving positive sight so if any test of the
November lows either does not happen of if they hold
than the resistance next is the center Bollinger bands
and a close above seen to be a sign of a larger rally.
One would expect short will also watch the center
Bollinger bands for resistance and a place to short.
This is however the last week of the month and window
dressing may pick up. The market has been down 3 weeks
and some earnings or other event may spark a larger
rally so be prepared. We may drop aging like Friday
first as window dressing usually picks up the last 3
days if the month.
The weekly Dow with 3 weeks
down yet still positive indicators as mentioned above .
The transportation average is
at support with the November lows not far below. A
bounce soon is needed yet now no positive signs from
indicators.
The Nasdaq did give a
bullish engulfing candle on Friday and if we can get
some follow through look for stochastics to run over 20
and RSI back over 50 for a better short term buy signal.
The NASI has crossed over and
in the past year these signals tended to last at least
several weeks which would suggest and upturn will not
happen. Maybe this may turn back up.
Recently we showed how the Nasdaq was
outperforming the S&P 500 and this is generally bullish
for the overall market. It has some resistance not far
above but may be consolidating here for another move up.
S&P 500 weekly is much like the
Dow chart and closed above the November closing lows. The 3
indicators as still bullish even though short term they
turned down some. The S&P 500 daily below shows
support remains at a bit over 800. You see the overhead
levels that would need to be cleared at 850 - to 858
then the 38% retrace at 874. Eventually the top line
should be tested again which is now at 922.
The NYSE has held over support
as shown though MACD still pointing down.
The percentage of stocks on the NYSE
trading over their 50-day averages are in mid channel at
42%.
NYSE advance-decline ratio
chart for reference it is at support again.
S&P 400 mid caps have held
support still up about 100 points from the November
lows. The 50-day EMA is at 528.
The Russell 2000 did not even
get to the yellow line support which demonstrates some
at least minor strength.
Banking index BKX monthly
still not far from 1994 low.
XLF financial ETF and the
Friday rally but it is still in 4-day range. A move back
over the line would probably bring in some buyers.
The longer term 20-year bond fund is
now at the gap top so a drop is likely to at least fill
the first of two gaps below.
TLT was on our watch list this
week to short and has done pretty well as bond prices
drop and bond yields rise. The 20-year yield went up
from about 3% to 3.65%.
If you would rather go long you can
use TBT the inverse ETF which goes up as the TLT
goes down. Check our
ETF list for so
many other opportunities to trade ETFs.
GSG
commodity ETF had a bit of a bounce on Friday on higher
volume and stochastics are about back over 20
this could be the start of a larger move but cannot tell
on one day.
\
Monthly oil chart and first
month to show green in the last 8 though the month is
not yet over but it may turn out to be a bounce month
for at least a short term bottom. We have one oil stock
on the watch list today but many look like they may
bounce. You may want to check EP, HP,
CAM, BJS, FTO and HAL as
examples.
Daily oil futures and the 50-day EMA overhead at 50 area. The MACD
positive divergence has been building for months.
The ETF OIL preformed a bit
better than oil futures price and ran to the 20-day EMA
and now back over the 4-month trend line.
Many like to
trade USO as an oil play based on the price of
West Texas Intermediate light, sweet crude oil.
Moves about the same as OIL but as a fund may
have different tax implications.
DXO is the double crude oil long ETF and as oil moved up 6.4% on Friday
this moved up 12.5%.
Gold longer term charts show the resistance at the trend line is
near. It broke above resistance on the short term chart but may soon have to
pullback as it goes this this next level.
Gold shorter term chart show the Friday break above this 6-month trend
line and horizontal resistance..
The gold cloud chat and nice move after touching the red cloud top support..
This GDX chart - normal candle chart - and as other below is just under
ht e200d-ay EMA so bullish in a close above and next target would be $38.70 from
September.
Lat week on the GDX Renko chart we noted a buy signal but it may have
been that the SAR had not yet given a buy though the CCI had. This week
it for sure did however and closed just over the December high.
The XAU
gold and silver index closed on Friday near its December
high and under the 200-day EMA resistance. A close back
over 130 would be bullish as it has not closed over the
200-day since last July.
The Gold Bugs HUI is
in a similar situation. This index differs from the XAU
as this index is comprised of Unhedged Stocks so as gold
prices rise they can in theory get the full benefit.
Silver has been doing well since breaking from its congestion pattern a
week ago. It is just under the 200-day so a break there is likely to take it to
$13 and the 50-day EMA.
A closer view to watch the
stochastics for overbought readings if it does run to
13.
The US dollar left us
on Friday with a shooting star candle with if often a
turn-around candle signifying a top. In this case you
see it is not as clear as the one about 12 candles back
when the price short up over the 50-day EMA and then the
prices fell back for 2 days. Still, we would expect a
pullback soon. If it is a short term top
then a pullback may help gold continue higher as they
still have somewhat of an inverse relationship.
|
Butch Cooley Market Comments
(Butch is founder of
Leg Up House
and the
Butch Cooley Worldwide
Hunting and Fishing . He has
been an active trader for decades.)
Stock Market Comments
Chrysler/Fiat: I actually think this
was the big story of the week. If not the big story,
it's one of the biggest rip offs going right now. Fiat
reported earnings on Thursday, and showed a loss of some
44%. They halted dividend payments and also a scheduled
stock buyback. S&P also stated that Fiat's liquidity
was down almost 44% in 2008, and had about $5 billion
remaining as of Dec 2008. That in itself is not all that
surprising, considering they make cars and all auto
manufacturing is having a bad time worldwide.
The rip off is Fiat is in negotiations to acquire 35% of
Chrysler and for no cash. Now "we" the tax payer, just
lent Chrysler $4 billion, and we gave Chrysler Financial
another $1.5 billion. And we are also scheduled to lend
them another $3 billion in the near future. We
committed to $8.5 billion and 35% of the company is
going to Fiat?? . This is stupid!! And Fiat has an
option of another 20% stake (for a total of 55%) and all
for no cash. I guess it's an all stock deal. Tell me
how the US taxpayer gets their money back on this deal?
IMO, if they close this, then Congress should demand
immediate repayment of these loans. I have been writing
and talking to my Senators in Colorado so often I need a
"hotline". For all the good it will do.
John Thain, the former Merrill Lynch CEO
and recently
head of Bank of America's
wealth management and corporate and investment banking
divisions: Well, John lost his job this week. Ken
Lewis, CEO of BAC, decided he had to let him go. Why?
Oh, that's easy. Seems John was spending all kinds of
money, apparently without Ken's knowledge or approval.
And some of the money he spent, he was sort of hiding
the fact. Back in December, Lewis was lobbying Congress
for money to keep BAC going, after buying Merrill
Lynch. This amount became $20 billion. Seems John
Thain was cutting a secret deal where a few of the top
execs at Merrill Lynch got bonuses from a pool of $4
billion, and this was happening when Ken was begging for
cash.
He was accused of grossly underestimating Merrill
Lynch's 4th quarter losses, which became $15.3 billion.
Then he spends $1.2 million redecorating his office in
early 2008. Some of the expenses included $87k for
rugs, $28k for curtains, $15k for a sofa, and $35k for a
commode. Now I'm not sure if he actually bought a
commode , a French chamber pot, or if he paid $35,000
for a real toilet. But it was a lot of money at a time
that money didn't need to be wasted. So far, none of
this is a crime. But old Ken Lay, Bernie Ebbers and
Denny Kozlowski claimed they had committed no crimes
either. Others decided they had. And in Thain's case,
Andie Cuomo, NY AG and now John Thain's "significant
other", seems to be on the job, and investigating.
Obamonomics: Seems this got off to a slow start this
week. In fact, not much happened. I actually think the
"herd" expected more out of President Obama's new
administration. But getting an agreement for money out
of Congress is going to take a little time. First of
all, it's becoming fairly apparent there was little to
no oversight on how and where the first $350 of the TARP
money got spent. So even Republicans want a little more
say in how things will be spent. And what is all this
talk about executive compensation, when it comes to
TARP? CEO pay is not the problem Even John Thain only
made $83 million a year, and I can't remember if that
included bonuses. Executive pay is a non issue. But it
sounds good doesn't it. Makes you warm and fuzzy
inside!! Our politicians are walking the beat and
keeping us safe.
And regarding the $825 billion stimulus, well the
Democrats have their own ideas on how that should be
spent. And it's different than President Obama's
plans. And definitely different than Republican plans.
So it's partisan politics all over again. I figure in
about a month, we ought to have some idea of how much
will be approved and where it will all go. Until then,
it's all noise.
And remember I said this stimulus package would come out
of Congress in excess of $1 trillion. Well to top that
off, I am hearing rumors that a second stimulus package
will be needed!!! Wow!! Sure am glad we have a new
President and he and Congress are on the job!!
Real Estate Missoula, Montana: Believe it or not,
median home prices are rising in Missoula, and are up
11.3% from a year ago. But before you decide to pack
and move to Montana, Missoula County claimed home sales
were down in November, from a year ago. They called it
a sharp drop, 64.2%. I'd say that was sharp. But I
found these numbers interesting. Currently the median
home price in the US is about $181,000, and it's down
about 13%. Missoula is boasting $248,950 as the median
price. So if you are lucky enough to sell your house,
it will be a good price? But because sales are down,
almost 65%, good luck?? And why is this happening?
Because, according to Larry Swanson, an economist at the
U of M, they didn't have much subprime, they have
few foreclosures, and Missoula is a "destination"
market. People come there from another place. And they
are not coming right now. That makes no sense. Many
people come from another place when they buy a house.
And they aren't "coming" right now either. Construction
definitely has slacked off, but Missoula's economy is
pretty high. Swanson claims it's because of local
industry, which includes health care and professional
services. Apparently other parts of the country don't
have have these things in their economy. And the U of M
is a source of stability. Whatever that means. I guess
Yale and Havard are not sources of stability?? How
about this, let's not plan to see many economists coming
out of the U of M in the near future. And if you do,
check their math.
Butch Cooley
|
A large
number of companies report this week and also Check the updated
Earnings Calendar
on all overnight holds.
Weekly economic calendar from briefing.com. Existing home sales and
Leading indicators ar on Monday. Tuesday Case-Shiller updates home prices and
consumer sentiment. The Fed on Wednesday while Thursday the weekly unemployment,
durable goods and new home sales. Friday is a report on Q4 GDP, wages, the
Chicago PMI and Michigan consumer sentiment reading. This should make for a
volatile trading week with good day trading potential.
To try futures trading you may
sign up for a free simulated account that uses live streaming data.
Futures have been very volatile so great opportunities right now for
wide swings.
When any of you sign up for a new
stockcharts.com
accounts there is a space to put in a referral name
on that form. If you enter
stocktiger@stocktiger.com they give
us credit. Thanks!
Featured Stocks
One of our Featured Stocks
ERF Wireless, Inc.
ERFW
http://www.erfwireless.com/
who is now focusing on secure wireless networks for the
banking and oil and gas industries
announced a week ago an agreement with
Schlumberger, the world's leading oilfield services
company. If you look at the SEC filing you would have to
suppose that this large a company would not be
drawing up such a lengthy 12-page document unless the
agreement represented a considerable sum. The
details of the money in the document were hidden as
Schlumberger would not like to give all details to any
of its competitors.
Some highlights are:
"The exclusive reseller agreement has a three year
initial term with two one year extensions."
"Schlumberger's exclusivity shall be subject to
minimum numbers of yearly purchase commitments" - which
is good protection for ERFW.
"The
overall market size assumptions are that over the
36-month life of the agreement a total of a minimum of
1077 combined wireless circuits will be established in
the North American Territory from a combination of
mobile broadband trailers (MBT) and
modified mobile vehicles." We would suppose that
this build out will take place much earlier than the
time written as both parties wish to maximize profits as
soon as posible.
"In addition to supplying the wireless circuit
connectivity, ERF Wireless will also provide the
manpower and resources to modify approximately 750
Mobile Vehicles." These it says says will be
at minimum
retrofit with telescoping towers and multiple
electronics.
We will try over the coming weeks
to piece together some kind of estimates based on other
cubically available data to give some idea of what
this single contact may be worth as it looks to be very
substantial and will help expand their footprint around
the country as well.
The stock after its huge run pulled
back on much lower volume to the 200-dau EMA and bounced
up on Friday.
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