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Oil is up above $96 per barrel and gold is back up at record level highs of $915 (as of 8:50 AM). Platinum broke an ALL TIME EVER record high overnight. And all the slow growth recession fears are being reflected in new data released this week and this morning. Plus fears of the bond insurer/subprime mess still yet to find the bottom (based on Paulson's/Bertankie's comments yesterday. And word on the street is finally catching up with Strategy Update's many massive warning that the credit derivatives market is the Shaquille O'Neil sized shoe that is waiting to drop. (It currently falling as we speak. Spreads getting wider.) Plus, due to a new change in SEC filing rules, people who used to have to wait a year to sell stock, can now sell after only six months -- and if things weren't bad enough, that will add several billion dollars worth of stocks that will become available to sell today. (Imagine if a lot of people are in a rush to sell, on top of everything else. Extra pressure on the way down!)
IMPORTANT GOLD ALERT FOR 2/12/08 AT STRATEGYUPDATE.COM (This blog's companion web site with updates posted between blog updates.)
GOLD WATCH: Something I've noticed..."Smart Money" (hedge funds/big boys) seems to own Yamana Gold (AUY) more than almost any other gold miner. Here's why I came to the conclusion. When gold is up, or in rally mode...I've noticed AUY is the first gold mining stock to start to go south, when gold prices start to drop. AUY is not necessarily to first to rise back up, when gold prices rally back (however if you do see it rally first, expect the rest to follow), but you can use this "down" indicator to help you be on guard for gold to drop, if you are planning on selling -- or allow you to be ready to buy if you want to buy on the dips.
DOW RALLY (DO NOT BE BAMBOOZLED!): Don't be fooled by the warm and fuzzy feeling that causes Wall Street rallies over these press release announcements like Buffet's $800 billion offer to re-insure municipal bond insurers, as a safety net if they want it. (And one of three insurers Buffett made the offer to already turned down the offer.)
Problem with this nice gesture, is these muni bonds aren't the root of the problem that looms ahead. These are the low risk bonds. However, if they ever get threatened that they are about to lose a "AAA" rating, they can fall back on this offer to avoid the sell off that would occur on a downgrade.
And Paulson announced that the Treasury Department and HUD are going to help keep people in their homes with a new warm and fuzzy, fluff-ball plan that won't make a dent in the subprime problem.
However, Wall Street psychology is a factor, and these announcements will falsely remove some of the fear that has been casting a gloom on the market, and we'll see a short term rally. The Fed, White House, Buffett and everyone else can try as they will to keep the market propped up, and the economic factors in check, but there's no way to artificially keep things propped up in the long run. We're talking stuff of historic proportions ahead.
Please beware -- the credit derivatives market is the big problem here: The spreads are getting wider -- and the problem is bigger (and getting bigger by the day) than the financial institutions have accounted for.
Plus, like subprime affected the housing market, get ready for the same thing to hit the car dealers/auto industry -- and watch for credit card companies to start seeing much later payments, and complete defaults. And as people's homes continue to drop in value, and they end up owing more on the property than it is worth, more and more people will be walking away from the payments and stiffing the banks.
So enjoy any short term rally this month. We think it will be time for a chorus of "Hell's Bells" sometime soon. (Like this month.)
Here are some stories from the overnight news wires to be aware of for Monday: METALS ARE UP AGAIN IN OVERNIGHT TRADING: Gold gets all the attention, but Platinum and Palladium are outperforming those metals due to Plat & Pall production outages and now shortages. See list and analysis below, and check the 24 hour LIVE charts at strategyupdate.com PAL IS UNSTOPPABLE! VGZ has been a tippy-top performer, lately, on days that gold is up. Check it out! (10AM UPDATE: PAL was up nearly 10%, grossly outperforming other metal stocks, and the rest of the stock market -- before metal prices started going down in the 10 AM hour. When metals rise again, expect it to be led by PAL, which may rise 10%-12% at that time.
KRY: They released some news at 9:19am, right after pre-market trading closed. Hmmm. Let's see how this (good) news drives this $1.80 a share gold mining stock.
Oil climbs $92 on Venezuela threat U.S. light crude for March delivery rose as high as $92.71 a barrel in early trade, matching its recent January 30 peak, the highest point since January 15.
Platinum hits record high on supply concerns SINGAPORE (Reuters) - Platinum hit another record high on Monday on the back of lingering supply concerns in South Africa, which produces four-fifths of the world's metal. Spot platinum rose to $1,885/1,892 an ounce from $1,880/1,888 late in New York on Friday.
Venezuela threatens to stop US oil sales over Exxon CARACAS (Reuters) - President Hugo Chavez on Sunday threatened to stop sending oil to the United States unless it halted an "economic war" that he said included an Exxon Mobil lawsuit freezing $12 billion in Venezuelan assets.
Goldman Sachs boosts wheat price forecast SYDNEY (Reuters) - Investment bank Goldman Sachs (GS.N: Quote, Profile, Research) has raised its outlook for Chicago wheat futures by 47 percent to $13.50 a bushel after the U.S. Department of Agriculture cut projected 2007/08 U.S. wheat ending stocks.
The Goldman Sachs three-month and six-month price forecast compares with CBOT March soft red winter wheat WH8 futures closing price on Friday of $10.93 a bushel, after prices again rose by their 30-cent daily limit.
Record high wheat prices were sparked on Friday by new world agriculture supply and demand estimates by the USDA, which cut projected U.S. wheat stocks at the end of the 2007/08 marketing year on May 31 to 272 million bushels from its estimate of 292 million bushels in January.
This is the lowest levels of stocks since 1947/48, Goldman Sachs said in its Commodities Watch report, issued on Friday.
Acute world wheat shortages, after crop problems in both the northern and southern hemispheres and strong export demand, have sparked wheat price rises on U.S. futures exchanges by the daily 30-cent ceiling for most of the past three weeks, causing the exchanges to raise the limit from February 12.
Reuters reports that Australia's Central Bank Warns of More Rate Rises: Australia's central bank bluntly warned on Monday that it would likely need to raise interest rates again to restrain inflation, even as it trimmed its outlook for economic growth.
The unusually explicit warning from the Reserve Bank of Australia (RBA) lifted the local dollar above 90 U.S. cents while bills futures slid as the market priced in a greater risk of a further rate hike, perhaps as soon as March. STOCK MARKET UPDATE: Experts are saying it's time to jump on the financial stocks, since they have been beat up so much. Batcomputer says, you will have a chance to buy the financial sector at lower prices than they are currently at. (And that's an understatement.) Batcomputer is very, very nervous that there will be a big bottom in the low 11,000's (or high 10,000's), before a big rally back to the 13,500 range. Look how the market has tanked in January, then again last week. But long term (2-3 years), you should be o.k. if you wanna take your chances on financials. Although the Batcomputer wouldn't. It's just not worth the risk since the dust hasn't settled yet. And we say there will be a lot more dust. Interested in gold in '08? See our update, including watchlist of picks. Wall Street updates throughout the day at strategyupdate.com.
2/11/08 Pre-Bell Update: Yahoo boardmembers to reject Microsoft's takeover bid feeling the offer is to low and wants $40 per share. (LOL!) Batcomputer says, "Watch CNET". (Let's watch and see what happens this week.)
Experts are saying it's time to jump on the financial stocks, since they have been beat up so much. Batcomputer says, you will have a chance to buy the financial sector at lower prices than they are currently at. (And that's an understatement.) Batcomputer is very, very nervous that there will be a big bottom in the low 11,000's (or high 10,000's), before a big rally back to the 13,500 range. Look how the market has tanked in January, then again last week. But long term (2-3 years), you should be o.k. if you wanna take your chances on financials. Although the Batcomputer wouldn't. It's just not worth the risk since the dust hasn't settled yet. And we say there will be a lot more dust. Interested in gold in '08? See our update, including watchlist of picks. Wall Street updates throughout the day at strategyupdate.com and do a Google alert for "strategyupdate.com" to receive blog reports.
IT GOLD ABOUT TO REALLY TAKE OFF?: Oil prices rising, inflation already rising (see commodity prices) and more Fed funds rate cuts expected...Gold miners are yet to catch up with gold's recent rise, proportionately. But of course gold itself is going to be safer than any one mining pick. It depends on what you are looking for in an investment. But although you always see gold and metals take some hard falls (especially at record high levels, that we are approaching again, as hedge funds take their automatic profits) -- if last week was any indication...gold is not only holding it's own in this volatile market...but could start to speed up it's gains, and reduce the sell offs this week.
Usually, I would be too nervous to buy metals after this big run-up this past week (because you can see some painful drops). But on Monday February 11, 2008...I think time will show today is about as good as you are going to do in the long run, when it comes to gold. (Unless you have the cajones to hang in there for one more "profit-taking dip" we usually see at these record levels. The last hedge fund sell off was at $836/oz. So you still have another $10 rise on gold before you have to worry about it.)
And the Batcomputer says that by that time, inflation fears, a weaker dollar, and higher oil prices may offset any major dips on it's way to $950-$1000. Gold is now the third currency and if the stock market runs into a "rough patch" over credit derivative/subprime/bond insurer crisis -- people will be pulling out of stocks -- and jumping into gold. (It would have been nicer to jump in at $800. But people always say, "Too late now" -- and then they look back and say, "Damn, I liked gold at $920!" (See Gold Update for list of miners and more on gold investing stategy.") AND WE CALLED PAL ON FRIDAY: We predicted metals would be up led by Palladium. Sure enough, metals were up, led by Palladium. And our Palladium pick (PAL), closed at $5.60 -- up 12.45% for the day! PAL was at $3.59 on 1/23/08. (Better than gold!)
METAL STOCKS ARE STOCKS, NOT THE COMMODITY ITSELF: And since these are stocks, they sell off, too when the market takes a dive.. But long run, when/if the stock markets go REALLY south, due to economic problems, gold will rise without the DOW-based sell-offs. AND, as the DOW goes down...gold and gold miners stock will/do not go down as much as general stocks, so you still win. (That's the point!)
So in other words, on some of these down 200-300 point days, your gold miner may only drop 2%-3%, when everything else in the market is down 7%-9%. And this past week, dropping -123 point, followed by -370 points -- it closed Friday down another -63 points. While gold had it's best day all month. Read the writing on the wall, y'all!
PROFIT TAKING FEARS: With gold this high, assuming you will see profit taking drive the price down. What do you do when it looks as though it's only going up? I would buy it like crazy on Monday in pre-market hours if the Batcomputer is giving the "buy" sign at 7:00am EST on Monday 2/11/08. (However, there is a lot of volatility with the Euro and metals in overnight trading, so you may want to watch to see which way the wind blows before you buy right before a dip today.)
UPDATES THROUGHOUT THE DAY AT STRATEGYUPDATE.COM. (Plus 24 hour LIVE gold, metals and euro charts.)
Here's an update of the past two days worth of updates from the Strategy Update website. StrategyUpdate.com: Updates, newswires and 24 hour metals charts.
Start with a new closing bell update for 2/6/08: After dropping -370 points yesterday, the market rallied as much as up +125 (based on good news at Disney perhaps), before ending on a days low of down -65 points.
That's a give back of -190 points off the days high. And it's never good for the next day when you end on the days low, with a give back like that. Overall, not a lot of confidence, especially with bond insurers and credit derivatives crisis looming. Even many bulls are saying we will be hitting recent lows, again (we dropped to 11,900 range this year, so far.) However, unless some goverment "mircale anvil" falls out of the sky to save the financial industry, SU predicts lows in '08 will be in the 10,700 between now and August.) But even if it's just a drop into the high 11,900 range...don't expect to see the DOW back in the 13,500 range anytime in the first half of '08 (or longer).
NOW, some GOLD TALK, since gold was up in overnight and early morning hours. It came down, slightly, as oil prices dropped on news on increased reserves. But gold has really held it's own (closing at $903.90). And you won't believe it, but I bought ONE gold miner stock in pre-market hours, from my watchlist of 50 miners. IT CLOSED UP 8.93% FOR THE DAY!!! Most other good mining stocks were flat to up +0.00%-+2.00% (GFI, GG, ABX, GLD, SLV, AUY were all in this range.) So for Vista (VGZ) to close up +8.93 is off the hook. But ZD trusted in his Batcomputer when they picked this name off the list this morning. (We posted it this morning...see below.)
2/7/08 UPDATE: Bad news on popular gold miner Newmont Gold (NEM), which is the #2 gold producer in the world, and popular with investors due to their non-hedged gold reserves. However, bad news on the earnings call means stay away from KGC until it shakes out.
HERE'S THE UPDATES FROM THE WEBSITE OVER THE PAST 48 VOLATILE HOURS:
2/6/08: Gold and gold mining stocks are up and outperforming the stock market today. But oil inventories come out in a half hour, and there is expected to be a surplus, so that could drive down the price of oil, and gold along with it. And although there will still be many ups and downs, gold will probably be outperforming the stock market in '08.
Be careful buying gold today, because you can expect the price to drop, based on a rise in oil inventories that most likely will reduce the cost of oil, per barell. However, with recent Fed cuts, and more expected, investors may be hanging on to gold positions, so it may not give back as much as usually expected.
1:30 PM GOLD UPDATE: Batcomputer says 1:30pm will be the peak for gold today. Be prepared for short-term downward price movement based on declining oil prices. (See more below)
Gold miners: But, if you decide you want to buy gold miners today, or in the future, SU likes AUY and VGZ (a nice little engine that could) the most. Also on the list; GCGC, KGC, EGO, UXG, NG, HMY, HL and GOLD. And two safer ones; ABX and NEM. (See news on NEM posted above. GOLD, Rangold Mining, had some news we don't like last week, but it hasn't seemed to hurt the stock, otherwise it would have been our #1 pick.)
Consider the miners above to be the "StrategyUpdate Gold ETF Basket", if we had one. (Once you buy one, stay on top of news releases that may have an effect on the stock.)
PLG and GRZ are two new ones we like, but haven't watched long enough. PLG is tied to Platinum and is kickin' butt today, but see alert below. GRZ is gold reserves. (Research 'em first!)
OTHER GOLD MINERS: These are popular ones, too, that go up and down, proportionately with the others mentioned above. Most of these I just turned cautious on over power outages in S. Africa that slowed production, and may suffer more power reductions in the future: GFI, GG, AU, IAG.
PLATINUM AND PALLADIUM WATCH: Gold is more of a currency, where Platinum and Palladium are industrial metals that have been hotter than gold, this year.)However, an expected drop in car manufacturing is expected to hurt these two metals. Which is why we took PAL (Palladium) off our list, but you can still trade it, as a cowboy. Platinum and Palladium still look to still be squeezing out big gains, today, as metal prices rise, due to shortages in these two metals caused by production outages in Australia and S. Africa. So that may be offsetting the downs you should expect to see in Plat and Pal, as industrial demand drops.
GLD is a popular ETF. (IAU is a similar, lesser talked about gold ETF, too.) It's price is linked to gold bullion prices. It's less risky, than individual mining stocks, but you won't see the big gains, either. I say, forget GLD. GDX is the gold miners ETF, which is tied to gold miners, as opposed to gold, itself. Same thing though...too safe. GRZ is a gold reserve ETF we like better. (Disclosure: VGZ, UXG)
2/5/05 GOLD & DOW ALERT: No gonna be a fun day for gold. Read Friday's prediction on what is going on with gold, today. And you are crazy if you think the DOW isn't about to hit a "rough patch" (as Bush calls it) on the opening bell, over bond insurer crisis and a much worse than expected ISM number (economic number). (All we've done since November-December is warn you about February. But you still aren't ready to believe what is about to happen. Because you never heard the phrase, "historic proportions", so you think you know what you can expect.)
Gonna be a GA-REAT day for SKF...(see alert below).
2/05/08 9:45 AM UPDATE: We told yo azz!!! In the first 15 minutes of trading, SKF is UP 5.73% and the DOW is DOW-N 223 points. (See also: REW, UP 5.74%.)
10:50 AM UPDATE: Batcomputer (SU Indicators) says Dow is ready to drop a little more, below it's current down -180-200 point range And don't look for one of these, "Down 200, then up 300" rally days like we have seen recently, though. If news of the bond insurers continues to scare investors, this could be a slow boil of consecutive DOW-N days. (SKF is a good indicator...when it is up 5%, DOW will be down about 220...and if SKF hits 6%...well, you know what comes next.)
11:35 ALERT!!!: SKF HITS UP +6%...let's see where the DOW goes from here.
12:10 NOON: To those who feel gold is taking only a short term dip, now is the time to start "layering in" your buy. Some folks feel gold is taking more of a long term, downward trend to 850, or below. But Batcomputer on Friday said, Tuesday or Wednesday would be the low point on gold and metals, before they take the big rise, based on all these rate cuts.
12:24 PM -- SKF vs DOW UPDATE As SKF moved to +6%, the DOW moved to -250 points. When SKF was up +5%, DOW was down 220 points. SKF up 4.50%=DOW down -185. It's very predictable. Hope SKF doesn't hit 7% today! Now, SFK is up 6.5% and DOW down 270 points (at 12:42pm). See the pattern!
MORE PATTERNS: 1:12 PM SKF UP 7%, DOW down -285. SFK UP 7.19% = DOW down 300 points (at 1:49PM). SKF UP 7.67% = DOW down 320 points (3:04 pm) SKF UP 8.27=DOW down 360!!! SKF 8.45%, DOW DOW-N 370 points (at closing bell) See the pattern?
SRS: Here comes SRS (Short Real Estate)...
2/4/08 ALERT: When SKF (Short Dow Financials) goes UP, the DOW goes DOW-N! (Click Daily Blog Link for more)
10:50 AM UPDATE: YIKES...after opening down -200 points at the bell, and leveling off to down -180, or so...The Batcomputer started going nuts...and raised the alert level, indicating a drop further to the DOW-N -220 to -250 (or -- clears throat -- more level). Watch SFK as an indictor. When it is UP above +5%, or more...start worrying about the DOW being down 220 at that point. So if SKF rises to +6%, or more...you know what is coming next!!! With the scare the bond insurance crisis, and derivatives market has given Wall Street (rightfully so) -- could be a slow boil of many DOW-N -200 points (or more) days this month.
2/5/05 GOLD & DOW ALERT: No gonna be a fun day for gold. Read Friday's prediction on what is going on with gold, today. (See thread on this blog below.)
And you are crazy if you think the DOW isn't about to hit a "rough patch" (as Bush calls it) on the opening bell, over bond insurer crisis and weaker than expected economic numbers. (All we've done since November-December is warn you about February. But you still aren't ready to believe what is about to happen. Because you never heard the phrase, "historic proportions", so you think you know what you can expect.) 2/4/08 ALERT: When SKF (Short Dow Financials) goes UP, the DOW goes DOW-N! (See yesterday's thread below.)
Gonna be a GA-REAT day for SKF! (Price is Right "Loser" Sounder): Whomp, whomp, whomp, whomp...(deflated), Whooooooooooompppppppp. STAY AWAY FROM GFI & IAG: IAMGOLD (IAG) used to be a good mining stock. It was hit with bad news last week that we brought to your attention, and more bad news today, as it's target is lowered -- today -- most likely based on the news we brought you last week. Gold Fields (GFI) was one of the most recommended at the end of '07. Not anymore based on this kind of news:
This conversation was conducted on February 4th 2008 from . Bellwether Report
Q: What's your professional opinion of Gold Fields Ltd.?
A: We are taking a negative stance on share of Gold Fields Ltd. as we believe the company will experience tough operationally challenges for fiscal 2008.
Q: Why do you take a negative' stance on this stock?
A: One of the biggest issues will be increases to deep level mining risks. As it stands, the company has already announced a 7% decline for its second quarter South African gold production due to health and safety stoppages over the quarter. Adding to this is the rise in the cost of capital expenditures, which will put further pressures on margins. Lastly, the recent power supply shortages that the company has been experiencing as a result of the nations rapidly increasing demand for electric power will surely put a damper on production and profitability for the near future.
Q: What more can you tell us about the Company's current position amid power issues?
A: Currently, Gold Field's power usage has been limited to approximately 90% of its normal power requirement. However, the larger threat is that there is no guarantee that this power level will be sustained. In addition, at current power levels, six of the company's 21 operating shafts will be at risk of closure, seriously putting profitability at risk.
Q: Based on this, what would you tell investors looking to position themselves in this equity?
A: Consequently, we do not advice investing in shares of GFI until we see evidence of improving operationally conditions.
(Strategy Update recommended to pull out of this stock a week ago, or more, based on S. Africa electric problems that affected GFI's production):
When it it time to buy gold, don't buy GFI & IAG. StrategyUpdate.com for updates, news wires and 24 hours live gold charts.
1/31/08 End of Month Update = WORST JANUARY IN HISTORY:
When you see the Dow trade in a 400 point range on the same day (the day after another Fed rate cut) -- something is going on...and you better be careful, out there. Those who have been following this site and blog, know that since the end of '07, we have been screaming to pull out of the market by January 2, 2008 to avoid a HUGE down month of historic proportions.
And with historic rate cuts, bail out talk, stimulus packages, and today's 200 point rally -- it is still the worst January in history. Long term investors will say, "So what, it always goes back up." And there is always plenty of money to be made in down markets.
However, for those non-professional investors -- people who cannot afford to take that kind of hit (want to avoid stepping in the biggest puddle in history, if possible) -- then I hope we gained some credibility with you for the future. If you are someone who feels safe because you stick to mutual funds -- or buy a "safe" stock and hold it for life because you know things always go up...this year's market isn't for you. READ MORE
1/31/08 Update (2pm):
* The Dow is up 120 points, after being down 190 on the opening bell. You would HOPE the market would be up after another Fed rate cut! But if people feel the market is at a bottom, Batcomputer says the DOW will be trading in the 10,700 range (the real bottom) between now and August, if not sooner. So please keep that in mind as you make your investment plans this year. It's all about the bond and derivatives market and it's coming down fast and hard. (Feel free to bet against the Batcomputer, but read the Daily Blog for previous predictions first, please.)
* GOOGLE EARNINGS ANNOUNCED AFTER THE BELL: I don't care what the earning results are...in this market Wall Street will find something they don't like and the stock will go down in after hours trading. (But this isn't based on the Batcomputer, just my opinion.)
1/31/08 Pre-Bell Alert:
* You gotta admit -- all SU has done is warn about the bond insurance crisis as we turn the calendar to February '08. Sorry I was off by a day. See 1/30 Closing Bell Investor Alert below. DOW will open up DOW-N! (Hope you can handle the G-Force)
* 1/31/08Opening Bell Update (9:33am): Dow drops 180 points in the first three minutes of trading.
* BOND INSURER BAILOUT: We are looking at nothing less than a massive government bail-out of the bond insurers. Hope they can pull it together in time, before the series of down 300 days hit the market. And SU still feels that the government/Fed will not be able to keep propping up the global economy, long term. A bail-out will help in the short term, but it'll get way too ugly, first because you can never expect for them to pull it together in time -- but I hope they do.
* SEE 1/30 CLOSING BELL INVESTOR ALERT BELOW.
* Gold dropped in overnight trading, but rebounded as the dollar becomes weaker and is trending back up -- but is going down in the 9:00 am hour. Overall, though, don't you think gold will be going up in '08? Should see some up $50 dollar days as the Fed collapses the dollar and inflation kicks in. Gold is the third currency, now. It's not about industrial use, or jewelery. It should be traded as a currency like the dollar and euro. We will see things happen to the euro this year, that we have never seen in history. Things are happening!
* I don't care what people say about supply and demand -- when the dollar goes down -- oil sheiks raise the price of oil to make up the difference. (Added inflation.) So in this case, do not look for an increase in production output to try and bring the price down.
* Weekly jobless claims and consumer spending numbers were released in the 8 AM hour. Reuters says, "Consumers spent less in December than at any time in the past 15 months while applications for unemployment benefits soared last week, two more signs the economy is weakening." This should add a little weight to the anvil, this morning.
1/30/08 Post-Bell Update:
* WE TRIED TO WARN YOU!!! DON'T WAIT TOO LONG IF YOU NEED TO ADJUST YOUR PORTFOLIO! Welp, looks like the bond insurance news Strategy Update has been crying about since late last year -- and early this year -- and even more so this month, warning of problems starting as soon as we turn the calendar to February -- has started to affect the market today, as news is starting to leak out. (See DAILY BLOG and read every thread for the past two weeks.) Evidence? The market was up 125 points (plus), but went south at 3:15pm on this bond insurers news (downgrades starting, and word is getting out that it is much worse) for a DOW close of down 37 points. (And a further slide was "saved by the bell!")
* Reuters Story on bond insurers killing Wall Streets' Rally: Wow, did my Batcomputer and Los Angeles street sources call this one!!! I have NO idea how they know these things, when they know these things (see daily blog)...but at least I listen and have this website to post the news.
* 1/30/08 3 PM HOUR UPDATE: Short term gold traders -- now is the time to sell/take profits for the day. This hour only, otherwise you may want to wait for another bump up, cause at $840/record highs, you will see some profit taking.
ALERT 1/29/08 8:15 AM: GDP and other numbers are coming out and they are sending mixed signals to Wall Street. ALL BETS OFF ON A RATE CUT NUMBER. MAKE SURE YOU ARE PREPARED FOR A DISAPPOINTMENT (NO MATTER WHAT NUMBER YOU ARE LOOKING FOR.) UPDATE SOON!
PLUS, fourth quarter GDP number was up only 0.06% (a bigger number would have indicated more inflation on the way. So the Fed can once again, point to this number to say further cuts (or a big one) is not needed. Set you loss limits now, and for the first time ever in Strategy Update history -- HOPE is part of the strategy, depending on what you are hoping for. WALL STREET STILL WANTS HALF A POINT.
1/30/08 10:30 AM UPDATE: When the ADP (employment number) came out in the 8 am hour, it was good enough to spook Wall Street that there might not be a half point cut. Gold, that was at a record high at the time, started to drop on the news. Within the hour, the GDP number came out, and it indicated to Wall Street that Bertankie and the Fed would HAVE to go a half point, now. And gold started climbing back up from it's five dollar an ounce hit, this morning. And agriculture is at the bottom of the pack today (most down). That's an economic indicator, as well.
Fed announces at 2:00 PM EST. The language and reasoning Bertankie uses (his reasoning behind the numbers) will be important, too. Wall Street will be reading a lot into what he says about what factored into the number.
Alright, so tomorrow, Bertankie may have his name changed back to Bernanke, based on tomorrow's rate cut news. Wall Street has the chance of a .5% point rate cut at 87%. So imagine what will happen if it's anything less. (Wall Street is the biggest bunch of spoiled crybabies on the planet. I know, I know...it's hard being so right in the face of such obvious wrong.)
Normally, I would be saying, "No chance of .5%....25% if anything at all." Reasons being,
* Bernanke doesn't want to appear to be bowing down to a bunch of spoiled crybabies.
* Inflation is on the rise, and a rate cut will make it worse.
* The day they came out with an unprecedented emergency rate cut, last week, turned out part of the problem could have been that rouge trader in France.
* Durable goods number were better than expected.
So they can say, "Well gee, we came out with the full .75% rate cut, last week due to what seemed to be a legitimate global economic crisis. However, at that time, we did not know about the $7 billion in losses from the rouge trader in France. And since inflation is a major concern -- consider the early rate cut to be the rate cut we were going to do today, since it turned out to be for other reasons than we were aware of at the time. And further cuts would offset any benefit, by increased inflation, including higher oil prices, because the oil sheiks in Saudi Arabia have to make up the difference in the weaker dollar -- so they simply hike the price per gallon -- even though there is no added production cost.
HOWEVER...like I said, that's what I WOULD have been saying, except for this little ditty:
Those of you who know me from my political blogging elsewhere, know that I have immersed myself in politics this past couple years, and you hear a lot of things. (Deniro Voice: I heard things.) If you check the StrategyUpdate.com website, you will see that these contacts allowed my to blog about the subprime mortgage crisis on May 5, 2007 -- predicting a bubble burst that would trigger a year long recession starting in November of '07.
Well basically, it happened to the day of the prediction if you check the headlines. And in October, sources recommended pulling out of the stock market entirely (mutual funds and all), because the market was going to start sinking first thing January '08. And we all know what happened.
We also learned that this would cause a big problem in the credit derivatives and bond insurance market. This next shoe, ready to drop, is scheduled to drop in February of '08 (like, next week), when all these derivative options come due, and if you think we had some down 200-300 this past month...
Well, that was just the little wave warning you that the Tsunami is coming. And it ain't gonna be a one week -- or one month sell off. We have already seen things that haven't happened in 70 years, or so. Some things have NEVER happened. You see people who have traded for 20-50 years saying they have never seen a week like last week.
So Bush can try to keep things propped up by visiting the oil sheiks and asking for a break, fiscal stimulus packages, bond insurance bail out talk (even though there wasn't any real talk) -- and the Fed can cut half a point: BUT THEY WILL NOT BE ABLE TO KEEP THE MARKET ARTIFICIALLY PROPPED UP WHEN THE SUBPRIME AND DERIVATIVE MARKETS END UP BEING MUCH WORSE THAN ANYONE WAS LEADING ON TO.
When people start walking away from their homes (since they now owe more than they are worth, once those teaser subprime rates jump to market rate), banks will not only be stuck with all these homes -- they won't be able to sell them, either. (And they won't be taking in all this money, while the homes sink in value.)
People will be later and later on their credit card payments -- and many will simply walk away from those payments, too.
And when these derivative futures come due, it will be like what happened when everyone options were due last week, and everyone was caught short, and we saw a huge sell-off including all the good and profitable stocks to cover the losses on the others.
Bond insurers will be out of business, and we are already starting to see the leaks in the dam start to sprout water this past week.
And I think the Fed knows this. So even though no cut, or .25% would be the right thing to do in these inflationary times; and even though Bertankie would do the wrong thing -- just to show he doesn't bow down to Wall Street ("Revenge of the Nerd")...
Strategy Update feels there IS still hope for at least the half point Wall Street is throwing a tantrum over -- due to the fact that the Fed is seeing numbers that we haven't seen, yet. And the numbers are very, very small where they are supposed to be big. And very, very big where they are supposed to be small.
11PM UPDATE: 11PM Update (1/29/08): O.K., the Batcomputer now feels the chances of a predicted and accounted for half point rate cut is more likely to happen, than not. Here's what we added to the equation that a computer was not able to deduce:
The Fed usually does not like to cut when the dollar is already weak, and oil is already so high, at risk of adding to inflation.
However, those are in ordinarily bad times. These are extra-ordinarily bad times. (See: Subprime/Credit/Derviatives)
So in this case, the big white elephant in the room, is the biggest elephant in the room ever (on steroids), so the Fed will have to try and prevent the massive fire they can see currently burning over the hill -- and worry about the next fire that these embers will spark, once those flames get hot enough. So yes, it's a rock and a hard place. And I think they're gonna go with the hard place. (Half a point so the entire planet doesn't have to blame him, and they'll worry about inflation as it rises. But only because they also know what lurks in the shadows.) And he can add, "we are prepared to step in as needed...", except insert the word, "inflation", next round.
This may help, too: Reuters: WASHINGTON/NEW YORK—Federal Reserve Chairman Ben Bernanke's job rides on protecting the U.S. economy from the worst of the fallout from housing and financial market turmoil, but politics and a few missteps could determine if he wins another term.
Bernanke's four-year term as chairman expires on Jan. 31, 2010. The next president, who will take office in early 2009, may consider whether to tap someone else to lead the Fed.
Check back on this blog later this evening or tomorrow for some of the stocks I like for '08, whether it's a bull or bear market. And remember, I bought one gold mining stock on Friday, and it was up 26% on Monday. (Yes, twenty six percent gain in one day.) Read the rest of this blog and you can follow the predictions and analysis and hopefully you'll check back for update.
And maaaaaaaan, if the Fed don't cut by at least half a point, I hope you are near a fire exit or have a parachute on hand. (Set your loss limits now!)
And on a lighter note, Strategy Update's Zuma Dogg called into C-Span on Sunday to give his prediction on the U.S. Presidential election. I don't necessarily mean anything I was saying, just wanted to rock the boat for some of my friends who drank a little too much Kool Aid.
Although news wires just reported this morning that gold is going down, as investors take profits since gold just hit record highs near and above $890, gold just started to reverse the down trend, at least for this moment, and is rising slightly.
And with price of oil is down today to $93 and change, you would expect gold to sink along with it, not start rising against the oil trend?
Bernakie is going to speak in three hours from now, and Wall Street is expecting a sign as to whether they will give up a nice juicy rate cut they are crying for. And although a rate cut would actually weaken the dollar, and add to inflation...perception is reality, and I think Wall Street is betting that Bernakie WILL INDEED indicate an upcoming rate cut, which would weaken the dollar and cause gold to go up:
Oil is down, yet gold is rising as I type this -- just ahead of Bernakie's speech -- when news wires just reported gold was down on a sell off -- and the trend immediately reversed ???
Either it was the world's shortest sell-off...or Wall Street is increasing their position in gold, betting on a weaker dollar and higher inflation with further rate cuts.
So if you see this in time...you may want to act on the info.
Personally, I would wait and see if Strategy Update called this, just in time...or if it's just a blip. strategyupdate.com
First of all, since many of you reading this have never hear of "Zuma Dogg", you may be wondering, "Who cares what this guy has to say?" That's up to you. But if you follow me for a while, maybe I will build up credibility in your mind. (I win 'em over the hard way.)
NOW, FOR TODAY'S POST...LET'S SEE IF I CAN GAIN SOME "CRED", RIGHT OFF THE BAT:
NOT gonna be a good day for the dollar or the stock market on Monday November 19, 2007. YIKES! INVESTOR ALERT! THE BOTTOM IS REALLY GONNA START TO BOTTOM OUT TODAY! NOT GONNA BE A VERY CHEERY HOLIDAY SEASON AFTER MONDAY'S CLOSING BELL!
