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Thursday, February 12, 2009

Continued Market Uncertainty

The market keeps skidding along the bottom of near disaster, as per graph from previous blog entry. A break of S&P below 810 will likely indicate disaster, below 790ish likely to start all out panic sell.
The government is actually making progress on passing stimulus bill, but the items in the bill keep changing. One that may cause markets to rumble for the worse is the removal of a tax break for companies that "lost" money in the last two years, excerpt:

"House and Senate negotiators all but eliminated the biggest tax cut for businesses in the compromise agreement on an economic stimulus bill, Senator Max Baucus of Montana said.

The provision, a top priority of business groups including the National Association of Manufacturers and the U.S. Chamber of Commerce, would let companies convert losses into tax refunds.

Baucus said today that the provision, under which companies could have claimed an estimated $67.5 billion in tax refunds this year and next, was sacrificed to help keep the final package under $800 billion. "

In effect, companies that are losing big money the last year or two would have gottem a nice cash influx. I actually agree with cutting this provision, morally.

A BIG plus is a Chinese official signaled China will continue to buy US debt. A plus that this significantly reduces the risk of a world wide "run" on selling US Treasuries, thereby allowing the USA to fund massive debt spending.

A quote in the article I love is:
Mr Luo, director-general at the China Banking Regulatory Commission, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

How great is that? A Chinese high official stating that the USA sucks, since it's acting recklessly for long term dollar valuation, but China is in a deadlock where it has no choice but to buy debt it knows will lose money over the long haul. This ties back to my previous blog entry where I said China has no choice but to continue to finance the USA with its crack...I mean debt. The day China says "no mas" is not going to be a nice day.

China's announcement is just in time as America announces its first FOUR months of the new fiscal year already has generated a 569 billion dollar deficit! To put this in perspective, 2008 fiscal deficit for the entire year was 455 billion.

Ireland has the dubious honor of being one of the first countries to break rank and take control over it's own major banks. This is what I believe will also happen in the USA, socializing the financial sector, effectively gutting capitalism in the banking industry.

England announces it will start to "print money" to fight deflation, which of course, is opposite of what it should do. This "Quantitative easing" is a shell game masking as outright fraud printing of cash.

What can I say about gold and gold miners? Strong as hell. My portfolio would be much better if I was 100% in these two items. I can't complain, I do have significant holdings. But everything else not in gold/gdx right now is hurting. GDX hitting close 36.45, it was below 34 just yesterday! GDX could be poised to make a run for 40 bucks.
The baby gold miners did VERY well today, up 5-15% in one day each, can't complain again.

I can complain about oil. I will not add to any oil positions, and switching to USL.
Lets see if we can eek out the week with the DOW staying above 7,500.

Next week is options expiration. I could see the market teetering on disaster into next week, then the "big move" (up or down) starting Mon/Tues/Wed timeframe, just in time for "big money" to make huge plays on cheaper options. Time will tell.

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