Archive for February, 2009

Investor Pessimism

February 20, 2009

Today the DOW has a fine new intra-day low of 7249 unless it collapses again toward the end of trading. The last time the DOW probed below that level was 11 APR 1997 when it closed at 6391. Market volume is up – currently approaching 530 million shares – well above the recent average. Supposedly Investors are concerned the governments plan will not help them. Well. Actually, I don’t think it was designed too. Investors are discovering the world is not about them – Surprise. Surprise. As this reality sinks in, stock prices are going down. Probably way down, perhaps down to levels not seen since 1994. Unfortunately we are still watching the house of cards collapse, and it aint flat yet, so there may be a ways to go before a bottom is declared. With so many rumors of nationalization, there must be fire or manipulation somewhere. Who is to profit if any of these banks are forced into collapse? It is hard to see, because with the current mentality, any successful banker knows it is his term tomorrow or the day after.

Then reality is the government may have no choice but to remove investors from the economic equation – at least for a short time. The governments problem is keeping everyone fed and entertained well enough so as to be relatively happy. Investors have an interest in this also. To do so, the the electronic payment and reconcilliation networks must be maintained. The FED simply can’t print enough cash to get around that problem. Think about how you are paid, and how you pay your bills – very little is done in cash these days, so the electronic funds networks are essential.

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Probing down for stable price and real value

February 18, 2009

Yesterday, It seemed at least occasionally that we were looking at the second attempt to find a real low in the markets – primarily the DOW. The close at 7552 was the same as 20 NOV 2008. But our theory speculates a rise after finding the low. That of course has not happened, which puts the theory in a spot. Not that I think it is wrong, just maybe it is telling us we haven’t hit the low yet.
My speculation, this time last year was that if the US Gov did nothing, the markets could hit 6000 by convention time, and might find 600 by election day. The Gov intervened and that of course has not happened – yet. Presuming all the efforts to fix the problem work, it should not. However, the current efforts by the new administration are much more focused on Main street issues, than on Wall street.

Some republicans are now talking about nationalizing banks, so if the republicans want to nationalize banks, where do we go from here? Greenspan is yammering about how we need to prevent bubbles. There is one way, and he – being a republican, can’t actually think about it seriously. The best way to stop bubbles is to tax trading profits – short term capital gains including real estate. If your work day to day is creating capital gains – you are not an investor, and you should pay tax on your earning from that work, like everyone else. This takes away the incentive to cause bubbles in the first place, and presto no bubbles.

As for the market, my projections if the probe to bottom fails at 7552, the next double bottom probe is 7528 of 04 OCT 2002. Today the market crashed though that one hitting 7484 at 10:12 AM EST. That was not a good sign, thought we can hope it were an anomaly. The market has closed at 7551 today.  It either rises and drops again later to 7484, or it continues with bubble busting and heads for 6738 from 25 APR 1997.  My guess is it heads down from here.

Auto Company and DOW issues

February 17, 2009

This morning the DOW dropped to within a few points of its 20 NOV 2009 low. I have been waiting for this. Looking at the graphics since 1970, I see a pattern – I think, where markets find a floor value by probing downward a couple times then advancing up from there. Today’s session low so far is seven points above the close of 7552 on 20 Nov 2008. Could be it is up from here – but maybe not. It will take a few days, for things to really sort themselves out. For the past couple of months the markets have largely been running on empty, hoping for a charging station in the neighborhood. The government has attempted a few things, but before 20 Jan 2009, those efforts were perhaps aimed more at saving the assets of certain big time republican investors, than at actually stopping an economic collapse. Well what else did they do, exactly with the 300 billion – seeing how now it seems to be largely unaccounted for?

In other news the big auto companies, one fresh off the Mercedes divorce, the other still trying to figure out how to get American teens to buy it’s cars again, after snookering their parents in the 1970’s.  GM might have to give all those snookered parents ten times their money back, plus a car that works reliably for several years to get beyond that one. A good start would be to scrap your dealer nets, and sell the cars directly to your customers. Many of the dealers are such scumbags no one ever wants to even talk to them – about anything, including buying your cars, and especially not about repairing them. To fix this train wreck, I suggest you sell the cars direct, give them a full 100K warranty and establish drive thru repair shops similar to the lube shops we find most everywhere, so they can be conveniently serviced and repaired as needed by people who actually know what they are doing. GM if you actually do this you will need to build cars that can actually be repaired easily – which will mean it is easier and faster for me to drive through your shop to have an O2 sensor replaced, than it is to diagnose and fix the problem myself. You will also either need to can the diagnostic fee garbage or seriously slash the cost of parts and labor. Most of us who do our own auto repairs know how much the diagnostic machines actually cost. We also know if you think about it for a bit you can isolate a failure close enough to pinpoint it with the cheapish diagnostic tool – not those mega-billion dollar boxes your dealers have. Ford you have the same problem. My son has a Torus which recently had a spark plug wire problem. The Ford dealer charged him close enough to a hundred bucks to diagnose the problem – which any mechanic can do with a cheap timing light in say two minutes. The final bill from this dealer was over $300 USD to replace ONE spark plug wire. And Ford wants him to buy another American car – like maybe one of theirs – say a FORD – so they can charge him $1800 to replace the plug wires one at a time, starting at maybe 60,000 miles. Ford, you need to have your guys talk to the GM guys about this kind of nonsense and what it does to market share thirty years later.