Game on, it's earnings season!
The futures are (6am) irrationally exuberant it seems, up nearly 100 points on the Dow for reasons that are not clear. WM is getting $5Bn and ACL is getting bought for $39Bn by NVS so I suppose we're celebrating the return of the deals. YHOO is still refusing to take MSFT's money but the big news to me it the BOJ nominated acting Governor Shirakawa to be Governor, hopefully ending 3 weeks of nonsense in which the BOJ has been frozen..
That would pave the way for my much delayed dollar bail-out by the G7, which has been on hold with the world's #3 bank frozen since early March. Shirakawa favors a tight-money policy and will almost certainly begin to push Japan's 0.5% rate higher, putting pressure on the carry traders who are fueling the global commodity boom with cheap borrowed yen. Fear of an unwinding yen sent oil tumbling from $75 in early 2006 to $51 in the beginning of '07 (along with the whole CRB) but we can't get ahead of this one as they spiked it to $79.86 in a blow-off sucker's rally, very much like the one that has being engineered last week and this weekend.
The dollar bears are already circling the wagons, including Iran, who is asking OPEC to stop accepting dollars as a rebound in the dollar coupled with an unwinding carry trade could make 2006 look like a picnic by comparison. OPEC gave the oil bulls an excuse to run this weekend as they declared they would not be raising output and would not even meet on the subject until September.
The solution for our own energy puts is to sell front-month puts and roll ourselves back as the payoff will be huge but delayed so we will hedge for now as they attempt to get back to $110 this week or next.
It is truly beyond me how THEY think people are going to pay $110 a barrel for oil – we discussed this early last month as GS was pushing for $200 oil. Aside from the 7,000 families a day losing their home to foreclosure, 90,000 people were forced to file for bankruptcy last month as they can no longer pay the gas bill, the phone bill or any other kind of bill as their jobs get switched from McDonald-Douglas to McDonald's in what this country laughingly calls "full employment." 90,000 bankruptcies is 1 in 100 US families declaing banruptcy folks, that's up 30% from last year!
The proximate cause is, of course the amazing amount of foreclosures and, as long as the government insists on bailing our the bankers while spitting on the homeowners, this is only going to get worse:
Small wonder looking at this disastrous chart of an economy gone wild that our President has achieved a new low 28% approval rating and has taken the lead in a historian's poll as the "Worst President Ever." Usually it takes time for hisorians to put things in context but out of 109 historians polled, apparently only 2 considered his presidency a success with 61% ranking him – worst in history with 35% ranking him between 31st and 41st.
"No individual president can compare to the second Bush,” wrote one. “Glib, contemptuous, ignorant, incurious, a dupe of anyone who humors his deluded belief in his heroic self, he has bankrupted the country with his disastrous war and his tax breaks for the rich, trampled on the Bill of Rights, appointed foxes in every henhouse, compounded the terrorist threat, turned a blind eye to torture and corruption and a looming ecological disaster, and squandered the rest of the world’s goodwill. In short, no other president’s faults have had so deleterious an effect on not only the country but the world at large.”
Don't blame me, I didn't say it, I'm just reporting the facts…
You can bet that in that 28% is a large percentage of the 1% of Americans who have liquid assets in excess of $1M, who have doubled their net worth during the Bush years, amassing $9Tn in assets since 2002 and on a path to add another $9Tn by 2012 – that is AFTER TAX money people, no wonder they want to repeal the "death tax" with money like that, I'd want to take it with me too!
81% of the people in this country think we are on the wrong track yet about half of those people will vote for the same idiots that are in office today on November 7th, if this country doesn't have the good sense to save itself, I'm not sure it matters much what the economy does in the short-term because we are doomed in the long-term.
Meanwhile, we're all about the short-term (2 years or less) with our investment virtual portfolio so let's make sure we make enough money not to care – how's that for an investment strategy? We had a fantastic week last week and we have lots of earnings and data this week that we'll talk about in the evening post but the pre-markets still look very good (8:30 now) so let's get ready to rumble…
The Hang Seng and the Nikkei gained a little over a point and the Shanghai jumped 5% this morning, after bouncing right off the 40% line at 235 on Thursday so the levels we'll be keeping an eye on are 238.50 (10%) and 293, which is just about the mid-point between 25% up from 235 and 75% down from 390. Once we get past that, we can start looking for a recovery in the mainland market.
Commodity shares led the Asian rally again as Friday's jobs data gave added weight to the premise that the Fed will be further debasing the dollar in order to continue to put off an ecomonomic contraction that would have been long over if we had just taken our medicine at the time, rather than spending money we didn't have (but I'm not going to blame any particular administration for that since it's Monday!).
Europe is up about a point ahead of our open and there really isn't very much to report there or here other than a commodity rally, which is my least favorite kind so I'll be taking today's action with a grain of salt, which itself was once a valued commodity, now worthless…
Let's keep our exuberance rational today!
