Ideas + Outlook week 1 FEB 2009

Economic Outlook: Lousy and getting worse. Parts of the U.S. economy are "shutting down".

Nouriel Roubini: The U.S. will lose over 6 million jobs with unemployment reaching at least 9 percent. The U.S. economy will contract in 2009 and expand 1 percent at most in 2010. Economic growth in China will slow to less than 5 percent.

He reiterated his statements that the biggest U.S. banks are insolvent, and that losses could reach $3.6 trillion, far exceeding his original estimates.

Obama-First 2 weeks:
Secretary of Treasury (Geithner) was NY Fed Governor before and during collapse of our financial system. He did and does whatever the banks and Wall Street tell him to do. He also neglected to pay income taxes he owed for several years. His background and sponsors are the usual (Goldman Sachs, Robert Rubin, Clinton, Banks, Wall Street, etc.) New heads of SEC and CFTC have the same background. They all take orders from Goldman Sachs, Wall Street, etc.

New Deputy Director of the Defense Department is an active lobbyist for Raytheon, a defense contractor. Obama’s promises about lobbyists, conflicts of interest, honesty, "earmarks", etc. were made before the election.

Obama and team are screaming that the country will go kaput if Congress does not vote to give him all the money he wants with no restrictions. He announced the money will “save” the economy and create jobs. These are promises.
No one knows where most of the money given away (somewhere between $350-900 billion) has gone. We do know some was used for billions of bonuses, lobbyists and payoffs. Obama is asking for an additional $1.6 to $3+ trillion (including TARP, “bailouts”, “special grants” and deficit).

His proposed "plan" has a few vague details, but does include "earmarks", lots of "pork" and over 4 billion for "community organizations".

Question: Is there any reason to believe the markets will go sharply higher in the next month? If not ...

Ideas: Good ideas, none. FDIC money market pays very little, but it is safe. Stop loss orders. Dividends, dividends, dividends....

Utilities, natural gas pipeline MLPs and some discounted preferreds and convertibles are OK.

http://seekingalpha.com/article/116156-energy-infrastructure-mlps-among-the-very-best-high-dividend-stocks

From SA:

http://2008stockmarketupdate.info/Wachovia Securities Outlook http://www.wachovia.com/corp_inst/page/0,,13_54_1067,00.html
Wachovia Securities Outlook http://www.wachovia.com/corp_inst/page/0,,13_54_1067,00.html
More bad news.
Political historian Kevin Phillips wrote a brilliant Harper's article "Numbers Racket" warning us that "the economy is worse than we know." Politicians use "deceptive statistics" to further their political ends. Don’t believe a word they (government) say.
http://www.harpers.org/archive/2008/05/0082023

Ideas +Outlook 10 JAN 2009 Not good.

Outlook: The outlook is getting worse.

The initial $750-900 billion “bailout” allocated seems to have “disappeared”. The various Federal Agencies and Congress cannot find large amounts of the money and the Sec. Treasury, Fed and Administration refuse to give information.
This is similar to the bundles of one million dollars given away in Iraq by Paul Bremmer and other Bush designees in Iraq.
No question, this is the biggest theft and fraud in history. And it is just starting.
Obama, new Congress and Administration, promise more to come.
The 2009 deficit is projected to be above 1.2 trillion dollars. (Republicans estimate over 1.8 trillion.) The “stimulus package” is estimated to be over 1.3 trillion and possibility of substantially more than 2 trillion. That is a lot of trillions!

Interest rates: They (Government) will continue to print and give away money. (The stated purpose is to flood the economy with money and push down rates to stimulate the economy.) This will stop as the dollar is becomes worthless and/or inflation starts to rise.
Bottom line: … interest rates will remain low near term. When Treasury Auctions begin to fail, states flood the market with borrowing and the US dollar begins to drop, rates will rise.

Stock Markets:
Earnings look down, unemployment up, defaults increasing, consumer spending falling and world markets collapsing. What do you think?

From NYTimes: Unhappy news and thoughts. Go to ….. http://www.nytimes.com/2009/01/04/opinion/04lewiseinhorn.html

Idea: Income is good.
ETFs: (EMB), (HYG), (AGG), (PFF) and
Market Vector Nuclear Energy ETF (NLR).
Site: Remember Quant for income info. http://www.quantumonline.com/login.cfm

Ticking time bombs:
Mortgages: Most homes bought after 2006 are “underwater”. (Worth less than the outstanding mortgage.) The media and “financial advisors” are advising people to walk away or stop paying. The increasing belief is that the Government will “bailout” home owners or lenders will reduce the balance and rates.
Credit card debt: Default rates are rapidly increasing due to soaring unemployment, increasing balances and rates. A lot of people and the media expect a consumer “bailout”. (Stop paying?)
Consumers, homeowners, Financial Advisors, small business owners, etc. expect a change in bankruptcy laws from the new Congress.
Bottom line: Potential for massive consumers defaults and backlash is high. Not good!

Ticking time bomb: The current head of the SEC, Cox, admits massive failure. Those in Congress responsible for oversight have failed and made matters worse. Obama’s nominees for SEC and CTFC are part of the problem and with Congress’ help will probably be worse.
Bottom line: Investor confidence and financial markets are at great risk. Market collapse?

Ideas: As the dollar loses value; Hard assets outside U.S. RIO, BHP, TOT, REP, PBR, etc.
Ideas: GLD, SLV, etc. Hedge against $$$ decline.

How many dollars can the US Treasury print? Is there a limit?
China has stopped buying U.S. debt. China holds over US$1 trillion of such paper, and as interest rates collapse, there is less and less incentive for them to buy American.
(From James West) Reduced demand for U.S. debt will hamper plans to keep printing money. One limiting factor that still seems to be respected in terms of how much paper can be printed, is the idea that there must be counterparty to every issuance of T-Bills. Theoretically, less demand for T-Bills will force a rise in interest rates to attract investors. But that does not appear forthcoming, which will make the U.S. dollar weak relative to other currencies – especially gold and silver.

Idea: How low can REITs go? Some offer 6-12% returns. Foreign REITs will probably rebound earlier. Pick your own. For ETFs, Closed-End has a good screen. http://closed-endfunds.com

Good news: The world may not come to an end. And Groundhog Day is coming.