Thursday, September 4, 2008

Its The Credit Baby!!!

I don't buy that today's action was all because of the unemployment number. I believe that this is about the credit spreads. About this time last year, all we heard about was the inverted yield curve being bad---and I wish that I had listened more. We have got to see some normalcy return to the credit markets before we get any better. PIMCO's Bill Gross sure didn't help the market today when he announced that he had no interest in participating in investing capital into any of the big banks. Gross is considered to be a wiz and his comments had a big impact on the markets.

Here is the question that I am trying to answer today. Was todays action factoring in awful numbers tomorrow or are we going to get more shock value to the downside if tomorrows numbers are bad? I think we factored in some bad today, but I am not really excited about buying much on a Friday. I honestly got hammered so bad today I don't know what calls I will make tomorrow. I can tell you that I am constucting a set of rules for my trading that will hopefully make me a better capital preserver.

I will share my rules this weekend. We are trying to work out a time for economist John Williams to come back on the show. John has been screaming inflation---even hyperinflation for quite some time now. Last time John was on the show he argued, quite convincingly, that we are just beginning to see the effects of inflation. Many are arguing that the Fed can take an easier breath because of the decline in commodity prices. John would argue that inflation is a monetary phenomenon and there is no real relief on the horizon. We hope to have a time worked out soon.

I made a rule a short time ago to quit trying to call a bottom in the financials. I did the same thing with the energy stocks last week----but the decline in FLR, NOV, DO, XTO, and others is really tough to ignore. I am looking seriously at XTO which bucked the trend today. I will see what happens, but these are definitely on my radar screen.

Now lets talk about the positives that I see in the market right now. First and foremost, I see a little more stability in the REITS. The one I mentioned last night, WRI was down about a dollar today, but well off of its lows of the year---now granted dividend payers will fare a little better in a panic situation. Volume was not scarily high today and I think that is a positive. Some retailers bucked the trend--BKE was up over 2 points today. Now Jim Cramer will tell you that this economy is all about housing. I say it is all about the SHOPPER. I am always encouraged to see decent retail numbers. This economy is 70% driven by the consumer and I like for the consumer to be out shopping---I don't care if they are shopping at SAKS or at Wal Mart---I just want to know they are shopping. Looking at the reports over the last month I think we are holding our own in the retail world.

We are going to be doing interviews again each week. Use the comment section below to tell us who you would most like to see back on the show.


Anonymous said...

Diane Swonk and Ryan Krueger