Weekly Market Commentary 09| 04 | 2011

by Christopher Alan Sweeney, tradingstocksbycas.com

09/04/2011 | Begun at: 10 pm EDT

CLOSES
DOW: 11,240 down 43 from last week
S&P: 1,173 down 3 from last week
Asian stocks: Nikkei down 140

OPEN MARKETS
European Stoxx: down 182
US $: 74.87
NYMEX crude: $85.93
Gold: $1882.60
US stock futures are DOW: down 41

MACROECONOMIC AND  GEOPOLITICAL
Well my announcement last week that the Bear Market was upon us seemed premature. It sure didn’t look like it the next day. The market went on a tear to the upside. I looked like a fool and felt like one too.

But the grim economic news just kept coming finally topped off by the Employment Report on Friday. No net new jobs were created in August. That hasn’t happened since the end of World War II when ex-GIs couldn’t find jobs fast enough. All the gains of the week were erased on Friday.

Things I’ve been writing about for months are now headlines. Did you miss the fact that: states, counties and municipalities shed 71,000 from their payrolls last month? I wrote about that inevitability several months ago.

Just two days ago I heard from a major money manager. He now thinks that gold and the DOW are both headed for 6,000. How’s that for bearishness?

Nothing the President can say this week is going to do any good. It’s the policies that he and his predecessors put in place that are destroying the economy. More deficit spending will do no good. Neither can the FED save us. It’s out of tools. How much lower can interest rates get? The 10 year Treasury note is yielding less than 2%.

Hayek was right. Keynesian economics does not work. It’s like trying to push something with a rope.

As Ronald Reagan said:“Government is not the solution. It is the problem.” SEE URL: http://www.cnbc.com/id/44373132

FNMA and FREDDY MAC did not help the housing sector they destroyed it. But it did make some Clinton appointees
multi-millionaires-notably, Franklin Raines and Jamie Gorelick. Raines is accused of being paid $90 Million as a bonus on phony accounting at FNMA.

Dodd/Frank and Sarbanes/Oxley are bankrupting our smaller banks. Over 367 US banks have failed since Dodd/Frank and Sarbanes/Oxley were passed. And they are destroying small publicly held companies. Thanks to FINRA, thousands of small brokerages have gone out of business-mine among them. Where do small companies go if they can’t get a broker to raise them some equity capital and their community bank no longer exists? The big money center banks could care less about you and your little day care center’s plans to expand.
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The EPA is putting firms out of business and standing in the way of any hope of a comprehensive energy plan. Literally millions of jobs could be created if only the government would let oil companies’ drill on leases they’ve already paid for.

The red tape at the SBA is so daunting that businessmen just give up. I did.

The National Labor Relations Board is so pro-union and anti-business that it seeks to destroy jobs-witness Boeing and its plant in South Carolina.

Obamacare, if it is not stopped by the Supreme court, will be the ultimate destroyer of America as we know it.

We not only have a debt crisis, we have an over regulation crisis. The best news of the week was Obama pulled back on the EPA regulating ground level ozone levels. That would have cost states as much as $90 Billion. SEE URL: http://www.politico.com/news/stories/0911/62586.html

We need to get rid of: all the Czars, the Department of Education, Department of Commerce, the Department of Agriculture and the EPA. We also need to change the tax code to a very simple broad based system. The whole code should be on one or two sheets of paper and everyone who is employed should pay something. All Americans should have some skin in the game even if it’s only $10 a year. Maybe Millionaires and Billionaires should pay more like Social Security on 100 percent of income even if they won’t be eligible to receive it if they make $25,000 or more after retirement. I’d personally like to see Social Security privatized as we did in Chile. It worked just great. Everyone over 35 stayed on the old system but everyone under 35 got personal accounts that their heirs could inherent. That’s wealth creation not a worthless IOU Ponzi scheme.

All those Czars and bureaucracies remind me of a personal story. Washington has become so obsessed with itself it has become like the USSR’s Kremlin. It’s the only area in the country where home values haven’t gone down. I was riding in a taxi on my way back from a meeting in Manhattan. We were headed for the Jet Blue terminal at JFK when we hit a pot hole that literally bounced me to the ceiling of the cab. When I recovered I looked at my driver’s license. His name was unprouncable. I asked him where he was from and he said Kazakhstan. I was wondering if they even had cars in Kazakhstan when he told me that that pot hole was nothing compared to those in his home country. When I asked why, he said: “everything gets worse the farther you are from the Kremlin.”

That brings to mind the effects of the recent weather events. Texas and Arizona are on fire and the lower Mississippi regions are so flooded our crops this year are going to be a disaster. What’s the government going to do about that? Answer: nothing. Inflation is well on its way.

In trading last week, I got short too early and only got even on Friday. I’m holding it over the weekend because this isn’t over by a long shot. I knew the entry point I wanted but I was afraid it wouldn’t get there. I know better than that. I should have let the market come to me. I know I won’t be short when the President speaks. He may say something intelligent like cutting regulations or reforming the tax code. That would give the market a bounce. If he demands more “green jobs”, infrastructure banks, other such nonsense and stimulus spending his speech will bomb. SEE URL: http://www.cnbc.com/id/44383180

Unfortunately, I think he wants more of the same so he can have a fight with Republicans in Congress and use the same old Democrat tactics in his re-election bid.

On the economic calendar we have:
• Monday is Labor Day so there won’t be any news.
• Tuesday we get the ISM non-manufacturing index.
• Wednesday we get: MBA home purchase applications, Same Store Sales and the FED’s beige book.
• Thursday we have International Trade and Initial Jobless Claims and the Consumer Comfort Index.
• Friday there’s only Wholesale Trade.

News wise it’ll be a light week. All eyes will be on the Initial Jobless Claims number. The President will address a joint session of Congress that night.

I’m not a fan of Newt Gingrich. I’ve met him enough times to be turned off by his ego and arrogance. But I just finished his book “TO SAVE AMERICA”. I highly recommend it. You don’t have to like someone to be impressed by their brilliance. Part of that brilliance is to seek out true experts in different areas. You also have to give him credit for trying to work with Hillary on Hillarycare but she opposed him at virtually every turn. His comprehension of health care issues, with the goal of universal care, are truly amazing. Don’t prejudge it. Just read the book!

TECHNICAL: See URL: http://stockcharts.com/h-sc/ui
Put in INDU for the DOW, SPX for the S&P 500, NDAQ for the NASDAQ and RUT for the Russell Two Thousand.

All the indices are under their 50 DMAs and the 50 DMAs are all under their 200 DMAs. ALL RSIs are also under 50 so we are firmly in bearish territory. I’ll stay short until I see a profit worth taking but get out before the President’s speech. Then look to get short again.

I do have one concern. There’s so much cash on the sidelines. Many money managers have less than 50% invested in stocks. Treasury bond yields are so low that huge money managers like PIMCO want no part of them. Corporate bond yields are comparatively attractive. High dividend stocks like Verizon are very attractive. If inflation rears its ugly head, bonds will drop like lead balloons.

That’s why my buddy, who recently sold his company and made a ton of money, has all his cash in banks making 1.1%. He wants no risk and isn’t concerned about making any more money. He said: “I have enough money to live on for the rest of my life even if I never make another nickel. That’s probably true unless we get hit with hyper-inflation.

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