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Jan 04
2009
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January 4, 2009 -
We hope that all of you had a wonderful and blessed holiday season! We slowed things down a little the last few weeks of the year here at OTCPicks.com, but now the batteries are recharged and we are back in the saddle again and ready to bring you lot of good new trading ideas in 2009.
The tumultuous 2008 is now in our rearview mirror and I don't think any of us are anxious to see another year like 2008 ever again! But, from our seat, we see "Better Times" ahead in 2009 and 2010. This coming year is not likely to be a blockbuster year but hopefully we should see a bottom in the housing market with the emergence of a new bull market trend in the second half of 2009. As housing bottoms and starts to recover, consumer confidence should begin to turn around. As consumers start to spend again, manufacturing will rise, unemployment will start to abate, and growth should return to the economy and markets.
Short term we don't see any miracle turn around in the markets. The market's recovery will happen slowly and deliberately and most economists predict the begining of the economy's rebound starting in the second half of 2009. The good news for investors and our members is that the stock market "always" is the first to rebound as investors try and price in the future typically some six months in advance. If the predicting the market six months in advance is true and it also proves true that the economy should start to rebound in Q3 of 2009, then it follows that the stock market should start it's recovery and rebound early in 2009.
2009 Trader's Almanac January Prognostications
- Since it's the beginning of a new year we thought we'd take a peak at the 2009 Traders Almanac and see what it has to say as follows:
- In 12 of the last 14 post-election years the year's market performance followed in January's direction. So if January is an "Up" month in the broader markets and the year's market performance is likely to follow in the same direction and likewise for a "Down" January market performance.
- Every down January on the S&P since 1950, without exception, preceded a new or extended bear market, or a flat market for the year.
- S&P's gains during January's first five days preceded full-year gains 86.1% of the time. 10 of the last 14 post-election years followed the first five day's trading direction and act as an "Early Warning" detection.
- November, December and January typically constitute the year's best 3 month span.
- There have been five straight post-election year January gains going back to 1985 and we think there may be a pre-innaguration market rally on optimism of what will happen with the new incoming administration.
Low Oil Prices are Like a Tax Cut
The good news is that oil has retreated from around $147 ppb in July to and got as low as $36 recently and currently stands at just above $46 ppb. Oil should end higher by the end of 2009 as OPEC gets production down and as the global economy starts to recover and consumption increases once again. I would not get used to $1.50 gas prices at the pump as history tells us it probably won't last for long.
Low Interest Rates will Stimulate Home Purchases in Long Term
Low interest rates with recent Fed. rate cuts should help keep mortgage and loan rates at low rates for a long time. Many home owners will refinance their homes with the new low rates and incredibly low rates will begin to bring home purchasers back into the market. A year from now we should see existing home sales at levels much higher than today, but home buyers are wary at this time as there are not solid indications that existing home prices have stabilized and prices will not plummet further. Once there is some confidence that home prices are stabilizing, new home buyers will come back into the market.
Obama Stimulus Package
President-elect Obama has called for a "HUGE" stimulus package that he wants to get passed shortly after his inaguration. While the details are not year known here are some of the uses of the stimulus funds that are being bandied about:
The "American Recovery and Reinvestment Plan'', as it is being called, is expected to cost between $750 billion and $1 trillion, and Obama has said it would be aimed to "create or save'' three million jobs by 2011.
The tentative stimulus spending proposals include:
- Massive infrastructure and public works projects, with money for roads, mass transit, bridges and schools, projects that Mr Obama has called "shovel ready.''
- A portion of a middle class tax cut that will become part of a permanent tax cut in the upcoming budget: immediate tax relief of some $500 for individuals and $1000 for couples.
- Doubling production of renewable energy through spending and tax incentives.
- Developing a national energy grid for harnessing and distributing power derived from water, wind and other alternative energy sources.
- Cash for states facing revenue shortfalls.
- Improving health care technology to bolster productivity and reduce bureaucratic costs.
- Extending part-time workers' unemployment compensation - a proposal Republican lawmakers have blocked in the past.
- Subsidizing employer expenses to temporarily continue health insurance coverage for laid-off and retired workers and their dependents.
- The plan may also enable workers laid-off from jobs without insurance benefits to become eligible for Medicaid coverage.
Post-Inaguration Market Pullback?
From the reading I have done it seems as most analysts predict an early January rally up through the inaguration and that there may be a post inaguration pullback as Q4 earnings start to come in. Q4 earnings are not likely to be good for most companies and it may create a sour mood and post-election pullback in the major market indexes.
We saw the same thing happen in the weeks leading up to the November election and within days of the election the markets got hammered and the Dow fell from around 9600 to 7400 in the following several weeks.
The U.S. Dollar - Stronger or Weaker moving forward?
The dollar, which had already been on a multiyear losing streak, began to weaken further in late 2007 and early 2008 as it became clear the country was heading into a recession. But as the global economic outlook soured, investors flocked to the safest assets around: U.S. Treasury bills, notes and bonds.
Because Treasury investments are denominated in dollars, this trend pushed up demand for greenbacks - and more demand has translated into a stronger dollar.
The stronger dollar has come at a bad time. It made U.S. goods more expensive overseas as the economies of many major U.S. trading partners are mired in recession. That has weakened the demand for U.S. goods, which has caused exports - a rare bright spot in the U.S. economy earlier this year - to fall hard.
The byproducts of a strengthening dollars is a drop in oil and commodity prices, and a drop in US exports as US goods become more expensive to buy and this causes a widening of the trade deficit. The dollar has weakened some in recent weeks and gold and oil prices have rebounded as a result.
Long term we think that the many variables point to a return to a weaker dollar. As the Federal Reserve continues to pump dollars into the economy, the increased supply of the US currency could push the value of the dollar much lower down the road. The higher the total cost of all the bailouts and stimulus packages, the more $ the Fed will spend and this extra supply should devalue the dollar to some degree. A long term weaker dollar will signal rising oil and commodity prices but we think that this will not happen overnight and it could be years before we oil above $100 again. Then again, if another major war, terrorist attack, or natural disaster happens in a major oil producing country, prices could jump again quickly.
Off to a Good Start in 2009
The market is off to a good start this year, the DOW closed right above the resistance level made in early December. If we have another good day on Monday the 5th it will bode well for the rest of the year historically speaking. I'm sure all of us could use a much healthier and happier market this year!
Once again, we wish all our members a Happy and Prosperous 2009 and will do our best to bring you new trading and ideas along the way.
Happy New Year - Market Off to a Good Start in 2009
We hope that all of you had a wonderful and blessed holiday season! We slowed things down a little the last few weeks of the year here at OTCPicks.com, but now the batteries are recharged and we are back in the saddle again and ready to bring you lot of good new trading ideas in 2009.
The tumultuous 2008 is now in our rearview mirror and I don't think any of us are anxious to see another year like 2008 ever again! But, from our seat, we see "Better Times" ahead in 2009 and 2010. This coming year is not likely to be a blockbuster year but hopefully we should see a bottom in the housing market with the emergence of a new bull market trend in the second half of 2009. As housing bottoms and starts to recover, consumer confidence should begin to turn around. As consumers start to spend again, manufacturing will rise, unemployment will start to abate, and growth should return to the economy and markets.
Short term we don't see any miracle turn around in the markets. The market's recovery will happen slowly and deliberately and most economists predict the begining of the economy's rebound starting in the second half of 2009. The good news for investors and our members is that the stock market "always" is the first to rebound as investors try and price in the future typically some six months in advance. If the predicting the market six months in advance is true and it also proves true that the economy should start to rebound in Q3 of 2009, then it follows that the stock market should start it's recovery and rebound early in 2009.
2009 Trader's Almanac January Prognostications
- Since it's the beginning of a new year we thought we'd take a peak at the 2009 Traders Almanac and see what it has to say as follows:
- In 12 of the last 14 post-election years the year's market performance followed in January's direction. So if January is an "Up" month in the broader markets and the year's market performance is likely to follow in the same direction and likewise for a "Down" January market performance.
- Every down January on the S&P since 1950, without exception, preceded a new or extended bear market, or a flat market for the year.
- S&P's gains during January's first five days preceded full-year gains 86.1% of the time. 10 of the last 14 post-election years followed the first five day's trading direction and act as an "Early Warning" detection.
- November, December and January typically constitute the year's best 3 month span.
- There have been five straight post-election year January gains going back to 1985 and we think there may be a pre-innaguration market rally on optimism of what will happen with the new incoming administration.
Low Oil Prices are Like a Tax Cut
The good news is that oil has retreated from around $147 ppb in July to and got as low as $36 recently and currently stands at just above $46 ppb. Oil should end higher by the end of 2009 as OPEC gets production down and as the global economy starts to recover and consumption increases once again. I would not get used to $1.50 gas prices at the pump as history tells us it probably won't last for long.
Low Interest Rates will Stimulate Home Purchases in Long Term
Low interest rates with recent Fed. rate cuts should help keep mortgage and loan rates at low rates for a long time. Many home owners will refinance their homes with the new low rates and incredibly low rates will begin to bring home purchasers back into the market. A year from now we should see existing home sales at levels much higher than today, but home buyers are wary at this time as there are not solid indications that existing home prices have stabilized and prices will not plummet further. Once there is some confidence that home prices are stabilizing, new home buyers will come back into the market.
Obama Stimulus Package
President-elect Obama has called for a "HUGE" stimulus package that he wants to get passed shortly after his inaguration. While the details are not year known here are some of the uses of the stimulus funds that are being bandied about:
The "American Recovery and Reinvestment Plan'', as it is being called, is expected to cost between $750 billion and $1 trillion, and Obama has said it would be aimed to "create or save'' three million jobs by 2011.
The tentative stimulus spending proposals include:
- Massive infrastructure and public works projects, with money for roads, mass transit, bridges and schools, projects that Mr Obama has called "shovel ready.''
- A portion of a middle class tax cut that will become part of a permanent tax cut in the upcoming budget: immediate tax relief of some $500 for individuals and $1000 for couples.
- Doubling production of renewable energy through spending and tax incentives.
- Developing a national energy grid for harnessing and distributing power derived from water, wind and other alternative energy sources.
- Cash for states facing revenue shortfalls.
- Improving health care technology to bolster productivity and reduce bureaucratic costs.
- Extending part-time workers' unemployment compensation - a proposal Republican lawmakers have blocked in the past.
- Subsidizing employer expenses to temporarily continue health insurance coverage for laid-off and retired workers and their dependents.
- The plan may also enable workers laid-off from jobs without insurance benefits to become eligible for Medicaid coverage.
Post-Inaguration Market Pullback?
From the reading I have done it seems as most analysts predict an early January rally up through the inaguration and that there may be a post inaguration pullback as Q4 earnings start to come in. Q4 earnings are not likely to be good for most companies and it may create a sour mood and post-election pullback in the major market indexes.
We saw the same thing happen in the weeks leading up to the November election and within days of the election the markets got hammered and the Dow fell from around 9600 to 7400 in the following several weeks.
The U.S. Dollar - Stronger or Weaker moving forward?
The dollar, which had already been on a multiyear losing streak, began to weaken further in late 2007 and early 2008 as it became clear the country was heading into a recession. But as the global economic outlook soured, investors flocked to the safest assets around: U.S. Treasury bills, notes and bonds.
Because Treasury investments are denominated in dollars, this trend pushed up demand for greenbacks - and more demand has translated into a stronger dollar.
The stronger dollar has come at a bad time. It made U.S. goods more expensive overseas as the economies of many major U.S. trading partners are mired in recession. That has weakened the demand for U.S. goods, which has caused exports - a rare bright spot in the U.S. economy earlier this year - to fall hard.
The byproducts of a strengthening dollars is a drop in oil and commodity prices, and a drop in US exports as US goods become more expensive to buy and this causes a widening of the trade deficit. The dollar has weakened some in recent weeks and gold and oil prices have rebounded as a result.
Long term we think that the many variables point to a return to a weaker dollar. As the Federal Reserve continues to pump dollars into the economy, the increased supply of the US currency could push the value of the dollar much lower down the road. The higher the total cost of all the bailouts and stimulus packages, the more $ the Fed will spend and this extra supply should devalue the dollar to some degree. A long term weaker dollar will signal rising oil and commodity prices but we think that this will not happen overnight and it could be years before we oil above $100 again. Then again, if another major war, terrorist attack, or natural disaster happens in a major oil producing country, prices could jump again quickly.
Off to a Good Start in 2009
The market is off to a good start this year, the DOW closed right above the resistance level made in early December. If we have another good day on Monday the 5th it will bode well for the rest of the year historically speaking. I'm sure all of us could use a much healthier and happier market this year!
Once again, we wish all our members a Happy and Prosperous 2009 and will do our best to bring you new trading and ideas along the way.
3. The Fed bailed out American International Group's (AIG) with an $85B infusion giving the government 80% ownership of the company.The Fed said if AIG were to topple, interest rates would have risen, lowering consumer buying power and stifling the already weakened economy and potentially inciting a panic by consumers.
