Thoughts Before the Holidays

Before I start, I just want to wish everybody a very Merry Christmas, Happy Hannukah, and Happy New Year. It has been an interesting 2008 and here's to 2009 being a happy and healthy one.

On a news-related front, Blago made a public appearance today and gave one of the most incredulous, cocky speeches I've ever seen. Please watch it here...it's short and amusing. He is "not guilty" he will "fight and fight" until his "last breath". He said NOTHING of substance. He reiterated that he will not quit his position. He should at least step aside and let the investigation proceed. I'm sure he can't be an effective governor with the media circus around him. I still don't know who more of a loser...him or Madoff.

Take a look at this chart on returns from the Madoff fund. It's a straight line for the past 20 years! Contrast that with the chart of the S&P....note the fluctuations. How did this not trigger any alerts? Unbelievable. Remember, if it's too good to be true, it can't be true. That performance is too linear! Second, why he is not in jail??? And, third, where is the $50 billion dollars? He could not have spent it all. He must have it hidden in some off-shore account. I hope for the sake of the investors and charities that they will be able to recoup some of that money.






Also, why did Obama pick Pastor Rick Warren to give the invocation at his his inauguration? I know they are friends, but he is overtly anti-homosexual (in fact, he won't even allow homosexuals into his parish), and has many other views that are not in line with most Democrats/liberals. I do applaud Obama for not appeasing only one political view with his choices for his cabinet, but this move is certain to ruffle many feathers on the left because of Warren's hard-right social stances.

Newsweek published an interview with a Somali pirate on the processes involved in hijacking ships. OK, Newsweek, how about not publishing advice on how to be a crook. Bottom line, this pirates need to be taken out and not have their ransoms paid or else it will lead to more hijackings!!

Bush announced the auto-bailout details this morning. It's a $17 billion life-line, but I doubt these companies can get their act together that quickly. I don't know what to think about these bailouts anymore. It's probably like trying to plug a leaking dam with some putty, but at the same time, a FLOOD of new unemployed Americans won't be a welcomed either.

OK, that's enough for now. Again, best holiday wishes to one and all!!

Madoff et al.

The Bernard Madoff scandal has impacted several people and organizations, including banks, charities, and pensions that had invested millions of dollars in his investment fund. The director of the SEC issued an official apology today for not catching on to Madoff, who basically stole billions of dollars from investors via the Ponzi scheme. What has the SEC been doing? They go after people like Martha Stewart and Mark Cuban for one episode each of insider trading, but completely miss the fraudulent undertakings of Madoff that had gone on for YEARS. People went to bed as multi-millionaires and woke up with almost nothing the next day. What an evil, narcissistic, arrogant, repugnant man. I am surprised he hasn't killed himself after the whole rouse was exposed, but it just shows how evil and unapologetic he is. The impact of the Madoff case will go beyond the actual dollars that were lost by the groups and individuals. It will likely cause a ripple effect in terms of confidence of investors around the world, who are going to be less likely to want to invest in the stock market. As if the worst year in stock market history wasn't enough to rattle investor confidence.

In regards to the market, the fed cut interest rates to almost zero today, and the market, for the time being, loved the news and rocketed higher. Importantly, the major averages did break above the 50 day moving averages. We'll see if a "Santa Claus" rally ensues, but, it is STILL as bear market, and one must remain cautious and place stop limits.

BTW, did you see the story about the boy named Adolf Hitler Campbell? Apparently, it was his 3rd birthday and his dad ordered a frosted cake with his name written on it, but the employee at the supermarket refused to do so, and they had to go to the local Walmart to get the cake. While I don't think the supermarket should have done that, what on earth were the parents thinking by naming him Adolf Hitler? The kid is going to receive constant teasing and torture from his classmates. How is he going to get a job? The parents are idiots. Even if they were trying to prove a point (not sure what that point is), it is going to seriously and negatively impact the poor kid's life.

On a lighter note, check out this elephant play the harmonica.

Size 10 Shoes

GW Bush was in Iraq giving a speech on Sunday when an Iraqi journalist stood up and flung one then his other shoe at the President. GW showed quick reflexes and ducked out of the way. After reading this op-ed piece by Frank Rich today, it wouldn't surprise me if Rich was diguised as the Iraqi reporter and was the one actually throwing his shoes at Bush. The title of his piece caught me by surprise ("Two cheers for Blagojevich"), but after reading the piece, he makes an excellent point (that the corruption is so broad and deep in Washington and the White House, that it almost makes Blagojevich's follies seem trivial). BTW, here are some funny Blagojevich cartoons.

If Bush would have been giving his speech in Iran rather than Iraq, he probably would have had more than a shoe (or two) thrown at him. They truly practice an "eye for an eye" punishment there. That would mean a lot of torture, electrocution, waterboarding, etc for Dubya.

Interestingly, Mr. McCain (who has vigorously opposed the Bush Administration on the torture issue), does not support Ms. Palin for president in 2012. George Stephanopolous was incredulous and asked again how he cannot support someone that he chose to be his V.P. and the next-in-line were he to fall ill, but McCain said, "my corpse is still warm" (he really didn't answer the question except for some mumbo jumbo that this is a new election cycle). Actually, I have to give McCain more credit than people like Rush Limbaugh who continue to blindly and stupidly support Palin for the 2012 run. McCain is being honest as he realized the grave mistake he made in choosing her. THE MAVERICK!!

How did he get the fox urine?

This story immediately caught my eyes. A man who was fed up with some kids that had toilet papered his house sprayed the teens with fox urine. The article says he had a squirt gun filled with fox urine and sprayed them as they approached his house.

I am in complete disbelief. How can the report not indicate how on earth this man collected fox urine??!?!?!?!? Does anyone have any ideas how one would do so? Please educate me.

Obamatism

A new poll that indicates that most Americans are pessimistic about the economy (and have very negative views of congress), find that 67% of Americans have a favorable view of Obama (and only 14% have a negative view). That's really quite impressive, because it means a lot of Republicans are viewing him a favorable manner. I think that the moderate and excellent cabinet he is putting together has a lot to do with it.

There's a recent piece on a sports recession. Honestly, I don't know how the average fan can afford to attend several sporting events if things are as bad as they seem in the economy. The price of the tickets, drinks, food for a family of 4 costs at least $300-400 for any major event. Plus, really, with HDTV, it's so much more comfortable to be watching from home. Of note, CNBC just added an HD channel. It's awesome. They have constant cycling charts on the right side of the screen and the stock quotes at the bottom are just so crisp and clear.

BTW, The silver lining of the recession....lobsters are on sale because of the glut!

Gov. Blagojevich isn't giving up. Obama is calling for him to step down, but he won't...yet. He's quite an persistent little-bugger, isn't he? Here's a little montage of jokes from the late night circuit regarding the most reputable governor. I love Stewart's line..."he has nothing to hide, except whatever is written on his forehead...which probably says, 'Bribe me'."

Corruption All Around

Rep. Rangel and Gov. Blagojevich are being investigated on major corruption charges. The governor also tried to get the editorialists who were trying to expose his story at the Chicago Tribune fired. These stories are pretty disgusting and push the reputation of politicians into a deeper abyss.

Meanwhile, poor ex-Senator Larry Craig just wanted to have some fun in a men's room and is still losing appeals on his guilty charge. I still don't see the big deal of his actions, especially in comparison to the other dispicable antics that abound in Washington and politics. Plus, men hit on women all the time in bars and other public places. Why can't Larry look for love in the bathroom? My only complaint against him is that he keeps insisting that he's not gay. Larry should just come out of the closet (or bathroom stall). And, if he did come out, he would get to call in sick to work (if he still had a job...which, in my eyes, he still should).

O/T check out Gov. Blagojevich's frontal hairline. At least no one can tell when he furrows his brow. And his brow will become very furrowed when he hears his sentence (and meets his cellmate in prison).

Quick Update

Good job by everyone keeping the discussion flowing while I was away/busy. Haven't had too much time to focus on the blog tonight, but here are some things that caught my eye.


1. The real "Mr. Short-term Memory" died today in New Haven. He had been the subject of several medical studies of the brain. Remember the Tom Hanks as "Mr. STM" on SNL?

2. Cojones- John Thain, the CEO of Merrill Lynch recently requested a $10 million bonus for this year. Are you kidding? I don't know how right it is for the government to regulate CEO salaries/bonuses, but I think that companies that received government money should not be giving out bonuses for AT LEAST this year. Mr. Thain did withdraw his request after public scrutiny, but it is still ridiculous.

3. Bear Grylls, of Man vs. Wild, was injured in Antartica. It was only a matter of time. I hope he will be OK soon that he can resume taping one of my favorite shows and start drinking the fresh blood from the severed jugular of a yak again.

4. This study on the spread of happiness totally makes sense, but it does seem like it was a lot of work to actually prove. It was published in BMJ. Fortunately, sadness does not spread as easily. Each happy friend increases your own chance of being happy by 9 percent, whereas each unhappy friend decreases it by 7 percent. Choose your friends wisely!

5. The above study also demonstrated that obesity co-segregates. A person's likelihood of becoming obese increased by 57 percent if he or she had a friend who became obese in a given time period. I guess that would explain the new study that demonstrates that Louisiana, Mississippi, Tennessee, South Carolina, and Texas are the unhealiest states in the U.S. Nothing against BBQ and other types of Southern food, but the portion sizes are just way too large.

6. Dog tries to save injured/dead dog in highway in Chile. Watch the video- it's pretty incredible. A new study also demonstrates that dogs have a sense of fairness. And, in Chicago, an obese dog froze to the sidewalk. Thankfully his layers of fat saved him from freezing to death.

7. OK, so the shooting and death of the teenager in Greece was a tragedy that needs thorough investigation. But, three days of rioting in Athens? That's enough. These people are always protesting in the streets. Where does it get them? What is this destruction going to accomplish? Already several have been injured now. Time to round up some Spartan police officers to quell the unrest.

8. The recession is even affecting television. NBC will cut back the number of hours of programming during primetime. And, in an interesting move, Jay Leno will move to 10 PM timeslot after Conan O'Brien takes over the 11:30 time slot in the spring. Conan is a gem. I'm glad he will have a chance to be seen by more people in the earlier time slot.

Update

I did a quick scan of the news and between the economy (it was announced today that the recession actually started in Dec 07), the stock market (7th largest loss in market history), fiscal emergency in California, the continued terrorist attacks in India (a bomb exploded on a train today), and even the flooding of historic Venice, there is just not much in the way of uplifting stories to discuss.

I'm going to be away at a conference and interviews for the rest of the week, so blog updates, if any will be sparce. For those of you that haven't checked out the comments sections, there are some real fireworks and good discussions here (blog record 38 comments in regards to a single post).

Hold down the fort while I'm gone. Start a new string of discussion on a topic in the comments section for this link if something strikes a nerve!

College Football

I know this isn't that important in the big scheme of things, but I hope the MESS that has been created this year via the BCS standings will finally, finally encourage the NCAA to move to a playoff system for college football. I will not hold my breath, as there have been several controversies already over the past several years that should have provided enough evidence to the powers that be that the BCS system is just not kosher.

As you may have heard, the Big 12 Championship game matchup was decided today by the 5th tiebreaker, which, unfortunately is the BCS ranking system. In brief, Oklahoma, Texas and Texas Tech all ended with a 7-1 record in the Big 12 South (and 11-1 overall), and were vying to play Missouri, the winner of the Big 12 North division. Texas beat Oklahoma back in October, 45-35, Oklahoma beat Texas Tech 69-21, and Texas Tech beat 39-33. Oklahoma got the nod for the Big 12 Championship because of a 0.9351 average, slightly better than 0.9223 average for Texas.

Personally, I really couldn't care about this, except as a casual football fan. However, there are so many players, coaches, universities and fans that pour so much effort, time, money and their heart and soul into college football that it just seems ridiculous that a computer ranking system (that takes into account "style points") ends up determining the championship, when every other sport in the NCAA and in the world is decided on the field.

Plus, it leads to pathetic pandering and campaigning by the coaches and universities, which just is so uncouth. This is a sport played by strong young men, and should be decided mano a mano rather than some nerdy computer algorithm.

Get rid of the conference championship games and start either a 8 or 16 team playoff from early December and that culminates in early January. It would not lead to global academic underperformance. The players are already receiving tons of help/tutoring and are still practicing football all throughout first semester finals in preparation for the bowl game. Plus, only 2 teams would end up playing in all 3 or 4 games, the rest would be eliminated earlier and the net time spent away from the books would be about the same.

This system simply does not make any sense. All I know is that Texas beat Oklahoma, and that Utah and Boise State are undefeated, yet it is unlikely that any of those teams have any chance at winning the college football crown.

Supply-Demand Economics

This is such a good news-bad news story/concept. The good news? The higher gas prices over the past year led to 11 straight monthly declines in miles driven by Americans. The high fuel prices had everybody salivating on methods and strategies for implementation of alternative energy sources and created the demand for more fuel efficient vehicles. Great, right?

Well, because it's a feeback loop, the decline in demand for fuel (not only by less driving but declining activity of world-wide economies), has led to an ABRUPT reduction in gas prices. This removes the impetus and inherent pressure to innovate, and I fear we will be back to square one. This is why we never learn the lesson. I think we need to implement a carbon tax. There is no other way around this. I know it is messing with free-market relationships, but, please, there is no need to be consuming so much oil, particularly when we get the majority of it for a high cost from not so friendly countries.

The Economy

Obama is doing a pretty good job at putting together his economic team. The free-marketers of Wall Street seem to really like his selections of Geithner as Treasury Secretary and Summers as Top Economic Advisor, as evidenced by the late day rally on Friday (which was really building up on a technical basis in the charts prior to the announcement) and the higher futures this morning. Not only are they centrist, but it's taking away uncertainty in these very uncertain times. Also, overnight, the government announced they will be bailing out Citigroup with a complex deal.

The script for the democrats and Obama can't get much better as far as drama and credit goes. Fairly or unfairly, Bush will go down in history as being the leader of the U.S. as it entered its 2nd greatest recession of all-time. He will also be remembered for socializing most of the banks and investment firms, and potentially for bailing out the automakers. Obama will come out looking as the "savior" as the economy will emerge (with or without his help) much stronger in the next 2-4 years. It's kind of ironic.

Watch the market today. It is an important day. There haven't been 2 big up days in a row in a very long time. If the market can tack on 4-6% today, then it would probably signify that a meaningful intermediate-term rally will take place (could rebound 30-40% from these levels). It actually wouldn't even be bad if the market went into negative territory after the higher futures, as long as it finishes up strong. It's all about the close and the last hour.

Cliff-Diving

There has been unbelievable price destruction of equities over the past several weeks. A few weeks ago, I posted the long-term chart of the S&P and indicated that a testing of the bear market lows from 2002-2003 would be inevitable. Well, I thought it would happen after some type of oversold rally to relieve some of the selling pressure, especially as we have entered favorable "seasonality" (November and December are typically very strong months).

I don't know what to say or what's going to happen next. Ever indicator that I and every other trader follows had been pointing to a rally. It never occurred and there has been a major price breakdown, below the lows of the previous bear market. The ultra-confusing thing is that the S&P is below, but the Dow and NASDAQ still have a little way to go to get back to those old lows. Will every index fall below? If they do, and there isn't a major rally in the next 1-2 days, S&P 600 and Dow 6000 will be the next stop.

I feel badly for everybody that has lost so much money in this market. It just doesn't seem fair that people can slowly put away money month by month in their 401K or investment accounts and have 5-10 years of gains disappear in a matter of weeks. No one ever said that the market wasn't risky, but still, it's just a travesty.

P.S. Ford hit $1 per share today and Citigroup fell below $5.

Five bucks with change to spare

Five dollars. That's not much money. You can barely get a good lunch these days for $5. But, do you know what you can get? One share each of GM and Ford stock, and you'd have 23 cents left over. It's unbelievable. The CEOs of the 3 U.S. automakers were on Capitol Hill today and took a grilling from the Senate. They stammered on their defense of why they need a $25 billion dollar bail-out. Chris Dodd pretty much summarized the sentiment many including myself are feeling about this issue:

The industry is "seeking treatments for wounds that I believe to a large extent were self-inflicted, but at a time like this, when our economic future is so tenuous, we must do all we can to ensure stability."

I watched some of the testimony. They had a PhD economist, Peter Morici, testify as well, and it was somewhat amusing to watch him directly rebut the promises that the CEOs were making in regards in becoming profitable in the very near future and being able to pay back the "loan". He cited that only Chrysler was even close to meeting the quality and efficiency standards that Honda and Toyota have in place, as rated by an independent quality assessment firm. Plus, he stated even with major job cuts in an attempt to improve their bottom line, the amount in pension benefits (about $105,000 per employee) that would need to be paid out will cripple their profit margins.

I don't have the annual balance sheets of these automakers (nor do I want them), but I will say that during the whole bull market run from 2003-2007, Ford and GM shares were flat/declining throughout. That implies terrible management. Here's what I would do: While these companies dug their own graves, the ripple effects throughout the whole economy would be horrific if they went under. Therefore, I would give the companies the $25 billion, with the conditions that all 3 CEOs are fired, and new CEOs are hired with proven track records of running profitable companies that produced quality products.

Our economy, bailout or no bailout, is in big trouble. Even Harvard's endowment investments are getting pummeled, as their account has lost 30% of its value this year.


At least health care is safe right?

Wrong!!

Read this article: Twenty percent of primary care doctors said they will cut back on patients seen, 10% said they will work only part-time, 11% plan to retire, and 13% are planning on finding jobs that don't involve patient care. Why is this bad? Because there is already a shortage of primary care doctors, and 67% of physicians surveys said they are working at full capacity or are overextended and overworked as it is. Oh, and 60% said they would not recommend medicine as a career. This is troubling, but understandable given what is going on in medicine these days. The demands for keeping up on the latest medical information, trying to manage elderly patients with multiple comorbidities, doing paperwork and fighting claims with insurance companies, and so on are just too much to handle for primary care physicians. That's why a job at a VA hospital is the way to go!

At least rich people in Santa Barbara are doing well. WRONG! More than 210 homes, including many multi-million dollar mansions have been destroyed by the wildfires. Worse yet, evidence is pointing to a bonfire started by 10 college students as the culprit. It's ashame, not only for the homeowners who probably lost priceless memorabilia in the fires, but also because of the added economic stress. California has already spent $305 million on emergency firefighting since July 1st, only $236 million more than was budgeted, and the state has a deficit of $11.2 billion.

Ok, that's enough of this Debbie Downer session. Have a good night!

Funnies

Bear Grylls on Man vs. Wild tonight, stranded on a desert island, said "No matter how tempted, never drink seawater, your kidneys will collapse". Perhaps they need a nephrologist consultant for the show! Also, in an episode from "Siberia", the locals sliced the neck of a yak, and he placed his mouth directly on its severed jugular vein and drank about a quart of blood. Even though it was nasty, at least the blood is isotonic and won't "collapse his kidneys".

I don't know who's a more talented and funny impressionist.

1. Frank Caliendo (watch this clip of him on the Tonight Show....his Leno, Bush, and John Madden impressions are awesome).

2. Rob Bartlett as the Godfather and Hulk Hogan. I love when he seamlessly breaks into Italian which pausing.


Has anyone ever been troubled by the Silversonic XL commerical? I think it is a little freaky. It's not really marketed for people with poor hearing, but instead seems to encourage eavesdropping. Watch this video.

Nuts and Bolts

Don't think we need to do something about the environment? Read this....brown clouds over Asia, decreasing the amount of sun to major cities there by about 25%.

This is cool...CSI meets Con-spiracy regarding the JFK shooting. There was NOT a second shooter.

This is ridiculous....what happened to separation of church and state?

A good argument for "taxes"....sorry Don! But it saves lives! I would also love to see similar studies on the effect of higher taxes on tobacco products.

This article, including the title, show why you cannot trade the stock market based on fundamentals alone. Expanding national deficit and unemployment were the two key economic numbers reported today. The market rocketed up in the 2nd half of the day. Technical analysis must be a huge part of the equation. In fact, now that I've learned about this stuff, it is hilarious that most of the newscasters, including those on CNBC and Bloomberg still try to explain daily moves on the news (e.g., "stocks plunge today based on credit fears, higher oil"...it's all crap). See my market update to the right. Today was an important day.

TF on the Detroit Bailout

Love Tom Friedman. He hits the nail right on the head again with a Scathing report on GM and the others. He has an excellent idea for what should be done IF the government decides to bail out the pathetic US automakers.

The devil inside me (or maybe just the free market capitalist) says let them fail, and use the taxpayer money instead to send the unemployed autoworkers to school, whether it be trade school or academic school. Or, better yet, let them fail, do nothing, and teach them all a lesson. The government cannot bail out every failed business and every unemployed worker in this economic cycle. It will probably be best for us to emerge from this recession (and ALL recessions eventually end) with true innovation and grit by both strong companies with innovative leaders and by resiliant and adaptable workforces. If we keep printing money for more and more bailouts, we are going to end up with massive inflation over the next several years. Remember we had inflation of 15-18% at the end of the 1970s. That's where we will be headed.

Potpourri

Some great articles on the current state and future of conservatism:

1. Mark Sanford, governor of South Carolina, blames the Republicans, not conservative ideology for losing the presidential election. I completely concur. I have been recently arguing with Bush/GOP supporters who hold conservative viewpoints. Haven't these Republican leaders failed in almost every facet??? (massive spending, huge deficit, bailouts, 2 endless wars and nation building in the Middle East, etc).

2. David Brooks on the Traditionalists vs. Reformers in the GOP. Regardless, as mentioned above, Conservatism is dying in the U.S., and that has happened with Bush at the helm. Now that Obama will be taking over, the conservatives are going to have to hunker down (as it appears they are already doing on a cruise). The Republicans used to be able to state their mantra in 8 words: Smaller government, lower taxes, strong defense, personal responsibility. One can argue that all but the "lower taxes" themes have been violated (budget/deficit huge, military forces stretched, bailouts galore), and the lower taxes will likely give way as we will face the "bills" for all of the spending, bailouts and unfunded mandates (social security and Medicare) over the next several years.

3. Are we really going to bail out the auto industry as well? I'm torn on this, because collapse of GM and or Ford will be devastating for the work force, but these corporations have been so uninsprining and run so poorly, that I kind of think survival of the fittest should be the principle to adhere to in this case. Who will the government bail-out next, Circuit City? Give me a break. GM continued to build gas-guzzling vehicles for years, while Toyota and Honda continued to produce better and more fuel-efficient vehicles.

4. Bush is going to publish his memoirs and admits he has made some mistakes, including "Mission Accomplished". Thanks, W.

5. Palin, on the concession speech she wanted to give on election night. She hints she wants to run for Pres in 2012. At least she will have 4 years to study up for the "gotcha" questions.

6. A new study, reported at the American Heart Association meeting, finds that 10-year old obese children had arteries equivalent to 45-year olds. One-third of American children are overweight. Get out there and exercise kids!! At least play Wii Fitness!!

7. This map is scary: depicts where homes are worth less than the mortgage.

History!

Wow! Not even close! A historic moment for sure.

I'm glad the campaigning is over. President-elect Obama will now have monumental tasks ahead of him: trying to steady the economy (less will be more), presiding over the two wars, dealing with other global threats (Iran, Pakistan, etc), the need to reform health care and social security, and the need bring a real energy policy to the U.S.

We will be watching closely....remember "the night is darkest before the dawn".

MNF

Chris Berman interviewed Obama and McCain at halftime of the Steelers-Redskins game. He asked what one thing they would each change about sports.

Obama said he would add a playoff system involving the top 8 teams to college football. He is "tired of computer models" deciding the champion. I agree. College football is the only NCAA sport that does not always have its champion crowned on the field. The college basketball is just as long as college football. Thus, the argument that the playoff games would interfere with the studies of the athletes is bunk.

McCain said he would aggressively pursue users of performance enhancing drugs in sports. He has been an advocate of this in his time as Senator, so no real suprise. The actual surprise was that McCain was pretty funny and used not one, but TWO Chris Berman catch-phrases and made Berman, as well as me, laugh pretty hard. And, I was all alone...did you ever notice that you laugh with less intensity when you are alone?? Anway, McCain said that he "could go all the way (staccato)...to the White House", and even though he is not being given much of a chance tomorrow by the pundits, "That's why they play the games". Berman fans know that these are two of his favs. Good job!

Election Eve

Don't forget to vote tomorrow! It will be a big day and probably a long evening.

There isn't much left to be said about the candidates and their platforms.

Instead, I will leave you will one final comedic-political sketch. This from radio pranksters from Canada who pretend to be Nickolas Sarkozy and Sarah Palin completely falls for it. Here's the audio.

Election Update

Only a few more days until the highly anticipated Presidential election. Finally, the campaigning will end and we can start the process of ridding ourselves of the Bush administration.

Here are some interesting links from around the web in regards to the election:

1. McCain-Palin conflict- the McCain campaign has realized the enormous gaffe in her selection, and fighting within the ticket BEFORE the election just isn't a good sign. A new poll indicates that 59% of Americans don't feel she is ready to be V.P.

2. The battle over Florida- Obama has a slight lead

3. Even George Will, one of the most prominent conservative writers in this country, can't hold in his criticisms of McCain-Palin anymore, including McCain's decision-making capability

4. The Economist (my favorite magazine), known for its economic conservatism and support of free markets, officially supports Obama over McCain. They cite McCain's poor choice of Sarah Palin, his indecision regarding the economic crisis, and his temperament as negatives, and cite Obama's ability to learn and excellent cadre of advisers, his style and discipline as reasons to support him.

5. Racism by attendees at Palin events continues.

6. Pretty cool map of newspaper endorsements.

7. Francis Fukuyama, from the AMERICAN CONSERVATIVE, endorses Obama.

8. A poll taken in Texas shows that 20% of people still think Obama is a Muslim.

9. Tim Gunn rates the fashion of the candidates.

10. Sarkozy voices harsh criticism for Obama's stance towards Iran. That guy has got chutzpah.

11. A dynamic view of the Electoral College over time. Very cool. Just makes you wish we had another system besides all vs. none for each state (why not use the method for most of the primaries- split the delegate?) and also makes you really wish we had other strong parties besides Republicans and Democrats.

Odds and Ends

1. Congrats to the Phillies. New World Series champs!

2. Give me a break...Joe the Plumber country musician?

3. Isaac Mizrahi, fashion guru, says the greatest fashion mistake is "bad hair". Has he looked in the mirror?

4. Speaking of fashion, maybe this is why I like the Christmas season so much!

5. These pirates off the coast of Somalia are out of control. 5 attacks in one day! Reminds me of my favorite pirate joke.

6. The numbers aren't adding up. How is Obama going to pay for everything? Doesn't anyone care about our deficit anymore?

7. Foreign accent syndrome. This wasn't in Harrison's. Incredible...watch the video. I would love a British accent or a Spanish accent like Javier Bardem's.

8. David Brooks with a great piece on perception vs. reality.

9. At 11:15 PM, Bill Clinton and Obama are campaigning together at a rally in Florida. I cannot even imagine how awkward it must be for Bill. All those months of battling him and now he has to go out on the stage and pledge his full support. Granted, it has to be done, but I'm just saying it must not be that easy to swallow the pride and do this.

10. Oh, how sad, Kim Jong Il is not doing well. I hope he recovers...he should be charged and tried for crimes against humanity.

Random Musings

Sorry I've been away the past few days...last few days were jam-packed with way too many interviews and a talk I had to give, so was barely aware of the news or the stock market.

Things I missed that were funny:

1. Will Farrell reprising his role as G W Bush on the Thursday edition of SNL

2. Jon Stewart "Gaffe-in" with funny flubs by our favorite politicians on the left and the right.

Interesting Things:
1. The Fey-Palin effect on real voters: small, but negative

2. Alan Greenspan takes partial blame for the financial crisis, by admitted his mistake in allowing completely unregulated free markets in the banking system. He thought the financial institutions would have looked after the best interests of their shareholders. Listen, capitalism is great, because it allows hard-working people to prosper. However, there is a point of excess, and when billions of dollars are involved, human nature, in general, turns people into greedy and conniving individuals. It's time to watch "Wall Street" again ("Greed is good") and also "American Psycho". Also, read this parable:

Once upon a time in a village, a man appeared and announced to the
villagers that he would buy monkeys for $10 each.

The villagers seeing that there were many monkeys around, went out to
the forest, and started catching them.

The man bought thousands at $10 and as supply started to diminish, the
villagers stopped their effort. He further announced that he would
now buy at $20.

This renewed the efforts of the villagers and they started catching
monkeys again.

Soon the supply diminished even further and people started going back
to their farms.

The offer increased to $25 each and the supply of monkeys became so
little that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50!

However, since he had to go to the city on some business, his
assistant would now buy on his behalf.

In the absence of the man, the assistant told the villagers. 'Look at
all these monkeys in the big cage that the man has collected. I will
sell them to you at $35 and when the man returns from the city, you
can sell them to him for $50 each.'

The villagers rounded up with all their savings and bought all the
monkeys.

Then they never saw the man nor his assistant ever again, only monkeys
everywhere!

Now you have a better understanding of how the stock market works.

3. The rating agencies are just as guilty in this whole financial mess. Read this story...there were memos that they would rate any deal, even if it was "structured by cows". Greed, again.

4. Farts can reduce blood pressure!! Awesome!

5. This one is for Don....a country that has socialist medicine came up with a huge medical breakthrough!!! How can it be?? (Read the story: potential cure for MS).

6. This is the most fair and objective examination I have seen regarding who is responsible for the current economic crisis. Scroll to the bottom to see the no fewer than 11 parties (including home owners themselves) who collectively share responsibility for this mess.

The stock market:

I'll keep this short. Extreme volatility in the markets again. Dow was only down 300 pts on Friday, but futures were "limit down". Vix closed at 79!!! If you understand this indicator, you realize that this is completely outrageous. Bottom line is no matter what the indicators are saying about over-sold conditions (new highs new lows, stocks below 40 day MAs, etc), it doesn't matter this time. In my opinion, there are now 2 major forces in play. First, the triangle I described last week on the 60 min chart has broken to the downside with a classic backtest and fall away.


This is clearly apparent on the daily chart as well.



Finally, we are destined to test the 2003 bear market lows. I would not be surprised to see the Dow down 1000 points (intraday) on Monday or Tuesday. Then, and only then can we start to form a good base and start to trade to the upside more rationally.

Financial Crisis in a Nutshell

Folks, this is a hilarious (and ridiculously true) "primer" on the subprime/financial crisis that we now find ourselves in. Please watch this powerpoint presentation, depicting the crisis as acted out by stickfigure people.

NEJM Editorial on Health Care

Great editorial today in NEJM on our health care system. The author makes 3 major points (inconvenient truths):

1. Over the past 30 years, U.S. health care expenditures have grown 2.8% per annum faster, on average, than the rest of the economy. If this differential continues for another 30 years, health care expenditures will absorb 30% of the gross domestic product— a proportion that exceeds that of current government spending for all purposes combined.

He lists great reasons why this is occurring, but the thing I would like to point out is that the "free markets" have not contained health care costs, as so promised by Newt Gingrinch and the AMA in 1994, as they squashed "Hillary Care".

2. Advances in medicine are the main reason why health care spending has grown 2.8% per annum faster than the rest of the economy.


I agree with the author's points (not listed here- see article). To expand further, we need to incorporate COST-EFFECTIVENESS into the CMS/Medicare approved drugs, procedures, etc. All a company needs to get approval from the FDA and for reimbursement from CMS is to demonstrate efficacy (often only compared to placebo). New treatments should be compared to standard of care and be evaluated by cost-effectiveness as well.

3. Universal coverage requires subsidies for the poor and those too sick to afford insurance at an actuarially appropriate premium; it also requires compulsion for those who don't want to help pay for the subsidies or who want a "free ride," expecting that they will get care if they need it.

This point is so critical. People think that someone else is paying for their health insurance in the U.S., and that health care taxes as they have in other countries would be crazy. Money quote:

When a firm pays $3,000 to $7,000 per worker per year for health care, it can get that money in only three ways: reducing potential wage increases, increasing prices for what the firm sells (which means lower real wages for workers everywhere), or lowering profits. During the past three decades, health insurance premiums have increased about 300% (after adjustment for general inflation). Where did the money come from for higher premiums? Out of wage increases that would normally accompany growth in productivity. During these three decades, the average worker has not received any increase in inflation-adjusted wages. Corporate profits, by contrast, have increased by 232% before taxes (284% after taxes), adjusted for inflation.

The most efficient, equitable way to achieve universal coverage is to make basic health insurance available to everyone regardless of income, employment status, family circumstances, or other characteristics and to pay for it with a tax roughly proportional to income or consumption.

People, stop being fooled! You are paying just as much or more for your non-universal health care as you would if we had universal health care. Think of all of the premiums, co-pays for visits and meds, uncovered costs, and the lack of increase in wages and then you might realize it. Also, health care should not be tied to your employment affiliation! How many people do you know that are working at a job that they dislike, just "for the health care benefits". Get with the program.

McCain on Imus

John McCain was back on the Imus in the Morning show today. It had been a long hiatus. I know Don Imus is barely relevant anymore, but it actually was a good interview. Imus asked some good questions, including the following (paraphrased): (the audio is within this link)

1. How can you be optimistic being so far behind in the polls? (he said he's closer in some polls than others and that Bush was behind Kerry by about the same margin in 2004 at this same point in time)

2. What is up with your pick of Palin as VP, after criticism from so many prominent Republicans? (he said she was the most qualified VP candidate in recent history)

3. How can you defend her after her terrible performance in her interviews with Charlie Gibson and Katie Couric? (she did fine in those interviews, was bombarded by "gotcha" questions)

4. How could she not even name a newspaper that she reads? (she reads the news "offline")

5. How can you defend the fact that she hasn't gone on any Sunday morning talk shows, including Meet the Press, generally considered a rite of passage? (his response to this is amazing, i.e., pathetic...listen to the audio)

6. Why do you keep making a case about William Ayers and not Rev. Wright? (I forgot his response, but Imus actually points out an interesting "double standard" by Obama)

7. Why does Gov. Palin keep saying that Obama is hanging out with terrorists? (he said there are some crazy people at his rallies, but only the minority)

8. Do you think race will play a roll in the election (people who said they will vote for Obama won't, i.e., the Bradley Effect)? No, people will vote for who they believe is the best candidate

Palin Supports Federal Ban on Gay Marriage

Today, Sarah Palin openly supported a constitutional ammendement to ban gay marriage, saying she believed that traditional marriage is the foundation for strong families. Of note, her view is different from that of John McCain, who feels this decision should be left up to the states.

I agree with Mr. McCain here. It's a states rights issue. BTW, the CT supreme court voted to allow gay marriage last week. I don't feel strongly that gay marriages must exist (although I do strongly support equal rights and civil unions, at the very least), but the argument that gay marriage will ruin the foundation of marriage just doesn't hold water. It doesn't seem that couples with "traditional marriages" in CT are suddenly seeing their marriages collapse because of the new ruling.

Powell Endorses Obama

Today on "Meet the Press" (haven't forgotten about you Timmy), Retired General Colin Powell, former Secretary of State for the Bush Administration, endorsed Barack Obama over John McCain for president.

He states his decision has nothing to do with race, and instead sites Obama's style and substance, Obama's "inclusive" rather than narrow-minded policies, McCain's poor choice of Gov. Sarah Palin (as she is "unqualified" to be president), and McCain's potential to place 2 more conservatives judges in the Supreme Court court as major reasons why he is endorsing Obama. He also called Obama a transformational figure and stated that the Republican Party has moved too far to the right.

Of course, he was openly criticized by Rush Limbaugh, who feels his decision is based purely on race. Limbaugh also thinks he is not showing loyalty to Bush and the Republicans, as they are the ones who anointed him a 4-star general.

"'Secretary Powell says his endorsement is not about race,' Limbaugh wrote in an email. 'OK, fine. I am now researching his past endorsements to see if I can find all the inexperienced, very liberal, white candidates he has endorsed. I'll let you know what I come up with.'" "'I was also unaware of his dislike for John Roberts, Clarence Thomas, Samuel Alito, Anthony Kennedy and Antonin Scalia. I guess he also regrets Reagan and Bush making HIM a 4-star and Secretary of State AND appointing his son to head the FCC. Yes, let's hear it for transformational figures.'"

I say good for Colin Powell for making what seems to be a well-informed and non-hasty decision and for doing what he feels is right in his heart, and not what is "right" for his former cronies. The culture of cronyism is a phenomenon that helped turn the Bush administration into a disaster. And for anyone who thinks his decision is based on race, PLEASE watch the video of his explanation on Meet the Press. I found his explanation to be completely reasonable, very well thought out with supporting evidence behind each one of his points, and finally, it was very heart-felt.

Market Update

Another wild day on Wall Street yesterday, although this time the swing was only 500 Dow points (the lowest of the week). It seemed like the market was going to take off in the mid-afternoon, only to get stopped cold and abruptly lose 4%.

Why did this happen? A look at the 60 minute chart shows that the downtrend line from the previous highs served as major resistance. The indices are forming huge symmetrical triangles. We should expect the S&P to fall to around 880 to test the lower part of that triangle. Then, the market will either: A) bounce up from there and try to break through the top part of the triangle again, B) bounce up and come back down again, or C) just fall straight through that downtrend line on this new wave down. The break of the triangle to the downside will trigger more massive selling. For conservative investors looking out more than 1-2 days, no major moves should be made until the triangle resolves to the upside or the downside. I can't tell you which way it will break, I can only tell you that when it does, it will cause major movement in the direction of the break. One pessimistic thing from a technical standpoint is that despite the very oversold conditions via a whole host of indicators, we cannot sustain a major rally. In the past 100 years, very oversold condidtions have always led to major snapback rallies. The 14% rally we had this past Monday may have been all the bulls can truly muster up. The other bearish problem is that these types of triangle resolve to one direction or the other about 2/3rds through the triangle, so according to my drawing on the chart above, we may have 2 chances at breaking to the downside but only 1 more chance (if we bounce up again) to break through the topside. These patterns do not keep going until the points of the triangle meet.

I mentioned that I had gone "long" the S&P and NASDAQ via the SSO and QLD. As I indicated in the comments section of "Double Bottom" yesterday, I got out of these positions late in the afternoon, as a failed rally on a Friday afternoon (and the downtrend line serving as fierce resistance), did not make me keen on holding long positions going into Monday morning. I'm sure that type of mentality among traders contributed to the decline in the last 90 min yesterday...who trusts this market? Bad news of failing banks, etc. tends to come out over the weekend and Monday's market could be ugly (again).

For all of you think that this technical analysis is baloney, let me point you to an interesting article today that utilizes fundamental analysis. In short, based on valuation, stocks are still not "undervalued". Based on data from previous recessions and stock market lows, valuations might need to drop even further, and estimates by these experts put the S&P in a range of 400-600 to get into the appropriate range (yikes). These facts are confirmed by the wise folks at Comstock Partners who also suggest stocks are far too overvalued (see text posted in the comments section for this entry...it's a bit long and didn't want to clutter the board).

Now That's Entertainment!

Folks, please, please, please watch these two videos. Obama and McCain gave tremendously funny speeches (roasts) at the Al Smith Memorial Dinner on Thursday night. The jokes are witty and cutting and hit at the very issues that have been debated over the past several weeks. It's refreshing to see them employing humor rather than the repeated sniping, scowls, and faces they make at each other in the debates.

Obama's speech


McCain's speech

Also, dont' forget....Sarah Palin will be on SNL tonight!

Post-Debate Wrap-up

My controversial views on the debate last night set off a firestorm. The post received 32 comments, an all-time record for my blog.

I did a little searching around the "internets" to see what others were saying about the debate.

First, the polls of "Joe-six pack", or the "Joe the Plumber" (I'm tired of the stupid "Joe" references by all of the candidates).

1. CNN Poll: Obama 58%, McCain 31%

2. CBS news: Obama 53%, McCain 22%, Tie 25%

3. Politco.com: Obama 49%, McCain 46%, but McCain won among independent voters (51-42%)

Second, amongst the pundits:

1. Time magazine: McCain A-, Obama B

2. Fox News: Amazingly, among 10+ pundits from Fox News, most felt Obama won the debate!! Fair and balanced!

Finally, fact checks:

1. MSNBC: Lots of stretching of the truth by both candidates

2. Factcheck.org: So many untruths by both candidates. It makes me sick. It seems almost everything each candidate said was untrue in some way. Yes, including the ACORN scandal.

I wish they could have some interns do real-time fact check during the debate and then pipe in the answers into the moderator's earpiece. Then the moderator can confront the candidates right there and then. Instead, the candidates get away with their drivel and most Americans will be none the wiser, because 95% are probably not going to read the post-debate fact check pieces on the internets. Heck, even I was getting all fired up about Ayers and ACORN until I was shown the truth. So, in essence, the debates just become a show and can sway American voters unfairly. The system has to be improved.

Double Bottom

The stock market continued another wild week with two massive down days after Monday's largest rally ever. Today, the Dow was down 400 points intraday, and although we didn't make a perfect double-bottom on the Dow and S&P that I was referring to in previous posts, the NASDAQ did make a perfect double bottom. When prices hit that low again, the market abruptly turned around and soared higher with huge gains for all of the indices. More importantly, these "hammering" candles put in on the charts today came on massive volume, which finally indicates that buyers are coming into the market. There is still a lot of technical damage on the charts, but now that the double-bottom is in place, we have a line in the sand, and can begin to trade to the long-side in the hopes of a counter-trend multi-week rally. I will be skeptical until we regain important resistance levels, but I did buy double-long ETF positions in the S&P (SSO) and NASDAQ (QLD; about 10% of portfolio each) at around 2:30 today, and for the first time in weeks, held positions into the close and overnight (I've been 100% cash otherwise with only occasional intra-day daytrades).

It's a Girl!!!

I usually don't like to post any personal stories, but you will have to allow me this one exception. My brother and sister-in-law, Sara, had a baby girl yesterday, Isabella Josephine. She weighs 7 lbs 3 oz, and is 19 inches long.

I have a few good reasons to share this personal story:

1. Most of you know my brother, Dean
2. She's really, really, really cute!
3. I'm a new uncle
4. There is an educational piece: Dean finds that tapping the baby's bottom with his index finger while cradling her is very soothing (to both her and Dean)

Congratulations Dean and Sara (and to my parents who are grandparents for the 1st time)!!

Final Presidential Debate

The debate is underway, and let me say, that this format is much, much better. They are really getting to rebut each other and Schieffer is asking some great questions. Less stump speech lines from both candidates. McCain is coming out much more aggressive but at the same time less angry.

The first question regarding the economy, McCain actually discussed a good populist plan by going in and helping out homeowners, and then I think won the battle regarding taxes. I have said it before and said it again, taxes CANNOT be raised in times of recession, even on really rich people. It will cause the economy to completely stall. The job losses will be staggering.

Regarding the deficit and budget, Obama gave no specific answers about what he would cut, only saying he would "use a scalpel". McCain suggests a spending freeze, and names several budget items that he would cut, including the ethanol subsidies (I agree...ethanol subsidies are foolish).

Regarding the comments by Congressman Lewis, McCain puts Obama back on his heels. McCain points out that he has repudiated some despicable comments made by people within his own party. McCain then brings up Ayers, and Obama tries to defend. He said he will not be a part of his cabinet. Then trying to defend ACORN, a brief defense, but McCain hammers back with allegations about Ayers and ACORN. Wow. These are jarring blows. Obama has not done an adequate job at separating himself from these two situations, and I agree that more investigations are necessary.

Energy policy: I will repeat, Bob Schieffer is asking the best questions. Makes Ifill and Brokaw look like puppet clowns. Bob wants to know how much we can reduce dependency on foreign oil. Earlier McCains points out how a full-force movement for energy independence will create millions of domestic jobs (he is right). McCain says we can achieve energy independence in 7-8 years. Obama says in 10 years. Obama reiterates that it is one of the most important issues (which I agree with). Obama even mentions offshore drilling as a possibility, but points out that domestic production will never equal our consumption. McCain wants to start offshore drilling immediately. Obama wants to limit free trade, McCain is strongly for it, and points out how the US has to pay to export goods to Colombia. Obama points out some the need to examine human rights along with the free trade policies. McCain has another nice zinger about Obama not willing to have free trade with Colombia (supporter of the U.S), but is willing to sit down with Hugo Chavez (non-supporter of the U.S).

Health care: Obama mentions people being able to buy in the same type of health plan as congress and mentions negotiating with pharmaceutical companies. McCain mentions a fitness initiative and the $5000 health-care tax credit. McCain asks what the fine is for not getting involved in his health insurance mandate. Obama replies, "Absolutely zero". He attacks McCains health care tax credit, and he is right that McCain will be taxing health care benefits (bad move Charlie), and that most health care policies cost more than $5000 (about $12,000). Insurance companies will cherry pick and exclude patients from coverage (true). McCain defends the status quo of the current health care system with multiple insurance systems. News flash...it hasn't worked. Premiums have skyrocketed.

Sorry was busy during the past half hour, but overall, I think I have to give this one to McCain. Obama won the first two debates and McCain won this final one. Probably won't make a difference as Obama has a 14 point lead.

Biden on Indians

Another "faithful reader" passes along the story about Joe Biden and his potentially racist remarks towards Indians (from India, not American Indians). Just to refresh your memory, Biden said the following back in 2006:

"In Delaware, the largest growth in population is Indian-Americans moving
from India. You cannot go to a 7-Eleven or a Dunkin' Donuts unless you have a
slight Indian accent. I'm not joking.”

Biden has had a long history of "foot-in-mouth" gaffes over the years, including the remarks about Obama being a "clean, articulate" black man, and recently asked a paralyzed person to 'stand up' for applause at a campaign rally.

These remarks were stereotypical, but I do not think the intent behind them was derogitory. He was trying to point out how infiltrated Indians are in Delaware. And, he was not trying to say that ALL Indians work at 7-11, rather the converse, that most 7-11s have Indians working at them (which, in fact, is largely true). It is a clear fact that, as a whole, Indians are bright, hard-working, successful people. Biden is not that dumb, he just says dumb things. Of note, the Indian-American Republican council has forgiven him.

Lynch Mob Mentality

Haven't had a chance to fully watch this video since I'm at work right now, but reliable sources have also passed this on as a must see statement on McCain vs. Obama from Keith Olbermann.

I'll comment on it later.

More Reasons to Avoid Bottled Water

Back in January, I had pointed out at least 4 reasons to avoid excessive drinking of bottled water. Now, there's another reason...there are contaminants in bottled water. While the water is still within EPA standards, and thus, legally safe, it really is no purer than standard tap water. (thanks to a faithful reader pointing this out in the comments section...I felt it should be highlighted).

P.S. Have you noticed that many of the bottles have gone to these hourglass-shaped designs? The claim is that it reduces the amount of plastic used to make the bottle by about 30%. Nice move by the companies (financially and for the environment).

Good Week, Bad Week

Good week for:
1. Scholar athletes, after a report from the NCAA revealed that the graduation rate for these student-athletes increased to 79%, an all-time high. However, only 60% of athletes in men's baseball, football and basketball are only graduating. Overall, this is encouraging, but there still needs to be a better metric. Are more graduating because of more help (i.e., getting answers to test and super easy courses)? Or, are they truly achieving more academic success? Perhaps they can examine how many progress successfully into the work-force or go on to graduate school.

2. Googlers, as researchers at UCLA found that searching the internet improves cognitive function over time. Now just don't search the internet while drinking alcohol, as this will offset the effect, as researchers at Boston University found that alcohol results in brain shrinkage.

3. AIG executives, after they partied in a luxury resort one week after the US government gave them an $85 billion bailout. This is disgusting and these people should be prosecuted to the fullest extent of the law.

Bad week for:

1. Government oversight, when a former government auditor revealed that an agency within the Department of the Interior that was supposed to help regulate the oil industry, was routinely engage in unethical practices, including bribes and sexual favors. This report is nauseating, but is blatant evidence for how the oil industry has congress and the government wrapped around their finger.

2. Adam "Pacman" Jones, who got into trouble, yet again, after he brawled with one of his bodyguards in a hotel last weekend. He was suspended for 4 games by the commissioner. This man is out of control, and he should be banned from the NFL. He has repeatedly demonstrated that he just cannot behave. A man is paralyzed because of him. He is a supreme troublemaker. Playing in the NFL is not a right, it's a privilege.

3. Not having a prenuptial agreement, after a Cambodian man literally sawed off half of his house, leaving half to his wife (see above image).

4. The "Father of Conservatism", after his son, Christopher Buckley, a writer for the National Review, officially endorsed Barack Obama over John McCain. He had many criticisms of McCain, including his changing stances on issues, his anger, negative attacks, and also his choice of VP candidate. He also praised the demeanor and intellect of Obama. That is impressive honesty. You've got to admire someone in that type of spotlight who has the courage to say those types of things rather than blindly following one party or the other.

Holy Cow!

In the words of the late, great Phil Rizzuto....HOLY COW!! The markets EXPLODED upward today. The DOW was up 936 points (an all-time record). It appears that the coordinated efforts that came out of the G7 meeting on Friday and from European leaders on Sunday to back up banks (2 trillion dollars in Europe) and free up the credit markets finally relieved some fears. This allowed the follow-through day to occur today in the markets after the wildly volatile day on Friday. The gap up held and it was steady buying throughout the day for 10-11% gains on most of the indices.

This DOES NOT mean it is the start of a brand new bull market. The market is only back to the point it was last Wednesday. But it certainly is promising. The healthiest thing for an intermediate term rally would actually be consolidation (a pull-back) for a couple of days. Today involved panic buying (people not wanting to miss the huge rally) just as last week was manifested by panic selling. The truth will come on a pull back. Will the sellers re-emerge? Will the bulls step up and defend the recent low? Will we put in a HIGHER low, and big the classic "stair-step" upwards? Then we will see. For now, let's call it a great day, and take it one day at a time. While the price action was bullish, this rally was way overdue. On the bearish-side, extreme governmental invention was needed to stave off disaster. The fact is, we still may be facing a pretty hard recession, and company earnings will likely be less than stellar for some time to come.

Futures

Early check on the futures markets shows that the major indices are up 3-4% in early trading. This COULD be the intermediate-term bottom folks. We now have two major ingredients in place: 1) Very oversold conditions; 2) A "reversal" day (futures down big, gap down hard, rally into the close and close at high of day in positive territory)...it was almost perfect (indices closed slightly negative). We could now have the 3rd and final piece: A follow-through day (major accumulation day on heavy volume). If the futures remain up large, the gap open doesn't fall apart, and the markets stay strong until the close, this 3rd criterion will be fulfilled. That should lead to a nice 15-25% rally up until we meet heavy resistance at around 10,000-10,500 on the Dow. This is the area from which the markets went into free-fall and will also be where the decline 20 and 50 day moving averages will be located after the rally. Thus, this should only be a bounce within a primary down trend. In addition, there still could be extreme price swings in both directions given the unprecedented level of the volatility index (VIX- closed near 70 on Friday), so you may have to stomach big turns for the next several days. More cautious investors may want to let the dust settle some more before making sizable entries.

Happy trading and good luck!

The Psychology of Tipping

Great article in the NYT today entitled "Why Tip?". Basically it discusses the pros and cons of tipping in restaurants and details the story of a restaurant in San Diego that has abandoned tips and placed a service charge in place for all meals. I have to admit, I haven't thought about tipping much lately...I pretty much standardly tip 20% without thinking about it. I don't really factor in the quality of service, and I honestly can't remember any times that the service was so bad that I even had to think about reducing the tip amount.

The main reason the owner of the San Diego restaurant eliminated tips was because the staff was squabbling over money, including waiters angling for better shifts and tables, and the kitchen workers didn’t feel they were getting a fair share of the profits. One of waitress interviewed for the piece claims she can concentrate on the job better now because she's not focused on kissing up for good tips. The counter-argument, of course, is that by leaving the size of the tip up to the discretion of the customer, it places incentive on the waitstaff to provide the best service possible. However, a study found that there is only a 2% correlation between the quality of service and quality of tip, thus overall, the incentives may be diminished.It would have been interesting to know if the quality of service improved or declined after elimination of the tipping rules at that restaurant (or at others that have done the same thing).

How do you all feel? Do you feel that tipping gives you leverage in obtaining better service? Do you change the size of tip based on quality of service or only reserve that for only major offensive violations in quality? A lot of restaurants do have gratuity included for parties > 6...is quality of service diminished for bigger parties? In Europe, where tipping is much smaller, how does the quality of service compare on a systematic basis? (in my experience quality in Europe has been good). Do you give bigger tips at restaurants where the waitstaff are forced to memorize all of the specials of the day and recite them without notes vs. with notes? (although impressive, I don't think I have ever decreased my tip size for the restaurants in which they allowed the waitstaff to use notes).

Can cockroaches live without a head?

I couldn't help but click on this headline story on MSN.com (ok, it wasn't a headline story, but it was on the front page). Amazingly, they can live for about a month without their head. They don't need their heads to breath and ultimately die of dehydration. That's why their indestructable! An entomologist at Delaware Valley College, who carefully decapitated cockroaches, found that although they live for weeks, their learning is quite impaired.

There is an interesting quiz on insects on the Mythbusters page on Discovery.com.

Finally, A Bottom?????

What a wild day for the stock market on Friday. The Dow was down 600 pts in the first half hour and broke below 8000. This was followed by a massive rally, all the way to the area of the closing of the previous day's close. However, the bears stepped in again and produced a slow and steady decline again throughout the day back to below 8000. It would have been very ominous for Monday if we fell below that opening low. Then, around 3 PM, like like the Phoenix rising out of the ashes, the market started a 1000 point rally in a matter of less than an hour. At 3:45 the rally fizzled, and prices fell back 300 points, producing a negative close (-128 points). If one only saw the closing prices, one would conclude that it was a quiet day for the market. WRONG! An analogy for football fans out there, it was the equivalent of one of Barry Sanders famous criss-crossing spinning backcutting runs that netted a 1 yard loss. Check out the intraday chart below to see this volatility.

Thus, the major question is whether we saw the "bottom" on Friday. Some have remarked that it is very rare to make a "bottom" in the market on a Friday. However, data from the last 68 intermediate-term lows (at least 3 month low), shows that although Mondays and Tuesdays are the most likely days for the low to occur, Friday surprisingly, is the not the least common day, but instead the 3rd most common day to create an intermediate term low.

Day of Week # %
Monday 16 24%
Tuesday 20 29%
Wednesday 11 16%
Thursday 8 12%
Friday 13 19%

Check out this article from Jason Geopart at SentimentTrader.com. He provides data and accompanying charts from all previous market crashes. As you can see from history, the "low" after the crash was always challenged again. Things are not going to go straight up from here. "V" bottoms are very very rare. There is often a period of backing and filling.

Furthermore, I did some 'word on the street' investigation this weekend at the mall. I asked almost everyone I saw about the volume of customers and actual spending. Nearly every employee/worker noted a decrease in both volume of shoppers and actual spending, including those at the car wash, Bloomingdales, the men's shoes department at Nordstrom, and college students trying to raise money for kids with cancer. The only place where things were mobbed and the employees reported no decline in shopping and spending over the past several months was the women's shoe department.

So, in summary, we may have a tradable low in the market. Conditions are extremely ripe for a good relief rally given extremely oversold conditions (only 1% of stocks are above 40 day moving averag). But, let price action in the early week confirm that we saw the low on Friday. Is it going to be a final low in the bear market? Probably not. Look at this longer term chart of the Dow. It would be very unlikely to just abruptly stop the decline here and not retest the lows at around 7500 from the 2001-2003 bear market.



And, caution from an excellent technical analyst, Brian Shannon, who gives some historical bear market perspective on his blog alphatrends.net:

Dow Jones October 1929: Over a 23 day period, the Dow lost 49% of its value,
but that was just the start of the bear market during which the Dow would
eventually lose 89% of its value (386.10 to 40.56). How many people do you think
called the October 1929 low of 195 "the bottom" only to get decimated by the
continued weakness over the next 3 years? We remain in a bear market and ALL
rallies should be treated as guilty until proven innocent, meaning you need to
maintain a super strong defense. Do not be too quick to call Friday's low "the
bottom", there are serious flaws in our economic system and a lot of closets
with ugly contents are still being opened.

If you're quick and have some guts, it may be profitable to risk some capital now on the long-side, but don't go all in just yet.

Free Fallin'

The stock market continues its extremely rapid descent. The markets are not behaving like they do, even in "regular bear markets". Typically, there are viscous snap-back rallies even in the midst of a bear market. The price declines are simply remarkable and historic. Look at the chart. I said the other night that the Dow will hit 8500 soon, but I didn't expect it would be this week. People are simply liquidating their 401Ks, and institutional investors are just not stepping in. No one wants to hold positions overnight, as there is just too much bad news that keeps cropping out overnight.

I'm extremely concerned that the market decline will lead to an even deeper recession due to decreased spending. Simply, millions of people who have been piling money into 401Ks, IRA, and standard investment accounts are going to cut their discretionary spending as they have seen their wealth shrink. I know it will cut back my spending...fewer new clothes, big screen TVs, DVDs, expensive dinners. Consumer spending accounts for 70% of GDP. Car sales are plummeting. Did you see that GM's stock is at a 58-year low? So much for buy and hold strategies, right?

People keep calling me telling me to buy stocks now because they are so cheap. Well, you could have said they were cheap 2 weeks ago, and now their 20-30% lower. Let the market show you the bottom. Feel comfortable missing the first 5% rally. It's much better than losing 10% in one day. Please.

Now, to cheer up, go to NBC.com to watch the videos from the special edition of Thursday night SNL if you haven't seen it. Go play with your kids, if you have children. Tell someone you love them. Watch this video of Dana Carvey on the Tonight Show last night doing some great impressions. He's still got the skills.