Wednesday, November 05, 2008

WE HAVE SPOKEN

Not much to say this morning. So many of us are grateful for the opportunity to have been able to volunteer and serve so many candidates this year, especially President-Elect Barack Obama. And many of us can now take some time and rest, recuperate and re-energize, for the BATTLE of HOPE has just begun.

So much more work to do: revitalizing the economy, helping those among us that are most in need, renewing our commitment to education, changing our health care system so that its emphasis is better placed on benefiting its users, restoring the world's confidence and trust in America, ENDING the immoral War in Iraq and bringing our sons and daughter safely home. And so many other issues to effectively address.

Obama's election is a milestone in so many ways. Many interest groups will claim that it is THEIR triumph. But it is everyone's triumph.

I look forward to our rights under the U.S. Constitution being fully restored. I look forward to fair trade replacing free trade. I look forward to a revised tax system that maintains its progressive formula while improving the position of the lower and middle classes as those that have benefited most in recent years pay a fairer share. I look forward to the Medicare Drug Plan being revised so that the federal government can negotiate pricing with pharmaceutical companies - just like the Veteran's Administration has done for years. I look forward to a greatly accelerated renewable and alternative energy program that ends our reliance on imported fossil fuels forever. I look forward to the use of diplomacy and the end of the Bush/Cheney "bombs first" policies.

Nothing will be easy. But the tone has been set.

If you were like me, you may have shed tears at some point yesterday. For me, the first wave hit at about 2:30pm Mountain time, as I was home for half an hour, taking a break from my Campaign volunteer duties, relaxing into my routine meditation rhythm. Then again, last night during Obama's Chicago speech.

While I have either campaigned or phone banked or canvassed or simply showed my support for many presidential candidates over the decades, beginning with Robert F. Kennedy's candidacy in 1968, this campaign for Obama has truly been the most transformative in so many ways.

As a nation, we have the opportunity to awaken to a more spiritual, less combative rising sun. Let us all take stock of the challenges that we all face, both in America and worldwide. We have the opportunity to retake the higher moral ground as a nation.

Let us all hold our government accountable. Let us all continue to raise our voices in support of the issues that we hold dear.

Monday, November 03, 2008

BACK TO THE MARKETS

As we find ourselves on the eve of Election Day, with lots of questions to open up regardless of who wins, a quick comment on the state of the stock market and the economy.

We had a good rally in equities last week, but we still closed out one of the worst months in stock market history. It is strange how many market pundits and professionals feel good about the markets as a result. Essentially none of the fundamentals have changed.

* Unemployment is going to increase substantially.

* The nation's manufacturing index has seen its bottom fall out, declining to its lowest levels since 1982.

* General Motors and Chrysler are pleading for a federal bailout. Personally, I prefer to see bankruptcies, the old fashioned way to restructure badly managed businesses. GM and Chrysler dug their own holes, relying on low MPG, bloated and expensive vehicles rather than offering a broad range of products that actually appeal to a broad market.

* Many people see uncertainty as far as government fiscal policy, deficit management, etc. regardless of who wins tomorrow. So safe havens in the stock market continue, in my opinion, to be well positioned companies that pay good dividends and have the wherewithal to continue to pay them during a big recession. I've mentioned many of these names in prior posts.

* While we have been looking for lower interest rates internationally as well as domestically, we really haven't seen sufficient cuts as yet. We might; I would not take the negative argument for granted. Big European rate cuts, as well as cuts in China, would go a long way to mitigating worldwide recession. But it is still an uncertainty to be considered when investing. Insufficient cuts would be viewed negatively by the investment community. But even big rate cuts may not have any positive effect, at least lasting positive effect, since we still cannot accurately forecast the breadth and length of the recession.

* We are seeing some progress in the financial community regarding home mortgages, with JPMorgan Chase doing workouts on bad WAMU mortgages, at least on a temporary basis. But with a potential flood of two million or more possible foreclosures over the next several months, much more must be done.

* We still face uncertainties regarding potential default increases on auto and credit card debt.

* The still unregulated, decentralized credit default swaps arena, a $62 Trillion or so market, remains a huge black cloud over the markets and economies worldwide. Even if we are able to move forward with regulating this market, there could be major unpleasant "surprises."


Bottom line: there is little logical rationale for markets to continue a sustained rally from its October 2008 lows. That said, while we could certainly see ongoing rally periods, potentially of explosive nature, they are likely to be short-lived. Markets dislike uncertainty, even if some pundits and professionals, alike, voice delight about what they think are low valuations. Remember: valuations based on earnings forecasts are pretty much worthless as we enter recessions. Analysts are universally slow in cutting forecasts, and universally laggards in issuing outright SELL recommendations.

All of this suggests a continuing bias towards not only testing October's lows, but very possibly establishing new ones. You can choose to sell on rallies or buy on further declines. I'm not so sure about buying on further rallies unless you are getting good, safe dividends as insurance along the way. It's simply speculation.

As the computers and androids always say in science fiction films and novels, "NEED MORE DATA."

Stock market bottoms are