U.S. stock index futures are pointing to a lower opening
on Wednesday. The market is due for a pullback after six days of gains.
Today's Economic Calendar:
- MBA Purchase Applications 7:00 AM ET
- Chicago PMI 9:45 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- 7-Yr Note Auction 1:00 PM ET
- Farm Prices 3:00 PM ET
News For Thought
Bureaucrats finger each other with regard to terrorism screw up. CNN,
citing a CIA source, reported: "he father of terrorism suspect Umar Farouk AbdulMutallab
talked about his son's extremist views with someone from the CIA and a report
was prepared, but the report was not circulated outside the agency, a reliable
source told CNN's Jeanne Meserve on Tuesday. Had that information been shared,
the 23-year-old Nigerian who is alleged to have bungled an attempt to blow up
a jetliner as it was landing in Detroit, Michigan, on Christmas Day might have
been denied passage on the Northwest Airlines flight, the source said."
Yet, another source told CNN: "that the son's name, passport number and possible
connection to extremists were indeed disseminated. "I'm not aware of a magic
piece of intelligence somehow withheld that would have put AbdulMutallab on the
no-fly list," the official said." And so it begins, the first internal crisis
of any significant magnitude for the Obamaites. How they deal with it will tell
us even more as to how the next three years will run.
The New York Times reported: "The United States government had intelligence about
a possible Al Qaeda attack around the holidays and had more information about
where the suspect had been and what some of his plans were, an official said."
More government money for GMAC is on the way. According to The Wall Street
Journal: "The financial-services firm is close to getting approximately $3.5
billion in additional aid from the government, on top of $12.5 billion already
received."
Brighter outlook ahead for executives looking for jobs. According to The
Wall Street Journal: "Recruiters are bullish on the outlook for executive-level
job hunters in 2010. And about 20% of employers say they'll add staff lower down
the totem pole, too."
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In this, our final IQ for 2010, we'll try to summarize what's
happened this year and what lies ahead for the new year. And two words that tie
them both together are Obama and uncertainty.
After the election of President Obama there was hope in the air. Most Republicans
were not hopeful, but independents were, while Democrats were giddy. Mr. Obama
was going to show the world how things were done. There was that audacity thing.
Well, so far, it's been shamefully predictable, and the future is no better,
barring a major shakeup in the White House and Congress. Then things would likely
move from awful to uncertain.
In a column that we penned late last year, right after the election, we described
a dinner we had with a fairly well placed insider in the Obama campaign. The
column ran on November 12. Our lead line noted: "Throw out your preconceived
notions about Barack Obama. The President Elect is a thoughtful, careful, smart,
and tough politician in the traditinal Chicago style, whose smooth demeanor is
a tactical asset, and whose policies and presumed direction for the country have
yet to be finalized, says one experienced Democrat with access to the campaign."
We then cautiously noted: "the portrait he painted of the future, is full of
ambivalence and caution, tinted with the hope that it all works out in the end.
To be sure, our dinner companion was not there to represent the views of the
Obama administration, and his opinions and observations were solely his own,
tempered by the occasional hedge and at one time a brief look of what seemed
to be concern and trepidation in his eyes, when we discussed whether he thought
that an Obama administration would turn out to be positive or negative for the
country. Yet, what emerged, with regard to the President Elect, was a picture
of a calculating man whose exterior is nothing like his inner self, but rather
an image which he has found useful in getting his goals accomplished."
Our dinner companion "was neutral about his expectations of the new administration,
noting that a nice outcome would be that Mr. Obama would "set things right" and
take the U.S. back to where the country was before the Bush administration took
over." In fact, as we noted then "Our companion spent a lot of time on that topic,
noting that in his view, the U.S. is a society in decline and that the best that
we could hope for is that the decline takes a long time, rather than being precipitous.
He did not mention whether he thought that Obama could reverse that particular
trend."
And we were warned: "More than anything, it seems to our observer, that the first
12-24 months of the Obama administration will have some "pain" associated with
it, as the new president will have to do things that are unpopular. He then noted
that at some point, Mr. Obama will have to spend some "political capital," ie.
take a stance on something, and that at that point the honeymoon will be over."
So far so good. Our guy was right. Obama has spent lots of political capital
on health care, and boy is he unpopular. Yet, we were wrong in our conclusions
about Mr. Obama and the 20 somethings and 40 somethings that run what has turned
out to be not a machine, but a helter skelter hurricane of lefties trying to
reach some bizarre manifest destiny on our dime.
We were right and wrong in some of our conclusions. For example: "the Obama machine
is organized, tempered, and is currently in data acquisition mode. It doesn't
want to make mistakes, and never operates in a manner that leads it to a position
where the risk of failure is high. In other words, these guys play for keeps,
and they are seasoned professionals. The silence emanating from their camp is
not to be mistaken for confusion, as it is the sound that precedes a tidal wave
gathering steam before it crushes the seawall." Perhaps this analysis will crystallize
it for you - while Clinton was the best politician of all time, Obama is a mastermind." What
we now know, especially after the Napolitano terrorism gaffe fest is that this
administration, in many ways like the previous one, is so focused on getting
their social agenda crafted that they are taking their eyes off the ball when
it comes to national security, and perhaps the long term implications of their
narrow focus. They aren't so much professional as they are driven to the point
of callousness. And they are true believers, which makes them a bit scary.
Where we were right was in our final conclusion: "No one is sure about which
way this is going to break. But when it does, we get the feeling it will take
the air out of the system, just prior to breaking a few bones. Sounds a lot like
Chicago politics with an intellectual twist."
Our source told us during that dinner that he would not likely be a source for
much longer since he was trying to get a job inside the administration. He is
not answering our queries of late. It would be nice to get his thoughts on things
one year after the "triumph."
What Lies Ahead
2010 may be the year where the Obamaites get to really try their luck on very
nasty international and geopolitical developments. Iraq, and Israel seeming to
be intertwined in a dangerous dance with oil and nuclear issues in the mix. The
recent failed terrorist attack, and the political tug of war inside the Kremlin,
along with the steady advance of totalitarianism in Venezuela, and an increasingly
bloody drug war in Mexico place the American hemisphere in a different light.
In other words, so many things are happening in so many places, that the odds
of something very significant happening are high. It's really just a matter of
which ball bounces higher.
Domestically, the health care debate has at least one more controversial leg
waiting in the wings as the House and the Senate haggle over details. Polls continue
to spell trouble for the Democrats, but the election is still months away and
a lot can happen from now until then, adding yet another layer of uncertainty
for investors to sort through.
From a big picture standpoint, the Presidential Cycle has been put to rest, as
the first year of the Obama presidency was a big up year for stocks. What will
happen in year two is clearly unclear, just as Chaos Theory terms the Universe
predictably unpredictable. One interesting view is that the next decade will
be one of diminishing investment returns and that we are all going to have to
learn to live with less. No shock there, especially when taxes start to rise.
Beyond politics, science may be the place where old beliefs get blown out of
the water. There is now significant evidence out there that invisibility is possible.
And scientists may have proven the existence of “dark matter” the stuff that
holds the Universe together. The technological implications of those discoveries
may make the iphone look like a stone club lying next to a crude fire in prehistoric
times.
There is some hope, although it may be local and it may be fleeting. But we'll
take what we can these days. Closer to home, we spent sometime yesterday afternoon
at the neighborhood Lowe’s. It was actually busy. And the sales people were hurrying
about, actually helping customers who wanted to buy things. Putting on the scribe
hat, we asked the fellow who was helping us with the Honey Do list a couple of
questions about business. He told us that business has been picking up and that
the spring looks to be busy as gardening season approaches.
Conclusion
Last year ended on a mixed note. Some were hopeful. Others were scared. We were
partially right and partially wrong, especially about Mr. Obama who has turned
out to be much more partisan and less of a politician than anyone might have
expected. The amount of tone deafness in his administration is perhaps its most
striking feature.
It turns out that the president did have an agenda, and that despite public opinion,
his centerpiece, health care "reform" will pass. This will change everything
for many people. But beyond that it's much too complex an issue to know how it
will change things. Some will prosper and some will wither as a result of this
major policy change. It will take some time to sort out.
Drug companies have already raised prices as have insurance companies. Physicians
are likely to curtail their exposure to Medicare, Medicaid, and Medicare advantage
type plans. The relationships between physicians and hospitals will also change.
That will likely tighten the types of coverage available at many emergency rooms
and will likely centralize the delivery of more complex procedures such as neurosurgery
and trauma. This won't be evident for at least 6-12 months, but it's coming.
What worries us most is that there are multiple big issues, both domestically,
and internationally that are likely to come to a head simultaneously or within
a few weeks to months of each other. When the health care issue blossoms, and
when the Bush tax cuts run out and the new taxes from Obama start to hit, Iran,
Iraq, Israel, and South America will also likely start to act up creating a potential
climate of external and internal pain, the cliche' "perfect storm" scenario.
We're not sure that Mr. Obama's team is ready to tackle what lies ahead. And
if they continue to focus on getting their pet agenda passed instead of paying
attention to what's going on in the rest of the world, things won't go well.
Polls don't lie. Folks are very unhappy with Washington and their free spending
ways. The Bush administration was very loose with budgets, but Obama is even
more loose.
We just have a bad feeling about this year that lies ahead. Hopefully, we'll
be happily wrong. Unlike other folks, we don't so much care about being right
as we care about making money.
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The Powershares
Commodity ETF (NYSE: DBC) is near a breakout. But lots
depends on what happens with oil.
Chart Courtesy of StockCharts.com
DBC is 60% weighted toward energy, 35% crude oil and 25%
heating oil. Aluminum makes up 12.5% and corn, wheat, and
gold make up the rest of the allocation within the fund.
Thus cold weather and tight oil supplies, present and potentially in the future,
if the Middle East erupts are a significant influence on this fund.
That's why the action in this ETF is important over the next few days to weeks.
Cold weather is already moving it higher. The fund is near its 52-week highs.
Here's what's important. If supplies continue to tighten, watch for the response
here. And if supplies are not too tight but the fund continues to move higher,
it could be a signal that trouble in the Middle East is about to increase.
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Technical
Look at the Market |
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S & P
Takes A Break - SPY ETF Rises to 5-stars
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The S & P
500 marked time on 112-29, with just two days left of
trading for the year. We expect volume to fall back as
the week progresses.
Yet, the S & P has acted well over the last few days, albeit in low volume,
setting the market up for an interesting start in 2010.
Investors still have plenty to worry about, especially the rising tensions in
the Middle East, as Iran, Iraq, and Israel are now entwined in a very complex
dance.
The bottom line is that it pays to be careful, yet, if something is working,
it's worth keeping.
Summary of Start Rating System
We are adapting our star based rating system to the S & P SPDR ETF (NYSE:
SPY). In this section a 5-star rating for SPY is a signal that down side risk
is very low and that the chances of a further rise in prices are greater than
those of a fall. A 4-star rating Means that the risk is less attractive but that
the odds of a rise in SPY still outweigh the risks of a fall.
A 3-stars rating on SPY suggests that the odds of a rise and a fall are even.
2-stars and 1-stars suggest that down side risk is on the rise.
In no way is this star rating system intended as a series of buy and sell recommendations.
The system is intended as a guide to the general trend of the market and the
S & P SPDR ETF.
Star ratings can change rapidly based on the market's action. Followers of the
ratings should review them on a daily basis.
Star Ratings for S & P SPDR ETF (NYSE: SPY)
S & P SPDR ETF (NYSE: SPY), 4 stars on 12-1-09 - closing price 110.84. Closing
price on 12-29-09 112.56. Short term support is at 110.84. The ETF now has a
5-star rating.
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
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