Last Thursday evening I spoke about the U.S. stock market was seriously oversold and bearish sentiment was at extremes seen at or near bottoms. I was prepared to go long if Friday opened sharply lower. It didn’t. The market rose for two days in a row, the first time this happened this month. Did I miss “the” bottom? I don’t think so.
The economy is in virtual free-fall. Everything that could go wrong is. Meanwhile, our government has gone into overdrive, no, make that warp speed (Scottie) in its attempt to right the sinking ship. Ring the cash register again; only let’s not forget we’re taking money out, not in. Where does it all end? Now homebuilders want to be bailed out (get in line). Who else can Uncle Sam look forward to coming hat in hand?
While the “Don’t Worry, Be Happy” crowd cheered today’s news and called this the “umpteen” bottom, the U.S. Dollar was smacked hard. Why? Read:
The world realizes that all this newly created money has to be borrowed. We’re already indebted up to our ears. The economy is in deep recession and it’s looking more and more like the worse one since the Great Depression.
As you can see ever since we hit the waterfall in September, all the calls of “the” bottom have proven to be wrong. While this current bear market spike up can carry us to the last peak at 8923 or even to the 50-Day Moving Average around 9300, it would come as no surprise to me that we start heading down again despite a seasonally favorable period this week and in December. Therefore, I continue to urge no equity holdings except those related to precious metals and short the U.S. Dollar.
Gold had two great days and while some profit taking the next couple of days is healthy, the fundamental news continues to suggest higher is the path of least resistance. We continue to hear of tremendous physical demand while mining supply wanes. I will go as far as to suggest the crimenex is going to get what it long has deserved – their shorts squeezed!
Oil held key support just below $50 and enjoyed a very oversold rally. Don’t get caught up in it as it still looks like it eventually wants to go towards $40.
U.S. Dollar – If not for the tremendous unwinding of short U.S. dollar trades around the world that had to be unwound, the U.S. Dollar Index IMHO would already be under 80. It’s only a question of when, not if. I believe it will eventually make new lows under 70 in the first half of 2009.
Interesting Speculation - Hudbay Minerals (HBM-TSX $3.31) http://www.hudbayminerals.com/ could be a good flyer for speculators. The stock was $19 earlier this year and sold off sharply with the rest of mining stocks. It recently announced a bid for Lundin Mining, a bid I don’t think is a good move (and the market seems to agree). A Canadian brokerage firm is leading a move to remove Hudson Bay’s board, distribute the cash to shareholders and sell the assets. The cash alone is worth more than the company is now, which means you get the assets for free. I think this move can work and I also believe we could see one or more new suitors show up. I think the downside is limited while upside could be 100% or more. On any weakness back under $3 would give me more reason to take a shot. Very Interesting video and also news story
Special Note of Interests
- I enjoyed meeting several readers last week at NY Giants David Tyree talk at Montclair University. I previously noted how David has not let the fame of “the catch” change him at all. He continues to champion his faith and this email received by an attendee is what made the day so worthwhile
Hi Peter Once again, I would like to thank you for inviting me to such an eye opening event at Montclair University to hear Super star David Tyree speak. I feel blessed to have met you and I can’t tell you after you helped me with getting my football signed, I actually met David face to face and after he signed the football, he came right up to me and said you (meaning me) need to open to God. I couldn’t believe he said that with such heart and feelings, I looked him straight in the eyes and said your right. He grabbed my both hands and asked me to pray with him. I can’t explain what came over me; but my chest was pounding yet felt so light. Since yesterdays experience I truly feel different and happier as if something was lifted.
Of course I still have all the problems many of us are facing with today’s market but I feel as if I can handle things better. I want to thank David for his spiritual love and kindness. He is a special man. May God always stand beside him.
As you know I have been meeting with David Suckey and have another meeting with him in two weeks. I am not as scared as I was before and have faith that everything will fall into place that is the right place. I know we will meet again and I look forward to the many future events. I also want to help out with the Giants and the children. 
Tyree Family with PG
- A Christian pastor calls his married flock to have marital sex for seven straight days. I showed the article to my wife and we voted. It was a split vote.
Peter
I know things are bad. It is a mess
It seems according to you that the goverment can do nothing right.
Please explain what you would do get us out of this disaster.
Brian
Brian Here’s the only way i think we can get out of this disaster:
Repeat after me, “Our Father who art in Heaven……
Peter
** THE SLAUGHTER OF THE INNOCENTS **
Compliments to Mr. Peter G. right on track and very reassuring to my similar train of thought. Troubled by World events, especially in the U.S., theres a few drafts in my folder that were never sent because they’re too disturbing. One of them is an analysis of G.M. and an effort to work out a rescue plan only to reach conclusion that bankruptcy is unavoidable unless the U.S. is willing to feed operating losses. A large nearby local highway G.M., Pontiac dealership is closing stating they have not bought a vehicle from G.M. for 3 months, sales year over year are down 80% and there is no traffic in the showroom. Sadly, be assured that the experience is similar throughout the United States. Anyway, that’s another project in my mind ready to be written tiltled, “REQUIEM FOR A HEAVY WEIGHT”. The analysis would conclude that G.M. might survive by shedding the Buick & Pontiac lines continuing with Chevrolet, Cadillac, Saturn & GMC trucks, all under one dealership roof. Confidence in the American manufacturers financial stability is shattered and the import showrooms are filled. G.M. can be fixed but it’s a big price tag. When you do things, do it right and only once. Off the top of my head, allowing for the impact of abandonmet of plant facilities $150 Billion would do it right, preferably as a Capital Addition and assure the survival of General Motors. This needs some work. Then there’s Ford & Chrysler. Anyway, here’s a current missive ” Slaughter Of The Innocents”, UNEDITED for political correctness, expressing anger. .
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**THE SLAUGHTER OF THE INNOCENTS
**CHANGE YOU CAN BELIEVE IN
My wife asked me last nite, “What’s bothering you, I can tell something’s wrong”.
Well, I’m going to tell you. I’m frustrated with failure of this country’s political system and the public to deliver a President with a financial & business accumen while grappeling with serious economic difficulties.
You should have seen Obama’s press conference at noonish today (Monday). Reading from a script, he looked authoritative except that junk economics was coming out of his mouth. It just like something you would expect from a Third World Nation.
Then he went into freestyle, answering reporters questions. It’s an empty head answering them and it shows all over his face. So getting back to “What’s bothering me”, it’s your future, my children’s future and grandchildren’s future. I’m not worried about my future nor my investment position.
Everything that they can do wrong is being done. Americans are going to get a needed lesson in economics that they’ll never forget. You know what bothers me most is the stupidity of his economic plan which produces nothing and takes from the private sector. But that’s his plan – Kill the private sector to grow the government payroll assuring the Democratic Party’s continuation. Yes, send more people to feed at the government’s trough. That’s what it’s all about. Permanent empowerment of the Democratic Party. Near the top of the agenda is an immigration policy change moving 12 to 14 Million illegals toward permanancy to virtually assure Democratic rule. All of this will fall on our backs and pocketbooks.
It infuriates me to think of Obama’s recent comment, “I spoke with all the living President’s (mentioning their names) and then added – I chose not to join Nancy Reagan’s seances to speak with President Reagan. Obviously, he was looking for laughs with a cruel insulting joke. There should have been an uproar but it was quickly dismissed. A couple of days ago, apparently forming economic strategy, he announced that “This is effectively the end of President Reagan’s supply side economics.” Really, what he said is that “This is the end of America’s Standard Of Living” and a growing dependence upon the government. Get ready for Obamanomics.
Now this isn’t an economic discourse, but this economic plan is designed to destroy America and substantially lower the standard of living. Don’t think that you’re going to escape it because hyperinflation is coming quicker than you think and it starts with a resumption of the U.S. Dollar’s downtrend and inability to float government financing causing the Federal Reserve to ‘MONETIZE’ the debt.
Who’s going to want to buy Trillions of Dollars of Federal debt from a troubled country to keep it from going down the drain?
Who’s going to want to buy Treasury Securities yielding less than 1% to 4% other than for short term safety?
The U.S. Treasury market is the next bubble debacle once the Federal Debt is soon ‘Monetized’. It needs some time, perhaps not much, but anything denominated in Fixed Dollar amounts or payments will be wiped out at least in terms of purchasing power. Few people see what’s coming and it’s called hyperinflation where prices run away dramatically with shortages of consumer products. Most people don’t understand the debilitating effect this has upon an economy, destroying everything right down to personal incentives. In the end, there’s always social upheaval with domestic violence. That is the future Americans face from huge deficit spending on unproductive consumption projects.
What I do see is people applauding ‘The Genius’ of Obama encouraged by the media which has elected the man of their dreams – A Communist inspired leader with irrelevant experience and a trivial accumen. So they’re going to pay a big price for this and I’m very resentful that they’ve pushed this upon us.
There’s no chance that I’m wrong about what’s coming and wait until you see what happens soon with a G.M. shutdown or bankruptcy which will be magnified, reverberating throughout the economy for months if not years. At least I’ll have the satisfaction of saying to myself that the people who elected Obama got what they deserved. To those who didn’t vote for Obama nor see the coming Hyperinflation nor understand how it will affect them, – THESE ARE THE INNOCENTS WHO WILL BE SLAUGHTERED through no fault of their own. There’s more than a few ‘INNOCENTS’ reviewing this memo. This is spiteful but everybody else has what’s coming to them – impoverishment.
Obama’s plan is to deliver the American and World economy a lot of pain with tired old junk economics proven time and again to fail through numerous examples of broken countries. You’d better give this a good think to make sure that you don’t join “THE SLAUGHTER OF THE INNOCENTS.”
Do you have any doubts that Obama would deliver anything other than an economic policy which discourages production of tradeable goods or services for sake of consumption to benefit unproductive classes?
Will he resort to aggressive undisciplined deficit spending?
Where will the Trillions of Dollars come from but through ‘Monetization’ of the debt? H
How can ‘Crowding Out’ of scarce Capital be avoided for the Private Sector as government seeks to source insufficient Worldwide savings?
Do you understand what Hyperinflation is and how it will affect you? This is the “CHANGE YOU CAN BELIEVE IN”.
Life is tough and the laws of nature cannot be violated. Successful government policy should benefit and encourage the factors of production rather than use resources to reward a non-productive constituency. Are you one of the ‘INNOCENTS’ heading for slaughter?
I hear people talking about hyperinflation, disinflation, deflation, etc. Peter, I wonder what you think is likely to happen? Have you already written on the subject and I missed it? Thank you. I love your blog and tell all my friends about it.
Peter check out the Irish stock market if you want an idea of how low can it go (10,000 to 2,500 so far in just over a year). Very similar economy to both the US and Europe. One has to question the solvency of the Irish state now too.
Peter to note on hbm..although most think this takeover of lundin is bad for the co. long term if metals regain it could be great. Short term though this may put hbm in play. Quadra mining has acc. some shares of hbm and also spec. is sherritt could play. Both have cash to spend. Highly unlikely this play by jag will do much because it hinges on the unwinding of the lundin deal. Like you said a good spec play at the right entry. It may edge to 4 or close temporarily but may falter and head lower.
Woops meant similar economy to US and UK in its structure.
http://finance.yahoo.com/expert/article/richricher/124339
Peter, I really enjoy the religious slant to your info — keep it up. Without it what hope is there (Isaiah 40:27-31).
What about us in Canada, should we remain in our Resource based and Precious Metal RRSP’s or hed to cash and buy in after the lows are hit. I thought these RRSP’s would have weathered the storm pretty well but they too were caught up in the mass sell-off and from what I am reading will take further big hits as this meltdown continues.
Peter, you stated”" Dollar Index IMHO would already be under 80″”
are you still waiting for a us dollar index near 90-91 before shorting?
John – Please re-read recent comments on U.S. Dollar. I shorted near 86 and said the ultimate short would be if we got to 90-91.
Dave- I think resources and especially gold are very near their bottoms so selling is too late. I do think oil can get to the low 40s
Renee- Deflation for now but will the U.S. printing presses pumping enormous amounts of dollars into the system, we could see inflation come back with a vengence down the road
hard to argue with deflation for now as we all move back into our caves for protection … what is scary is the possibility of the lack of trust between banks becomes extended to more institutions … who would deliver to the big 3 right if they were buying anything now without prepayment? What happens as food companies start running into financial hardship, the banks won’t lend them money and suppliers won’t deliver …. the bail outs have to stop the US economy is not too big to fail even if some of its banks are. Stockpiling oil would be a good move for governments right now as wood food as strategic reserves …. this crisis scares me more daily as the government is trapping itself deeper and deeper into the collective mentality of spending beyond ones means …. that is what cause it (sub prime buyers) money being lent without sufficient reserves giving the risk being taken, over capacity in the auto industry and contracts that paid people while demand was reducing … being in the auto industry … this collapse has been going on for nearly 6-7 years … it was just though of as a downward cycle before … now it is the end for some.
when inflation does hit … and it will on necessities first because thats what will be demanded and supplies will fall watch out. Prepare yourself this is no pretend scare like Y2K which I personally laughed at … this is real and all encompassing to North Americans.
Orgy
Great read, Peter. I too think we’re in that deflation period and think that the perception by some that we’ve seen the bottom of wall street is miss-guided. Though I admit that I would love it if this was the bottom.
Do you have any inkling as to how long before we hit inflationary times? I’ve been thinking that it would be 12 to 20 months out but the speed at which new financial disasters keep appearing makes me think that it could be a lot sooner.
One other thought about inflation and deflation …. they can exist simultaneously … in a free market … prices are determined by supply and demand … in the next couple of years, deflation will most certainly exist on luxury items and discretionary items because of excess inventories and over capacity.
The orgy of spending on massive amounts of truly luxury and discretionary items can easily be halted as the supply of necessities is impacted … back in the depression the dustbowl led to massive crop failure of wheat … thus for flour etc inflation was a reality well deflation was occurring on unnecessary products.
Protect yourself … stockpile some dry goods and spices … if you don’t need them send them to feed the homeless if nothing else …. at that time you can remember the generosity of a young boy dying of leukemia.
Orgy
Peter, given you views on this market, is it time to short via QID or SDS? You mention that you have shorted the US dollar. Is that still in place and assuming it is, is there an ETF we can use to do that?
Susan I’ve covered all shorts and unless the market went straight to 10,000 or so from here, I don’t believe shorting anymore is in the cards. I suspect we’ll go into another trading range between 7,500 and 9,000 for the foreseeable future. December, especially the second half, is a time when rallies occur ( It’s known as the Santa Claus rally). If it does, don’t sweat it as I believe Santa only has a lump of coal for the bulls.
http://www.dickmorris.com/blog/2008/11/26/the-free-market-consensus-1989-2008-rip/#more-502
Gold down….hgd should be up…it’s down…..hgu should be down, it’s up….most gold shares are up…..can this market get any more confusing? Maybe this is forcasting another rise in gold???
http://www.montclairtimes.com/NC/0/1085.html