Grandich's Blog

“The biggest mistake leaders can make is to give people false hope that melts like snow”

Winston Churchill

If it wasn’t truly sad, I would just laugh at the “Don’t Worry, Be Happy” crowd who flood the airwaves with bullish forecasts based on the belief our government is going to get us out of this mess in rather short order. We won’t bother to mention it’s the same government that help get us here in the first place (with a major assist from the brain trusts from Wall Street – what’s left of Wall Street anyway).

I received an email today from a great friend who really isn’t involved with finances but knows I am (and he happens to be more street smart about finances then most so-called advisers). It really hit home regarding our government’s ability, or better yet, lack of ability to achieve. Here it is:

Read this slowly. Let it sink in.
Does anybody out there have any memory of the reason given for the establishment of the DEPARTMENT OF ENERGY during the Carter Administration?

Anybody?  Anything?  No?

Didn’t think so.

Bottom line . . . we’ve spent several hundred billion dollars in support of an agency the reason for which not one person who reads this can remember.

Ready?  It was very simple, and at the time everybody thought it very appropriate.

The Department of Energy was instituted August 4, 1977 TO LESSEN OUR DEPENDENCE ON FOREIGN OIL.

HEY, PRETTY EFFICIENT, HUH?

AND NOW ITS 2009, ALMOST 32 YEARS LATER, AND THE BUDGET FOR THIS NECESSARY DEPARTMENT IS AT $24.2 BILLION A YEAR, IT HAS 16,000 FEDERAL EMPLOYEES, AND APPROXIMATELY 100,000 CONTRACT EMPLOYEES AND LOOK AT THE JOB THEY HAVE DONE!

THIS IS WHERE YOU SLAP YOUR FOREHEAD AND SAY, “WHAT WAS I THINKING?”

AH YES, GOOD OL’ BUREAUCRACY.  AND NOW WE ARE GOING TO TURN THE BANKING SYSTEM OVER TO THEM?

GOD HELP US.

U.S Stock Market – You get a little nervous when a plan actually seems to be playing out as expected. The Thanksgiving to New Year’s holiday period did indeed provide the bulls a chance to wipe themselves off a little and catch their breath before the next cattle drive to the slaughterhouse.

Despite all the renewed optimism (I think this was the 9^th or 10^th time since October, 2007), a marked increased in bullish sentiment according to Investor’s Intelligence and the fact that several perma-bears turned bullish (including a close advisor friend who was once as bearish as me but is now down 500 Dow points since turning bullish), the market again was repelled around DJIA 9000 and is now testing support again (DJIA 8000 is very key support). The countertrend rally was an “A” typical bear market rally – light volume and not widespread.

After four straight down days, we can see a bounce but I won’t be surprise that poor earnings results end up leading us back down to test the November lows. The few days before and after the inauguration could give another “false hope” rally but I believe until such time the DJIA can get above 9100 on expanding volume and breadth, the major bear trend remains.

U.S. Treasuries – I still have faint hope that the 10-year Treasury bond can get below 2% yield so I would hold our initial entry points and add only if we get close again to the 2% mark

Oil - I continue to believe the $35 -$40 area is where new positions should be taken. The sharp rally to previous key support at $50 was all but certain to fail. Since my suggestion to go long oil is for a 3-5 year outlook, I’m not going to suggest to most to trade this market. Saudi Arabia’s announcement of further cuts makes me feel OPEC is very serious and these cuts should begin to show up in the next 4-8 weeks. Yes, we can go to the low 30s but that would IMHO just speed up the shrinkage in supply. Remember, this position is for the next few years, not days or weeks.

Precious Metals and the U.S. Dollar – There was nothing precious about them today. Gold was bombed from the outset and never even managed a feeble rally.  With a major cut in European interest rates likely this Thursday, we could see more pressure on gold and a little lift to the dollar. However, I would become a big buyer of gold if such a cut causes a sharp sell-off in the Euro Dollar and gold. I add to my bearish U.S. Dollar ETFs if the index gets into the high 80s. Stay tuned.

Mining Shares – I would like to see gold go lower so I can get some major mining shares onto my model portfolio list. These shares basically doubled from their October lows and I would like to use major support areas to enter them. Stay tuned

Note of Interest – I hope many of you caught CNN’s airing of IOUSA movie. It was a great 2-hour program

Young Chuck moved to Texas and bought a donkey from a farmer for $100.00.
The farmer agreed to deliver the donkey the next day.
The next day he drove up and said, ‘Sorry son, but I have some bad news, the donkey died.’
Chuck replied, ‘Well, then just give me my money back.’
The farmer said, ‘Can’t do that. I went and spent it already.’
Chuck said, ‘OK, then, just bring me the dead donkey.’
The farmer asked, ‘what ya gonna do with him?
Chuck said, ‘I’m going to raffle him off.’
The farmer said ‘You can’t raffle off a dead donkey!’
Chuck said, ‘Sure I can watch me. I just won’t tell anybody he’s dead.’
A month later, the farmer met up with Chuck and asked, ‘What happened with that dead donkey?’
Chuck said, ‘I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.’
The farmer said, ‘Didn’t anyone complain?’
Chuck said, ‘Just the guy who won. So I gave him his two dollars back.’
Chuck now works for Goldman Sachs.