By The Greek:
(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD)
Presidential hopeful John McCain last week declared that even though Chris Cox is a good man, someone needs to take some blame for blowing it. But, let's face it, if you're canning Cox, you had better nix Ben Bernanke and Hank Paulson as well. If these guys had recognized what lay ahead a year ago, they might not have thrown so much money at so many stopgap bailouts, and would instead have created this newfangled RTC a long time ago. They speak of addressing the root cause of the issue now, but that root cause could have been addressed better a while back. So, take Hank and Ben out back too while you're at it Mr. McCain.
And, dare we say, maybe give the President an early retirement as well. Like he said himself last week (which you can see in our "weekly videos" piece), "I'm sure there's some of my friends out there saying, I thought this guy was a market guy... what happened to him?" The Prez lays blame on his cheerleaders at times like these, saying he's doing what his "experts" told him to. Heck, it's clear, that's what Congress did also, and what both McCain and Obama would do, so we're not going to bother George, outside of pointing out that all the money spent on Iraq might be nice to have around now.
Let's face it, many of us saw this chaos coming, but because things have not gotten this bad in such a long time, we even second guessed ourselves; heck, the rest of the market labeled us Armageddon types and never listened in the first place. We are on the verge of national bankruptcy here folks. Buckle down, seriously buckle down people; don't spend, no matter what they tell you. If you still have jobs, save some dough and start thinking about selling some of the extra assets before those assets lose market value. That's what Morgan Stanley (NYSE: MS) and Merrill Lynch (NYSE: MER) are doing this very minute. This is no joke; we're looking at the hardest times since the Great Depression, and many of you lived through the '70s, so consider that even worse times than those look to be arriving now.
Let's face it though, the pom pom girls inherited much of this mess. So, let's hire back Alan Greenspan, and then fire him like he deserves. Remember how Greenspan went out with such fanfare? Remember, he wrote a book and had some artwork made of his image, and CNBC sold the portrait to some lucky sucker? I think I even had a kind word or two for Mr. G back then. Yeah, let's kick him out the door and give him his proper due now too. If it was not for Alan's excessive rate cutting after the tech bubble burst, and after 9/11, the housing bubble might not have expanded to such great extent.
Here's where we need to remember though, that playing Monday morning quarterback is easy. Post 9/11, we all got a little bit crazy, and we all did a few wacky things in overreaction. You have to take yourself back to that time. If you do that, I think you can forgive some of the misgivings you now have for President Bush and for Alan Greenspan. It was a unique time in our history, and unfortunately its legacy carries on.
Still folks, I'm not sure our government is capable of saving us anymore. Try as they may, I saw the bullets running down a few months back, and when they run out, America gets downgraded too. When that happens, who will bail us out? Buy gold folks. We're going back to the stone age after all, so you'll need gold, some flint stone, a spear, a cave, water supply, a few chickens and some firewood. As for currency, the spear will go a long way, but gold will do for a while too.
Some wise voices brought to our attention (Steve Ferguson and Alan Abelson) the problem known to us as inflation. If the government is going to purchase such great quantity of poisoned bank assets, and at the same time not tax us more, then the dollar is bound to weaken. You can't keep printing money at this rate without that happening. So isn't that counterproductive?
Seriously, I'm thinking of moving to the Southern Hemisphere, if only it wasn't also imploding into geopolitical chaos now. But, there's some real estate opening up a little further south, in Antarctica, what with all the ice melting. There's a positive Al Gore forgot to mention!
Let's face it, it's getting downright scary isn't it? But, Main Street still doesn't quite get it. Many many many people are looking at their 401Ks and still viewing that capital as "retirement" money, not realizing that when you lose your job and are overloaded with debt, that's your insurance, life-saving, pay the bills money as well. Unfortunately, too many folks are still living on the adage that long-term investing always pays. What they're forgetting is that sometimes, we go through what's called a secular bear market. During those rare periods, you often need money unexpectedly, and have to sell those "long-term" investments at short-sighted prices. I'm really worried folks. I'm sorry, I just can't soften this up. It's the time we're suppose to be fearless, and I'm thinking about joining the lemmings. When the market is on the cover the New York Times and leads the evening news, you're suppose to buy according to all the Cramers versus Cramers. But, we're living in a unique period in history. We have to think outside the box before the box closes in on us. Given mounting geopolitical issues, on top of everything else, we're really seeing just how hard it is to be fearless when fearful events abound.
Something Abelson wrote this week struck a chord. We're entering consumer driven recession, and every such recession leads to tough credit conditions of their own. You see where we're going with this I hope. There are more facets of credit that look poised to join the others in hell. Yes, I'm speaking of consumer credit, which has already taken to deterioration. Be nice if the government could bail us out of debt right! Well, maybe they won't be able to soon, cause where is the money going to come from?
What's plainly evident from last week's commentary out of both presidential candidates is that they'll use this condition to promote the change they both represent. I must say though, that I did not come out of Obama's press conference with much confidence in his grasp of the situation. Unfortunately, this compounded upon my concern about him following his Russia/Georgia commentary. McCain was a little better with his economic points, but his Ron Paul like comments about the Fed troubled me. You see, I believe that Ben Bernanke is only taking the leadership role because nobody else has a clue in Washington. So don't scold the Fed for acting outside its bounds when we haven't got anybody else worth two cents to do the job. God bless Bernanke for recognizing the total lack of economic leadership, or clue, out of the Senate Banking and House Finance groups. Anyway, it appears that as far as the economy is concerned, you're voting for the candidates' individual advisers, not the candidates themselves. This is because they are going to rely on those men when elected into office. It was nice to see Rob Rubin standing behind Obama, but not so much to hear mention of Paul Volcker, of tough medicine and high unemployment fame (he had a tough job though too). And if McCain is going to fire everyone, then who will be left to run things? The fact is that Bernanke, however flawed, might be the smartest we have. Well, that's excluding Mishkin, who most wisely found an out before the crap hit the fan. Maybe we have to ride out Bernanke, because we are still more than one chess move away from checkmate, and we may lose no matter what anyway.
As scary as this week seems all of a sudden. I mean, I was soothed for all but a day, and most other expert commentary is also showing signs of confusion these days. What if these guys with their shotgun plan are right though... What if this is our best option, and while we put the inflation card back on the table, we at the same time sure up our financial system... Okay, so nobody will want a loan at higher rates, and it might take us some time to come out of this... At least we might avoid something darker that we dare not mention again. In that case, maybe the market got it right in its initial reaction. Only time will tell though, and scary times those will be.
The Week Ahead
The coming week should boost C-SPAN in the ratings ahead of all other programming. The first presidential debate is scheduled for Friday, and the rest of the week will be packed full of Congressional testimony of the Treasury Secretary and Federal Reserve Chieftain. Good news though! You can watch C-SPAN via link from our dear friends at MarketMovingNews.com.
Kraft Foods (NYSE: KFT) replaces AIG (NYSE: AIG) in the Dow Jones Industrials Index (SPDR - NYSE: DIA), but there is not much other news on the schedule for Monday. Financial sector players will be closely watching Vik Pandit's appearance on Charlie Rose. Mr. Pandit heads up Citigroup (NYSE: C), and investor focus will be keenly attuned to how Vik seeks consumer credit shaping up, and Citigroup's outlook.
Believe it or not, an IPO is scheduled for Monday, but it could be pulled depending on market sentiment. Fluidigm, a lab-technology company, is set to price shares at $14 to $16, as it seeks to raise capital on 5.3 million shares. For those of you unaware, "The Greek" was an IPO/Emerging Growth Analyst at one point in his career, and we hope to incorporate this type of research into our effort here at some point in the future. Monday's earnings schedule includes 3Com (Nasdaq: COMS), AutoZone (NYSE: AZO) and CarMax (NYSE: KMX).
This Tuesday should be intense, as Henry Paulson, Ben Bernanke, Christopher Cox and James Lockhart testify before the Senate Banking Committee. This is must see TV, and damned good programming for C-SPAN; shame every major financial market channel will also cover it in its entirety. Hank and the gang will undoubtedly be pushing for swift passage of this mega bail out plan, and we're sure the Treasury worked through the weekend hashing out specific numbers, and huge numbers at that.
Tuesday is International Council of Shopping Centers day, when we pay close attention to consumer spending via the weekly same-store sales data. We've been calling for, and receiving, declining growth trend as we enter the now coined "dead zone before Thanksgiving." Last week's ICSC data showed year-to-year growth dropped dramatically to 1.3%, from the prior week level of 1.9%. We reiterate that with "back to school" season behind us now, there's little catalyst for growth. The Redbook Survey has offered data in line with ICSC, and you can look for the Redbook Survey on Tuesday morning as well.
This week also offers the State Street Investor Confidence at 10:00 a.m. ET on Tuesday. We expect that this figure will show a decrease in September confidence. The mark was reported at a level of 77.2 in August, down from 82.6 in July.
Markets in Japan will be closed on Tuesday. In the states, but concerning global issues, the U.N. General Assembly opens. Also, Former President Clinton's Global Initiative Meeting gets underway.
On the corporate front, Google (Nasdaq: GOOG) launches "dream phone." In New York Bankruptcy Court, Delphi will be seeking a better pension deal from General Motors (NYSE: GM). The day's earnings schedule includes Diedrich Coffee (Nasdaq: DDRX), Evolution Petroleum (AMEX: EPM), FactSet Research Systems (NYSE: FDS), H.B. Fuller Co. (NYSE: FUL), Lennar Corp. (NYSE: LEN), LightPath Technologies (Nasdaq: LPTH), Qualstar Corp. (Nasdaq: QBAK), Versar (AMEX: VSR) and Worthington Industries (NYSE: WOR).
The stress mounts for Bernanke on Wednesday, as he appears again before the Joint Economic Committee. August Existing Home Sales are due for release on Wednesday morning at 10:00 a.m. Bloomberg's consensus of economists is looking for an annual run rate of 4.92 million sales, compared to 5.0 million in July and 4.86 million in June. Home building supply company, Lowe's (NYSE: LOW), is set to hold an investor conference on the same day. In related news, the Mortgage Bankers Association offers its regular mortgage activity data. The prior week benefited from lower long-term rates on the conservatorship of Fannie Mae and Freddie Mac, and we expect last week did as well. However, the situation is since changed on new inflation concerns tied to the Friday announced bail out. Speaking of bail outs, Wednesday marks the deadline for the U.S. bankruptcy court to rule on Barclay's (NYSE: BCS) acquisition of Lehman's brokerage assets.
The regular Petroleum Status Report is due from the EIA, and in related news, the trial of Senator Ted Stevens, Republican from Alaska, is set to begin. Stevens is accused of concealing gifts from an oil services firm.
Intuit (Nasdaq: INTU) is holding an investors day, while the earnings schedule includes Bed, Bath and Beyond (Nasdaq: BBBY), Copart (Nasdaq: CPRT), Craftmade Int'l (Nasdaq: CRFT), Financial Federal (NYSE: FIF), Neogen (Nasdaq: NEOG), Nike (NYSE: NKE) and Paychex (Nasdaq: PAYX).
Testing Bernanke's nerves to their limits, he and Paulson are scheduled to address a House panel regarding the conservatorship of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Dallas Fed President Fisher will address a group in New York as well. Meanwhile, in Chicago, the regional Fed kicks off a joint event with the ECB entitled, "Credit Market Turmoil of 2007-2008, Implications for Public Policy." In France, President Sarkozy is expected to address his nation's economy on Thursday as well.
Weekly Initial Jobless Claims are set for report at the usual 8:30 ET, and Bloomberg's consensus sees a reading of 445K, versus 455K last week. The prior week data was said to be influenced by hurricane related job loss in Texas/Louisiana, and thus the expectation for improvement this time around. However, we seem to recall a few New York businesses coming under some stress last week...
Durable Goods Orders are scheduled for August, with expectations for a month-to-month decrease of 1.6%. This compares against growth over the prior two months. New Home Sales, scheduled for 10:00 a.m. report, are forecast to have run at an annual pace of 510K in August. That will compare against readings of 515K in July and 530K in June. You can see the trend...
The EIA Natural Gas Report has regularly noted storage growth over the seasonal fill period and again last week. The report is up next again at 10:30 on Thursday. A couple mergers are awaiting shareholder approval on Thursday, including the Northwest (NYSE: NWA) - Delta (NYSE: DAL) deal and the Wrigley (NYSE: WWY) - Mars transaction.
Swiss Re has an investors day scheduled, and the earnings slate includes Accenture (NYSE: ACN), Aehr Test Systems (Nasdaq: AEHR), Amarin (Nasdaq: AMRN), Analogic (Nasdaq: ALOG), Authentidate (Nasdaq: ADAT), Bonso Electronics (Nasdaq: BNSO), Chattem (Nasdaq: CHTT), Christopher & Banks (NYSE: CBK), CRA Int'l (Nasdaq: CRAI), Diamonds Foods (Nasdaq: DMND), Discover Financial (NYSE: DFS), Finish Line (Nasdaq: FINL), McCormick & Co. (NYSE: MKC), Media Sciences Int'l (Nasdaq: MSII), Pioneer Behavioral Health (AMEX: PHC), Research in Motion (Nasdaq: RIMM), Rite Aid (NYSE: RAD), Scholastic (Nasdaq: SCHL), Smart Modular Tech (Nasdaq: SMOD), Spectrum Control (Nasdaq: SPEC), SYNNEX (NYSE: SNX), Texas Industries (NYSE: TXI), TIBCO Software (Nasdaq: TIBX) and Vail Resorts (NYSE: MTN).
Friday brings the final Q2 GDP Report, and economists are not looking for significant change from the last check, which showed 3.3% growth. Corporate Profits are due at 8:30 a.m. ET as well. Then, at 10:00 a.m., look for the University of Michigan/Reuters Consumer Sentiment Index. Economists see a reading of 70.5 for the September figure, compared to 73.1 at last check and 63.0 in August.
There will be much to do in politics and geopolitics on Friday. Beginning with the latter, The quartet of Middle East peace making mediators meets, and a grouping of The Commonwealth of Independent States, which includes former Soviet states, congregates in Kyrgyzstan. It should not be hard to discern what they'll likely discuss, their former brother Georgia.
In the United States, turn your televisions on at 9:00 p.m. to catch the first of several presidential debates. Considering recent geopolitical and economic hot button issues, the two candidates should be quite talkative.
Friday's earnings schedule includes American Greetings (NYSE: AM), AZZ Inc. (NYSE: AZZ), Jabil Circuit (NYSE: JBL) and KB Home (NYSE: KBH).
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