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Goldata Financial
Dedicated to
above average returns in the stock market.
STOCK MARKET COMMENTARY
February 2, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata Financial
Last week, we learned that having a new
president does not change the economic picture or the political climate. The fundamental
news continued to be awful all week as Monday started with an earnings miss
by Caterpillar (CAT) followed by announced layoffs nearing 100,000 and ended
with a GDP report for 2008Q4 that was only -3.8% (-5+% was expected). This
number actually rallied the markets during Friday’s pre-market until it
was exposed that inventory builds added 1.3% (which brought it back to -5+%).
In spite of these terrible fundamentals, the markets actually traded up early
in the week because the politicians were playing the 2009 version of
“good bank/bad bank” where manna from the Feds would move the
troubled assets of the banks to “bad banks” paying cash for them,
thereby leaving “good banks” to lend, the solution to all our
problems. Stop me when you’ve heard this one ---- The problem is
valuing these troubled assets. If the Feds pay market rates, the banks
don’t get “good”. If the Feds pay more than market, the
banks get “good” but the taxpayer just gets a “thank you”.
This was the dilemma Hank Paulson (remember him?) had in 2008’s version
of this game and he “changed his mind” choosing to get some
equity for us from the banks in exchange for cash as opposed to overpaying,
in essence giving them money for nothing. By Thursday, the markets headed
south as the new bipartisan spirit of the Obama administration went AWOL with
a pork-laden “stimulus” bill passing the House without Republican
input or votes. The downside continued Friday as word was leaked that
“good bank/bad bank” was “on hold” as apparently the
new administration has no better ideas than the old one. Here’s one:
Let’s create “new” banks. These new institutions will not
be encumbered by bad loans and can lend to their heart’s content. In
addition, they’ll need to hire people, rent space to operate out of and
we’ll only have to put up $200-$300 billion, which will be equity.
Assuming a standard bank multiplier of 10, this could add $3 trillion of
stimulus. Just a thought. There are positives out there to report.
Corporations are now raising money in the bond market without government help
or notice by the press. Mutual fund flows have become positive the last few
weeks and there is a better tone to trading, even on the down days. Managed
accounts have seen more positions added this week as gold continues to
perform and more biotech and health-care related names cross their 200-day
moving averages to the upside. I expect to report more groups with similar
action in the next few weeks. It feels like the middle of the
“economic” winter because it is. As investors, we must disregard
the news of today and listen to Mr. Market tell us about tomorrow. The view
here is that he is waiting for Washington to finish and then we will move
higher.
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