A Game of Inches... 8,000 or Bust... Shays Rebellion Revisited... Stock Watch... Economic Calendar... Seally Mattresses...

In baseball only an elite number of players were able to end the season with a .400 average. Names like Ty Cobb, Joe Jackson, Ted Williams, and Rogers Hornby belong to that elite list. Of the 12 times the magic .400 number was breached, two players (Rogers Hornsby and Ty Cobb) finished the season above this benchmark number on three separate occasions. In recent history Tony Gwynn finished the season at .394, George Brett at .390 in 1980, and Rod Carew .388 in 1978. (1)

Similar to the magic .400 number, it appears that Wall Street has drawn a line in the sand at the magic 8,000 number. This number has been tested on several occasions. November 19, 2008 stands as a key date. (2) That was a day when housing starts reached the lowest level since 1959,and the CPI marked its largest one-month decline since 1947. Since then, inter-day losses have crossed the 8,000 mark on several occasions, but the mark is always reset within a 24 hour period.

Let's face it, the news has not gotten better... and many feel it has actually gotten progressively worse. Sure the government intervened with TARP, the Big 3 bridge-loan, Obama's election, and release of the second half of TARP have all figured into the equation. Still though a steady flow of bad news should have sent this market lower. Now this mess sits squarely in Obama's lap. The issue of government transparency will be raised once again. Like Roosevelt against the back-drop of bank runs, Obama's administration may well be served to have a formal "banking holiday." (3) While FDR's plan was meant to stop bank runs, Obama's holiday would allow the banks to come clean once and for all. Obama's political capital cup is over-flowing. This is the time to make a big move. And banks need to finally come clean with bad loans, bad collateral, and faulty accounting methods. His approval rating will allow Obama to practically anything...

The Treasury and Fed, which appear to be in no way shape or form accountable to the American people must called to the carpet. The Treasury's mis-use of the original TARP funds to re-capitalize banks is the first place to start... The TARP in its original form was created to combat the mortgage and foreclosure crisis. Instead, Bush and friends exhausted their last bit of political shenanigans for a last laugh at Congress' expense. It could be that Thomas Jefferson was right. He was fearful of a class of financiers who would become so rich and powerful that they could actually manipulate the entire financial system. As mentioned before, this is the principle reason that Andrew Jackson "Killed the Bank." We have long-since blown through reporting the amount of money the Fed has printed. (4) However, the public... Congress... and the world economy for that matter is entitled to know the names of institutions which have received "additional loans" from the Fed. Furthermore, it is a necessity to find out the "true value" of the collateral that was received in those loans!!! The day that happens, could well be the last day any entity is interested in purchasing T-Bills from the U.S. government. Bloomberg's lawsuit inquiring about these loans is as much a national security issue as much as it is a question about the basic institution of democracy itself. Should that suit be denied, as Lincoln once said "When it comes to this I should prefer emigrating to some country where they make no pretence of loving liberty -- to Russia, for instance, where despotism can be taken pure, and without the base alloy of hypocrisy." (5)

Shays Rebellion Revisited...
In the past, I have alluded to Shays Rebellion. In American History, a farmer by the name of Daniel Shays took out loan, but could not repay it. Like many states immediately after the American Revolution, Massachusetts had a tremendous amount of pressure placed on it by the debtors to increase money supply, thus allowing debtors to repay their loans with inflated dollars. The creditors preferred a tight money supply. State governments were owned by the creditors. When massive numbers of farms went into foreclosure, Shays and other Revolutionary War veterans led a rebellion against banks... Kind of scary if you think about it...

What is different now it that banks are just as broke as the debtors who borrowed the money. While Treasury ad Fed have made several attempts to re-capitalize lending institutions... then beg them to lend, the credit market has become the X variable int he equation. And I would not loan a cent to ANYONE rated below a 650 credit score.

Stock Watch
Added NEOP traded on the OTC... This little dandy out of Dublin, OH is a pure speculation play which could bring a 300-500% return, or could lose 20% of my investment. We'll know more by late February. Price .70 cents a share...

SRS showing sings of a major breakout this week as retailers are showing weakness... and demand for commercial real estate diminishes.

SCC Consumer discretionary spending tends to rise during income tax season. With unemployment, and massive amounts of debt, the consumer in spite of Obama's tax cuts will be storing money under their mattress and shopping discounts!!!

EFU Significant movement from the ECB is making this an immediate winner. I own common shares. Unless the EURO becomes the world's reserve currency tomorrow, I believe we will see continued erosion in the buying power, coupled with liquidity injections.

Continued 6/115s on British Pound Sterling...

CNK I have sell orders in at 3.8. The options are currently trading at 3.2 for March. I am pushing for an extra 20% return on premium... o.k. I'm a pig at times!!!

RYL, MDC, MLHR, FXI, WYNN Puts are still in rally mode...

MCRI... June/5s puts still looking a bit shaky... We will see what their earnings look like... remember, this company gets its revenue from Nevada... ouch!!!

*Natural Gas is looking interesting...

Economic Calendar
Monday Jan 26 Tuesday Jan 27 Wednesday Jan 28 Thursday Jan 29 Friday Jan 30

Market Focus »


Existing Home Sales
[Report][djStar]10:00 AM ET

Leading Indicators
[Report][Bullet10:00 AM ET

4-Week Bill Announcement
[Bullet11:00 AM ET

3-Month Bill Auction
[Bullet11:30 AM ET

6-Month Bill Auction
[Bullet11:30 AM ET

20-Yr TIPS Auction
[Bullet1:00 PM ET

FOMC Meeting Begins

ICSC-Goldman Store Sales
[Bullet7:45 AM ET

Redbook
[Bullet8:55 AM ET

S&P Case-Shiller HPI
[djStar]9:00 AM ET

Consumer Confidence
[Report][djStar]10:00 AM ET

4-Week Bill Auction
[Bullet1:00 PM ET

2-Yr Note Auction
[Bullet1:00 PM ET

Bank Reserve Settlement

MBA Purchase Applications
[Bullet7:00 AM ET

EIA Petroleum Status Report
[djStar]10:30 AM ET

FOMC Meeting Announcement
[Report][Star]2:15 PM ET

Weekly Bill Settlement

Durable Goods Orders
[Report][Star]8:30 AM ET

Jobless Claims
[Report][djStar]8:30 AM ET

New Home Sales
[Report][djStar]10:00 AM ET

EIA Natural Gas Report
[djStar]10:30 AM ET

3-Month Bill Announcement
[Bullet11:00 AM ET

6-Month Bill Announcement
[Bullet11:00 AM ET

5-Yr Note Auction
[Bullet1:00 PM ET

Money Supply
[Bullet4:30 PM ET

20-Yr TIPS Settlement

GDP
[Report][Star]8:30 AM ET

Employment Cost Index
[Report][Bullet8:30 AM ET

NAPM-Chicago
[Report][Bullet9:45 AM ET

Consumer Sentiment
[Report][djStar]9:55 AM ET

Farm Prices
[Bullet3:00 PM E

Seally Mattresses Stink... We have gone through Three... 3 of them in a 24 month period!!! All have developed the same material defect... Finally, we are getting a refund!!!

Sources Referenced
1. http://findarticles.com/p/articles/mi_m0FCI/is_/ai_67831640
2. http://www.bizjournals.com/atlanta/stories/2008/11/17/daily64.html
3. http://search.yahoo.com/search?fr=ytff1-&p=FDR%20Bank%20Holiday%20wiki&ei=UTF-8&type=
4. http://www.slate.com/id/2205574/
5. http://showcase.netins.net/web/creative/lincoln/speeches/quotes.htm

Will a Thaw in Credit End the Crisis? TARP for the Good Banks... Stock to Watch...

The world economy in general, and the U.S. economy in particular relies on credit. Credit is the life source of much, if not all growth. However, we have all witnessed the negative impact of too much credit. According to Allbusiness.com, over-extension is defined as:
"A loan balance or total credit obligation beyond the borrower's ability to pay . In situations where the borrower has taken on more credit than he can handle, a debt consolidation loan (combining several obligations in a single loan repayable over a longer term) may be the only alternative to bankruptcy. As a rule of thumb, borrowers who pay more than one-third of their net income to repayment of consumer debt, excluding mortgage debt, may be over-extended in their ability to repay recurring household debt." (1)

As we noted, credit drives growth. The question is can the American consumer handle more credit at this point int he economic cycle? According to one Reuters report, "In spite of rising energy prices, a turbulent stock market and an
ongoing state of war, US consumers have continued to spend. While this
spending has prevented the economy from slipping, it has come at the
cost of decreased individual savings and increased personal debt." (2)
According to Reuters, one of the most influential groups driving consumer credit is aging baby boomers. This demographic has increased spending in a period when many have decreased it. This would suggest that many retailers would be best served by marketing services to this influential class.

Credit cards, which have been the key to consumer spending are adjusting their offers. According to creditmall.org, "The last year and one-half has been interesting in that banks are seeking the affluent, the credit worthy, and stable." (3) People who were able to qualify for cards several years ago cannot. Revolving credit at the corporate and individual level could well have run its course. A new "growth" engine must be found.

TARP for the Good Banks
Like most Americans, I am growing increasingly frustrated with the TARP Program. In general, there has been a lack of progress. Banks who received these funds have not begun to loan... There are a variety of reasons. 1. If you were a cash-poor bank, you would think twice about lending as well. 2. You are concerned about loaning money because you are uncertain about the counter-party's ability to repay the loan. 3. You would rather keep the dividend charade going for as long as possible to prop up the stock price.

There could well be a more modest proposal which would serve the good banks, punish the bad banks, and more importantly destroy the weak business models. If another TARP program were developed, and I am certain there will be a second TARP, then it should be done with the most solvent and well-run banks. The good banks should be given government loans to purchase the good assets of the bad banks, and allow the bad banks to fail. (4)

While I am certain this will create a great deal of turbulence in the world of finance, it could well be the only viable solution that truly saves the financial system. One thing is for certain, the government will not be able to bailout every group that needs it. Heck, instead of cooking the books to make them look good, there could well be a case of cooking the books for TARP funds. (5)

Stock Holdings
SCC, EFU, SRS

Options Holdings
RYL, MDC, WYNN, MCRI, FXI, CNK, BBW, MLHR

1. http://www.allbusiness.com/glossaries/over-extension/4944338-1.html
2. http://www.reuters.com/article/pressRelease/idUS157743+09-Jan-2008+BW20080109
3. http://www.creditmall.org/
4. http://www.marketwatch.com/news/story/bloody-start-earnings-season-batters/story.aspx?guid={3746153F-B946-4C22-8870-66BC92C0B31B}&siteid=trackedcomment#comment1416992
5. http://beltwayblips.dailyradar.com/story/the_cook_the_books_financial_collapse/

Over-Expansion v. Over-Contraction... A "Short" List of Retailers... Watch List...

Over-expansion v. Over-Contraction.... That is the battle of almost every economic cycle. Below is a list of companies that over-expanded during the previous economic cycle. While I am concerned about the loss of jobs, there is a great opportunity to develop new... efficient... and effective business models for the future. I will admit, that the demise of two companies will not bother me in the least.

Piercing Pagoda: Earrings are one thing... but putting extra holes in eye brows... noses... belly buttons... etc. is something else. Maybe these folks made a bundle of cash in the last trend of punching holes in the human body... but this should be a word of warning that a company can easily die with the trend as well. WWE... Roller Derby... Bungee Jumping...

Video Gallery: I made my last visit to Video Gallery nearly one month ago. It was a last visit by choice! Over-priced items... and incompetent help put this place on the dinosaur list. As I left, I crossed a Red Box .99 cent rentals... no retail space... no workers... and all credit card transactions. Block Buster will be next... it is not a matter of if, just a matter of when!


FYI................ If you intend to give gift cards around the holidays, you need to be careful that the cards will be honored after the holidays. Stores that are planning to close after Christmas are still selling the cards through the holidays even though the cards will be worthless January 1. There is no law preventing them from doing this. On the contrary, it is referred to as 'Bankruptcy Planning). Below is a partial list of stores that you need to be cautious about.

http://www.snopes.com/politics/business/storeclosings.asp
*All information is deemed but not guaranteed to be accurate as reported by Snopes.com (1)

Watch List...

Look for an up market week. Followed by more horrific news. The issue of transparency will surface sooner rather than later. The Federal Reserve will have a lot of explaining to do if... if... the new administration is truly looking out for the best interests of the American people. I believe companies in general, and banks in particular are becoming "more transparent" only because their toxic assets are surfacing. Like a bad mafia movie, there are some bodies that keep re-surfacing.

SCC Continue to short consumer spending. Un-employment will be in double digits before summer.

EFU Europe will see the EURO re-set at par value with the dollar... ut-oh! Massive cuts from central banks to follow!!! Good bye social state... Hello welfare state.

SRS With a list of retailers closing shop, note that there are not a lot of others
rushing to take their place of place inside malls...

FXI... MCRI... WYNN... CNK...

1. http://www.snopes.com/politics/business/storeclosings.asp