SNL: Obama's China Visit

It looks like SNL's writers have a much better command of economics than our policy makers.

America's middle class also deserves a wet kiss, an expensive dinner, and a double feature.





link to video

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Nice While It Lasted

The Supreme Court has lifted its stay on the Chrysler deal. It had been a pleasant 24 hours, thinking that just a touch of sanity still existed. It is both disheartening and frightening to see all three branches of our government ignore the rule of law "for our own good." I had hoped that the Supreme Court would shine a light on the Administration's legal steamrolling. That little Pollyannaish flicker of rationality has been snuffed.

link to Bloomberg article

In another legal development today, Obama proposed making "pay-as-you-go" the law. This would require Congress to offset any increased spending with an equal amount of cuts elsewhere. After pushing through a record massive "stimulus" package that is leaving us with a record massive deficit and after embracing trillions in government loans and guarantees, the Administration wants us to believe that it is and has always been fiscally conservative.

In his speech announcing the proposal, Obama said, "Paying for what you spend is basic common sense." The mind reels.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

One Simple, Bold, Realistic Move

I've been thinking about what I would do to address this crisis if I were President Obama. Abdicate and hit the speaker's circuit for a huge stress-free payday is the obvious choice. I have plenty of suggestions as to what should be done, but I am a realist. My ideas as to what should be done don't have a serious chance of being implemented until we default on our debt, suffer a collapse of our currency, suffer from hyperinflation, and/or lose a war against Switzerland.

Until then, I do have one idea for Obama which could actually be implemented and have an immediate positive impact. I would "ask" Treasury Secretary Geithner to resign for "personal reasons," and I would immediately appoint Paul Volcker as the new Treasury Secretary. Volcker has presently been relegated to the role of heading the President's Economic Recovery Advisory Board. That means that it's his job to bring the donuts in the morning.

I don't know of anyone in the financial world right now who has more credibility than Volcker. He's the only U.S. official in the past 20 years who has been able to conclusively prove himself a vertebrate. Volcker was appointed Chairman of the Federal Reserve in 1979 and proceeded to take the politically dangerous path of jacking up interest rates to pull our country out of the stagflation of the 1970s. That's exactly the type of leadership and experience we need right now.

Let's not kid ourselves. We face many real problems which will take some time to unwind no matter what the government does. At the margin, however, credibility and confidence do play a role. So far, the government's mixed messages, flip-flopping, half measures, speeches devoted to future speeches about plan details, and lack of transparency have led to increased uncertainty and volatility. Appointing Volcker along with a firm statement that Volcker had carte blanche to clean up the banks would be a tremendous step forward. I would be buying equities on the day of that announcement.

In the meantime, I plan to await the administration's plan to start planning on a plan to plan for the planning of a speech to lay out their plans for this crisis.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Obama Rally and Market Strategy

Buy on the rumor, and sell on the news. The markets had a nice run-up of nearly 20% in the week prior to the election. This can't all be attributed to an expected Obama victory, but it was likely one of the factors.

Now, it's the morning after (well, the afternoon of the morning after the morning after), and it seems both Democrats and Republicans are selling shares once again. I'm guessing that Obama's supporters are selling some shares to replenish their cash after funding his campaign to the tune of $600 million (an absolutely insane figure). Republicans are likely terrified of the Democratic victory and are selling some shares to stock up on ammo and to reserve their "Palin 2012" commemorative moosehide parkas.

To what degree did an expected Obama win help boost stock prices just prior to the election? Of course, we can't quantify it precisely, but it may be instructive to look at the following graph of TAN, a solar ETF. This basket of solar stocks rallied about 75% in the week leading up to election day.


Obama has made no secret of his support for alternative energy development. In an October 31st interview with Wolf Blitzer of CNN, Obama listed energy independence as his number 2 priority for 2009 (the economy was number one). In that interview, Obama said, "We have to seize this moment, because it's not just an energy independence issue; it's also a national security issue, and it's a jobs issue. We can create 5 million new green energy jobs." The strong move in the alternative energy stocks leading up to the election hints of an expected Obama victory being one of the factors for the rally.

So, again we've had a rally, and again we're giving it back. There are plenty of potential explanations. Could be acceptance that analyst earnings estimates still have to come down. Perhaps the reality that our economic and financial problems transcend any President or government action is setting in. Maybe we're seeing profit-taking from the rally or more forced de-leveraging. Perhaps the Plunge Protection Team had to take a breather to reload the ink in its printing press.

Whatever the case, we should expect the dramatic volatility in the market over the past month to continue in the near-term. Fortunately, this volatility has provided some good trading opportunities. As I've stated, my intention has been to fade any strong moves in this market, and that's what I've been doing. Both times last month that the S&P 500 approached 850, I turned short-term bullish and added some long market exposure while covering my shorts. And both times the S&P 500 approached 1000, I sold those positions. The most recent assault on 1000 occurred on election day, during which I fortuitously unloaded the QLD, SSO, and GOOG exposure that had been added during the prior dip.

I was hoping to rebuild my short exposure gradually during the latest market rally. Unfortunately, I was only able to add a few short positions (a couple of alternative energy names and one financial) before the rally fizzled.

As we stand now, I plan to continue fading strong moves in the market. I'll be looking to cover the current shorts and rebuild the long side should we head back to recent lows. If we turn around and start heading back up, I anticipate adding short exposure in the S&P 500 and the Russell 2000 as well as in the consumer, alternative energy, and financial spaces.

I'm also keeping an eye on the currencies. I sold our Yen exposure back on the 24th when it spiked, leaving us with exposure to only the Chinese Renminbi. I should have rolled the Yen exposure into the Canadian dollar at the time, but I missed it. The long-term fundamentals of the U.S. do not support its recent strength. The strong move in the dollar has been largely due to short-term technical reasons as well as a knee-jerk flight-to-safety. I am very negative on the dollar (long-term) at these levels and will likely be buying the Canadian dollar if it weakens much further.

Disclosure: The Rubbernecker is long volatility and short whiplash.

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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.