This is The Wall Street Digest Hotline Update for Tuesday, February 12, 2008, at 6:00 p.m. EST.
Warren Buffet's offer to assume muni bond liabilities produced a 210-point rally today. By the close, however, the Dow trimmed its gains to 133 points, closing at 12,373, while the Nasdaq remained flat at 2,320. Oil closed $0.81 lower at $92.78 per barrel, and gold closed $15.60 lower at $911.10 an ounce.
Current money creation by the Fed will produce a mini-economic boom during the second half of 2008. However, money creation at current levels is inflationary. Interest rates will be rising in 2009 to fight rising inflationary pressures. Bernanke's money creation proves he is far more concerned about a deflationary meltdown, and is willing to fight the resulting inflation in 2009.
Credit spreads are still too wide. The Fed must cut Fed funds from 3 percent to 2 percent as soon as possible.
I would continue to avoid both the entire real estate sector and the financial sector, including the builders, banks of all sizes, brokerage companies, and insurance companies. Going forward, billions of collateralized debt obligations and collateralized mortgage obligations will be written down in 2008 and 2009.
Residential real estate will not bottom in 2008. A record five million homes are for sale in the U.S., home prices are still falling and one million home foreclosures are expected in 2008. However, the Fed is finally flooding the banking system with new money that will provide needed mortgage funds to banks and other lenders.
The S&P 500 is still undervalued by more than 50 percent, which means the S&P 500 Index could double and still be below fair value. After the market bottom, which I believe is near, stock prices should rise 22 to 25 percent over the next twelve months. The U.S. is still the engine for global growth. Consequently, the global boom will follow the U.S. lead.
Let's stay fully invested! The Smart Money and the institutions have been purchasing U.S. stocks on every pullback. Historically, that has been a reliable indicator of a market bottom. The Smart Money has never been wrong.
The next Hotline Update will be on Friday, February 15, 2008, at 6:00 p.m. EST.
Friday, February 15, 2008
Monday, February 11, 2008
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, February 8, 2008, at 6:00 p.m. EST.
Credit worries continue to weigh on the markets. At the close, the Dow lost almost 65 points, closing at 12,182, while the Nasdaq gained almost 12 points, closing at 2,304.85. Oil closed $3.58 higher at $91.69 per barrel, and gold closed up $15.50 at $925.50 an ounce.
Congress just passed a $152 billion bail-out of the economy, but American consumers won't receive checks until May or June.
In the meantime, the Fed is holding two monthly auctions totaling $60 billion each month. However, the best news is that the Bernanke Fed is creating money at near record levels. In the past two weeks, the Fed has created $88 billion in new M2 money. The Fed is hiding the weekly M3 money supply creation number because the amount of money creation underway now is highly inflationary.
M2 money creation at $88 billion translates to at least $132 billion in M3 money in just the past two weeks. This money is in the banking system right now. The economic power of $132 billion in new M3 money dwarfs the power of the $152 billion bail-out by Congress, which by comparison was simply posturing by the politicians.
Current money creation by the Fed will solve the credit crisis and create an economic boom during the second half of 2008. However, money creation is inflationary. Interest rates will be rising in 2009 to fight the coming inflationary boom. Bernanke's money creation proves he is far more concerned about a deflationary meltdown, and is willing to fight the resulting inflation in 2009.
Gold traders watch the Fed's money creation. I am not surprised that gold was up $15.50 today.
I would continue to avoid both the entire real estate sector and the financial sector, including the builders, banks of all sizes, brokerage companies, and insurance companies. Going forward, billions of collateralized debt obligations and collateralized mortgage obligations will be written down in 2008 and 2009.
Residential real estate will not bottom in 2008. However, the Fed is finally flooding the banking system to stop the housing slide.
The S&P 500 is still undervalued by more than 50 percent, which means the S&P 500 Index could double and still be below fair value. After the market bottom, which I believe is near, stock prices should rise 22 to 25 percent over the next twelve months. The U.S. is still the engine for global growth. Consequently, the global boom will follow the U.S. lead.
Let's stay fully invested! The Smart Money and the institutions have been purchasing U.S. stocks on every pullback. The Smart Money is never wrong. Historically, that has been a reliable indicator of a market bottom.
The next Hotline Update will be on Tuesday, February 12, 2008, at 6:00 p.m. EST.
Credit worries continue to weigh on the markets. At the close, the Dow lost almost 65 points, closing at 12,182, while the Nasdaq gained almost 12 points, closing at 2,304.85. Oil closed $3.58 higher at $91.69 per barrel, and gold closed up $15.50 at $925.50 an ounce.
Congress just passed a $152 billion bail-out of the economy, but American consumers won't receive checks until May or June.
In the meantime, the Fed is holding two monthly auctions totaling $60 billion each month. However, the best news is that the Bernanke Fed is creating money at near record levels. In the past two weeks, the Fed has created $88 billion in new M2 money. The Fed is hiding the weekly M3 money supply creation number because the amount of money creation underway now is highly inflationary.
M2 money creation at $88 billion translates to at least $132 billion in M3 money in just the past two weeks. This money is in the banking system right now. The economic power of $132 billion in new M3 money dwarfs the power of the $152 billion bail-out by Congress, which by comparison was simply posturing by the politicians.
Current money creation by the Fed will solve the credit crisis and create an economic boom during the second half of 2008. However, money creation is inflationary. Interest rates will be rising in 2009 to fight the coming inflationary boom. Bernanke's money creation proves he is far more concerned about a deflationary meltdown, and is willing to fight the resulting inflation in 2009.
Gold traders watch the Fed's money creation. I am not surprised that gold was up $15.50 today.
I would continue to avoid both the entire real estate sector and the financial sector, including the builders, banks of all sizes, brokerage companies, and insurance companies. Going forward, billions of collateralized debt obligations and collateralized mortgage obligations will be written down in 2008 and 2009.
Residential real estate will not bottom in 2008. However, the Fed is finally flooding the banking system to stop the housing slide.
The S&P 500 is still undervalued by more than 50 percent, which means the S&P 500 Index could double and still be below fair value. After the market bottom, which I believe is near, stock prices should rise 22 to 25 percent over the next twelve months. The U.S. is still the engine for global growth. Consequently, the global boom will follow the U.S. lead.
Let's stay fully invested! The Smart Money and the institutions have been purchasing U.S. stocks on every pullback. The Smart Money is never wrong. Historically, that has been a reliable indicator of a market bottom.
The next Hotline Update will be on Tuesday, February 12, 2008, at 6:00 p.m. EST.
Wednesday, February 6, 2008
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, February 5, 2008, at 6:00 p.m. EST.
A sharp drop in the ISM Non-Manufacturing Index pushed stock prices sharply lower today. At the close, the Dow sank 370 points, closing at 12,265, while the Nasdaq fell 73 points, closing at 2,309. Oil closed $1.61 lower at $88.41 per barrel, and gold closed $19.10 lower at $890.30 an ounce.
The ISM Index plunged to a reading of 41.9 percent in January from 54.4 percent in December. It was the largest drop in the history of the index and signaled contraction in January. The sharp drop raised recession fears. Investors sold stocks and purchased bonds in a flight to quality. As a result, bond prices jumped, while interest rates fell. The 2-year Note yield fell to 1.94 percent, well below the Fed funds rate, now at 3 percent. The Fed funds are forecasting a 100 percent chance of a rate cut at the March 18th FOMC meeting.
I would continue to avoid both the entire real estate sector and the financial sectors, including the builders, banks of all sizes, brokerage companies, and insurance companies. Billions of junk collateralized debt obligations and collateralized mortgage obligations have not surfaced because no one wants to admit they were dumb enough to purchase them.
It is increasingly difficult to refinance commercial real estate, which will push prices of buildings and shopping centers down over the next two or three years. Residential real estate will not bottom in 2008. The downward slide has just begun for commercial real estate.
The S&P 500 is still undervalued by more than 50 percent, which means the S&P 500 Index could double and still be below fair value. After the market bottom, which I believe is near, stock prices should rise 22 to 25 percent over the next twelve months. The U.S. is still the engine for global growth.
Let's stay fully invested! The stock market has a long history of impressive gains during election years. The market is still oversold and undervalued. Most importantly, the Smart Money and the institutions have been purchasing U.S. stocks on every pullback. The Smart Money is never wrong.
The next Hotline Update will be on Friday, February 8, 2008, at 6:00 p.m. EST.
A sharp drop in the ISM Non-Manufacturing Index pushed stock prices sharply lower today. At the close, the Dow sank 370 points, closing at 12,265, while the Nasdaq fell 73 points, closing at 2,309. Oil closed $1.61 lower at $88.41 per barrel, and gold closed $19.10 lower at $890.30 an ounce.
The ISM Index plunged to a reading of 41.9 percent in January from 54.4 percent in December. It was the largest drop in the history of the index and signaled contraction in January. The sharp drop raised recession fears. Investors sold stocks and purchased bonds in a flight to quality. As a result, bond prices jumped, while interest rates fell. The 2-year Note yield fell to 1.94 percent, well below the Fed funds rate, now at 3 percent. The Fed funds are forecasting a 100 percent chance of a rate cut at the March 18th FOMC meeting.
I would continue to avoid both the entire real estate sector and the financial sectors, including the builders, banks of all sizes, brokerage companies, and insurance companies. Billions of junk collateralized debt obligations and collateralized mortgage obligations have not surfaced because no one wants to admit they were dumb enough to purchase them.
It is increasingly difficult to refinance commercial real estate, which will push prices of buildings and shopping centers down over the next two or three years. Residential real estate will not bottom in 2008. The downward slide has just begun for commercial real estate.
The S&P 500 is still undervalued by more than 50 percent, which means the S&P 500 Index could double and still be below fair value. After the market bottom, which I believe is near, stock prices should rise 22 to 25 percent over the next twelve months. The U.S. is still the engine for global growth.
Let's stay fully invested! The stock market has a long history of impressive gains during election years. The market is still oversold and undervalued. Most importantly, the Smart Money and the institutions have been purchasing U.S. stocks on every pullback. The Smart Money is never wrong.
The next Hotline Update will be on Friday, February 8, 2008, at 6:00 p.m. EST.
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