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Author: Mike Celeste Editor: Tony Ponzo November Circulation: 6760

Stat Sheet Week Ending November 15th 2008

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-447.0-5.0%-4,768.0-36.0%
S&P-58.0-6.2%-595.0-40.5%
NAS-130.0-7.9%-1,135.0-42.8%

Highlight of this past week: Indicator Strategy plays show 3 wins and no losses so far in November.

In this Issue---
Momentum Plays---
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This week did not go all that well in this strategy. We had our first two losses in a long time. So our perfect record of late has been broken. Friday's play was a real disappointment as everything was set to be a good play. The W indicated the stock was prime for a down play, the market futures were down substantially in the pre-market and the stock was headed down in the pre-market. The market did indeed trade down but our play (SUN) turned up and continued up and never looked back. It turns out the stock was upgraded in the middle of the day. That happens every now and then and there is nothing anyone can do about it so we just move on. Both losses were not that big but we don't like to see them at any rate. Still, the Momentum strategy is showing a 79.32% profit for the year and in this very down year for the market, we think this win rate is looking very good.

 Three Indicators---
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Our 3 Indicators all hit the up button for a Thursday play, and the Dow ended up 553 points. How's that for a good play? When all 3 are there, up or down, at the same time, it has been very accurate. This Indicator strategy continues to be a real bargain--if used. This would apply to stocks or options, at least the many stocks and options we look at during the course of a day.

 The Economy, The Markets & Commentary---
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It looks like these volatile markets are going to be around for quite a while. Now the bailout has completely changed direction and focus, with the statement that when the facts change, the use of the money changes. Remember back a ways when we said that we didn't know the details of this bailout? It was started as a 3 page statement, then went into general description and the real power was given to the Treasurer. We, the taxpayers, don't really have any say in what happens to this money, and it sure seems that they are shoving it down our throats and saying, "This is the way it is going to be, so get used to it, and we will change it anyway and anytime we want." Another thing--the amount of the bailout is always quoted as $700 Billion---but they always leave out the additional $110 Billion in tax benefits that were tacked onto the program. In other words, the government would have gotten $110 Billion in taxes that they are not going to get from the makers of wooden arrowheads, Puerto Rican rum, etc. It seems to me that the total here is $810 Billion. Then, there doesn't seem to be any more talk about the taxpayer making money on the deal. No assets are going to be bought, except possibly stock, at least at this stage, and who knows what is going to happen to the auto makers if they don't participate and receive some aid. At the same time, many states are lining up with hands out for bail money.

The nations of the world are meeting this weekend to see what they can come up with, but as President Bush so appropriately said, "It will take some time and many more meetings before solutions can be found. That is in contrast to the bailout that was thrust on us over a relatively few days---a bailout of billions that is put together over a few days?? Give me a break! Nothing of any consequence can be put together that fast. Oh, we are far from over on this and while the stock market usually looks ahead about 6 months, it would appear to me that we are talking about a whole lot longer than that before we get straightened out. It seems more like years instead of months. As mentioned before in the newsletter, the last real estate crash here in California took 10 years to get back to the same level, 1989 to 1999. Then, you can look this up, too. The Dow went down after 1969 and it was 13 long years before it came back to that same level--around the 1,000 mark. Just speaking the facts. The layoffs announced on Thursday and Friday were really frightening. Citicorp is laying off 10,000 with about 60,000 more to come as the year advances. And, they are not alone--company after company is announcing a cutback in the workforce. The debate about BK for GM, vs a bailout will continue---and heatedly. Some want the axe to drop quickly instead of cutting off a limb at a time, so to speak. A quick, painful year, or 10 years of slow decline. Is a job at a lesser pay better than no job? That's what is involved with the auto industry. If bankruptcy is done, union contracts would have to be redone and a leaner company would come out of it. Somehow, the average pay at GM, including benefits, got to be about $78 an hour. Toyota has an average pay of $48. Now how is GM ever going to compete and get back to profit unless they figure out a way to get that high pay rate down. There are only two ways we can think of for that to happen. One is to go into bankruptcy reorganization or to get the union to agree to an adjustment and that is not likely. It seems like during these times, people would rather have a reduced salary than no salary at all. But, it always amazes us how logic is often tossed out the window. Keep in mind that Japanese car companies have factories in the US and are making profits. They have controlled their costs. Hey, I don't have the answer, but I did know back when, that you can't loan 100% and not have to prove income to get a loan---and that loaning at a leverage of 30-1 or 60-l doesn't require much of a downside before more capital is needed. At 30-1 a drop of 3.3% means more capital. At 60-1, a drop of less than 2% means more capital required. If things go up, fine, you make 30 or 60 to 1---but nothing goes up forever, especially on fabricated values that really didn't have value. The same thing happened in the oil business, and we showed them what can be done---don't tell us demand drove up oil to $147 a barrel. It was speculation on a 20-1 leverage---only about 5% was needed for a contract. Fine when it goes up--for the speculator--but not fine when it starts dropping because no one will pay the higher and higher prices. Then a 5% drop requires more collateral for the margin--and the landslide is on. Of course, in most parts of the country we still haven't seen the relative drop in gasoline prices, but it will eventually get there.

The stock market was all over the place on Thursday and Friday On Thursday we saw a swing of about 900 points, with most of that coming in the last 2 hours of trading. On Friday we saw the market drop over 400 points in the last hour. The market was up, down, up down, all day. This is the time for day trading and we have been taking advantage of it. Today, the Spy Put that I invested in opened at 2.72, went down to 2.04, then up to 3.75, then back down to 1.75, then back up to 3.90 at the close. If you were really nimble you could have switched from a Put to a Call a couple of times and really raked in big profits. Very emotional, but when you are hearing negative news all day and you see a rally, it kind of slaps you across the face saying that here is a good opportunity to get a Put. In that last frantic hour, the Dow was actually up about 80 points before diving down to close with a loss of 337 points. Now the question again comes up--have we hit the bottom and can it hold for a 3rd time. Stay tuned.

 Today's Thought---
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Every day more money is printed for Monopoly than the U.S. Treasury (but the Treasury seems to be trying very hard to catch up.)


Mike

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