Daily Investment Interpretations

January 9, 2009

2009-1-9:   Today was a -1.64% to -2.81% down day..  The NASDAQ dropped the most, at 45.42 points (-2.81%) to close out the week at 1,572., the Dow fell the least, at 143.28 points (-1.64%) to close at 8,599 and the S&P 500 split the difference, losing 19.38 about (-2.13%) to lend at 890. Oil fell to $40.83 a barrel, and gold rose $0.50 to $855 an ounce. The VIX rose slightly to 42.82
    Apparently, there was a bleak U. S. jobs report showing that the U. S. is in its worst shape since the 40's, although the actual job count was, I believe better than expected: Carnage continues with 524,000 jobs lost in December
    Of course, there are varying opinions upon whether or not the economy is going to recover in the second half of this year. Here's an article by one of the doubters: Battipaglia: 2009 is not going to be a recovery year
    Paul Krugman has published an article, "The Obama Gap", in which he estimates that President-Elect Obama's fiscal stimulus plan will probably provide only  something like -to-1/3rd the fiscal boost needed to make up for the shortfall in 2009-2010 Gross Domestic Product. 
Cabot's China and Emerging Markets Buy Signal:
    I mentioned last night that Cabot's China and Emerging Markets newsletter has been favorably impressed with what's happening in the Chinese markets, and has just added a third stock to the two stocks they're already recommending. In the meantime, the two stocks they recommended have fallen sufficiently  Right now, I'm down about 10% below the prices I paid for them, so there's no urgency thus far in rushing out to buy FXI (or, maybe, any other Chinese company)
    Meanwhile, the alternate-energy stocks are surreptitiously working their way up in price. Solar energy stocks fell sharply last year in anticipation of a silicon glut spurring price wars and a shakeout of solar energy providers, coupled with the economic downturn. Of course, once the shakeout has run its course, there will be ample business for the strong companies that survive this competition. Also, it will only be about a week-and-a-half until incoming President Obama announces his green-energy and infrastructure plans.
    Here's what looks like a very good Morningstar article discussing what's happened, and what we might expect going forward from here: Banks and the Avalanche of Deflation. The author likens the scale of the monetary and fiscal stimulus that the U. S. government is applying to our credit bubble to the Large Hadron Collider--something historically unprecedented. He entertains three potential outcomes. In one, the program works and the economy is re-inflated at the risk of overheated inflation "
due to the difficulty associated with weaning the markets from the steady drip of government funds". The second is a depression-like scenario. The third is a "lost decade" in which "Each time the economy begins to emerge from its slump, the resulting higher rates pressure the housing and financial markets lower again."