JPMorgan Warns of Tough Times Ahead - Wall Street Reacts

Well, it seems as if winter may be ending early as there was some movement from the hibernating bears today. Finally, we saw some strong movements from most of the inverse etfs today. As I said yesterday, the “Holiday High” may not sustain into the new year. Negative outlook persisted as Jamie Dimon, the CEO of JPMorgan, went on record to say that they had a “horrible” November and are having a “horrible” December. I can’t imagine the kind of numbers they are performing if the CEO has to prepare the market the way they did today. Like I have been saying all along, financials are definitely not out of the woods yet. The $700 billion was chump change just to help cover their bad debt. It has not stimulated any new lending, and in my opinion, much more “tarp money” will be needed if they expect the banks to start lending anytime soon. Wait until the consumer starts pulling out their money next year, because of the massive job loss. The banks are getting desperate. You can actually find pretty decent rates if you’re willing to work with the banks. This is a pretty cool site where you can have different FDIC insured banks bid for your business. It usually results in better rates. Visit MoneyAisle.com for more info.


KB Toys and EZ Lube were new members of the Bankrupt club this week, which is slowly becoming standing room only. Office Depot said they plan to close 112 under performing stores in North America, as well as six distribution centers. They are also going to cut spending by $200 million. These are the beginning signs of business failure. If only businesses new that you should cut spending in the high times and begin to contract their operations and use the recession times as building, they would be far better off. Many American businesses will now suffer from their past five years of greed. This should add another log to the Unemployment fire as we are looking to have one heck of a Q1 2009.

The auto bailout is still pending as it is finding some adversity in the Senate. Sure, they may have to go back in tweak some things, but I still don’t see how they won’t pass this bridge loan. Media likes to keep people on edge, but I believe it is a lot farther coming along than media plays it out to be. The auto bailout is the one lurking variable I still feel has the power to keep the bull running for a bit longer. I just wish it would be done and over with, so that we all could move on with more normal market movement.

One thing to look out for is next week when The Fed meets to discuss the rate cut. Sure, we most likely will see yet another cut to our already very low discount rate. However, don’t be surprised to see The Fed disappoint the market. The market expects a 50 basis point cut. In doing so, The Fed would be flirting awfully close with inflation and also needs room for emergency rate cuts, as I believe they know we have harsher times ahead. If we indeed see a lower than expected rate cut, that could cause for some negative trading and set a bad mood for next week. At any case, I believe the bears are ramping up soon to take control back of this market.

SRS showed today why I deem it the “Rock Star” out of all of the ETFs. We saw it just about touch $100 today (close to 30%), which I would say is pretty strong. In my opinion, SRS is just getting started. Wait until the commercial loans come do. 200+ stock in my book. SKF and FAZ also had high gains due to the negative outlook given by Mr. Dimon. FXP gained pretty well as Asian markets are continuing to show doubt to investors of their ability to grow in these tough times. Hey, maybe people are beginning to do their research.

I would like to say the selling will continue into tomorrow, but there are a couple of elements that could stir that up. First, we still have the auto bailout lingering out there. If a deal is cracked tomorrow, expect a pretty strong cheer rally. For you gamblers, picking up some GM or F stock may not be a bad idea. Just get out fast again. The second element is that it is Friday. Recently we have seen big runs on Fridays, despite whatever bad news the economy can throw at the market. For some reason, investors have found Friday a good day to buy, although I do believe the bulls are not as ramped as prior weeks. I still like YHOO as a pick up, as I believe it is only a matter of time until a deal is struck. At any case, I am glad to be short right now, and expect pretty strong gains from them the next few weeks. Happy Trading and see you tomorrow.

8 comments:

  1. Kuntal Says:

    Hi FF,

    Any target price for SRS in your mind? I remember you talked about 150 to 160 range in an earlier post. Does this still hold good?

    Regards
    Kuntal

  2. Anonymous Says:

    You are a phenomenal help. Keep it up!

  3. Anonymous Says:

    Keep up the good work, I enjoy reading your blog.

  4. Anonymous Says:

    Hey FF,

    Thanks a lot. Your comments are always great. Look at after hours trading for SRS. It is already $102! Wow! By the way, I was trying to find the exact date of Fed rate cut announcement in yahoo finance with no luck. Could you please give me a link?

    Thanks again.

  5. Dave Says:

    Economic calendar on msn moneycentral. There are also earnings, events and splits calendars.

    Kuntal, FF says "200+ stock in my book" in today's post, so I think his SRS target is over $200...

  6. Anonymous Says:

    Thank you for your blog. I'm reading it since 2 or 3 weeks, I hope to make good choices with your advices.

    Right now, I bought some SRS at 80$. I hope it is a good choice :)

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