April Fools - Investor Fools

jobloss reportBREAKING NEWS*** The recession is over! Today, I liquidated all of my shorts and placed every last cent from my brokerage account as well as two mortgages on my house into 3 stocks- AIG, C, and GM. I plan to be a billionaire by July. Well, that's going to be my best attempt of an April's fools joke and I am sure I didn't have anyone believing it for that long, but hey, we've got to have some fun on here. Believe it or not, but there are many out there believing that the above portfolio would be a good play right now. As for me, we're right on track on where I expected to be at this time, and this is good news.

It seems as though investors are going to roll the dice with the FASB meeting all the way to the gates. With this much buying purely on the speculation of the meeting, it just means there is that much more to retrace if the announcement is on par or less impressive than what people are expecting. In my mind, there is too much anticipation for the meeting, as I personally don't feel their decision and changes they make to mark to market are going to change much of the economic turmoil. If anything, it will adjust how banks look on paper, but as we have learned from past experience, that debt must be accounted for sooner or later. You would think that the US would learn from our mistakes of the past.

Today's rally also overshadowed some more ACTUAL bad news that was overlooked due to all the excited buying in anticipation of tomorrow's FASB's meeting. Today's ADP unemployment projections for March blew expectations out of the water. Market expected the number to be a loss of 663,000 where the actual number was 742,000! If this isn't bad news, I don't know what is. I have been saying it over and over, that the two most crucial economic indicators for a turn around in this market is unemployment and housing prices. When I say housing prices, I do not mean purchase volume, but the average house price. I expect to see more and more houses sold, but it is the average price which I am interested in and which I feel is an early indicator of where our economy is heading.

With this in mind, this forecasted number of 742,000 shows the continual deterioration of the economy as more and more businesses are contracting due to lack of consumer spending. However, with the announcement there was not much of a reaction from investors. Sure, futures came down as did the value of the dollar, but I would consider this data much more defining compared to anticipation of a FASB meeting that no one even knows what the consequences will be of such an announcement that is made. There are a lot more forces pushing the market for a sell off tomorrow than a rally. In fact, I believe only a close to flawless plan announced from FASB tomorrow could end us in the green.

Another reason why today's unemployment forecast was critical is because it foreshadows the unemployment rate being announced on Friday. Obviously this number is going to be a very bad number. As long as our small businesses continue to have huge employment cuts, how can we expect to bring an increase to our GDP, when 70% of our GDP relates to consumer spending? Another critical result from today's number is that the government led the way with the job cuts. Here the government is spending trillions of dollars on trying to "preserve" jobs and they can't even retain their own employees. If they can't, how can we expect any other small business to? Especially with new up and coming tax margins.

One data piece that many felt "equalized" the above number, was the lower number of scheduled job losses. Scheduled job losses fell 19.3% in March to 150,411. I find this number to be much more insignificant than the ADP number, but most obviously don't. Also, many people were impressed that GM's sales were only down over 30%. What world do we live in now?

As I expected, oil took another hit today as energy and commodities are continuing to show weakness. As strong as the market was today, financials rose fairly moderately, leading me to believe that indeed we could be near the end of this aggressive financial rally we've seen this past month. However, there still remains too much up and coming government news which makes me still cautious in moving forward.

Right now I am pretty well balanced. If indeed we see a positive reaction from the FASB meeting and rally, I still have several Apple $110 call options that I bought back in November that should get a big boost, as NASDAQ has been benefiting most from these rallies recently. If we fall from more bad economic data, my FAZ call options and SRS should see very strong gains.

So, we have another critical trading day tomorrow and hurdle our first big "anticipated" announcement, in which we have a few more to come in the coming weeks. Tomorrow's reaction should give us a preview of what we should expect going into some of the others in coming weeks. The US dollar is becoming prime for shorting, especially in the midst of all the G20 meetings. I may be shorting it as early as tomorrow depending on how the market reacts.

I have thus fulfilled my March goal thus far, which was to preserve my capital for a much bigger and better profit opportunity. At this point, we are much more closer. The shorts are cheaper, the sentiment has changed, and the deflation indicators are stronger. My Zecco.com account is ready and waiting to beef up on short. The time is very close. Just a note, those who were unable to subscribe to the premium podcasts, the problem has been fixed. You can now subscribe and become a premium subscriber by Clicking Here. Happy Trading and we'll see you tomorrow.

4 comments:

  1. Boogy Says:

    FF,
    Wow this bull has some legs. Nothing really fixed or solved in my opnion, but apparently the market thinks everything is fixed.
    What's your thoughts for when we should see a reversal ? 9k, 10k on the Dow or is it more bulls on CNBC, like Cramer, saying recession's over like today ?
    Appreciate your thoughts.

  2. Finance Fanatic Says:

    Boogy,
    I believe this rally is not done yet, and may hit near the mid 8000 range, especially with the help of Uncle Sam. But as I have stated before, I believe there is a rude awakening approaching.

  3. 5U Says:

    zero hedge great write up on KIM

    sooooooo criminal.....banks can break the law, as long as its endorsed by the Current Administration

    http://zerohedge.blogspot.com/2009/04/wall-street-back-to-its-criminal-ways.html

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