State of the Union Doesn't Sit Well in Wall Street

president obama speechLast night, President Obama addressed the world with the traditional, annual State of the Union address. Every year, all legislative and supreme branches meet together to listen to The President speak about the current "state of the union." Usually, the speech discusses trials that the country has faced the prior year and ways those problems were overcome. Also, plans for the future are discussed and if the watching politicians agree, statements are met with a cheering applaud or even a standing ovation. Considering the democrats and republicans are split in the room, it usually involves half of the room cheering while the other half grunts and moans.

A big portion of President Obama's speech last night focused on the current state of the economy. What really intrigued me, was the amount of contradiction I found between what he was saying to what he is currently doing. He talked of injecting money and tax incentives into small businesses (which by the way is what I have been saying the past year!), however, small businesses are getting killed with increased taxes, higher energy costs, and more stringent government restrictions. He also discussed eliminating capital gains tax for investment in small businesses, however, the recent changes that have been made have been the exact opposite to that. Are these really his plans or was he just trying to get a louder cheer?

Later on in his address, which is what Wall Street took the most offense to, President Obama discusses the banks. He tried to clarify that it was not his intention to declare "war on the banks," but clearly he plans on fighting them. He said if they can afford big bonuses, they can afford higher taxes to payback the taxpayers that loaned them money during the crisis (which we had no say in!). He also alluded to the fact of much tighter regulation of the banks as well as transparency, which are two "no no's" to be saying around big banks. Today's response from the markets, in which the Dow closed over 100 points, shows that Wall Street did not appreciate the remarks.

Microsoft beat earnings expectations today, however, guidance for the next quarter was much lower than analyst were hoping for. This is a trend we are starting to see from most businesses. Companies are proceeding with much caution into 2010, knowing that struggles and pains of our dragging economy are far from over. In fact, we may be seeing the last of a 10,000+ DOW by the end of the week, as dismal data is picking up.

Fed Chairman, Ben Bernanke, was extended another term, which gave Wall Street another reason to cry. In the past, Big Ben has not been the most compatible chairman with Wall Street and has created some problems recently. In addition to that, jobless claims continue to surprise analysts, as more and more jobs are still being loss.

Support levels for the market are crumbling beneath us. We have seen a spike in the VIX since mid January and it seems as if we are beginning the next leg down. Puts on GDX and DIG are appealing to my portfolio, as well as going long on FAZ and EEV. Emerging markets are experiencing even more pain as President Obama made it very clear, he wants things to stay "domestic" going into 2010. I will also discuss some other "Pro-Bama" stocks that should benefit from his next 3 years (possibly more) in office. Happy Trading.

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    I guess bill gates has been out done by google and the late steve jobs.

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