Crash Market Stocks - Financial Tips On Making Money In The Stock Market

The government is beginning to take steps to slow spending, showing consumers that they do not plan nor want to be in the business of bailouts for much longer. I think most would agree that the continuation of government bailouts to businesses, will eventually lead us into a massive whole of debt and even more risks of inflation. The big question is will the government really have the courage to let go and allow the economy to walk on its own feet. My worry is that, lately, we have depended so greatly on government stimulus that if they were to cut off all bailouts, it would send us into another down spiral. Just as we saw with Cash for Clunkers, consumers have become very comfortable with subsidized purchases and as soon as they are gone, the consumers are also gone.

Financing terms for Fannie and Freddie debt were tightened this past week, showing that maybe some underwriting standards may start to get more conservative. The institutions are increasing the amount required for a down payment, as well as raising the minimum credit score for eligible borrowers. The changes were not too earth shattering, but show that steps are being made.

Secretary Geithner also announced that the $700 billion bailout fund will soon be not needed. The government plans to cut off the fund as soon as they can and are hoping that the economy will be able to move on without it. Unfortunately, I believe the only thing consumers have learned this past year is that, "when times get rough, don't worry, Uncle Sam will fix them." Who will step in to help grow the economy when the government leaves? I, personally, do not believe the government will be able to do all they plan to. For instance, putting stops to home buying incentives and loan purchasing would open up the doors to yet another housing crash. As such, we would see that trickle back into consumer spending, once again bringing down the entire economy.

For the time being deflation is being covered up by continual government spending, but trust me, it still exists. All economic signs are pointing to the existence of massive deflation, and as soon as this kicks in, I expect to see a lot of selling pressure in the markets. Oil and gold continue to see success, but I still believe their highs are coming down very soon. Gold will once again be a superstar in 2012-2013, but for now, I believe it has some retracing to do. I also see the dollar bouncing back as investors come back to safer investments. There are a lot of changes are economy currently faces, and I expect to see some major changes coming in the beginning of 2010. Happy Trading.

I thought since Wall Street is so tagged on these bailouts, I would give a quick update on the status of the Auto Bailout. Well, it is looking that the auto bailout is inevitable and should probably be reaching an agreement this week. Horrific unemployment numbers announced Friday seemed to help disagreeing lawmakers come together to find a way to put money in the auto maker's pockets. After looking at the numbers, the consequence of not passing the bill would force bankruptcy, which then could lead to the loss of up to 500,000 jobs just for November (3 million jobs in the long run). This would cause utter disaster in the market.

The terms of the bailout will most likely be a $15-$17 million bridge loan until March to help get their business back on track. This bridge loan sounds like exactly what it's called. A bridge to survival until Obama is in office and a much more lofty bailout can be drawn up, most likely costing over $100 billion.

GM said they need $4 billion by the end of the year to avoid bankruptcy. Chrysler needs 7$ billion. Ford, being in better financial condition, needs only $9 billion as a line of credit for their "emergency fund." So congress has officially opened the bailout door to industries who are struggling. I see the absolute necessity to bail out the banks, having access to capital lending which I believe is the most critical part of our economy. However, by opening the door to an outside sector, gives all sectors reason to come knocking for our taxpaying dollars. Who's next? Airlines? Farmers? Miners? It's not that I don't feel remorse for some of the failures of our sectors, I just feel we can't keep bailing out anyone who is feeling financial pressures, because during this recession, there will be several. Plus, bankruptcy can be a good thing for some of these businesses. It allows them to restructure their liabilities, free them from debt, and start over. It has been very successful for Delta and other companies.

At any case, they are predicting the bailout to be approved this week. One of the big factors that helped settle the loan problem, was to decide where it would come from. It was agreed to take the money out of the energy fund, as an incentive to make more fuel efficient cars. So I would expect a pretty strong rally the day it passes, even though this has been expected for quite some time. Anytime bailouts have been approved, it has boosted the market for a day or two. However, I still don't feel this is the answer for them. Unless we keep paying their bills for the next 2-5 years, their liabilities will far surpass their revenues.

So congratulations, you all have officially invested into the auto industry. I was hoping maybe we could all be sent a new Taurus or F350 for our generous donation. In any case, this week should be an interesting one. Have a good evening and we will see you tomorrow.

I thought it was going to happen. Today, during what I like to now call "The Countdown" (last five minutes before close), the Dow was dangerously flirting with the 7500 line, which many believe is another threshold. We saw it get to 7506 and then quickly retreat, settling at 7552 at the close. If you were to turn your computer off at 9:30 (PST) and came back to check it after the close, you would not have believed it. Today, we had almost a 700 point swing, with an ending volume of about 528M (Avg being about 333M). So we are continuing to see an increase in volatility and an increase in volume, which mixture can ultimately be poison for the market.

Earlier, it looked as though we were going to rally. But at about 11, it all began to crumble. Then it really kicked into gear the last 30 minutes before close. Even though we look at awe at the close, is it really all that surprising? In fact, even in my post from last Friday, I talked about the very good possibility of reaching 6500-7500 range by tomorrow. Everywhere we look, even globally, there is no good news. The jobless count continues to go up, and financial markets continue to go away. The government is like two rival gangs trying to get along, and our retailers have no access to money to buy new inventory, even though the consumer probably wouldn't be buying it. The bad thing about it all is that I believe we, as the consumer, haven't even felt the effects of this crisis all that much. 2009 will be a tough year for most Americans and many other countries.

Well, not to be a Debbie downer, as I am sure many of you, like me, had a pretty successful day today. Sure, my options took a bath. Oil has just been crushed. Once it got under $50 a barrel, it was a free fall. I think oil will continue to struggle for the next bit, but I am still confident I should get a healthy bounce back up before my options expire. Apple and UYG was down with everything else. GDX remained down, but held well against the turmoil. In fact it was up close to 6% earlier in the day. Gold is just waiting to take off, it just needs some support from the rest of the market. This is why I play the options on the long side. As much as all of them got killed today, my losses were pretty minimal.

In the midst of all my down long options, I still came up very strong, because the bulk of my positions are in FXP, SRS, and EEV. I finally shaved a majority of my SRS, I mean how greedy can I get with that stock? We saw it get to $269. What can I say, Rock Star. FXP continued to rise, pushing its way towards $100. FXP was held back slightly today with rumors of China investing in their own agriculture market (only being up 8%, boo hoo, right?). These are all head fakes. FXP should be over $100 in no time. EEV was up a strong 13.5%, which gave me some good profits today.

Tomorrow will be interesting. After the close today, Dell beat market expectations with their earnings, which shot their stock up over 5% in after hour trading. Apple and Google are also getting some love in after hours. News like this could be just enough to propel a nice bear market rally tomorrow, especially for tech. However, we shouldn't underestimate the devastation of what happened during today's trading and also the downward pressure from options expiring tomorrow. All the news will be talking about tonight will be the Dow Disaster. This should bring down consumer confidence, especially in the stock market. However, my gut tells me we will probably rally tomorrow and it could be strong. We may see a new resistance at around 7500, temporarily, unless that is beaten tomorrow. In that case, we could see ourselves heading to 7000 real quickly.

Days like today are why I like to wait until right before close to make my move. The market's momentum was totally different earlier in the day, and could have fooled people into thinking that we were going to end in a strong green. Heck, I was fooled. But with our recent volatility levels, I can't pull myself to make any trades before 12:45pm (PST), unless it's at the open (which I don't do much). As much as I wanted to pick up some more long options before close, I couldn't bring myself to go anymore long than I am already. I may regret it tomorrow, but I will still make profits elsewhere. Playing the options on the long side has really paid off for me. I do not feel nearly as much pain on days like today.

These next few days and weeks could be real defining moments for the market. Days like today may send a wake up call to Washington to put their differences aside and grind down and find some temporary relief. Whatever the case, it will probably not last. There are too many pieces of the puzzle missing, and too many cooks in the kitchen to fix the mess we're in. Take some Advil when you wake up, because it could be another doozy of a day. Expect to see similar volatility and volume that we have seen the last few days. Happy Trading everyone and I will see you tomorrow.