Overview: This week the U.S. President claimed he is not “concerned about a double dip recession.” Why should he be? HE has a great job, lives in a really neat house, our house, gets free medical care for himself and his family, and free travel on cool airplanes….. unlike millions of Americans in this country who are concerned about their mortgage and car payments, not to mention food and energy. It reminds me of another of my “famous” says, “He is blind who will not see and deaf who will not hear.” I wonder if he will “see” the results of the polls or next year’s votes or “hear” the chatter of the voters displeasure. As I have been bemoaning for the past year, we are mired in recession regardless of whether or not it meets the dictionary criteria of one. Each week over 400,000 Americans apply for first time unemployment, to the tune of nearly two million a month. The so called jobs creation of 100-200,000 or so claimed by the Administration does not quite measure up. Once the Administration figures out the reality of what the U.S. economic condition is, perhaps then some “attitude correction” will occur. Now for some actual information to hopefully guide my readers through the mire of news and data…….
Interest Rates: September Treasury bonds closed at 125-23, up 15/32nds as money once again moved from equities to the relative safety of Treasuries. Concerns over the global economic situation, the prospect of an increase in the debt ceiling making it easier for the U.S. administration to keep from defaulting on its already gigantic debt and continue its rampant spending. While we do not see an increase in rates coming out of the Federal Reserve, which would no doubt impact the debt servicing if it were to raise rates, we continue to favor the short side of Treasury bonds. There is no room for lowering rates and while “stimulus” programs could become inflationary, the Fed probably will not move. International and national economic reports are due this week and that could determine market direction across the board. Hold put positions or sell calls on any further rally in bonds.
Stock Indices: The Dow Jones industrials sold off sharply on Friday adding to the recent declines, closing at 11951.91, down another 172.45 points. For the week the Dow lost 1.6%. The S&P 500 closed at 1270.98, down 18.02 points and for the week lost 2.2%. The tech heavy Nasdaq closed at 2643.73, down 41.14 points and for the week posted a loss of 3.2%. We have been warning of a major selloff in equities for some time and cannot impress enough the need for holders of large equity portfolios to implement hedging strategies. We have been offering our assistance in setting up hedging programs with only nominal response. We urge investors to heed our warnings and now other analysts have joined in voicing their negativity towards the U.S. economy and current price levels. Disappointing news internationally also is a factor in the market declines. Import and export numbers were viewed as detrimental to economic growth. If at all possible, get out of riskier positions and move to cash until the “smoke clears.”
Currencies: The September U.S. dollar index closed at 7523, up 83.1 points with losses posted in most major currencies that are viewed as overbought and on concerns over Eurozone debt conditions. The Swiss Franc closed at 11883, up 2 ticks and remains our favorite in the group although we suggested taking profits on our previous long recommendations. The September Euro lost 155 points to close at 14312. The September British pound lost 125 points to 18219, the Japanese yen 4 points to 12454, the Canadian dollar 33 points to 10212, and the Aussie dollar 73 points to 10438. We continue to favor the sidelines for small investors.