Well oil just keeps on falling. It closed today at $43.65, down almost 7% for the day and down a jaw-dropping 70% from its peak in July. Today's close marks a 4 year low. What happened to $200 oil that Goldman was predicting this summer? Merrill analysts today said that they are predicting oil at $25 next year. I remain a long term oil bull but am not making any plays until the market shows some signs of correction, beyond a week long bounce. When I say long term, I mean over the course of my working life. I am 22, so my investment horizon for oil plays is up to 35 years.

Moving on to the Big 3. Today they said they would be willing to accept strong government oversight in exchange for immediate aid (Chrysler and GM have said they need help soon, while Ford says they hope not to have to tap potential government credit lines, but would like to have them available just in case). They are looking for a total of $34B. I don't think they should get it, bankruptcy is a better option. My thinking is as follows: if the Big 3 enter Chapter 11 bankruptcy (something firms do regularly - think airlines), they will gain leverage in negotiations with both their creditors and the United Auto Workers (UAW). That is, they will be able to say to these parties "if you don't come to the bargaining table, we will go under and then we are all ******". They will be able to negotiate better terms on their outstanding debt, as well as cutting pay and benefits to UAW (which in my opinion are both excessive). Without entering bankruptcy, they will not have this advantage at the negotiating table and, while the UAW is granting some concessions, they are not nearly what they need to be for these firms to return to profitability.

The argument against bankruptcy is as follows: if the firms enter bankruptcy, customers will be unwilling to buy cars from these firms because they will be worried about the car companies' abilities to live up to their warranty obligations. This is where the government plays a role: they set up a fund to guarantee the warranties on these vehicles in the case of any of the Big 3 shutting down, much like the FDIC insures bank deposits.

I must confess, these opinions are not my own, I believe I read them on The Big Picture, but it may have been elsewhere. Regardless, now you've heard the much less publicized bankruptcy argument.

The market rallied again today. More choppy action, no surprises there. The question I am wanting answered is: when (if ever) is the precipitous fall in the price of oil going to stimulate the global economy?

So it seems I was right about a pull back this week. Man was yesterday harsh. After that I was not surprised at all by the rally we saw today. This range bound trading accompanied by high volatility is what I anticipate over the next 6 to 9 months. While we may set new lows over this period, I think it depends on how rough the recession gets over the coming quarters. I feel the market has priced in something pretty serious, but only time will tell whether the drop has been sufficiently large. As far as the recovery, I really can't see it happening until we get some good news (or no bad news for a while from financials). A string of earnings that surprise on the upside, or a series of better than expected economic data are the kind of catalysts I am looking for. Not sure exactly what is causing the unprecedented levels of volatility, but it seems to be here to stay as well.

Moving on, I saw an excellent video on YouTube last night. It is a speech Elizabeth Warren gave at Berkeley about the death of the American middle class. I found a lot of the information she presented somewhat surprising, but she has clearly done her homework, so I don't have any reason to doubt her. It is nearly an hour, but in my opinion time well spent (you can skip the first 6 minutes). There is also a story on Naked Capitalism quoting her talking about the lack of method surrounding application of TARP funds. She is the head of the TARP oversight committee and doesn't have good things to say about Paulson's methodologies.

Finally, another interesting piece on major university endowments selling private equity stakes at huge discounts. Apparently private equity has different accounting rules which has allowed them to not mark down the value of their holdings by as much as they should.

Okay so I made an early New Year's resolution to keep this thing updated. Let's see if we can make that happen.

There is an excellent video posted on The Big Picture of an interview with the Chairman of Blackstone Pete Peterson. It seems a little dated though, I must admit. Regardless, this is a sit down with a truly wise man He talks straight about the real problems America faces long term - ever mounting debt, social security and healthcare pledges etc. He also discusses what's wrong with the current American mindset and some possible causes. 15 minutes well spent.

Black Friday sales figures seem to be pretty good as well. Marketwatch reported that they are up 3% from last year (here), a figure which surprised me somewhat. Maybe consumers are feeling a little more confident now that Obama has been elected and oil continues to fall? I'm sure the sales were also enormous.

Also, another story I read that made me smile was that Trump Entertainment is to miss an interest payment. I have always hate a very strong hate for Mr. Trump and always felt that he was an incredibly self-important charlatan. Looks as if another Trump company is hitting the skids. I feel sorry for the employees if this firm folds, but I will not feel sorry for Mr. Trump.

It will be interesting to see what the coming week brings. A new month, maybe some cheer off the back of the Black Friday numbers? Hard to say though. Given the rally we saw last week I would have to put my money on a pullback to start it off.

Wow. It has been an awful long time since I have posted here. Let's see what do we need to catch up on? First off, both Lehman and WaMu went, as I said needed to happen, although not in the way I expected. Second, in the face of unprecedented market stress, Goldman and Morgan became bank holding companies - something I didn't foresee happening. Third, Wachovia was bought by Wells Fargo. The TARP didn't pass, then it did. The TARP's mandate was changed to buying stakes in banks with the first $150B or so (a move I fully support). We had the 17th worst month ever for the Dow and the 9th worst for the S&P. Within that month was the worst week ever, and the best week in 34 years for the Dow. The volatility index (VIX) was also at historic highs, reflecting panic in the markets. Oh and oil dropped from $110 to $64 at last check. Finally, we saw enormous coordinated moves by a number of Central Banks to address the freeze up in credit markets following the G7 meeting.

If you want some comedy amongst all this bad news, we also had some moron at seekingalpha.com blaming Cramer for that awful week. Don't even get me started on that tool.

What else? It's looking like Chrysler and GM are going to merge, eliminating thousands of jobs (the UAW is clearly unhappy and trying to block the deal). Wachovia also exposed a massive hole in its balance sheet that Wells Fargo needed it to write of before the merger was complete.

Okay, that wasn't in chronological order, but I think that about does it. Where are we now? Well the credit markets are starting to thaw, as evidenced by the steady falling of the TED Spread and LIBOR over the last few weeks. As this occurs, it seems that some confidence is returning to the market. By no means are things good, but it doesn't seem like the whole system is going to collapse - at least not immediately. Therefore, some investors are starting to pick up bargain stocks. There are so many good companies which have been thrown out with the bad. Some real fortunes can be made in the market right now for people who have strong stomachs and a long term outlook. I read one interview with an institutional investor who said he has never seen opportunities like those that prevail in the current market.

It seems that earnings are going to be bad for a couple quarters - especially in financials, but I feel that has already been priced in. I guess I am throwing my lot in with the others who say that buy the good companies now. Good companies include those that won't need to go to the credit markets anytime soon, are well diversified internationally, have a consistent long term track record, pay a safe dividend and ideally have relatively recession-proof products (consumer staples and pharmaceuticals to name a few).

I would stay away from credit card companies for sure though. I remember back in July I opened my Mastercard bill and read that my minimum payment was optional this month, and took that as an indication that they were trying to lowball writeoffs due to delinquint customers. Shorting Mastercard would have returned ~50% since then. It seems to me that the consumer credit bubble will be the next to burst. I also watched a really interesting movie called In Debt We Trust that reaffirmed my opinions. That means stay away from credit card companies and discretionary consumer products.

Finally, it looks like Obama will win tomorrow night (I was ambivalent until that hack Sarah Palin was nominated for Vice). It will be interesting what the market's reaction will be either way...

Today I received a message from my discount broker Tradefreedom Securities (owned by Scotia Bank) saying that they have removed trading on margin for Washington Mutual and reduced the margin from 70% to 50% for Lehman Brothers. It seems that they think they are going to go under and don't want to see anyone with long positions on margin do down with these firms. I can't fathom who would be long these companies on margin, but apparently someone, somewhere is.

In my opinion, Lehman and WaMu need to go before the market can stage a recovery. I am not sure why I think this (I usually want a more justifiable opinion), but I feel that the market needs to see at least one, if not both, of these firms to be bought out in order for people to feel good enough about the strength of financials for anyone to place a bid. I heard a rumour that Goldman bid for Lehman at $11.50 per share on Tuesday. I for one would feel a lot better if Goldman stepped in here. Perhaps they will wait for their traders to short the stock to $2 before launching a hostile takeover this weekend. All here say though, only time tell.

It also seems that Merrill is the target of vicious shorting. It is down as much as 18% today and has set a new 52 week low around $19 (previous $22). I have some put positions on this stock and noticed that volume exploded today on the $15 January put, which traded 17,000 contracts today. Almost 15,000 of this volume came from two purchases, where the ask price of $3.00-$3.05 was paid. This tells me that someone is willing to bet big money that Merrill's stock price has a long way to go down before it recovers. Good news for me :)

Also, Petrobas (PBR) released details of another big oil field off the coast of Brazil. With the price of oil plummeting, PBR is on sale and I plan to buy for the long term as soon as oil starts to show sings of recovery. This is also bullish for Transocean (RIG) who supplies Petrobas with the deep water, harsh drilling environment rigs that Petrobas needs to extract this oil. The supply for such rigs is far outstripping demand (including future production), which will allow Transocean to raise rates. Both are long term buys for me.

Oil has been making a lot of headlines lately. It's precipitous fall from $147 to $108 has been tagged as a big reason for the rally we have seen from lows in the Dow of under 11,000 (although lately the market has been trading in a bounded range). It should be noted that the decline has been slowing of late (except a big drop after Hurricane Gustav failed to inflict heavy damage on oil infrastructure). I posted earlier that I didn't expect oil to drop far below $110, and am pretty much sticking to that thesis, although will concede that it will probably drop to the $100 per barrel range. It was clear to me that oil's astronomical rise in the first half of this year was unsustainable and was simple speculation (bearish news for oil elicited bullish reactions, an indication to me of price manipulation). Regardless, I do feel that despite any demand destruction we may have seen in the Western countries, the developing countries will continue to increase demand, resulting in consistently higher prices for the next period of years.

I feel that this drop in prices is an excellent opportunity to buy oil companies. My personal favorites are Transocean (RIG) and Petrobrasilias (PBR), with PBR being my number one long term pick right now. They are sitting on an estimated 50B barrels, but it is in deep water, so you need to believe that future prices will be high in order for their stock to really move.

Let's see, where do we start? The Fed didn't cut rates. No surprise there. They are handcuffed between spiraling inflation (headline inflation is at a 27 year high and core inflation is well outside of their 2% upside target), and a very weak economic outlook. Unemployment is approaching 6% and the housing market shows no sign of an upturn. If anything, I could see them cutting if the outlook gets much worse. It is worth pointing out that according to academic economics (which most of the Fed governors are devout followers of), inflation which is derived from rising commodity prices is outside of the control of monetary policy and should be treated as a one-time shock. This means that (according to academia) they should not adjust monetary policy to address the inflation the U.S. is experiencing. While I am not here to argue whether or not academia is correct in this thinking, it is an interesting thought to consider. I don't really see any action any time soon, because I feel the Fed wants to keep some "dry powder" if things really start weakening. I forecast 2% being the Fed Funds target rate into 2009. It should be pointed out that the Fed Fund futures do not agree with my analysis, as they are anticipating a probable hike in one of the next two months.

Freddie Mac and AIG brought more bad news to the financial sector this week, posting losses well in excess of forecasts, with FRE losing over $800M and AIG losing in the range of $5.4B. I was in no way surprised by FRE's results, actually part of me was surprised they weren't worse, but I must admit I didn't see AIG coming. They had unrealized losses of $5.57B on their "super senior credit default swap portfolio". I don't like this at all. First off, what is an insurance company doing in the credit default swap market? Second, why were they on the wrong side? I must admit, long term, they will probably be able to write this portfolio back up once the value of the swaps decline, but they may have to take another big writedown next quarter. Makes me wonder how the are going to be able to meet obligations from any big disaster in the short term...

I think I see some pessimism creeping back into financials. But I am bearish, so perhaps I am just seeing want I want to see here. But I can't see the price of oil falling much below $115, so I see the crude-driven rally fading here.

The inevitable appears to be happening. Today financial stocks led the broader market down. It was not as ugly as it could have been thanks to a large sell-off in oil which sparked a hundred point rally in the Dow. Regardless, the Dow ended down 42 points, while the S&P 500 and the Nasdaq were both down around 1%. There were two notable occurrences in the market today. First, as mentioned above, the financial stocks led the market down. This has not happened since the huge rally in mid-July began. Also, sliding oil prices could not lift the indexes out of the red. Over the last month or so, any day oil slid, the market popped. Today oil was down 3% and the market could not muster a rally. This does not bode well for the immediate future of the market. There are too many drags for it to go anywhere but down for a while (consider headline inflation, housing prices, unemployment, looming writedowns at the banks, credit card companies looking shaky...).

It will be interesting to see what the Fed has to say tomorrow, as well as Freddie Mac's earnings, which are sure not to be good. I, along with pretty much everyone else don't think the Fed is going to cut or raise rates, but every word of their release will be scoured for a hint of what is to come. I don't want to make a call for tomorrow because the market's reactions on rate decisions days never really make sense to me, but if I was a betting man I would place my chips on red...

Well he did it. Cramer called a market bottom today. He cited good earnings across the board (apart from financials). I mentioned recently that excluding energy and financial companies, earnings were up 2% since last quarter. While I think it is possible that we have touched bottom, I don't agree with the timing of Cramer's call. Here is why:

Although he didn't say it, I think Cramer may have been influenced by the ADP jobs figure, which came out today and indicated that private sector jobs grew by 9,000 over the last week. This survey is notoriously inaccurate and there will be a more precise figure released by the government Friday. I feel that Cramer may have got so caught up with the idea of calling a bottom he may have forgotten about the traditional inaccuracy of the ADP figure. If I were Cramer I would have at least waited for GDP data to come out tomorrow. If those figures meet or beat expectations, then he could feel a lot more comfortable with his call. Waiting for better jobs figures on Friday would be even more prudent.

I am not saying that Cramer is wrong. If GDP figures beat expectations tomorrow, I think there is a distinct possibility that we have seen the bottom. If not, I think we will be seeing new lows before the real recovery begins.

Well I guess I was a little timid in my analysis this morning. Today the market was killed. The Dow, S&P and Nasdaq ended down 240, 23 and 46 points down, all around 2% on the day. As I expected, financials and airlines were hit, with the ^XAL declining 6.21% and the ^XLF dropping around 4% (although a lot worse than I anticipated). It is looking more and more like last weeks rally was a sucker's rally and we are going to be moving to new lows over the coming weeks. The VIX is also on the rise again, after bottoming last Wednesday. A few notable pieces of news today: Merrill Lynch announced plans to raise another $8.5B in stock, oil inched about 1% higher and the White House unveiled a record projected deficit of $482B. That represents a decline from a surplus of $128B in Bush's first year in office. That works out to the the surplus decreasing/the deficit increasing by just over $76B per year of Bush being in office. Wow. As if the United States isn't suffering from excess debt already.

Despite the awful day in the markets, I saw an interesting piece of analysis on the Business News Network which said that this earnings season, when financial stocks (which suffered heavily declining earnings) and energy stocks (which enjoyed large rises in earnings) are removed from the calculation, corporations reported a 3% increase in earnings over the last quarter. To me, that is very bullish and tells me that there is light at the end of the tunnel. Don't get me wrong, I am not saying that this piece is going to turn the market around, but I do feel that when the financials find a bottom, the market will find a bottom and a powerful rally will follow. That has been said numerous times by others, but I am now seeing concrete evidence.

Looking forward into this week I cannot say I have have a very good feel for what it will bring. Futures are indicating the market will open modestly lower this morning, dragged by financials. I will say that I see financials modestly lower by the end of the week and airlines considerably lower. That is barring surprise jobs, housing, or GDP numbers (due out on Friday, Tuesday and Thursday respectively). I feel that there are bulls waiting to seize any piece of good news and turn it into huge market gains this week.

The GDP is expected to come in at an annualized 2.1%, a number I find surprisingly high given all the doom and gloom talk by CNBC pundits about the pending "deep recession". I have made a point of not listening to these people and personally don't feel that the economy will even suffer a textbook recession - defined as two straight quarters of negative GDP growth - but do feel that this 2% growth here is optimistic. Any surprise here (especially to the upside) will have a big effect on the market.

The Case-Shiller index is out on Tuesday where economists are expecting it to show a 16-17% decline in housing prices since last July. Again an upside surprise here would be huge in my opinion, especially for the homebuilders. A surprise here though would not have an effect of the same magnitude of a surprise in GDP numbers.

Jobs I feel are the least important economic data to be released this week. Economists are looking for a drop of 70,000 in July non-farm payrolls. Unless there is a BIG surprise here I don't really feel that these numbers will have much of an impact.

All told, I feel that this market will move sideways, possibly with a small downtrend, barring any major surprises in the economic data. If I were to bet which, of any, of these numbers were to surprise, I would have to say the GDP figure is looking a little high, even for me.

Well today the market lost big. The Dow was down 286 points, the Nasdaq was down 46 and the S&P 500 ended down 3o points. In my opinion it was long overdue. As I predicted this morning, financials and airlines got it really bad. Big financial names were down as much as 15% on news that institutional depositors had withdrawn almost all of their deposits from WaMu. I read today that there were only $100M of such deposits left, down from $2.5B last quarter and $11B a year ago. Additionally, credit default swaps have priced in a 24% chance of default at WaMu this year and 50% over the next five years. This is certainly not good news. It appears my idea to short WaMu into earnings would have been a profitable trade, but I did not have the nerve due to the hot money pouring into financials at the time. Wow do things change fast. It looks like select financials may be testing their lows of last week during trading next week. Add the $2B loss at National City to round out financial earnings and the euphoria surrounding financials seems like ages ago. I foresee a long, slow downtrend in the financials until the next crop of good news.

Other points for the financials I found funny: the new CEO of Wachovia bought 1 million shares at an average price of $16.24 Tuesday. Unless he dumped them in a hurry, you would think he could have timed the market a little better. Also, the shorts that fled financials after the new SEC rule proposals have returned en masse, with net short positions increasing 10% or more at Wachovia, WaMu, and Banc of America. There was a similar trend in the automakers after Ford and Diamler's big losses. I read a JPMorgan report today that said that at the end Q2, financials were the second most heavily shorted industry in the history of Wall Street records. The first? Automakers. Such high levels of pessimism do not inspire faith in the markets moving forward...

It seems that this rally may be ending. After only posting marginal gains the last two days, futures are indicating that stocks are set to lose on the back of a $9.6B loss at Ford. Weekly unemployment and housing figures are also expected to be released today. It is really hard to say with any conviction which way the market is going to go before seeing these figures, but I am certainly bearish overall. Airlines as well as financials have seen unbelievable runs over the last few days and are due for a pull back. Automakers I also see falling (as they have been) further. A $9B quarterly loss at Ford? To me that means that it is pretty much all over for them. We also haven`t seen any bullish analyst calls on financials, which we witnessed yesterday. Mike Mayo called for Wachovia at $30 in the long term and Dick Bove made a bullish call for Wachovia at $17.

Well Wachovia was trading at $18.40 at the time of writing, above Dick Bove`s call, a bearish signal. Also, the rally in financials I believe will look like the rallies in financials that we saw from February to May (big run up over a few days, then a tapering off for a week or two, followed by another big fast run up on good news which brings them higher than at the end of the preceding run up). I believe that if we see a sustained up trend in financials that is what it will look like.

May I add that although oil has dropped $20 to $124 over the last 5 or so trading sessions, lubricating the rise in equities, I feel that the oil will hit resistance at $120 and will start to rise or stagnate around that level. This will stop the rally in airlines and give take some optimism from the market. Now we wait and see what happens.