Peter Schiff Compares U.S Economic Crisis to Collapse of U.S.S.R.

Wow, take a look at this interview with Peter Schiff of Euro Pacific Capital via RussiaToday. Peter Schiff is at it again predicting more doom and gloom for the U.S economy. He's talking his own book but he also predicted this crisis in 2006. He thinks Obama will make things worse. I say the Schiff trend is your friend until it breaks.

Roubini Sees 20% Downside in S&P, Government Bond Safe Haven and Stimulus Consequences (Business Week Interview)

Columbia's Amar Bhidé and NYU's Nouriel Roubini
BUSINESS WEEK, 1/7/09, Maria Bartiromo

In this interview Roubini believes the Dow and S&P will be 20% lower from here, job losses will total 2.5 million in 2009, Government bonds will be a safe haven until mid year and there will be consequences to our trillion-dollar budget deficits.

Kind of depressing. Also watch the S&P for a confirmed break of the 50 day moving avg on volume spikes. The Dow broke it on Friday. It could be time to put on some protected shorts in size if Roubini's right.

@dvolatility

S&P Setting Up for Jobs Report, VIX Broke Out Recently.

The S&P chart looks to be setting up for the jobs report. It is forming a triangle of confusion and the ultimate trend decision will be made toward the point. Traders are anticipating the jobs report along with ugly 4th quarter earnings. The S&P is also sitting right on the 50 day moving average and a break below that could bring a herd of sellers. Also the VIX broke out of a monthly downtrend recently with traders probably positioning for continued market anxiety. A Marketwatch survey of economists predict 500,000 jobs will be lost in December. The reaction will depend on the psychology threshold of market participants. If the number comes in better than expected the market could rally but if it's worse than expected the S&P could break the 50 day and go into free fall.

The recent bids in the VIX were probably anticipating this event. Traders could've been scooping up volatility on the cheap to set up straddles or strangles to play a move in either direction. Try Option Monster, Daily Options Report or VIX and More for more info on S&P options (VIX). These next couple of months at the CBOE could get very interesting.


SPY (S&P ETF)

VIX (Volatility Index)


Short Treasuries? (TBT) China Might Lose Appetite for US Debt. But Will U.S Print and Fund Its Own Debt?

I keep reading articles saying now is the time to short treasuries. In fact it was the cover story of Barron's this week. There's also news that China could lose it's appetite for U.S debt to fund its own problems. Now might be a great time for China to unwind into treasury strength since the U.S Dollar is right at late 2004-05 levels and 30 year treasury prices are at 132'25, up 18% from 112'00 in '05. This is only if China loaded up on Treasuries in 2004-'05 when Greenspan didn't understand why the yield curve was flat when inflation was a concern. Not sure if the unwind would work smoothly right now but look at the chart below. Also look at the chart of the UltraShort 20+ Treasuries ETF. IF it breaks above 44.12 on strong volume it could reach a $50 handle. If not a retest is in the works.

US Dollar:30 Yr Treasuries (futuresource.com)
TBT (UltraShort 20+ Treasury ETF)

Here are bits from articles I've read recently. They are from respected sources and the whole general idea makes sense. But the Fed is talking about buying long term treasuries to keep borrowing costs low which could 'artificially' mediate the effect. We'll see. I also provided an article from FT Alphaville re: Goldman Sachs not believing the bubble hype, for now at least.

Financial crisis is causing suicides

Is this the modern day equivalent to people jumping out of windows during the 1929 stock market crash?

German Billionaire Commits Suicide


Trader takes own life over large losses
http://www.chicagobusiness.com/cgi-bin/news.pl?id=31449&seenIt=1

Mortgages Ltd. chairman's death ruled a suicide
http://www.azcentral.com/arizonarepublic/business/articles/2008/07/24/20080724biz-colesdeath0724.html

Suicide Madoff investor was 'honorable man'
http://www.msnbc.msn.com/id/28368421/

Billionaire Merckle commits suicide
http://www.ft.com/cms/s/0/f9557fac-dc05-11dd-b07e-000077b07658.html

Real-Estate Executive Found Dead in Apparent Suicide
http://online.wsj.com/article/SB123127267562558295.html?mod=special_page_campaign2008_mostpop

Private equity boss kills himself
http://www.guardian.co.uk/business/2008/sep/28/privateequity1

Obama on 'Check, Please' in 2001 Reviewing Restaurants in Chicago

I thought I'd post this up in honor of Obama's inauguration. By the way your new President likes the Southern Sampler and Peach Cobbler at Chicago's Dixie Kitchen.
"In this 2001 "lost episode" of Check, Please!, then state senator Barack Obama reviewed Dixie Kitchen and Bait Shop in the Hyde Park neighborhood of Chicago. The full episode will air on January 16th at 8:00PM on WTTW." checkpleasetv.com

Obama Stimulus, Ivy Zelman on Housing, and Alcoa Cutting 13,500 Jobs

Traders are anticipating major moves by the Obama administration once he takes office on January 20. Obama believes the economic stimulus package will be approved within 2 weeks of his inauguration. A horrible jobs report is expected on Friday so we'll see if Obama trumps the recession trade (or if job losses come in less than expected).



Obama Urges Swift Action on Economy - VOAnews



In other news Alcoa is about to cut 13,500 jobs. Not sure how the economy can recover if companies continue to delever their labor force expense which ultimately puts a squeeze on personal income statements and forces the consumer to delever. And once they stop spending it causes a domino effect of job cuts. Hurry up Obama!
"Alcoa, the largest U.S. aluminum maker, said Tuesday that it would cut 13,500 jobs, or about 13 percent of its global work force, and reduce spending and output because of the economic downturn. The company, based in Pittsburgh, said that in addition to the job cuts, 1,700 contractors also would be eliminated and that it was implementing a global salary and hiring freeze." International Herald Tribune
On the housing front, star homebuilding analyst Ivy Zelman said on CNBC this morning to sell this homebuilding rally. She thinks job losses will not allow the market to deal with the oversupply of distressed inventory fast enough and that homebuilders are rallying strictly on Obama stimulus anticipation. She's bearish because delinquencies continue to rise and a "tsunami" of foreclosures are expected to show up on the market during the next several years. She thinks loan modifications will fall short and mortgage nationalization would be the only cure because there's too much negative housing equity on the market. The video below takes you to CNBC.com.


Ivy Zelman (Housing Analyst) on CNBC


Has the market already priced in this madness? Can Obama create enough jobs to soak up all of this housing inventory? Place your bets.

Watching Copper Futures...

It looks like the recent disconnect between base metals:precious metals is starting to close. Copper Futures are up 3.6% to 151.15 tonight. Gold futures have tanked recently due to a recent USD rally. Let's see if $copper can recover from here or at least successfully retest the 5 year base. There's still an issue with global demand.


Comex Copper Futures Recover To End Near Steady 1/5/08

"The base metals made an uncertain start to the year, and in the absence of any clear direction were again caught currency watching," Westgate said. "The metals all recovered from their intraday lows, however, with a combination of short-covering activity and fresh buying interest coming into play."

"Copper came under pressure "in light of a stronger dollar today brought about by talk of aggressive stimulus plans being contemplated by the Obama administration," MF global analyst Edward Meir said in a research note."