Markets Shake Off Another Dismal Employment Report and Open Slightly Higher
December 24, 2008 – The markets are moving modestly higher this morning despite the fact that new jobless claims came in higher than expected to 586,000, hitting a 26-year high. Expectations were for 560,000. Meanwhile, and predictably, consumer spending slipped again in November, falling 0.6%. And after the final GDP number for Q3 came in yesterday down 0.5%, the focus this morning on what will likely be a really ugly number in Q4, in the neighborhood of a 4.5% decline.
Against all of the bad news, however, stocks are still managing to uptick, which could be an indication that traders are looking ahead, having priced in all of this bad news all ready. Let’s just hope the economy doesn’t give the Street any reasons to adjust further downward.
The dollar is slightly weaker against the euro, which is trading at 1.3997 while it is softening further against the yen. And oil prices are down $1.53 this morning to $37.45. Weekly oil supplies data will be released this morning, and traders are clearly expecting inventories to have increased further. We remain puzzled that OPEC hasn’t come in and slashed production again as a reaction to traders which continue to cut their expectations for demand. Gold prices are up $0.0 to $838.
In international markets, Japan’s Cabinet approved an 88.5 trillion yen ($990.9 billion) budget for 2009 to help stimulate its economy. Russia is expected to run its first deficit in a decade next year, at about 5% of GDP. Falling oil prices are a primary culprit here.
On the corporate front,
· Toyota (NYSE:TM) is posting the worse monthly sales in eight years, down 21.8% in November, while Nissan (Nasdaq:NSANY) said sales were down 19.8%.
In terms of what we expect in today’s session, we think volume will be light, trading will be choppy and stocks will have a tough time picking a direction to move. Traders are, if they have not already, exiting for the holiday. The DJIA dipped below 8,500 yesterday, which is our cutoff level for accumulating, but we wouldn’t be buyers today. There isn’t enough activity out there to get a strong enough sense for the direction of the markets.
Wit, Wisdom, Fools and Folly
Jim Rogers, this morning on Bloomberg said that this is going to be the worst U.S. economy since World War II, and it could well be as bad as the depression era – depending on the decision making of Washington, who Rogers says is making a lot of mistakes. He said he is prepared for the worst. In terms of what he is seeing from policy making, he said “it is unfathomable what they are doing”. Taxing capital and protectionism, Rogers said, would be catastrophic. If American continues to make mistakes, like the UK fell as an economic world power from 1918 to 1930, the same will happen in the U.S., he said. Propping up everyone and printing all of this money will lead to greater problems. He thinks China will be the great country of the 21st century, having moved his family to Asia (Singapore) as well.
He also likes commodities, which he thinks will be short in supply for the next decade or so. Commodities are the only investment group whose fundamentals are unimpaired. The IEA said the world’s supplies of oil are declining at a rate of 7% per year. In terms of gold and silver, should we buy now? He said he owns gold, if it goes down he will buy some more and if it goes up he will buy some more. About platinum, he said it is more industrial and tied to the auto industry. When and if it is time to buy autos again, platinum will be “a spectacular play.”
The complete interview can be found on Bloomberg, and it is worth a listen. Rogers, in our opinion, is one of the smartest people on Wall Street and should be paid attention to. His commentary on the decisions being made in Washington and how they may make things much worse is truly disturbing, and we hope that the Obama team will invite him into the discussion.
