I hope everyone had a relaxing long weekend. And I hope you had a chance to watch the Inauguration yesterday. There was an amazing amount of people here in D.C.
Of course, our offices were closed; folks could work from home or extend their weekend.
The news reported there were 1.4 million people on the Mall to watch Obama get sworn in. And there had to have been that many more in the city. It was nuts. We’re slowly returning to normal today.
Despite the painfully cold weather, the crowds were energized by Obama’s speech. I wish I could say the same for the stock markets. The Dow Industrials lost 330 points to close below 8,000 for the first time in two months. Seems like just Friday I was mulling the potential for the Dow to retest those November 20 lows…
*****Earnings season really heats up this week. So if the Dow does retest the November lows, the catalyst will be pretty obvious. Nobody expects 4th quarter 2008 earnings to be anything but bad. And I maintain that, with the Dow at 8,000 poor earnings are priced into stocks now. But to keep stock prices from heading lower, we’re going to need to hear companies say things aren’t getting worse.
Will that happen? I don’t know. But I suspect it will. After all, what do companies have to lose by demonstrating a little false bravado at this point? Most stock prices are in the tank, investors know the economy stinks – why not come out and be a little positive, re-affirm your previous estimates and say "We’re seeing signs that business may be picking up?" You can always lower those estimates later, and I doubt CFOs will burn much good will with the analyst community given the present circumstances.
*****First up on Obama’s docket is his $825 billion stimulus plan. It seems likely that tax breaks are coming, which may take the form of smaller Federal tax withholdings from people’s paychecks. This should get some more money flowing in the economy, but the underlying problems are more daunting.
In a nutshell, there is an inadequate capital base to support lending. So far TARP has tried to re-capitalize banks as a way to encourage lending. But that solution hasn’t much of an effect. Because there are still so many impaired assets on balance sheets, there’s no way for banks to feel their capital bases are sufficient. That means even formerly credit-worthy Americans can’t get loans. And with unemployment rising, the numbers of Americans who don’t qualify or simply know they can’t borrow are rising.
Ultimately, the savings rate in America has to rise. America has been living paycheck to paycheck for too long. Improving the capital base of banks is a start, but it’s the capital base of American citizens that has to rise. And you can’t do that with credit.
People need to be encouraged to spend less and save more. Granted, the current economic situation is helping with the spending less part. And that will probably lay the groundwork for increasing savings down the road. But it’s going to take a while.
*****I’ve been of the opinion that Treasury bills will take a beating in 2009. And if the Obama Administration seeks to incentivize saving with higher interest rates for savings, Treasury bills will suffer even more.
A downside play on Treasury bill is one of the key initial investments for my $100,000 Recovery Portfolio. If you’d like more information on how I’ll profit from a drop in T-bill prices, or you want to learn how I’ll turn my $100,000 into $250,000 by 2012, there are still a few seats left for tomorrow night’s $100,000 Recovery Portfolio video conference.
During this video conference, I’ll show you the investments I’ll enter to kick of my Recovery Portfolio. Plus, you’ll get the Special Report Ian Wyatt’s Market Outlook for 2009 and the Investments to Make Now, which will serves as my investment blueprint.
It’s completely free to attend. Here’s a LINK where you can register for this special investment event which airs tomorrow night, January 22, 2009 at 6 PM.