Where is the Rally?
Research for Online Investors

by John Dalt

2/26/09

Why do we all like to join in on a party? First thing in the morning, I have coffee and CNBC then FOX. This sets the tone for the day. I woke this morning to news that the European markets are up, and I felt invigorated, ready to take on the world. The commentators were excited. Premarkets looked strong. One of my rules is to never buy in the first hour. The first hour is for selling, it seems like markets always settle down after the first hours orders are digested. The Dow ran up over a hundred, and then, gradually settled back like a fat lady in a hammock. Lazily rocking back and forth, settling in, until it was back at even. The drama was done, the story had been written, we wait on a catalyst to drive us higher, or spook us into selling.

Crude Oil had a good day; the United Arab Emeritus announced another million-barrel cut in April.  I wanted to jump on the merry go round, but this is probably one to be thrown off and get your teeth knocked out.  The overhang in storage is still there and huge.  The world is using seven million barrels less per day than last year, ships are being used for storage, and Cushing is full.  I do not know where it all goes when the contracts go to delivery.  I have to admit, I made a little on it, I bought USO on 2/13 before the three-day weekend.  It was a play on the unexpected, but nothing happened so it did not work, I could not get out on Tuesday.  I sold it yesterday for a small profit.  I just felt, and still do, that low oil prices are fermenting trouble in many dangerous places that could really throw a wrench in the oil supply. 

Financials are higher today with traders assuming all will be ok with the new plan. There are rumors the Fed is ready to take a larger stake in Citi for more TARP funds. Everyone except Chris Dodd has disowned the idea of ‘nationalizing banks’ so financials are leading the market. When the market was up one percent, the financial ETF (XLF) was up four percent. When the Dow was even, XLF was still up three percent. Banks have been beaten down because of self-inflicted bad balance sheets, and government missteps.

The president’s budget caused a stir in the markets. Sallie Mae (SLM) the student loan provider lost 30%.  The budget calls to end subsidies for student loans, so all student loans will now be made through the Dept. of Education. SLM can bid on servicing the loans, but they are out of the business of making loans.  I wonder, how many happy democrats work there?  Drug makers sold off with plans to let U.S. citizens buy drugs from overseas, and a proposal to shorten the patent life on drugs that would close their window to recover costs and make a profit.  I wonder, how many democrats work there?

Christina Romer, OH! Bama’s designated hitter for the economic council appeared on CNBC this afternoon. What a happy face! She was giddy to tell us how the White House was going to spend more money to reorganize our economy. Wow, who could imagine spending money on renewable energy, raising taxes on carbon based energy, and taxing the highest income producers could be considered stimulating to the economy? I will have to ask my daughter tonight, maybe she can explain it to me! The idea of raising the cost of energy with carbon taxes so solar, wind and other renewables are able to compete is so counterproductive. When you are paying more for electricity, and any other form of energy, remember ‘it is not a tax’.  I wonder, how many democrats buy energy? 

There is a good article in the Wall Street Journal today.  Daniel Henninger analyses the goals and direction the new president wants to take the country.  You can read it here.

I ordered some books this morning.  Look for quotes out of them in the future.  I can hardly wait to get into a little history.  “America’s Great Depression by Murray Rothbard” looks to be illuminating.   A little teaser from the acknowledgements “The Great Depression was a failure not of capitalism but of the hyperactive state.” 

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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