Friday Outlook: Commodities, Emerging Markets

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Tomorrow completes quad-witching. Once that’s out of the way volume should slow down as we enter the holiday period marked by two shortened trading weeks. I’d also suggest, as have others, that investors [and even window-dressers] are exhausted and in much need of rest.

Markets seem like such a guessing game right now. RIMM reported a better than expected outlook and the shares climbed 5% in after hours trading. With bulls seeking any good news, maybe that will rally markets tomorrow… um, I guess. I continue to believe, as previously, that stocks can’t go much higher until the bond bubble breaks, freeing up cash. It’s amazing to see 10 year yields at barely over 2%. Only some really frightened investors or restricted fund managers would buy that paper.

Posting will become spotty over the next two weeks. It’s time to rest and enjoy our families even while watching market action. Like everyone we have housekeeping issues to deal with as well.

Have a great weekend.

Disclaimer: The ETF Digest is long GLD, FXE and FXI.

Comments

[David White:]

Good article again. There are a few other factors that enter in though.
1) Japanese bailout plan has been announced for $486B
2) Other central banks are lowering their rates -- bullish for the dollar.
3) IPI cut their end of year Q estimate by half. POT cut theirs by 10%. MOS has already cut on Dec. 1.
4) Oil is drastically down. It seems to have taken most commodities with it.
5) The automakers' future is still up in the air. Clearly Paulsen is using orderly bankruptcy as a threat in the negotiation process. We will have to wait to see how it all turns out. They are claiming they may announce something today. Paulsen is clearly most interested in making sure the automakers can become profitable in the near future. Understandably he is having a hard time bringing all of the factions around to his way of thinking. A bankruptcy judge could effectively compel compliance. Paulsen seems to be saying, "why don't you just do the right thing now? The judge will force you to do it anyway in an orderly bankruptcy." Apparently the UAW and perhaps others are using the threat to the economy of a bankruptcy as their negotiating tool. It seems like a doomed arguement given the large number of businesses with problems. The market may meltdown if this is not resolved today.
6) RIMM and ORCL had fairly good results. They should provide a little good news to the market.

2008 Dec 19 07:42 AM

[David White:]

I should poitn out that MOS has an FPE of 3.8 and POT and FPE of 5. Their announced cuts will likely not hurt these two companies too drastically. Fertilizer is still needed by the spring. Many may be holding off buying it until a later date with the economies in bad shape. Both of these companies should recoup much of their cuts for this quarter and next in the following quarters. We still need food. IPI cut by a lot more (50%). It does not have the long term business relationships that POT and MOS have. It may get hurt. Also both POT and MOS have excellent balance sheets. After recent boom quarters they are flush with cash. They are in excellent shape. Staples are good stocks to own in a recession. These might be two. IPI is a recent IPO. It has had a lot of startup costs. You might want to avoid it in the short term.

2008 Dec 19 07:50 AM

[David White:]

Perhaps I should have pointed out that other countries central banks lowering their interest rates tends to be good for the US equities markets. It tends to strengthen the dollar. It effectively makes dollar denominated equities go up in value in the respective foreign markets (they ones that just lowered interest rates). This tends to make US securities more attractive.

2008 Dec 19 07:54 AM

[NOWHEREMAN:]

What Part of Bernanke's: I will bail everybody out, lends support to the USD?

Hedge Funds shutting their doors to redemptions, will allow them more leeway. Forced liquidations have slowed.

The sheer volume of fiat dollars will not lend support to its value. IMHO

2008 Dec 19 08:51 AM

[David White:]

My point was that foreign banks doing the same thing counteracts the Bernanke moves with regard to interest rates, etc. that would normally cause the US dollar to go down.

Then too, the appearance that Bernanke / Paulsen show knwo what they are doing (i.e. strengthening the US economy) helps the US dollar rise.

Since we are such a big oil importer, oil going down also helps the dollar rise. The lower oil importation costs make the US economy more viable by itself.

2008 Dec 19 09:04 AM

[David White:]

Apparently there has finally been agreement on the automaker bailout. This shoudl buoy the market today. Also today is the last day of the January contract. February becomes the front month Monday. It is currently at $41. In addition the automaker bailout shoud lead to a rise in commodity prices if only for today. Look for some of the oil stocks, oil service stocks, the fertilizer and grain stocks, etc. to all rise. Of course, use your own judgement on this. No one has ever really perfected market prediction.

2008 Dec 19 09:08 AM

[David White:]

I did forget to mention S&P downgraded about 12 banks. This should be a negative on the market today. One might suppose it will be overridden by the great automaker news ($17.4B to GM and Chrysler).

2008 Dec 19 09:11 AM

[David White:]

I should have added that this $17.4B deal to Chrysler and GM does not involve a bankruptcy court.

2008 Dec 19 09:16 AM

[Internet2k4:]

A Bloomberg interview yesterday revealed there will be a U$ Treasury auction scheduled for nearly every business day in 2009. I've been watching TIP, but adding TBT to the radar screen.

2008 Dec 19 10:00 AM