Tuesday Outlook: Commodities, Emerging Markets

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This market is pretty spooky that’s for sure. Let’s face it, the much anticipated rescue for FRE and FNM came to pass and investors scoffed at it. There are lines of people at many banks wanting to withdraw funds. That’s not supposed to happen in this modern financial system, but it is nonetheless. None of this is good.

Bernanke testifies Tuesday and no doubt he’d like to bring by the shirt collar, the architect, former Chairman and “maestro” Alan Greenspan, with him. But, he’ll just have to be as creative as possible.

Also we get producer prices [please ignore the bogus “core rate”], retail sales [watch for a spike caused by inflated energy and other prices] and there are some interesting government bond auctions taking place as well. Want some?

I’ve been cynical and sarcastic about conditions as readers know, but that’s the way things are.

Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in SPY, SDS, MZZ, TWM, IWM, QQQQ, QLD, XLY, SCC, XLI, XLB, SMN, SIJ, IYR, SRS, GLD, DBG, DBA, DAG, EFA, EFU, EEM, EEV, EWZ, RSX, FXI and FXP.

Comments

[Alpha Seeker]

David you are making a few dumb predictions in this article. However, the only one i agree is to place a call to the population to get out on the streets and demand end to the incompetent Bush administration.
Then watch what happens to the dollar.

[gabeborenstein]

While degree of paranoia in the market can not be disputed ,the FED is addressing the issues.It is a nonsense to believe that FNMA or FREDDIE will be allowed to fold.The implicit backing of the U.S government was met and the investors should understand the minimal risks if in fact they do exist.To believe that these two agencies will be allowed to fail is to accept the notion of a total financial anarchy.That is not a likely outcome of the current turmoil.In the eighties the S&L system imploded and the FED had found solution.It is handling the current issue quite well.It is for the major shorts that the real issues are being distorted and have created sporatic panic.
The distortions are amplified by illiterate reporters on a major TV financial daily spectacle ,who actually belief to be economists and repeat economic nonsense irrelevant to the market reality .
When the DOW was at 14,000 this program literally had a party instead of focusing on the real fundamentals .Now that the issues have surfaced ,but are being addressed competently by the FED , this very same program is distorting the facts and the program's reporters continue to belief that they are competent economists.
In the period ahead we will see the stock market rally as the investors will comprehend the degree and importance of the FED's actions in relation to the financial institutions.I admitt that few additional rate cuts would be helpfull as demand pull inflation(the real threat )is not an issue.
Bunker Hunt ?was accused of trying to squeeze the silver market during the period of a rampant inflation(17%).COMEX had imposed 100% margin on the silver futures -the metal imploded bringing relief to all of the concerned (including the FED).
The real issue in the period ahead will be Europe and Emerging Market economies facing high rates and shortly economic decompression.The resulting economic chaos will force global investors into the dollar denominated assets .The stock market will rally if for the wrong reasons .Volatility may continue for a bit longer.

[Trader T]

I'm no fan of the Bush administration but we've had a sitting US Senator (Schumer) directly involved with causing a run on a bank. Where is the public outcry? Calls for censure? Calls for his resignation?

[sieraromero]

The Fed should rescue FannieMae and FreddieMac. They should not rescue under any conditions the shareholders of those institutions. The American taxpayer is going to be picking up the tab on the banks and other financial firms to try to stop the coming financial meltdown. ENOUGH IS ENOUGH!

[bbzz24]

People in the streets?!?! Be serious. It will take 1 tank of gas to gather a few folks that have any idea what you are talking about, and another one to drive to the capitol at least.

With oil at 140 suburbanites cannot afford to protest even if they want to. Unless there is another stimulus check on the way.

[Alan vonAltendorf]

Important post today at FT Alphaville: Trillion Dollar Mean Reversion

ftalphaville.ft.com/bl.../

[Jerbear]

Blaming Bush is narrow minded name calling.

Congress has more power than the president. Congress has done nothing to prevent any of this. The problems with energy and social security have been known for decades. They have done nothing and continue to do nothing.

They all need to be removed and we start over. Never vote for an incumbent no matter what party they are in.

We need fresh minds and people willing to work more than two days a week.

[User 148223]

As always, Mr. Fry, great job of making clearer the murky numbers we are seeing. Keep the keen eye and sharp tongue.

[dukeb]

David, thanks for pointing out DGP a few posts ago!

The people who blame Schumer for IndyMac are so freakin' clueless it boggles any mind with an IQ over v1.5. If anything, he saved some depositors their butts. Go to the FDIC's IndyMac FAQs and get an education on what happens during a takeover rather than sale...you fill out forms for even properly titled accounts if your combined balance is over $100k. If you have brokered IndyMac CDs, the interest stopped the day of the takeover but you're not going to get your $ back for a bit....that's lost interest and no access to your funds. And now the FDIC has FROZEN all foreclosures at IndyMac and is pledging to rework mortgage terms to the best possible for its borrowers BEFORE it sells what's left of the institution. Well what about the DEPOSITORS who were over their FDIC insured limits and who are supposed to collect as much of those proceeds as possible from the sale of IndyMac assets? Think giving gifts to the BORROWERS on their dime is righteous? IndyMac was the FDIC & the Bush Brown Shirts exercising what amounts to financial eminent domain over a bank to further their own agenda. It's a disgrace. Schumer is akin to an honest stock analyst who says to look out. The OTC and FDIC are prohibited from foreshadowing any of their actions, so you'll never hear it from them. Blame Schumer? Pathetic.

[secmaven]

The Trillion Dollar Mean Reversion is a significant post! If the financials had retained the trillion dollars they extracted from the economy the reversion would work without too much pain. The problem is that the trillion was paid out in lavish bonuses to the employees who were craft enough to execute this swindle. This money is long gone in a buying binge of exotic real estate, sailing vessels and power lunches.

[dukeb]

On my news ticker now: "*DJ Bernake: IndyMac Failure Was 'Inevitable,' Bad Asset Quality"

That also makes you wonder about how well the FDIC's pending "aggressive" readjustment of mortgage terms will proceed. If the IndyMac assets / loans are bad, perhaps the FDIC will only prove true the rumors that not many are actually salvageable. They might be shooting their foot while it's still in their mouth....but only time will tell.

[notsosmart]

and now-conservative socialism.the russians & chinese could be laughing now if the capitalistic greed virus hadnt spread to them.as L.armstrong sang"its a wonderful world".

[parnelli96]

Great work Dave.

[BlueDog]

Nice synopsis. I'm 100% in cash right now. There is no quick fix in this market but there are trading opportunities.

[texas joe]

Don't blame the pres? Less power than Congress? Excuse me, but they've done far more damage than Congress simply by ignoring the excesses the laws mandate that they control. The Treasury's new lending guidelines? Uh, shouldn't they have been doing that all along? And didn't Spitzer try to force the lenders to do that in 2003, only to have the administration block them with an obscure statute?

Wake up. The problem is the crooks are running the pen. Where did Paulsen work before the Treasury? Bernanke before the Fed? Let's see, could it be, no...., sorry, yes! They worked for the exact companies that pulled this crap and then got short-sell protection yesterday.

The only key to any of this is a) be an exect that gets the bonuses from the scams or b) understand the rigged game and avoid getting caught in it.

American Success Formula: Forget morals and ethics, embrace greed and corruption.