Fritz Hottinger's  Instablog

An early CNBC headline today (10/6/09) read:  Stocks Power Upward! 

Then came others: “crude is higher, greenback lower, dollar under attack”, “gold hits all-time high”.  What are we to make of these confusing and contradictory claims?

The primary purpose of our Seeking Alpha columns and threads is the sharing of financial information, without digressing unduly into political discussion and debate.

This writer has found it almost impossible over the past several months to comment on either current market conditions or future direction without trespassing into the political realm, and thus gave himself an extended sabbatical.

Today these reservations are being abandoned - - - there is just too much at stake not to speak out.  As this is being written the Dow is up 157 points after gaining 112 points yesterday. And now it rests (comfortably?) above 9700.  What will keep it there is anyone’s guess!

But let’s posit a few:

§         continuing investor exuberance

       (based on more promises and more hope?)

§         continuing US government largesse for the next needy category

       (bailed out banks, homeowners, auto mfrs, clunker-owners = I’m next)

§         continuing purchases of US paper by our major debt-holders

      (China cannot shoot itself in the foot; they want us as consumers of their exports)

On the other side of the scale, weighing much more heavily IMHO, are some economic facts difficult to ignore:

§         Unemployment rate is now bouncing against the 10% level

§         Private-sector payrolls are lower today than at end of 1999

§         US needs to replace 7.2 million lost jobs, and population growth will require another 100,000 new jobs a month  (WSJ/10/5/2009)

The Dow does not climb when unemployment is rising.  (see chart below).

This latest charge by the Dow has ambiguous origins, and is not to be trusted.  Cautious investors and traders will keep in mind that the Treasury still runs the PPT (Plunge Protection Team), and does not have to disclose its activity in the market.   Statistics from government agencies, regardless of the administration in power, are often slanted to produce desired results.  One egregious example:

Need to reduce budget deficits?  Just remove food and energy from Consumer Price Index, thus reducing future Social Security outlays.

Political considerations can no longer be ignored.  They impact the marketplace severely.  This Administration has frightened the public with its oratory and ubiquity, and with promises that intelligent investors know cannot be kept.  With true unemployment rising and unlikely to decline any time in the near future, consumers are tightening their belts and their purse strings.

And they are not likely to relax their grip any time soon.  Their fears of what this Administration could do are many:

ü      airwaves are filled with unsupported statements rendered as fact;

ü      unkept promises of transparency and openness, bi-partisanship;

ü      pay-offs to labor unions, trade groups, financial backers; trial lawyers, etc;

ü      trade agreements altered or abrogated to benefit constituencies;

ü      a visible trend to “Chicago politics”: to secure power create dependencies that can deliver votes;

ü      demagoguery of the Health Care Plan (17% of our GDP) with no solid answers to legitimate questions;

ü      39 Executive Branch czars (at last count), not vetted by Congress.

This list could go on and on, but by now you should have the drift - - - there are just too many reasons to be doubtful of what this Administration will do to the economic fabric of our country, in both the short and long run.  The investing public will not be fooled in the long run.

Now is the time to SELL High - - - take advantage of it.  Take some money off the table while you have this opportunity.  The time to BUY LOW is sure to come.  One more glance at the chart above should be all the proof you need.

PS//

Wise investors use times like this to add a contra to their portfolios.  We particularly like SDS, which HottingerSignals holds and trades.