gabe borenstein

Closing Update for Monday, August 17: Global Sell-Off Visits U.S.

The global investment community must realize that the U.S economy is not synchronized cyclically with the rest of the economic universe.
Psychology is one thing ,but reality is another.
Both U.S administrations had provided a measured liquidity injection into the key economic sectors and succeeded in stabilizing economy.It is the fiscal spending and the monetary policy that is and will be driving the U.S economic expansion not demand pull (inflationary).
Allowing for the multiplier ,the injected liquidity is almost equivalent to the U.S GDP .It is an insurance against the economic failure and a catalyst for unprecedented non inflationary expansion in the period ahead .
The fourth qtr of 2009 should attain 4.5 % GDP growth.
This will assure above average expansion in 2010 and the decline in unemployment to 3.8% .
The current debacle has allowed corporate America to be come mean ,lean competitive machine.
Without the American economic expansion ,Emerging Market economies and Europe and Asia will fail.
To date ,the deflection of the issues that exist outside the U.S economy has allowed the other markets to keep up with the U.S market gains .
This irrational focus on the U.S ,has allowed the global speculators to keep the dollar under the pressure.
I am convinced that as the global community begins to comprehend the fundamental non- inflationary forces that will maintain economic momentum ,the dollar will gain substantially.
The U.S stock market is not ahead of the curve but behind it.
Only months ago ,Depression was consensus,instead we are heading for unprecedented economic expansion.

Closing Update for Monday, August 17: Global Sell-Off Visits U.S.

Market is fine.

Earnings on Tap for Thursday, Fingers Crossed

For the record ,JP Morgan does not even have a fraction of the 90 trillion dollars exposure in the derivative market.
This distortion of facts ,continues to drive market fears.
The "stability aid" is the most effective plan that addresses issues to the point.
This program will show mega effects after it is fully implemented.
Another 50 bps cut would be helpfull.
Commodity price implosion should increase real disposable income.
Some incremental time is needed.
By the time Christmas arrives we should have a major stability on the way to a major rebound.
As I have stated earlier ,the only thing we should fear ,is fear itself-
and perhaps CNBC .
How can you expect impact from the program which is not implemented yet.
I will say this again,recession can be deflected but the market had priced the recession as a done deal.

Earnings on Tap for Thursday, Fingers Crossed

Given the magnitude of the market decline,the earnings are irrelevant to the market direction.
The market had discounted not only a severe recession(a doubtfull outcome within the context of the measures undertaken to address the debacle),but an economic Armageddon.
What really matters is the market psychology continuosly driven by distortions.
The 700 billion dollar "stability plan" is a 5 trillion dollar catalyst(40% 0f the GDP)which will create and contribute to a major economic/market rebound.
But first ,it must be implemented. As of this moment we have an effective plan which has not been acted upon.
Then what is the market responding to?
Media disseminated fears enhanced by the opinions of the record shorts.
Please note the record open short interest.
Is should be clear that the financial system will not be allowed to fail.
Once the process of direct liquidity injection begins ,the economic response will be quick and visible.
For all of the irrational fears ,the dollar maintains its recent strength and is likely to make further major advancements reflecting the global perceptions that the real relative risks lie outside the U.S.
This flight to quality (dollar)will result in explosive demand for the dollar denominated assets (equities and the real estate).
I have warned about the current risks as late as September 18 ,2007 during the Brian Sullivan interview (Bloomberg TV)during the FED time.
My fears were deflected by the market.Now ,everyone claims to have predicted the current debacle.
More importantly the" experts" continue to distort the risks .The point is that in the U.S all of the issues have been identified and are being aggressive addressed,however we must allow at least six weeks for the program to be fully implemented to elicit the response that investors want to see.
One more time,clearly the market had discounted the most pessimistic earnings estimates.At this point in time the only thing we should fear ,is the fear itself.
We need to ignore the critics who perceived inflation as being a the threat(until recently),and now are calling for recession.
One more aggressive easing in conjuction with the current measures could make a Christmas an enjoyable holiday that it should be.
By the second half of 2009 ,the GDP growth should attain 5%.