This Week in Barrons – 08-02-09:
Okay – this Clunker Car program has me baffled. In order to jump start the auto industry your government decided to help people buy new cars and help the environment by letting people get up to $4,500 for a vehicle that gets poor mileage, for one that gets "better" mileage. OK – so we’re using taxpayer dollars, to try and push people into buying taxpayer owned car company products (GM and Chrysler)? Isn’t that ‘robbing Peter to pay Paul?’ But let’s leave that for an instant – what reports ‘thus far’ are showing us is that people buying Hyundai's and Hondas (by a wide margin) – with my U.S. taypayer dollars – which is slightly disconcerting. But let’s ask a different question – where is the money is coming from to pay for this. Well – potentially the TARP program – which means that the FED just PRINTED it! Which really means that we ‘the public’ borrowed it from the FED – that is charging us INTEREST on that money – and we’re using it fund our neighbor’s purchase of a ‘foreign car’. That is our ‘monetary policy’ at work! The ‘cash for clunkers’ program will indeed be found to be a money hole, with no significant gains of employment nor spending, but leaving us with the bills.
Sounds like something Goldman Sachs might do – and speaking of Goldman – their past CEO – Mr. Henry Paulson – here’s the exchange between Congressman Stearns and Hank Paulson. http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2009/7/31_Congressman_Cliff_Stearns.html Congressman Stearns had his way with Mr. Paulson – which the crux being – “why should we trust you after you begged us for TARP money to buy up toxic assets and then ten days later decided "the heck with that" and gave out billions to his banker buddies, including AIG which of course sent a boatload ($13B) right back to Goldman Sachs. But that’s not what is shocking to me. What I didn't know and this interview exposes is the incredible "deal" that Paulson got when he accepted his governmental position. You see – Hank Paulson was the CEO at Goldman, and owned $200 Million worth of Goldman stock. If he sold that on the open market, he'd get hit with a $35 Million tax bill. Well, no self-respecting banker is going to give Uncle Sam $35 Million in tax money. So what did he do? He took the job of Treasury Secretary for a short period. Why give up such a great position at Goldman? Well – when he became Treasury Secretary - he had to get rid of his Goldman Stock, but the law reads that if you're doing it for a position such as that, your taxes are waived. Yes, that’s right – Henry Paulson paid $0 in income on $200 Million worth of Goldman stock!!!
Now I ask you – did Paulson give up a great job at Goldman making millions, to become the Treasury Secretary because he wanted to do the very best for his country, OR did he accept the short term position knowing he could sell his stock TAX FREE, then get Congress to GIVE HIM BILLIONS which he could distribute to his banker buddies and especially Goldman via AIG? You tell me, if that wasn't the sweetest piece of con jobbing anyone ever pulled. Yet even scarier is the fact that very well connected people in our Government were all for Mr. Paulsen being the Treasury Secretary, and applauded the consistent Goldman connection!
On fact – to act like icing on a cake: just this Thursday we found out that 5,000 bankers got over 1 MILLION dollars in bonuses – that’s amazing in my view – given we’re floundering in the midst of the single biggest economic crisis in 80 years – and that doesn’t include the Goldman bonuses over ½ a BILLION dollars.
What a while ride it’s been. Our 401k’s up very large this year – our trades (which we make public) – some examples are: FAS up over 400%. SLW up 150%. UYM up 79%. XLF up 27%. BUCY up 40% - and the list goes on. On Monday and Tuesday of this past week - market "tested" 9K, and each time it held. Then just to make the week complete, by Thursday morning the market was up almost 200. But Monday is the first trading day of the new month and that "generally" brings some mutual fund buying – so we "should" be flat to green on Monday. Now logic would dictate that we roll over after that, but frankly they have a tiger by the tail right now, pushing the market to 9171, and probably don't want to lose much of that - so, our guess is a greenish Monday, followed by some sluggish and soggy trading and then yet another push higher later in the week.
My feeling was, and still is , that we are going to see a wicked run higher, and I do believe that late Thursday we saw the ingredients being put together. Then on Friday we saw the bravado. The jobs number sucked, and don't forget that was the very best number Uncle Sam could give us. All they cared about was that the FED was going to come out with their plan on Monday, and as long as the FED is tossing trillions around, they wanted in. So, the market is in rally mode. AS LONG as we don't get anything supersized that comes out of nowhere, we should see this thing pick up steam shortly and really roar higher – to about 9,600 for a starter.
- we’re holding the GDX (a basket of gold mining stocks) with No Auto Stop
- we’re holding NGD (a gold miner) with No Automatic Stop
- we’re holding MOO (agricultural business ETF)
- we’re hold XLK (a technology (minus healthcare) ETF)
- we’re holding IPI (a potash hold – again in the agricultural theme)
- we’re holding CSCO @ 19.20 / hard stop @ 21.60
- we’re holding DIA’s @ 84.45 with a 90.50
- we’re holding SPY’s @ 91.97 with a 98.00 stop
- we’re holding QQQQ @ 36.26 with a 39.00 stop
- we’re holding FRO @ 23.79 with a 24.00 stop
Until next week – be safe.