Zero Capital Gains

I have examined all of the details of President Obama's Recovery Stimulus Plan. There are tax cuts and spending plans . Why doesn't the government suspend capital gains for investments made in 2009. I propose to eliminate any capital gain taxes for anyone investing in stocks, housing, or a new business. This suspension of taxes would only be good for 2009 investments. Whenever these transactions are sold, ZERO tax would be due. As January ends, we have not had an Obama rally! The next three months will continue to exhibit depression in the economy. It is time for a plan that makes sense!

Random thoughts...the market holds 8,000 but it will be tested again...all the news is bad and depressing....no demand for anything.....what if Obama's plan doesn't work?......

Revisiting the January Indicator

The January Indicator is simple-whichever way January goes, so goes the entire year. It seems that this market forecasting tool is right over 70% of the time. January has five trading days left. We need a huge rally to offset the dire action so far this month. I expect the indicator to indicate a down stock market year in 2009. I want to be optimistic, so there is a chance that this dismal economy is such an anomaly that all bets are off as far as the validity of the indicator. The question for this week remains 'how will the equity and bond markets react in 2009'? We will have to wait a few weeks for the details of President Obama's new stimulus package. The Congress gave the President approval to use the remaining $350 Billion from the TARP. What will happen to the five major banks in this country? Will it be nationalization (and death of equity) or a hybrid like a 'good bank' and a 'bad bank' (more risk to the government)? Remember that the market could have a huge rally at anytime as the DOW has held 8,000 in spite of horrible earnings reports. I guess I will wait for results of the remaining five trading days of January, 2009.

Random thoughts......What is worse than a 'depression'? email your thoughts.....deflation seems to be rampant everywhere.....demand is almost nonexistent......Obama had a great first week as President....lets watch the next 93 days for action....

A New President as Investors Swear off Banks

Today the S&P Bank index had its' biggest percentage decline ever. As Barack Obama celebrates tonight, his economic advisers are trying to figure a way out of this depression in Bank stocks. The bank stocks are now worth less than 10% of the S&P 500 for the first time since 1991. Banks like Citi and Bank of America are selling at under $6 per share. JPM and Wells Fargo are getting close to $15 a share. Is this the end of bank equities? Will the major banks be nationalized with all of their equity wiped out? My suggestion is to create a 'RTC' for the bad bank debt that is paralyzing the markets. The major banks would then be able to lend money and start over again. The bad bank debt would be sold off to willing investors. The result would probably be recapitalization with 'new stock' issued. Current shareholders will be diluted and conceivably wiped out. This fix has to occur THIS WEEK.

Random thoughts.....President Obama has a few months to change the psychology of the American people...if not, we are in a depression that will be merciless....dividends you can count on....Altria was up today as the market believes smoking will still be in demand in 2009...look for reduced industrial dividends or a return to stock dividends....cash is very much KING today..

Bank of the United States

Is it possible for the United States government to own our largest banks? Will Bank of America, Wells Fargo, Citi, and JPM be owned by the USA by the end of 2009? As the economy heads to depression (20% chance), the banks will need more and more capital to stay in business. President-elect Obama will pull out all of the stops. He will have $ Trillions to invest in our country. If the decline moderates, the banks will get stronger. If we enter a period of deflation and depression, the banks will be nationalized.

My hope begins next Tuesday. Consumer psychology can turn on a dime. The new President will instill confidence in his leadership abilities which will lead to consumer confidence. As I have said, the demand for products and services has dropped precipitously in the last four months. It is up to the new government to change this psychology.

Random thoughts......forget about seeing the movie CHE......today is option expiration day on Wall Street......I worry about the stock of GE......no market on Monday. ....it is MLK day.....I hope the pilot of the US Air plane is honored by President Obama......Who will be the next senator from New York?

Free Rent

Commercial and residential landlords have seen their vacancy rates increase dramatically over the last three months. Demand for office space and apartment rentals has dropped. What is a landlord to do? Leasing incentives are now the talk of the town; free rent, fresh paint, new carpeting are just a few. Some landlords will be offering free trips to Hawaii, leases on automobiles and dinners at the best restaurants. Vacant space produces zero income for landlords. This is no longer a
'sellers or landlord' market it is a 'buyers or tenants market'. As you drive or walk down the streets of your city, look for 'free rent' or 'for lease' signs. I am sure there is a shortage of signs today.

Random thoughts...Citi and JPM moved up their earnings reports to this week...the news will not be promising...Steve Jobs is now on a medical leave from Apple....the big story is the second $350 Billion of the TARP...how will it be used....who will benefit...watch out for the government getting too involved in business....Obama in a few days....lets be hopeful...

Time if of the Essence; The Second $350 Billion

President-elect Obama today asked Congress for the Second $350 Billion from the Tarp(officially President Bush had to ask for it). Congress has fifteen days to reject the Obama administrations demand for the funds. Will this Congress stand in Obama's way during the first few days of his new government? This answer is most probably yes. It seems that Nancy Pelosi & Barney Frank want Barack Obama to understand that they will be participating in the final decision. The first $350 Billion was invested in the Banking system to prevent a depression. It is time to deal with the housing crisis by dealing with foreclosures. I believe that Obama will focus on this issue immediately. Time is of the essence!

Random thoughts- Will Citi & Morgan Stanley merge their brokerage units?...yes , look for the announcement within 24 hours....Morgan Stanley will be the Firm with the most retail stockbrokers....all dividends on banking stocks are in question...look for the elimination of dividends within months....2009 starts out with the best actor at the Golden Globes being a WRESTLER....no wonder the market was down today..where is the Obama rally? any day...

Eleven Days to Go

In eleven days, Barack Obama will become the 44Th President of the United States. For the last few weeks, he has been trying to change the psychology in the markets. His economic speech this week gave us a glimpse of his plan. It seems that he will do whatever is necessary (more than $1 Trillion?) to turn this economy around. He will present the world with a leader that wants to solve problems. He doesn't want politics to get in the way (keep Nancy Pelosi quiet). Hopefully, this change in psychology will lead to a honeymoon with the markets. The so called OBAMA RALLY should begin sometime next week. We should expect continued negative economic news for the next few months. The combination of a President who is a world leader and a massive economic spending plan will lead to a significant rally. What if we don't get the rally?

Random thoughts....4Th Quarter Earnings reports begin next week...hold on to your seat.....will negative news be discounted or will it lead to a test of 7800....what about Robert Rubin quitting Citi....or the merger of Morgan Stanley's brokerage unit and Smith Barney....in Eleven days, the world will change forever.....

Discounting the Unemployment Report

The market had a terrible day today losing almost 250 points. The blame for today was the ADP Report which showed a loss of 693,000 jobs in December. The official Unemployment Report for December will be released on Friday morning. I expect most of the corporate news to be bad for awhile as companies take as much as they can in losses for 2008. Tomorrow will be interesting as Obama will outline his economic plan for recovery. Thursday is also the fifth trading day of 2009. The direction of the market will be very important to me. Will the horrible unemployment report be discounted? We will see.

Random thoughts......Citi is working with the government to get the bankruptcy courts to change the law and allow CRAM-DOWNS (read a previous blog of mine to fully understand)....Obama will delay the tax increase on incomes above $200,000 until 2010....Obama is hinting that his plan could more than $1 Trillion.....Deflation has to be stopped now or it will be too late...we have a few months to turn this around or it will be too late....

Fiscal Policy Obama Style

In two days, President-elect Obama will announce the details of his two year economic stimulus plan. With a 2009 Fiscal deficit of about $1 Trillion, Obama will add another $775 Billion or so to this deficit. Obama must spend at least $1 Trillion to inflate our economy. He will accomplish this through a combination of tax cuts and spending. Should we worry about the deficit and inflation? No, we must get out of this potential deflationary spiral NOW! The bigger the stimulus plan, the better.

Random thoughts....The market is up two out of the first three days in 2009...the next two trading days are extremely important...if the market performs well in the next few days look for 9,600 next week...the Obama effect has begun.....look for the $dollar to remain strong as the euro and yen weaken...gold?.....

New Years Resolution 2009 CRAM DOWN

The U.S. Government has to realize that their #1 Resolution for 2009 is to end the residential housing decline. CRAM DOWN has to become the word of the year. Cram down is defined as a "bankruptcy court's enforcement of a reorganization plan despite the objections of some creditors. In terms of the residential mortgage debacle, this would give judges greater latitude to rewrite mortgages held by homeowners. Currently, bankruptcy judges cannot rewrite first mortgages for primary homes. President Obama will change this after January 20, 2009. He will sign into legislation a bill that will allow judges to alter these mortgages. The RTC of the 1990's had the ability to 'CRAM DOWN' commercial loans. These new loans help fuel the economic growth of the late 1990's. This is the year that the banks and the government have to bite the bullet and CRAM DOWN these loans to current market. If the principal due on a residential loan is reduced to the current market value of the home, then the homeowner will find a way to stay in that home and avoid foreclosure.

Random thoughts....Tomorrow, Friday is the first trading day of 2009....gold, oil,
real estate, and other investments may perform in 2009....look for my comments on these markets....the key is the first five trading days....Happy New Year