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....

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

January Effect

The definition of the January effect on stocks is, "many investors choose to sell their stock before the end of the year (by December 31, 2008) in order to claim a capital loss for tax purposes." Once the New Year begins (2009) those same investors choose to quickly reinvest their money in the market, causing prices to rise. Most of the time, investors choose to invest in small capitalization stocks that were sold at losses during the prior tax year (2008). This year I believe that investors will choose large capitalization stocks, since most of them were down over 30% in 2008. The first five trading days of January will help me determine my views for 2009. We know that there is plenty of capital on the sidelines, but will investors decide to take any risk.

Random thoughts....since the markets have been down about 40% this year, we can expect a major upside from the January effect...question is how long will it last...if we can get a rally for the first five days of January, psychology will improve with the new Obama administration just weeks away...an optimist might look for 9,600 in the Dow in January....more later on 2009,,,gold, high yield bonds, real estate, how about Cram-down...that's the big news of 2009