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2010-02-26 10:28

WINTER OF DISCONTENT (FINAL EDITION)

I will be doing my radio show live at Orange Coast College in Costa Mesa tomorrow. Come check out the event... http://www.kfiam640.com/pages/MYOB.html Well the showdown lived up to the hype and resulted in a political steel cage match that favored the Republicans which came out swinging. Wow, Lamar Alexander was no joke, eschewing the bait from the stiff jabs and light footwork from the President in the opening round. Nobody won if winning meant changing minds, but the underdogs put in a better performance than odds makers thought they would. I guess a good offense is the best defense after all. The plan still boils down to a very expensive fix that would leave 15 million or so uninsured and assumptions would have to be perfect. Perfect government assumptions on a spending plan is something nobody should bank on. I'm not sure why John McCain keeps showing up as he is only reminded of his election loss and it seems to take air out of his balloon and GOP arguments. In the end, it wasn't a negotiation per se as both sides pushed their agendas with passion and, occasionally, facts. But when we think of leaders and leadership nobody stepped up to find common ground. Those were our top lawmakers talking past each other. It's wild when you think of how tough a problem this is for everyone. We all have a beef with healthcare from insurance, to medicines, to hospitals. I'm grappling with new policies at Wall Street Strategies, and it is expensive. And that's the point; I can afford to work out something with employees but it hurts enough for me to say whoa when it comes to the notion I should also be paying for healthcare for people that don't work for me. It doesn't make me a monster or uncaring. I was listening to the radio on my way home from work, and the callers to the urban music station all said the Republicans don't want black people to have healthcare. This is frustrating because this shouldn't be a birthright for anyone. I think that we should endeavor to make sure we are all covered for medical expenses. The focus should be on economic prosperity, and all this other stuff would fall right into place. The more people get as a right from the government at birth the less likely they'll ever have the privilege of paying for it out of pocket. I say privilege a little tongue and cheek but God bless the child that has got his own. This is why I think that the entire approach is wrong in the first place. The economy is sinking rapidly and this needs to be reversed tomorrow, not a few years down the road. As much as it's important for some kind of smart tweaking of the healthcare system it feels like we are making college plans for a kid that just failed the first grade. This is not only focusing on the wrong program at the wrong time but making the primary problem greater. "It's the economy Mr. President, sir." "Now is the winter of our discontent Made glorious summer by this son of York And all the clouds that lower upon our house In the deep bosom of the ocean" -Richard the Third Act 1, Scene 1, 1-4 The best case scenario for this plan is for the bulk of it to kick in years from now...but Rome is burning today. The most compelling evidence for a possible double-dip recession has come over the past week. Who would have thought in this age of global warming the one straw of hope is that winter weather has skewed the numbers. Many are saying the spate of horrific economic data simply reflects the harsh winter we've endured thus far. But the thing is that this stuff isn't just a blip on the screen, it's part of a trend. In fact, the only reason you couldn't argue it's not already a double-dip is that some of the data has remained in decidedly downward channels. While there is no doubt that this has been the winter of hell for global warming believers it has also been the winter that reflects the discontent of Main Street. This is the winter that is man-made. This is the winter that can't continue to be ignored in Washington. Just consider the flash points of pain and suffering: * New homes sales * Plunging mortgage applications * Initial jobless claims The experts figured that new home sales in January would surge by 5.0% year over year after some confusion over government incentives sent December's number tumbling. Well, new home sales were down 6.1% year over year and 11.2% month over month. At an annualized rate of 309,000 the tally is down three months in a row. * Median home price: $203,500 -2.4% y/y and 5.6% m/m * Only Midwest sees month over month increase * Months supply surged to 9.1 from 8.0 in December and 7.3 in October 2009 was the worst year on record for new home sales, down 23% to 374,000, and now it seems like a stretch we will see the 500,000 predicted by the National Association of Home Builders. Now, in a serious case of desperation the White House is planning to stop all mortgage foreclosures until they have gone through the government's HAMP program. The program isn't going to work because people don't have jobs. In fact, the big new buzz in the industry is a "graceful exit" according to the American Banker. How to get people that are seriously delinquent and don't qualify for loan modification out of the home. I saw the movie "Pacific Heights" years ago and determined then I never wanted to be a landlord. I'm sure that bankers don't want to be landlords either. Let's face it imagine a banker trying to get a family out of a home they've legally lost is like sending a lamb to slaughter. Mercy is important in life but this gets complicated. I don't think that the government has the right to keep getting in the middle of contracts even when there is much sympathy. Mortgage applications and initial jobless claims are not only moving in the wrong direction but are setting off alarms. Applications to purchase homes decreased 8.5% to the lowest level since 1997, while initial jobless claims are on the cusp of creeping back above the 500,000 mark by increasing 22,000 to 496,000. The Market I must say that I'm impressed with way the market acted yesterday. It seems like a spark began with healthcare insurers after Lamar Alexander took a hard opening line. Then, after the close, there were impressive earnings reports I must say that the market is locked in a strange state of confusion. On one hand the economic data looks scary but corporations are saying things are okay, albeit last night retailer Kohl's (KSS) was cautious. I think that the market will remain range-bound for a while, maybe until the next jobs report. With that in mind, investors must understand how to be cool and to pick their spots. We had a big winner with TRW yesterday and DECK after the close yesterday, but there were times these stocks looked shaky although the fundamental story never changed. There are times to bite the bullet, but if you say you're an investor then make sure it's based on fundamentals and if those don't change materially then maybe be cool.

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Disclaimer: Securities Operations Forum is providing this research to assist investors in determining when to buy and when to sell. All investment decisions are yours and as a result you could make or lose money. Securities Operations Forum, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed, but not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Securities Operations Forum sit on the Board of Directors of any covered company. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security.