Brilliant or Stupid Ben?

market 's 300 point down.

“I think the greater risks are to the downside," Ben Bernanke reiterated in his second day of congressional testimony yesterday, “that is, to growth and to financial markets.”

We heard hints in his testimony Wednesday that more rate cuts might be on the way. Yesterday, the Fed chairman made it quite clear that he means to cut rates again, noting that inflation expectations have remained “pretty stable” and that “inflation will moderate this year as oil and food prices don't rise as much this year as they did last year.”

From the cheap seats, it’s sure looking like every food and energy commodity is at or near an all-time high and U.S. inflation is growing at a rate far from “pretty stable.” Regardless, gamblers in Chicago were emboldened by Bernanke’s remarks… futures there now price in a 100% chance for a 50 point rate cut in March, a 62% shot for 75 points.


Following Bernanke’s testimony, the dollar reached new lows across the globe. The dollar index has given up two full points since the Fed chairman began his testimony on Wednesday, and now sits at an all-time low of 73.

Likewise, the euro shot up to $1.52 yesterday, an all-time high of its own. The yen gained all the way to 104, a three-year high versus the greenback. The Canadian dollar and British pound stood still at about $1.02 and $1.98.

This is starting to surprise even us. We remember predicting the euro would go to $1.50 just after parity was reached… and getting roundly criticized for it. Now that we’re inching even higher, we suspect it’s going to have to gain some sympathy votes sooner or later.


“There will probably be some bank failures,” Bernanke suggested, saying that many overexposed small financial institutions in the U.S. are still at risk. While we respect Bernanke’s candor on the matter, markets didn’t care for his speculation.

Traders sold down financials in style yesterday, and the whole market followed… nearly1% losses for the Dow, S&P 500 and Nasdaq yesterday.


Neither Fannie Mae nor Freddie Mac helped in the matter much. Both banks reported big losses this week, writing down $3.6 billion and $2.5 billion in their respective fourth-quarter earnings announcements. Both losses were greater than Wall Street expected.

Naturally, as the U.S. two largest buyers and backers of American mortgages disclose a basket of bad subprime bets, the U.S. government has chosen to ease regulations on their investment capabilities.

Within hours of Freddie revealing its multibillion loss, the Office of Federal Housing Enterprise Oversight proudly announced that it will be removing limits to the amounts of loans and securities Fannie and Freddie can own. The two companies’ investment pools were formerly capped at a fixed level because of a few accounting “lapses” in 2004.

But now, Fannie and Freddie can invest in as many subprime-backed securities and risky mortgages as they can stomach, potential losses be damned. Brilliant.

Visa unveiled plans to go public yesterday

In an SEC filing, the company said it would offer up to 446 million shares at $37-42 a pop. Thus, the company may raise up to $19 billion -- the largest IPO in history by nearly a factor of two. AT&T’s 2000 IPO scrounged up a measly $10 billion.

Visa will be the last major credit card company to go public. While we dare not speculate on the short-term outlook of the IPO… if MasterCard’s recent offering is any indication, Visa’s will be the buy of the year:

There is no exact date set as to when Visa will begin trading, but rumor has it ticker “V” will be tradable by March 20.

The best perform sectors and worst sectors

we just need to follow where the money is flowing into so that we could track the potential leaders

10 Best Performing Industries
Industry Name Percent Change (over time selected)

DJ US Platinum & Precious Metals In... 17.39%
DJ US Heavy Construction Index 7.35%
DJ US Nonferrous Metals Index 7.18%
DJ US Steel Index 5.90%
DJ US Industrial Metals Index 5.58%
DJ US Full Line Insurance Index 5.39%
DJ US Mining Index 5.27%
DJ US Coal Index 5.18%
DJ US Gold Mining Index 5.05%
DJ US Basic Resources Index 4.50%

10 Worst Performing Industries
Industry Name Percent Change (over time selected)
DJ US Fixed Line Telecommunications... -6.27%
DJ US Telecommunications Index -6.18%
DJ US Mobile Telecommunications Ind... -5.45%
DJ US Footwear Index -4.53%
DJ US Internet Index -4.01%
DJ US Food Retailers & Wholesalers... -3.72%
DJ US Consumer Electronics Index -3.55%
DJ US Automobiles Index -3.53%
DJ US Mortgage Finance Index -3.33%
DJ US Specialized Consumer Services... -3.18%

Something you don't wanna miss in this market

I got this news from others.
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In the U.S., gas prices have crept up again. They’re now just short of all-time highs.
The national average price at the pump rose to $3.11 over the weekend, a dime short of last May’s record high of $3.21 and 75 cents higher than this time last year. The U.S. Energy Department recently raised its forecast for spring gas prices up to $3.40. If you ask us, that’ll be a bargain by 2009.

The dollar index continued its recent fall over the weekend, sinking deeper into the 75 range and now less than one point from its all-time low. The euro dug deeper into $1.48, and the pound rebounded to $1.96. The Canadian dollar is little more than a whisper below parity, at 99.7 cents. The yen rallied too, back to 107.

“If you’re keeping score at home,” notes Chuck Butler, “that's two consecutive down weeks for the dollar, after spending most of the early part of this year on the black side of the ledger. There were just so many pundits out there talking about a ‘dollar rebound’ in 2008 that the markets had to test the waters to see how it looked. And it just didn't look very good! The fundamentals just aren't there for a dollar rally in 2008.
“But hey! Stranger things have happened, eh?”

Gold’s price held steady all through the weekend , around $950, just off recent record highs.
To put that price in perspective, each Oscar statuette last night cost “the Academy” $100 more this year than it did in 2007, says Bloomberg. Gold has shot up 40% since the last Academy Awards, and according to Oscar spokespeople, each legendary trophy now costs a record $500. But even an enterprising Oscar winner won’t be able to profit from gold’s rise: By accepting an Academy Award, winners are required to never sell, trade or alter the Oscar before offering to sell it back to the Academy… for $1.

Friday's market view from IBD

Bond Insurer's Potential Bailout Plan Turns Market's Early Losses Into Gains.
Posted 2/22/2008

Stocks reversed sharply for the fourth straight session Friday, this time closing higher after shaking off early losses.

The Nasdaq followed Thursday's 1.2% loss with another decline early Friday. It was down about 1.5% in the session's final hour of trading. But a late rally carried the index into positive territory, closing up 0.2%.

The Dow industrials scored a bigger gain, finishing 0.8% higher. The S&P 500 matched that 0.8% advance, while the NYSE composite picked up 1%.

Volume picked up slightly on the NYSE and rose 4% on the Nasdaq.

The day's action capped a topsy-turvy week for the market. Four times the major indexes started in one direction, only to change course by day's end. Tuesday and Thursday brought negative reversals, Wednesday and Friday positive turnarounds.

That behavior points to a market that lacks direction, as well as any kind of conviction among big investors. A healthy market doesn't react that severely to every little headline.

The rally confirmed on Feb. 13 by the Nasdaq's follow-through day remains technically intact. But we need to see a lot more healthy gains in the broad market and leading stocks before growth investors can start buying aggressively.

Right now, you can almost count the market's total number of breakouts on one hand — most of those being late-stage commodity stocks.

For the week, the Nasdaq fell 0.8%. The NYSE composite fared better, advancing 1%. The Dow ticked up 0.3%, the S&P 500 0.2%.

Without Friday's late rally, the Nasdaq would have closed at its lowest level of the correction.

The session started with more weakness among battered financial stocks. Several beleaguered investment banks, weighed down by the impact of the credit crisis, flashed more losses early on.

A lot of smart people think Bernanke and the Fed are fast running out of bullets.

The FOMC said that its 125-point cuts in January "would likely not contribute to an increase in inflation pressures given the actual and expected weakness in economic growth and the consequent reduction in pressures on resources."

Translation: A slowing economy -- consequently slowing demand for raw materials -- will put the kibosh on any bad things that might happen as the dollar gets crushed. The Fed did, however, leave the door open for a “rapid reversal” in policy, should the need arise. After all, the Fed’s charter says it’s supposed to promote “price stability.”

To review: Cutting rates won’t increase inflation, because the economy is slowing down. But raising rates quickly will stem inflation in a pinch. Got it?

What happens to the economy, then? Hmmmn….

Oil closed at $100.01 yesterday, a record high

WOW, isn't it expected with the aggressive and irresponsible GOV and FED? They are crazy as they did in the past 10 years and tried to create more bubble. Gosh, where does the money come from for tax cut?
And of course, there’s your typical “rebel uprising” news from Nigeria this week… rumors that OPEC is going to cut production… and more than one CNBC cheerleader calling for a quick U.S. economic comeback, leading to higher U.S. demand.

“But the real reason oil finally broke $100,” says our oil man Bryon King, “is a fundamental shift in global production. The old ‘Seven Sisters’ are aging relics -- Standard Oil, Royal Dutch Shell, British Petroleum, Texaco, Chevron, Exxon and Mobil. They are no longer what they once were. Today, these poor spinsters collectively control less than 10% of the world's oil resources.

“The old seven have now been replaced by the new ‘Seven Other Sisters’ (SOS).” These are:

Saudi Aramco (Saudi Arabia)
Gazprom (Russia)
CNPC (China)
NIOC (Iran)
PDVSA (Venezuela)
Petrobrás (Brazil)
Petronas (Malaysia).

“The party line from the SOS and OPEC,” Byron says, “is that ‘the market is fully supplied.’ Well, only if you like paying $100 a barrel.”