Jobs Number Tomorrow

All hands waiting for tomorrow's jobs data with some interest in what the Big 3 folks will say today in front of Congress. So, best link today is this article about how bad the hedge folks are getting kicked in the ass. Story.

Scenarios

The DJIA, SP500 and NQ100 have settled into a pre-Friday unemployment data ranges. Bears look to assault the lows of the 24th before the jobs number and then crash into new lows to end the week's trading. Bulls hope to reject the lower ranges and climb above last week's highs to put an end to this bear market. With the volatility of these past few month, the indexes may make each scenario look believable at some point interday before they reverse.

Surplus Population

The strategy to stabilize the US financial system is based on the theme of providing enough liquidity in the market until the banks and brokerage firms can develop plans utilizing all the features of the loans and guarantees implemented by the Fed/Treasury. These plans will contain two overall principals; raise enormous amounts of cash; and change the risk profiles for conducting future business. The first principle allows the banks to survive a severe downturn without lending money. The second principle will be their excuse. Goldman and Morgan have started to implement the sale of 3 year notes denominated in Euros to add to their own bulging money piles supplied by the US. These notes are guaranteed by the FDIC and pay about 1 to 1.5 over comparable market instruments.

The new administration will have to endure the criticism of a general recovery strategy which has the Fed/Treasury saving their own at the expense of the economies of families across the country. What Bernanke and Paulson have delivered thus far is radical intervention only when viewed against how the notion of free markets have come to rely so heavily on social coffers to save a select group of private investors. If the banks are still not lending or qualifying loan profiles drastically restrict growth, the real meltdown will be the burden of the 'surplus population', as Dickens would say.

Valuations Adjust

The revalue tumbler keeps on rolling through the various financial products. The valuations created primarily by major brokerage and banks in pricing debt and a sundry of derivative paper by literally marking prices to stoke performance data, keeps trying to find buyers. Along with trying to sharply reduce holdings is private equity firms, major institutions are trying to cash up by selling billion dollar positions in the secondary market. Hedge funds are seeing continued withdrawals and many have now temporarily halted redemptions. All this plays into the credit squeeze as bridge funding competes with everyday transactions and a general unwillingness to lend to even the best of names.

Shopping Crunch

How the holiday shopping will turn out is certainly a subject of a little more interest this year. A bad start would confirm some of the worst fears of preparatory planning by consumers who are expecting a significant downturn given stock performances to date and the daily serving of economic death march data given out by market news prognosticators. If the news is better than expected, look for the markets to extend gains as manager's pricing increases just in case the bottom action is more than just a bear pause.

Price data crunch still shows positive numbers with a caution being the 24th's major indexes lows being a critical hold for next week.

Pig

The concern over the fairness of distributing bailout funds to various financial entities is being argued daily. Many believe a great blunder was committed when Paulson, Bernancke and Geithner, decided to let Lehman fail. What they really have to be worried about however is not early mistakes, but rather their ability to convince people they now have a grasp on the overall dilemma and can adjust at the right places to bring about broad cures which greatly influence the 80% of the population which drives the economy. It would be a political disaster as well as a economic one if after all that is said and done the banks and insurance companies were cashed up and the rest of the working population was left with a pig.

Bottom Hopes

Construction of the bottom continues today as back filling is the main feature. Several programs run here which indicate momentum, based on Nov 5th and continue to signal an upturn. Though they are not as strong as previous turns, they have had a move in the right direction.

The Treasury and Fed have thrown just about every conceivable trick at the market lately to help the banking and insurance industry from imploding. These creative measures need to work sooner than later.

Money For Nothing Chicks For Free

Markets strong this AM with CITI bailout news and ahead of Obama's announcements regarding his economic team at mid day today. Last week's action saw a confluence of potentially unprecedented governmental future funding dilemmas as the realization of Japan like economic conditions of the 80's and 90's were becoming evident. Realization that overnight rates will probably go to zero after the first of the year with three month T bill rates reaching their lowest level, just above zero, last week. The world does not really want US assets unless they are treasuries. The Fed is in effect flooding the world with dollars and will do so aggressively for the foreseeable future as it aims to liquidfy the transactional financial pipelines. A world where negative interest rates requires you to pay to save and get paid to borrow, especially if you have a supply of treasures, is to say the least a bit upside down.

Hedged Out

Interest rate futures had there single biggest range day since 1987 yesterday as another component on the capitulation check list was marked off. Big 3 negotiations have been kicked down the road but some sort of re-balancing with design performance mandates will be put into place before or shortly after the new administration takes office. Hedge funds, a major contributor to the high days in stocks, are now down to a mere 17% exposure to stocks according to Bloomberg.

Connecting these huge daily trading ranges is the topographical feature of an expanded bottoming process. Filling in the bottom is made more interesting by the lack of any clear vision as to a national recovery plan especially since the Treasury and Fed have been anything but transparent so far to date. The Obama folks as of yet have not tipped their hand in a strategy, probably reasoning there is little to be gained from presenting a plan that they are powerless to enforce.

So by and far the key market participants are adjusting by liquidation and trying to figure out how to get into the G's pants. Insurance companies have developed a plan to buy small banks to enable them to qualify for Tarp or in-kind funds. Hedge funds as mentioned are cashing up by liquidating not only stocks but by eliminating giant positions in commodities which accounted for the vast majority of the idiocy play called developing world demand.

Down As The Absurd

The bulls are bailing. The bears who rode the market down and starting buying in October are bailing. Down as the absurd has finally reached a thunderous capitulation where even the elderly would be run down if they were standing in the exits. The play by play business talk personalities have scripted themselves into a drama which is more thrilling than the clever put downs of the bears they played for years. A new category for the Emmy awards could read, Best Prone to Hyperbole in a Daytime Market Series.

This is not about blaming the messenger. It is about how little knowledge these tv personalities have on a daily basis in identifying and disseminating important business analysis and market behavior. What was wrong with Wall Street was hardly ever an issue during the bull run. What was right about judging risk correctly was mundane. Now the shit is hitting the fan and they are helping to fan it. These shows have always perpetuated the great analytics employed by Wall Street which has always come down to two things; buy it and hold it. Important analytics identifies risk and changes direction enough correctly so that when adverse events do occur, there is plenty of cushion.