Indiana Jones And The Search For The Market Bottom

You don't have to be a world class archaeologist to figure out what's going on in the Dow this week. Earlier I warned that the Dow would indeed test the 8,000 mark again, and it did at the end of yesterday's session falling to just under the 8k level.

With an entire night to digest the numbers, Dow futures are having another meh day. It could go either direction, and this may actually be a vitally important day in the markets. If the Dow rallies once again or stays around the opening level then it's another sign the 8k level is the bottom for now. There's evidence that the market really wants to stay above 8,000. News this morning that Saudi prince Alwaleed Bin Talal Alsaud increased his stake in Citigroup to a full five percent of the company may be the rally point for today.

If it sinks big time however like yesterday, then all bets are off.

Plenty of evidence is there on the latter. The Fed is starting to see evidence that deflation may be the threat, not inflation.

Five years after Federal Reserve Chairman Ben S. Bernanke helped stamp out the risk of deflation, the threat is returning as the financial crisis and a worsening economic slump pull inflation lower.

Fed policy makers now predict the U.S. economy will contract until the middle of next year, according to minutes of their Oct. 28-29 meeting released yesterday in Washington. Government figures showed that consumer prices excluding food and fuel costs fell for the first time since 1982 last month.

The minutes, along with a slide in financial stocks to the lowest level in 13 years, increased the odds that the Fed will cut its benchmark interest rate next month. Bernanke may also need to revisit the unorthodox policy options, such as purchases of U.S. government debt, that he outlined as a board member in 2002-2003, Fed watchers said.

``The Federal Reserve put deflation back on the table as a significant policy concern,'' said Vincent Reinhart, former director of the Fed's Division of Monetary Affairs, who is now a visiting scholar at the American Enterprise Institute in Washington. ``There does not appear to be any barrier to lowering'' main rate below the current 1 percent level, he said.

Deflation, or prolonged declines in prices, hurt the economy by making debts harder to pay off and lenders more reluctant to extend credit. Japan is the only major economy to have suffered the phenomenon in modern times.

Things could go either way, short term. Long term however keep in mind things will get worse...much worse. We're getting closer and closer to the "Stagpression" scenario, a multi-year period of recessionary contraction that will cycle around the globe.

StupidiNews!

• The Obama cabinet continues to take shape with Arizona Governor Janet Napolitano as Homeland Security Secretary.
• If the GOP does have a leader, it's House Minority Leader John Boehner.
• It's all but official: Missouri got it wrong on November 4th for the first time in 48 years.
• After 17 years, Guns N' Roses has a new album out and it's launching on...MySpace?
• US corporations want a major rollback of pension plan rules to stay afloat.

Obamacare Is A Go

While much has been made of Obama's selections for AG and SecState, possibly the most telling and potentially important cabinet appointment was leaked today, that of Health and Human Services Secretary: Tom Daschle.

As Ezra Klein points out, this means Obama is dead serious about getting Obamacare signed into law.

CNN is reporting that Tom Daschle will not only be Health and Human Services Secretary, but also health reform czar under the Obama administration. This is huge news, and the clearest evidence yet that Obama means to pursue comprehensive health reform. You don't tap the former Senate Majority Leader to run your health care bureaucracy. That's not his skill set. You tap him to get your health care plan through Congress. You tap him because he understands the parliamentary tricks and has a deep knowledge of the ideologies and incentives of the relevant players. You tap him because you understand that health care reform runs through the Senate. And he accepts because he has been assured that you mean to attempt health care reform.

And I agree with his analysis 100%. Obama may be playing politics with Clinton and State, but he's playing politics to win with HHS.

Considering the seriousness he's taking this with, new tag: Obamacare.

The Whole Hillary Thing

There's two schools of thought on Hillary Clinton as SecState:

1) The Sopranos Theory -- Much like Tony Soprano did with his the relatives he had to keep an eye on, Barack Obama is wisely putting Hillary Clinton in the post where Obama appears to be the most magnanimous and the Clintons end up causing the least actual damage. If she accepts, it means:

• her fate is now tied to Obama's success,
• she can't turn around and run against him in 2012,
• Bill's legacy is on the line as much as hers is,
• she's duty-bound to implement Obama's foreign policy, not her own,
• the most popular US Presidential couple living is America's new face abroad,
• the Clintons are a lightning rod taking needed pressure off Obama,
  
• and Hillary really does want this job, and wants to do well internationally.
  

Obama's got her right where he wants her, and he knows this is the best way to neutralize Hillary Plan 2012. Keep your friends close, keep your enemies in your cabinet.

2) The Sandbag Theory -- Obama's telling the netroots on the left to go screw off just two weeks into his transition, he's going straight down the middle with this Village centrist stuff and the reason Clinton is his SecState is because his foreign policy isn't going to be different from hers. Obama's just hung a huge "Open For Business, Neocons Wanted" sign up on Foggy Bottom and his policy on Iraq is to reduce troops there so they can be deployed to Afghanistan, Pakistan, and eventually Iran. Progressives has served their purpose and now will be abandoned as Obama and the Democrats angle towards the center-right. They find out the hard way Obama's foreign policy is the same as Dubya's only with the competence and slickness of the Clintons behind it. The Left has been totally had and Obama will now be operating to stay in power and pleasing the GOP, having learned the Power of Triangulation from the master himself. The key to winning GOP support will be his Neocon foreign policy, and in the end it's Clinton's third term and Obama's going to throw the Left under the bus.

Which theory is true? I don't know, it's only been two weeks. But the arguments are there, the appointment of Clinton means "No Drama Obama" either is brilliantly tapping the Clintons, or he's already turned on the netroots.

Zandar's Thought Of The Day

Cartoon by Pat Bagley at Cagle Cartoons.

Let's not forget both sides are using the auto companies to advance their political agendas.

The GOP wants to protect auto executives and CEOs, while busting the last remnants of the UAW and ignoring global warming. The Dems want to protect the UAW while stopping global warming and attacking excessive CEO pay.

The GOP position is like the airlines, the Big 3 will emerge leaner, meaner, and stronger (never mind the airlines had to then turn to consolidation, massive layoffs, and union busting to do so.) The Dems position is that the government has to step in (never mind the Dems screamed that the auto industry was a dinosaur that deserves to die.)

The compromise will most likely save the industry...just not the union jobs. Dems will get a much greener industry, GOP will get the UAW all but decimated, and they'll each call it a win.

Unless, you know, you're an auto worker in a plant town.

Obama's AG

Many news outlets are saying this morning that Obama has picked former Clinton Justice Department #2 man Eric Holder as his choice for Attorney General, but there's one rather big blemish on his record:

Holder, 57, has a rich background within the criminal justice system as a former judge and top federal prosecutor in Washington. He is widely known within the city's legal community and for his philanthropic work on behalf of troubled juveniles detained at Washington's Oak Hill facility. If he is confirmed by the U.S. Senate, Holder will be the first African American attorney general.

For the past several years, Holder has defended private corporations as a partner at the law firm Covington and Burling. But he took on an active role in the Obama campaign as a friend and adviser to the senator from Illinois after meeting him at a Washington dinner party, and over the summer served on his vice presidential vetting team.

Holder has won praise from lawmakers on both sides of the aisle, although his selection is likely to revive questions about his failure to act forcefully to prevent a last-minute pardon of fugitive Marc Rich, who won clemency from President Bill Clinton during his last days in office in early 2001.

The Republicans are already attacking Holder on this, and the wingnuts are gleefully pointing to this as proof that "Clinton's third term" is underway and that Holder is somehow worse than disgraced Bush AG Alberto Gonzales. I leave with you with part of a speech given by Holder in 2004, courtesy of Melissa McEwan at Shakesville:

At the beginning of the 21st century, this nation faces problems that are old and that are new: racial, sexual orientation, and gender inequality all remain. … The solutions are contained within a new, dynamic, progressive movement that has the ability to inspire and motivate the people of this nation in the way that progressives have in the past. That ability exists in this room, and in the law schools, and in the courtrooms, and in the law offices around this country. It is our task to unlock, to unleash the creative energy needed to give life to this renewed movement. It is not enough for us to gather at annual meetings, to participate in panels, and to return to our communities, and be content to observe, or to passively criticize, the now dominant governing philosophy.

Quite simply, it is time to act. It is time to organize. It is time to retake the levers of government and to use them for the common good. It is time, finally, to be true to our ideological heritage. And so my challenge to you tonight is to leave this convention renewed in your convictions, and committed to using your abundant talents for the good of the citizens of this country.

So...yeah. This is one of the guys who will help Obama put the country back together, I hope. I'm far less worried about Eric Holder and Marc Rich than I am his views on the Constitution, torture, executive power and the "plenary executive", the legality and scope of how much power the Warren Terrah grants President Obama, enforcement of civil rights and voting laws, and the politicization of the Justice Department.

Even more than SecState, Obama's appointment to AG is the most important appointment he can make after the "above the law" presidency of Bush, Ashcroft, Gonzo, John Yoo, and Mike Mukasey. It was the Bush legal team (illegal team?) that gave him the cover to do all the horrendous things that he did to America like torture, like suspension of habeas corpus, like wiretapping American citizens, and it was specifically Gonzales who turned Justice into the Cover Preznitman's Ass Department.

Only after Gonzo went too far and fired career US Attorneys based on political reasons was he forced to resign. Meanwhile, current Chief Ass-Coverer Mike Mukasey has done exactly nothing to clean up Justice.

I understand that "Better than Gonzo" is about the lowest bar in the history of Presidential cabinet appointments, but Eric Holder seems like somebody actually dedicated to Rule Of Law and not Rule By President. More than any other cabinet position, it's the AG that has the most work ahead of him, and it's good to see former Consitutional Law professor Barack Obama take this seriously.

StupidiNews!

• Convicted Senator Ted Stevens has lost his re-election bid in Alaska to Democrat Mark Begich.
• Obama plans to select the first African-American Attorney General to head the Justice Department.
• Somalia is on the verge of falling to Islamic militants.
• China's auto industry wants a bailout too.
• The Sirius-XM merger's biggest loser? Subscribers from each side who have each lost half their favorite channels.

Retest And Re-Fail

Keep an eye on the markets today. The magic numbers for the Dow are 8,000 and 820 for the S&P 500. If the markets close under those numbers this week, we're in a lot of trouble. Last Thursday the markets hit those numbers during the day and then made a major rally up off of them. Over the last two days however that rally has evaporated.

We'll see what happens over the next day or two. Futures are at "meh" right now. Could be another bear market rally day, could be a cliff, could be just a day.

The Game Is Rigged

The Village is doing everything it can to limit the power of Obama, and they are doing it by forcing his hand on decisions in the Court of Public Opinion.

Both Joe Lieberman's expected survival as Senate Homeland Security chairman and Hillary Clinton's appointment to SecState are done deals now according to the Village, and it's as if they are daring Obama to do something about it.

With the auto industry bailout all but dead at this point, Obama's not looking like he's in charge of much of anything right now.

Then again...Bush is president right now, not Obama. And Obama doesn't seem to have any inclination to assert himself as the top dog in Washington.

The more things change...

StupidiNews!

• A new study shows half of primary care physicians want out of the business due to red tape.
• The biggest obstacle to Hillary Clinton's Secretary of State appointment? Bill Clinton.
• Sales of holiday gift cards are down sharply as consumers wonder if the companies will honor them should they go bankrupt.
• The Big 3 carmaker bailout seems to be out of gas.
• Movie pirates in China have cracked Blu-Ray disc's "unbreakable" copy protection.

About Face On The Bailout

The White House has all but ended any chance of saving the US auto industry, now saying it's opposed to the Big 3 bailout because the industry is no longer worth saving because the industry is no longer "viable".

The White House Monday came out swinging against a Democratic plan to aid America's ailing auto industry, as the Senate prepared to debate a $25 billion package.

"We believe that this assistance should come from the program created by Congress that was specifically designed to assist the automakers -- from the $25 billion Department of Energy loan program," said White House spokeswoman Dana Perino in a lengthy statement.

Senate Democrats want to use a different $25 billion from the financial rescue package passed last month. The White House wants to use the same amount from a loan, passed in September, to help carmakers improve fuel efficiency.

"We should not seek ADDITIONAL funding while $25 billion sits available in a program that was designed for automakers. Congress should instead amend the Department of Energy's loan program to ease the availability of those funds and relax restrictions on their use -- as long as qualifying firms make the difficult decisions to demonstrate their viability going forward," she said in a statement.

Democrats contend the fuel efficiency money was meant to help carmakers for that purpose, not to help them survive financially.

But, Perino said, there's also a philosophical argument for not allocating $25 billion from last month's program.

"Taxpayers should not be asked to subsidize private companies that are unwilling to show that they can be viable. It is clear that U.S. automakers must restructure in order to be viable," she said.

Saving white collar executive jobs at America's financial instututions? Vital to the American way of life. Saving millions of blue collar union jobs? The industry is not viable.

Republicans hate blue collar workers. They don't care if Joe the Auto Plant Worker loses his job at all. Joe the Hedge Fund Manager? We need to spend $4 TRILLION NOW, and any more would be fiscally irresponsible.

Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.

CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved.

Try $4.28 trillion dollars. That's $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources*.

Not only is it a astronomical amount of money, its' a complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government taken over roughly the last year, based on government data and new releases. Strictly speaking, not every cent is directed a result of what's called the financial crisis, but it arguably related to it.

If the White House can go out of its way to see the last major unionized industry destroyed and the jobs laid on Obama's doorstep, so be it.

Bad News, Bears

That grim economic data I mentioned down below starts off with Citigroup's expected move to lay off anywhere from 35,000 to 50,000 employees.

Citigroup Inc plans to shed about 10 percent of its global workforce, a person familiar with the matter said Friday, as the bank tries to return to profitability and faces mounting criticism of Chief Executive Vikram Pandit.

The cuts could result in a loss of roughly 35,000 jobs, based on the bank's reported 352,000-person workforce as of Sept 30. The cuts will be on top of the 23,000 jobs Citigroup has already slashed this year.

Additional reductions would come from layoffs, the sale of units and attrition, said the person.

The financial sector is getting gutted. It won't be the only sector of the economy that takes massive job loss numbers either. The stubborn belief this will be a short recession, with predictions of an unemployment rate peak of 7.5% and a recovering economy in summer 2009 are downright silly.

This is a consumer-driven recession. It will be long and painful because the US consumer drives not only the US economy but increasingly the global economy as well. If the US consumer isn't consuming stuff...who will? We don't have the money for stuff, we're tapped out, credit is drying up and we have no more money to spend.

And as US consumers save money and spend less, the recession will get worse and worse as more businesses that depend on consumption go under, taking more money out of the economy. There's no real hope for any serious recovery until the housing depression ends. That may not happen until 2010.

And by then it may very well be too late. But all that is Obama's problem now. If he's still listening to the same economists that got us into this, we're doomed.

Even so, there's little Obama will be able to do other than turn on the inflationary printing presses. When that happens, all bets are off. Bush has done too much damage to the economy. In reality the damage to our economy started with Reagan, but some say even earlier when we went off the gold standard with Nixon, and some say even earlier then that with FDR and the New Deal.

The specter of global depression is becoming increasingly likely with each week that passes.

StupidiNews!

• A week full of grim economic reports could have the markets testing new lows.
• Chinese and Indian students set record enrollment numbers in US universities this year.
• Congress and the Bush White House are headed for an interstate pile-up on the auto bailout.
• Are the Feds tracking cell phones without informing telco providers?
• NASCAR's Jimmie Johnson takes his third straight Nextel Cup.

New Day In Iraq (Again)

The Iraqis have agreed in principle to a June 30, 2009 withdrawal back to US bases and a December 31, 2011 withdrawal date of all US troops, the trick is if the Iraqi Parliament will pass the agreement or not.

The agreement sets June 30, 2009, as the deadline for U.S. troops to withdraw from all Iraqi cities and towns, Iraqi government spokesman Ali al-Dabbagh said.

The date for all troops to leave Iraq will be December 31, 2011, he said.

These dates are "set and fixed" and are "not subject to the circumstances on the ground," he said.

Twenty-seven of the 40 Cabinet members in attendance voted in favor of the agreement, said Iraqi Foreign Minister Hoshyar Zebari. One minister abstained.

The Cabinet consists of the prime minister, two deputy prime ministers, and 37 other ministers.

The approved draft will be sent to the 275-seat Parliament later Sunday, where it will be put to another vote. "There is great optimism that they will pass it," said Industry Minister Fawzi Hariri.

It's a start...but it still means another threeyears of the Iraq War for Obama. He has every reason now to speed this up as much as possible.

Spam, Spam, Recession and Spam

I'll have my Spam without so much recession in it, thank you.

The economy is in tatters and, for millions of people, the future is uncertain. But for some employees at the Hormel Foods Corporation plant here, times have never been better. They are working at a furious pace and piling up all the overtime they want.

The workers make Spam, perhaps the emblematic hard-times food in the American pantry.

Through war and recession, Americans have turned to the glistening canned product from Hormel as a way to save money while still putting something that resembles meat on the table. Now, in a sign of the times, it is happening again, and Hormel is cranking out as much Spam as its workers can produce.

In a factory that abuts Interstate 90, two shifts of workers have been making Spam seven days a week since July, and they have been told that the relentless work schedule will continue indefinitely.

Funny, our recession comes with Viking Hordes too.