Morning Report: Tax Gift Coming, Buy Stocks Now!
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(Stocks in article: NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, NYSE: NYX, NYSE: SDS, NYSE: GE, NYSE: IBM, NYSE: SLB, NYSE: S, NYSE: UBS, NYSE: DB, NYSE: MOT, NYSE: NOK, NYSE: MCO, NYSE: ABK, NYSE: MBI, NYSE: MHP)
Not to be upstaged, the recently returned from the Middle East, President Bush, will add his two-cents today regarding fiscal stimulus. Hank Paulson warmed up the market this morning with his announcement that Bush would have something to say later in the day. He's not likely to go into much detail, since he has the perfect opportunity to help the next Republican nominee by offering his plan in his final State of the Union Address on January 28. We expect Ben Bernanke's Fed could have something important to report the following day, and we believe by the end of January, the economy could receive the aggregate of 100 points of rate cut.
Our hope is aggressive, and Ben's own words yesterday seemed tempered closer to 50 points. If the stock market were to weaken sharply ahead of the scheduled FOMC announcement, we expect the Fed would move to cut rates 50 points in emergency meeting and then follow it up with another 25 points on the 29-30th. The market needs 75 to 100 points at this point to solidify. We have reached important technical support, and election year incentives should offer fiscal stimulus in the form of significant tax rebate or other gift to American tax payers in the low to middle class range.
Rumors are focused on a tax rebate, similar to Bush's gift in 2001, but bigger. We are looking at a rebate of $500 to $800 dollars, and the possibility of the temporary elimination of the 10% tax bracket. This would be well-served and appreciated by Americans. While we admit to being early again, we expect the stock market to begin to anticipate action and start its move higher from here. So, BUY!
ECONOMIC REPORTS
At 10:00 a.m., the Conference Board reports Leading Indicators for December, with Bloomberg’s surveyed economists seeing a 0.1% month-to-month deterioration. This compares to a 0.4% decline in November, again consistent with economic softening. Also at 10:00, the University of Michigan’s Consumer Sentiment figure for the month of January is seen at 74.7, compared to 75.5 in December.
Bond Insurance Catastrophe
Shares of Ambac (NYSE: ABK) and MBIA (NYSE: MBI) tanked seriously yesterday. Moody's and S&P look set to further impact the financial system, as news hit the wire that Moody's (NYSE: MCO) might downgrade the insurers. This would put $2,400 billion of municipal and structure bonds insured by these firms at risk of downgrade and lead to more writedowns at many financial firms. Some of Merrill Lynch's disclosure yesterday included writedowns related to this business. This is where Hank Paulson needs to make a phone call or take the CEO's of S&P and Moody's into a back room of the White House and beat them silly. It's amazing how well the rating agencies have skirted retribution thus far, and some serious penalties need to be paid by these firms for the negligence that seems apparent.
On a personal aside, I ran into a fan on the street yesterday, while traversing downtown Manhattan. This marked the first such street recognition, and I acted more like a fan than the almost celebrity I'm far from being... Somehow, I always expected it to happen in Astoria, where I shop for olives and other Greek specialty foods, but it seems fit it happened around Wall Street. Want to give a shout out to Steve, and express thanks for your loyal readership.
Not to be upstaged, the recently returned from the Middle East, President Bush, will add his two-cents today regarding fiscal stimulus. Hank Paulson warmed up the market this morning with his announcement that Bush would have something to say later in the day. He's not likely to go into much detail, since he has the perfect opportunity to help the next Republican nominee by offering his plan in his final State of the Union Address on January 28. We expect Ben Bernanke's Fed could have something important to report the following day, and we believe by the end of January, the economy could receive the aggregate of 100 points of rate cut.
Our hope is aggressive, and Ben's own words yesterday seemed tempered closer to 50 points. If the stock market were to weaken sharply ahead of the scheduled FOMC announcement, we expect the Fed would move to cut rates 50 points in emergency meeting and then follow it up with another 25 points on the 29-30th. The market needs 75 to 100 points at this point to solidify. We have reached important technical support, and election year incentives should offer fiscal stimulus in the form of significant tax rebate or other gift to American tax payers in the low to middle class range.
Rumors are focused on a tax rebate, similar to Bush's gift in 2001, but bigger. We are looking at a rebate of $500 to $800 dollars, and the possibility of the temporary elimination of the 10% tax bracket. This would be well-served and appreciated by Americans. While we admit to being early again, we expect the stock market to begin to anticipate action and start its move higher from here. So, BUY!
ECONOMIC REPORTS
At 10:00 a.m., the Conference Board reports Leading Indicators for December, with Bloomberg’s surveyed economists seeing a 0.1% month-to-month deterioration. This compares to a 0.4% decline in November, again consistent with economic softening. Also at 10:00, the University of Michigan’s Consumer Sentiment figure for the month of January is seen at 74.7, compared to 75.5 in December.
Bond Insurance Catastrophe
Shares of Ambac (NYSE: ABK) and MBIA (NYSE: MBI) tanked seriously yesterday. Moody's and S&P look set to further impact the financial system, as news hit the wire that Moody's (NYSE: MCO) might downgrade the insurers. This would put $2,400 billion of municipal and structure bonds insured by these firms at risk of downgrade and lead to more writedowns at many financial firms. Some of Merrill Lynch's disclosure yesterday included writedowns related to this business. This is where Hank Paulson needs to make a phone call or take the CEO's of S&P and Moody's into a back room of the White House and beat them silly. It's amazing how well the rating agencies have skirted retribution thus far, and some serious penalties need to be paid by these firms for the negligence that seems apparent.
On a personal aside, I ran into a fan on the street yesterday, while traversing downtown Manhattan. This marked the first such street recognition, and I acted more like a fan than the almost celebrity I'm far from being... Somehow, I always expected it to happen in Astoria, where I shop for olives and other Greek specialty foods, but it seems fit it happened around Wall Street. Want to give a shout out to Steve, and express thanks for your loyal readership.
Market-Moving News
- MarketWatch: Asia Mixed
- FT: European Shares Hit by Credit Fears
- FT: Bond Insurers in Jeopardy
- AP/Yahoo!: Paulson Predicts Quick Stim Plan
- AP/Yahoo!: Bush to Discuss Stimulus Today
- ECONOMIC REPORT 10:00 Leading Indicators December (Consensus: -0.1%)
- ECONOMIC REPORT 10:00 University of Michigan Consumer Sentiment (Consensus: 74.7)
- CNBC: Lacker Says Rate Cuts Quite Possible
- Platts: Crude Stabilizes
- Forbes: The Other Green Engine, Diesel
- SA: China Grows Into World's Largest Internet User Market
- Bloomberg: U.K. Retail Sales Drop
- Yahoo! Earnings Calendar
- AP/Yahoo!: GE (NYSE: GE) Q4 Meets Views
- CNBC: IBM (NYSE: IBM) Boosts '08 Outlook
- AP/Yahoo!: Schlumberger (NYSE: SLB) Profit Rises
- Bloomberg: Sprint Nextel to Cut 4K Jobs (NYSE: S)
- AP/Yahoo!: NYSE (NYSE: NYX) Gobbles Up AMEX
- TheStreet: Cell Phone Sector on Hold
- Bloomberg: Bush Gets Iranian Sanction Help from UBS (NYSE: UBS), Deutsche Bank (NYSE: DB)
- Greek: Buy Investment Banks
- Greek: Sunset for Solar Stocks
- Economist: The Geopolitical Week Ahead
- Iran Daily: Tales from the Dark Side
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posted by The Greek | 9:30 AM
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