Wednesday, December 17, 2008
(Cont'd from above)...

Jim (cont'd):   

Then, there's ag... short for agriculture... which also had a great day... even the last half hour downturn, after Obama picked Tom Vilsack, the former governor of Iowa... He's the man, by the way, in the state that pushes the idiotic ethanol policy... the one that jacked up the price of food 30%, for 3% of the energy use... But, then again, Iowa did go first in the primaries to be for Obama, so of course, the Secretary of Agriculture seems easy...

That's why farm equipment companies like Deere (DE*) and the fertilizer companies like Potash (POT) and Mosaic (MOS) totally rocked today...

And did you notice the alternative energy plays... yeah, that's an Obama thing, right... First Solar (FSLR) was up 12% today... Trinity (TRN*), the railcar company that makes windmill towers... up gigantically. It's kind of like the old E.F. Hutton ad... When Obama speaks, others listen... and, in this case, the market listens.

Now, there's only one other person who moves stocks like Barack Obama... and that's Benjamin "Booyah" Bernanke...

Part of the reason why we held out for the day is that it's dawning on people that the Fed finally means business. Remember the "Malcolm X" market... by any means necessary...

Bernanke's going to take your mortgage rates down to 4%... I'm telling you, that's where they're going to go... He's going to make it so that you've got to buy a house... maybe a couple of houses. That's why I think KB Home (KBH), Toll Brothers (TOL) and Lennar (LEN) were all up huge. That was the best-performing cohort in the market, the housing stocks...

Bernanke made it possible for banks to make money, by borrowing overnight for next to nothing... and just buying 1-year T-bills... Hey, the banks should make fortunes right now and, at long last, they have a way to rebuild capital that isn't just from the government, thanks to the impending housing boom, their mortgage portfolios should come back to life... June 30th... Hey, need I reiterate?... We're getting closer and closer... to my day... 196 days, and housing bottoms... I feel stronger than ever, as I do everyday...

That's why I believe Goldman Sachs (GS*) was up huge again today, after that, what was supposed to be a miserable quarter, and MS was up big, even though that was supposed to be an absolutely horrible quarter... This is what I call "the last bad quarter syndrome"...

The Fed's actions should make these awful portfolios of mortgages come back from the dead. And, by cutting rates so much, the Fed has pressured the dollar down versus foreign currencies. That is going to be fabulous for exports. All day today, I heard people gripe about... we have a weakening dollar... and I have a word for those people... It's called "wrong."

See, the industrials are going great guns with this... also the drug stocks... they were en fuego, because of the weak dollar. SGP, hitting levels it hasn't seen in ages. What do I like?... What do I own for my charitable trust, ActionAlertsPlus.com?... I like JNJ. That's the one to pull the trigger on. It's the most levered to the weak dollar, and hasn't caught fire yet. Maybe you're forgetting it. Maybe you're not remembering it. Maybe, when the market opens tomorrow, you'll think of it, if you remember that JNJ is your play...

Finally - and this is the best news I've heard in ages - unlike Bernanke, Cox and Paulson... it looks like somebody in the Obama administration actually watches the show... that's right, we have traction...

The Obama people are talking about implementing my government-run trading desk to get rid of the trillion-dollar logjam of mortgage-backed securities in the system... All these mortgage-backed bonds... they're all illiquid... they don't trade. They just sit on the balance sheets, causing immense pain for anybody who owns them. My plan, and now it looks like Obama's plan, is to have the government literally set up a trading desk, and make a two-way market, where it could buy and sell these bonds. You've got to remember, even though everyone always called these pieces of paper "toxic" and "poisonous"... at the right price, like everything else, they're good... And, I've got to tell you, right now, they have become the single-best play on the Fed fixing the housing market with lower rates and my call that housing will bottom in the middle of next year...

The problem, in my opinion, is that we don't know what these bonds are worth. The sellers want 70, the buyers want 30. Those are approximations. My plan is to have a trading desk buy that bond at, say, for like 49-51... tighten the spread... that's what we know as tightening the spread... and create a real valuation for things... even a floor... that will be recognized by the brokers and will finally allow these bonds to trade.

That would be terrific if they traded... terrific for the banking system... something that dissembling (Treasury Secretary) Hank Paulson doesn't seem to get. But, "brilliant" Larry Summers, obviously does understand.

Here's the bottom line...

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The Bottom Line!:     How did this market hold up for most of the day, even though it was up 300-plus yesterday, until it was kneecapped half an hour into... right before the close?... How come there were so many pockets of real strength?... Well, between the Obama infrastructure and agriculture stocks ward, and Benjamin "Booyah" Bernanke giving a boost to housing, the banks and the weak-dollar plays, not to mention the stocking stuffer of my trading desk plan to get rid of illiquid bonds, there should be something for everyone this holiday season. You just have to know where to look.

[verbatim recap]

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