China Primes the Pump
Research for Online Investors

by John Dalt

03/04/09

Before market opening this morning, it was reported China may double their $585 billion economic stimulus plan.  This created a positive bias to the market opening.

Today was the first day that financials did not lead the market.  As we climbed this morning, financials languished.  This is foreboding to me.  The real estate crash and resulting financial meltdown are what have driven the market down.  In the past, the financials have always led the market higher during bear market rallies.  For the market to unhinge from financials now seems impossible.  Bank stocks will continue to be a weight around the neck of the market pulling it lower until this sector is fixed.  The remedy can be either government action, or allowing weak players to enter bankruptcy and flush the bad out.

Oil climbed before the EIA report came out.  Crude inventory was drawn down, but gasoline and diesel inventories were higher. It surprised me that crude did not climb immediately on this news.  The higher inventories of gasoline and diesel predict slowing sales to refiners.  Refiners bought and refined more crude in the past week to capitalize on the low price of crude.  If the smartest guys are buying now, it may be time for us to look at USO for an intermediate term holding.  Do you really believe crude oil will be below $45 in December?  Crude did climb later in the day to close at $44 per/barrel.

We sold out of GE last week at a small lost because of our discipline using ‘Trailing Stop Losses’.  It was painful at the time; we actually let it go a little past our stop.  Today it is down another 30% from where we sold it!  This is a great demonstration of why a ‘Trailing Stop Loss’ is so important.  It kept our money intact to play another day.

I have posted a new report on Gold under Investor Resources. It is an interview with Sascha Opel, former editor of the First Newsletter. He has some good insights. You can read it here.

I wrote yesterday about the developing banking problem in Eastern European countries. These problems are caused by currency fluctuations against the Euro. Today Germany killed an initiative to provide aid to these countries. Germany is facing elections later this year, and aid is not popular. Ukraine is the one country that could cause a lot of instability; it has a long common border with Russia. Ukraine’s President is pro western, but his main antagonist is pro Russian. Putin is trying to woo Ukraine back under Russia’s influence. This will play out over the next few months, and have implications for the future of Europe. Russia is short on oil dollars right now, but still wants to be a world player.

February was the worst month for the U.S. auto industry in 27 years. The UAW bosses are having a retreat in Florida at a resort, while GM and Chrysler are asking for more money from the government.

"We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."
                                                               - Sir Winston Churchill

I want to thank you for subscribing to our MarketWatch newsletter. I try bringing you information everyday that helps you as an investor. I apologize for any bad grammar or dangling participles. I write this on the fly, during the market open, and get it to you shortly after market close. Sometimes my proof reading is more like poof reading!

I found this picture a day late to include with the revelation that congress is working on a gun control bill.  You can read a copy of the bill here.  Pass it along to some of your friends.  C.F. wrote, he could not believe this was going on, and the N.R.A. has not sent out an alert.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future. 

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