Chinese Gold, U.S. Debt
Research for Online Investors

by John Dalt

4/27/09

Rick Waggoner was canned at GM by the administration.  Now add insult to injury, the employee stock-purchase plan has sold all GM shares.  Regulatory filings show that the financial manager sold all GM shares in favor of short-term financial instruments.  By May, the GM Common Stock Fund will be eliminated as an option for employees.

This week the market faces minor reports on Tuesday of Consumer Confidence (it is supposed to be up) and the CaseShiller Home Price Index (expected to continue to decline), but the big day is Wednesday.  We have first quarter Gross Domestic Product (GDP), which is expected to decline by up to 5%, announced before the market opens.  In the afternoon, the Federal Open Market Committee (FOMC) will issue their report with an interest rate decision.  The rate currently is 0%-0.25%.  Will the morning GDP announcement affect the FOMC?  How will the market react if the GDP is worse or the FOMC is non-responsive?  Wednesday is setting up to be volatile.

The Treasury is selling over $100 billion in two, five and seven year notes today through Wednesday.  Check out the TBT, it is the Ultra Inverse 20-year Treasury ETF.  If it is down the Fed is buying, if up they are not buying enough.

The Chinese State Administration of Foreign Exchange announced Friday that they have been buying gold over the last five years, almost doubling their reserves.  China now ranks fifth in the world of nations that report their reserves.

Oh! Bama has asked his cabinet to come up with ways to save $100 million.  He asked them to come back in two months with their best ideas.  The U.S. government saving $100 million out of a $4 trillion budget is like saving the price of a Big Mac from a family budget of $100 grand!  Atta boy.

Natural Gas set a new low today. The administration is working to restrict miner’s ability to remove mountaintops, and restrict placement of tailings (their waste) close to any body of water. All coal miners are off today. Natural gas could be a big winner as the summer heat raises demand for electricity. Natural gas fires many peak demand generation plants, at these low prices it can be used for base load power.

Rumors are that of the 19 banks subjected to “stress tests”, one bank requires additional capital. They will have six months to raise cash, or will need more from the government. The one too big to fail, and considered to be in the worst shape is Citi (C). Financials were down today. This fits with the release of a tentative plan for the government to exchange their preferred shares in Citi for common stock. This bookkeeping entry would have the effect of more regulatory capital without actually costing the treasury any money they may not have. Congress does not appear willing to enact another TARP program of grants to banks after stiff arming the Detroit automakers and unions.

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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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