GDP Better than Expected!
Investment Research for Online Investors

by John Dalt

01/30/09

Pardon the headline, we need some good news. It is technically true, which should give you pause whenever you read a headline, or watch TV news.  Gross Domestic Product slid 3.8% in December. This was less than the market anticipated, but the market sank.  While GDP did not fall the 5.3% expected, wholesale inventories were higher. Building wholesale inventories are seen as negative, predicting slower GDP for the future, as inventories are worked off. Unemployment now stands at 7.2%, with predictions that jobless rates may climb to 10%.

The President scolded Wall Street for paying bonuses while taking money under the TARP (rhymes with CARP) program.  “That is the height of irresponsibility,” Mr. Obama said. “It is shameful. And part of what we’re going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility.” Chris Dodd threatens to bring John Thain before congress to explain, and wants the Congress to consider legislation for a ‘Claw Back’ of any bonus paid by recipients of government bailout monies.  I wonder if they will include Senators and Congressmen on the finance committees, since they were responsible for oversight of Fannie Mae, Freddie Mac, etc. Maybe we should cut pay for all Federal and State lawmakers that have overspent and brought us to the brink of bankruptcy. Do not forget the judges that expand government responsibility under twisted interpretations of constitutions at the state and federal level. Every year new entitlements or responsibilities are found that costs millions or billions in compliance.

The House passed a partisan $829 billion ‘Recovery and Reinvestment’ bill.  The Wall Street Journal had this chart with some of the highlights of the bill.

 How does this spending help employment?

That's $265.2 billion in givaways and campaign promises.  The President has repeated the necessity of quickly passing a rescue bill to “put people back to work”.

I talked with an old friend last night.  A decorated Marine, wounded in Vietnam.  We talked politics for a moment.  I mentioned I would bring him F.A. Hayek’s book “The Road to Serfdom”.  He asked me to study the ‘Hegelian principle’.  I thanked him; you may want to spend a little time on the internet reading a few of the listings.  Some are nuts, but you will recognize the underlying political operation.  The President said, “There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy”.   You can read a response here.

http://www.cato.org/special/stimulus09/cato_stimulus.pdf

It seems not every economist agrees.  Darn those silly facts.  Mom always taught me not to throw more fuel on a fire.  Too much money got us into this mess; will even more get us out?

Gold is going up, but feels toppy.  I am waiting for a pull back to re-enter.  Oil traded steady.  My order on the DXO did not fill at low price of the day.  I just did not feel like chasing it.  Unless there is some news to drive higher prices, next week should bring even lower oil and perhaps gold.  If the Treasury can solidify the plan for a ‘bad’ bank, the financials should take off.  When Congress passes the stimulus bill, the market will probably react favorably, and gold may go through the roof.  There was heavier volume in GLD today, but we all know what happens after a run-up.  We may be witnessing a buy the rumor and sell the news scenario.  Senate passage is almost a lock; Olympia Snow has said she would vote for it.

The Dow closed at 8000; do you have your list of quality stocks you want to add if the market dips to 7600 or even 6600?  You may want to consider PG, MSFT, BRKB, and GE.  What are your favorite blue chips to add at the low of the year.  Send ‘em here.

Question circulating on the internet:

How can 2 million people get in and out of Washington, DC in sub-freezing temperatures in two days…?

When 200,000 couldn’t get out of New Orleans in 85-degree weather with four days notice?

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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