Ol Time Religion
Research for Online Investors

by John Dalt

4/18/11

The market got a dose of Ol’ Time Religion this morning. S&P cut the outlook for U.S. debt to “Negative” from “Neutral.” During morning pre-market trading, the DJI took a quick 100 point drop. The White House rushed spokesmen out to downplay the significance of the change.  It seemed like a replay of an old movie, "I am shocked, shocked to find that gambling is going on in here..."

Austin Goolsby said, ‘This is a political statement by S&P. The President and Congress agree how important it is to address the budget deficits; it is just a matter on where the cuts are applied. Moody’s has not changed their outlook on U.S. debt.’

His statement was like a lion and gazelle recognizing that dinner time has arrived, it doesn’t mean they agree on the menu!  S&P’s change in outlook means they may have to cut the U.S. AAA credit rating in next three years.  S&P handicaps a one-in-three chance that a downgrade will occur. According to Reuters, Mary Miller, Assistant Treasury Secretary for financial markets said, Even though I don't think an actual downgrade would occur, in this very sensitive or vulnerable time for the U.S. dollar, it's enough to spook investors from holding or buying U.S. dollars."

Earlier this morning, China raised the reserve requirements on their banks.  Their economy grew 9.7% in the first quarter.  The government is trying to slow inflation in food and real estate by restricting the availability of money.  CNN reports that consumer prices in China surged 5% in the first quarter.

We have documented the tight rope German Chancellor Angela Merkel has to walk.  As Europe’s largest economy, Germany carries much of the weight for bailing out eurozone countries.  This is not popular with voters, and her party has been losing local elections in the past few months.  Another left field event happened this weekend.

While the European Central Bank (ECB) and the International Monetary Fund (IMF) are in Lisbon negotiating a rescue package for Portugal, there was an election in Finland.  The “True Finns” party made big gains on a platform that is skeptical of bailouts of other eurozone countries.  Finland has a vote on any bailout package proposed for Portugal.  Germany’s Merkel may finally have an ally in applying some discipline to the bailout mechanism.

The G-20 Finance Ministers met from Thursday to Sunday in Washington.  We don’t trust it.  Anytime this many world improvers get together, it is with one goal in mind.  What can we control and how do we do it?  The U.S. administration is defenseless with these bunch of jackels.  The Finance Ministers decided on a regimen of reviewing the domestic policies of the world’s seven largest economies.  How much risk does each pose to destabilizing the global economy?

The reviews will be conducted by the IMF, with results reported back to the G-20 meeting in the fall.  Guess which economy is at the top of the list?  Turbo Tim Geithner, U.S. Treasury Secretary said on Saturday that the U.S. welcomed “continued IMF surveillance of our fiscal and monetary policies.”  What would Ronald Reagan have said?  Did I mention, Tim Geithner was a former IMF official?  Just another reason, along with being a tax cheat, he should have been disqualified from serving in the administration.

Earning season kicks into high gear this week with financials and twelve of the Dow 30 stocks reporting.  We expect more volatility, a present for the weak hearted!

Quote:
To the GOP establishment…We didn’t elect you just to rearrange the deck chairs on a sinking Titanic. We didn’t elect you just to stand back and watch Obama redistribute those deck chairs. What we need is for you to stand up GOP and fight!...The GOP needs to learn to fight like a girl.---Sarah Palin in Madison Wisconson.

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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