Options Expiring, Market Jumping
Research for Online Investors

by John Dalt

3/16/09

Christine Romer, Chair of the White House Council of Economic Advisors, appeared on NBC’s meet the Press on Sunday. Please Mr. President spare us any more torture listening to this ‘happy talk’ bureaucrat. She reminds me of a high school home economics teacher (no slight intended).

One of our holdings in the Long-Term Portfolio announced their quarterly dividend.  Based on today’s stock price, this company is returning 15%, and we will make money on a higher stock price for a capital gain!  Our next great recommendation pays a 22.5% dividend that is partially shielded by tax deductions, plus upside potential of capital gains in excess of 300% when investors rush back to this cash cow.  You can get in on these, and other great investments here. 

February’s Building Permits and Housing Starts are released tomorrow.  A larger drop than expected could throw cold water on the market.  CPI (Consumer Price Index) also comes out Tuesday.  CPI along with PPI (Producer Price Index), which comes out Wednesday, may signal inflation is starting to creep into the economy, which would be good for commodities.  These also may lead the FOMC (Federal Open Market Committee) to firm up interest rates on Wednesday.  We are presently operating at 0% to 0.25%; expect the FOMC to pick a rate, probably 0.25%. 

FSBO (Financial Accounting Standards Board) is signaling an adjustment to ‘mark to market’ rules in time to affect first quarter reporting.  Some clarification of rules for assets that have value not recognized by the cash market would have a profound impact on the balance sheets of most large banks.  These ‘toxic assets’ may have a value of 75% if held to maturity but the marketability may only be at 25%!  A bank holding $100 million (face value) of mortgage securities may have written down $75 million, but add back $50 million to their balance sheet in a few weeks.  This could be powerful for the financial sector.  Many argue that this is just a ‘bookkeeping entry’.  The truth is these securities were always worth more than the banks were able to value them at, because there is not a liquid market for them. 

The SP500 was up over 770 and then fell back to close at 753, just a little lower than we started this morning.  This is not a big deal; it just reminds us that the bear market is not over.  The chance of bad news this week, plus options expiration, makes traders nervous.  Traders are working the market up and down for quick profits.  Positive bias for financials should power us higher, but as the market goes up, traders are quick to take profits at the first sign of bad news. 

You can access the Omnibus Appropriations Bill here.   We the first source on the internet to have this link available.   You may want to look through it, just for curiosity.  You can also access the stimulus bill through our website here.  This copy has handwritten notes and strikeouts on it.  Congress was in a hurry to get it passed before the public discovered their shenanigans.

“ A government big enough to give you everything you want, is a government big enough to take everything you have.” 

                                President Gerald Ford 1976 

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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