Teflon Market
Research for Online Investors

by John Dalt

3/24/11

Volume is suppressed in the markets as traders and investors look over their shoulders.  How do we keep going higher with all of the problems?  One commentator called this a ‘Teflon market.’  Nothing sticks…earthquake…ok…dubious military action….ok….credit crisis…ok.  Thank you sir, can I have another?

Portugal’s parliament was not able to agree on the austerity plan presented by Prime Minister Jose Socrates.  The Prime Minister met with the President last night and resigned.  He now heads a ‘caretaker’ government until elections are held.

This morning Fitch cut Portugal’s credit rating by two notches and warned that more downgrades may come in the next three to six months.  Yields on Portuguese 10-year bonds hit an all time high of 7.9% this morning.  Portugal has bond refundings due in April and June worth 9.2 billion euros.

Prime Minister Socrates is attending the meeting of eurozone leaders in Brussels today.  He is adamant that Portugal does not need a rescue.  He will leave it to the new government to request a rescue package from the European Central Bank (ECB) and the International Monetary Fund (IMF).

This is pure politics.  Of course Portugal needs a rescue, but the parliament would not approve the package of spending cuts to qualify for the eurozone credit guarantees.  The Prime Minister cannot approach the IMF as a ‘caretaker.’  The IMF would require the same spending cuts and tax increases the eurozone would have, perhaps even more.

The parliament has rejected this option, so Portugal must borrow at higher interest rates until a new government is in place and decides to take responsible action.  The minority parties that thought they saw a political advantage to bringing down the government will have their chance to demonstrate leadership in two months.

Me thinks they will not like the choices when they are in the majority any more than they liked them as minority!

Western planes enforcing the ‘no-fly’ zone over Libya struck deep inside the country this morning.  Government troops have entered the western town of Misrata to besiege the city’s main hospital.  Turkey told Reuters that NATO would take over the campaign within the next couple of days.  This meets Obama’s objective of handing off the military operation.

Who funds and runs NATO?  The U.S., oh well.  Rebels in Misrata said they had killed 30 government snipers that were ‘picking off civilians from rooftops.’  The African Union invited representatives from Qaddafi’s government, European Union, U.N. Security Council and neighboring Arab countries to Addis Ababa for a meeting to discuss the crisis on Friday.

With the problems in Japan in mind, CNN had a good story about the necessity of nuclear power generation in the developing world.  It is simply the cheapest way to bring power to poor countries.  China has 40% of the world’s planned nuclear projects.  They have halted all new approvals while they review safety rules and check existing reactors for potential hazards.

According to the World Nuclear Association, S. Korea plans to increase nuclear from 35% of generated power presently to 59% of the country’s needs in 20 years.  What is the world to do?  The reporter for CNN boldly says that, “Coal and renewable cannot fully meet Asia’s rising energy demand.”  We don’t disagree, but try to label our opinions as such.  China’s energy use in increasing 12% per year. World leaders know that power shortages could restrict economic growth.

To the mailbag:
John, could you give a veteran a break?  I have to pay taxes on all the gains from the Buy, Sell, Hold service!---Buy, Sell, Hold & Long-Term portfolio subscriber R.A.

John’s reply:  I can’t think of any person I would rather help make money!

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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