Friday, January 9, 2009

It Always Ends Badly

The trouble with suffering through deep recessions is that there's seldom any respite from the continuing flow of bad news, nor is there relief from the severity of the crushing blows delivered daily to the economy and to investors.

This first full week of January provided a little bit of a glimpse of what the rest of the year is going to look like, and it isn't pretty. After going straight up on Friday of last week, the markets went straight down through the week, ending with a loud thud on Friday that sent all the major indices into negative territory for the year. Lest we not forget, the January Barometer - which has proven to be 91% accurate - says, in a nutshell, as goes January, so goes the year. 2009 is not shaping up to be very good at all.

I've actually been quite amused by the number of supposedly "smart" people who are still encouraging people to hold onto their 401k funds, keep them in stocks, "because they always rebound" and other such nonsense. Stocks are sure to bounce off their lows, but they're probably not even close to their absolute bottoms yet. The number of bankruptcies by listed companies in 2009 is going to astound even these "experts," especially the ones who said recovery will begin in the second half of the year.

Anyone currently accumulating either cash, gold, silver or all of the above will be rewarded handsomely at the end of this corrective period, whenever that is... 2010, 2011 or later.

What sank the indices on Friday was no surprise announcement. The Bureau of Labor Statistics, that august group of number massagers, pronounced on Friday morning that the US had shed another 524,000 jobs in December, and that's almost surely off by at least 100,000. The number ADP applied to December job losses on Wednesday was 693,000, and that's more believable, though the stock pushers will gladly take the "official" government number as gospel (or at least that's what they'll tell their clients), being that it's 1/3 smaller than reality.

Dow 8,599.18, -143.28 (1.64%)
NASDAQ 1,571.59, -45.42 (2.81%)
S&P 500 890.35, -19.38 (2.13%)
NYSE Composite 5,703.69, -133.45 (2.29%)

Again, the numbers surely should have surprised exactly nobody, yet the markets responded in the usual pattern of lost hope and near-desperation. They sold in the morning and sold more in the late afternoon.

Declining issues outweighed advancers by a large margin, 4714-1871, though the 5-2 ratio is hardly demonstrative of the market's true weakness. For that, two other readily-available indicators are more poignant: The new highs-new lows ratio and overall volume. New lows outnumbered new highs, 90-30, and while that margin is not great, the persistence of its one-sidedness is remarkable. As for volume, it gets weaker by the day. More and more investors are pulling out of positions and redemptions from funds are still running, at a slower pace than 3 months ago, but that's only because the overall fund balances and holders are smaller.

NYSE Volume 1,158,510,000
NASDAQ Volume 1,946,649,000

Volumes were absolutely pathetic, and they're likely to get even smaller as more players head for the benches. Obviously, those who didn't exit positions on Wednesday, did so on Friday.

Commodities made marginal moves, which is understandable, especially considering the amount of debate over President-elect Obama's thinly-outlined recovery plan, announced Thursday, and rounded beaten up and down since. Oil dropped 93 cents, closing at $40.83. Gold struggled to gain just 50 cents, closing at $855.00, though silver stood apart, gaining 22 cents to finish at $11.32 (lest I remind anyone for the umpteenth time that silver is my #1 pick for 2009).

The coming days and weeks do not bode well for investors of any stripe, unless you're super smart and super short this market. The entire nation is sluggish and on hold until the 20th of January, when the new administration officially takes over. 10 days and counting.

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