OK. Please do not think I am going for a hysteria angle here, but in line with the whole mark-to-market piece I wrote the other day, my mind is on some accounting stuff. Why, I donât know, but it is. And it suddenly made sense what was bugging me: statistics are whatever one wants to make of them. And whenever one gets bureaucrats involved, statistics can be painted however one wants to paint them. For instance, the Congressional Budget Office of the U.S. Department of Treasury reported that the federal budget deficit in 2008 was $455 billion. However, the official budget deficit is calculated via the cash method whereas the ârealâ deficit was $5.1 trillion because all tax receipts including Social Security tax receipts are used to pay government liabilities on a real-time basis. Ergo, utilizing the cash method, the federal government does not set aside any consideration for future Social Security and Medicare benefits in the year in which those benefits will eventually be recognized! Furthermore, this does not reflect monies from the TARP program because it was technically approved after the close of the fiscal year! Thus, as noted in previous pieces, the U.S. Treasury is dependent upon foreign buyers (primarily China and Japan) of its bonds to continue to purchase the debt because there are no funds held in reserve for Social Security and Medicare obligations that are earned annually. Think about thatâ¦the taxes collected are going to pay current debt rather than being set aside for people who are supposed to receive Social Security later. This means that according to the â2008 Financial Report of the United States Governmentâ shows that under true GAAP accounting that the total deficit is now $65.5 trillion- this number exceeds current total world GDP! Thus, the federal government is ostensibly bankrupt which means they can either slash social benefits (not going to happen), raise taxes (not going to happen), or print more money which devalues the currency a bit and eases the stress of the whole thing plus allows the government to cover the cost of the stimuli programs. Thus, whether one feels the government should be involved in this whole credit morass problem, be well aware as you day trade that there are potentially much bigger problems down the line than what we can even envision at this point which may well be traced back to the events of the current time. Yet these problems which may plague the nation/world in 2040 and may be increasingly discussed by economic and political pundits in the next few days/weeks have nothing to do with day trading stocks on any given day in the year 2009. Overnight, markets in Asia were widely mixed with prices up as much as 1.5% in Hong Kong to down 2% in Tokyo. In Europe, markets are generally lower across the board to the tune of 1% to 2%. Domestically, futures are sharply lower following in Europeâs footsteps with renewed worries reasserting themselves; for instance, last night, Freddie Mac indicated it will need another $31 billion else it will be insolvent. With stocks trading in a narrower range yesterday and closing in the middle, it makes trading trickier today from the get-go. Look for a sloppy session overall, but an interesting one. Financials will likely tell the tale one more time again so if they get a bit of a bid as the morning progresses, go with it. it is also very worth keeping an eye on the mark-to-market discussions occurring today because any major news out of that Congressional panel will have a direct impact on stock prices today. But, all else equal, it will likely be very choppy with a slight downside bias. Reiterating- Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea. If the whole story is not there - If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified- Good- The following stocks have good news and/or a strong technical pattern MW- great earnings HOTT- decent earnings COF- closed just off the high of the day after being discussed negatively early in the morning by a Tier 1 firm AXYS- looking to put itself up for sale- wants 60 for itself (thatâd be nice, wouldnât it?) EBAY- in a wide-ranging conference call, among other things, the CFO said he was âmiffedâ at the current stock price of EBAY LZR- continued its recent rally in closing near a high THS, TSM- on âMad Moneyâ last night EJ- decent earnings and raised revenue guidance for next quarter Bad-The following stocks have bad news and/or a weak technical pattern JAS- bad earnings; missed on quarter MCK- closed near low of day after Moodyâs noted it may cut its rating on MCK as MCKâs business substantially comes from RAD (nearing bankruptcy) NCS- closed near low of day amid balance sheet concerns after posting poor earnings TBSI- closed near dayâs low after discussing balance sheet trouble which may put it in violation of debt covenants NVLS- lowered guidance for quarter CMTL- renewed its Tuesday decline in closing near a low NTCT- trounced on worries about the companyâs outlook; they are giving a presentation today WH- crushed on bad earnings ESRX, ABC, MHS, AET- healthcare stocks very weak yesterday; most closed at dayâs lows if not trend lows POT, AGU, IPI, CF- German fertilizer entity K+S sees significant sales and earnings drop in 2009 Earnings: THURS MAR 12 BEFORE EJ PVX SFD TLB VIP THURS MAR 12 AFTER ARO HIBB ZUMZ Good luck today. Erik R. Kolodny
You know, Erik....a survey conducted in 2002 showed that 91% of all statistics are made up. Thanks again for the daily game plan and good trading today.
Erik comes here every day like "clock work" and takes time to write a very informative piece for everyone to read and hopefully gain insight...Erik is a stand up guy!
Thaks...I try. I am certainly not always right, but I certainly try to set u pa game plan...like today, my thought was that we'd stay a bit lower, but the financials did gain a bid per what I said so I went long a host of them as they got positive onthe day after opening lower. I simply try to set a framework and hope I am of help.