January 13, 2009 Edition

Good Morning All,

Markets have not had an up day since last Tuesday when the latest 20% plus rally reached overbought proportions. This serious surge, which began off the November 20th lows, appears to have contained more than just an index advance, as its final weeks included some interesting moves among the mid and small cap stocks. So now we have seen a double Autumn bottom followed by a rally, followed by a bout of profit taking...so what is next.

It is very difficult at this juncture to make a great case for a major economic recovery any time soon, so we won't. We will however note that in all previous modern world recessions or depressions neither China nor India was a major player, a situation that lends itself to a serious view that it indeed may be different this time. We would also wish to make much of several other important indicators, ones that have been discussed in previous letters and monitored by yours truly and thousands of others. First let us note that the TED SPREAD has recently fallen under 100 basis points after having reached 364 following the Lehman debacle. LIBOR has dropped under 1% as well, its lowest level in years. Without getting into the details, it is sufficient to suggest that credit markets are loosening, the first and most important step on the way to recovery. On the international front the noticeable drop in the U.S. trade deficit and the rise in its Canadian counterpart can be easily explained...think energy. Meanwhile though the Baltic Dry Index that monitors shipping has risen sharply from its October lows. Okay, so before I put many more of you to sleep let's get to the guts of the issue at hand.

For those of us with exceptionally strong stomachs who watched the final Bush press conference yesterday and likely had a number of different reactions, these were mine. Revulsion, not pity for a man who should never have been allowed to hold a serious public office. An ignorant, incurious asshole who doesn't yet understand what he never understood. A man-boy who presided over the worst administration in American history and still believes that historians will exonerate him. From deregulation to Iraq to Katrina and the devastated world economy this moron knows no shame and feels little remorse for the mess he has left behind. Not for the economic terror we are now experiencin', not for the millions of dead, maimed and displaced Iraqis whose lives were imperiled, and not even for the American regular soldiers and reservists who will spend the rest of their lives with missing body parts or fractured minds. I am filled with disgust when I think that neither he nor his cronies nor his puppet masters will ever spend a moment in Abu Ghraib....not even a week of soft time at a country club prison.

In March of 1933 Franklin Roosevelt and the people were so invested with confidence and hope that a major market rally ensued. Next week another sea change will take place in America and I would expect not less but more of a positive public reaction, because if changing a George Bush for a Barack Obama cannot inspire an American revival, I don't know what can. Let the Renaissance begin.