Top Line: Another new low for the market on Thursday. For those of you sitting out there with cash, you aren't going to get much better prices than you can get right now.
Where we would like to start this evening is the Treasury bond market. There was an absolute melt up in the Treasury's today. The 30 year bond ended the day down 44 bps to 3.47%. This market is one of the largest and most heavily traded in the world and to see it move like this during a day is almost unprecedented. Just think about this for a minute...the 30 year Treasury bond moved almost a half a percent in one day. WOW.
What's wow about it is the government's insatiable desire for money would seem to Raise rates not cut them by nearly a half point in one day. All the deflationists out there must think this puts an exclamation mark on their argument. If 30 year Treasury bonds are only yielding 3.47%, then inflation is going to go down for 30 years!!! We would argue with them, at least for the next few months.
Ok, you all know that the stock market was down 444 points on Thursday so let's see if there is anything else we can discuss. After the market closed this evening, DELL announced their earnings that actually beat expectations although their revenues were lower than expected. This news surprised the market just as the news from HPQ did. The world doesn't really believe either of these two announcements...but here at the Update it's exactly that situation we have been waiting for. The public not believing any good news and selling everything. We think that this will be the inflection point in the market...Buy stocks Now.
The big downside leaders were financials, particularly Citigroup, which was hammered for another 25% today. This stock is under 5 bucks. This is just ridiculous. Why are people selling this stock for $5? Sellers just don't have any idea what they are doing. The Update is not recommending to buy it but what are these people thinking? Obviously, they are not thinking, this is totally irrational behavior.
The volatility indexes were up again today which makes sense based on the huge selloff but this is a good reason to buy as we have been saying for several days. Yes, we know you are tired of us saying it, but we are getting more and more bullish with every down tick in the market.
Today the volume in the market was pretty heavy which gives us more thoughts that the selling has very little left. Once the sellers are done selling, there will be some gap ups that will shatter the shorts in this market. All of the talk you hear about the hedge funds selling or de-leveraging as they call it is a nice story ,and may have been true a month or two or more ago, but the hedge funds are now trying to figure out how to make money. How do they do this? Could their strategy be shorting stocks since it's so Easy? That would make them have to Buy stocks in order to cover those shorts to push prices back up again. Think about it.
As we write, the Asian markets have begun to trade strongly up. The Hong Kong market, the Hang Seng index, started down about 3% and has now turned around and traded up 4.5%, and that is only the morning session, may be more in the afternoon session. The same thing is happening in Japan, with the Nikkei 225 starting down about 4% but is now trading up about 3%. (One thing is that the Nikkei had traded down under 7000 back in October and tonight it traded down to 7400.) The South Korean market opened down about 3% (but not quite to the October lows) and now is trading up nearly 7%. These are powerful reversals which could provide some 'round the globe upside on Friday. As it stands right now, the US futures market is up over 2%.
What else? Bottom line...we are about to see how fast the stock market can go up. There are so many depressing analysts out there that the public is going to stay away from the market for a long time...probably about a year from now when prices are back up to much higher levels. Our target for prices in the next few months is the 11K to 12K range. There are so many great values out there right now. Take a look at T, AA, DD, PFE, JPM as well as one of our favorite, the GDX. The market is tired of going down...