Holiday Week

by Larry Levin

Monday kicked off the Holiday-shortened week with low volume as one would expect. What one might not expect, however, is the trend that took place - down. Given the lack of volume, today's drop took me by surprise.

Believe it or not, part of the blame goes to Toyota. Today Toyota forecast an operating loss for the current year, which would be a first for the Japanese automaker since World War II. It blamed a slump in global demand and a sharp appreciation in the yen against other currencies.

This news, as well as credit downgrades of GM and Ford debt, hammered Ford shares -12.2% and GM's -21.6%. The thought was, if the most successful automaker on the planet can't make a buck - can any?

If Toyota is going to keep having trouble, and they're talking about laying off workers and cutting back sales, how are the domestic automakers going to stay afloat? asked Craig Rappaport, a wealth manager with Janney Montgomery Scott.

Stocks were pressured by more bailout talk: commercial real estate developers. The Wall Street Journal reported today that commercial real-estate developers are seeking access to free handouts in D.C. And why not, Congress is incapable of saying no. Nobody is complaining. Nobody is marching on D.C. Nobody seems to care that lawsuits are needed to force not only the Federal Reserve, but the regular banks to tell us what they have done with the TARP funds. They are all saying - Up yours buddy, sue me - and nobody is irked. So why not hand out nearly free cash to real-estate developers?

The Journal said that developers of projects like malls, hotels and office complexes are seeking access to the recently announced Treasury plan to provide $200 billion of relief to borrowers on auto and student loans, as well as credit-card debt. These developers have $160 billion of loans coming due for refinancing next year and getting it done in the real market doesn't look good. So they're going to Uncle Sugar Daddy.

This news caused REITs to fall as well as several insurance firms, since they are generally large investors in commercial real estate and over the last several years were big buyers of securitized loans backed by things like malls, office towers and hotels. In short, we will be bailing out more really bad investments (read: SPECULATION) that didn't go so well.

So if the mega real-estate developers, which are the so-called smart money, cannot refinance their debt - does that mean the banks see real-estate as a bad investment in the future? Yup. So can we dispense with the bottom is in in the real estate market on the financial shows already?

Nuff said.



Previous Day's Trading Room Results:

Trade Date: 12/22/08

E-Mini S&P Trades*
(before fees and commissions):

1) VA buy @ 8:35am at 880.50 = -2.25 (1 lot)

2) Engf sell @ 9:30am at 876.75 = -1.00 (1 lot)

3) Algorithm positions (1)...combined daily total...-1.75

ZB (30 Year Bond) Trades*
(before fees and commissions):


1) No trades today.



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