03.06.09

03/06/09

            It was another ugly week on Wall Street, almost a carbon copy of two weeks ago. Wednesday turned in a fine performance, but it turned out to be a “suckers” rally. The indices now stand just about where they were 12 years ago. So much for the sales pitch of “buy and hold”.  Any and all gains during that time have now been given back. The insurance giant AIG reported a staggering $62 billion loss for the quarter. This forced the government to provide them with an additional $30 billion in emergency funding.

             Remember, this is a global problem, and it will require England, Germany, France, Japan, and China, along with the United States to get their economic engines back up and running again. China has a $585 billion stimulus program already in effect. If they would double or triple that amount, it would go a long way towards getting things started. At the same time, we need to eliminate the “mark to market” rules for banks in pricing their assets. This would relieve the biggest problem they are faced with. That would create a trickledown effect into resolving the housing problem.

             Will these resolutions be put into place?  We think something close to this will happen. It may take another two or three months, but it will happen because it needs to happen.

            Some of the “smart money” has started buying. “Insiders” are defined as high ranking officers or board members who are privy to ‘information’ not known by the general public about that particular corporations business.  It is referred to as Insider Trading when they buy or sell stock in their company. The normal ratio of shares purchased vs. shares sold is 1.8:1. This indicates that those executives feel that the stock will increase in value in the foreseeable future. Several reporting companies that follow these statistics reported that the ratio for the month of Feb. went up to a 3:1 ratio. The important thing to remember is that these insiders have a tendency to be early on both the buy and sell side. But the fact that they are usually right about the purchase or sale bodes well for the market currently.

             We again are staying on the sidelines 100% in cash going into next week.

Till next time

 The MTA Staff