Market Perspective 11/25/2008

Here is my take on the markets this week -

• GDP number for Q3 2008 was revised down to -0.5% from 0.3%. Not a big deal in the grand scheme of things.
• Most other data revealing the state of the economy right now (i.e. 4Q 2008) suggest SERIOUS negative economic growth. Think something like -5% annualized. The last time we saw data this bad was 1980-1981.
• Unemployment data deteriorating at an accelerated pace. Peak unemployment very likely to be 8.5-9% in the first half of 2009. This number is moving fast. Keep an eye on it. We are in a heap of problems if the peak number moves past 10%.
• Most economists now saying 2009 is lost which means it will be 2010 before the economy even thinks about getting better.
• Watch out for what happens w the automakers. They will likely get the $25bn they need from Congress, but not w out strings attached. We should all hope they get this money right now if for no other reason than not giving them the money at this very moment in time will literally send the economy into a death spiral. This is not what we need right now. Long term, we should focus on the problem of the automakers as a country but we cant just let them go cold turkey. We have to downsize the automakers in an orderly fashion over the course of several years.
• One big thing the market was looking for was for Obama to step up to the plate and take more control over the economic situation. Previously he said he wasnt the President until Jan 20. The market didnt like that. We want him to announce his economic team which he did this week and last. Since W is pretty much a lame duck at this point, everyone was loking to Obama to be more vocal about his intentions on Jan 20. Obama got the message and has been more active about communicating his intentions on how to deal w this economic crisis. Market rallied on this news.

If you have been watching the stock market recently, you know the market has been forming something of a bottom at recent levels. This bottom is a very delicate one in my opinion. Any news that the deterioration is accelerating is going to be a problem for the markets to handle. Automakers need to get their money w strings attached.

Cross your fingers...