Roseman's Eruptions



Bears Gone Bulls Badly Hit since late October

The S&P 500 Index and other major U.S. indices violated important support levels on November 19 suggesting the market is now poised to break its October 2002 lows. The S&P 500 Index is now down 45% in 2008 – its worst year since 1931.

Several high profile hedge funds and traditional equity fund managers turned bullish on stocks following the crash in October. Through yesterday, these advisors are sitting on losses exceeding 15% as stocks continue to swoon.

More Countries to Impose FX Controls

Indonesia announced foreign exchange controls last week, triggering the first round of restrictions or limits on foreign currency trading. Other nations are sure to follow as economic growth falls off a cliff this quarter compounded by plunging exports.

As the global financial crisis deepens and spreads to the real economy, more countries will resort to protectionist policies in the emerging markets, eventually imposing semi or hard foreign exchange controls.

Investment-Grade Corporate Bonds Deserve a Premium

Are investment grade corporate bonds the new “safe-haven” for investors?

You certainly wouldn’t think so following their worst monthly drubbing since 1980 in October. September and October sliced and diced investment grade debt to levels unseen in more than two decades with effective yields now at 8% compared to 3.7% for ten-year U.S. T-bonds.

Credit Markets Unlock but Remain Vulnerable to LIBOR, TARP and Accelerated Deflation

LIBOR rates are well below their clogged levels four weeks ago and U.S. corporate bond issuance in October witnessed a strong rally following a drubbing in September. Credit markets are definitely regaining much needed traction and investors should be encouraged by narrowing credit spreads.

Volatility Levels off the Charts

Stock market volatility continues to shock most market participants this fall with enormous swings occurring almost daily. On Thursday, the Dow was down almost 300 points at its worst levels only to recover with a massive 552-point gain. That’s an incredible 850-point turnaround in the span of just four hours of trading.

The Dow, however, dipped under its October 27 low of 8,176 while the S&P 500 Index was far below its 848.92 low last month.

Revisiting the Dow’s 1933-1936 Rally

Probably one of the craziest suppositions now is to project a 100% gain for U.S. stocks over the next few years. After all, everyone, and I mean everyone is suffering big losses in the market this year and nobody truly believes equities will start a bull market any time soon.

Stocks can muster a convincing bear market rally following a crash. This last occurred in the 1930s as the Dow almost doubled between 1933 until 1937.

The Beginning of the End for U.S. Auto Manufacturing

In 1955, U.S. manufacturing was approximately 55% of the nation’s GDP. Today, manufacturing is barely 15% of GDP as the United States and other industrialized countries continue to transition to service-based economies. Unfortunately, the backbone of American industry is now coming apart at the seams and desperately hungry for a government bailout.

Credit Storm Hits Farmers

From their lows earlier this year the grains complex has plunged about 40%, with corn, soybeans, wheat and rice all down hard since mid-July. That’s consistent with the CRB Index, now off more than 40% since hitting an all-time high in early July.

But if the credit crisis finally caught up to commodities in July after six straight years of big gains, then the same credit phenomenon might propel the grains higher eventually. That’s because crop yields are now shrinking again after a harvest boom in 2008; projections for grain harvests in 2009, however, look grim.

Big Rate Cuts Fail to Halt Stock Swoon

The European Central Bank (ECB) and the Bank of England made bold interest rate cuts yesterday with the British cutting rates to their lowest levels since 1955. Despite aggressive interest rate cuts by global central banks over the last 60 days, markets remain on edge and unable to find any semblance of balance.

In the United States, a post-Obama-elect victory on Tuesday failed to carry through into Wednesday’s trading with the Dow dropping 486 points and again on Thrusday, dropping another 443.

Reckless UBS Tarnishes Switzerland’s Image

Global investors are still reeling from the ongoing and seemingly never-ending losses incurred by Switzerland’s largest bank, Union Bank of Switzerland (UBS). Yet as the Zurich-based bank is chastised by its shareholders and clients, the bank will emerge stronger going forward as it embraces less risk and returns to its core business – banking.