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The Financials Pit Review

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For the week of November 3rd, 2008

Tue, Nov 4 2008, 05:40 GMT
by Kalvin O'Brian

Pit Guru

U.S. Economy

Tuesday is almost here and after posting a 17% loss in the S&P for the month, the ½ point cut just implemented by the Fed last week has done its job; at least so far. This could be the first chapter in a long turnaround for the stock market. However, with rates at this level as recovery begins, inflation could become an issue especially if oil prices climb from these levels. Some noteworthy reports and data posted a positive change. These could be early indicators that we hit a bottom. The University of Michigan's consumer sentiment index increased to 57.6, up from a reading of 57.5 earlier this month. There was also a change in the core rate of personal consumption which increased 2.4% in September from a year ago. This does not mean that we are going to climb at a 45 degree angle from here though. This data supports the idea that many ordinary investors believe the election will change everything. I do not believe that but I do believe that confidence will come back into the market as we go into the New Year if crude stays at these levels. I will be long the market keeping close stops. I do expect a rally to continue this week.

Currencies

Last week’s rate cut launched all the dollar’s counterparts - the Canadian included. GDP in Canada was overall better than expected - it was down .3% in August but up .6% from a year ago. The hardest hit sectors were the majors in that area manufacturing, mining and energy. I expect the rally to continue through this week. Unemployment in the Euro area remained the same at 7.5% in September. I remain bullish this currency this week as well.

The Bank of Japan lowered its interest rate from .50% to .30%. This was a clear cut effort to help stimulate its economy. Consumer prices there increased 2.1% in September. Since September 12th the yen has increased almost 9% against the greenback. I do expect this to continue. It also is expected that the next in line to cut rates will be the Reserve Bank of Australia.

Published on  Tue, Nov 4 2008, 05:43 GMT