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Mark's Market Blog

1-24-09: Fiat and DTV are coming!

By Mark Lawrence

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Obama became #44 this week, and the market immediately took a nosedive on the principle that you go up on the anticipation of good news, and down on the actual news itself. The market broke decisively out of the previous trading channel (purple lines) and even tested the previous December 1st low (pink line). We bounced off that low and slowly started moving in perhaps an upwards direction. I haven't changed my story, I expect this market to continue trending upwards until March.

The following three paragraphs and graphs are rated NC-17, no children under 17 should be reading this or viewing the charts. To give you some sense in historic context of what our banks have been doing, I prepared the following graphs using data from the Saint Louis Federal Reserve Bank. Immediately below is a chart of the total loans from the Fed to all banks from 1919 to November 30, 2007. There was a brief period in 1984 when the Fed loaned out about $8 billion, other than that the total loans outstanding from the Fed have fluctuated from zero to about $2.5 billion.

Next is the identical graph, except from 1919 to December 31, 2008.

As you can see, we're now loaning about $700 billion directly to banks, almost 100 times more money than the previous record. Below is a close up of the period from July 2007 to December 31, 2008. What we see here is that the Fed went crashing through their previous record of loaning money to banks in January of 2008; by July of 2008 the numbers were simply breath-taking. An interesting point here is this graph shows clearly that Fed President Bernanke was terrified about the reserves and health of our banking system starting in January of 2008, but we never heard a hint of this until September 2008.

Peter Orszag, currently the director of the Congressional Budget Office, is Obama's nominee to head the Office of Management and Budget. He said recently, "Even after the economy recovers from the recession, the U.S. faces the prospect of budget deficits measuring 5% of gross domestic product over the next five to 10 years" This is $700 billion per year deficit on a roughly $2.7T budget; the government is now addicted to spending 25% more than they, um, "earn." The 2009 U.S. deficit will total at least $1.6 trillion, plus the cost of the Treasury Department's $700B financial rescue package.

Chrysler did a deal with Italy's Fiat. This gives Fiat access to Chrysler's US dealer network, and gives Chrysler access to Fiat's small engines and European dealer network. I find this perplexing. Fiat took a 35% stake in Chrysler, but paid nothing. What does that say about the value of the remaining 65% of the stock? Fiat has no cars which are US certified, this process will take a year at minimum and cost a lot of money that Fiat doesn't have. Their small engines aren't certified, and fit into Chrysler cars that don't exist. Chrysler is now 35% owned by Fiat and 20% by Mercedes. Will the US Government continue to loan billions of dollars to what is now effectively a foreign corporation? What car company will be interested in buying the remaining 45%? Why would those companies agree to Chrysler selling off the Jeep, Ram or Viper brands? This deal may make all the sense in the world starting in 2012, but how will Chrysler survive until then? Asked for a 2009 sales forecast, Sergio Marchionne, chairman of Fiat, said "I honestly do not know. It's not that I refuse to make a projection. I just don't have a reliable context in which to make the projection. I abstain."

Obama is already consistently being called "The Greatest President Since Lincoln." I dunno, maybe he's gonna be great, but I think I'd like to see him actually do something before I anoint him our new savior. He has given us an early front-runner for quote of the year. On January 19th, Obama said, My friends, we live in the greatest nation in the history of the world. I hope you'll join with me as we try to change it.

My sales are up and down with the market. I had two pretty good weeks, I was on track for a very decent January if not exactly a record setter, but the first half of this week the phone was totally dead. I'm more and more happy that I've held onto enough cash for me to live on for about six months - that's in the absence of any sales whatsoever - and if anything I'd like to build that up to a somewhat larger number. No Corvettes or major home improvements for me this quarter (shown: the 205mph $105,000 2009 ZR1). Maybe in the spring, we'll see what Mr.Lincoln #2 brings us for Easter.

Iranian President Mahmoud Ahmadinejad said the recent fighting in Gaza showed Israel's continued existence in the region is "not feasible." Iran is a top backer of Hamas and Hezbollah. Ahmadinejad called on Saudi Arabia's King Abdullah to speak out over "the massacre of your children in Gaza." Obama can expect to have serious trouble with Iran, who continues to be a major sponsor of terrorism and continues to work on nukes.

On Tuesday, February 17, by law all TV broadcasts in the US will switch to digital, there will be no more analog TV. If you have cable or satellite and you're ok with spending $60 - $100 per month (that's $720 to $1200 per year) to vacuum out your brain, you're ok. The rest of this is for people who want to get free broadcast TV. If you have a plasma or LCD TV, you have a good start. If you have an older TV and you want to get digital broadcasts, you'll need a TV converter. You can buy these at Walmart, EBay, and other fine stores everywhere. You can apply for a $40 off coupon from the government. You will also need an antenna. Digital TV doesn't get snowy when the reception is poor - you either get perfect TV or nothing. You can find out if you need an antenna from TVFool.com or AntennaWeb.org. If the stations you want are all labeled yellow, you might get by with an indoor antenna. That didn't work for me, but maybe your karma is better than mine. I already did the shopping for antennas on quality and price, here's the good choices: If the stations you want are all within an 80° spread, you can use a directional antenna like the EZ-HD (shown) for about $60. This is a small, unobtrusive antenna with good reports. TVFool will also show you where to point your antenna. If the stations you want are scattered all over the place, you'll need an omni-directional antenna like the Winegard MS-2000. If the stations you want are far away (labeled lt green, red, blue, violet) you'll need a larger antenna mounted higher up on your roof like the Winegard HD-7694P or the Winegard HD-7698P. If you want to use your antenna for more than one TV, you'll also need an amplifier and a signal splitter like the Winegard AP-8700 for two TVs or the Winegard HDA 100 for three or four TVs. If someone tries to tell you that TV antennas are not allowed, show them the FTC federal ruling that says they should jump in the nearest lake. I have DirecTV so that I can watch the Packers on NFL Sunday ticket, however now that football is over they want to charge me $80 per month to watch local channels plus the Home Shopping Network, the Wedding Channel, and a bunch of movies like The Return Of The Blob. So I'm turning off my DirecTV until September, when the Packers start up again. No more watching 2am specials on the New 24 Caret Gold Barrack Obama Commemorative Presidential Coin for me.

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