Investing Adventures

Some folks say we’re in a recession. Others say we’ve hit the bottom. The truth of the matter is that no one has any concrete idea about what’s going on. But I can only guess as to what’s going to happen, at least short term.

Let’s start with yesterday’s action. As I suggested after the major run up Tuesday, we had somewhat of a resistance ceiling on the S&P and DJIA. What happened after yesterday’s close?

For a brief second, we went above resistance on the S&P (and the DJIA too if you don’t believe me!) and quickly retraced back below yesterday’s close ending lower.

Now, this morning brought some more bad news to the markets. First, the Carlyle Group’s mortgage-bond fund is nearing collapse after it defaulted on some $10+ billion. Them, as well as Thornburg Mortgage, Inc. (TMA), had been issued margin calls, essentially forcing them to put up more collateral. The problem is, investors are still very weary of allowing mortgage-based assets to be used as collateral. Therefore, unless some sort of bailout occurs, the Carlyle Group’s mortgage-bond fund will ultimately collapse. I think TMA might be saved but it’s still too early to tell.

So you have two mortgage groups on the brink of collapse. What next? Well oil hit $110 / barrel. Gold topped $1000 / oz this morning. While jobless claims remained unchanged, retail sales for February fell by about 0.6%. Did I mention the $ vs. Yen hit a 12 year low with the exchange rate now at $1 : 100¥ Yen? The Euro (€) is at an all time high against the dollar as well.

Don’t forget that next week the FOMC meets. The markets have priced in a 50 basis point cut. To be honest, I don’t care what most of the pundits say. We’re in a recession and the markets still have room to go lower. The news hasn’t gotten any better since Helicopter Ben dropped $200 billion on the markets.

Anyone taking bets on seeing oil reach $120 / barrel and gold touch $1100 / oz by the end of the month?