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[TTHQ Staff]

(Complimentary excerpt of Gene's weekend report posted at www.ingerletter.com formembers. Our continuing S&P guideline short for big-picture work reflected ourview regarding the forecast multi-week rebounds as being an upward consolidation 'only'. Iremind visitors the March call was rebounds into early April then make hay into May.)
Gene Inger's Daily Briefing . . .for Monday April 14, 2008:

Good evening,

'Imagination at work' . . .reflects the perennially unjustifiedoptimism, that all heard from many analysts and spokesmen with 'agendas' about big-cap orother overpriced (and illogically valued) stocks, as we forewarned, not only back at thetail-end of 2006 . . . via our 'distribution-under-cover-of-a-strong Dow forecast for year2007 (including calling for periodic Summer & Fall rallies with 'zero' sustainabilityodds); but lately, as a slew of pundits confused 'systemic stabilization againstinsolvency', with economic   turnaround.Not that we don't believe (per GE's mantra) of turning 'imaginative ideas' into servicesto solve tough problems; they have, they do, and they will. In fact that's essentiallywhat we did for financial forecasting, during a time that a majority on Wall Street andbig economists, instead focused on 'imaginary' ratings or price valuations.

(For reasons of fairness to paying members) we're goingto reserve a 'special report' on the 'real' implications to the broader market of theGeneral Electric story (warned it was under distribution for a year; that's why it's oneof our regularly covered charts) to a 'members only' video. It's dedicated to how thisrelates to our 'grand dame' saga.

On Thursday, before this event; we warned that'upheaval wasn't sidelined' by a calm pervading most commentators or investors preferringto keep things basic. Inline with our approach of talking not too complexly, but neitherdescending to lowest common denominators to convey views (such as 'good or bad'; buy orsell; an equivalent of giving a man a fish, rather than teaching him how to fish; or TVnews in this too-busy-to-think era), clearly indicated we were looking at pre-Expirationhorsing around shy of upside target zones established about a month ago; in-harmony with aprojection for March lows; erratic 'tentative-at-best' non-capitulation irregular reboundinto early-mid April followed by new phases of decline. As it unfolds; my call was proven.(And -even in GE's case- part of that relates to an early 'heads-up' on rising Asianinflation.)

Putting the power of imagination to analyticaluse: I thought the real-world challenge was to 'clear the decks' first in housing in thepreceding 2005-2006 era, as a panting citizenry was charging-in; and then realizing therewould be periods of time for money going into stocks before coming out anew. And thatthere would be ensuing points, in which we suspected (all the way back before our '06/'07forecast) the housing bust in fact plus globalism, would be microcosms of decliningprimacy debt-liquidation plus a slew of other threats to American financial hegemony.Maybe too complex for some; but to understand the truth of macro conditions helped preparefor it; hence pertinent.

Daily action . . . on Thursday this past week, emphasized 'upheavalisn't sidelined' . . . simply because (weeks ago before a majority realized Gov'mintefforts to stabilize hemorrhaging were having financial but not economic impact) as the'shock value' of deleveraging turned into 'routine' acceptance of growing risks coincidentwith inflation (a difficult conundrum within the 'stagflation' we first forecast here overa year earlier); so many erroneously thought we were past the 'inflection' point of risk.A week earlier we wrote that the 'early stages of the bear' were behind; not the laterstages. Notable.  

Stable and more orderly financial markets wereexpected; but that is not the same as a resolved real world. It means prices spiked asother countries (especially several as have their local currencies pegged to the Dollar)experienced unusual, but necessary, concurrent price rises; that Oil prices are upprimarily (as noted before) due to Dollar weakness (rather than demand rising persistentlyas many erroneously assume); and it means turning points in getting 'handles' onmark-to-market junk debt environments while expected; are now widely misinterpreted asimplying (ingerletter.com reserved).

Were we too negative, calling for the multiweek reboundthen new trouble? Obviously not. We felt it nominally irrelevant that you get much fromforthcoming 'rebates' (likely  alreadyfactored-into markets, which discount everything; including a minor stimulus); and ofcourse sobriety (even in financial sectors); as saving 'solvency' isn't the same asstimulating a surplus of liquidity, which is actually unlikely to meaningfully improve.Eventually (reserved for members) solvency salvaged; is not liquidity or momentum; Iopined over the past couple of weeks; while looking for a short-term topping process.

Our argument was not terribly off-the-mark to suspect,that as we evolve through this period, the market likely is preparing for a next phase ofdecline; that it won't deviate much from what we outlined; in terms of increased riskstarting in April's first half and leading to downside 'hay in May' (contrary to themajority looking, after our forecast of a limited rebound, for some macro low andprolonged advance); although (reserved). I postulated an April rebound peak, with specialvulnerability into May, months ago.  

Bottomline: macro signs as interpreted; including (updatednotably) the following bullet points:
· Quartet of economic challenges onlyinterrupted -not resolved- by interim ongoing events;

· These focus on a) housing; credit /debt; c) commodities; and d) oil fairly distinctly;

· Analysts wrongly continue to confuse'solvency' via systemic stabilization, with better times;

The Nation could be shocked absorbingpotential writedowns and capital-raising pending;

(Reserved comment on) sufficiency of'term lending facilities'; suffice to say 'concerned';

Volker addressed these situations lastweek; media assessed only superficially (at best);

Remember our big 'reflation' call in2002? Well, can primary dealers handle new demand?;

Last year's call for housing to be a drag into '09-'10 continues(others embrace our call);

Pension issues (San Diego & Florabama situations as examples)barely surfacing as yet;

Trailing S&P 500 Price/Earningsratio recently hit almost 21; saw that as a negative portend;

Commercial property implosions followdrastic retailing contractions; ongoing forecast here;

Global economic decline started; inlinewith ongoing forecast of economic contagion;

All along argued impossible for worldto 'decoupling' from 'U.S. credit pandemic';

Remember our theory: 'solo-walk' '07 Dow highs masked (redactedstructural core forecast);

Deleveraging remains 'a b*tch', as unpleasant (secular) scenariosrotationally evolve;

Year-plus macro key forecast: not short and shallow economic dip;but long and deep;

(We included a few more of our macro bullet points; about a dozenreserved for members).

Further points: nearer-term issues tocontend with beyond above; some with macro aspects:

Call was big-caps artificially creating false comfort; then'grand dames' to start succumbing;

Pyramiding mountains of compounding debt have not ended;facilitation assisted banks;

Lehman or others now becoming 'sobered', likely a warning theybegin to realize what's next;

Canada blockingU.S. firm's buy of Canadian satellite firm is a trade-shot across our bow;

Forewarned February-May 2008 mortgagereset tsunami for a year; ramifications extend;

Overall multiplier effect may force(reserved); housing bottoming optimism still unrealistic;

Forecast '05-'06 real-estate bubbleburst as microcosm of bigger issues; as are unraveling;

Capitalism requires credit; restoring equilibrium takes more time;

Mideast and Persian Gulf tensionsincreasingly unstable with rising threats from Islamists;

Terrorists in Lebanon or Gaza (or evenin Egypt) share radical goals irrespective of 'clan';

Remember; we ramped our videos last year in-anticipation of'epic' historical distribution;

Combined with 'deleveraging', it enhanced prospects for 'thepanic of 2007 / 2008' per call;

Our year-earlier forecast contrasted this 1880's 'railroad bonddebacle' and 'panic of 1907';

Ironically those events prompted creation of thenow-compromised major rating agencies;

(Additional bullet points reserved for ingerletter.com membersonly; we invite your joining).

MarketCast (intraday analysis & embedded Daily Briefing audio-video).. . remarks forecast substantive irregular but volatile rallies over the preceding fewweeks. At the risk of reminding everyone markets remained 'at risk' as 'oversold'eliminated; in past week called new threat in 'so-called' safer 'big-cap' Grand Dames. (1^st video's focus).

We retain our macro (forward-roll adjusted) June S&P 1599 short-sale; irrespective ofinterim oscillations; as clearly outlined all these weeks. Evolving short-term toppingprocess irrespective of daily trading shifts. Multi-Index macro perspective (2^nd video).

After the video's, a few comments about computers & chips; Intel, Nvidia, and Apple.
Twin video comments provided; with pre-close remarks reflecting background about some ofthe continuing factors today, and as dovetail with overall conditions, as well. Then theusual nightly technical MarketCast final overview will follow per usual.

 

Special: 2 o'clock balloon'Worldview' MarketCast comment (includes GE)



 Daily Briefing Technical-Corner 'weekly final'MarketCast Video

 

(members note: Flash-basedvideo plays in all browsers; needs 'free' download / plug-in only if prompted)
 

Bits & Bytes . . . provide investors ideas in afew stocks, often special-situations, but also covers an assortment of technology issues(needed for assessment of general factors in tech overall, or as compelling developmentscall for) that are key movers in the NDX, SOX or S&P, plus ideas ingerletter.comthinks might merit further reflection. (Individual stock comments generally are providedin the video overviews only; once in awhile I'll have some thoughts here, wheresomething's particularly emphasized or of technical nature necessitating some discussion.Increasingly most all is via video.)

Over the past year, one of the reasons we've warned about buyingtechnology earlier in the distribution saga, has relied upon two factors: a) the belieftechnology was not at all immune to the contracting expenditures, and slower CapEx weanticipated for a good period of time in 2007, 2008, and beyond to some extent, includingconsumers, who are unwilling to pay-up for electronics in general, or PC's in particular(more); commoditized changes in technology, that were influenced by the stupidoutsourcing of production, allowing mundane chips to be manufactured (or knocked-off) inAsia, and that's on-top of contract players (more); or if you like c) the belief that masslow-cost PC's would enlarge what is called the 'computer user universe' (conclusion anddiscussion of effect on particular stocks; Intel, Nvidia, AMD and Apple; are reserved).

Commentsare interpretative speculative postulations provided 'as is with allfaults' and all risks with no assurance about future performance of anything(markets or stocks) in any way whatsoever. Personal necessity, irrespective of opinions,may require buys or sells deemed necessary, without prior notice.
 
In summary . . events continue reminding us of risks Allied fighting forcesface, given continued attacks on free peoples, by elements including organized terroristforces in various countries. A world addressing terror threats continues, asdomestic issues absorb us more while as we also focus on Middle East and World War IIIavoidance.
 
Our 2007 view had been that we're in an ill-defined recession; finally recognizedas it evolves. As to whether it descends into something akin to post-railroad debacles wayback in the 1880's; is likely what the Fed worries about (as to longevity); while actionsaffirm they're desperately engaged to stabilize fluidity of functionality. Regressionto the mean or traditional affordability 'rules' likely hallmarks of home lendingguidelines for years. I hasten to add, whether depressing or realistic (per 3 yearforecast here of the housing break combined with 'junk debt' investment avoidance); stockseventually get interesting. Gilded Age globalists unflaggingly failed to see the era'stransition, or detect the public's mood of increased populism; essential reform calls; andlow taxes.

 
McClellan Oscillator finds NYSE 'Mac' fluctuating via intervening bull-bearshuffles on the NYSE & NASDAQ. Reflex rallies allowed 'risk off-loading'tactics; as 'Street' debt holdings aren't investment grade. Multi-month efforts evolving.In this regard, we suspect that strategy fluctuates (as) expectations remain out-of-lineoptimistic for the actual world situation. (The overall world situation is clearly denotedto our members.)
 
Issues continue including oil, terror; China (including latest Pentagonhack spying; a type of action that if we were financially sober would provoke warrantedredressing), Pakistan; certainly all the MiddleEast, Europe; funny money NY economics. Noted for a year: includesinternational dependencies, as outcroppings of a radical extremist globalism which isneither pro-American nor conservative; even as true conservatives support fair trading;constrained spending, and not squandering our US crown jewels.
 
Fifteen months ago I called it an 'accident waiting to happen'; noting it wasaffirmed historically that long-duration periods of free money (a Gilded Agementality) do not create permanent liquidity; but give that illusion while the oppositetranspires. There will be various trading swings; through 2008 or later. We scalp these,while retaining our (adjusted) position shortfrom June S&P 1599  (rolled), which continues clearly to represent thebelief that while rallies occur; they remain within our structural bear.
 
Since early 2007 we noted economic conditions more similar to post the Gilded Age endingin 1929, the panic of 1907 (hence our call for the start to be the 'panic of 2007' lastyear at the end of that Gilded Age, and it's NOT coming back (further remarks).
 

Enjoy theweekend!

 

Gene

 
Gene Inger,
Publisher
 
~Gene Inger’s Daily Briefing™(The Inger Letter daily analysis on www.ingerletter.com)
 
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