2009 looking better all the time

MasterCard use was down 8% in December. MasterCard started a new finance charge policy and moved due dates forward limiting some users to just one week to pay without a $50 late charge. So people try new cards with no annual fees, 2% direct rewards and a two week due date. But the bad-news-analysts are using MasterCard today to say sales are down. That is not true, it is MC that is losing business this holiday season not stores at least in New England. But it is good that the market is not listening to the bad-news-analysts like Mad Money and Fast Money all who failed to detect the market bottom in November. They want to frighten stockholders so that they can create a new bottom so they can say how smart they are. But American and Asian markets are now completing their third ascending market bottom and European markets are completing their second ascending market bottom. Asian markets are up 0% to 1% today and European markets are currently up 1% to 2% and American market futures are up slightly again.

The real good news is that the bad-news-analysts have lowered retail sales expectations so the market will respond even better when the truth comes out. Last year when we all should have sold out the Pollyanna-analysts were saying retail sales were up when we were telling the truth that the malls were relatively empty. We were right and they were wrong last year by about the same magnitude as they are wrong this year. This year we are seeing shopping malls filled more than last year but not as crowded as two years ago and we are seeing mail orders flat to slightly rising. So we expect a slight improvement in retail sales this December relative to 2007 and that will be great news for the market because the market expects a loss now.

We expect the next administration will give the average taxpayer several thousand dollars in 2009 to stimulate the economy. We expect it will be at least four times the stimulation the economy got in 2008 plus we expect the administration to postpone the expiration of the tax breaks the rich were getting under president Bush so they will be happy too. The stock market has discounted expectations that the new administration will tax investors heavily and put federal sin taxes on gasoline, fuel oil, big cars and big houses. It now appears that will not happen soon. The collapse in fuel prices will put a hold on left wing nonsense and there is evidence that President Elect Obama will unfetter the nuclear energy industry so that nuclear energy will come on line when oil shortages begin in ten years. We can expect the new administration to leave American oil in the ground until it appreciates more and remains high in price.

We saw poor sales at specific stores such as Home Depot, Lowes, AnnTaylor, Talbots and Sears and a few electronics stores. On the other hand discount stores were packed.

Talk show "experts" are saying, "Probably 50,000 American stores could close in the spring without any effect on consumer choice." Retail profit margins would then improve considerably. But construction will stay in the doldrums and it will be very tough for Home Depot. Confusing payment notices intermingled the long term interest free and short term credit. Customers do not like finance charges that result from the confusion on amounts and dates due. It may be the new bank policy but it could damage them as it is evidently damaging MasterCard with reported 8% reduced card usage in December. At worst, national sales are currently reported only down about 2%.

We expect the first week of January, and the month of January to set the stage for an advance in the stock market in 2009.

Since we expect the economy to turn up in 2009 we expect the stock market to end higher than it leaves 2008. At some point in 2009 we expect the market to be up 30% to 40% from the low in 2008.

But if the market had a high of 100 in 2007 and lost 40% to hit a low of 60 in 2008 then a 40% rise from 60 gets the market back to only 84. That is why people will switch from cash back into the market. They will see a 40% profit even if the market it is at 84 (or down 16% from the 2007 high).

The people who bought in at the low in 2008 will see 66% profit when the market recovers to the 2007 level. That is 66% more profit than the average gains from investing in equities because that just gets us back to where we started.