Is GE on the same path as GM?

After today we will take a break and resume this blog July 28.

CIT likely will be allowed to fail. Some unconventional unregulated lenders like GE were given government loan guarantees so that they would not fail like CIT (CIT had no loan guarantees) but GE's guarantees are up on October 31. GE's second quarter profits slid 49% as credit defaults have mounted at Capital Finance, its finance arm. GE saw an 80% drop at Capital Finance and a 41% fall at NBC Universal during the last quarter. It seems nobody with any clue likes to watch the socialist GE/MSNBC/PRAVDA propaganda machine any more.


Market forces July 17
The market has cleared away the short-term oversold condition it established these past four weeks. On July 28 we will know if the window of buying opportunity is closing. We do not expect the economy to rebound this year but since many economists say it will we expect the possibility of a false rally this fall.
The FED supporters are already warning congress to expect interest rate increases because inflation is already starting a run on the dollar. The enormous second-wave of adjustable mortgage rate resets is due to in begin late 2009 and to continue through 2011, as well as the increasing upward pressure that unemployment is putting on delinquencies (mortgages, credit cards, and home equity loans). Smaller weekly additions to the unemployed do not mean unemployment is declining. We still have to find jobs for all the unemployed as well as the 8% or 9% who have already exhausted their benefits. The increasing unemployment rate comes when homeowners have a high ratio of household debt-to-income, and the high ratio of mortgage loan-to-value. This is not a normal downturn. The high debt-to-income and loan-to-value ratios create a situation where job losses can lead to economic weakness (actually becomes a leading indicator). Well over 22% of U.S. homes, condominiums and other residential properties have negative equity now.


Market Outlook

The Five-day rally has the market in an overbought position again. Options expirations this week could be part of the reason for the run in stocks as it is a method to manipulate options and futures. We expect U.S. stocks to resume the steeper slide after the realization that bank and other corporate earnings reports still do not reflect any write down of toxic and obsolete assets and as the run on the dollar gains momentum.

Last night Asian markets were up: China up 0.2%, Japan up 0.5%, Taiwan up 1%, and India up 3.5%.

Today most European markets are up in a range of 0.4% to 0.6% half way through their session.

US futures indicate a -0.5% USA market opening this morning.

The rally this week signals that this current decline will take at least a month longer to unwind. We will continue cherry picking into the market. We expect the decline will be the typical rotation with sharp drops in individual stocks while other stocks flatten out and then decline so the change in the market indices will be much more gradual.

The new democrat-socialist administration destroys every free market sector they touch. Solar and energy sectors are still in decline. Health care is ready to plunge again as soon as congress passes the health care bill. Why is it that congress and federal employees would get better health care than what they give the rest of us? Is that another big government entitlement for the master elitists of the world?