Weekly Marketmail
Friday, November 21, 2008
Reno, NV (Marketmail)—U.S. stocks roared higher late in the day after NBC News reported that President-elect Obama intends to announce his economic team on Monday, and that he is expected to name current NY Federal Reserve President Tim Geithner the next Treasury secretary.
The announcement removed a lot of the leadership uncertainty that had been punishing the stock market. As a result, the Dow rocketed 494 points, or 6.54%; the S&P 500 flew 47 points higher, or 6.32%; and the Nasdaq jumped 68 points, or 5.18%. Encouragingly, the Dow closed above the 8000 milestone and the S&P finished the day at 800.
The 800 level for the S&P 500 was the low reached in 2002 during the last recession. And when the index violated that support level yesterday, many analysts announced that lower lows were in our future. See chart.
Closing exactly on the 2002 low today means we still have a lot of wood to chop before we can definitively say the lows have been set. However, Monday’s market could clear up much of the ambiguity.
Best case scenario is Obama announces his economic team on Monday by giving an inspiring speech, and Citigroup announces something on Sunday that removes the uncertainty that has been driving its stock price down to the depths of destruction. Citi’s shares traded as low as $3.05 today, just moments before the Geithner announcement, and then rebounded to $3.77 after the announcement. Citigroup is a Dow 30 and S&P 500 stock. Its shares are down 87% for the year, and 89% for the trailing 52 weeks.
Tim Geithner is widely respected on Wall Street. He was educated at Dartmouth and Johns Hopkins; worked for Kissinger and Associates in Washington, the International Affairs division of the U.S. Treasury, and served under former Treasury Secretaries Robert Rubin and Lawrence Summers. He also worked for the International Monetary Fund; speaks Japanese and Chinese; and lived in East Africa, India, Thailand, China, and Japan. He’s 47 years old. Read more.
The positives for Geithner being Treasury secretary could also be his negatives. For example, he was at the heart of the financial crisis, literally the bargaining table, when Lehman went down and AIG almost went down. Moreover, he’s been a key constituent of Paulson’s throughout the crisis. That said, either you think he’s the right guy because he’s been intricately involved with the credit crisis, or you think he’s the wrong guy because he’s been intricately involved. Regardless, Wall Street obviously likes him, and that’s what counts for investors.
Conclusion
We’re very encouraged by today’s results. We have to give kudos to President-elect Obama for recognizing that the leadership vacuum in Washington has been adding to the economic uncertainty and driving stock prices significantly lower as a result. By allowing NBC News to report in advance that Geithner was expected to be the next secretary, Obama saved stocks from going dangerously lower. After all, Citigroup was about to go below $3, several other financial stocks were getting hammered, and there was no defined support level below. It was shaping up to be an awfully precarious situation, especially when considering how treacherous the final hour of trading has been.
Let’s hope Obama has a great speech ready for Monday. Many legitimate investors are looking for inspiration before they dare come back into stocks. If he delivers, stocks could continue to rally much higher since we believe a lot of the selling this week was in anticipation of redemptions.
Specifically, we believe many fund managers liquidated positions this week in advance of expected redemptions at the end of the month, since trading volume is typically too light during Thanksgiving week. If we’re right, we could make up a lot of ground next week.
If the Dow goes up or down more than 300 points on Monday, Tuesday, or Wednesday, we’ll have another report for you that day. The stock market is closed on Thanksgiving, and it’s open for a half day on Friday, but we will not have a report for you on Friday. We’ll still be feasting and enjoying our families!
Happy Thanksgiving!!
Marketmail gets updated on Fridays and whenever the DOW closes up or down 300 points or more.
None of the stock information, data and company information presented herein constitutes a recommendation by Navellier or a solicitation of any offer to buy or sell any securities.
Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for you.
Although information has been obtained from and is based upon sources Navellier believes to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute Navellier's judgment as of the date of the report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security.
Past performance is no indication of future results.
FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not intended or written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties.
Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.
IMPORTANT NEWSLETTER DISCLOSURE: The performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier's Quantum Growth, Louis Navellier's Emerging Growth, Louis Navellier's Global Growth, and Louis Navellier's Blue Chip Growth, are not based on any actual securities trading, portfolio, or accounts, and the newsletters reported performances should be considered mere "paper" or proforma performance results. Navellier & Associates, Inc., does not have any relation to or affiliation with the owner of these newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, should be referred to InvestorPlace Media, LLC at (800) 718-8289. Investors evaluating any of Navellier & Associates, Inc.'s, (or its affiliates') Investment Products must not use any newsletter information, including newsletter performance figures, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm's mutual funds, managed accounts, and hedge funds. InvestorPlace Media, LLC newsletters do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products' portfolios and the InvestorPlace Media, LLC, newsletter portfolios. Newsletter portfolios (1) may contain stocks that are illiquid and difficult to trade; (2) may contain stock holdings materially different from actual funded Navellier Investment Product portfolios; (3) do not include trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the performances claimed by InvestorPlace Media, LLC newsletter portfolios do not reflect the performance results of Navellier's actually funded and traded Investment Products. In most cases, Navellier's Investment Products have materially lower performance results than what InvestorPlace Media, LLC newsletter portfolios claim to have. The InvestorPlace Media, LLC newsletters and advertising materials typically contain performance claims that significantly overstate the performance results an investor may expect from any Navellier Investment Product.
Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier's composites and/or a presentation that adheres to the GIPS standards, please contact Tim Hope at (800) 365-8471 or timh@navellier.com.