What’s Keeping Obama up at Night?

by Don Miller Contributing Writer, Money Morning

Editors Note: Inevitably the fanfare and excitement about our new administration will die down, and they will have to get down to work. President-elect Obama may have a laundry list of urgent jobs, but fixing the economy is priority one. The market’s problems are about to become his problems. Money Morning gives us a taste of the economic data that’s been keeping the president-elect and Wall Street up at night – and what we should be paying attention to as well.

Stock Market Gyrates as Reports Show Economy Deep in Recession

The stock market struggled to recover from a tumultuous 2008 yesterday (Tuesday) while digesting a trio of downbeat economic reports from the manufacturing, housing and service sectors.

The reports included separate data on factory orders and pending home sales for November, as well as the Institute of

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Gold was under pressure right from the open of Globex trading in the Far East on Wednesday morning. It bottomed in Hong Kong and clawed its way back to unchanged by the time the Comex opened…but there was always someone there to make sure that the price didn’t get over $965 all through London trading. Every time it tried, it got shoved down. Its attempt to break through that price shortly after the Comex opened, met with a wall of selling that dropped the price by $25 in less than 90 minutes…and all of Tuesday’s gain of the same amount, disappeared. A rally attempt at the London close ran into big resistance at precisely 1:00 p.m. New York time yesterday. And as you might have expected…volume was huge as well…128,000 contracts, net of switches.

The shares got creamed.

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CBO forecasts $1.2 Trillion Budget deficit!  And we can expect more!  ADP shows job losses mounting big time!  Brazil’s real reverses course… And Now… Today’s Pfennig! Well… There are two major things on the docket for the front and center piece today, both tell us a lot, but I think I’m going to go with the announcement of the Congressional Budget Office (CBO) yesterday afternoon as the lead story, and the ADP jobs report as the second story… So, let’s go to the tape!

The CBO announced yesterday that they are forecasting a $1.2 Trillion Budget Deficit for 2009! Uh-oh! This is scary folks, and there’s plenty more where that came from! This “forecast” doesn’t even

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We've seen the headlines declaring the 2009 deficit to exceed $1 trillion, and with the massive economic stimulus bill coming, we appear ready to add to it. Although Obama claims the bill will have no pork attached to it, but I'm a little skeptical. They will need to come up with new ways to increase government revenue, and here's one possible one:br /br /With fuel prices low due to a economic slowdown and demand destruction, those is Washington might seize the opportunity to raise the federal gas tax...br /br /blockquoteA government commission has called for a 50 percent increase in gasoline and diesel fuel taxes, which could mean an extra 10 cents per gallon for drivers.br /br /Congresswoman Corrine Brown told Channel 4 the government needs a comprehensive plan to solve the problem -- a plan that could include vehicle registration fees or toll roads ...

How many times have you looked at a stock chart and thought, If only I had bought shares five years ago? If we all had time machines, we would be millionaires. But we have not had the luxury of playing Monday morning quarterback with our investments. Until now, that is…

Thanks to the recent stock market crash, we have the opportunity to pick up seriously cheap shares that were flying high until mid-September. In some cases, this is a chance to hop into a time machine and buy these stocks before they became household names. Until recently, these stocks were the darlings of Wall Street. And when the market stabilizes, these stocks could quickly return to favor…

There are few defensive plays like health care - after all, people don’t stop getting sick, and health benefits aren’t something that cost-conscious employers can cut without enduring the wrath of angry employees. But despite

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The stock market struggled to recover from a tumultuous 2008 yesterday (Tuesday) while digesting a trio of downbeat economic reports from the manufacturing, housing and service sectors.

The reports included separate data on factory orders and pending home sales for November, as well as the Institute of Supply Management report on the non-manufacturing index for December - giving investors fresh insight into the depth of the current recession.

Despite the overall negative tone of the reports, some analysts maintain the worst may be over.

“While the economic headlines remain grim, stocks are holding higher in quiet trading because a lot of the bad news was already discounted when the stock market crashed in 2008,” Frederic Ruffy, options strategist, at WhatsTrading.com told MarketWatch.

Factory Orders Fall Biggest Since 1992

Data from the manufacturing sector confirmed that the recession accelerated in November. Orders placed

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The trillions of dollars that Washington is throwing at beleaguered American industries could have unforeseen consequences in the longer term viability of domestic investment opportunities. Washington’s handouts may come at the expense of funding important R&D projects that could give the U.S. a long-term competitive edge that it appears to be losing to Asia.

If in fact this scenario plays out, emerging markets in Asia could prove to be the superior play in the coming decades as they surpass America’s R&D investments.

R&D is the cornerstone of sustained growth. For example, China recognizes this by launching a branding campaign that turns the pejorative “made in China” to a higher value added “created in China.”

While some of the R&D numbers coming out of Asia today still may pale compared to the U.S., the important criteria is the percentage of GDP and overall growth that these emerging markets are investing in innovation.

For example, South

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The deep recession expected in 2009 will likely lead to higher rates of crime. Adam Lass says investors can play this trend by picking up shares of commercial jails. Florida-based Geo Group (NYSE:GEO) operates in several countries and is rapidly expanding its detention facilities. Adam says investors could be in line to double their money by the summer.

This from Taipan Daily:

I’d like to talk to you about prison for a moment.

Now, don’t start panicking or checking your Rolodex for your attorney’s number. I am not looking to prosecute anyone (nor be prosecuted myself for that matter) any time in the near future.

It’s just that jails have been cropping up a bit as I look about the investing scene these days. Sort of a theme, as it were.

The Smartest Guys in the Room Get Burned

For one, there’s that fellow Bernard Madoff.

You know the

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ETF Deathwatch In '09

Tom Petruno of the Los Angeles Times notes that about 60 exchange-traded funds were closed in 2008, a big increase from past years. The articles says that only five ETFs were shuttered from 2003-2007.

He talks to Ron Rowland, who serves as chief investment officer at Capital Cities Asset Management. He also publishes newsletters advocating momentum-based trading strategies using stocks, ETFs and other types of funds. In any case, he has formulated his own ETF Deathwatch List, which enters 2009 with 97 ETFs and 42 exchange-traded notes included.

His list is calculated based on average daily volumes, among other factors. You can read the story here. 

 

Energy ETFs Rebounding

This article in Barron's by Michael Kahn takes a look at ETFs such as the Sector Select SPDR Energy ETF (XLE) and the Market Vectors-Coal ETF (KOL), which are starting to attract more assets and look better

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Seattle, Washington-based Red Robin Gourmet Burgers' (RRGB) traffic began declining long before the onset of rising gas prices in October 2007, which began choking business in the casual dining sector a victim of poor site selection in new markets.We believe shares of RRGB will continue to underperform both the larger market and the restaurant industry. In spite of their poor performance, the company has retained and even added to these sites as it repurchased 45 franchises since 2005. Moreover, 2009 consensus EPS estimates are 10% higher than ours, and we think our estimate may prove aggressive if the economic slowdown is deeper or more protracted than we currently anticipate.Read the full analyst report on RRGB "RRGB" Free Stock Analysis: Buy? Sell? Hold?Zacks Investment Research