Last week's missing posts..

Much of the monday's rallly and the last week's rally is either coz of the high expectations  on the Obama Package to kick start the economy or in the anticipation of it. Over the last weekend, Obama unvieled priliminary details of the stimulus package, including “making the largest single new infrastructure investment since the creation of the federal highway system in the 1950s”.

Some off-the-cuff thoughts :

- Building supplies groups

- Industrial equipment makers

- Construction firms

- Miners

- Crane manufacturers

- Engineering firms

- Plant hire firms

- Temporary power generators

- Catering contractors

Words of famous Bill Gross: "My transgenerational stock market outlook is this: stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing, and even lower corporate tax rates. That world, however, is in our past not our future. More regulation, lower leverage, higher taxes, and a lack of entrepreneurial testosterone are what we must get used to – that and a government checkbook that allows for healing, but crowds the private sector into an awkward and less productive corner."

Nervous investors on Tuesday paid for the privilege of owning US government debt, pushing interest rates on three-month Treasury bills to negative levels for the first time in postwar history, reports the FT. The implied yield for three-month bills briefly traded at negative 0.01% –  the first time since 1940, traders said. At that level, an investor is essentially paying someone to own the security. The flight to safety helped the Treasury sell $30bn in four-week bills at a discount rate of 0.0% for the first time. That auction followed the sale of $27bn in three-month bills at a discount rate of 0.005% on Monday.

Though a Treasuries bubble might appear unproblematic, however, its bursting could turn out to be more dangerous than the collapse of any other kind of bubble. If confidence eventually returned to other markets, investors would shun the low yields on Treasuries. The Fed would then face the choice of monetising most or all of the Treasuries market, as funds fled to higher-return investments, or else of allowing Treasuries yields to race higher. Because foreign holdings represent a significant proportion of the stock of Treasuries outstanding, a collapse in Treasuries prices might soon be reflected in a collapse of the US dollar, with the accompanying threat of hyper-inflation in the USA and depression elsewhere. At that point, many investors might wish they still enjoyed the comparative calm of the ‘credit crunch’.

Today:

Events in North America have dominated global credit markets in recent days and today was no different. Investors welcomed news that the US House of Representatives approved a $14 billion loan to the “big three” Detroit car makers. However, the bill will also need to be passed in the Senate, and noises from the Republican members suggest that this could be difficult. Several Senators have expressed their opposition to the bill, and many others are likely to be uncomfortable with the government using tax payers money to bailout failing companies.

Earlier, Labor Department reported initial jobless claims in the week ended December 6th jumped to 573,000, their highest level since November of 1982. Separately, a report from the Commerce Department showed that the U.S. trade deficit unexpectedly widened in the month of October, reflecting a notable decrease in exports amid the global economic weakness. Economists had been expecting the deficit to narrow to $53.5 billion compared to the $56.5 billion originally reported for the previous month.

Airlies stocks came under pressure as the oil had a biggest one day gain in 3 months, up about $4.67 to $48 dollars. Also it was reported yesterday taht the airline industry will suffer a $2.5bn net loss next year despite the big fall in the oil price, as carriers are overtaken by falling demand for air travel amid the deepening recession in several leading economies.

And the woes for financial firms do not seem to have come to an end. FT quoted that the biggest US financial institutions reported a sharp increase to $610bn in so-called hard-to-value assets during the third quarter, raising concerns about the hidden dangers on balance sheets.Translation: More write offs, and banks are hiding more and more assets on their balance sheets. WFC