Madoff, Autos, and More

Most people never heard of Bernie Madoff until last Thursday but by now his name has been splashed around the world in every home. The man built an empire by convincing wealthy individuals, hedge funds, and banks globally to participate in his grand Ponzi scheme. The fallout is massive as some ordinary individuals as well as the wealthiest woke up on Saturday to realize they may be poor now. This is a crime and the reverberations could be massive. The surprising news is that the markets don't appear to be too troubled by the massive amount of wealth that just vanished. We anticipate some shocks to the system will be felt as more information about this financial scandal becomes known. Stay tuned!

This week the markets will also continue to focus on the auto bailout. It looks like the government is pursuing some bridge loan but the devil is in the details. At this point, we don't know what the Bush Administration is proposing but we hope they force all the stakeholders at GM to move in the direction of a delevered balance sheet and a lean cost efficient manufacturing operation.

Tomorrow, the Federal Reserve will let us know if rates will be cut again but until we get their statement on the economy, the markets should leave stocks in flux for the next day and a half. Of course we will get enough economic data before the Fed's big moment as we find out about industrial production, consumer prices, and housing starts but we don't expect to see any news that says the economy has bottomed and the economy is ready to turn positive.

We still maintain a negative bias on the markets until all market experts expect the worst and it is apparent a bottom to the economy is in sight. This still may be three to six months away from now. Volatility will continue for stocks, commodities, and currencies and fear and anxiety amongst investors is still evident. Professional investors are tiptoeing through this path of danger and so should you. Stay liquid and only buy quality.