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Good Kill on the Auto Bill…

I like my Republicans to be Republicans and that’s exactly what the majority of Senate Republicans where this morning! The lame duck spoke loud and clear this morning, and sent a nice message to the Big 3 (GM) (F) (Chrysler) and UAW that stated you will probably get your money, but you better be real careful!   (Bush leading from the center will probably lend them the money from TARP.)

Main Street does not want to buy their cars, Wall Street doesn’t want their stock, banks don’t want to lend them money, and the American taxpayers are sick and tired of the incredible lack of professionalism by the management and the UAW.

One thing is for sure in the financial markets. You can always count on investors to take things to extremes. Through the years, we've seen many market extremes: the internet bubble, the tech bubble, the Chinese stock market bubble, the U.S. real estate bubbvle, etc. Want to know the next one brewing even now? 

The Bond Market Bubble!

In an attempt to "run to safety", too much money has run nto the bond market. Heck, you're not even earning any interest on your treasuries at these extreme levels!

The moves have been parabolic lately as shown by the chart below. Check it out. 

With this "Bond Bubble", bonds are quickly becoming more risky all the time!

Is there a “holy grail” out there to be had? No! But if you want to know something that is about as close as it gets….it’s sector rotations.

 You see, it’s no wonder that Wal-mart (WMT) has done well in the recession. It’s because it’s in a “defensive” sector of the economy. Then you look over at Whole Foods Market (WFMI) and it gets creamed. That’s because it’s in a cyclical sector that does good when “the cash is flowing” pretty good in the economy.

 So over the past year, Wal-mart moved up from $44 to $54 a share while Whole Foods went from $40 down to $10 a share. Considering the economic/business cycle can help to keep you in the right stocks at the right time.

It’s pretty safe bet that they are coming! And it is more a question of when and how much?? President–elect Obama, Nancy Pelosi and Ben Bernanke have all been in favor of a stimulus, and President Bush is open to it.  Most economists and financial experts agree that the government has to borrow its way out of trouble, and why not, it’s never been cheaper for the Government to borrow. They are the only part of the economy that really can borrow now!

Here in America, for some reason we are caught up on the notion of being "too big to fail". I'm not sure why..because history doesn't show that big companies are "too big to fail". Many fail on their own and many have never gotten bailouts either. 

For instance, GE (General Electric) is the only original "big" company left of the Dow Jones Industrial Average. 

 Tired of seeing the government throw money at banks, insurance companies and auto companies? Think it's unfair that they get billions of dollars while you don't get anything? 

Well, there is one way to help solve that. Allow the next wave of government spending to benefit you. How? Invest in what the government is about to spend money on. What's that? Obama says it will be "infrastructure". 

While it can be debated to some extent, which companies will benefit from this, there are some big names that will very likely benefit from this "wave of spending" by the government. 

Two stocks to consider for instance, may be U.S. Steel (Stock Ticker Symbol: X) and Caterpillar (CAT). If they are going to build and repair, its sure to involve some steel and some equipment to build with. These two companies have a huge slice of the pie when it comes to that sort of thing.