WallStreetWeather.net Forecast For Week Of May 25, 2009

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Summary Of Last Week’s Influences:
Financial markets last week certainly reflected they were driving under the influence of Mercury retrograde squaring off with Jupiter and Neptune. Mercury represents communication and movement, and markets tend to lose their sense of direction when retrograde. Mercury retrograde certainly took the stock market on a circular route that in spite of all the gyrations left the major indices just slightly higher than where it left off the previous week. Jupiter and Neptune together in Aquarius saw Monday’s extreme optimism and euphoria quickly fade into uncertainty over how strong those much touted “green shoots” really are.

The overzealous enthusiasm of Mr. Green Shoots “printing money” at the Fed saw the yield on the 10 year note rise 32 basis points by Friday’s close to 3.455%. While Bernanke was out searching for any sign of deflation, the dollar weakened to its lowest level this year and crude oil closed at its highest level for 2009 on Wednesday ($62.04).

As Dallas FRB president Richard Fisher told Saturday’s Wall Street Journal, the most frequent concern raised during his recent trip to Asia was about the Fed’s purchase of Treasurys. (China has been buying short-term treasuries over longer maturities in the last eight months to protect itself against a sharp increase in bond yields in the event Bernanke’s bond bubble bursts.) After S&P lowered its outlook on the UK’s sovereign debt from stable to negative Thursday for a possible downgrade following the next General Election, the media was hyping comments by PIMCO’s Bill Gross that the US “could be next.” According to Friday’s Wall Street Journal, a five year CDS contract on US debt was $37,500 for every $10 million insured. But a five year CDS on France’s debt cost $36,500.

This latest development brought more gold bugs out of the woodwork, despite gold jewelry sales at a 20 year low. Like oil, gold is not trading on fundamentals but on the anticipation of more inflation in the pipeline as a result of all this debt issuance. Jupiter expands and Neptune’s tendency is to inflate into a bubble.

What do loaded guns and credit cards have in common? Apparently physician Senator Tom Coburn has picked up on the USA’s natal Mars challenging natal Neptune through his Amendment attached to the credit card bill. Mars rules weapons, and Neptune rules ideologies, as well as those plastic credit cards. And now you don’t have to leave home without either one of them, as under the CARD Act of 2009 that President Obama signed Friday, you can now take a loaded gun along with a credit card into America’s national parks. (BTW, the CARD Act was first introduced in Congress on January 22 - the last time Mercury was retrograde.)

Summary Of This Week’s Influences:
This will probably be another light volume week since it’s a holiday week. This week features Jupiter exactly conjoining Neptune on Wednesday, bringing a giant dose of optimism and euphoria or hysteria that grows like a contagion. With the planetary pair conjoining in wild and crazy Aquarius and Mercury retrograde, who knows? I’ll keep my prognostications private this week and rate myself Bob Toll-style in next week’s forecast.

Most likely it will probably be another week of choppy/mixed conditions that give way to more volatile and bigger moves in either or both directions as the week progresses. Mars in Aries interacting with Jupiter and Neptune Tuesday and Wednesday can accelerate the speed of the market moves. My post “Wall Street and the Consumer in Parallel Universes,” explains the three exact alignment of Jupiter and Neptune this year.

Neptune’s energies are extra potent from May 24 to June 2 as from Earth’s vantage point the planet will appear to be stationary in the sky, turning retrograde early Friday. Neptune rules interest rates, inflation, and oil and these are usually key issues when Neptune's energies are pronounced. On Tuesday, Wednesday and Thursday, the Treasury will auction a total of $162 billion in new debt.

Neptune rules clouds and fog that can create confusion that obscures our minds from thinking clearly. Is it real or just rumor and illusion? Neptune is about opening up our creative and intuitive faculties so we’re sensitive enough to pick up on the subtle nuances that are not always readily apparent analytically. Taking some time to tune out in favor of some R&R can be particularly productive this week. Mars in Aries favorably aspecting Jupiter and Neptune offers the opportunity to be proactive about developing creative ideas/projects that previously got pushed aside in favor of more immediate obligations.

Neptune rules drugs and chemicals. In “Project Solar: Merck & Schering-Plough’s Reverse Merger,” I wrote that legal issues would probably arise in late May over Schering’s revenue sharing agreement with Johnson & Johnson (JNJ) for Remicade. This week J&J is expected to begin formal arbitration for a return of J&J’s full rights to market and sell Remicade and its improved version Simponi outside the US, according to the Financial Times.

Individual investors (many who are senior citizens on fixed incomes) hold about 20% of the $27 billion in unsecured debt that General Motors (GM) and the government are asking they swap it for a 10% equity stake in GM to prevent the automaker from going into bankruptcy. If the bondholders accept the offer, they will get 225 newly issued GM shares per $1,000 face value, but then GM will execute a 1 for 100 reverse split. The Fed’s monetary policy of low interest rates pushed these investors to seek yield through higher risk investments. As bondholders, these investors thought they would escape punishment by the government as the government has protected the bondholders while wiping out the shareholders in bank failures. Tuesday is the deadline for their decision, but as I’ve written before*, GM is headed for bankruptcy court.

Mercury moves direct Saturday evening with the Moon in Mercury-ruled Virgo. Reconfirm schedules, review all the fine print, fully charge electronic devices, and run backups and security scans on computers.

No disclosures.

*Link to previous Weekly Forecast talks about Henderson and Wagoner. It links to a December post that contains the links to my three part series on the automakers.

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