Morning Thoughts

Good morning... nothing surprising this morning other than the faulty government report which is understating job losses, is at least negative for 2 months ago. January numbers were revised lower from previous levels, as were December 07 numbers. (this is yet another reason to ignore these numbers, as they are not only wrong, they are then revised substantially). More worrisome is the unemployment rate FELL to 4.8%. This signals more and more Americans have just given up the ghost on finding a job and dropped out of the job market altogether. Further, if you believe the numbers to be accurate the government created 38K jobs which means the private sector lost > 100K. Again, this is a highly flawed report so using any numbers is relatively fruitless in my opinion, but the trend is clear for anyone who does not have their head in a bucket of Kool Aid.

The Fed came out this AM and 12 minutes before the report (not they are trying to manipulate the market) announced (a) they are increasing their TAF auctions from $30B an auction to $50B and (b) instead of holding them "until needed" they are now firmly saying at least 6 more months. They are also expanding WHAT they will take, which means our Federal government is on the path to holding subprime mortgages - but since they have the printing press they can do whatever they want. Last some vague language about working with other central banks aka begging them to cut rates so we don't look like the only idiot in the globe.

Due to market sentiment being so poor it would not be surprising to see some attempts at rallies which we already appear to be having. Again it is a process, and people will find any glimmer of silver lining (more rate cuts - woo hoo!) to continue to buffet the market. But hopefully as each data point comes out more people move from denial to acceptance stage. But now the people calling for "everything to be fine in 6 months" are losing more credibility by the minute.

I am selling some of my short exposure into this morning's sell off, but not that much. Now, the next wave of Fed cut chatter, federal government bailout chatter, and the like will be used by bulls to try to move the market up. After any rally we will continue to see the same themes, dollar erosion, more Fed cuts, commodities rally, etc.

We remain in bear market, and simply turn your thinking upside down from the past 5 years... instead of buy on dips, you sell on rallies. Turn the charts upside down if you are a chart reader and just pretend it's a bull market and react accordingly.

I did add back my Powershares DB Agriculture Fund (DBA) exposure that I sold off earlier in the week in mid $42s, when I said I'd be interested buying back in mid $40s. It is just around $40 this morning. I continue to use this as my "safety" fund and inflation buster; not to mention the underlying macro themes are the strongest out there in any sector.

I also am liking the relative strength in technology of late - while I don't expect it to last too long it might work in the near term, much like the relative strength we saw in financials, retailers et al in late January.

I'll be poking around for some other buys, but the key level now is S&P 1270. We are still destined to test it and if it holds or not, determines a lot. I expect the "invisible hand" to work all the magic it has to make sure we hold, at least the first time through.

Be careful of the Kool Aid...

Long Powershares DB Agriculture Fund in fund and personal account