The core of the issue is whether the US automobile industry can survive the present credit market crisis that has effectively shut off credit to everybody, including the buyers of cars and trucks, because of the failure of many banks.

At precisely 3:00pm ET yesterday, General Motors (GM) was trading at $5.57 – a huge loss from $13.00 in the past three weeks. But in the final hour, GM stock plunged a further -16.5% to $4.65, closing at $4.76. GM now has a market capitalization of just $2.7 billion, but as of June 30 had a $20 billion deficit on its balance sheet and an underfunded pension liability of -33.1 billion. If markets were truly free, GM would be forced to declare bankruptcy, from which there would be no hope for recovery. Ford Motor and Chrysler are in the same position. The Federal government needs to immediately nationalize these companies along with the top five to ten banks to protect a couple million workers – the most important in America today because if these jobs are lost there will be a depression.

That is the state of the union today.

Yesterday and overnight, the losses on the international equity markets were massive, including in NY where the DJIA (-678.91 -7.33% to 8579.19), S&P 500 (-75.02 -7.62% to 909.92) and NASDAQ Composite (-95.21 -5.47% to 1645.12) were smashed.

The Toronto Composite (-456.13 -4.54% to 9600.18) was hammered as Canada’s top two financial companies (RY -11.1% and MFC -18.5%) plunged on selling from foreign investors under immense duress. The Venture Board (-30.97 -2.89% to 1041.67) actually slowed it descent, having been down almost -20% in the prior three days.

In NY, the best performing sector (XLK) was down -3.32%, largely because of the positive earnings report from IBM. All sectors were bad, but Energy (XLE -14.4%) and Financials (-10.4%) were worst hit. In the Financials, the Banks ($BKX -11.9%) and Broker-Dealers ($XBD -12.3%) took immense losses for a single day.

In fact, while not compacted into a single trading session like Black Monday October 19, 1987, the past few days this week has been just as bad. Yesterday alone, the global equity index (Dow world index) dropped -4.2%. So this crisis is a global one.

Overnight today, the Asia-Pacific equity markets were also smashed: All-Ords of Australia (-8.20% to 3939.5); Shanghai Composite (-3.57% to 2000.6), Hong Kong (-7.19% to 14796.9), India Sensex 30 (-7.07% to 10527.9), and Japan’s Nikkei 225 (-9.62% to 8276.4). Over just three days, the Nikkei Dow has plunged -20%.

In Europe at 8:52am ET, the French CAC (-8.61%), German DAX (-9.02%) and UK FTSE 100 (-8.24%) were crashing, awaiting the dire opening in NY.

The $USD soared yesterday +0.49% to 81.25 and is up this morning in the futures to 81.97. The $CDW (Cdn Loonie) plunged -2.33% to 86.95 after dropping -1.67% the previous day and almost -2% over the two days before that. The Loonie’s fortunes are tied to the Western Canada oil patch, which is being smashed as Crude Oil prices plunge. Those prices are plunging because the banks have called the loans of speculation based hedge funds. Now there are margin calls. The leverage in futures trading leads to such a result where Crude Oil has fallen from $147 to under $82 from just mid-July.

The inter-relationships in capital market trading are now quite obvious.

Yesterday Crude Oil dropped -$1.81/bbl to 86.62, but the futures this morning had crashed to 81.85. That move has strengthened the $USD to 81.97, and taken the bloom (for a short time) off the precious metals.

$GOLD contracts yesterday (starting late in the previous day’s session) sold down -$20.00/oz to 886.50. Later gold rallied to well over 900.

In the spot market this morning, the precious metals have backed down from overnight highs (in brackets) to be presently (9:10am ET) for gold, palladium, platinum and silver: 907.03 (931.70), 190.5 (201), 1009 (1024), and 11.46 (12.24). Volatility here is extreme.

The DJIA futures were at 8320 at 9:10am ET, fully 1000 points than yesterday morning. The DJIA this morning opened down almost -700 points in 5 minutes. The selling wave continues. In fact this is a tsunami.

This selling wave continues to present incredibly good buying opportunities, in my opinion.

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Comments & Outlook

Morgan Stanley (MS) and Goldman Sachs (GS) a week ago filed to become banks, which required their moving from a position of over 30 to 1 leverage to well under 10 to 1. That deleveraging process is now killing hedge funds and close to the margin clients, forcing them to sell securities and futures positions, which is exasperating the market crash.

For this reason, ie, to allow deleveraging to go as smoothly as possible, there was recently a period where short-selling was not permitted in many stocks. The monetary authorities, however, misjudged the impact the Morgan Stanley and Goldman Sachs decisions would have on capital markets. At the point where investment banks were deciding to become commercial banks, under the protection of the Fed, the bail-out package legislated by Washington was found to be inadequate.

The market has since been in an all-out rout.

The Treasury Secretary, who is the last person who should be managing a solution because these investment bankers are his friends and former colleagues, has now deemed the advisability of using Treasury capital to be used to buy preferred shares of the banks. Doing so would be the worst possible decision for the government. Bank failures would happen in any event because the system is broke.

Believing that certain industries like banks and automobile manufacturing are critical to the future of the American economy, the federal government must immediately backstop the potential failure of the largest companies in those industries, however weak they might be.

As I see it, the government, and not the Fed, must open a window of opportunity where until the end of 2008 there will be a bid to buy all the common stock that any leading company (from a select list) chooses to sell to bring order to their balance sheet. Selling control shares to government should be at the discretion of the company directors, but in my view those directors who reject the offer and who later fail in their duty to protect the employees and vendors with other means should be considered at fault should those companies fail.

What this means, of course, is that the US government must take emergency action to nationalize those economically crucial companies that can no longer survive on their own. It also means that the present bondholders and shareholders of those companies have probably lost their financial stake. The offset however is that the public treasury will earn back a very significant return when the economy stabilizes and comes back to good health. With effective legislation, those profits would later be distributed back to the taxpayer, which would be worked back into the economy.

The action I recommend is the ultimate back-stop in a crisis where the financial system has failed. Everybody wants free markets, and in time they will get them if the proper legislation is put in place. But private investors who today put further capital into any company that relies on a smoothly functioning credit market system are fools. The system has failed and needs to be replaced.

That reminds me of the joke of the condom used by a Scottish regiment, which after the condom had broke held a vote to repair or replace. This is no time to make stupid decisions; the current financial system needs to be replaced.

The capital market, however, can survive if only legislators can remove the control that bankers have over it. There are values out there in the Energy and Basic Materials companies, some of which are trading at 1 to 2 times annual cash flow. Others can be bought literally for the net cash on their balance sheet. There are industrial companies that make essential products that continue to build their order book. There are healthcare companies like Genentech, Pfizer and Merck, for example, that will continue to manufacture essential products.

This is a time, while legislators are replacing the failed financial system, to be investing long-term capital in those parts of the market I recommend.

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Links & Charts

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International Economics Review

US Economic Calendar.

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Knobias Cara100 Tables

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Cara 100 Daily RSI-7 Charts

At least one RSI value >70:

At least one RSI value <30:

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International Equity Markets Review

Europe

Here is the latest session data for the bourses of Europe.

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Here is the latest session data for the London stock exchange FTSE.

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Here is the latest session data for the German DAX.

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Here is the latest session data for the French CAC 40.

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Here is the latest session data for the Milan Italy stock exchange MIBTEL.

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Here is the latest session data for the Swiss market index.

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Asia-Pacific

Here is the latest session data for the Asia-Pacific stock exchanges.

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Here is the latest chart for the Japanese Nikkei 225 index.

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Here is the latest chart for the Singapore index .

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Here is the latest chart for the Shanghai Composite index .

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Here is the latest chart for the Hong Kong Hang Seng index .

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Here is the latest chart for the India BSE 30 index .

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Here is the latest chart for the Australian All Ordinaries index .

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US Equity Markets Review

DJIA (interactive) chart

NASDAQ Composite (interactive) chart

Table 15: Dow 30 List

You can do this table yourself by entering the following string into the Summaries window at www.billcara2.com and then clicking on the link for Performance.

AA AIG AXP BA C CAT DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM MO MRK MSFT PFE PG T UTX VZ WMT XOM

Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)

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The Americas

Here is the latest session data for the exchanges of the Americas.

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Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.

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Here is the latest session data for the Toronto Stock Exchange composite index.

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Sector ETF Summary for the US equity market

The tables I show in this section are for ten (GICS) Sector Index Funds (ETF's) only, but they cover the full spectrum of the US equity market.

Table 1: Cara ETF List

You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance. XLE XLB XLI XLY XLP IYH XLF SMH IYZ XLU XLK SPY . You can also add more ETF’s – up to 30 in total.

For a list of components to any ETF, go to the AMEX.com web site, and click on ETF's.

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10 (energy: XLE)

Table 2: Senior oil & gas equities

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15 (basic materials: XLB)

Table 3: Senior metals and steel equities

Table 13: Senior gold equities

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20 (industrial: XLI)

Table 4: Senior capital goods makers and transportation

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25 (consumer discretionary: XLY)

Table 5: Senior consumer discretionary equities

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30 (consumer staples: XLP)

Table 6: Senior consumer staples equities

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35 (healthcare: IYH)

Table 7: Senior healthcare equities

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40 (financial: XLF)

Table 8: Senior financial company equities

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45 (technology, semiconductor: SMH)

Table 9: Senior technology equities

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50 (telecom: IYZ)

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55 (utilities: XLU)

Table 12: US Utilities

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International Equity Market USD-denominated ETF Review

Table 14: International equities perspective

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Japanese equity market ETF: EWJ

Here is the Japanese (EWJ) equity market ETF Daily data charts:

Interactive EWJ Daily data:

Interactive EWJ Weekly data:

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U.K. equity market ETF

Here is the United Kingdom (EWU) equity market ETF Daily data charts:

Interactive EWU Daily data:

EWU Daily data:

Interactive EWU Weekly data:

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Canada's equity market

Here is the Canadian (EWC) equity market ETF Daily data charts:

Interactive EWC Daily data:

Interactive EWC Weekly data:

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Bonds & Yields Review

Table 10: Yahoo Finance U.S. Treasury Debt, Municipal and Corporate Bond Yields

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Here is the $USB 30-year Treasury Bond chart.

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US Bond Funds -- Interactive Daily Data Charts

SHY Daily data series chart:

IEF Daily data series chart:

TLT Daily data series chart:

AGG Daily data series chart:

LQD Daily data series chart:

TIP Daily data series chart:

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Table 11: Interest-sensitive securities

Consumer Finance -USA -- Interactive Daily Data Charts

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Commodities Review

$CRB Index

Open Futures Contracts

Interactive Chart of Daily CRB Commodities Index:

Interactive Chart of Weekly CRB Commodities Index:

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Oil Review

Here is the e-miNY Mar-08 Crude Oil chart.

Interactive Chart of Daily Crude Oil:

Interactive Chart of Weekly Crude Oil:

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Gold & Precious Metals Review

Spot gold chart for the week

Interactive Chart of Daily Gold EOD Continuous Contract Index:

Interactive Chart of Weekly Gold EOD Continuous Contract Index:

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Spot silver chart for the week

Interactive daily data

Interactive Chart of Daily Silver EOD Continuous Contract Index:

Interactive chart of the Silver Bullion index.

Interactive Chart of Weekly Silver EOD Continuous Contract Index:

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Spot platinum chart for the past three days

Interactive Chart of Daily Platinum EOD Continuous Contract Index:

Interactive Chart of Weekly Platinum EOD Continuous Contract Index:

Interactive chart of the Platinum metal index.

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Spot palladium chart for the week

Interactive Chart of Daily Palladium EOD Continuous Contract Index:

Interactive Chart of Weekly Palladium EOD Continuous Contract Index:

Interactive chart of the Palladium metal index.

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Interactive Chart of Weekly Copper EOD Continuous Contract Index:

Interactive Chart of Daily Copper EOD Continuous Contract Index:

Interactive chart of the Copper metal index.

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Table 13: Senior gold equities

To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows:

NEM ABX AU GFI GG HMY AUY KGC BVN
Interactive Daily data
Interactive Weekly data

MDG LIHRY AEM BGO IAG EGO RGLD GOLD CDE GRS
Interactive Daily data
Interactive Weekly data

CBJ SSRI SIL NG KRY UXG GRZ TSE_HRG TSE_GUY TSE_AGI
Interactive Daily data
Interactive Weekly data

NXG GSS MNG DROOY MFN RNO RANGY MRB CLG
Interactive Daily data
Interactive Weekly data

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Here are the key Silver miners and the SLV ETF:

SLV SIL CDE HL PAAS SSRI SLW MGN

Interactive Daily data
Interactive Weekly data

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Here are the Weekly and Daily Data charts of the indexes:

Interactive Chart of Daily U.S. Goldminers Index:

Weekly U.S. Goldminers Index:

Interactive Chart of Weekly U.S. Goldminers Index:

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The U.S. goldminer share trust ETF trades under the ticker symbol GDX.

Here are the U.S. Goldminer ETF (GDX) index Weekly and Daily data charts:

GDX Daily data:

GDX Weekly data:

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The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD. Yes, just like GDX on the AMEX, you can trade XGD on Toronto.

Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:

Interactive Chart of XGD Daily data:

Interactive Chart of XGD Weekly data:

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Forex Review

Here is the chart of the week's trading in the $USD.

Interactive Chart of Daily U.S. Dollar Index:

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Interactive Chart of Daily Euro Dollar Index, priced in USD:

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Daily British Pound Index:

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Daily Japanese Yen Index:

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Daily Canadian Dollar Index:

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Wrap-up