Stock Online TraderBulls & Bears Make Money, Pigs Get Slaughtered…Let Us Not Be That Pig…

Imagine that you have $2.8 trillion sitting around. And for kicks, let’s assume that most of that money, about two-thirds, is invested in U.S. dollars and other dollar-denominated assets like U.S. Treasury bonds.

And let’s assume that your currency was linked to the U.S. dollar, too. In other words, you often buy dollars to maintain a stable value relative to the buck.

Read the rest here….

Falling USD to Boost US Stock Markets and Consumer Spending

Capital One Financial Corp (COF) is a diversified financial services company, which markets a variety of financial products and services through its banking and non-banking subsidiaries. It has four segments: U.S. Card, Auto Finance, Global Financial Services and Banking. The U.S. Card segment comprises domestic consumer credit card activities. The Auto Finance segment comprises automobile and other motor vehicle financing activities. The Global Financial Services segment comprises international lending activities, small business lending, installment loans, home loans, healthcare financing and other activities. The Banking segment comprises local banking operations, which includes consumer, small business and commercial deposits and lending conducted within the Company’s branch network.

Capital One said its net charge-off rate rose to 3.28 percent in October from the third quarter’s 2.86 percent. The charge-off rate in U.S. cards rose to 5.11 percent from 4.13 percent in the same periods, while card loans at least 30 days past due rose to 4.75 percent from 4.46 percent. Capital One had on Tuesday raised its forecast for 2008 credit losses.

“While management previously indicated that the U.S. card loss rate would trend north of 5 percent in the fourth quarter, we were surprised to see how fast this jumped,” Credit Suisse analyst Moshe Orenbuch wrote. Standard & Poor’s revised its rating outlook for McLean, Virginia-based Capital One to “stable” from “positive.”

In a quest to reinvent itself, Capital One struck out too early, at the wrong time in the mortgage cycle acquiring NorthFork and Hibernia, despite having negotiated the minefield of consumer credit reasonably well in the earlier part of this decade. But, with long-time believers having been burned one too many times, and the credit cycle not yet in its terminal phase, its optimal solution may be to sell itself.

With recession upon us, along with the housing bust, the credit card companies will feel the pain. This makes COF an excellent short at 55-56$ level.

Current Price: 49.20

Disclosure: No position in COF, but will be planning to short it soon.

The Consumer Crunch
The long-awaited, long-feared consumer crunch may finally be here. That might not mean an economywide recession, but the pain for American households will be deep.

In recent years the U.S. mostly has seen narrowly focused downturns, where a few sectors are hit hard while the rest of the economy and financial markets remain relatively unscathed. In the dot-com bust of 2001, for example, tech companies and stocks took it on the chin, while consumer spending and borrowing sailed through without a pause. This time the positions will be reversed, as consumers tank while much of the corporate sector stays on track.

Builders Downgrade
Citigroup analyst Stephen Kim said that it’s been difficult to time the bottom because the housing cycle’s downturn has not coincided with the economic cycle, and because the pullback in the resale market is lagging far behind the market for new homes.

He suggested that the good news would come in the form of a turnaround in subprime default trends. Under current conditions, Kim said, it will likely be the second half of 2008 before there is “sufficient data” to allow for optimism in the sector. Kim reduced his ratings to “Hold” from “Buy” on the following homebuilder stocks: Centex Corp., with a price target cut to $22 from $35; D.R. Horton Inc., price target cut to $12 from $17; KB Homes Inc., price target down to $25 from $37; Lennar Corp., price target to $17 from $31; Pulte Homes Inc., target to $12 from $21; Ryland Group Inc., target price to $23 from $36; Standard Pacific Corp., target to $3 from $11. He cut Meritage Homes Corp. to “Sell,” from “Hold,” and dropped his price target to $9 from $17. The analyst kept a “Hold” rating on Toll Brothers Inc., and cut his price target to $19 from $24. He kept “Sell” ratings on: Beazer Homes USA Inc. and cut his price target to $9 from $13; Hovnanian Enterprises Inc., price target cut to $8 from $12; and MDC Holdings Inc., price target to $37 from $44.

Fed Cut
Futures on the Chicago Board of Trade show traders began betting that the Fed will lower its target rate for overnight lending between banks by a half-percentage point on Dec. 11. Traders see an 82 percent chance rates will be cut to 4.25 percent at the meeting, and 18 percent odds of a cut to 4 percent. The Fed has reduced the rate by three quarters of a percentage point this year to 4.5 percent.

Fed Injection
The Federal Reserve will provide funds for banks to borrow in an attempt to forestall any cash shortages at the end of the year, its first such operation since December 2005. The Fed’s said in a statement that it plans a series of repurchase agreements, starting with an $8 billion injection on Nov. 28, extending into next year.

Short Sale Recommendation

ABK – Mortgage Insurer
BIG – Retailer
BZH – Homebuilder
COF – Credit Services
CIT – Credit Services
CTX – Homebuilder
DHI – Homebuilder
DFS – Credit Services
FBN – Home Furniture
IMB – Mortgage Lender
INFY – Software
KBH – Homebuilder
LEN – Homebuilder
LOW – Retailer
LZB – Home Furniture
M – Retailer
MBI – Mortgage Insurer
MDC – Homebuilder
MTG – Mortgage Insurer/Title
MTH – Homebuilder
OSTK – Retailer
PHM – Homebuilder
RYL – Homebuilder
SCON – Communication Equipment
SHLD – Retailer
WIT – Software

Disclosure: Short on DHI