10:21 am - Market Report by Bill Wermine

Dear Traders,

The world stock markets are on hold and are yet to resume their downtrends until the powers that be in Washington decide on the bailout. The cartoon below expresses
my feelings. No matter what they decide the bear is in control and will claim more victims.

Just the way we like it, a bailout with no strings attached.

Former Republican house speaker Newt Gingrich weighed in on the Wall St bailout " I find it inconceivable that the Treasury and the Federal Reserve could manage the whole economy of Wall St. And yet that is what Paulson is proposing. I think that is an undertaking of such gigantic delusion that is will be a nightmare," Gingrich declared.

US Treasury chief Paulson and Bernanke have used every trick in their book to prevent a bear market from materializing on Wall St, before the presidential election which now threatens to eject the Republicans from the White House. They have been unsuccessful

Notice the attached Dow Futures chart which is in a relentless downtrend. I would like to see a high volume panic capitulation which is evidence of professional buying before committing to the long side of the Dow. Even then it would be a short term trade with careful risk management

The Federal reserve has tried to put a floor under the stockmarket by slashing the federal funds rate 325 basis points from a year ago to 2 % today, far below inflation. Futures traders in Chicago are betting on a 1/4 point cut on the Fed Funds rate in October as perhaps their final bullet to halt the downwave.

In my opinion it will fail: The reason is that Wall St, and the US financial insiders/ powers- Masters of the Universe have been running perhaps the biggest pyramid scam in all of history being the subprime mortgage scam. The pyramid is collapsing- major financial houses such as Lehmen/ Bear Sterns are bankrupt. Washington Mutual, a 150 year old bank failed- being the largest bank failure in US history. Depositers in InDi Mac Bank in California are still waiting to get back their deposits after it failed. The list goes on- AIG failed being taken over by the government/ Fannie May etc etc.

The housing market in the US continues to collapse with the highest foreclosure rate since the 1931 depression. This is destroying the wealth of the Middle class whose house is their only asset.

If you have assets/currencies in the US I suggest you exit. There is a possibility the US could declare an emergency- impose exchange controls and you could not get your money out. The US mint last week suspended the sale of American Eagle/ Buffalo gold coins. In 1932 Presendent Roosevelt in the US declaired an emergency and made it a criminal offense to hold gold coins or bars. There is a huge demand for gold in the US as a safe haven. Gold dealers are selling their stock of gold coins in some places at a 10 % premium to the gold price.

Open a Phillip Wrap account in Singapore where you can hold any currency cash deposit you wish - ie AUD/ Euro/ BRL. One of my clients opened a Wrap Account and placed his funds in the Lion AUD fund. This fund only invests in short term commercial paper and AUD Treasury bills. It is super safe and for AUD Lion Fund to fail there would have to be a nuclear holocaust and Australia would cease to exist. There are no Fannie May or mortgage bonds in this portfolio. If Obama wins that could ignite some furious trends in the currencies and commodities should benefit.

Continue to run your short US Dollar/Long Euro positions. Hold quality KLSE shares focusing on shares such as Dutch Lady/ F & N and Nestle which I hold for myself and clients. We still have to eat and these companies have solid balance sheets, are well managed and will survive the current volatility. Unlike the Dow, the KLSE had a capitulation last week, selling has dried up, and a solid base is forming from 1000 to 1050. Near term target 1200. I am looking at the CPO market. If the US Dollar collapses on a hint of an Obama victory that would benefit plantation shares and the CPO futures. CPO is forming a floor, there is evidence of professional buying in this environment of maximum doom and gloom, bad news, extreme fear. Reward is the greatest when uncertainty is at the maximum.

Have a good week
Bill