Here is a short piece on current market events that was written on Monday, November 17, 2008 by Roger Young, head of the Retail and Correspondent sales desks of Fidelity Capital Markets:

Good morning.

The dour news on the economy continues and overseas traders are signaling more concern over the economy, the consumer and the markets. While we have expected some better performance in equities based on technical's, "bullish divergences" set on last week's new lows in the Dow Jones Industrials index, we caution that fundamentals keep pointing to weakness in consumer spending and a higher unemployment rate, so a trend is still negative.

Moreover, while signals abound that liquidity has been restored, somewhat, (with Libor rates touching its lowest levels since 2004 and Euro interbank loans for 3 months at the lowest level in 16 months), an intensifying of severity in weaker numbers and a recession could start to tighten lending rates. Last week, indications the economic slump is deepening caused stocks to fall about 5% on the week, and volatility was back--big time.

The Dow Jones broke through a key 8,000 support level, then set new lows for the year and quickly regained on a huge rally and closed higher. The S&P 500 slipped below its October 10 low near 840.

Unfortunately, there was no real follow through into week's end, and shorts seem to have been taken out. The average stock in the S&P now has 8.1% of its float sold short, down from 11.9% in July, thus downward pressure could come back.

Bonds remain in flight-to-quality mode, and do not expect that to change. We still think that the Fed will have to ease further, Foreign Central Banks are still big buyers, despite the lower dollars in circulation, and as well, this is seasonally a time when corporations use Treasuries to dress up the balance sheet--especially banks. Thus, do not look for much of a back up in rates--after all, if we did not see it when we had the quarterly refunding then....

In the NEWS:

WSJ: Fitch Mulls Toyota Downgrade.

Fitch Ratings warned Monday it might strip Toyota Motor Corp. of its AAA credit rating amid the industry global woes, another potential chink out of the company's armor as it deals with slumping sales in the Western world and slowing growth in emerging markets. The credit rater said its review should be completed within several weeks and will include determining whether "Toyota can show sufficient resilience against the adversities the industry is facing in order to determine whether its AAA rating remains appropriate," said Fitch executive Tatsuya Mizuno.

Barron's: Massive Bailouts Strain Treasury- U.S. Treasury puts $13.8 billion into Freddie Mac.

WHAT ONCE WAS UNTHINKABLE has happened: massive bailouts by the Treasury and the Federal Reserve, and extension of billions of the taxpayers' and the central bank's credit to a queue of petitioners that grows by the day.

But what happens if the requests begin to strain the credit of the world's most creditworthy borrower, the U.S. government itself? Unthinkable? Just in the past week, American International Group lifeline was increased to $150 billion from the original $85 billion; Freddie Mac sought an additional $13.8 billion after having gotten clearance for $100 billion in capital infusion along with Fannie Mae, which also looks as if it will need more cash; American Express converted to a bank holding company so it could get money under the $700 billion Troubled Assets Relief Program; General Electric finance unit will have $139 billion of its debt backed by the Federal Deposit Insurance Corp.

And, of course, Detroit is looking for a credit line from Washington as General Motors could run out of cash without a bailout. General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking $25 billion of new loans, on top of $25 billion already approved for loans. The latter were intended to help the carmakers retool their fleets and make more energy-efficient vehicles. Democratic lawmakers Monday plan to unveil a bill that would give the Big Three auto makers access to the $700 billion Troubled Asset Relief Program set up in October to help ailing banks and other financial firms. As written, the legislation wouldn't include auto-parts makers. Parts makers are seeking to change that in a letter signed by nearly 100 companies and being sent to the House and Senate on Monday. In the letter, the Motor and Equipment Manufacturers Association, a trade group, will ask that its members get equal access to TARP funding sought by the carmakers.

FCMS - Pace Accelerates for Consumer Bankruptcy Filings. After two years of steady growth, personal-bankruptcy filings suddenly increased nearly 8% between September and October. The filers have much more debt than those in previous economic downturns.

NY Times- Tech Companies Succumb to Slowdown

The New York Times reports that the technology industry is finally feeling the slump, as orders for both consumer tech and business products have collapsed in the span of a few weeks. Things are so bad, in fact, that some have compared the situation with 2000's dot-com bubble bust. Last week Intel (INTC) and Nokia (NOK) both warned of slowing sales and eBay (EBAY) and Advanced Micro Devices (AMD) dropped over 10% on Friday. Other tech companies feeling the pinch include Cisco Systems (CSCO), which warned that revenue was plummeting, Best Buy (BBY) and Sun Microsystems (JAVA), which announced plans to lay off 18% of its workforce.

NY Post- Hedge funds tried to sell their risky assets before Saturday's deadline- Hedge funds rushed to unload their higher risk stocks and bonds in the weeks before Saturday's deadline for investors to remove their money from the hedge funds. The withdrawals could force up to 25% of all hedge funds to close their doors, industry sources say.

I'm sure I did not cover all the doom and gloom news, as everything seems to hinge on what is a global recession unfolding to be much harsher than anyone expected. Nonetheless, the talk in Washington is that president-elect Obama will immediately consider a huge infrastructure spending program, tax cuts and more support for autos and other companies. That could be huge and if effective start the wheels in motion. I'm not a big fan of growing the deficit to get out of this mess, but given we have thrown everything but the kitchen sink at this problem will only minor success, the fiscal stimulus is going to be needed.

Still looking at strategies that employ safety of principal, and CD or UST short ladders as well as Munis that are stronger credits--Gos, Pre-res and Essential Revenue bonds--are the only game in town for now.

Let's end on some good news: Friday marked the first time in four weeks that no banks failed!!!!

Thanks, Roger

Roger H. Young Vice President, Manager- FCMS PWI/NF Distribution

Source: Fidelity Capital Markets, 2008