For many investors, 2007 has thankfully come to an end. The credit crisis and the housing market implosion has ravaged the equity markets. Here is what I want to see for the New Year:

A bottoming of the housing market. Too many Americans are suffering.

The banks and brokers suck it up and writedown all they can on their debt fiasco and get on with running their business.

The Federal Government ditching the extremely stupid bio-fuel initiatives. The environment is being destroyed by more agri-production and food prices are soaring.

Gasoline taxes needs to be higher to force people to drive more fuel efficient vehicals.

China and India continue with their economic expansion.

Peace in Pakistan and in Iraq.

AL Gore and his environmental friends stop flying around in private jets and living in modest sized homes.  

Yesterday, the DOW dropped almost 200 points on Benazir Bhutto’s death at the hands of extremists. Al-Qaeda and the Taliban are reported to be behind her assassination. The risk of civil war within a nuclear country is a cause for concern for the markets. The immediate effect is that money are going to oil and gold to hedge against geopolitical risks. With no signs that the housing market has yet to reach bottom, investors will stay on the cautious side.

In addition to tight credit conditions, the American consumer will be grappling with higher energy and food prices. Analysts’ earnings forecasts for companies are still considered to be quite optimistic. They might need to be taken down a notch. What has happened in Pakistan reminds the markets that global risks are real and remains a potential threat.

On the bright side, the Fed along with the other central banks are easing interest rates and flooding the market with liquidity. Countries like China and India are still growing their economies. There is no money to be made in the markets but the investor needs to pick their spots.

As I eat the leftovers from a Christmas dinner feast, we in North America have a lot be grateful for. Despite the housing crisis bought on by crooked agents, bankers and appraisers, we are grateful to be citizens in good ol’USA. We enjoy economic and political freedom, human rights and a relatively clean environment. It’s no surprise that millions of people from the rest of the world want to enter the United States to better their lives for themselves and their children.

Where else in the world would a woman born in a village in India become an astronaut? For women and visible minorities, the USA do indeed offer plenty of opportunities. Yes, we do have a lot of challenges also. Our ballooning debts at the government level and the personal level and the fact we are a nation of obese people. What is worrisome is our reliance on foreign oil. Our economic prosperity depends on steady supplies of oil.

History has shown that the USA has learned to overcome many obstacles. It will take time. Mistakes are made. But when people are allowed to be creative and pragmatic, the right solutions will be found. Unlike many other nations, we do draw on the talents of the best and the brightest regardless of color and gender. We do have a lot to be grateful for.     

Dear Santa,

As the markets go beaten down by the credit crunch, there are certain things I would like for the new year. The markets did get their lumps of coal. Hopefully 2008 will be more king for the markets. Here’s whate I want:

House markets stabilize: Thanks to greedy banks and mortgage brokers, many Americans are under water on their homes. 

Ditch the biofuel programs: The effect of using biofuel to run our cars are higher food prices and more harm to the environment.

A fiscally responsible government: Where’s the next Ronald Regean to move the U.S. forward.

Al Gore practices what he preaches: Instead of flying around in private jets with his army of lackeys, perhaps he should do more video confrencing. Along with his celebrity hypocrites, they do untold harm to the environment than the average American. 

Merry Christmas to all!!!

According to a report in The Wall Street Journal, Chrysler CEO Robert Nardelli told staff earlier this month that the struggling car company is operationally bankrupt but technically, it is not. He said that the only thing that keeps Chrysler from bankruptcy is the $10 billion private equity investors had pumped in. To offset the 2007 loss of $1.6 billion, Chrysler is expected to embark on aggressive asset sales.

Most industry analysts to expect Cerberus to pull off the turnaround of Chrysler. To succeed, ruthless cost cutting and new initiatives have to be implemented. This means paring back low selling models, shutting down factories and coming out with attractive, reliable vehicles that the buying public actually wants.

To stop the bleeding, the Chrysler management team needs to act fast. The company is facing headwinds that are also affecting the two other Detroit based automakers. They include a weakening US economy, high fuel prices slashing demand for profitable SUVs and intense Japanese competition. If Nardelli and company can pull off the turnaround, he should get the CEO of the year award.

The U.S. Congress passed a bill that would mandate the first increase in automobile fuel economy in 32 years. President George W. Bush intends to quickly sign the legislation. The energy bill, which by 2020 will boost required average mileage of cars, small trucks and SUVs by 40 per cent to 35 miles per gallon. In a rush to come across as pro-environment and appearing to be less reliant on Middle East oil, politicians are passing a flawed bill.

Instead of mandating higher fuel mileage, they should simply hike taxes on gasoline. Higher prices will force consumers to change their spending habits. Instead of riding around in air conditioned, 7 seat SUVs, Americans will switch to smaller more fuel efficient vehicles. To fit in this vehicles, many Americans will have to adopt a more healthier lifestyle.

Just look at Europe where they pay much more for fueling their vehicles. They are driving around in well designed fuel efficient vehicles. High gasoline prices force people to cut down on consumption.  Legislation will not change people’s consuming habits as effectively as pricing. If the U.S. government were really serious about having people eat healthier, they should charge taxes on junk food.

The traditional Santa Claus rally seems unlikely. The stocks in the financial services sector are getting hit from the subprime fiasco. As the credit crisis persists, firms are writing down their debt portfolios. Despite Goldman’s strong earnings this morning, the equity markets are still nervous. Morgan Stanley and Bear Stearns are reporting tomorrow and Wednesday respectively. If their results and guidance continue to be negative, the equity markets are likely to sell down further.

Before the markets can rally, they need to see that a bottom is near on the credit crisis. Markets can handle bad news but not uncertainty. Right now, the path of least resistance is down. If the overall equity markets are to rally, the financial sector needs to stabilize. We are not there yet.

According to a report on steroid use in the Major League Baseball by former Senate Majority Leader George Mitchellhas, there is a serious drug culture in which steroid use is widespread. The report mentions big stars such as Roger Clemens, Miguel Tejada, Andy Pettitte and Barry Bonds. The report puts the blame on just about everyone involved in baseball, from the players’ locker all the way up to the executive offices, to deal with the problem.

The reason by the league did not deal with the steroid problem was simple. Attendance for games were still going up. People wanted to see players like Barry Bonds continue to break hitting records. It is about winning at any costs. Nobody is interested in seeing mediocre players, natural or not. We all want winners.

The league will only change if their revenues go down from fans’ disgust. Until now, there is no real financial incentives to change the way things are done. Athletes are making millions of dollars a year. Team owners are seeing the value of their franchises go up. Like any other industry, it will be market forces that dictate changes in the way business is conducted.

Ever since July, there seems to be no end in sight for in the sell off in financial stocks. Despite Citi’s announcement of a new CEO, the stock is down over 5%. Other financials such as Bank of America and Wachovia are forecasting that their profits will be weak due to substantial write-downs on their sub-prime debt holdings. Despite the easing of interest rates by the Fed, the banks are still not lending to each other.

The markets are shunning these stocks due to worries of a weakening U.S. economy and possibility of more write-downs of bad debt. If the financial shares continue to break new 52 week lows, the end is not yet in sight. The sign that these stocks are bottoming out is when investors start coming back in buying them up, pushing up their share prices regardless of the bad news.

Unfortunately, the market suggests that the bottom has not been reached yet. With oil prices trading near $100 and the U.S. dollar still low, expect to see more sovereign investment funds make investments in the beaten down U.S. financial entities. For the investor looking to buy in the financial sector, wait.

When it comes to money, does it really matter where it comes from? Seems like it doesn’t really matter. With all these Western banks and brokers taking massive billion dollar write-downs, they are taking much needed cash injections from foreign countries’ Government sponsored investment funds. These are countries that sell their goods and oil to the United States and not surprisingly have huge trade surpluses.

Today we saw UBS join Citi, Bear Stearns and others accept billions of dollars in capital infusions from these sovereign funds. So what many of these countries are not democratic and have less than stellar human rights records. Business needs to go on. Jobs must be protected. The world economy needs to grow to keep billions of people gainfully employed.

These countries need the United States to continue buying their goods. The US needs their money to continue with their spending ways. On the surface, they are not likely partners. The harsh reality is they need each other. Expect to see more of these deals.