Confirming recession fears further, the news the Producer Price Index released today reduced the near-term inflation fears. The PPI dropped 2.8 percent in October, the sharpest month-to-month decline on record, and above the expected 1.9 percent decline.

The core PPI, which measures all products in the index excluding energy and food products, actually rose about 0.4 percent, suggesting that the lower costs of energy has yet to be filtered through to other products. On this note, the record decline in the price of crude oil (which fell 24 percent in October alone and another 25 percent in November so far) can serve as an economic stimulus for the economy. 

Tomorrow, the Consumer inflation numbers will be released. Economists expect consumer prices to drop as well; the size of that decline is expected to be 0.8 percent. The massive amount of liquidity did not make its way into the economy yet, and the inflationary pressures are now one less thing for the policymakers to worry about. Central banks will have more room to keep cutting rates, further trying to revive the economy. 

The PPI news could also be a bullish sign for the future. We have been noting the presence of the historic level of liquidity waiting to hit the economy; once it does and thaws the credit markets enough to get economic activity going again, the low cost of energy could have a strong stimulus effect and get the economy churning fairly quickly again. 

Investors seeking to grab undervalued stocks will then jump in at the first signs that the economic situation has a potential to improve- as the markets are forward-looking, they tend to bottom before the economy does. Volatility, however, is likely to remain high for a while. For example, today, Hewlett Packard's rosy 4^th quarter forecast helped restore some confidence and stocks opened up strong. But once again, the Dow was extremely volatile- dropping as much as 2 percent before closing up 150 points.

Trades

During the week, as we were waiting for signs of the market bottom, we did not recommend any new trades.

There are numerous pro and cons to its offering. The positives of going public in this environment could be that investors, hungry for action, new ideas and new investments, may greet the new issue with enthusiasm. The negatives include the muted reception that's more likely than enthusiastic at this point, as investors are pressuring underwriters to cut the offering price, according to some reports.

In any case, we are watching the story and will report to you Thursday morning whether we think it's worth a trade. As always, look for a trade or no-action alert in you inbox or fax machine. 

Until next week,

Your Ground Floor Trader Team

Your next regularly scheduled issue, Tuesday, November 25^th, 2008.