Thurs 09.29.11

Nice, upbeat commentary this morning. Equities are way in the green today with investors playing the risk-on trade after today's revised GDP and lower jobless claims. Banks in particular, which have been the most volatile of late, are rallying the hardest, with big money-center banks Citigroup and JPM each up over 4.5%. Also, large industrial cyclicals, such as Caterpillar are also having a strong day, up 3.5%. As predicted, there's going to be some "window dressing" today and tomorrow and mutuals funds sell losers and buy winners from their portfolios. As long as something bad doesn't come out of Greece, expect today to keep its rally and not lose the momentum tomorrow (last day of qtr).

Tues 09.27.11

Equities are on a tear right now, with the Dow and S&P up 2.2%. I think Kevin states it perfectly in his last sentence when he notes that if Europe can clean its act, then investors will begin to take more risk and get back into equities. The one area of caution I will note though is that last week's fall was primarily heavy volume all on the downside from institutional investors. Although yesterday's rally was broad-based, it was on much lower volume and the NYSE Up/Down Volume was only 69%, which compared to a greater than 90% on Wed and Thursday of last week. Still, I'll take a nice bounce back rally after last week's brutal market.

Thurs 09.22.11

It appears that the Fed is "out of bullets", and at this point we need fiscal policy (e.g. govt) vs. monetary policy. The Austerians who are trying to run Washington through scare tactics, and who almost had the US default on our obligations, want us to cut spending and reduce our deficit now. My take is this would be better served when the economy has gained its footing and is in a full-on growth mode. We need spending from both the private sector and the government right now. As long as Europe can be contained, the US will not go back to 2008, but we need spending and job growth.
Here's a quote from Barry Ritzholt, which I find is how I feel about the current fiscal policy from our government.

Don't expect a policy response from the Austerians. These misguided politicos are in charge in D.C., despite having gotten the past few economic cycles precisely backwards. During the last expansion (2003-07), instead of raising taxes and cutting spending — managing the deficit, creating a better private/government spending ratio — the hypocritical deficit peacocks in the USA did the exact opposite. We cut taxes during (2) wartime, created yet another entitlement program, and raised yet other government spending during private sector economic expansion.

That approach makes much more sense in the current environment of consumer de-leveraging, weak private sector job creation, modest capex investment, and low growth. Instead, we suffer from the opposite:

Based upon a fundamental misunderstanding of the works of John Maynard Keynes, they are once again out of phase. Now, the same crowd is looking at raising taxes and reducing government spending when an already frail economy cannot support it.

Excess government stimulus during expansions and austerity during (or immediately after) contractions is simply misguided economics, bad politics and awful policy.

Tues 09.6.11

Not much more I can say than what Kevin has noted. Look for equities to be deep in the red today. Also, here's a couple of charts I found from dshort, which outlines how historically September has been the worst month for the market. Last year, we had a big jump in September due to QE2, but this year, unless we announce some massive jobs bill, will continue its downward trend.

Mon 09.05.11

Right now, I am burrowed in my house, waiting on Tropical Depression Lee to pass (as my good friend Michael can attest, there's never a better time for a bloody mary then when a tropical system comes through).  The past couple of weeks, I have repeatedly stated that the market would be very volatile, due to Congress being on vacation, the market awaiting Washington's response to create jobs, short-selling ban on financials in Europe (which is like trying to put a band-aid on a waterfall) and Europe continuing to kick the can down the road. Well, after last Friday's dismal jobs report, Obama has begun working the circuit with a Labor Day speech in Detroit, specifically discussing jobs and getting the economy jump started. But, tomorrow, expect the market to move its focus back to Europe.

Fri 09.2.11

There really isn't much more I can say than what Kevin from Morgan Keegan has noted. I was just telling a friend of mine that the bond market is banking on the fact that the Fed will begin selling short-dated treasuries and purchasing long-dated treasuries, but I hadn't heard that this is called "Operation Twist". The bond market appears to be frontrunning this expectation, as the 10 and 30 year yields have both declined, while the 2 year yield has remained unchanged. On the equities front, I'd look for a lot of red today, and hopefully when Congress gets back from their 3 week vacation hiatus on Tuesday, they'll be ready to come through with real job growth plan. None of this green jobs, I'm talking New Deal type job growth, that will spur economy....

Thurs 09.01.11

My quick take though is that investors are waiting on the jobs # tomorrow. The ADP report earlier in the week was not bad, but not good, either, so as long as we don't have a not bad jobs # tomorrow (consensus is non-farm payrolls increase 70k, but not sure if this will include or exclude the striking Verizon workers), we should continue to see the market move in an upward direction. After the jobs report, investors will be closely monitoring any new jobs/stimulus coming out of Washington.

Tues 08.30.11

No comment from MK, but here's my quick take. Market is taking back some of the gains we had from yesterday, (S&P down almost 1% right now). This was somewhat expected, as yesterday's large positive move was on light trading volume and was led by the two sectors that have been beat up the most, Financials and Technology. This leads me to believe that the biggest driver of the moves in the stock market were short covering squeezes. On August 15, short interest in the NYSE rose over 1 billion shares compared to the end of July, and was the biggest bi-weekly increase since March 2009.  Today we should give back some of yesterday's gains, but I wouldn't expect to see us give back more than half of yesterday's gains.

Mon 08.29.11

Just a short comment today from MK....not much on my end except to say that it should be another day in the black for the stock market. Optimism from the higher consumer spending, coupled with the details out of Greece that two of their banks are merging, so as not to require additional funding from the government, has all been well received.

Fri 08.26.11

The main driver of the downside move was the initial disappointment that Bernanke did not give any indication that the Fed would implement a new round of monetary stimulus in the coming months.  I have attached a good article below that outlines the Fed Chairman’s comments.

However, this was largely expected by most professional traders and I do not expect any real significant sell-off in reaction.

Finally, I am expecting a very quiet afternoon trading session, as traders begin to close out positions for the week over the next few hours and turn their attention to heading home to prepare for the approaching hurricane.

Thurs 08.25.11

here's a graph I grabbed from Barry Ritzholt which I wanted to share. The gist of it is that historically the market moves in relationship to GDP. What the graph is showing is that in order for the market to continue to rise, we must see GDP increase substantially. 1 to 1.5% GDP growth will more than likely result in a pricing correction....so, hopefully Bernanke has something up his sleaves, and Obama has a solid jobs bill on the way...

Wed 08.24.11

Actually a day late....no comment published today.....but here's my take on what we're seeing.

The good news is that although the bond market is still pointing to a slowdown, it's not pointing to a recession (as noted by an inverted yield curve). On the equities side, I still don't believe we are through yet with all this volatility. I actually saw yesterday where BofA Merrill's head strategist believes the S&P will hit 1400 by end of the year (15% gain from yesterday). He believes it will be back-end loaded, but I just have a hard time seeing this, with everything going on in Europe and the lack of jobs in US. Banks are shedding jobs by the thousands right now, and if investors continue to question the banking system, we are going to have some more pain to come. My guess is that investors are positioning themselves for something big this weekend from the Fed at Jackson Hole, but I think they're going to be disappointed. The other problem I see is that we have all these factors that must all happen to help the stock market stabilize or rise: Europe not implode, China not slow down and unemployment to remain steady (and hopefully decline).....but if just one of these goes wrong, then the market will resume its downward spiral again. Worst case scenario won't hit the lows we hit in 2008, but it will be enough to scare more investors to the sidelines. Just my quick thoughts

August 18th

Not any good news out there today....10-year is at its lowest its ever been since the Great Depression, which is only good if you have equity in your house and are looking to refi....besides that, today's gonna be bad, so strap on your boots....other news Morgan Stanley downgraded world economic prospects on the ever increasing chance of a recession in Europe, along with a bumpy recovery in US, which they say both will impact China (especially since they rely on exports.....does this mean we see China turn from an export country to a "consumer" country, and let its currency increase in value....only time will tell, but I don't think China is smart enough to see the long-term benefit

Older Musings on the Market

So - it's obviously been a while since I last posted. I have still been avidly following the market, and from time-to-time, I have emailed to friends my thoughts on macroeconomic factors that were impacting the market. I am going to now include these (albeit late) on my blog. Hopefully, I'll be updating this more often, and maybe even bring some individual stock analysis periodically....but for now, we'll take what we can get.