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November 28, 2009: Month to Date Review of the Market

Posted by Larry Doyle on November 28th, 2009 4:10 AM |

What a world and what a market.

Despite ongoing economic weakness and now a potential sovereign default (Dubai), the major market equity averages closed the week generally unchanged. The Treasury market benefited the most from the reality that risks remain abundant and, in a flight to safety, capital poured into this sector.  The dollar continued its descent into hell while supporting a large number of market segments, primarily commodities and especially gold.

Despite seeming investor indifference to major fundamental developments over the last six months, we disregard the situation in Dubai at our peril. Why? As Bloomberg writes, Dubai Crisis May End in ‘Major’ Default, BofA Says:

Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.

“One cannot rule out — as a tail risk — a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.

A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote.

Let’s address economic data released this week prior to reviewing the month to date market returns.


1. Existing Home Sales: increased by 10.1%. The expectation of Uncle Sam’s tax credit for housing being discontinued has served to pull demand forward in this sector. I’ll believe that health is returning to housing when mortgage delinquencies, defaults, and foreclosures decline on a regular basis. We’re a long way from that happening.

2. GDP: revised lower to a 2.8% increase from last month’s initial reading of 3.5% increase. Things that make you go hmmmm!!

3. Consumer Confidence: registered a reading of 49.5, which does not compare favorably to an August reading of 54.5. Confidence is all about jobs and housing. Unless and until we see signs of real health return to those sectors, do not expect a robust rebound in consumer confidence.

4. Durable Goods: declined by .6% versus an expectation of a .5% increase. This negative reading is offset somewhat by October’s Durable Goods report being revised from a 1.0% increase to a 2.0% increase. Again, I do not expect to see consistent growth in these figures without real consistency in the housing and automotive sectors.  

Let’s move along to market performance. The figures I provide are the weekly close and the month-to-date returns on a percentage basis: (more…)

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