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HomeEconomic/Market Highlights . . . 12/17: “The Golden Rule”
Posted by Larry Doyle on December 18th, 2008 7:00 AM |
For time immemorial, nations and economies have operated by the Golden Rule. Well, in this economy and this market, that Rule is strong and seemingly getting stronger. While the U.S. dollar sank to a 13yr low vs the Japanese Yen and declined another 2+% vs the Euro, gold moved higher by another 2+% and is now at a 9 week high and up 9% for the year.
In speaking with an investment advisor today, he told me that he has moved almost 20% of his fund into gold in anticipation of continued declines in the value of the dollar.
While gold is increasing in value, we are not seeing other commodities follow its lead. In fact, oil (down 7% on the day) intraday went below $40 per barrel, while copper dropped to a near 4yr low. Through the grapevine, a close friend shared with me today that Goldman is long oil in SIZE from a very large transaction with Mexico. Both commodity moves indicate to me that the market believes the economy will bump along the bottom for the foreseeable future.
What is going to get us to turn the corner on the economy? The Fed has done all it can monetarily, and will clearly utilize “quantitative easing” in buying longer maturity mortgage, consumer, and corporate assets. There is another $350 billion in TARP funds, some of which will likely be directed towards helping homeowners on the brink of foreclosure.
Beyond that, all eyes in Washington and across the country are looking toward a MASSIVE economic stimulus. Obama has already indicated the outlines of his plans with the largest component being infrastructure.
Will this be the “magic bullet” that we all hope? It would be foolhardy to think that $300 billion, if not $500 billion, and perhaps $1 trillion, would not give a serious jolt to our economy. That said, will a package of the size and type being discussed by Obama revolutionize the art of stimulus packages and lead us to a viable and sustainable economic recovery? I think not. Why? (more…)
Economic/Market Highlights 11/22-11/29/08: “Whack a Mole”
Posted by Larry Doyle on November 30th, 2008 3:15 PM |
The domestic equity markets rebounded by 15% over the last week which is the single strongest week since the 1930s. With that rebound the markets still ended down app 5% for the month. Despite the enormous rebound, albeit on moderate volume and in a shortened week, the overall sentiment and fundamentals to the market remain decidedly negative.
The Dow has been in a range of 9600-7500 over the last 6 months so the rebound off the lows of 11/20 bring the market back slightly above the midpoint of this short-term range. I would counsel those who trade the market to trade it against those levels with an overall negative bias.
The rebound started with the announcement of Geithner as Treasury Secretary but then received another 1.1trillion reasons to move higher in the form of the rescue package thrown to Citigroup (300bln) and 800bln in the form of more rescue money for Freddie/Fannie, more purchases of debt issues by Freddie/Fannie and Federal Home Loan Banks, and funding for a facility to facilitate increased liquidity for consumer finance markets.
With those announcements, the equity markets continued to rally as did the U.S. government bond market, and the U.S. mortgage market (each of those debt markets rallied by app 40 to 50 basis points). The corporate credit markets, the high yield markets, and the municipal markets did not rally, however. Those markets remain largely frozen for entities looking to issue debt.
Economic/Market Highlights 11/20/08: D-E-L-E-V-E-R-I-N-G !!
Posted by Larry Doyle on November 21st, 2008 7:55 AM |
There were major forced liquidations on the parts of hedge funds, asset managers, and insurance companies that went through the markets Thursday. Laszlo Birinyi, a noted market tactician whom I follow quite closely, indicated today that given the market price action that making investment decisions now is “strictly guesswork”.
Equity markets traded down another 5.5% to 6.5% Thursday with much of that selloff occurring in the last hour which is an indication that orders from asset managers and mutual funds built into the close. The delevering process (the selling of assets purchased with borrowed money) continues!! Volume on the NYSE was 8.8bln shares, 44% above average. Clearly a strong indication of massive liquidations. Oil and copper were down 6% and 4% respectively given continued expectations of economic weakness. When does OPEC come out and announce aggressive cuts in production?
Government bonds rallied by 30basis points in the 10yr (a huge move) in a “flight to safety” trade.
While the safest bonds rallied, bonds with a risk component (high grade corporates, mortgage-backed bonds, high yield) either did not move or in the case of high yield traded down in sync with equities. (more…)
Economic/Market Highlights 11/19/08 . . . The Pain Increases!!
Posted by Larry Doyle on November 20th, 2008 7:10 AM |
***Citigroup is down another 25% in this morning’s trading as investors are concerned that embedded losses are deeper than previously thought….as the attached article highlights, “it makes us think the mark to market writeoffs are not over yet”.***
Read more as to how and why “Citi’s Slide Deepens….”
As my Dad used to say when the report cards came home, “Just give me the grades and save the sob story for your Mother!”
| Dow | on the day | -5.1% |
| month to date | -14.2% | |
| year to date | – 40% | |
| S&P 500 | on the day | -6.1% |
| month to date | -16.7% | |
| year to date | -45.3% | |
| Nasdaq | on the day | -6.5% |
| month to date | -19.5% | |
| year to date | -49% | |
| 10yr U.S. Tsy | on the day 3.33% | down 20bps |
| month to date | down 64bps | |
| year to date | down 70bps |
With grades like these, my Dad would have clenched his teeth, furrowed his brow, and bit his tongue. My Mom would proceed to rip my head off. Truth be told, that tough love was just what I needed to increase my discipline.
While tough love needs to be more love than tough, the fact is that covering my own shortcomings in work and discipline solved NOTHING. Our “socialized housing finance system” and our effectively “socialized banking system” are finding the same outcomes. Ultimately the price must be paid much like the losses must be recognized.
Neither Paulson nor Congress nor anybody in Washington or Wall St will tell you that the system has trillions in embedded losses but they do and our markets know it and are showing it by their prices.
(more…)
Economic/Market Highlights 11/17/08
Posted by Larry Doyle on November 17th, 2008 10:20 PM |
I am going to save all the readers here extensive verbiage so as not to be overly morose about the ongoing challenging economic environment. I will offer my thoughts and comments on a few of the higher profile stories as indicators of what is going on, broadly speaking.
1. G-20 Summit….I had high hopes that commitments to global coordinated tax cuts would emanate from this summit. Talk about a major “whiff” on behalf of the global leaders. All I see is that leaders expressed a “promise” to work together on the critical issues. Wow, how gracious of them. Over and above this promise, I sensed that global leaders want to wait until the Obama administration takes charge and work with them. Believe me, with all due respect to Barack and team, if anybody thinks they have a magic bullet and will “inspire” a heightened level of confidence in the markets and economy, well….don’t hold your breath.
Read more on how “G-20 leaders Tighten Grips on Banks” (more…)
Economic/Market Highlights 11/21/08: V-O-L-A-T-I-L-I-T-Y !!
Posted by Larry Doyle on November 22nd, 2008 4:10 PM |
The fact that the equity markets totally reversed yesterday’s 5-6% selloff is not the biggest story of the day. In short, 400-500 point swings either way have become so normal as to not be a big deal. But they are a big deal and I will explain why shortly.
At 2:30pm the equity markets were basically unchanged. By 3:45pm the equity markets had rallied by 5-6% primarily on the announcement of Tim Geithner, NY Fed chair, as the nominee to be Treasury Secretary, while the other candidate for that role, Harvard professor and former Tsy Secretary for Bill Clinton, Larry Summers will be a senior White House economic advisor. Well done by Barack to get both on the team.
The markets respect Geithner and he will be easily approved. Summers would have faced some grilling for sexist comments he made while President of Harvard as well as the fact that he has already been Tsy Secy and it would have been viewed as “the more things change the more they stay the same”. Geithner obviously knows where all the bones are buried on Wall St. having worked very closely with Paulson over the entirety of this financial fiasco. The transition should be seamless. Geithner and Paulson have different styles but both are respected by Wall St. even if Paulson is not fully liked by Main St. The markets respect Geithner and this is obviously very important.
Read more here as to “Obama Likely to Pick Fed’s Geithner for Treasury.”
While Geithner and Summers are obviously highly respected they are not Houdini and they will not be able to singlehandedly turn our economy or markets around based on their name alone. (more…)
Tags: Sense on Cents, Sense on Cents commentary on market, Sense on Cents view of economy and markets, Tim Geithner, unemployment call, volatility in markets
Posted in American Consumers, Auto Industry, Banking Institutions, Current Affairs, Economy, General, Tim Geithner, Warren Buffet | No Comments »