Major profit-taking in the bank stocks rolled over into the broad-based market on Friday resulting in a lower close. The better news is that we still finished up for the week. This gave us our first back-to-back up weeks in almost a year.
The major indexes were all lower at Friday’s close. The Dow Jones posted a drop of 122 points to finish at 7278. The S&P 500 moved back to 768. The NASDAQ was last traded at 1457.
Oil ended the week at $52. Gold was $5 lower Friday to end the week at $953/oz.
The Federal Reserve chairman spoke to a banker’s convention Friday. He offered no new insights into monetary policy. He said that the bank has been encouraged by the response to this lending programs.
One challenge to establishing additional liquidity has been the use of the Term Asset Backed Loan Facility (TALF). It was funded with $200 billion to assist the private sector in buying loans backed by cars, credit card receivables, student loans and SBA loans. Only 4 deals worth under $5 billion have been done so far.
The big problem, according to many money managers, is the recent actions of the administration and Congress. The consensus is building that a contract with the Federal government is no contract at all. The managers feel that these guys will change the rules as they go along so there is a great hesitation to commit any funds.
In spite of the mind-numbing ineptitude of this government, the market continues to be in a position for further moves upward. We’ve had 11 recessions since WWII and we’ve recovered from every one.
This time will be no different.
Saturday, March 21, 2009
Friday, March 20, 2009
Upon further review
After having moved up over 50% in just the past 8 trading sessions, the financial sector ran into some profit-taking Thursday. Strength in the energy sector wasn’t enough to overcome that selling, so the market closed about 1% lower.
The Dow Jones ended at 7400, off 85 points. The NASDAQ closed at 1483. The S&P 500 declined to 784.
Oil was $3/bbl higher to $51. It rose on a combination of a weaker dollar and that thinking that the economy will be getting stronger. Gold advanced up to $959/oz.
Wednesday's actions by the Federal Reserve were due to the fact that the administration simply can’t get its act together with all its distractions. What the Fed has done is to monetize the debt which, effectively, eliminates concerns about deflation. It has also pretty much countered all the previous drops in monetary policy.
Short-sellers have to be wondering what hit them. They aren’t about to give up as the consensus – invariably always proven wrong – has it that more travail is waiting, so they’ll keep working to drive stocks lower – especially in the absence of new rulings about the uptick rule.
Here’s why they’re about to be bugs on the windshield of a resurgent market.
Significant changes are coming in the mark-to-market rules. This will help the banks regain their fiscal footing and improve the flow and availability of money.
Even before one dime of this spending foolishness or these new incentives actually hit the economy, the velocity of money has already begun to spin up. Retail sales reported for January and February have posted an annualized rate of growth of 10%. To me, this is just the start.
And, finally, the Fed is flooding the system with money. Given how undervalued the markets remain even today, the coming monetary tsunami will light the markets up – majorly.
Be prepared.
All this money and growing economy is going to have an inflationary result. The fixed-income safe harbors of the recent past will be crushed by this as yields rise and prices for existing issues drop.
A good place to look for benefit from this turn will be the traditional inflation hedges of gold, commodities, energy issues and, yes, real estate.
The best is yet to come…
The Dow Jones ended at 7400, off 85 points. The NASDAQ closed at 1483. The S&P 500 declined to 784.
Oil was $3/bbl higher to $51. It rose on a combination of a weaker dollar and that thinking that the economy will be getting stronger. Gold advanced up to $959/oz.
Wednesday's actions by the Federal Reserve were due to the fact that the administration simply can’t get its act together with all its distractions. What the Fed has done is to monetize the debt which, effectively, eliminates concerns about deflation. It has also pretty much countered all the previous drops in monetary policy.
Short-sellers have to be wondering what hit them. They aren’t about to give up as the consensus – invariably always proven wrong – has it that more travail is waiting, so they’ll keep working to drive stocks lower – especially in the absence of new rulings about the uptick rule.
Here’s why they’re about to be bugs on the windshield of a resurgent market.
Significant changes are coming in the mark-to-market rules. This will help the banks regain their fiscal footing and improve the flow and availability of money.
Even before one dime of this spending foolishness or these new incentives actually hit the economy, the velocity of money has already begun to spin up. Retail sales reported for January and February have posted an annualized rate of growth of 10%. To me, this is just the start.
And, finally, the Fed is flooding the system with money. Given how undervalued the markets remain even today, the coming monetary tsunami will light the markets up – majorly.
Be prepared.
All this money and growing economy is going to have an inflationary result. The fixed-income safe harbors of the recent past will be crushed by this as yields rise and prices for existing issues drop.
A good place to look for benefit from this turn will be the traditional inflation hedges of gold, commodities, energy issues and, yes, real estate.
The best is yet to come…
Thursday, March 19, 2009
Shock and awe
With the help of some financial shock and awe from the Federal Reserve Wednesday, the markets moved from down about 2% mid-day to close higher across the board.
The Dow Jones finished the day up 90 points and over 1% higher to 7486. The NASDAQ continued its strong run, adding 2% to close at 1491. The SAP 500 also added 2%, ending trading at 794.
Oil was unchanged at $49/bbl. Gold was down $23/oz earlier but rose the stock market up to add $21/oz and end at $938.
In addition to keeping the Federal Funds rate in the historically low range of 0% to 0.25%, the Federal Reserve announced it would be buying a total of $1.2 trillion in securities. Over the next 6 months, it will buy up $300 billion of long-term US Treasury bonds and $700 billion of Fannie Mae and Freddie Mac backed assets. The goals are to stabilize the credit markets and to put more downward pressure on mortgage rates.
The last one seems to already be working. The return on the 10 year US Treasury note dropped to its lowest level since 1962. This is significant because this is the issue that most mortgages are priced against.
Despite the long-run problems with inflation, the US stock market has had a great dose of good news in the past week. Not only are their serious signs of a turnaround in monetary velocity underway, it also seems that some mark-to-market accounting reform is on the way. And today, the Fed jumped in with both feet. These three developments should be causing serious indigestion for the short-sellers of US stocks.
Despite some problems developing down the road because of policies today, as we had in 1975-1976, a significant rally in stocks over the next year has potentially become very real.
The Dow Jones finished the day up 90 points and over 1% higher to 7486. The NASDAQ continued its strong run, adding 2% to close at 1491. The SAP 500 also added 2%, ending trading at 794.
Oil was unchanged at $49/bbl. Gold was down $23/oz earlier but rose the stock market up to add $21/oz and end at $938.
In addition to keeping the Federal Funds rate in the historically low range of 0% to 0.25%, the Federal Reserve announced it would be buying a total of $1.2 trillion in securities. Over the next 6 months, it will buy up $300 billion of long-term US Treasury bonds and $700 billion of Fannie Mae and Freddie Mac backed assets. The goals are to stabilize the credit markets and to put more downward pressure on mortgage rates.
The last one seems to already be working. The return on the 10 year US Treasury note dropped to its lowest level since 1962. This is significant because this is the issue that most mortgages are priced against.
Despite the long-run problems with inflation, the US stock market has had a great dose of good news in the past week. Not only are their serious signs of a turnaround in monetary velocity underway, it also seems that some mark-to-market accounting reform is on the way. And today, the Fed jumped in with both feet. These three developments should be causing serious indigestion for the short-sellers of US stocks.
Despite some problems developing down the road because of policies today, as we had in 1975-1976, a significant rally in stocks over the next year has potentially become very real.
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