My last post was about the market seeming to take off Tuesday with the air leaving that balloon quickly and the market ending up only slightly. I mentioned my expectation that there is a massive amount of cash on the side-lines waiting to enter the stock market and only waiting for an excuse to do so. While the market was up pretty well Tuesday morning it did not have legs, went into red territory for a while and only closed up due to a brief late-day rally. Today, the market had legs and those legs were able to carry the day. So what, do you ask, caused the bounce?
As I said there was a lot of money looking for a bottom - or at least an excuse to expect one - and there was news today that a report that actually comes out tomorrow will show good retail sales:
http://noir.bloomberg.com/apps/news?pid=20601087&sid=a2bxxRzucFoU&pos=1
Now this was not the actual report but I have little doubt that the retail industry one day in advance would say sales are likely to be up nicely in the report without knowing that to be the case. If not, tomorrow will be a bad day for the market.
In any event, I prefer to focus on fundamentals, not daily reports, and whether the increase in retail sales is sustainable. In terms of personal debt levels and increased savings rates, it is not sustainable. Personal debt is still very high and slowly coming down as savings rates are increasing, which is in my book one of the most promising long term developments. Still, it will take many years. So let's look at the employment situation. In a word, it is still "ugly." First you have unemployment benefits to 1.3 million Americans that just ended and hundreds of thousands more in weeks to come. Since these are among the consumers that represent around 70% of our GDP, you will see an impact pretty quickly from this "stimulus" ending. Second, even without the unemployment benefits ending issue, employment otherwise is rather dismal. As noted in the linked article by Abigail Doolittle, the only semblance of positive news in employment figures this past week was due to 652,000 people leaving the labor force. These are by-and-large folks simply giving up, probably because the time lapse for getting a new job is near record levels. Numbers getting better because two thirds of a million people gave up is not good. Now if you focus on the jobs creation - after taking out Census numbers - you will see there was some creation but the numbers are low and we need more than that just to keep up with population growth. In other words, employment is not getting better and people spending money represents roughly 70% of GDP; you do the math on that.
http://seekingalpha.com/article/213251-jobs-and-spending-spiral-down-together
So let's look at something else that has led us out of past recessions - real estate. You know where I am going here - it is still sucking wind. As I usually do on real estate, I refer you to Calculated Risk. This week they have had a dozen or so posts on residential sales, refinancing, commercial real estate, mall vacancy rates and the like. I can summarize them all in a word, "ugly." Just look here for one post:
http://www.calculatedriskblog.com/2010/07/mba-mortgage-purchase-applications.html
Purchase mortgage applications fell off a cliff in May after the tax credit ended and things are getting no better in June.
There are lots of other areas to look at but I think just focusing for now on the two major areas leading past recession rebounds is enough to suggest any market rebound has not got long term legs. And hey, I did not even mention EU issues, China slowing down, government debt, the BP oil spill or personal bankruptcies on the rise.
Disclosures: None.
Wednesday, July 7, 2010
Tuesday, July 6, 2010
No Bites
Over the weekend I deliberately did a couple of posts that are pressure points for some folks I know - at least from time-to-time - read my blog. Now I am not saying I made up what I was saying or did not believe in it, as I would not do that here, but I may have been a bit more over the top just to push my friends' buttons. Yet so far, not a rise out of them, at least in terms of comments. Perhaps they are not reading my blabber after all.
HEAD FAKE
Let me start by noting that in some way most of the functionality of this blog has shut itself down - or perhaps I did without knowing. I cannot bold, attach stuff or do any of the regular functions. With that warning, let me address the title of this piece that I had to capitalize as I could not bold it.
The markets, coming off a three day weekend in the U.S., seeing good market climb over seas, were off to the races this morning. I saw the Nasdaq up over 2% at one point and - then - the bottom fell out. We still ended up with a late day rally, but the air left that balloon very quickly. So what is up with this?
Unlike the folks at Bloomberg who seem willing to surmise every hour or so on why the market is reacting as it is, I will resist the temptation to be that precise. I do have a couple of more macro observations to note. First, after a couple of weeks, indeed months, of drops, there is certainly a load of money on the side-lines waiting for a bottom to set in, so a bounce off a nice weekend with no terrible news was not too surprising - especially with over-seas markets leading the climb. Yet there also was no real positive news and what little there was was not to inspiring. So we had a hectic day yet closed up with a nice bounce at the end of the day.
Now I do not see this having legs despite the market bounce at the end. The drivers of the drop this past month plus are still there. You know them: stimulus ending this year in the U.S. and elsewhere, the EU and U.S. perhaps doing some fiscal tightening, EU debt issues and sovereign downgrades in focus, China's expansion cooling considerably (as it needs to), job creation not even close to keeping us even, real estate (commercial and residential) still sucking wind despite low rates, the oil spill in the Gulf dampening spriits and imposing financially on expectations on various fronts . . . and the list goes on and on. Botttom line, in my macro-opinion, the markets out paced the recovery and are now returning to Earth. So the big question, have they landed yet?
Honestly, economists from what I can tell vastly over estimated corporate profits, growth and the like for the last half of 2010 and 2011, so if I am right, stock appreciation based on such growth is toast. The market has corrected a good bit but I suspect has just a bit to go. It will take something drastic, in my opinion, to take us down or up seriously from here, but I am just guessing here. No one knows. At the end of the day, what I do believe is that the market is correcting to normal.
Expectations of economic growth in this country or others are over-blown. They are based on income predictions that are not realistic. We are in the process of reaching the mean, as in what economic activity in this world can support now and in the long term. I thihk for the stock market the norm is still a bit lower as the market still has built in some growth above what I expect. By year end I expect markets to be down another 10-15%. We will see. This is just my best guestimate and there are plenty of folks out there much smarter than me.
Disclosures: Well I have equity positions and short positions to hedge, so I am all over the board.
HEAD FAKE
Let me start by noting that in some way most of the functionality of this blog has shut itself down - or perhaps I did without knowing. I cannot bold, attach stuff or do any of the regular functions. With that warning, let me address the title of this piece that I had to capitalize as I could not bold it.
The markets, coming off a three day weekend in the U.S., seeing good market climb over seas, were off to the races this morning. I saw the Nasdaq up over 2% at one point and - then - the bottom fell out. We still ended up with a late day rally, but the air left that balloon very quickly. So what is up with this?
Unlike the folks at Bloomberg who seem willing to surmise every hour or so on why the market is reacting as it is, I will resist the temptation to be that precise. I do have a couple of more macro observations to note. First, after a couple of weeks, indeed months, of drops, there is certainly a load of money on the side-lines waiting for a bottom to set in, so a bounce off a nice weekend with no terrible news was not too surprising - especially with over-seas markets leading the climb. Yet there also was no real positive news and what little there was was not to inspiring. So we had a hectic day yet closed up with a nice bounce at the end of the day.
Now I do not see this having legs despite the market bounce at the end. The drivers of the drop this past month plus are still there. You know them: stimulus ending this year in the U.S. and elsewhere, the EU and U.S. perhaps doing some fiscal tightening, EU debt issues and sovereign downgrades in focus, China's expansion cooling considerably (as it needs to), job creation not even close to keeping us even, real estate (commercial and residential) still sucking wind despite low rates, the oil spill in the Gulf dampening spriits and imposing financially on expectations on various fronts . . . and the list goes on and on. Botttom line, in my macro-opinion, the markets out paced the recovery and are now returning to Earth. So the big question, have they landed yet?
Honestly, economists from what I can tell vastly over estimated corporate profits, growth and the like for the last half of 2010 and 2011, so if I am right, stock appreciation based on such growth is toast. The market has corrected a good bit but I suspect has just a bit to go. It will take something drastic, in my opinion, to take us down or up seriously from here, but I am just guessing here. No one knows. At the end of the day, what I do believe is that the market is correcting to normal.
Expectations of economic growth in this country or others are over-blown. They are based on income predictions that are not realistic. We are in the process of reaching the mean, as in what economic activity in this world can support now and in the long term. I thihk for the stock market the norm is still a bit lower as the market still has built in some growth above what I expect. By year end I expect markets to be down another 10-15%. We will see. This is just my best guestimate and there are plenty of folks out there much smarter than me.
Disclosures: Well I have equity positions and short positions to hedge, so I am all over the board.
Monday, July 5, 2010
Be Careful What You Shoot For . . .
This is a good bit off-campus from my usual fare, but I cannot resist. Let me begin by apologizing to my friends who are card carrying NRA members. I am not a member and do not care to be, but I am also not against it. I have plenty of realtives and friends who have guns for hunting and recreation and I have enjoyed going to the shooting range myself, but I really do not see the need for folks to walk around with concealed guns unless they are police. Daily I read about bar fights, guys or girls at a party having a fight, etc. etc. Moreover, while I consider myself fairly level-minded I am sure there are plenty of less level-minded individuals out there that can qualify to buy and carry a concealed weapon. And so, I am not happy when students can carry concealed weapons on campus. Seriously, college campuses allowing students to be carrying on campus.
http://noir.bloomberg.com/apps/news?pid=20601109&sid=aiL1FpbQYfUU&pos=10
The excuse given in the article is self defense, but that is total bull pucky. I am 50 and have never needed a gun for self defense. I would only need one, or any one would only need one, if other students or (in my case) co-workers could also carry concealed weapons. Sure, someone could always illegally carry a weapon and in that one moment in a million you need a gun to protect yoursef. But I have kids and when they eventually go to college (I pray) I am not about to send them to schools that allow other kids to carry guns to class. This BS is infringing on my rights because I have to fear folks walking around with hidden guns. Truly folks, there is no real need in self-defense or otherwise to carry a concealed gun around in today's world in this country. I am all for people having guns for sport or target practice or even in case of national invasion, but given today's society there are just too many idiots out there for me to feel safer with folks around me carrying concealed weapons.
Now I suspect it is just a matter of time before some A-Hole on campus takes out his concealed weapon and does in some fellow students or professors or something even worse happens leading to a major political push to limit guns more than they were in the past. I truly hope they dial this back before that happens. I am not worried about the folks I know carrying concealed weapons, I am just worried about everyone else. Just think about the ass who was tail-gating you the other day that you flipped the bird to having a gun - or if you were inadvertantly tail-gaiting someone with a gun. I am not extreme and I get plenty pissed driving on a regular basis. Road rage is no strnger to me. I cannot imagine having road rage with guns. Moreover, if folks with concealed guns are allowed to go out and drink I am staying home. Never mind terrorists - our own citizens with guns actually scare me more and I was in NYC for 9/11.
Point being, I lived and worked in NYC for nearly two decades; my car was broken into seven or eight times, my apartment was once stipped to the bone (I mean appliances, couch and everything), and I dealt with road rage on a daily basis. I never needed a gun nor wanted one and was quite glad those around me did not have one (though some in NYC obvoiusly carried illegal guns. I was still better off without one). You may feel better if your son or daughter have a concealed gun on campus to protect themselves, but think about it - would you feel safer if every other student on campus had a gun? Would you feel better if all your neighbors and co-workers had a gun - a concealed gun? If you would, either (a) you know people much better than I do, (b) you truly expect terrorists to invade on a massive scale or (c) you really do not know your neighbors and friends well enough. Either way, I am against concealed guns as I really see no need for it. We are no longer in the wild West.
Disclosures, None.
http://noir.bloomberg.com/apps/news?pid=20601109&sid=aiL1FpbQYfUU&pos=10
The excuse given in the article is self defense, but that is total bull pucky. I am 50 and have never needed a gun for self defense. I would only need one, or any one would only need one, if other students or (in my case) co-workers could also carry concealed weapons. Sure, someone could always illegally carry a weapon and in that one moment in a million you need a gun to protect yoursef. But I have kids and when they eventually go to college (I pray) I am not about to send them to schools that allow other kids to carry guns to class. This BS is infringing on my rights because I have to fear folks walking around with hidden guns. Truly folks, there is no real need in self-defense or otherwise to carry a concealed gun around in today's world in this country. I am all for people having guns for sport or target practice or even in case of national invasion, but given today's society there are just too many idiots out there for me to feel safer with folks around me carrying concealed weapons.
Now I suspect it is just a matter of time before some A-Hole on campus takes out his concealed weapon and does in some fellow students or professors or something even worse happens leading to a major political push to limit guns more than they were in the past. I truly hope they dial this back before that happens. I am not worried about the folks I know carrying concealed weapons, I am just worried about everyone else. Just think about the ass who was tail-gating you the other day that you flipped the bird to having a gun - or if you were inadvertantly tail-gaiting someone with a gun. I am not extreme and I get plenty pissed driving on a regular basis. Road rage is no strnger to me. I cannot imagine having road rage with guns. Moreover, if folks with concealed guns are allowed to go out and drink I am staying home. Never mind terrorists - our own citizens with guns actually scare me more and I was in NYC for 9/11.
Point being, I lived and worked in NYC for nearly two decades; my car was broken into seven or eight times, my apartment was once stipped to the bone (I mean appliances, couch and everything), and I dealt with road rage on a daily basis. I never needed a gun nor wanted one and was quite glad those around me did not have one (though some in NYC obvoiusly carried illegal guns. I was still better off without one). You may feel better if your son or daughter have a concealed gun on campus to protect themselves, but think about it - would you feel safer if every other student on campus had a gun? Would you feel better if all your neighbors and co-workers had a gun - a concealed gun? If you would, either (a) you know people much better than I do, (b) you truly expect terrorists to invade on a massive scale or (c) you really do not know your neighbors and friends well enough. Either way, I am against concealed guns as I really see no need for it. We are no longer in the wild West.
Disclosures, None.
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