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March 17th, 2009UncategorizedSo long, November lows. Last week, the news media, always looking for a headline, were quick to point out the Dow Theory Sell Signal that occurred last week. Of course, there were plenty of analysts that came out of the woodwork to proclaim the Dow Jones Industrial and Transportation Averages as irrelevant indexes, and therefore Dow Theory had no great impact on the market. Since then, the DJIA now sits 7 percent below its November low after only a week and the S&P 500 is now below its November low. The Nasdaq is not far behind. It looks like the Dow Theorists may be right. Sadly, there are not many signs pointing to an improving market. -
March 16th, 2009UncategorizedBank bailouts, homeowner bailouts, auto industry bailouts, and now massive stimulus packages; the Federal Government spending list goes on and on. The Federal Deficit for this fiscal year is projected by Goldman Sachs to be as high as $2.5 trillion. That's 5.5 times the fiscal 2007 Federal Deficit and 1.5 times Gross U.S. Savings.
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March 16th, 2009Uncategorized(WSJ Feb 25, 2009) âThe S&P Gets Its Earnings Wrong, Stocks are cheaper than they lookâ, by Jeremy J. Siegel Economist Jeremy Siegel (associated with WisdomTree funds, and professor at Wharton) is an important figure. When the Wall Street Journal published his editorial ( read full article ) claiming that Standard & Poor's had a flawed method that massively overstates the S&P 500 P/E, that became something that can't be ignored. In fact, Siegel said if S&P had calculated index earnings correctly, investors would see that stocks are historically undervalued.
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March 16th, 2009UncategorizedThe good news is: The market is deeply oversold as we enter a brief, but strong seasonal period. Short Term - Most of the major indices had been down for 6 consecutive days through last Monday's low. Tuesday's rally was followed by 3 consecutive down days as of Friday's low. By virtually all breadth measures, the downside has been exhausted.
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March 12th, 2009UncategorizedMike Larson Writes: Three market developments keeping me up at night - I'm a worrier by nature. I can't help it. My job is to peer around the corner, figure out what's next, and most importantly, discern what can really go WRONG in the economy and the markets. And right now, I see three troubling developments that are keeping me up at night. These problems aren't front-page news ⦠yet. But they are circling in the background and threatening to explode into the headlines â derailing the market in the process. I suggest you sit up and take notice. I sure am.
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March 11th, 2009Uncategorized
In his long awaited annual letter to shareholders, Warren Buffet reflected on the economic crisis, the coming inflationary pressures, and his own personal mistakes. “During 2008 I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt,” he explains.
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March 10th, 2009Uncategorized
The BEA released its preliminary numbers for 2008Q4 GDP. There was little good news in it, as many have observed. Consumption fell even further than first estimated. In an accounting sense, support from exports collapsed. Even the downward revision in inventories, which might have suggested a production rebound in this quarter, seems to incorporate more of a signal of further anticipated declines in demand, at least given the high inventory to sales ratios. And while declining imports add, in a mechanical sense, to output, it certainly hints at a sustained decrease in anticipated economic activity. Figure 1 shows these GDP components.
Figure 1: Real GDP growth (blue bars), and accounting contributions to GDP growth. NBER defined peak at dashed gray line. All in Ch.2000$ SAAR. Source: BEA GDP preliminary release of 27 February 2009.
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March 9th, 2009UncategorizedThe bigger the top, the bigger the drop whether in gold or the S&P index..." A DOUBLE TOP or so technical analysts say â is an ugly chart pattern signalling not only a reversal of trend, but an all-out collapse.
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March 9th, 2009Uncategorized
Finally, the SEC has come out and said that Allen Stanford was running a Ponzi scheme. Which should put an end to this kind of nonsense. Meanwhile, Stanford has had his 254 acres of Antigua seized by the local government. I guess those desperate phone calls to the country failed to bear fruit.
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March 9th, 2009UncategorizedIn his first televised speech before Congress, President Obama asserted that prosperity will return once the government restores the flow of credit in the economy. It may come as a surprise to him, but an economy cannot run on consumer loans. Furthermore, credit stopped flowing in the U.S. for a very good reason: there was no more savings left to loan. Government efforts to simply make credit available, without rebuilding productive capacity or increasing savings, are doomed to destroy what's left of our economy.
