April 18, 2012 Market Update
Stocks rallied significantly for the quarter and bonds generally were flat, with the dollar rising and gold falling. The trading volume of stocks on up days continues to be weak, while on down days, is much higher. So far this month the S&P 500 has given up nearly one fourth of its returns year to date. I can’t help but feel an eerie similarity to this time last year, as the effects of Federal Reserve intervention created another “risk on” rally, without the economic fundamentals to support it. Like Yogi Berra says, “It’s déjà vu all over again.” Although...
Read MoreFebruary 8, 2012 Market Update
I hope you are having a great start to 2012. The S&P 500 has rallied off of its October lows almost 25 percent, and is now showing signs of exhaustion. Volume on the buy side throughout the entire upswing has been significantly below average, with large volume days occurring only when the market is selling. This is a consistent indicator throughout history of a lack of investor conviction that a sustainable advance can be maintained. Last year was quite the roller coaster, and investor sentiment for 2012 remains very bullish as evidenced by historically low levels of cash held in...
Read MoreThanksgiving Market Update
We hope you are enjoying your preparations for Thanksgiving Day! Our last update on October 27th indicated that the significant and rapid rise of the US stock market off the October 3rd lows would most likely result in a pull back over the next few weeks. So far, that forecast has come to fruition with the S&P 500 index declining 7.17% from October 27th through yesterday’s close. The not-so-super Congressional Super Committee admitted defeat yesterday, confessing they cannot find a way to cut our budget by a mere 6% or so per year. The markets, however, had already priced in the...
Read MoreSo when is a default not a default? When it’s called a haircut!
Euro zone officials announced a debt deal yesterday requiring insurers and private banks to accept a 50% loss on current Greek bonds. They also committed to throw another one trillion Euros at recapitalizing the insolvent banking system in Europe, which is about half of what has been conservatively estimated is required to keep the system afloat. In essence, Greece has defaulted on their debt, but in order to try to prevent a massive unwinding of unsecured Credit Default Swaps or CDS’s they are calling it a “haircut”. Italy is most likely next and these bailouts only serve to...
Read MoreWe Have a Debt Deal! (Now What?)
Our last market update on June 30, 2011 stated that we expected the debt ceiling to be raised, albeit at the eleventh hour. Sure enough, Congress has passed a debt ceiling increase and reduction package which appears to lean toward austerity in the coming years. The good news is that we are now starting to get some real visibility regarding our forecast, as both domestic and global economic indicators clearly point to a slowdown. We also anticipated that if there was a serious commitment to downsizing the government and reducing spending, we would see stocks sell off, but treasuries,...
Read MoreMarket Update
Domestic stocks ended the quarter essentially flat, after a month end 4 day rally. So far this month, we are seeing significant volatility due to the uncertainty of whether or not a sound debt limit deal will be reached. We believe Congress will vote to increase the debt limit, but the jury is still out with regard to whether or not sufficient measures will be employed to deal with the necessary deficit reductions needed to maintain our credit standing from rating agencies. Regardless of that, our research shows that at the end of the day, US treasuries are ultimately the only game in...
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