Blog

30 Jan 2009

Posted at 14:48h in The Friday Brief by
There’s an old market axiom that says as goes January, so goes the market. As this one draws to a close we find the S&P 500 down 7.5% as the economy’s descent continues. According to Commerce this morning, the economy contracted at a 3.8% annualized rate in the fourth quarter. If the inventory buildup which occurred in the fourth quarter is excluded, the economy actually contracted 5.1%, the worst in 28 years. As reported, it is the worst since 1982. The economy shrank at a 0.5% annual rate from July through September. The back-to-back contraction is the first since 1991. For all of 2008, the economy expanded 1.3% helped by exports and government tax rebates in the first half of the year. The GDP report is the first for the quarter and will be revised in February and March as more information becomes available.

23 Jan 2009

Posted at 15:22h in The Friday Brief by
Good news on the economic front is rarer these days than moments of grace from our new Vice President. The lofty and idealistic words of President Obama, so well spoken seem a distant whisper among the barrage of history-making declines in housing, employment, prices, and confidence. Republicans and Democrats are already at loggerheads over the stimulus package. Corporate earnings are more dismal than expected and equities markets have given up almost two-thirds of their gains from lows reached in November.

16 Jan 2009

Posted at 15:41h in The Friday Brief by
New revelations about the weakness of America’s banks have kept the pressure on stocks. The S&P 500 is down 5.2% at the moment but remains 14% above the market’s low reached November 20, 2008. A major reason stocks are holding up in the face of relentless economic news is their yield. Dividends paid on S&P 500 stocks are roughly 3.5%, which compare very favorably to the 10-year Treasury yield of 2.4%. Stocks are also up on investors’ high hopes for Obama’s economic team and their ultimate stimulus package.

09 Jan 2009

Posted at 15:43h in The Friday Brief by
High hopes for a fresh new year, a new Administration, and a massive new stimulus plan gave the markets new life for a few weeks. We wonder though whether investors’ expectations will withstand the continuing drone of bad economic reports, surely to come for the next several months. The early read suggests yes, expectations for recovery late this year are holding.

31 Dec 2008

Posted at 16:44h in The Friday Brief by
If commodities were traded for black eyed peas, you can bet they would be setting price records about now. Black-eyed peas have long been associated with good luck, particularly in the South and given the bad luck we suffered this year, folks will likely be pulling out all the stops to ensure a better one in 2009. Should you add black-eyed peas to your investment planning? 

19 Dec 2008

Posted at 16:46h in The Friday Brief by
The drumbeat of worsening economic news on jobs, corporate profits, bank downgrades, auto makers, and housing continued this week, yet the market is higher by 1.6%. It was a week of new records as inflation fell 1.7% in November, faster than at any time since records began in 1947. Construction of single-family homes dropped 16.9 percent to a record-low 441,000. Oil by the barrel has fallen 75% from its record high of $147.27 reached only five months ago on July 11th. But the most remarkable records were made in US Treasuries. Yesterday, the yields on two, five, 10, and 30-year US government debt reached the lowest levels since the Treasury began regular sales of the securities. The Fed dropped the target on their main rate to near zero on Wednesday. We saw the yield on three-month Treasury bill actually fall to a negative return.

05 Dec 2008

Posted at 13:09h in The Friday Brief by
As of this writing, we find the S&P 500 down 8.6% for the week and the month of December, so far. Yet it remains 10% above its intra-day low reached Friday two weeks ago. The economic news has been as bad as expected and government counter-moves have been about as good as could be expected, with lame-duck limbo in full swing. Both Democrats and Republicans are warning Paulson that he may not get the additional $350 billion TARP funds.

21 Nov 2008

Posted at 13:20h in The Friday Brief by
It comes as absolutely no surprise that the massive bankruptcies and bailouts of September and October were enough to freeze both consumers and businesses in their tracks. The government numbers for the next couple of weeks are nothing more than a post mortem exercise to confirm the obvious. However, as we move forward a couple of weeks to get beyond the period of absolute shock, the reports will begin to provide clues about the possible breadth and depth of this recession.

14 Nov 2008

Posted at 13:29h in Briefs about our Process, The Friday Brief by
Information travels faster than ever now which tends to amplify panics and crises. The natural herd tendency to sell or buy is fanned by the rapid flow of news, often in its raw state. Globally linked computerized exchanges make buying and selling more efficient and faster than ever. What is crystal clear in this time of crisis and uncertainty is that we have no control of the markets (short of shutting them down). They are bigger and more powerful than any government and they will find their equilibriums in all circumstances. Predicting or timing them is all but impossible, especially over full cycles.

08 Nov 2008

Posted at 13:40h in The Friday Brief by
Those of us over 40 don’t need reading glasses to know how bad the news is; headlines are full of it. And there is plenty to come in the weeks and months ahead. The economy is collapsing at an astonishing rate as we enter the self-perpetuating recessionary cycle. Banks aren’t lending because they are afraid of the coming recession and the recession is growing deeper because banks aren’t lending. Businesses are firing because demand is evaporating and demand is evaporating because businesses are firing. House prices are falling because no one is buying, and no one is buying because prices are falling. The worse the news gets, the more the consumer hunkers down.