This Week’s Data
Weekly mortgage applications (secondary indicator) rose 11%.
February wholesale inventories dropped 1.5% versus estimates of a .8% decline; that as wholesale sales rose .6% bringing the wholesale sales to inventory down for the first time in months.
Weekly jobless claims fell 20,000 versus forecasts of a 4,000 decline.
More analysis of Geithner’s P-PIP plan:
More analysis of the latest G20 meeting:
The free trade pact with Columbia. Not dead yet? We should be so lucky.
This is a great analysis of our current economic environment and what will and won’t work to correct it (must read):
Another gem of an appointment:
International War Against Radical Islam
Stocks rallied yesterday and the Averages (DJIA 7837, S&P 825) closed up but still below the late March resistance level highs (DJIA 7949, S&P 834). I said in yesterday’s Morning Call that if stocks were not able to recover above the 7949, 834 level, I would likely become a seller.
Well, I lied. I am back to being impressed with the strength demonstrated by stocks in the face of bad news yesterday. Specifically, (1) a number of companies were out talking their earnings down and (2) the Fed released the minutes of its last FOMC meeting in which it lowered its expectations for an economic recovery.
The other thing that got my attention was the volatility index which traded below 40 for the first time in a long while. That suggests less fear and an upward bias to the Market.
If all that confuses you, join the crowd. I am clearly teetering on the brink of uncertainty. The reason is that it looks to me like buyers and sellers are struggling for control of the tape. Yes, the indices are below the 7949, 834 level; but not by much. This is one of those times that I just don’t feel comfortable making a bet based on a single price level. So rather than risk selling then getting whipsawed and incurring a unnecessary trading costs, I am going to incur the risk of being slightly later to a move than I might otherwise have been and do nothing. I think it 50/50 whether stock prices break higher or lower.
The same goes for gold. It closed down slightly on the day--the ETF price a bit below its former support level. The bottom line being the same as above--I don’t have enough conviction to act, so I am still not a seller and will risk being a day late.
Jeremy Siegal wrote an article advocating weighting S&P earnings by the market value of the reporting companies (I linked to it in this commentary). It caused quite a stir and was roundly criticized. Here is his rebuttal:
There were a couple of other items in the news yesterday. They were positive to me, but could easily be interpreted as a negative by others:
(1) the SEC decision to put out for discussion five potential changes to the short selling ‘up tick’ rule: while some might argue that this is a positive, I thought it a typical bureaucratic CYA maneuver in which the agency avoided the assumption of any leadership on the issue and didn’t even address the real problem that was at the heart of the real short selling abuses in this latest Market downturn--naked short selling in which a short seller sells stock short that he/she hasn’t borrowed
(2) Geithner now wants to give TARP money to insurance companies [an unnecessary negative] while his TALF program has fallen flat on its face and banks are scrambling to give back as much TARP money as possible [a clear victory for free Market capitalism],
The only clear positive is that it appears that credit default swaps [CDS] are going to be standardized which will increase transparency and make pricing them much easier.
A Look at Financial Strength
These are stocks owned in the Aggressive Growth Portfolio
Debt/ # Yr EPS Down Net Value Line
Company Equity ROE Since 1998 Margin Rating
Blackrock Inc 7% 9% 1 33% A
Franklin Resources 2 22 4 28 A
Mastercard Inc 5 30 0* 23 A
Pepsico Inc 29 32 0 23 A++
Sysco Corp 36 32 1 3 A++
*MA went public in 2004
04-09-2009 8:17 AM