Economics

   This Week’s Data

    The October Institute for Supply Management’s manufacturing index came in at 55.7 versus expectations of 53.3 and 52.6 recorded in September.
    http://mjperry.blogspot.com/2009/11/ism-index-strong-v-shaped-recovery.html

    September construction spending rose 0.8% versus estimates of a 0.1% decline; offsetting this really positive number was a big downward revision of August’s reading.
   
    September pending home sales surged 6.1% on top of a 6.4% jump in August.

   Other
   
    One of the reasons I believe that the recovery will be sub par is that our financial system in crippled.  Supporting that notion is testimony yesterday from a Fed official.  As an aside, this testimony also coincided with yesterday’s sell off following the strong initial up move (medium):
    http://www.calculatedriskblog.com/2009/11/fed-official-loan-quality-is-poor.html

    This is long but it is a great review of developing Fed policy on executive compensation:
    http://www.ritholtz.com/blog/2009/11/incentive-compensation-risk-management-and-safety-and-soundness/

    Also a bit long but a great review of the risks our economy now faces:
    http://www.nakedcapitalism.com/2009/11/bullish-data-recoveries-crashes-and-the-psychology-of-forecasting-redux.html

    What backs the buck (short):
    http://www.ritholtz.com/blog/2009/11/what-backs-the-buck/

    The unintended consequences of ‘cash for clunkers’ (short):
    http://mjperry.blogspot.com/2009/11/cash-for-clunkers-now-comes-hangover.html

    Housing affordability (chart):
    http://www.businessinsider.com/chart-of-the-day-house-prices-and-median-household-income-2009-11?utm_source=Triggermail&utm_medium=email&utm_campaign=Clusterstock%20Chart%20of%20the%20Day%2C%20Monday%2C%2011%2F02%2F09

    Tuesday morning humor courtesy of Doug Kass:  Twenty top signs the economy is bad:
   
20. The economy is so bad that Barack Obama changed his slogan to "Maybe We Can!"
19. The economy is so bad that Sarah Palin is only shooting moose for food, not for fun.
18. The economy is so bad that when Bill and Hillary travel together, they now have to share a room.
17. The economy is so bad that instead of a coin toss at the beginning of the Super Bowl in February, they will play "Rock, Paper, Scissors."
16. The economy is so bad that Angelina Jolie had to adopt a highway.
15. The economy is so bad that my niece told me she wants to dress up as a 401(k) for Halloween so that she can turn invisible.
14. The economy is so bad that I ordered a burger at McDonald's (MCD - commentary - Trade Now) and the kid behind the counter asked, "Can you afford fries with that?"
13. The economy is so bad that I saw four CEOs over the weekend playing miniature golf.
12. The economy is so bad I saw the CEO of Wal-Mart (WMT - commentary - Trade Now) shopping at Wal-Mart.
11. The economy is so bad that Bill Gates had to switch to dial up.
10. The economy is so bad that rapper 50 Cent had to change his name to 10 Cent.
9. The economy is so bad that they Pequot tribe built a reservation on the site of one of their casinos.
8. The economy is so bad that the Treasure Island casino in Las Vegas is now managed by Somali pirates.
7. The economy is so bad that if the bank returns your check marked "Insufficient Funds," you call them and ask if they meant you or them.
6. The economy is so bad that I bought a toaster oven and my free gift with the purchase was a bank.
5. The economy is so bad that the only company hiring this week is the one that sends people to scrape bankers off of Wall Street sidewalks.
4. The economy is so bad that I went to my bank to get a loan, and they said, "What a coincidence! That's just what we were going to ask you!"
3. The economy is so bad that a picture is now only worth 200 words.
2. The economy is so bad that Hot Wheels stock is trading higher than GM.

And the No. 1 sign how bad the economy is...

1. The economy is so bad that the guy who made $50 billion disappear (Madoff) is being investigated by the people who made over $1 trillion disappear (our policymakers)!

Politics

  Domestic

  International War Against Radical Islam

The Market
    
    Technical

    The Averages (DJIA 9789, S&P 1042) continue to seek the lower boundary of a trading range.  The upper boundaries are set (10086, 1102); and at the moment, there are multiple prior minor resistance levels that could potentially be the new lower boundary.  The one thing I would note is that most of them are (1) clustered very tightly and (2) are within 5-6% of current levels.  So technically speaking, stock prices have a lot of resistance to wade through to get below 9213-978.  That suggests that we could end up with a reasonably contained trading range (9213-10086, 978-1102).

    Meantime, both the dollar and the VIX remain above the upper boundary of the former down trends off highs, re-enforcing the notion that stocks are firmly in a trading range.

    The latest from Trader Mike (short):
    http://tradermike.net/2009/11/november_2_2009_stock_market_recap

    The S&P’s indecision (short):
    http://bespokeinvest.typepad.com/bespoke/2009/11/sp-500-just-cant-decide.html

   Fundamental
   
    Has the easy money been made? (medium):
    http://online.barrons.com/article/SB125694285397619649.html?mod=BOL_hpp_dc

       Headlines

    The economic news (see above), especially the ISM manufacturing report got investors stoked--and it was a positive surprise.  Later in the day, there were several announced acquisitions/mergers (Stanley Works/Black & Decker, CF Industries/Terra Industries and this morning’s announcement that Buffet is buying Burlington Northern) also positive from a valuation standpoint.  I would have thought that the pin action would have been better; but apparently a Fed official made what were interpreted as negative comments and that kept a lid on the Market.