In tribute to today's madcap stock rally in the face of tomorrow's FOMC policy rate decision, we present Tom Petty and the Heartbreakers classic, "Mary Jane's Last Dance."
Picture Mary Jane as Wall Street, High Yield Bonds, the global economy, or all three. Tom Petty is the Federal Reserve. That's all for today. Tomorrow's a big one.
Showing posts with label stock market. Show all posts
Showing posts with label stock market. Show all posts
Tuesday, December 15, 2015
Wednesday, March 10, 2010
Oy! Tech Keeps Stocks on the Upswing
Tech stocks continued to dominate the gainers once again as stocks continued their month-long ascent. The NASDAQ easily outpaced the other major averages. Investors are coming to realize that tech companies are more financially capable and less in debt than their traditional industrial, material or financial counterparts.
It goes to reason, since most of the strong tech companies - Apple, Cisco, Amazon in particular - are young and have little to no debt service, separating them in material ways from other companies which may be struggling with finances, debt service, bond issuance and legacy costs (pensions, health care, etc.).
The general economy is still somewhat in a confused state of non-denial. While most indicators are benign or improving - other than housing and employment (Is there anything else that matters?) - sentiment remains steadfastly cautious. It actually has set up a nice paradigm for traders, especially those with more guile and shorter time horizons. In other words, the majority of the market is running on momentum, a tricky mistress, which can turn on a dime.
So long as stocks continue to gain in value, I'll reassert that they're not sufficiently discounting the future, which looks horrid. The government's plan seems to be to continually kick the can further down the road, applying patches along the way. There cannot be stability or prosperity until the government sector cleans up its act and tackles the issues of debt and entitlements head on, something few elected officials wish to do.
Eventually, piling debt upon debt is going to cause an implosion and dislocation, as it did in the fall of 2008. Current policies are leading to more spectacular failures, as exposure is now greater and includes not only financial institutions, but government entities such as the Fed, Treasury, and the unmentionable messes contained within Fannie Mae, Freddie Mac and the soon-to-flame-out FHA.
Fixed income gains are increasingly scarce and many unstable. Witness the note redemptions by Fannie and Freddie on defaulted mortgages within MBS, tight spreads and few alternatives. Flat-lining fixed income is inducing more equity investment, forcing stocks higher, eventually to unsustainable levels. It's a no-win, unless you're completely in cash because of declining asset values almost everywhere else. The stock market is nothing more than a chimera, an abstraction of the global economy and plenty of opinions. Short-term gains are possible. So are permanent losses.
Dow 10,567.33, +2.95 (0.03%)
NASDAQ 2,358.95, +18.27 (0.78%)
S&P 500 1,145.61, +5.17 (0.45%)
NYSE Composite 7,327.67, +33.65 (0.46%)
Winners beat losers, 4325-2192. New Highs: 773; New Lows: 51. Volume was substantially better than recent sluggish sessions. Lots of stock changed hands, but movement was constrained.
NYSE Volume 6,089,594,500
NASDAQ Volume 2,502,965,000
Oil posted another ridiculous gain of 51 cents, to $82.09, despite another in a series of inventory builds. The energy complex is wickedly overpriced and reversion is a certainty. Current prices cannot be maintained with reduced demand levels. Gold fell $14.10, to $1,108.20. Silver dipped 3 cents to $17.31.
Economic data has been slim and incapable of providing direction.
It goes to reason, since most of the strong tech companies - Apple, Cisco, Amazon in particular - are young and have little to no debt service, separating them in material ways from other companies which may be struggling with finances, debt service, bond issuance and legacy costs (pensions, health care, etc.).
The general economy is still somewhat in a confused state of non-denial. While most indicators are benign or improving - other than housing and employment (Is there anything else that matters?) - sentiment remains steadfastly cautious. It actually has set up a nice paradigm for traders, especially those with more guile and shorter time horizons. In other words, the majority of the market is running on momentum, a tricky mistress, which can turn on a dime.
So long as stocks continue to gain in value, I'll reassert that they're not sufficiently discounting the future, which looks horrid. The government's plan seems to be to continually kick the can further down the road, applying patches along the way. There cannot be stability or prosperity until the government sector cleans up its act and tackles the issues of debt and entitlements head on, something few elected officials wish to do.
Eventually, piling debt upon debt is going to cause an implosion and dislocation, as it did in the fall of 2008. Current policies are leading to more spectacular failures, as exposure is now greater and includes not only financial institutions, but government entities such as the Fed, Treasury, and the unmentionable messes contained within Fannie Mae, Freddie Mac and the soon-to-flame-out FHA.
Fixed income gains are increasingly scarce and many unstable. Witness the note redemptions by Fannie and Freddie on defaulted mortgages within MBS, tight spreads and few alternatives. Flat-lining fixed income is inducing more equity investment, forcing stocks higher, eventually to unsustainable levels. It's a no-win, unless you're completely in cash because of declining asset values almost everywhere else. The stock market is nothing more than a chimera, an abstraction of the global economy and plenty of opinions. Short-term gains are possible. So are permanent losses.
Dow 10,567.33, +2.95 (0.03%)
NASDAQ 2,358.95, +18.27 (0.78%)
S&P 500 1,145.61, +5.17 (0.45%)
NYSE Composite 7,327.67, +33.65 (0.46%)
Winners beat losers, 4325-2192. New Highs: 773; New Lows: 51. Volume was substantially better than recent sluggish sessions. Lots of stock changed hands, but movement was constrained.
NYSE Volume 6,089,594,500
NASDAQ Volume 2,502,965,000
Oil posted another ridiculous gain of 51 cents, to $82.09, despite another in a series of inventory builds. The energy complex is wickedly overpriced and reversion is a certainty. Current prices cannot be maintained with reduced demand levels. Gold fell $14.10, to $1,108.20. Silver dipped 3 cents to $17.31.
Economic data has been slim and incapable of providing direction.
Monday, January 8, 2007
In a Give and Take Environment, the Takers Will Rule
Entering the first full week of trading on the major US markets, investors are swamped with signals running the gamut from bullish to bearish to bust, putting the direction of the market unreliably up in the air.
It's not a pretty picture, but hardly one which the behemoth American economy cannot endure. The usual drivers of investment - Fear and Greed - have been seen shuffling about Wall Street with notable hangovers, especially Greed, which ended 2006 with a six-month long 17% buying binge on the DJIA.
Fear, which had been praying quietly at home for most of the 2nd half of last year, binged through the holidays on news of slow retail sales and the continued run-down in the construction industry.
So the two of them are planning a partnership of sorts for the early months of 2007 - lubrication for the skids - to keep everyone somewhat afloat on the money and credit mothership.
Greed says there are bargains out there and you don't want to miss out. Fear says your mortgage is tapping you out and you should retreat from the speculative market.
That's where the partnership stands, with both boys tossing signals of varying strengths of Doom, Gloom, Boom, Bust and Bonanza. And of course, it's January, so market watchers and witches of all stripes and hats will trot out the ancient adage - how goes January, so goes the year.
It's enough to drive a rational investor batty, the operative word being rational, begging the question: what's a reasonable strategy in an up and down market?
One word: allocation. One more: hedge. Um, forget it, here's a plan. If you've got more than 75% invested (25% cash), you're normal, but right now, overexposed. If you've been at that percentage for the past six months, you probably have some hefty profits and now would be a good time to relieve yourself of them before the market does it for you.
Converting some - not all - of your profitable investments to cash within the next few weeks makes sense. If the market sells off, you can buy back in at lower prices. If it continues rising, you still have the cash which should be invested in either CDs or if your appetite for risk is still unsated, dollars.
That's right. The greenback is likely to rise over the short term against the Yen, Pound and Euro due to three distinct forces: 1) Some expression of fiscal restraint and responsibility by the newly-installed Democratic majority in Congress; 2) The US economy will perform its peers in 2007 as their slowdown will be more painful than ours, and 3) Lower inflation and slightly tighter credit after years of excess.
My plan calls for shifting as much as 50% of the whole out of stocks and into a mix of fixed investments or currency trades. Since the chances for a meaningful correct some time soon are very good and getting better every day, you should take some of the profits, pare some losses and wait until January has an imprint - either up or down - before making any major strategic investment moves.
Keeping track of the market - just the Dow, since that's the one that counts for gauging purposes - we've had three days up and one down (Friday, Jan. 5), though the losses on that one day more than outdid the cumulative gains thus far. The Dow is down roughly 40 points in 2007, but it's far too early to discern direction. It's likely that the index won't give us a reading that we can use as an indicator until the 24th or 25th, but let's keep a sharp eye on it.
It's not a pretty picture, but hardly one which the behemoth American economy cannot endure. The usual drivers of investment - Fear and Greed - have been seen shuffling about Wall Street with notable hangovers, especially Greed, which ended 2006 with a six-month long 17% buying binge on the DJIA.
Fear, which had been praying quietly at home for most of the 2nd half of last year, binged through the holidays on news of slow retail sales and the continued run-down in the construction industry.
So the two of them are planning a partnership of sorts for the early months of 2007 - lubrication for the skids - to keep everyone somewhat afloat on the money and credit mothership.
Greed says there are bargains out there and you don't want to miss out. Fear says your mortgage is tapping you out and you should retreat from the speculative market.
That's where the partnership stands, with both boys tossing signals of varying strengths of Doom, Gloom, Boom, Bust and Bonanza. And of course, it's January, so market watchers and witches of all stripes and hats will trot out the ancient adage - how goes January, so goes the year.
It's enough to drive a rational investor batty, the operative word being rational, begging the question: what's a reasonable strategy in an up and down market?
One word: allocation. One more: hedge. Um, forget it, here's a plan. If you've got more than 75% invested (25% cash), you're normal, but right now, overexposed. If you've been at that percentage for the past six months, you probably have some hefty profits and now would be a good time to relieve yourself of them before the market does it for you.
Converting some - not all - of your profitable investments to cash within the next few weeks makes sense. If the market sells off, you can buy back in at lower prices. If it continues rising, you still have the cash which should be invested in either CDs or if your appetite for risk is still unsated, dollars.
That's right. The greenback is likely to rise over the short term against the Yen, Pound and Euro due to three distinct forces: 1) Some expression of fiscal restraint and responsibility by the newly-installed Democratic majority in Congress; 2) The US economy will perform its peers in 2007 as their slowdown will be more painful than ours, and 3) Lower inflation and slightly tighter credit after years of excess.
My plan calls for shifting as much as 50% of the whole out of stocks and into a mix of fixed investments or currency trades. Since the chances for a meaningful correct some time soon are very good and getting better every day, you should take some of the profits, pare some losses and wait until January has an imprint - either up or down - before making any major strategic investment moves.
Keeping track of the market - just the Dow, since that's the one that counts for gauging purposes - we've had three days up and one down (Friday, Jan. 5), though the losses on that one day more than outdid the cumulative gains thus far. The Dow is down roughly 40 points in 2007, but it's far too early to discern direction. It's likely that the index won't give us a reading that we can use as an indicator until the 24th or 25th, but let's keep a sharp eye on it.
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