Friday, February 1, 2013

Stocks Rise Sharply Despite Ho Hum Unemployment Report

This looks more like a bubble with every day that passes! Stocks closed up more than 140 points!

Unemployment Yawn!

Stocks are significantly higher overnight, on very little news. Fed POMO today, so higher stock markets are expected.
The monthly jobs report:

Wednesday, January 30, 2013

But Stocks Barely Blink!

This is bubble behavior!

Q4 GDP Contracts!

Tuesday, January 29, 2013

Stocks Reach New Highs As Consumer Confidence Crashes

As least some people are confident of their futures. Of course, since Wall St titans are the chief beneficiaries of the Obama-Bernanke cadre of collectivists, they are supremely confident of (their) futures! As the continue to destroy the middle class, their obliviousness to the well-being of everyone else becomes nothing but a minor distraction!

from Zero Hedge:
As the efficient stock market moves to all-time nominal highs in many cases, Consumer Confidence just fell off a cliff. The conference board printed at the worst level in 13 months - so all those 2012 gains are gone - and fell month-over-month by the most since the August 2011 fiscal cliff debacle. For every income levels (except those earning under $15k) confidence plunged with the $35k-$50k bracket crashing the most. It would appear that the driver of 70% of the US economy is not buying the new normal being fed to us daily by any and every media outlet possible. No matter how much the market is held up by mysterious runs in FX markets or volatility compression, it would appear that - just as we have been noting - the underlying macro fundamentals will eventually be priced in, as this does not bode well for retail sales.

Stocks Erase All Gains, Plunge Again On Bad Real Estate News

After being down all night, stocks erased the losses. But moments ago, the Case/Shiller index was released, and it showed that real estate prices are dropping again! Stock reversed and went red again!

Personally, as long as the Fed continues to print ad infinitum, Wall St will think of the Fed as god and will continue to shrug off all economic bad news! I expect that even this drop will be short-term and temporary! There is no longer any perception of risk on Wall St, and this only leads to moral hazard, more bad behavior, and more asset bubbles! It only sets us up for more trouble when the news can no longer be ignored!

Monday, January 28, 2013

Are stocks a sucker’s bet?

With corporate profits at record levels and stocks regaining the ground lost during the financial crisis, Wall Street anxiously anticipates the return of the individual investors to equity markets. It may be a long wait, because the little guy may have concluded stocks are a sucker’s bet.  
Investors, as opposed to traders, buy stocks in companies whose profits they expect to rise. The conventional wisdom says stock prices will follow profits up, but over the last two business cycles, that simply has not happened.
In March 2000, the S&P 500 first closed above 1500. Since corporate profits are up 135 percent but stocks have made virtually no gain since over the last thirteen years.

Buying stocks does not seem to pay any more, because most of the increased value created by higher profits has been captured by hedge funds, electronic traders, private equity funds, aggressive M&A shops, and trading desks at investment banks, which have multiplied over the last two decades.
Their activities, essentially, fall into two categories. Aggressive trading—e.g., exploiting complex shorting opportunities, quickly detecting and exploiting movements in trading intentions of large mutual funds and other tactics often associated with exotic hedged bets and electronic trading. Direct asset purchases—buying underperforming companies, all or in part, to force managers to pay out large sums, rearrange their companies through mergers and divestitures, or exploit unattended business opportunities incumbent managers have been lazy about pursuing.

Not all of this is negative to stock prices or unfair.
Shrewdly synthesizing public information to identify value in companies ahead of other investors is the way stars like Warren Buffet became legends. Stock prices rise permanently in wake of their actions, and that’s good for the ordinary investor already in the stocks they pick.
Shaping up underperforming companies likely started even before the first Greek shippers bought out rivals to discharge incompetent captains and reduce seafaring risk, spread overhead and accomplish more leverage with potters, weavers, farmers and foreign merchants.
Nevertheless, too much of a good thing—electronic trading and aggressive hedging—can be disruptive and impose unnecessary risks. Look at the costs imposed by the May 2010 Flash Crash, and consider how often private equity and M&A shops acquire companies and load up them with debt, make big payouts to dealmakers, and then later disappoint investors and creditors.
Through superior information, quick execution and aggressive marketing, traders and dealmakers capture a great deal of the potential increase in value created by new and anticipated corporate profits before that value is recognized in stock prices. This results in lavish compensation for traders and dealmakers and stock prices that don’t rise with profits.

Instead of ordinary folks getting a decent return in their IRAs—in line with the rise in corporate profits—real estate prices in the Hamptons and luxury goods sales at Manhattan’s finest stores soar.
Hedge funds, electronic traders, private equity and M&A shops do act on information that is obtained through careful, legitimate research but the ordinary investor simply does not have the resources to compete with those efforts. Moreover, as several SEC investigations into insider trading indicate, critical competitive information is sometimes obtained through unethical and illegal means—data pried from incautious corporate officials and through electronic espionage further disadvantages opportunities for gains by individual investors and conventional mutual and pension funds.
The ordinary investor is simply out gunned. For him stocks have become a rigged game.
Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. Follow him on Twitter @PMorici1.

Sugar Leaps, Struggles to Hold Gains

This chart doesn't look very good for further gains. I'm keeping tight stops on this one!

Cattle Futures Leap Due to Short Supplies

Live cattle futures are up about 2% today. I expected this! I don't think today's gap higher is going to be the end of this, either. Cattle futures, and beef prices, are bound to go significantly higher. Cattle herds are the smallest since 1952, so this was expected!

Mixed News Day

Capital goods orders plunged 4.3% in December, while durable goods orders rose. Stocks rose sharply at first, then plunged, and have now risen back to flat.

Ironically, the durable goods figures showed strong demand for Boeing's Dreamliner, but this is the same aircraft that was shut down worldwide in recent weeks due to unexplained fires. This may be bad news couched within what would otherwise have been good news!

Djokovic Takes the Australian Open

Djokovic goes Aussie. Good job!