March 31, 2009
Today, this last day of the first quarter of 2009, the markets rebounded.. The NASDAQ
gained back 26.79
to close at 1,529,
tacked on 86.9
and the S&P
racked up 10.34
to close at 798.
shrank slightly to $48.45,
The real test of the markets begins tomorrow, with
quarter-end manipulations behind us.
Yesterday, I decided that it was time to come down on
the side of the bears. Today, I found this pronouncement from the Chief
Economist of the Organization for Economic Cooperation and Development (OECD): Tepid U.S. recovery in
2010: OECD. In this article, he updates the forecast he made last
November (a little over four months ago) in which he predicted that the
OECD economy would shrink by 0.4% this year, and would grow 1.5% next year
(2010). His new prognosis has the OECD economy shrinking by 4.3% this year
and shrinking 0.1% next year. He now projects a 4% contraction for the U.
S. economy this year, followed by stagnation next year.
On March 10th, just as this March rally was getting off
the ground, Marketwatch's Irwin Kellner published an article, Animal spirits,
in which "He points out that this may presage an eventual return to
the pre-Crash economy in which 70% of the GDP is generated by personal
consumption expenditures." Today, Dr. Kellner has published a new
article, Signposts in the dark,
that's perhaps, a bit more pensive. He cites numerous signs that the
U. S. economy is expected to recover soon, and the fact that the rising spread
between yields on 10-year fixed-rate Treasury bonds and
inflation-protected TIPS has jumped from 0% to 1¼% over the past three
months, the fact that the price of crude oil is rising, and the other
inflation indicators that are predicting inflation ahead. At the same time, he
ordinary times, if you want to know where the economy is headed you would
look to the markets for guidance. The problem is these are not ordinary
times, nor are these ordinary markets.... Since the economy is now
in uncharted waters, few investors are willing to jump in to the stock
market until they have reason to believe that the downturn is likely to
end sometime soon."
Although I've come down on the side of the bears, data
If the indices continue to rise, I'll be nibbling my way into stocks,
ready to sell if the market turns down, and buy back if the market
re-inflates. I'll be paying close heed to Cabot's China and Emerging
Markets Newsletter because the Chinese market may not exactly track the U.
S. market as the Chinese adapt to selling to themselves rather than
selling to us. But this is for the future to determine. The point is:
don't want to let my personal dogmas get in the way of my being responsive
to the markets.
With volatility so high, and the long-term outlook so
uncertain, this would seem to be a trader's market rather than an
investor's market, at least in the U. S..
Consumers mired in the doldrums
It's Tuesday, and time for Michael Ashbaugh's weekly
technical analysis: Technical
Indicator: S&P survives 50-day-average test. Mr. Ashbaugh observes
that the S&P 500 didn't violate its 50-day moving average, leaving the