Daily Investment Interpretations

October 25, 2010

 

2010-10-25 (Monday Night):    The markets rose today: Existing-home sales jump. The NASDAQ Composite ratcheted up 11.46 points (0.46%) to 2,490.85  The Dow climbed 31.49 points (0.28%) to close at 11,164.05, and the S&P 500 added another 2.52 points (0.21%) to end at 1,185.62. Oil increased to  $82.30 a barrel, while Gold rebounded to $1,340. For some reason, the VIX jumped 1.08 to 19.86.
    My investment advisory service issued a partial "buy" recommendation this afternoon. This "buy" guideline is strictly based upon the service' indicators, and it's partial because the markets really are extended, and really are rising on hope. The markets have fallen a little since the "buy' advisory was issued, so there should be time to buy tomorrow morning.  
    Tipping point for TIPS  Five-year TIPS (Treasury Inflation Protected Securities) sold with a negative interest rate of 0.55% today. This is how bond investors see inflation ahead. The spread between the TIPS and regular 5-year bonds was 1.57%.
    Fed's bond appetite may reach $2 trillion  This is Goldman Sachs' estimate of how much the FED will have to buy "to achieve their dual mandate of low inflation and maximum sustainable employment". Other banks set the amount between $1 trillion and $1.5 trillion.
    How to prepare for Fed's 'QE2'  The author warns that the markets may be very volatile next Wednesday when the Fed reports back on Quantitative Easing II. There have been estimates that the markets have baked in $0.5 trillion to $1 trillion. The author thinks that $0.75 trillion to $1 trillion would be just right. But he thinks that owning anything but Treasuries is a bad idea. (He also states that the polls show a Republican takeover of the House, but probably, a Democratic retention of the Senate.
    GOP ‘wave' on Nov. 2  Looking for a turnover in the House but not in the Senate. Expect gridlock.
    Tea party's tentacles  
    Tea partiers lay out plans  
    ‘Head & shoulders’ and ‘double-dips’  Mark Hulbert writes that investment advisors who warned of a double-dip recession aren't about to take responsibility for their error. "Strangely, however, I’ve seen precious few mentions of this positive turn of events from the advisers who this summer were so quick to pounce on the bearish significance of the potential head-and-shoulders top. Why? My hunch is that it’s the rare adviser who is willing to be rigorously empirical in following the lead of the data. The vast majority appear instead to have preconceived notions of where the markets are headed, and focus their analysis on arguments that support their preconceptions."
    "My point instead is that, if they do turn out to be correct, it will have nothing to do with the arguments they advance in support of their positions. Think about it this way: If your adviser pays so little attention to his own line of reasoning, why should you?"
    USDA sees further food-price rise  
    Fund inflows rushing in to emerging markets.