Daily Investment Interpretations

October 6, 2010

2010-10-6 (Wednesday Night):  The markets closed out the day little changed after a blizzard of bad news: Private sector sheds 39,000 jobs in September: ADP, Roubini: 40% chance of double-dip recession, Real estate slump could last 8 years: IMF, Developed economies to slow, IMF saysFitch downgrades Ireland; outlook’s negative, The World Wakes Up to Threat of Currency Wars, and U.S. 10-year yields lowest since January 2009 The NASDAQ Composite dwindled 19.17 points (-0.8%) to 2,380.66. The Dow advanced 22.93 points (0.21%) to close  at 10,967.65, and the S&P 500 slipped 0.78 points (-0.07%) to end at 1,159.97. Oil rose to  $83.30 a barrel, while Gold ended at $1,351. The VIX ended the day down slightly at 21.49.
    The above headlines are pretty well self-explanatory.
    Treasurys rally as yields touch record lows. The yield on 10-year Treasuries dropped to 2.39%. The yield on the 5-year Treasuries touched 1.12%, which is the lowest in history. The yield on 2-year Treasuries hit 0.38%, which is also a record low.
    "'The combination of bad data and very pointed comments by Fed officials leave one to believe that the Fed will be launching a ‘quantitative easing rocket’ in the near future, and traders don’t want to miss the ride,' Giddis said."
    The bottom line here is that the markets are rising not because of improvements in the economy but because they expect austerity advocates to be zipping their lips and flooding the developed world's economies with more money.
    I guess it's not clear that we've reached escape velocity from this Great Recession.
    Just when you thought it was safe to go back in the water... U.S. bank industry entering new crisis: analyst. Mortgage foreclosures and defaults are threatening banks solvency.    
    TARP's $50 billion tab  Here's an ironic message. You may have noted the public outrage about the TARP and what it did to the federal deficit, and the debt burden it placed on future generations. It turns out that the TARP program cost at most $50 billion instead of $770 billion, and may even show a profit before it's all over. (The TARP repayments are being used to juice the economy so that falling tax revenues won't boost the federal deficit, as well as cut state and local budgets).
    Paul Krugman opines that "the market is expecting more than the Fed will deliver" Dr. Krugman has also written this recent article: Fear and Favor. in it, he notes that billionaires are buying expert endorsements of their sponsors' positions. (Politicians aren't the only public figures who can be bought.)
    Rex Nutting writes, Washington hasn’t done nearly enough