Daily Investment Interpretations

April 27, 2010

2010-4-27:  The markets took dives into the canvas today, dropping by 2%-or-more, on S&P's downgrading of Greek sovereign debt to junk status, with Portuguese debt ratings not far behind: Greece cut to junk, Greek, Portuguese ratings reignite debt crisis. The NASDAQ Composite tumbled 51.48 points (-2.04%) to close at 2,471.47, the Dow plunged 213.04 points (-1.9%) to 10,991.99, and the S&P 500 shed 28.34 points (-2.34%) to end the day at 1,212.05. Oil fell to $81.80 a barrel, while Gold added $17 to close at $1,170. The VIX rose 5.34 to 21.81.
    Paul Krugman is quite concerned about the consequences of the sovereign debt situation: Permanent Link to The Cohesion Crisis, opining that Greece will probably have to default on its debt. Todd Harrison sees this Greek debt situation as a possible replay of the 2008 bank meltdown, except that this time, there's no overall government that can ride to the rescue: A Five-Step Guide to Contagion. (However, the Greek and Portuguese bailouts would add up to an order-of-magnitude less than the funding required for the 2008 bank bailouts.) Michael Ashbaugh, in his weekly technical analysis of the market indices, notes that these Greek debt crises have had only short-term effects on the financial indices, suggesting that this might be a good time to buy: Staking out the S&P's near-term technical support. He mentions that the intermediate-term trend is still up and still intact. (Stock market futures are slightly positive tonight.)
    My investment advisory service hasn't warned of dire consequences from this contretemps.
    What am I going to do tomorrow? If my investment advisory service doesn't indicate otherwise, and if stock market futures are up tomorrow morning, I may do some bargain-hunting, picking up additional shares of the NASDAQ 2X Fund QLD and a few Chinese bellweathers.
    For anyone seeking commentaries that make the bearish case, Investment portfolio for the truly paranoid, and Paul Farrell's Six investing rules for a worst-case scenario ought to fill the bill.
    A couple of articles dealing with the public reactions to what's coming to light on Wall Street are GM's False Claim That Bailout Was Paid Back "in Full" Breaks Advertising's Rule No.1 and Goldman Knowingly Sold Garbage Barges.
    Mark Hulbert writes Wall Street cheer absent on Main Street. He explains that Wall Street is giddy with the stock market returns of the past year, but individual investors have put virtually all of their money in bond funds, followed by international funds, with only a percent or two allocated to domestic stock funds. Individual investors are convinced that the system is rigged against them, and is playing games with them. He notes that we have to look back to the 1974-1982 period to find a similar period of disillusionment, and that this period was part of an 8-year secular bear market that didn't end until the indices hit bottom in August, 1982. Well, yeah, that's the way I see things panning out. I don't expect the current secular bear market to end until sometime between 2014-2018.  In the meantime, I'll use moving averages and my investment advisory services to tell me when to buy and when to sell.