Daily Investment Interpretations

July 20, 2010

2010-7-20:  The markets rose again today: Fed speculation lifts stocks.  The NASDAQ Composite gained 24.26 points (1.1%) to finish at 2,222.49. The Dow climbed 75.53 points (0.74%) to close  at 10,229.96, and the S&P 500 added 12.23 points (1.14%) to end at 1,083.48. Oil ended at $77.75 a barrel, while Gold closed at $1,192. The VIX subtracted 2.04 to 23.93.
    Mark Hulbert writes, Deflation camp gets powerful new ally. Jeremy Grantham has converted from worrying about inflation to worrying about deflation.
    U.S. 10-year yields fall to new 15-month low of 2.9% interest. This isn't automatically a harbinger of deflation. It could also signal greater fear and a flight to safety.  
|   Double dip is doubly certain: Robert Murphy    
    Irwin Kellner: Too much, too soon. Dr. Kellner has joined the ranks of the double-dip forecasters. (It's worth noting that he correctly predicted the rebound in the spring of 2009.)
    Michael Ashbaugh: U.S. benchmarks confirm primary downtrend.    
    Not everyone expects a double-dip recession: Mark Luschini on double-dip odds. Canada, in better shape than the United States, has just raised interest rates for a second time: Bank of Canada raises interest rates (to 0.75%).
    Also, relevant to Moody's downgrading of Irish sovereign debt (Moody's cuts Dublin's debt): Irish bond auction goes well 
    Meanwhile: Senate poised to extend jobless benefits
    Brett Arends: Crocodile tears for the rich explains that "according to an analysis by the Central Intelligence Agency, the U.S. has one of the most unequal income distributions in the world. The U.S.? Our income distribution is more in line with Zimbabwe, Argentina, and El Salvador. As for all those millions out of work: Maybe they can get jobs as servants.
    Paul Krugman has two very interesting charts tonight in Permanent Link to More Depression Debt. The first chart shows that the national-debt-to-GDP ratio rose rapidly under President Hoover's conservative program, and didn't rise under President Roosevelt's lavish stimulus program. The reason? GDP rose faster than the national debt, allowing the ratio to remain essentially constant. This highlights the (in my opinion) dangerous current fallacy that if we keep running up deficits, it will increase the national-debt-to-GDP ratio. In the first place, about one-third of the money spent to stimulate the economy will end up back in the Treasury because of income taxes, and in the second place, if the money is wisely spent, the boost in GDP may more than offset the rise in the national debt. (The U. S. national debt is currently about 40 times as large as it was at the end of World War II, but what counts isn't the absolute value of the national debt but the debt-to-GDP ratio.) This isn't like borrowing money to take a trip to Tahiti. This is (or can be,, I think, if spent on competitive infrastructure) like borrowing money to invest in new equipment to boost corporate revenue and profits.

    Farrell: Goldman's dream-inception technology