Daily Investment Interpretations

August 20, 2010

2010-8-20:  The stock market ended a bit lower today: Retailers edge lower; Ann Taylor a bright spot.  The NASDAQ Composite ended up 0.81 points (0.04%) to finish at 2,179.76. The Dow shifted down 57.59 points (-0.56%) to close  at 10,213.62, and the S&P 500 declined 3.94 points (-0.37%) to end at 1,071,69. Oil closed at $74.00 a barrel, while Gold moved down to $1,229. The VIX dipped 0.89 to 25.55.
    It would seem that even the experts don't know what's coming next (although that won't keep them from telling you what's coming next... "...often in error, never in doubt.") Paul Krugman today is again presenting his view that many economists can't seem to get past their fantasies and prejudices to recognize even what has already happened: Permanent Link to Expansionary Austerity?. He gives as an example, the interest rate forecast prepared by Morgan Stanley for their clients early this year. Last December, Morgan Stanley predicted that the interest rate on 10-year Treasuries would be about 5 % about now. Instead, it's 2.62% tonight. (Morgan Stanley apologized to its customers yesterday.) Other primary dealers weren't much better than that, with JPMorgan Chase & Company, and Royal Bank of Canada prognosticating 4.5% for 10-year Treasuries. His key point is the alleged incompetence of the economists and politicians who are leading us.
    So who's right? I suspect that we will get an answer before the year is out.
    PIMCO's Mohamed El-Erian sets the chances of deflation in the U. S. at 1-in-4. Other economists estimate the odds to be somewhat higher: Preparing for Inflation and Deflation, and Funds Look to Dangers of U.S. Deflation. Meanwhile, bond yields continue to fall: Treasuries rally this week on flight to safety.   
    Roster of dividend-payers