Daily Investment Interpretations

August 26, 2010

2010-8-26:  This morning's unexpectedly improved jobless number--473,000 compared to the 495,000 that MarketWatch had predicted--gave the stock market an opening boost but it didn't last: Stocks slide as cheer fades. The NASDAQ Composite fell 22.85 points (-1.07%) to 2,118.59. The Dow lost 74.25 points (-0.74%) to close  at 9,985.81, and the S&P 500 subtracted 8.11 points (0.77%) to end at 1,047.24. Oil closed at $73.44 a barrel, while Gold moved down to $1,240. The VIX rose to 27.37
    Apparently, everyone is waiting on tomorrow's numbers (the downward revision to the GDP, and the consumer confidence reading) and upon Ben Bernanke's speech.
    A level of 1,040 on the S&P 500 index is a "line in the sand". A close below this level would signify a downward breakout of the current trading range. If this should happen tomorrow night, then to paraphrase "Anthony and Cleopatra", 'Rome will in Tiber melt and wide arch of the rang'd empire fall'.
    Nouriel Roubini ("Dr. Doom") is predicting that 2nd qtr. GDP will be revised to "well below 1%" and could wind up being close to 0. It seems to me that Dr. Roubini has laid his reputation on the line with this specific forecast. Now, PIMCO's CEO, Mohamed El-Erian, whom I quoted on August 20th as having put the odds of a double-dip recession at 1-in-4 has just tonight endorsed Nouriel Roubini's dire assessment of the economy. Both Dr. El-Erian and Dr. Roubini agree that the risk of recession is rapidly rising. My investment advisory service, which, so far, has bought the thesis that this is just a temporary soft patch in the road, and that the recovery will slowly continue, has been shaken by Dr. El-Erian's ratification of Dr. Roubini's warning. If the 2nd-qtr. GDP is revised below 1%, it would suggest to me that GDP growth is negative by now. Of course, that would not necessarily make this a double-dip recession, since a recession requires two back-to-back quarters of negative growth. Still,...
    Irish woes continue to flow This is another reminder that Ireland's austerity program seems to be backfiring.
    Bond buyers are killing the recovery This article refers to the fact that ultra-low bond interest rates are fueling a feeding frenzy of mergers and acquisitions.
    S&P 500 to retrace steps to 900, and S&P 500 to hit 450, SocGen strategist warns  When these kinds of gloom-and-doom articles appear, it's usually a sign that the markets are about to turn around and go up.
    Ex-Fed banker: Low on ammo  The Fed's former vice-chairman, Alan Blinder, warns that the Fed is running low on ammunition, and that buying private assets... corporate bonds, small business loans, and credit-card receivables... would be more effective than buying U. S. Treasuries.