Daily Investment Interpretations

September 17, 2010

2010-9-17 (Friday): Once again, the market indices ended about where they started. The NASDAQ Composite led the charge, with a gain of 12.36 points (0.54%) to 2,315.61 The Dow rose 13.02 points (0.12%) to close  at 10,607.85, and the S&P 500 eased up 0.93 points (0.08%) to end at 1,125.59. Oil slid to $73.54 a barrel, while Gold stayed put at $1,275. The VIX climbed 0.38 points to 22.01
     Consumer sentiment The University of Michigan consumer confidence index dropped from 68.9 to 66.6, its lowest level since August, 2009. (This may be due to falling stock prices in August.)
     CPI revives deflation talk There was an 0.3% rise in the Consumer price index in August, but, stripping the volatile food and energy sectors, the increase in prices was 0 %. The annualized rate of rise of the CPI so far this year has been 0.6%, and the annualized rate of the core CPI so far this year has been 0.7%. “'A dip below 1% shows that the economy is just one modest contraction away from dipping into a Japanese like deflation,' said Steven Ricchiuto, chief economist at Mizuho Securities USA, of the core inflation rate."
     Europe gives back gains on Ireland fears Ireland is the latest member of the little PIIGS to squeal "Help!"
     U.S. stocks falter as safety plays snapped up 
     Middle class running as fast as it can This article, written by Marketwatch's Rex Nutting, is a landmark article for me. In the article, he quantifies how far the middle class has fallen since 1973.) (Allegedly, that was when the very-rich began to skim off the rises in GDP to the exclusion of the rest of society.) Family incomes have dropped in spite of the fact that these days, both spouses in a family work and earn income. Wage-earners have maintained their declining life-styles by going into debt.
     In charts: What we learned about the economy. This documents graphically what's been happening with the economy since April.
     Lessons from Lehman’s fall  Senior MarketWatch Columnist Chick Jaffe gives good advice for avoiding unpleasant outcomes.
    Looking at the two-year chart of the S&P 500 below, I see  the rounding top of a peaking market that's getting ready, short-term, to turn lower. It seems to me that investors are in a "wait-and-see" mode. The economic news right now is mixed.
    Continuing Wednesday night's discursion on postwar threats of nuclear Armageddon, in 1969, the recently elected Richard Nixon, working with Henry Kissinger, conceived and executed a wildly dangerous scheme. He would try to make the Soviets regard him as a capricious wild man, a Nero or Caligula, capable of bringing on a nuclear Holocaust on the strength of a whim. Then he wanted to prevail upon them to intercede with Hanoi to bring to a close the Viet Nam war (on U. S. terms). He sent 18 B-52's loaded with hydrogen bombs to race to the edge of Soviet airspace and then to loiter there for three days. "
But what if things had gone terribly wrong — if the Soviets had overreacted, if a B-52 had crashed, if one of the hastily loaded warheads had exploded?" What, indeed? This was a wretchedly dangerous gambit... book-smart but street-stupid... that could have snuffed out both countries, while the citizenry on both sides were blissfully unaware of any immediate danger.
    Another close call came on September 26, 1983.
"Only three weeks earlier, the Soviet military had shot down a South Korean passenger jet, Korean Air Lines Flight 007, that had entered into Soviet airspace, killing all 269 people on board.[4] Many Americans were killed, including U.S. congressman Larry McDonald. NATO was soon to begin the military exercise Able Archer 83, preparations for which had been interpreted by the KGB as preparation for a first strike.[4]
    Lt. Col. Stanilav Petrov was the duty officer at the Serpukhov-15 bunker near Moscow, which housed the command center of the Soviet early warning system. Shortly after midnight, the bunker's computers reported that an intercontinental ballistic missile was heading toward the Soviet Union from the U.S. Col. Petrov dismissed the warning as a computer error (which had happened before). If he had decided otherwise...
    Most of us (myself included) have forgotten that the threat of assured mutual annihilation hangs us over us today almost as much as it did during the Cold War. All the machinery is still there. It would seem that it could happen at any time.