Daily Investment Interpretations

June 30, 2011

2011-6-30: (Thursday Night): The markets have now soared for a fourth day in a row: Market Wrap: Another Strong Showing, . The NASDAQ Composite was up 33.03 points (0.41%) at day's end to 2,740.49. The Dow jumped 152.92 points (1,25%) to close at 12,414.34; the S&P 500 gained 13.23 points (1.01%%) to end at 1,320.64. Oil climbed back up to $95.10; Gold rose a little to $1,511: Some gold bugs think storm has passed. The VIX fell 0.75 to 16.52.
    Technical Talk: Bulls Charging 
    Possible market bottom 
    How QE2 shook markets  
    "While initially benefiting Treasurys themselves, the program has done more for commodities and stocks since Fed Chairman Ben Bernanke in late August suggested the Fed could roll out a new bond-buying program.
Since then, gold futures have jumped 22% and the Thomson Reuters/Jefferies CRB index of global commodities has gained 28%. As for U.S. stocks, the Standard & Poor’s 500 Index is up 26%. The dollar index, which measures the performance of the U.S. unit against a basket of six currencies, has lost more than 10%; more money in the system is considered a way to devalue the currency."
    What the end of QE2 means for Wall Street (video)      
    "Recent gains could be a blip in the downtrend that started in April, writes Jon Markman. Here's his advice: "Apply caution in late July  The key idea is that the fiscal stimulus program failed to lift the economy enough to lower the unemployment rate, and to generate higher consumer spending.... in other words, to kick-start the economy and to generate the higher tax revenues that would pay for the money spent to stimulate the economy. "Analysts at the start of 2011 expected U.S. GDP growth to clock in at around 4% this year. And yet as manufacturing has stalled amid stubborn unemployment and a plunge in consumer confidence, economists have had to ratchet down estimates to 2% or lower. Two percent, you need to know, is stall speed for an economy as large as ours. It’s not enough to grow jobs at any kind of reasonable pace to make up for the ones lost since the last recession. So that $750 billion borrowed and allocated for stimulus by Congress in the president’s first year, and the $600 billion borrowed and allocated for bond buying by the Federal Reserve, have literally bought us nothing. There has been no payoff. None. Zilch. Nada. That’s why we’ve now got to cut into the kids’ milk money to pay the bills.
    "Lakshman Achuthan, head of the Economic Cycle Research Institute — the one forecasting organization that I trust — says the hidden reason for all this is that the global industrial machine has entered a profound and pervasive cyclical slowdown that cannot, at this point, be blunted. Concurrently, he says, employment growth has peaked for this cycle, and will never improve beyond the pace seen in February to April this year. “That was as good as it’s going to get,” he told me in an interview this week. This is a huge problem because the only way that debts can be paid off — in Greece or the United States — is if borrowed money is used to create valuable assets that spin off cash. Without growth that creates jobs (and in turn generate taxes that can pay off the debt), you have one big smokin’ hole in the middle of your country.
Market futures are slightly lower tonight.