11/22/11
Follow the bouncing ball – otherwise
known as the stock market. Yes, JP Morgan, as in the original John
Pierpont, was right when he was purported to have said of the the
stock market, “it will fluctuate.” And so the Wall Street Maalox
market plays on. This morning stock futures are saying there's a
diminished chance for a turnaround Tuesday after a Monday that saw
the Dow give back 248 points to 11,547. The S&P 500 landed at
1192. The problem again this morning that has taken futures off the
highs is Europe. Spreads are widening something unbelievable again to
the 200% range and bonds of various EU nations are getting hammered.
When the Dow was down over 300 at the
worst of it yesterday, the 3-month treasury bill was the magnet for
money looking for near term safety. For a time, the the yield on the
3 month dropped to 0.00% and is holding at .01% this morning. That is
not a positive near term sign for stocks as it indicates another
large move out of the stock market to hold something that will pay
nothing in yield, but with the promise of getting the principle back.
What a concept!
As for other flight to quality areas. The dollar got little love as the UUP (PowerShares Dollar Index) finished off the highs, but managed to nudge above the 22 level. In spite of the pronouncements of a strong dollar in the mainstream, the UUP is down from its peak earlier this year of near 23, but did manage to find support just below 21. This narrow and downward trending year long pattern shows a lack of enthusiasm for the greenback even as the euro is on its death bed. Hmmmm, I wonder why? In my best Mr. Rogers voice: Can you say, “fiat” and “massive deficits”? Thought you could!
So there's the on going market irony. The dollar drags along (admittedly bouncing from the March lows), but has largely moped while Treasurys, priced in these dollars, attract money because they are perceived as a safe haven! Yes, the market is an entertaining place.
At one point yesterday, Gold was down
$50/oz. But let's remember, behind a 20% rise in feeder cattle this
year, gold is up 19.2%
in comparison to a 1.3% Dollar decline and a 4.7% S&P 500
drop. On a monthly basis, the stock market indexes (or indices, if
you prefer) are also red, while gold even with yesterday's drop is up
3.5% for the month. In other words, don't be fooled by the daily
moves that we are seeing in gold. The picture remains very green for
the year.
By the way, for the year, the Utilities
stock group has been the best performer, up 9% YTD. The worst
performers – the Financials, down a whopping 23% this year.
Healthcare is the only other positive performer this year with a 2%
gain. Go to finvez.com for further details. I bring this up only to
show, again, the mess the stock market is in vs the double digit gain
for gold this year. It's two different worlds. And there shall come a
time when investors will flock to gold as the real haven (sensibility
shall return), but the entrance will be a small one – like fitting
a camel through the eye of the needle – stealing from a classic New
Testament biblical reference. The time for amassing gold is now and
not at a future point when everyone will attempt to crowd into it.
Unfortunately, $50 moves are going to
happen in gold (we'll likely see even larger moves) to jostle the
unaware and the weak hands. It's the glaring defect of the system
that we're in. Something with core intrinsic historic value is priced
in a sinking value asset – in this case gold being priced in paper
dollars. It's what we must live with for the time being.
Moving on to a few other items of note
The $MF situation looks worse and worse
as we telegraphed at http://www.financialbalerdash.
Analysts are so useful. Canaccord
Genuity resumes Netflix as a Sell. This coming the morning after the
company announced plans for a stock dilutive $400 mln convertible
notes offering to raise $200 mln in cash. The stock is at $69 pre
market. The conversion price is $85. It bought back $200 mln shares
of its stock this year at over $200! Very funny stuff!
Let's talk economy. One of my favorite
economists who I often interviewed at CNBC, Paul Kasriel, of Northern
Trust sees a lost decade coming for the EU. The EU is the world's
largest economy. You've got be asking yourself how this is going to
impact the global economy and the U.S. Economy. http://stks.co/1ELP
. I like Kasriel because he accurate. He is not part of the
'consensus' community of economists who have only declared recession
when we're actually in one. Kasriel is ahead of the curve.
Even more to ponder. From Stocktwits:
RT aliadi US GDP no longer enjoying export advantages of weak $USDX.
PCE starting to top out. wheres growth coming from? #forex.
Good question.
I love Amazon... http://stks.co/1E7Z,
although its stock is certainly vulnerable to market declines.
Speaking of retail. Best Buy and Radio
Shack are not long for this world. BBY is said to be removing
tradition bar codes from products to keep consumers from using their
smartphones to compare prices on their shopping jaunts. BBY is so
losing. Radio Shack is in the same antiquated category. I will have more on
retailers tomorrow from my own channel checks and the impressions
that I get from my teen daughter.
I remember having involvement in
setting up this story when I was at Fox. How Turkeys are processed:
http://www.youtube.com/watch?
Focus Media has been grabbing
headlines. The real pain – the analyst experts on Wall Street who
recommended it. The stock is down 66% since. http://buswk.co/tydweo![]()
.
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