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Dow 200+ Point Up/Down Days Update

On July 16, 2010, in Stocks, by Tim

After heightened volatility in May and early June, the last month or so has been relatively quiet (and positive) for equity markets, that is, until today when the Dow dropped 269 points, its biggest decline since the 323 point plunge on June 4th.

Prior to today, five of the last seven big moves have been up, however, in late-April/ early-May it was four out of five to the downside. So far, July is a bit behind the pace of recent months, but my guess is that markets won’t get any less volatile in the near-term, likely soon deciding on which direction to go, the economy providing the needed guidance.

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Dueling Outlooks for Stocks

On July 16, 2010, in Stocks, by Tim

If you’re confused about whether now is a good time to buy or sell stocks, don’t look to CNBC to provide you with any clear guidance as the increasingly gloomy outlook for the global economy and equity markets has seen a fair number of bearish headlines mixed in with the usual complement of bullish ones. Here’s a good example from earlier today:

Markets Will Rally Into Year End: Strategist

So where should investors look to put their money amidst the uncertainty? Jay Leupp, senior portfolio manager at Grubb & Ellis AGA; and Harry Clark, founder, president and CEO of Clark Capital Management Group, discussed their views.

“Looking at the broader market, we see 14 to 15 percent earnings growth for the next couple of years,” Leupp told CNBC.

“We see a good value entry point here.”

World at Risk of Folding in on Itself: Deputy Doom

The global economy is at risk of folding in on itself unless policy makers face up to the threats of inflation inflexibility and exchange-rate inflexibility, according to Arun Motianey, director of fixed income strategy at Roubini Global Economics.

A Japan-like outcome is a big risk for the developed world with deflation a big danger, he said.

Recent figures show that the recovery is sputtering in the US while China’s booming growth has slowed down slightly, as Beijing unwinds stimulus measures.

One could argue that simply because there are regular bearish views on equity markets at the network, the situation must be quite dire. It’s no wonder that retail investors have withdrawn more money from the stock market than they’ve added over the last year or so.

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The Mood of the Consumer Darkens

On July 16, 2010, in Economy, by Tim

The Reuters/University of Michigan consumer sentiment index dropped to an eleven month low in the mid-July reading, down from 76.0 in late-June to just 66.5, the weakest reading on the mood of the consumer since August of last year, just as the Great Recession came to an end (according to the nation’s most learned economists).

Stocks don’t seem to be taking the news well, the July rally after the move down in May and June appearing to be in some jeopardy. Unfortunately, plunging consumer sentiment is consistent with the other gauge of the public’s mood as the Conference Board’s consumer confidence index also plunged when it was last reported two weeks ago.

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Greenspan Wants Higher Taxes

On July 16, 2010, in Economy, by Tim

Former Federal Reserve Chairman Alan Greenspan thinks that taxes in the U.S. should be higher, not lower, as detailed in this Bloomberg report today.

Former Federal Reserve Chairman Alan Greenspan, whose backing of George W. Bush’s 2001 tax cuts helped persuade Congress to pass them, said lawmakers should allow the reductions to expire at the end of this year.

“They should follow the law and let them lapse,” Greenspan said in an interview on Bloomberg Television’s “Conversations with Judy Woodruff,” citing a need for the tax revenue to reduce the federal budget deficit.
…
Greenspan, in a telephone conversation after his Bloomberg TV interview was taped, said his position is that all the expiring Bush tax cuts should end, for middle-class and high- income families alike.

Ending the cuts “probably will” slow growth, Greenspan, 84, said in the TV interview. The risk posed by inaction on the deficit is greater, he said.

“Unless we start to come to grips with this long-term outlook, we are going to have major problems,” said Greenspan, who led the U.S. central bank from 1987 to 2006. “I think we misunderstand the momentum of this deficit going forward.”

Apparently, aligning himself with the growing austerity movement continues to be seen as the best path toward redemption, a key part of his ongoing “legacy shaping” efforts…

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One Step Closer to De-flation

On July 16, 2010, in Economy, by Tim

The Labor Department reported that consumer prices fell 0.1 percent in June, down for the third straight month, paced by further declines in energy prices.

On a year-over-year basis, the government’s measure of annual inflation fell from 2.0 percent in May to just 1.1 percent in June, the lowest level since last October when the price index first pushed back into positive territory after almost a year of negative numbers.

(more…)

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Friday Morning Links

On July 16, 2010, in Uncategorized, by Tim

MUST READS
Goldman to Pay $550 Million to Settle SEC Suit – Bloomberg
With Goldman Settlement, Blankfein Keeps His Grip – NY Times
Senate Passes Overhaul That Will Touch Most Americans – WSJ
U.S. Home Seizures Rise 38% to Record as Banks Process Backlog – Bloomberg
As regulatory overhaul passes, focus shifts to implementation – Washington Post
The Unemployment Benefits Stalemate: Our Broken Politics on Full Display – HuffPo
The Last Bubble: Unresolved Debt in the US Financial System – Jesse’s Cafe
Greenspan Says Congress Should Let Bush’s Tax Cuts Lapse – Bloomberg
Who Steered You Wrong About the GS Case? – The Big Picture

MARKETS/INVESTING
Oil up near $77 as US equities, economy mixed – AP
Gold edges lower as demand stagnates – Reuters
World at Risk of Folding in on Itself: Deputy Doom – CNBC
Sprott files registration statement for new physical silver trust – Mineweb
Is ‘cash for commodity’ the biggest trade in town? – FT AlphaVille
Top performers’ top funds – MarketWatch

ECONOMY/WORLD/HOUSING/FED
Core Inflation Rise More Than Forecast – Bloomberg
Buffett warns U.S. economy only halfway back – Reuters
How to Tell a Nation Is at Risk – Norris, NY Times
Red Light Flashes for a Bank Lending Loophole – Caixin
Short sales get lender scrutiny for a reason – MarketWatch
Foreclosures to Hit 3M, Repos to Reach 1M in 2010 – Mortgage News Daily
Fed’s Lacker wary over U.S. debt, bank reform – MarketWatch
Fed’s volte face sends the dollar tumbling – Telegraph
Fed Nominees Support Expanded Duties – NY Times

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