Commentary 10/14/2011

Commentary 21st Disconnect between stock prices & Cos

With the recent “crash” in the stock market, those who follow Wall Street’s shenanigans would’ve noticed the massive disconnect between the Marco and Micro economic climate. It’s strange how economists will say we are on the edge of a recession and the CEOs say things are just a bit slower. How can this be?

Equity markets are “supposed” to be driven by the earnings of the underlying companies that these stocks are supposed to represent. It’s therefore a surprise that the market sold off so aggressively while companies reported record earnings in the second quarter of this year ( Q2 2011). Furthermore the cash positions held by these companies have been at record levels for 10 consecutive quarters; according to S&P companies hold almost $1 trillion in cash

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On the Macro-economic side of things firms hoarding cash instead of putting that money to work, building new plants or hiring more workers is not good for the US economy. However, companies have been able to cope with a changing consumer and 9% unemployment. They have been able to deal with that and create record earnings without taking on too much risks or spending the cash that they have. Companies are essentially doing more with less. On the other hand large, multinational companies are benefiting from growth outside of the United States. In 2010, 46% of all the sales from S&P 500 companies were from outside of the United States, according to S&P. And that number is expected to continue to grow. It makes these companies even more resilient against what happens in the U.S.

Unfortunately, in 2011 we saw unrest in North Africa as well as the earthquake and tsunami in Japan, Prior to both of these events, we were talking about 3%+ GDP growth. Unrest in North Africa and the Middle East led to a huge spike in gas prices and when oil prices rise unexpectedly, both consumers and businesses get spooked. Gas prices hit consumers directly in their wallets, and decreased consumer spending is one of the main reasons the economy has gotten off to such a slow start this year.

Investors were in a panic selling zone, and while the stocks have hit the floor of valuation, speculators continue to throw the proverbial baby out with the bath water. However if they would take the time to listen to the CEOs of the companies they continue to short sell then maybe we would be sitting nice and comfortable at Dow 12500.

Week in Review 10-14/10/2011

Date of publish: 14/10/2011

For Financial week: 10-14/10/2011

Written by Matthew McCreath

Week in Review 

Stocks had their steepest drop in two weeks, as fresh European sovereign-debt worries helped knock the market off a 2 ½-month closing high. The tone soured before the opening of U.S. trading after a representative for German Chancellor Angela Merkel said Europe's leaders would be unable to address every sovereign-debt problem at a euro-zone summit on Oct. 23. The Dow Jones Industrial Average on Monday lost 247 points, or 2.13%, to 11397, closing near the session's lows and wiping out all of Friday's gains. The loss pushed the blue-chip index back into negative territory for 2011. The S&P 500-stock index shed 24 points, or 1.94%, to 1201, and the technology-oriented Nasdaq Composite declined 53 points, or 1.98%, to 2615.

Shares rose sharply but failed to recapture steep losses in the previous session, as conflicting reports on Europe's debt crisis whipped the market around during Tuesday's final trading hour. The Dow seesawed from steep losses to big gains in a volatile session before finishing up 180 points, or 1.6%, to 11577. The rally came after the blue-chip index dropped 247 points Monday. The S&P 500-stock index gained 25 points, or 2%, to 1225, led higher by strong gains for financial and energy stocks. The Nasdaq Composite rose 43 points, or 1.6%, to 2657. The market received a jolt higher in the final hour of trading after the Guardian reported France and Germany agreed to increase the size of Europe's rescue package to more than €2 trillion ($2.7 trillion). But the report was almost immediately contradicted by Dow Jones Newswires, which reported European officials are still debating the size of the euro zone's bailout fund.

Stocks dropped as a gloomy assessment of the U.S. economy from the Federal Reserve added to a sharp fall in technology stocks after Apple’s earnings disappointment. The Dow Jones Industrial Average fell 72 points, or 0.6%, to finish at 11504. The S&P 500-stock index lost 15 points, or 1.3%, to 1210, and the Nasdaq Composite shed 53 points, or 2%, to 2604. The Dow spent much of the day in positive territory but quickly sank after the release of the Fed's "beige book" report of domestic economic activity showing investors pared back risk in line with the central bank's cautious take on the economy.

Stocks rose Thursday, zigzagging from losses to gains throughout the session after a series of conflicting headlines on European sovereign debt. The Dow finished up 37.16 points, or 0.3%, to 11542, while the S&P 500-stock index added 5.51, or 0.5%, to 1215. The Nasdaq Composite fell 5 points, or 0.2%, to 2599. Stocks whipped from positive to negative throughout the session. They moved higher midday after French President Nicolas Sarkozy and German Chancellor Angela Merkel issued a joint statement pledging European Union leaders would have a bailout plan in place by Wednesday. Those leaders also called for immediate talks with the private sector over Greek debt. Earlier, stocks had fallen after reports a Sunday European summit could be postponed because of disagreements over how to deploy cash in the Continent's bailout fund.

Stocks rose following another batch of corporate earnings and ahead of this weekend's European Union summit on the sovereign-debt crisis. The Dow gained 226 points, or 2%, to 11768, near session highs during the final trading hour of the day. The gains put the Dow on pace for its fourth straight weekly gain, marking its longest winning streak since January. The measure is up more than 1% this year. The S&P 500-stock index advanced 20 points, or 1.6%, to 1235. The technology-oriented Nasdaq Composite advanced 32 points, or 1.2%, to 2630. Investors remain fixated on how European leaders will combat the debt crisis that has spread to many regions across the euro zone. 

Commentary: CFA vs Common Sense 14/10/11

Date of publish: 10/14/2011

For Financial week: 10-14/10/2011

Written by Matthew McCreath

 Commentary: CFA vs. Common Sense

     I've always wondered this, why is it that a qualified analyst can come on CNBC and I an unqualified viewer can say that he/she is talking utter foolishness. How is this possible? What does he/she have that I can’t learn for myself? Can the average Joe perform better in the financial markets than a licensed portfolio manager? Are you better off paying a professional to run or advise you how to run your money, or can you go it alone?

     It is important to note that there are many hard-working financial professionals out there; people who not only work hard to deliver the best results for their clients but also the best service possible. It is also important to realize that advanced tools can be just as important as instinctive (or acquired) genius. Most financial services firms give their brokers and advisors access to powerful databases and advanced financial planning tools that can help predict future needs or market swings and recommend optimal strategies for any client.

     The most fundamental problem with financial advisors is that they are salesmen first and they are paid as a result. If you want to surpass your advisor in knowledge and aptitude, the most important thing to do is read. There is no end in the learning process for an investor, and likewise no end to what can be learned.

     There is no shortage of reading material when it comes to learning about markets, companies and industries. An investor can learn a lot about a company simply from freely-available reports, business publications, as well as various articles found freely on the internet. If the average Joe hit the books while they hit the golf course, it doesn't take long to catch up.

     Many people find investing to be a mystery, an inconvenience or simply do not want to take on the responsibility of managing their own money. I think many people are not only able to match the abilities of their advisors but outperform them and should take more responsibility for their money. 

Week in Review 14/10/11

Date of publish: 14/10/2011

For Financial week: 10-14/10/2011

Written by Matthew McCreath

Week in Review 

     Stocks soared, on Monday, as investors put their faith in a resolution to Europe's debt crisis and the ability of U.S. companies to power through an uncertain economy. The Dow Jones Industrial Average jumped 330 points, or almost 3%, to 11433, its biggest one-day surge in two months.  Monday's gains came after German and French leaders said they were determined to present a "comprehensive package" by the end of October that would include a plan to recapitalize euro-zone banks as needed and address the Continent's debt crisis.

     U.S. stock benchmarks ended a low-volume session close to the flat line Tuesday, with investors unwilling to make big bets ahead of an unofficial start to the earnings season and Slovakia’s vote on the euro zone’s bailout fund. The Dow Jones Industrial Average finished the day 17 points, or 0.2%, lower at 11,417. The S&P 500 Index inched up 0.65 point, or 0.1%, to 1,196. Utilities and telecommunication shares were hit the hardest, while technology stocks outperformed among its 10 industry groups. The Nasdaq Composite Index   climbed 17 points, or 0.7%, to 2,583.

     Stocks finished with strong gains, Wednesday, amid optimism about plans to recapitalize euro-zone banks. The Dow Jones Industrial Average advanced 103 points, or 0.9%, at 11519. The Standard & Poor's 500-stock index climbed 12 points, or 1%, to 1207, and the Nasdaq Composite advanced 22 points, or 0.8%, to 2605. With the gains, the Dow is up 5.6% this month, the fifth-best start to October since 1900, and is down just 0.5% on the year. During Wednesday's session, the Dow rose 209 points, putting it into positive territory for the year, before dropping in the final hour. The European Commission Wednesday set out its plan to shore up European banks in the face of the region's sovereign-debt crisis. In addition, Slovak lawmakers regrouped to broker a deal that would remove the remaining obstacle to enhancing the euro zone's government bailout fund.

     The financial sector led stocks lower, Thursday, following less-than-stellar results from J.P. Morgan Chase, while strength in technology shares limited the broader market's losses. The Dow Jones Industrial Average fell 41 points, or 0.4%, to 11478, after dropping as much as 141 points on Thursday. It marked the Dow's second drop in the last three sessions and biggest decline since Oct. 3. The blue-chip index still is up 5.2% this month and briefly moved this week into positive territory for the year before pulling back. It is down 0.9% this year. The S&P 500-stock index eased 4 points, or 0.3%, to 1204. Financial and industrial stocks registered the biggest declines, while technology stocks rose. Meanwhile, the Nasdaq Composite rose 16 points, or 0.6%, to 2620, marking its fourth straight gain. The technology-oriented index has gained 12% over the last eight trading sessions.

     Stocks rose Friday, driving the Dow Jones Industrial Average to its longest weekly winning streak in six months and pushing both the Dow and the Nasdaq Composite into positive territory for the year. The Dow industrials climbed 166 points, or 1.5%, at 11644, near the session high, en route to its first string of three straight weekly gains since the three-week period ending April 8. The S&P 500-stock index gained 21 points, or 1.7%, to 1224.58, with energy, material and technology stocks in the lead. The Nasdaq Composite advanced 48 points, or 1.8%, to 2668. Stocks rose amid strong U.S. retail-sales data, signs of progress in Europe's sovereign-debt crisis and stellar results from Google, all of which helped set the positive tone.

RIP Steve Jobs

I just read an article on ABC saying that Steve Jobs has died at 56. Its weird, I feel that even though his body has become lifeless, future generations will remember him every time they open their mac books, touch their iPad or listen to music on their iPods. Its corny, I know, but when you look at the legacy of Mr Jobs you look into one of the greatest pioneers, innovators and CEOs of our generation and he will be greatly missed. I send my condolences to the friends and family of Steve Jobs, we have all lost a great human being.

Stocks are cheap.. but they'll stay cheap

I just wanted to write something quick here. I'm watching kudlow report right now and one of the analyst just said "stocks are cheap but they have been cheap and they probably will stay cheap".
That statement just defines this market. Now I think the highs for the markets are in for the year but until we see a big solution in Europe the markets will just muddle along or continue to drift lower. Sad but true.

Week in Review 30/9/2011

Date of publish: 30/9/2011

For Financial week: 26-30/9/2011

Written by Matthew McCreath

Week in Review 

   

   Stocks jumped and blue chips staged their biggest percentage gain in more than a month, as investors bet that efforts will be taken to stem Europe's sovereign-debt crisis. The Dow climbed 272 points, to 11044, clawing back more than one-third of last week's losses. The S&P 500-stock index gained 27 points, to 1163. The Nasdaq Composite was the laggard, gaining 33 points, to 2517, after spending much of the day in negative territory.  Stocks closed near session highs following reports that a "special purpose vehicle" to help stem Europe's debt contagion was in advanced development. Those reports followed an ECB official's endorsement of a more aggressive bailout plan and another official's remark that the ECB can't rule out an interest-rate cut.

   A sharp afternoon downdraft prompted U.S. stocks to erase more than half of their earlier gains, as investors fretted over a report that highlighted a potential split in the euro zone over the terms of Greece's second bailout. The Dow finished the session up 147 points, to 11191, after surging as much as 325 points. The S&P 500-stock index gained 12 points, to 1175. The Nasdaq Composite closed up 30 points, to 2547.

   U.S. stocks snapped a three-day winning streak, sinking as a drop in commodities prices added to concerns about policymakers' ability to contain Europe's debt crisis. The Dow fell 180 points, to 11011. The S&P 500-stock index lost 24 points, at 1151, while the Nasdaq Composite shed 55 points, to 2492. The moves came on a day when Finland voted to approve changes to the euro-zone bailout fund, after leaders raised concerns earlier this month that they would demand collateral as a precondition for participation. Germany votes on the changes Thursday. The changes need to be approved by all 17 euro-zone members to take effect.

   Stocks erased a strong rally but still finished off their worst levels Thursday in thin, choppy trading as the Dow and S&P rebounded from afternoon lows. Stocks started the session sharply higher following several robust economic news and after Germany's parliament passed a crucial vote which approved the reforms to the EFSF. The Dow gained 143 points, or 1.30 percent, to finish at 11,154, rebounding from its afternoon lows. The S&P 500 rose 9 points, or 0.81 percent, to end at 1,160. The Nasdaq slid 11 points, or 0.43 percent, to close at 2,481.

   Stocks declined, setting the market up to close the worst quarter in years on a down note, with glum overseas economic reports weighing on investor sentiment. The Dow shed 156 points, to 10999, in Friday afternoon trading. The Dow has lost 10% for the quarter as of Thursday's close, the biggest percentage decline since the first quarter of 2009 and the worst point drop since the nadir of the financial crisis in late 2008. The S&P 500-stock index shed 18 points, to 1143, while the Nasdaq Composite slid 44 points, to 2438. Those two indexes also are closing out their worst quarterly performance in years.

Commentary: Getting stuff done 30/9/2011

Date of publish: 30/9/2011

For Financial week: 26-30/9/2011

Written by Matthew McCreath

 Commentary: Getting stuff done

I hear it constantly, “I want to trade but I don’t have the time” or “I want to start investing but I don’t have enough money”. Unless those statements end with ‘yet’ then I think there really isn’t much desire, because truth is there isn’t anything stopping you.

There are 168 hours in a week and you really can’t find 5 hours out of them to look over charts, read a book, website, listen to a conference call or possibly read a newsletter *cough*. I’m sure it would be time better used than watching jersey shore. However, if you’re are finishing up stuff for work or school fine but if you’re mindlessly watching television then possibly your time would be better used taking control of your financial future.

Money is an iffy subject because it has to do a lot with the individual in question. Not many people have thousands of dollars sitting under their mattress that they can through into an investing or trading endeavor. For example to trade commodity futures unleveraged, one would need over a quarter of a million dollars. However, on the complete other side of the spectrum, there are forex brokers like Oanda which offer nano lots, where 1 pip is one cent. This means one could trade unrestricted with only fifty dollars and actually grow.

Fact is if you can’t find fifty dollars you have other problems or other priorities which is perfectly understandable. Using fifty dollars to buy groceries or pay rent is much more important. I’m just saying using fifty dollars to possibly grow your wealth seams worth it if it was going to be otherwise spent on a new pair of shoes or to watch that new movie. One must prioritize if they truly want to succeed.

Priorities go into the depths of what this commentary is about. When you have stuff to do, it’s best to get the most important stuff done first. I can’t tell what is important in anyone’s life because I’m not them. However, simple logic would agree that if you really want something or if something needs to be done, it just simply has to get done. So if you really want to do something, finance related or not, you have to step back, prioritize and make the necessary sacrifices. If not you’ll either never reach your goals or it will just take too long.

Week In Review 23/9/11

 Disclaimer: The above statements should not be seen as a financial recommendation. Any trades or investments discussed within this newsletter are simply my own thoughts as of the moment of publication, and are subject to change. Traders entering any market should make their own decisions based off their own research and tolerance for risk. Losses in trading are very real and can exceed your initial investment. There is no guarantee that I will enter, or have entered any of the trading or investing ideas discussed in this newsletter. I, the author do not grant this work for distribution beyond any single individual subscriber as this publication is protected by International Copyright laws. All rights reserved. No license is granted to the user except for the user's personal use. No part of this publication or its contents may be copied, downloaded, stored in a retrieval system, further transmitted or otherwise reproduced, stored, disseminated, transferred, or used, in any form or by any means except or with prior written permission. I am not a licensed financial planner or advisor. It is also understood that the writer of this newsletter has warned against the dangers of shadowing other traders thoughts.

Commentary 19/23/11

 Disclaimer: The above statements should not be seen as a financial recommendation. Any trades or investments discussed within this newsletter are simply my own thoughts as of the moment of publication, and are subject to change. Traders entering any market should make their own decisions based off their own research and tolerance for risk. Losses in trading are very real and can exceed your initial investment. There is no guarantee that I will enter, or have entered any of the trading or investing ideas discussed in this newsletter. I, the author do not grant this work for distribution beyond any single individual subscriber as this publication is protected by International Copyright laws. All rights reserved. No license is granted to the user except for the user's personal use. No part of this publication or its contents may be copied, downloaded, stored in a retrieval system, further transmitted or otherwise reproduced, stored, disseminated, transferred, or used, in any form or by any means except or with prior written permission. I am not a licensed financial planner or advisor. It is also understood that the writer of this newsletter has warned against the dangers of shadowing other traders thoughts.

Apology

I'd like to apologize for not having released last week's newsletter. Frankly I've been busy with school recently and barely have enough time to write and publish the newsletter however, I will try to manage my time better as well as be more consistent in my releases. Also I've been learning about blogger and html coding to enhance the flow of the site. So thank you for baring with me and I promise there will be a release this Friday.

Week Ahead (5-9/9/2011

Next week will be a relatively light news week for the US. There will be no trading on Monday as it will be the labor day bank holiday. On Tuesday the ISM non-manufacturing PMI (Purchasing Manager’s Index), It's a leading monthly indicator of economic health - businesses react quickly to  market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy; Above 50.0 indicates industry expansion, below indicates contraction. If the actual release is higher than the forecast of 51.3 then the markets should rally. The next major news release comes on Thursday with Unemployment claims and the trade balance. Forecast come in at 409k and –50.3B respectively. Based on Fridays jobs number expect light volume going into the release and bearish bets as well. Also there is the trade balance which will be watched carefully to see whether there was actually a contraction in global trade. Also watch for the ECB press conference on Thursday and any  announcements on austerity measures or new policies to aid Greece or Italy. If there is any significant announcement Wall Street and other  European indices could rally  violently. NEWS Monday: - Tuesday: ISM Non-Manufacturing PMI Wednesday: - Thursday: Unemployment Claims  & Trade Balance Friday: -

Week In Review (Newsletter 29/8-2/9/2011)

The market Stocks rallied Monday, following a trifecta of positive news: A Greek bank deal, a solid U.S. consumer spending report and relief that Hurricane Irene caused less damage than expected. The Dow Jones industrial average added 254 points to close at 11,539. The S&P 500 rose 33 points to 1,210. The Nasdaq Composite gained 82 points to 2,562.   Early Tuesday morning, investors were spooked by a report that showed consumer confidence sunk to its lowest level in more than two years. All indices closed the day in positive territory. The Dow Jones industrial average moved up 20 points to 11,559.95. The S&P 500 rose 3 points to 1212.92; while the Nasdaq added 14 points to 2576.11. Stocks got a bit of a late-day bounce from the release of the Federal Reserve minutes. The minutes revealed that some members supported QE3. U.S. stocks advanced Wednesday, pushing the Dow back into positive territory for 2011 and capping a four-day winning streak that closed a volatile August. The Dow finished with a gain of 53 points 11613.5. AT&T shed 3.9%, to 28.48, after the U.S. Justice Department filed a civil antitrust lawsuit that seeks to block AT&T's proposed takeover of T-Mobile. The S&P 500-stock index gained 6 points 1218.9, led by financial and utility stocks. The Nasdaq Composite eked out a rise of 0.1%, to 2579.46. Three batches of economic data helped set a positive tone for Wednesday's session. Despite the recent strength the major All three indexes had their worst August since 2001 after fears of an economic slowdown in the United States and debt issues in Europe put investors on edge. A four-day rally ended Thursday with a slump led by banks. Many investors sold stocks ahead of the monthly jobs report Friday. The Dow Jones industrial average fell 119.96 points to close at 11,493.57. Markets rose shortly after the manufacturing report showed evidence of growth in August. Retailers rose after reporting strong sales last month, despite worries about the economy. The S.& P. 500 fell 14.47 points to 1,204.42. The Nasdaq fell 33.42 to 2,546.04. U.S. stocks tumbled on Friday after data showing zero jobs growth in August brought investors face-to-face with the prospect of another recession. The declines left Wall Street lower for the sixth week out of seven on a light-volume day ahead of the long U.S. Labor Day holiday weekend. Stocks had rebounded recently on expectations the Federal Reserve would introduce new stimulus to boost the sluggish economy. However latest reports show that action by the Fed alone cannot address the economy's problems.  Bank shares were again among the day's biggest losers after U.S. housing regulator filed a lawsuit against Bank of America Corp, JPMorgan Chase & Co, Goldman Sachs Group Inc and other big lenders over mortgage practices. The Dow Jones industrial average was down 253.16 points, or 2.20 percent, at 11,240.41. The S&P 500 Index was down 30.46 points, or 2.53 percent, at 1,173.96. The Nasdaq Composite Index was down 65.71 points, or 2.58 percent, at 2,480.33. Friday marked the S&P's biggest drop in two weeks. Despite the day's sharp decline, stocks were only modestly lower for the week. For the week, the Dow fell 0.4%, the S&P lost 0.2%, and the Nasdaq was flat. Quick Stats on world markets DOW opened this week at 11277 closing 37pts 0.4(%) lower at 11240 S&P 500 opened this week at 1175.10 closing 2pts  0.2(%) lower at 1173 USD Index opened this week at 73.77 closing 0.98pts 1.3(%) higher at 74.75 Gold opened this week at 1818.95 closing 57.95 dollars 3.2(%) higher at 1876.9 Oil opened this week at 85.38 closing 1.07dollars 1.3(%) higher at 86.45

Commentary (Newsletter 29/8-2/9/2011)

The market has QE3 on its brain. This just shows that macro economic factors have more impact on the markets than any factors affecting the businesses that these stocks getting pummeled are supposed to represent. Hopes for more support from the Federal Reserve have helped stocks levitate in recent sessions, making investing and trading in any markets, especially stocks much more difficult, as if it wasn't hard enough, and frustrating the average investor or destroying the savings of pensioners as their 401ks or IRAs come down with the markets. The minutes of the last Federal Reserve policy setting meeting, released Tuesday, revealed that a third round of asset purchases, or "quantitative easing," was raised as a possibility to support the economy and financial markets. QE2 spurred a significant rally in many markets and Investors are beginning to say, 'Hey, if they're going to do a QE3, probably the same thing happens.’ Stocks and commodities rallied as the Fed minutes came out., as Some traders clearly felt that the Fed was signaling a third round of quantitative easing (QE3) solely because they acknowledged discussing a range of easing options. A few members felt that recent economic developments justified a more substantial move which seemed to be all that was necessary to get everyone salivating again.  The Fed is deeply divided; they couldn't even seem to agree on whether inflation posed an imminent threat or not however the minutes revealed that some committee members advocated another round of  easing or QE3.  By itself the Fed can't restore confidence or create jobs, so any steps it might take won't be game-changing for the economic growth prospects. The likelihood of more stimulus has increased dramatically as a result of this and some other recent data, but at this point it's unclear how much that will really help markets. Frankly if it didn't work the last time its not going to work the second time. Wall Street has a gambling problem and the fed cannot keep supporting it because when news comes out showing inflation again the complainers will come in their masses to blame everything on Mr Bernanke. The same traders making a killing on rising wheat prices will crush a restaurant stock when it says wheat prices are shrinking margins or complain when their trading profits buy less in the stores. When you bite the hand that feeds you, don't be surprised when it does return and I will loose much of my respect for Ben Bernanke if he decides to feed Wall Street’s gambling problems once again.

Introducing the You Tube Channel and The Traders Handbook.

I have opened a You Tube channel and another blog to discuss everything about trading, from systems to the psychology. So check it out and enjoy.

http://www.youtube.com/user/FreshLookWS?feature=mhee

http://tradershandbook.blogspot.com

Week Ahead (Aug 15-19)

Monday starts the week’s flow of news with the TIC long-term purchases.  This data represents the balance of domestic and foreign investment. The market impact tends to be significant but varies from month to month. Demand for domestic securities and currency demand are directly linked because foreigners must buy the domestic currency to purchase the nation's securities, which will be a good indicator of how capital flowed in this volatile month for the market.

Building Permits will be released on Tuesday. It's an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building which will indicate how the housing market recovery is doing.

On Wednesday we have the release of the PPI (Producer Price Index). This tends to have more impact when it's released ahead of the CPI data , which is on Thursday, because it's a leading indicator of consumer inflation - when producers charge more for goods and services the higher costs are usually passed on to the consumer.

CPI  will be released on Thursday showing consumer prices  for the month accounting for a majority of overall inflation. Inflation is important because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate.

Unemployment Claims will also be released on Thursday. This is currently the nation's most important economic data. The market impact fluctuates from week to week but will be important as it is one of the most watched economic data amongst the street. Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health.

Week in Review for Financial Week Aug 8-12

Each day of this week has seen the Dow Jones industrial average swing at least 400 points. The week started with a 634-point plunge Monday responding to S&P’s Downgrade of US debt, but on Tuesday, the Dow soared 429 points after the Federal Reserve's announcement on the economy and interest rates Tuesday. The Dow bounced up 100 points, then fell 400 points, and then roared back more than 600 points — all within an hour and a half. Wednesday showed the Dow continuing its free-fall erasing all of Tuesday’s gains and some with a 520 point decline. Global financial markets rebounded sharply Thursday after a drubbing Wednesday, extending one of the most volatile streaks in history for stocks. The Dow Jones Industrial Average surged 423 points. It marked the first time in the index's 115-year history that it has moved by more than 400 points for four consecutive days. Friday ended with a 125 point rally in the Dow ending the week  just 1.5% lower, surprising after the volatile week we have had.
The current market mayhem was kicked off by concerns about a wide range of economic problems, including seemingly intractable unemployment in the U.S., political paralysis in Washington, continuing weakness in the financial system and over-extended European governments. The sheer number of moving parts that investors are trying to keep their eyes on has made it hard to stay focused on any one problem.  With many economists now fearing the recovery is in jeopardy of reversing into recession, it may be some time before Wall Street can find its footing again. Ultimately, stock markets are driven by corporate earnings which are improving.

Commentary for Financial week Aug 8-12

Wall Street's gut-wrenching turbulence in the last six trading days has sent many investors into a state of paralysis, watching helplessly as the Dow Jones industrial average free fall 520 points one day only to soar 430 the next. Baron Rothschild, an 18th century British nobleman, once said "Buy when there's blood in the streets, even if the blood is your own." Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.  And there is no further shortage of contrarian investing advice out there. One of my investment idols, Warren Buffet once said “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” and being one of the richest men in the world, his returns show no lack of proof of his financial abilities.

So with fear running rampant on Wall Street this week, is this the time to buy? Well that depends on which camp you are in. Double dip or sale, if you believe that we are going in a double dip though unlikely then I say cash and safe havens such as gold, blue chip stocks and fixed income is the way but if you think this is the sale before the next leg of this bull market then take Cramer’s advice and buy on the panic sell offs.

Now I don’t believe we are staring down the barrel of another recession but I just don’t see any major catalyst to kick start the next leg of the rally. This puts Wall Street in a sort of financial limbo, where traders don't know whether to buy or sell  into the insane volatility seen this week. Equity bottoms tend not to occur when there is still a glimmer of optimism, in    Rothschild’s terms there still isn’t enough blood on the street but with over 4 Trillion dollars leaving the markets since the start of this “crash”, the falling knife is only a couple sessions away from hitting the floor. 

 The bottom line is the market is trying to discount all of the worst negative scenarios which have yet to occur, We need to see the European Central Bank and US Government take firm leadership and provide some substance to alleviate the fear  factor...and I think that's coming.

Double Dip or Sale? Daily Rant Aug 5, 2011

Baron Rothschild, an 18th century British nobleman, once said "Buy when there's blood in the streets, even if the blood is your own." Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.  And there is no further shortage of contrarian investing advice out there. One of my investment idols, Warren Buffet once said “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” and his returns show no lack of proof of his financial abilities.

 

So with fear running rampant on Wall Street is this the time to buy? Well that depends on which camp you are in. Double dip or sale, if you believe that we are going in a double dip then I say cash is the way but if you think this is the sale before the next leg of this bull market then take Cramer’s advice and buy on the panic sell offs. However, there is an imminent problem, where is the catalyst? Now I don’t believe we are staring down the barrel of another recession but I just don’t see any catalyst to kick start the next leg of the rally. This puts Wall Street in a sort of financial limbo, where the bears are at their best but the bulls are still kicking and screaming as they go down.

 

Equity bottoms tend not to occur when there is still a glimmer of optimism, in Rothschild’s terms there still isn’t enough blood on the street but the falling knife is only a couple sessions away from hitting the floor. 

Gold Bears where is the downside? Daily Rant Aug 4, 2011

Gold bears, where are we really going? There are some markets that I understand that valuations can be skewed and there is therefore both buying and short-selling opportunities but I don’t understand how the precious metals market is one of those.

 Rather than take the near to long-term outlook think the reverse. Basic economics says that anything with a finite supply with continuous or increasing demand for it, will appreciate over time and doesn't gold and silver fit that description? Unless we find a new planet made of gold we have a finite supply on earth and with rapid global population growth, gold could appreciate to significantly higher levels from here.

With price targets on gold ranging from $1800 by the end of the year to $3000 by 2015, I don’t see much downside catalyst or sentiment for gold to stay at these levels or much lower. Now I will concede that gold will see weakness if the dollar strengthens significantly but like I said before basic economics point to higher gold. So my question lies in why are there Long-term gold bears in the market? And if you are one please post a comment below so I can understand your reasoning and so we can both learn. As far as today’s price action I would say that the bears won the battle but not the war. 

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