Saturday, 30 January 2010

Weekly Wrap: Your source for stock, stock market, and stocks info

Weekly Wrap: Another down week? It can’t be---well---it is. Stocks got bashed this week across the board. If you take a glance at the chart for the week, you’ll notice that every rally was sold. The sell-offs were particularly steep which could mean that a real change in character in the market is occurring. Thursday and Friday weren’t pretty in particular. Friday sell-off was not a surprise to people who don’t drink government Kool-Aid. The big news at the end of the week was the GDP number. This number was reported at 5.7%. That means the US government said the economy was expanding at 5.7%, which is actually a wondrous number to report. For an economy the size of the US, 3% growth is considered good. 4% is very good. So the number comes out and it’s 5.7%. That should have given the bulls all the momentum the needed to take stocks higher. The problem is that the number is completely bogus and the market actually sold-off on a supposedly bullish number. Doesn’t inspire a whole lot of confidence when the market plunges on “good news”. You can’t believe anything that comes out of the government statistics and here is why. Last quarter the government reported 3.5% growth in the US which was above economists’ estimates. Then a month later they said, “Well actually it was 2.8%”. Then after that it was revised to 2.2%. So the real GDP growth in the previous quarter was 2.2%. You take out the tax credit for first time home buyers and the cash for clunkers and it was probably negative. Which would mean the US economy would still be in recession. So, it doesn’t do anyone any good to pay attention to anything the government says. The market is much smarter than the government or anyone else. The market has gone down for two weeks straight and it may be giving us a clue to its next potential trend. Let’s talk about Greece and the Eurozone economies. Anyone remember Argentina’s or Russia’s debt problems? You may have the same scenario playing out in Greece. Credit spreads are widening in those developed nations and the endgame isn’t pretty. Greece’s budget deficit is 12.7% of their entire GDP. That means 12.7% of their income is going to pay the creditors. Portugal, Spain, and France are all seeing their creditworthiness get questioned as well. Yeah, this sounds like a global “recovery” to me. I don’t think so. The politicians and central banks don’t get it. You can’t solve a debt crisis with more debt. You will have to pay the bill when it comes. Discharging the debt is just like paying the minimum balance on a credit card. The credit card company keeps charging you more and more each month. Your credit balance keeps growing. They are actually happy that you only pay the minimum because the means they will make more money off of you. The creditors of Greece, Spain, France, and Portugal will cripple the Eurozone economies because those countries debt payments will be so large that all the money collected will go to paying off debt. This is another one of those developing crises. Ben Bernanke was reappointed. Not a surprise. I am not going to say much on that. I think it was a bad choice and it won’t be realized how bad a choice it was until down the road. The Fed also decided to keep rates at 0%. Again, not a surprise. The Federal Reserve does not control interest rates. Everybody just thinks they do. The Federal Reserve follows market rates, and if the bond market is asking for no return in order for safety it should make you wonder how healthy the economy actually is. Boeing hit a new intraday high Friday from the March lows, and Tesla Motors has filed for an IPO. It is the first US car IPO since 1956. Oh yeah, the iPAD came out too! (Not gettin’ it.)

1 comment:

Daddy Paul said...

I must agree that most of the number coming out of Washington these days is questionable. I do not see a lot of jobs in my area just empty homes and for sale signs.

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