Here we go again!
I find it amazing that the same stories can be interpreted the exact opposite way one day, then the next and then the reversals continue. This is not a simple change of sentiment, this is a market full of analysts and investors running around like headless, clueless chickens.
They’re selling Google, they’re selling Apple, they’re selling ISRG (absolutely NOTHING has changed for them), they’re selling BA who would be at full capacity for 5 years even if half their orders cancelled. They are selling retailers that are doing well because they are retailers – this is panic selling folks but someone besides me has set a floor at 13,000 and they are buying what you’re selling.
We’re going to continue with our plan to pick up all those stocks we wish we bought in August but we are also covering for another 500-point slide to 12,500, which is where chart people will take us if the fundamentalists can’t hold the more logical line at 13,000. We still need to see some real capitulation in the energy patch and oil needs to get back to the $70s quickly to revitalize the Dow (sans XOM). I’ll get into it on the weekend but this is, hopefully, just another stage of the painful rotation out of energy and financials that we’ve been tracking all year (since the builders kicked it off in ’06 actually).
The big story today is a rumor that the UAE may drop their currency peg to the dollar. If this sounds a lot like the story where China was going to unpeg Hong Kong or where Qatar talked about unpegging or Saudi Arabia’s rumored change from last month or whatever the rumor mill turned out the week before that in order to force the dollar lower. I’m not saying the dollar isn’t a disaster, but it looks like a bottom to me when the PR machine goes into overdrive trying to push people out of it. Yes, we know we’ve wrecked our currency – now move along, there’s nothing more to see here…
Asia did not like the look of yesterday’s session one bit and generally retraced about 1/3 of Wednesday’s gains. China is going to be forced to raise interest rates despite a slowdown in industrial output as inflation is in danger of outpacing their growth. Europe is selling off with great vigor this morning as BCS found another $2.7Bn to write down. See, this is what I’ve been talking about – when you try to hide $200Bn in losses under the rug you have to expect a few billion to pop up here and there pretty regularly.
We got our CPI report today, which claims an in-line 0.3% monthly inflation rate BECAUSE IT COUNTS THE DECLINING COST OF HOUSING AS A MAJOR FACTOR! Overall, even with this Lala Land figures, prices are up 3.5% for the year (only 2.1% on the core). Energy prices were up 1.4% for the month and food was up 0.3% and medical care was up 0.6% but this was offset by housing, which makes up 40% of the index, and was up just 0.2%.
Wages were up 0.2% so as long as you stick to the core and don’t consume any food or energy you are keeping up nicely! Of course, property taxes are not included in these numbers and the average homeowner is paying over 50% more of those since 2001.
JCP gave terrible guidance and GMAC’s ResCap home-mortgage unit is VERY close to violating debt covenants so let’s watch our levels closely in case we have to duck and cover again!d I’m still holding onto hope but bear (oops, don’t say bear!) in mind it’s the kind of hope that comes from bargain hunting when you are 80% in cash!
Be careful out there.
