Mondays never let us down, do they?
Thank goodness too or we would have regretted flipping more bullish on Friday but the combination of thin trading and a short week with no data on Monday was just too much for the pump-monkeys to resist and they are out in force this morning, sending the Dow futures 40 points higher, over 100 points above Friday's low, where our lower levels held and we made some upside bets (see Weekend Wrap-Up for details). We are mainly in cash for the duration of the year but we'll be keeping our eyes open for some nice opportunities, like shorting oil again as they cross below $75 (now $75.08 at 7:30) on the last day of January contract trading, using $75 as the stop line to the upside – that play should be an easy way to scalp a few quarters.
Gold popped back to $1,118 overnight but not too impressive as silver is laying around at $17.35 while copper was rejected at $3.16 and couldn't hold $3.15 either so we're probably heading back to test $3.10 this week once the dollar reasserts itself after losing ground to the Euro ($1.435) and the Yen (90.50) in overnight trading (after the Nikkei closed up, of course). None of that matters, of course, in the final 8 trading days of the first decade of the 21st century as it's VERY unlikely the Dow will match it's Dec 27th, 1999 finish of 11,497 or the S&P 1,469 or especially the Nasdaq, which is not even at 1/2 it's 1999 finish of 4,069.
The NYSE, oddly enough, has been a small winner over the past decade, having finished 1999 at just 6,876 and the Russell has been the best performing index, now at 610 and up over 20% from the decade's start at 504. This is GOOD – this makes me feel good about America and about our prospects for the future. Of course our big industrials had a rough decade – we shipped our manufacturing overseas and there's little left there. Of course tech can't compete with the idiotic bubble of 1999 and the S&P also fell victim to globalization and performed poorly against increasing foreign competition.
But at home, our broader and generally smaller companies – the ones that employ 70% of all American workers, have found a way to survive and thrive through difficult economic circumstances and that, my friends, is what capitalism is all about. While the government bails out GM, AIG, CitiGroup and hundreds of other large-cap companies, the small-cap companies, with no help at all, adapted and survived and came out stronger than any other index group. Hopefully this will wise up both investors and our government and remind them that this country was built on the ingenuity of the real entrepreneurs and giving those people capital to work with is the best path to success for our future. How this country got to be a corporate welfare state is a very sad state of affairs but clearly that's a game that has to end!
For large-cap US corporations, this has been the worst decade since the 1820s, and I don't need to tell you how annoying it was to play the markets back then! The performance of the past 10 years (let's call them the Bush years) seem even worse when compared to the prior decade (Clinton years?), when the market gained 17.6% ANNUALLY on average. That's right, we got through the great market crash of 1906 and the great depression without turning in decade performances as bad as Bush II yet there are some in the Senate that are still digging in their heels to keep business as usual in Washington – think about that!
You would think that a crisis would have helped this country work together and grow stronger but today we see the passage of a mess of a half-assed Health Care Reform Bill that went strictly along party lines with a 60-40 vote in the Senate with ALL the Republicans voting no on the bill. We're never going to make progress fixing things that are wrong with this country with this mentality and believe me, we still have a lot of things that do need fixing.
China knows how to fix things and they announced this morning that they were going to be on-target for 8% growth in 2010. This pulled the Shanghai Composite out of the doldrums but the Hang Seng fell below 21,000 and couldn't get back over it, marking the 9th daily decline in the past 11, down 7.5% from the Dec 3rd high of 22,600. The Nikkei had a better day, jumping half a point at the open and holding it all day as exports fell more slowly than they have at any point in the past 14 months and we all know how "getting worse more slowly" is one of the best ways to excite the bulls – almost as good as "beating low expectations." Still despite this excellent (well, sucking less) news, the Nikkei failed to hold the critical 10,200 mark for the day.
Europe got off to a good start this morning but on very thin volumes. "With very little market-moving data to speak of today or indeed the rest of the holiday-truncated week, we suspect volumes will be thin across most asset classes," said Kenneth Broux, economist at Lloyds Banking Group. “We are entering a period of low volume and if there isn’t any bad news, the market can move higher,” said Kilian de Kertanguy, a fund manager at Cholet-Dupont Gestion SA in Paris, which oversees about $2.3 billion. Commodity stocks led the charge on the China news (which is the same old 8% they always predict but, on a Monday, that's considered news) as well as nice action from the polluting stocks, who celebrated the fact that the Climate talks ended with no meaningful progress.
There was also no meaningful progress in solving the Dubai crisis or in Iceland, where the country's credit rating is once again in jeopardy. None of this matters as we gear up for the holidays and we will remain fairly neutral into the new year unless we get to the top of our range again (10,500) where it will likely be too tempting not to short a bit more.
Be careful out there, lots of data starting tomorrow can melt any small rally we have today.
