Lakshman Achuthan, managing director of the influential Economic Cycle Research Institute, has said he’s sure the economy is “rolling over” but can’t definitively call it a recession yet. Today he adds that the elevated price of gold signals anxiety more than inflation concerns. ECRI has a good track record as a trend predictor, from all accounts. On the other hand, it’s also true that gold is hitting new highs and the financial media has to put a good spin on that. Wall Street doesn’t like physical gold, because whenever it dominates the news stories, it undermines the stock and fund selling on which the Street mainly depends. Continue reading
Tag Archives: stock market
Dan Denning On Dubai, Copenhagen, And The Stock Market
Dan Denning, author of “Bull Hunter” (Wiley, 2005), in the Daily Reckoning (Australia):
“The S&P 500 hit a 14-month high overnight. The conventional wisdom is that two news events are responsible. This is probably wrong. But let’s look at both events anyway and see what happened.
The first is that Abu Dhabi extended a $10 billion in financing to debt-distressed Dubai. Hossanah! Remember, Dubai is not Lehman. It’s Bear Stearns. It’s merely the reminder that there are lot of leveraged investors in the world who’ve used borrowed money to buy assets that aren’t very productive. They’ll get theirs soon enough.
The second bullish item is that ExxonMobil (NYSE:XOM) made a US$41 billion all stock bid for Houston-based natural gas company XTO. This sent Exxon shares down 4.4%. Thus the Dow’s rally was a bit tepid (XOM is a Dow component)……
Exxon is either getting a bigger foot in the U.S. natural gas market or hedging against cap-and-trade legislation, or both. We vote for both. No one is in a better position to know about the constraints on global oil production and discovery of new reserves than a major company like Exxon. And Exxon has seen firsthand that unconventional natural gas can be a lucrative little market.
But are those two bits of news really enough to send the market higher? Probably not. Who knows why the market goes higher? It does what it does. There’s an alternative explanation.
The alternative explanation is that the Copenhagen climate talks look like they’re collapsing into confusion and President Obama’s legislative agenda is in tatters. The private sector absolutely loves this…..
Good policy? Bad policy? Who knows? All we know is that the more uncertainty you introduce into the markets, the more conservative and defensive investors are going to get……
That’s not to say that a deal won’t come out of Copenhagen. Maybe the planet will be saved. Or maybe Copenhagen is the sell signal for global warming as a big idea/moral issue with which to bash the public. But either way, we reckon the stock market actually likes the idea that no climate deal is imminent and that healthcare legislation in the U.S. Senate can’t seem to get 60 votes.“
My Comment
Full disclosure: I worked for Agora two years ago. I receive no financial or other compensation ( trips, free food, passes to movies, restaurants, invites to exclusive seminars, commissions on real estate, insider deals etc. etc.) for mentioning them. But, if you´re writing about financial contrarians, they´re the original ones ….
My own difficulties with and criticism of them do not – and should not – prevent me from correctly attributing and acknowledging their work in populariazing nearly all the main issues that are now being debated in the media. Certainly, it was through them, and through Lew Rockwell, and Mises, not through establishment media or their blogs that I received an education in Austrian economics (I should add that I was always instinctively oriented to it, from childhood on).
Having deleted my facebook account after the social media wrestling-match between the Wall Street media mob (and backers) and Deep Capture´s investigative team (and backers), I am now content with actually writing emails or making phone calls to people I want to contact. Thankfully, there aren´t many I do.
SEC To Look At High-Frequency Trading and Naked Access
From Reuters, a report shows sharp rise in “naked access” to markets after 2005:
“NEW YORK (Reuters) – A report says that 38 percent of all U.S. stock trading is now done by firms that have “naked sponsored access” to markets, the controversial trading practice said to imperil the marketplace, and which faces a regulatory crackdown.
Naked access gives trading firms, using brokers’ licenses, unfetted access to stock markets. The firms, usually high-frequency traders, are then able to shave microseconds from the time it takes to trade.
Aite Group, a Boston consultancy, found that naked access accounted for just 9 percent in 2005.
The U.S. Securities and Exchange Commission is set to make changes to naked access and less risky forms of so-called sponsored access, when it releases a document expected next month.
The document is also expected to look more generally at high-frequency trading — where proprietary trading firms, brokers, and others use algorithms to make markets and profit from narrow market inefficiency.”
Market Up and Dollar Down
The dollar is at the low end of its trading zone (roughly 81-82 on the low end and 84 on the high) and likely to be under pressure this week.
The general idea is that risk appetite has returned, following some supposedly good data.
One is an improvement in sentiment among builders.
Another is the news that apparently banks have raised about $48 billion out of the $78 billion needed to get through the downturn.
But it’s my view that the dollar holding up was not about risk aversion as such, although it probably included a component of it. (Actually, recently, you can’t really say it has shown any strength – it’s been struggling bravely). The dollar’s rally was about deleveraging – which is not the same thing at all. Investors might think that sentiment is getting better but that doesn’t mean that positions don’t still have to be unwound and debts paid back.
But right now, it’s a giddy party again. The Indian Sensex went up 17% in one minute on May 18 on the unexpected news that the incumbent Congress party and the liberalizing PM Manmohan Singh had been reelected. But notice that the spike also involved some hasty short-covering. And it was helped by Sri Lanka declaring that the 25 year war with the rebel (or terrorist, depending on your persepctive) Tamil Tigers was officially over. The Sensex led the world financial bounce with an upsurge of 48%.
We’ll see how that goes.
Meanwhile, injecting some unseemly gloom into the festivities, Jim Rogers tells us that the next meltdown will be in currencies.
I notice that the COT (Commitment of Traders) report shows net long positions in the dollar are at their lowest since 2008. That usually signals a reversal of trend, but expect further pressure in the short-term.
Insiders Selling the Rally
Insiders are selling this rally like crazy, so says The Pragmatic Capitalist:
“I recently wrote about reports that insider selling was at record highs and buying was practically non-existent. The selling has become even more alarming in the last week and the buying has slowed to an absolute trickle. Below you’ll find the list of latest insider buys and sells. The sells are staggering with the amounts ranging from $3MM to $63MM (and I was only able to copy one page). The buys, on the other hand, are meager and range from $100K to $635K (the $800K purchase is a few months old and shouldn’t be in the data). You’ll also notice that the screen came up with just 18 total purchases vs 170 total sales (the lowest of sell screen data were sales of over $400K which is not shown here due to the large size of the results…”
My Comment
Wall Street, as well as the administration, both want to boost the market for reasons that partially overlap. The administration wants to be able to justify the bail-outs and retain some of the shine of of the pre-election rhetoric of “change”. But too much optimism will work against legislation/reforms that need a certain amount of panic to be passed.
Wall Street, on the other hand, doesn’t want panic at any price. It wants stability and optimism. And is eager to jump at any positive news it gets.
Mike Martin at MartinKronicle has a long and interesting interview with Victor Sperandeo (of “Trader Vic”), who calls it – as most informed commentators do – a bear market rally. Sperandeo’s voice is a bit hard to follow but Martin’s questions are searching and cover a lot of ground.
Two points:
Sperandeo (like nearly everyone else) thinks currency depreciation is inevitable and massive inflation around the corner.
He’s pessimistic about the Middle East situation and anticipates more friction with Iran.