In the previous post, I made the long-term case for commodities. In this post, we'll consider an indirect way to get exposure to them. It's common knowledge that emerging market economies tend to be correlated with commodity prices. That's because emerging markets are often dependent on the export of natural resources, making them "banana republics," … Continue reading Russia Looks Rich & Cheap
The financial media has been pointing out that employment is steadily improving. A cursory look at the numbers seems to support that. For example, the unemployment rate has declined to 8.2%, down from 9.1% last year. Some will be quick to point out the decline was due to workers leaving the labor force, and not because of improving employment. However, it's difficult to say that no job-related measures have improved. Over the past year, the … Continue reading Working Hard?
The first quarter was full throttle "risk-on" for U.S. equity markets. The S&P 500 came out of the gates screeching and clocked more than 10% for the quarter. This rally seems to have rekindled animal spirits, and now the strength of the U.S. economic recovery is the toast of the town. From a macroeconomic perspective, a continued expansion would imply further equity market strength. … Continue reading Fast Money
2011 was a tumultuous year, we experienced everything from the nuclear disaster in Japan to a revolution in Egypt. While U.S. stocks were as volatile as the times, the S&P 500 ended up right where it started and returned 0% for the year. According to the stock market, we have gone nowhere for the past 12 months. Judging by … Continue reading Treading Together
The markets are quivering in anticipation of what the Federal Reserve may or may not announce later today. The consensus is that it will decide on implementing "Operation Twist." In this situation, the Fed would maintain short-term rates while reaching out to lower long-term rates, effectively "twisting" the yield curve. The idea is that lowering long-term rates will encourage borrowing, spending, and investment. However, … Continue reading Twist and Shout
All year long, corporate earnings have been the rationale for lower stock market valuations. Typically, the arguments go something like "earnings are strong... earnings are increasing... earnings are making new highs." And while those things are true, nobody is talking about where the earnings are coming from. Fortunately, there are some seasoned-pros, like Jeremy Grantham at GMO, who read between the lines and are … Continue reading Between the Lines
This is going to be a busy week for economic data, and maybe for the markets as well. Consumer confidence, FOMC minutes, the ISM, and the employment report will all be released over the next few days. Given that various economic indicators have been implying that the economy is heading towards recession, this fresh set of information will be closely watched. Special attention … Continue reading Just Looking
The markets seem to be hoping that good ol' helicopter Ben will come through with another round of quantitative easing (QE) tomorrow. Doing so would extend the legacy of the "Greespan Put" and probably ignite a speculative risk-on rally. Analysts like Dave Rosenberg and Bill McBride have pointed out how equity markets seem to be dancing around the Fed's QE activities, shown for … Continue reading Bernanke Put
So what did the stock market think about S&P's downgrade? We got an answer today, in bright flashing red. The Dow sank 634 points today - the sixth largest single-day drop in history. To be fair, the sell-off wasn't rooted entirely in the downgrade (which was widely expected). Rather, as I have written before, it looks like the market is … Continue reading Patient Trigger Finger
It was a wild week for US markets. Volatility was off the charts and on Thursday the Dow dropped 512 points - its ninth largest single-day drop in history. Stocks are down about 7% from their peak in April and are now negative for the year. Then on Friday, adding insult to injury, Standard and Poors stripped … Continue reading Here Comes the Sink
People often say that the stock market is a leading indicator for the economy. And it is, that is until it isn't. The market is a leading indicator in so much that current prices can be influenced by expectations of future economic growth. Of course, those expectations can simply be incorrect. The huge 90% … Continue reading Playing Catch Up
We are within an arm's length of reaching a "debt ceiling" in the United States. In other words, the government has basically maxed out the national credit card (based on limits established by US law). The Treasury Department has indicated that unless Congress authorizes additional borrowing (which only Congress can do through its lawmaking functions), the United States will not … Continue reading What’s up with the Debt Ceiling
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