Micro over macro
Dow Jones up 58 @ 8174 (another narrow 150 point range which is a positive as we don’t want volatility)
Gold down $5.80 @ $897.6 (More closes above $900 and the charts are positive targeting $950 near term)
CRB Index down 8.4 @ 218.76 (metals and oils weaker on profit taking)
Oil down $3.8 @ $41.92
The Hindsight.
More bad economic data was shrugged off signalling sentiment maybe, just maybe turning; certainly another close above the 8,000 level presents a stronger technical picture. For those of you who like reading the gory details U.S house prices fell 18% in 20 cities and consumer confidence fell to another record low @ 37.7%(exp’ 42%). The only amazing thing was that 13% of consumers expected business conditions to improve over the next 6 months….who are these people? Must be bailiffs,liquidators and psychologists specialising in trauma/depression. On the jobs front it’s the same old story just new names with ING shedding 7,000 , Texas Instruments and Phillips chipping in with another 17,000. There really isn’t much need to keep reading these dire numbers as the market has priced this in as it “desensitises”. It’s all so Ho Hum. Suffice to say since Obama won in November he will be greeted with an extra 519,895 ex workers.
Now this is funny.
AIG, (the worlds largest insurer,which was recently bailed out by Uncle Sam to the tune of $150bln) has paid bonuses to retain the very staff who lost $34 bln in derivatives trading.By paying them some $450 in bonuses AIG argued they had to keep staff from “being poached and needed them to unwind the positions”. So, I can go out lose squillions of dollars and very nearly take the entire banking system down with me then get rewarded?!….only in America.
And so is this
The Fed announced overnight they will appoint “agents” with the power to renegotiate “Joe the Plumber’s” mortgage to a level which he can live with. Now on pure economics this makes sense as it is crucial that Joe feels confident again, re-starts spending and thus stimulates the economy.But does this mean Joe can now say I want my mortgage rate cut in half and you banks have to write off all my debts? If it does then the gamblers, alcoholics, credit card junkies and consumer queens must surely start putting their hands up! Charles Darwin must be turning in his grave.
Domestic
Our markets rallied strongly firmer commodity prices, a better than expected NAB business survey(although it was very open to interpretation as is most economic data) and overseas banks shares rallying. Today we see CPI which will be ignored. It is expected down 0.4%, with JP Morgan going for up 0.2%…there always has to be one! As we saw yesterday’s high PPI data(some 1.0% higher than expected) the RBA will cut rates next week, period. …75 bp is a given with 100bp a 50/50 chance.
The Foresight
The next two weeks are critical for our markets. I really can’t see any new institutional money hitting the market until the banks start reporting. Just how much bad news is built in is debatable but I firmly believe if the banks can only slightly reduce their dividends, say by 10%, then we are in for a major rally. Again, it’s the unknown and stories/rumours that are circulating just need to be put to bed by actual figures. I believe the minimum will be a “relief rally.” It’s a bit like going out on a blind date and you hear your date is really ugly and doesn’t wash, so when she appears and is only below average and has only slightly greasy hair, you then get interested.
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Have a great day.
QUOTE OF THE DAY ” Never ask a Barber if you need a haircut”