THOUGHT’S ON FRIDAY’S DATA
Nothing mind blowing to report this morning. In fact, more of the same – weak consumers, signs of deflation and “better than expected” earnings. Consumer sentiment came in essentially flat this morning at 65.7. This was a slight drop from the last reading, but nothing significant.
The more important news this morning is the personal income and outlays. Personal incomes were flat for the month and fell 2.4% year over year. Consumer spending was up 0.2% for the month and 1.1% year over year. It’s nice to see that people are making less and spending more. All joking aside, the boost in spending was due almost entirely to cash for clunkers which we all know is about the most fiscally irresponsible program this government has ever put together. As I mentioned a few weeks ago, this program has the potential to be highly destructive. Taking out a loan from China to finance a program that encourages consumers to take out a loan to purchase a depreciating asset they likely don’t need….The effect on retail sales should be large, but the government just wants to see the near-term boost in GDP.
The market is rising on good earnings news, however (at least it was when I started writing). Intel raised their guidance, Dell posted horrible (though “better than expected”) numbers and Tiffany’s and J. Crew both posted terrible, but “better than expected” quarters. The analysts are still playing catch-up here and that alone is enough to give the market a reason to jump.
As has been stated many times, the market can remain irrational longer than a person can remain solvent. That is unless you are able to see through all the silly rationalizations and government statistics and stand aside. As for me, I am slowly and methodically establishing a short position through the use of inverse leveraged ETFs.
Everyone is saying that if somebody is making money on onse side of a trade, then someone else must be losing money on the other side. Zero sum game right? Well, guess what, with global govt providing liquidity and pumping billions and even trillions of dollar into the system…its obvious that a lot of people will make money owning risky assets. This is unprecedented and is on a larger scale than what was done during other deep recessions so until all this stimulus money is soaked up, there is still money to be made going long on risky assets.
And you know who is on the other side of these trades?? our future generations are the losers. They will be taxed to their chins, along with an inflationary economic environment. I dont understand why the younger generation dont speak up against this. I would not want to remain in the US if I was under 20 right now.
If there is more stimulus on the way, then we just going to continue to blow this bubble even further before an explosion is inevitable a few years down the road.
The stock market is not a zero sum game. Contrary to popular belief….
I agree it’s not…its not zero sum game at any one moment but if the world ended tomorrow and everything had to settle, I think it’s pretty close. Like I said, the winners today are taking out gains at the expense of the future, which has been cumulating losses all these years.
There is the caveat. On a long enough time frame it is absolutely zero sum. But for investing purposes and our finite existence as investors it is not zero sum.
Chasviv said:
As has been stated many times, the market can remain irrational longer than a person can remain solvent. That is unless you are able to see through all the silly rationalizations and government statistics and stand aside. As for me, I am slowly and methodically establishing a short position through the use of inverse leveraged ETFs.
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You should NEVER ‘establish’ short positions in leveraged etfs. This is one of the stupidest retail moves ever. Those leveraged etfs are meant for day traders and gamblers. Not real, actual trading establishments.
James,
What would you recommend otherwise?
Are personal incomes really “flat” for the month and down only 2.4% year over year?
According to the US Treasury incomes are down much more:
http://www.ritholtz.com/blog/2009/08/federal-income-withholding-taxes/