Stock Market Continues to Grind Higher, Somehow
Courtesy of Todd Harrison at Minyanville
So lemme get this straight…
There’s discord in Europe regarding how to handle Greece — which has €20 billion coming due in April and May — and it won’t even make this week’s EU Summit agenda.
Sovereign spreads, while narrowing last night, have jacked wider in recent weeks — which is negative — in response to the non-response.
The health care legislation — whether you agree with it or not — will cost hundreds of billions of dollars, adding to the already yawning deficits.
The tape is over-extended no matter how you slice it and complacency reigns; volatility measures are a hat size, seemingly on their way to a ring size.
State budgets are cracking, unemployment is rampant, social mood is deteriorating, commercial real estate looms and geopolitical tensions abound.
And the stock market continues to grind higher.
My first thought was to channel that scene in Uncle Buck when Louis Rukeyser says, "Take that Karl Marx," but my pop culture references are often lost on alotta folks (not everyone idolizes John Hughes).
My second thought was, "This is either the strongest market I’ve ever seen or a precursor to something entirely sinister."
My third thought was, "Respect but don’t defer” to the price action."
My fourth thought was gonna reference the banks, both the relative lethargy today and the bovine backstop that is BKX 50.
My fifth thought? I forget. Look at me, I’m A.D.D., so I’ll just creep into some Random Thoughts:
- China, in response to Google (GOOG), is talking tough a trade wars. When it comes to protectionism in the context of a globalization, the only winning move is not to play.
- If Jerry Maguire ran a hedge fund, his mission statement might look like this.
- "Our calculation (of unfunded pension liabilities) is that it’s more like $3 trillion. And the kicker is that the taxpayer is on the hook."
- Quarter-end performance anxiety is good and thick; my sense remains that the tape turns before the last trading day of the month under S&P 1200. From there, Q2 flows will shape the tape into April.
- USA Today is reporting that Syracuse center Arinze Onuaku is "very unlikely" to practice and the team is "very cautious" about bringing him back. They "remain hopeful" he can return to the court before the season ends, as do I.
- Could we continue to melt up ala 1999? I suppose; the question is whether we’re currently at JDSU $50 or JDSU $500. If I knew the way, I would take you home.
- Petty. Summer. Tour. Brother. Birthday. Noice.
- Once upon a time, you could set your watch with the Google-Goldman (GS) super-tell duopoly. As both are pointing due south today, it’s worthy of a mention.
- Have you clicked on the (non-market but very worthwhile) perspective directive yet?
- Riddle me this: What would be the market reaction if Timmy Geithner was replaced?
- I would again note the commodity volatility, which tends to serve as a precursor to equity volatility. That, as discussed yesterday, seems to be the best bet on the board.
- I had a case of the Monday’s yesterday; it was cold and dreary, my content felt forced and I was thinking about all the time spent in front of my screens; 20 years that can never be recouped. Strange as it may sound, I awoke this morning truly grateful for what I have rather than what I mighta missed. We often say gratitude is latitude; I just wanted to let you know it actually works.
Minyan Mailbag: Move Along Folks — Nothing to See Here!
Toddo,
The whole issue of unfunded liabilities is a big bruhaha over nothing. We will eventually change the social security and Medicare age and the issue will go away . We know it and the politicians know it–now its only a matter of getting to the crisis that will allow "the fix" to happen. Just look at the financial crisis of 2008–under the right circumstances, congress can pass whatever is necessary to avoid the next crisis.
Minyan S.
That, my friend, may be the greatest trick the devil ever pulled — convincing the world he didn’t exist. Our society is now conditioned to expect the government to bail us out; this is an evolution of a discussion we had in December 2007, entitled Moral Hazard: The Great Debate, which was written in response to one of Bennet’s better columns, Buyouts, Bifurcation, Bailouts and Bankruptcy.
I don’t disagree that there will be state bailouts — we touched on this in the 2010 Ten Themes — but we would be wise to remember the net effect of these "fixes" are cumulative still. Will it "matter" before the avalanche of corporate debt starts to come due in 2012? Most likely; the market is a discounting mechanism. The question we must all wrestle with is, "from where?"
Be that as it may (or may not) the big picture is a series of little pictures and each step forward should be sure and steady. Watch those financials (through the lens of BKX 50), remember to breath and relax your grip on the handlebars; it’ll make for a smoother journey.
May peace be with you.
R.P.
