Courtesy of John Nyaradi
This week was certainly an emotional roller coaster ride. Sunday brought us the daring raid on Osama Bin Laden’s compound in Pakistan and then throughout the week, commodity investors certainly suffered motion sickness as oil weathered its biggest one week drop in history and commodities across the board were crushed.
At Wall Street Sector Selector, we had a pleasant ride as our 2X inverse position in the High Conviction Portfolio experienced an unrealized gain of 31%, the Option master portfolio garnered unrealized gains of 55% and 22% in two put options and our defensive positions in the Standard Portfolio advanced, as well.
On My Radar
Volatility was the name of the game and we can expect more ahead as fear now seems to have reentered the marketplace. The “buy the dip” crowd has to feel like the villain in the old “Dirty Harry” movie, “Do you feel lucky? Well, do ya?”
The View From 35,000 Feet
The big news, of course, was the attack on Osama Bin Laden’s compound in Pakistan, but that was quickly swept away in the 24 hour news cycle by the collapse in the commodities market, particularly oil and silver.
The Euro declined sharply on dovish comments from the European Central Bank and Greece bubbled to the surface with a Friday night crisis summit among European financial leaders over what to do with sick stepchild, Greece.
Everyone seems to agree that a new plan is needed and rumors swirled that Greece could leave the European Union. The script is the same here as it has been for months.
Rumors, followed by denials, followed by the rumors proving true.
The most likely outcome for now is a restructuring of Greece debt with possibly some “haircuts,” but this is such a big monster that I don’t see it going away in the long run and that a default of some form is nearly inevitable.
At home, the S&P 500 had its worst week since March, Friday was the one year anniversary of the infamous “flash crash,” and Thursday’s new claims for unemployment took another unexpected jump.
Offsetting Thursday’s bad report, Friday’s Non Farm Payrolls showed a welcome rise in employment in the headline number, but that was offset by the household report showing a decline of 190,000 and the labor force participation rate at a quarter century low of 64%.
Weekly Developments:
Positive:
? Factory Orders
? Non Farm Payrolls
Negative:
? ISM
? Initial jobless claims rise
What This All Means To You
What this all means to us is continued weakness in the overall economy, negative seasonality and an epic collapse in commodities, all adding up to a treacherous May ahead……
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