The markets rebounded Tuesday in the face of some serious negative economic news. The Conference Board’s Consumer Expectations Index fell to 47.9, the lowest reading in over 35 years and the second lowest number in the history of the index. The index is now below the levels of the last four recessions.
Imagine yourself taking one of your family’s most valuable heirlooms into a professional appraiser and having them offer you an expert opinion of, say, “X.”
Ignore the endless bottom calling in the press that is buzzing around with some financial pundits pointing to the Bear Stearns blow-up as a likely capitulation in the markets. One thing that should be abundantly clear is that Wall St. tends to err on the side of optimism.
The banking sector has taken an absolute beating over the last year as residential real estate losses surge and the penalty of lax lending standards comes home to roost. The sheer vertical lift off in delinquency rates and losses is astounding. Just take a look at the following charts.
When bond maven Bill Gross openly writes about it – as he did in his January Investment Outlook - it’s perhaps inappropriate to use the word “secret”.
If you feed-at-the-trough of the mainstream financial outlets, seldom does a day go by that you are not confronted with conjecture about whether the Federal Reserve will raise or lower rates.
From a Dow theory perspective, the primary bearish trend confirmation that occurred the on November 21, 2007 remains intact. According to Dow theory, it’s the close that counts and up until March 7, 2008, the averages have both been operating within the boundaries of the previous two secondary high and low points.
One exercise that Brian Pretti from ContraryInvestor.com employs that is both insightful and fun in his writings is to ask readers if they would buy or sell a chart with the description removed; two such charts are provided below.
Barack Obama's campaign is running on the slogan, "Change we can believe in," which aptly describes the likely future state of the U.S. consumer. This is not an article on how the U.S. consumer is dead, but looks at the likely decline of consumption's importance in GDP using Japan as a historical guide with the focus centered on demographics and interest rates.
Since the rally out of the January lows began, I have heard it said on numerous occasions that the strength of the Transports somehow has bullish undertones and implies that the decline is over. The overall spirit of the comments I have been hearing has to do with the fact that the Transports have recovered more than the Industrials.