The Dow was up another 29 points on Friday and closed above 10,500, which is bullish behavior. The Dow Transports and Utilities, along with the Russell 2000 and the Nasdaq 100 all made yearly highs. The S&P is trailing due to weakness in the financial sector. Full Article
Yesterday we wrote that we expect a benign pullback here. On Tuesday the Dow gave back 14 points. That qualifies as benign.
Earnings season is now upon us and we expect it to be positive. Companies have had 3-4 quarters to make emergency adjustments to their business models, reduce capital expenditures, refinance debt at lower rates, cull workers, roll back compensation, pressure suppliers, improve productivity, jettison marginal operations and refocus on higher margin opportunities. Full Article
In last month’s edition we addressed the issue of economic security in the Homeland and we will look into it further this month. The acute phase of the financial crisis is clearly over, but the long-term consequences are just starting to be grasped. In our view, they include the Sunset of the Dollar. This unspoken government policy is the only way to fight deflation.
The U.S. government’s $18 trillion underwriting commitment to Wall Street will weaken the dollar, supporting a long-term uptrend in energy, commodities, and gold. Our SSIA model portfolios are already 100% positioned to take advantage of this macroeconomic theme. Full Article
The war on terrorism is officially over, and you won’t hear the term ‘jihadist’ used by the Department of Homeland Security, but the war in Afghanistan has just begun and it is not going well. Lessons learned about the risks of asymmetrical warfare in Iraq have not yet been translated into improvements in the field. Full Article
It’s a small world and it’s changing. Now, when Asia sneezes, the U.S. market catches cold. The Chinese Red Share index in Shanghai dropped 13% over the last week, precipitating a domino effect that rippled through global bourses. The news that triggered the selling has to do with fears that 1) China’s banks are curtailing lending; 2) foreign investment in China remains weak; and 3) signs of industrial recovery are spotty. Probably $150 billion of bank loan cash found its way into the Chinese stock market this year, but new bank loans in July were one- quarter the level from June. Full Article
The market is baiting the bears and remains resilient despite being overbought. Financials and materials are particularly strong, while tech is correcting modestly. It is possible that these leading sectors can simply zig zag sideways for a while and then resume their advance later this month. Full Article
Despite an increase in selling pressure, with decliners leading advancing issues by 2-to-1, the S&P 500 managed to hold above the 1000 mark yesterday. We can thank the financials, which have been rallying in their own world. Full Article
The S&P 500 hit the 1000 level yesterday, as expected, but showed no signs of vertigo. Nevertheless, with index futures down this morning, the widespread enthusiasm for the attainment may prove to be the contrary indicator we have been anticipating. Full Article
The Economic Cycle Research Institute (ECRI) is an unbiased, independent forecasting service. According to their analysis, “the cyclical improvement in the economy is proceeding in a textbook sequence, from long leading indicators to short leading indicators to coincident indicators.” The analysts add, “there are now pronounced, pervasive and persistent upturns in a succession of leading indexes of economic revival.” Full Article
U.S. troops have now moved out of Iraqi cities and the Afghan ‘surge’ is underway. If the hoped for U.S. economic recovery does not begin in the sec-ond half of 2009, however, the strategy of countering jihadist movements primarily with mili-tary power may become untenable as a U.S. national policy, for economic reasons alone. Full Article
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