U.S. Economy
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Oil Prices On a Tear and Headed Higher
Oil prices are at their highest level in more than a year and a half and are likely to head even higher as the global economy bounces back from recession.
Benchmark crude for May delivery rose $1.75 to settle at $86.62 a barrel on the New York Mercantile Exchange (NYMEX) Monday. That followed gains of $1.11 a barrel on Thursday and $1.39 a barrel last Wednesday.
In all, prices are up over 5% since last week and over 70% since April 2009. And right now oil is trading at its highest level since Oct. 8, 2008, when crude settled at $88.95.
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How to Stop Greedy Banks From Killing U.S. Capitalism
A white paper on bank reform delivered to Congress and regulators last week by the Association of Mortgage Investors - the powerful lobbying group that represents huge institutional investors - warns that if the securitization market isn't radically reformed "it will be difficult if not impossible for capital market investors to return to funding economic activity."
What the report doesn't say is that banks - standing in the way of bank reform - don't want a simplified, standardized, and transparent securitization market, because that would revitalize free-market disciplines and undermine the control they exercise over the credit markets.
Right now, the stock market is discounting news about tight credit conditions. But analysts worry about an increasing disconnect between rallying stock prices and the hoped-for rebounds in consumer-driven growth and the U.S. housing market - both of which are struggling with a lack of access to credit. This disconnect is fostering fears of a stock-market correction.
Investors need to understand exactly what's at stake here. And they need to know how to protect themselves and - even more important - how to profit from the volatile-but-powerful capital waves that will result from this fundamental battle over our future.
To understand the escalating risk – and strategies needed to protect the free markets – please read on... -
The Bull Market is Intact and On the Move
Bears have been scratching for a vulnerable spot in the bulls' narrative in the past few weeks, but have been coming up empty, as they logged a blistering March.
Sellers tried to sink the market back in February as the long-simmering Greek debt fiasco roared into the headlines, but that didn't work out so hot for them. And early last week they tried again by both highlighting new reports of discord between the European Monetary Union authorities and Greece, and by flogging the news of a Fitch Ratings Inc. downgrade of Portuguese debt.
At some point, portfolio managers outside of Europe may decide that they care about these matters but for now there has been what you might call a Gallic shrug. Tant pis, as the French say.
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Fastest Recovery Ever Could Push Corporate Profits to Record Highs in 2010
Sometimes we get a little carried away talking about esoteric subjects like bulls, bears, supply, demand, moving averages and the like. But if you just want to focus on something real, then look at corporate profits. When they're rising from a low, that's good; when they're flat-lining or declining, that's bad. Pretty simple.
Much of the rally of the past year has been in anticipation of a profit recovery. And now that recovery is actually coming in a bit better than bulls expected, which is why they are able to elbow bears so effectively. ISI Group now figures that corporate profits will clock in at +38.8% for the first quarter (year over year) of 2010, then +42.4% in the second quarter, +36.8% in the third quarter and then +30% in the fourth quarter (against harder comparisons). That would put profits in 2010 up a record 36.1% overall.
To read more about how corporate earnings will shape the market click here.
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U.S. China Currency Dispute Heating Up
The heated debate between China and the United States over the value of its currency intensified yesterday (Thursday) when a senior Chinese trade official warned that further appreciation of the yuan could put many of its exporters out of business - something China can't afford.
Those remarks came shortly after a key International Monetary Fund (IMF) official flatly stated that the currency is severely undervalued.
China's Vice Commerce Minister Zhong Shan told The Wall Street Journal in an exclusive interview that the profit margins on many Chinese export goods were less than 2% and any further increase in the currency's value would endanger more exporters' survival.
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No Changes to Fed Policy
The U.S. Federal Reserve today (Tuesday) kept its benchmark interest rate at a record low level Tuesday and made no changes to the key "extended period" policy pledge.
In its description of the economy, the Fed noted that "household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit." Also, the housing market has yet to turn a significant corner and the commercial real estate market remains in dire straits.
"Investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls," the Fed statement said.
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Bulls Overcome Market Tug of War to Send Stocks off to Strong March Start
Stocks rose briskly last week, resulting in a big week for the major market indexes. Weekly and monthly index charts improved, and such major U.S. stocks asThe Boeing Co.(NYSE: BA),Hewlett PackardCo. (NYSE: HPQ),American ExpressCo. (NYSE: AXP),Google Inc.(NASDAQ: GOOG),AppleInc. (AAPL), Goldman SachsGroup Inc. (NYSE: GS) and General Electric Co. (NYSE: GE) emerged from flat-lining or faltering price patterns on decent, if not outstanding, volume.
Just two weeks ago, every one of the afore-mentioned stocks looked terrible, exhibiting intense apathy amid slow, grinding declines. Then the skies parted, and suddenly the sun is shining on these shares once again.
That's why U.S. stocks are off to a strong March start - already up 4.1% from the end of February. And don't forget, a year ago at about this time (March 9, 2009), the market reached its nadir: The Standard & Poor's 500 Indexis up 69.98% since that time.
Here's why the shift seems so abrupt. The markets are now in a tug of war between two forces:
- On the plus side are good fourth-quarter earnings reports related to an improving economy.
- On the negative side - as a friend at a major macro hedge fund described it last week - are "frigid winds blowing across the credit icebergs."
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What's In Store for U.S. Stocks in Light of Greece's Tragedy?
The recent month of February was quite interesting for U.S. stocks, because while the Dow Jones Industrial Average rose 2.6%, it didn't exactly take a direct route to those gains: There were eight separate triple-digit moves in the Dow, both up and down.
At the root of that volatility were political and economic developments that challenged the rationale for the huge rally out of the March 2009 low. Bulls were basically rethinking their beliefs that the home-price plunge had abated, employment was on the verge of a big turnaround, governments could cut taxes and boost spending without end, and that interest rates would remain at zero for years.
I had prepared subscribers for much of this turmoil. Back in early November, I highlighted signs of trouble in the market for government debt well before the troubles in Dubai and Greece came to a head. In December, we started a dialogue on what to expect as the U.S. Federal Reserve withdrew liquidity from the economy and lifted interest rates. The upshot was a series of letters detailing why you should expect the first nine months of the year to trade flattish with a lot of volatility.
