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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
April 13, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the holiday-shortened week was
spent in negative territory, Thursday excepted, but the bullish tape action continued.
The dips were bought early in the week, mitigating losses each day, starting
with a prominent analyst downgrading the financials on Monday. This lead to a
weak open, but buying came in late curtailing damage. Tuesday saw a weak TIPS
(Treasury Inflation Protection Security) auction which, again, created a dip which
was quickly bought. Wednesday’s positive action included a take back of
ground lost due to a release of Fed notes that was fundamentally downbeat. Other
bullish action included Mr. Market’s reaction to actual earnings
reports as Alcoa missed (when was the last time they made?) and the stock
hardly budged. Then Bed Bath and Beyond (BBBY) beat and the stock took off.
Action like this confirms what has been discussed here for the last month or
so --- bad earnings and fundamentals are already baked into this market and
only surprises, mostly positive, will move stocks. Wells Fargo’s (WFC)
earnings surprise Thursday morning sent the shorts covering in a buying panic
(do we need a downtick rule?) with the financials dragging the averages north
of the Mason-Dixon line (up for the week). Continued strength in financials
is unlikely, though, as these companies will probably use strength in their
stock price to float secondaries to raise private capital,
priced at a discount, which will dilute other shareholder’s equity. The
success of raising private capital through a secondary, more than any other
government program (TARP, TALF, PPIP, the NFL on CBS), is great news long
term as its success means trust and greed are returning to our financial system
and the government’s role can be diminished over time. Other bullish
news was a report of two takeovers – Centex (CTX) and Textron (TXT, not
yet official). Again, takeover action implies a private buyer’s
acceptance of more risk for more reward. Technically, things continue to look
good as SPY80 now looks like the new Maginot Line. Volatility came in a bit
last week, but is still at historically elevated levels. As such, short of a
sharp correction, I am reluctant to expand stops off a tight base. Friends
from earlier in the year, gold and health care, continued down and, again,
hurt relative performance. Conclusion:
The long-term picture now is “half-full” and will provide
confidence to continue to step in when we do get an over-due pullback. The
news will continue to be awful but it appears Mr. Market smells a fundamental
turnaround down the road. Who are we to argue?
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