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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
June 22, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the dollar continued to be the
focal point in the market. Monday and Tuesday brought the bulk of the
week’s losses with two Russian ministers playing “good cop, bad
cop”, one coming out Monday saying that they back the dollar and another,
Tuesday, wanting an international currency to buy in lieu of the dollar. Obama
extended his daily TV appearance streak (watch out Cal Ripken), with Wednesday’s
being most significant. At that time, he released the framework of what will
be new oversight for the financial industry. In that Kodak moment, he
suggested more agencies with more “czars” watching to make sure
that no entity becomes too big to fail (see Fannie Mae and Freddie Mac for
success rates on this strategy). By Friday, after the departmental infighting
was in full bloom, we were no closer to a solution. The healthcare debate
continued with all pontificators poking holes from the peanut gallery,
creating more opaqueness as to what the ultimate proposal will be and a rally
in the HMO stocks Friday anticipated future gridlock and failure. And that
was the problem last week --- the Administration introduced unknowns into the
market where before there were knowns and one of
the stock market’s Ten Commandments is that
the market does not like uncertainty. This gave Mr. Market the excuse to
implement the start of the pullback we have been looking for. Technically,
the S&P 500 stayed above its 200-day moving average, but only due to its
sloping down and to the right on the chart which has removed 3% from whence
it crossed over a few weeks back. The longer-term chart looks intact even
with a potential pullback of 10-15%, which would not be unexpected after the
gains seen off the March lows. Hedges will continue to be added to managed portfolios to mitigate long exposure during this
potential correction phase. This week’s chuckle came in two parts. The
first reported by the London Telegraph that Germans will soon be able to buy
gold from vending machines. Memories of the Weimar Republic live and
let’s hope we pay a little attention to those who have experienced hyper-inflation
and are more sensitive to it than we. The second from the IRS that said
“never mind” to the proposal mentioned last week to tax
personally a corporate-issued cell phone. One last comment on a piece of the
proposal for financial oversight mentioned above. This one deals with the
originator of securitized loans required to keep a piece of it, with the
thought that having some “skin in the game” will prevent them
from issuing a security that they know is not worth what they are asking.
Besides being currently illegal, this implies the buyer is not sophisticated
enough (don’t they hire MBAs?) to figure out the value of what is being
bought. At last look, there were no guns pointed at anybody’s head to
buy these securities and one would hope that if they thought it inflated,
they would pass. In any event,
the seller would alleviate his exposure with a hedge, making the argument
moot. Conclusion: Choppy trading
looks to be the theme over the near term and moving stops up on spikes will
continue. A move higher after this consolidation period is currently most
likely.
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