|
Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
August 17, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the world’s economy took another small step forward toward
healing itself. France and Germany reported small increases in their GDP for
Q2, defining an end to their recession and that may explain, in part, the
June trade report which shows our exports starting to rebound. The markets were
still jittery exemplified by its reaction to initial news that State Street
(STT) needed more reserves (initially thought to cover real estate losses)
than previously thought. When this tidbit was released, traders shot first
and sold, asking questions later but within the hour, a clarification that
the reserves needed were for pending lawsuits steadied the market. Toll
Brothers (TOL) announced better year over year sales for the first time in
four years, albeit from depressed levels. Not much should be taken from this
stat as Uncle Sam is goosing sales with an $8,000 tax credit (set to expire
shortly) along with California’s $10,000. So follow the math: A
$200,000 home requires only 3.5% down (through another of Uncle’s program)
or $7,000. The first-time buyer gets an $8,000 tax credit, netting out to a
down payment of minus $1,000. Didn’t we swear off these nothing down
mortgages? Now we’re giving them cash to buy! An
important, but little noticed, item was word that the toxic assets on bank
balance sheets were starting to slowly sell (to private equity). With banks
raking in profits on wide Fed-generated spreads, they are slowly accepting
their losses on these assets against profits generated, cleaning up their
balance sheets in the process. Reverting back to the overall market, it
continued to show a strong bid below the market as each of the week’s
selloffs was tempered by buying. This thesis was successfully tested Friday
as consumer confidence data disappointed and the averages suffered their
worst decline of the week until the end of day when losses were cut in half
in the final hours. Two items from Washington to report: First was that
Congress decided that it didn’t need the 8 new planes discussed here
last week. It seems four will do. Second- the “vast, right-wing
conspiracy” has spread to the Democrats who announced their intention
of sending their goons to town-halls to disrupt the disrupters in the health
care debate. Perhaps a different approach to health care should be considered.
While channel-surfing this week, I landed on C-SPAN with Newt Gingrich
announcing the following stat: Based on current demographics, we will spend
$20 trillion (with a T) on dealing with Alzheimer’s in the next 40
years. He suggested floating Alzheimer’s bonds that citizens could buy
which would accelerate research and (hopefully) speed a cure. Once found, the
bonds would be paid off with the savings that were realized. It seems to me
that innovative ideas like this that can rid us of this disease and others,
rather than just allocate dollars to treat it (or not) should be our goal. I
hear nothing from the Administration along these lines. Conclusion: The
market is buoyed by buyers on the downside and wants to go higher. I’ll
continue to protect the downside with stops should the buyers disperse and
ride the winners higher.
|