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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
September 14,
2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the previous week’s mystery
about gold was cleared up late Tuesday as Barrick
Gold (ABX) issued a secondary offering for $4+ billion, proceeds of which
will be used to buy back hedges (previous sales used to lock in price). While
ABX’s stock price retreated as arbitrageurs locked in gains from a
market price of up to $42 (sell) with an offering price of under $37 (buy),
gold finished the week north of the $1,000 mark, with seemingly little to
impede further progress. The U.S. dollar’s weakness contributed to
gold’s price action and correlated positively with action in stocks all
week. Fundamentally, the news was “less bad”. Federal Express
(FDX) upped future earnings expectations which were taken positively by this
“half-full” market. Reality is that the bar for FDX earnings
estimates were reduced awhile back, so net-net, nothing much. Jobless claims
went down a smidge, but are still at a hefty 550,000. A warning about further
home price deterioration came from Meredith Whitney, the latest superstar
(now independent) banking analyst, who espoused on CNBC that possibly another
25% down is in the cards. Let’s hope she is wrong as the banking sector
is still tied to the price of real estate that acts as collateral for their
loans. In Washington, center stage was President Obama’s speech on
health care Wednesday night. While brilliant as always in style and delivery,
a few thoughts on the content presented. The first was the analogy that
health insurance should be like car insurance, i.e. everybody should have it.
I was under the impression that car insurance was not a right, but a privilege
and, assuming one does not own a car, one does not need it. The better
analogy might have been that one buys their car insurance personally, one buys
their home insurance personally, why doesn’t one
buy health insurance personally? As long as consumers of health services are
not the payers, costs will always be a second thought. Want proof? The
leading purchaser of Viagra until recently was the GM health care fund, which
happened to have trivial co-pays. With a requirement of carrying health insurance,
the question of what happens if you don’t pay for it is a slippery
slope? Fines? (already overcrowded) Jail? Funding for the $900 billion
program was also suspect as the primary source ($600 billion) was to come
from reducing fraud and abuse in Medicare (wish I had a dollar for every time
I’ve heard that phrase) along with reduced reimbursements (is there a
doctor left that will work for $1.47 an office visit?). Conclusion: The
market is handicapping little change from health care and is focused on the
weak dollar, which has helped gold and large, internationally-based companies
who earn a substantial amount of profit in non-dollars (when converted in a
weak dollar environment, more dollars/profit). The decline in the dollar has,
to date, been orderly, as has the market’s ascent. Any changes to this
theme will have negative consequences for stock prices in the short term.
Pushing up stops on spikes will continue to allow managed accounts to enjoy
the upside, but protect them on the downside once the music stops.
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