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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
September 21,
2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the music played on while the storm
clouds continued to gather over Wall Street. We woke up Monday to word that
our government was slapping tariffs on tires we import from China, leading
the Chinese to threaten retaliation. This drove the futures down as bears
dusted off copies of the Smoot-Hawley Tariff bill of 1930, which was credited
with turning the recession of 1930 into the Great Depression, and thought
that, alas, their time had arrived. Cooler heads prevailed as market
participants quickly figured out that this was a political bone thrown to the
unions to get their support for the health care bill (needed because their
health care benefits might be threatened or taxed) and not a change in
policy. By the close, the averages eked out a gain. And so it went all week,
with any selling being bought by the retail customer whose trading volume on
discount brokers, it was reported, had increase approximately 15% over the
last month. The dollar continued to weaken, gold hit new highs and this
continued to be an additional driving force for higher prices. Capital raises
and restructurings by the likes of Genworth (GNW)
and American Airlines (AMR), previously left for dead, were impressive and
even Citigroup (C) threatened to raise additional capital and start
monetizing our 34% stake. By Thursday, the first hint of clouds appeared as
gold sold off and corporate credit spreads started to widen, but the market
continued to rise. Friday brought much of the same. Washington took a victory
lap this week as it celebrated the demise of Lehman Brothers a year ago.
There were reports of a few broken arms as our leaders attempted to pat
themselves on the back for saving us from the financial disaster their
policies help create. It’s amazing what a few trillion dollars of
liquidity will accomplish! But we still have institutions that are too big to
fail, housing policies that encourage small equity down-payments, and
government policies that discourage job creation. Little noticed was the
government’s decision not to extend its guarantee of money-market funds
as of September 18. With FDIC insurance at banks still guaranteed up to
$250,000, it will be interesting to watch the flow of funds away from
money-market funds which fund commercial paper borrowing by corporations
(their guarantees removed a few weeks ago). Conclusion: This continues to be
a positive momentum market, but each day appears to bring more divergences
that normally signal a reversal. I’ve seen too many of these momentum
markets to call a top and I also know that it provides great opportunity for
gains before the turn. I’ll continue to bump up stops as we proceed
higher as it still remains the best option for participation and protection. Just
keep the umbrella handy.
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