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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
October 12, 2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the dollar’s slide to new
lows continued to turn into gains for equity prices. In addition, Monday
brought the first hint of potential, tradition job-creating stimulus
mentioned outside the West Wing. It appeared that the desire for reelection
by the state-minded Democrats next November (and Obama in 2012) has started
to give way to policies of real job-creating initiated by the private sector
(since their solution has not worked). The initial trial baloon
was a tax credit for new hires by employers but was pooh-poohed by the Dems as “been there, done that”. Should
unemployment worsen over the next few months as predicted and health care
resolve itself, look for Congressional self-preservation to lead to more of a
Republican-minded solution here. There was mixed fundamental news to digest.
On the plus side, the service ISM expanded for the first time since
September, 2008 and weekly unemployment claims dropped significantly. On the
negative side, consumer credit continued to come in as deleveraging continues
(not a good thing for an expanding economy) and the dollar’s slow but
steady drop led to new highs for gold. Concerns about the consequences of a
potential acceleration of the dollar’s drop downward heightened. The
drumbeat for extending the home-buying tax credit started with some
suggesting that if $8,000 for first-time buyers is good, $15,000 for any
buyer would be great. The best
guess here is a six-month extension of the current policy as there is some
pushback against these types of policies (extending “clunkers”
was shot down). In the “how much is that doggie in the window?”
department, Washington’s business skills were on display this week as
they “negotiated” a sale of Citigroup’s Phibro
unit to Occidental Petroleum for $250 million (average annual earnings for
the last five years was $371 million [5 times earnings comes in near $2
billion!!!]). It seems that the inability of the new Federal pay czar to
reconcile a contract calling for $100 million of compensation with his
mandate for punishing big paydays led to the fire sale. I hope they do better
selling the 1/3 share of Citigroup we all own. Late in the week, Fed chairman
Bernanke told us that he will take his foot off the monetary-stimulus pedal
when the time is right. This spooked the bond market, but equity punters were
not fooled. This Depression-era scholar will err on the side of too much as
he respects the consequences (1937) of hitting the brakes too hard, too
early. Speaking of bond markets, the Latvian government attempted to sell
some bonds last week and nobody showed up. There were unconfirmed reports of
Latvia declaring war on the U.S., a la “The Mouse that Roared”,
to resolve their problems. Conclusion: This continues to be a market driven
by liquidity and performance-chasing. I’ll continue to press up stops
as prices rise and will attempt to take advantage of an anticipated choppy
market.
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