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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
December 21,
2009
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the battle over S&P 1,100
continued with some unanticipated but interesting news items. Bulls could
point to great earnings reports from Research In Motion (RIMM), Oracle (ORCL)
and Nike (NKE) and the ability of Mr. Market to absorb $51 billion of new
common stock offerings by Citigroup (C), Bank of America (BAC) and Wells
Fargo (WFC) with only a slight hiccup in the averages. The Fed continued to
be the bull’s best friend as notes from their meeting proclaimed
“full speed ahead” for continued liquidity injections. Bears
claimed that the debt crisis was spreading as Austria was added to the list of
debt-challenged entities along with New York State whose governor declared
that his state was out of cash and would pro-rate payment of bills to
vendors. For those of you “hiding” in munis,
it might be worth a look at your portfolio as even Warren Buffet’s
Berkshire Hathaway (BRK) has begged off insuring muni
bonds coming to the conclusion that should it come down to a choice between
the voters or the investors, the investor will draw the short straw every
time. The dollar strengthened last week, and some would point to the uptick
in long-term interest rates after inflation reports showed an increase,
attracting higher-interest earning dollars. Maybe so, but the view here is
that the debt problems of Europe (Greece, Spain, now Austria) weakened the
Euro and the dollar’s rally is more of the relative strength variety as
we are still taking on a record amount of debt and at accelerating pace with possibly
more to come (health care). The free market made a brief appearance as GM,
without government subsidies to aid it, decided to close down its Saab
division. This destruction of supply is part of the healthy (I understand,
not if you’re a Saab employee) cycle that normalizes markets and will allow
for non-government induced growth in this sector. More of this type of
decision making in the banking sector last fall would have left us with a
much stronger banking system today, with balance sheets of newly formed banks
unencumbered by bad loans. Current decision making at banks must conclude
that small-business lending will only hurt the capital ratios that they are
measured by so Treasuries are bought in lieu of these new loans. Until the
current regime of banks “fix” their balance sheets (lotsa time), growth in jobs and the economy will be restrained.
There were signs of sanity in the
health care debate as both former Democratic DNC chair Howard Dean and
left-leaning commentator Keith Olbermann withdrew
their support of the Senate bill due to the changes required to get the 60
votes to pass “anything”. It seems that more folks are concluding that
we’ve crossed the line between good legislation and politics as Dems fear no health care bill is 1994 redux
(Republican sweep of both houses). My read of the tea leaves is that the
electorate has turned on this effort and the best thing the Dems could do for their survival is to quote SNL’s
Emily Litella and say “Never mind”.
Game plan: Government liquidity continues as the main driver of this market.
Winners will be allowed to run with stops trailing right behind.
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