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Goldata Financial
Investing with the accent on rísk
STOCK MARKET COMMENTARY
January 25, 2010
From Elliot
Goldberg, Registered Investment Advisor, Goldata
Financial
Last week, the continued news from China that
they will remove liquidity (and hence slow world-wide demand) finally made
its presence felt in our markets. While Tuesday’s rally was prompted by
polling that Scott Brown, a Republican, would win Ted Kennedy’s seat
and remove the 60th vote required by the Dems
for the ultimate say on health care, Wednesday morning’s announcement
from China about more tightening held much more sway. This, along with
Thursday’s jobs report that
confirmed stagnant job creation, sent the Administration into panic mode as they formed a circular
firing squad, looking for others to blame. Treasury Secretary Geithner was
benched and Paul Volcker (of Reagan lore) put on the Brett Favre jersey and
took his place. President Obama continued to sharpen the blade on the
guillotine in the town square where each banker, one by one, should be
justifiably punished for our woes to the delight of the populist masses. Even
Fed head Bernanke was persona non-grata as he became the scapegoat of
Democratic Senators facing re-election this fall by their threat to nix his
reappointment. Barney Frank took aim at some of his favorite government
programs, Fannie Mae and Freddie Mac, questioning their continued relevance
in their current form. Even the Brits scared us with an increase in their
terror warning levels on Friday. Our Administration has still not gotten the
message (even after Scott Brown’s victory) --- the people want the
Administration to focus on job creation.
All else – increased demand for business’ products, tax
revenues, even health care --- flow from it. This continued denial and ramp-up of
uncertainty did not help and, despite continued good earnings reports all
week, the averages finished on their lows. Managed accounts were active as
stops were tripped and losses were mitigated. Friday’s closing bell
left ample cash positions which should comfort portfolio owners as
Monday’s market has the increased probability of continued or accelerated
ugliness. Of note in government news was Japan’s decision, after 4
rescue attempts in the last 10 years, to let Japan Airlines declare
bankruptcy. The lesson for us should be that time and money was wasted trying
to fend off the inevitable.
Keeping entities alive with government funds such as Citigroup, AIG,
Fannie Mae and Freddie Mac only add to our losses and slow the healing
process. Game plan: The tide is potentially rolling out and as Warren Buffet
says “Now we’ll find out who’s wearing a bathing
suit.” Last week’s sell off may be just another bump in the
road … but what if it’s not? In rising markets, everyone’s
a genius. Risk must be managed, especially if the tide continues to roll out.
I’m on it like white on rice.
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