All the good news now priced into global stock markets?
Posted on 17 March 2010 with no comments from readers
Wall Street breathed a sigh of relief yesterday as the Fed confirmed that ultra-low interest rates would continue for ‘an extended period’, generally thought to be over six months, and rumors of a rate rise once again proved to be greatly exaggerated.
Some kind of a relief rally might be anticipated over the next few days. But there is also a contrarian view that says all the good news is now priced into the market.
Chart view
Certainly the chart from last March shows a picture of a strong initial recovery, a flatter upturn later in the year and then a dome pattern. Breakouts might now indicate another leg up but the deteriorating quality of news suggests this may not follow.
The Chinese monthly purchasing managers’ index showed its smallest expansion in manufacturing activity in a year. Meanwhile, a hike in inflation has put Chinese savers into negative real interest rates. An inflection point seems close in the Chinese economy with a scaling back of last year’s colossal stimulus package.
Then again the European Union lifeline for Greece is just the first in a long queue, with Spain a much larger problem and other indebted nations also in need of a bailout. Business is not good in Europe. Germany just published revised figures showing a heart-stopping 17.9 per cent fall in exports in 2009, with China taking over its position as the world’s biggest exporter.
Czech retail sales declined the most in four months in February. Spanish home prices fell for the ninth quarter in a row through December. Japan is caught in a debt trap. The UK and USA are facing possible loss of their triple-A credit ratings. US housing and auto sales are way down.
V-shaped recovery?
None of this supports the V-shaped recovery thesis now priced into global stock markets. The world economy has fallen into a trough and shows very little sign of being able to dig itself out anytime soon.
Where is the magic catalyst to make it happen? Interest rates can hardly go any lower. Government spending causes more debt and is ultimately a burden on an economy, draining money from far more productive private enterprise.
No a further shake out of asset prices to reflect the reality of a world of falling profits over a number of years, and a series of further economic shocks is inevitable. Try to present the reverse argument and you really struggle because there is no credible counter view.
no Comments posted by readers:
Stock shares continue to climb like there is a 50% clearance sale on all stock shares. Everything that is sold on the DOW,Nasdaq and S&P500 gets bought right back up by the invisible hand. Market is freakin pathetic. Just looking at it makes you sick. I have not seen anything this rigged in quite some time now.
The Federal Reserve is determined to push up the stock market. The market will continue to rise until they are forced to raise interest rates. Don’t ask me what will cause that to happen. I wouldn’t expect any rate increases until just before the traditional year-end Santa Claus rally, at the earliest. An ‘extended period’ might be a year, or two! Watch the unemployment rate. Inflation won’t be a problem with it at over 9%. Remember, the US Government wants inflation to reduce the value of its’ enormous debt.
Escalating oil cost will eventually crush everything. The next bubble pop will probably be unmanageable, but might be 5 or 10 years down the road.
Ed Note: perhaps I should retire to grow roses! Usually when markets are thought to be secure that is a bad sign. Remember when house prices used to only go up? Just a few days to the market reversal.
A Totally Rigged Stock Market:
I wonder how long will it take for the average, individual investor to realize that the entire stock market is heavily rigged by the US FED?
Example: stocks have risen 12 of the last 13 trading days; ironically, for each day that it has risen, there has consistently been very low volume. For more info on this topic, go here:
http://www.zerohedge.com/article/ben-bernanke-has-become-pied-piper-momoism
A Smug FED That is Very Pleased:
Certainly, as is the case for the US Treasury bond market, the bulk of the buyers (both direct as well as indirect) realize that the FED is the “secret buyer” there, since the indirect buyers have all but evaporated. Who are they kidding? Bernanke is the Emperor who is wearing No Clothes!
The FED and their agents, GS and JPM, must be very proud of their “accomplishments” since the spring of 2009.
I was looking at the UPRO $200-210 calls for April and there were a lot of calls for them while looking at the SPXU calls for anything over $33 seem to have been cleaned out by those that squeezed all the shorts out. You can even see $220 calls for April being active now. Never failed today. Everything that was sold today was bought right back up again on low volume. The April FAS calls now are $100-110 and the 110-120 are starting to become active as well. From the looks of the FAS and UPRO calls for April the market looks like it is not finished with its pumping. At the rate FAS is moving at it looks like FAZ will go to $5. In the last few weeks FAZ went from over $22 to around $13 now and still tanking.
Ed Note: Always the darkest moment is before the dawn.
Unemployment numbers are worse than expected but in line with expectations is the new line so everything is green before the market opens.