Monday, July 20, 2009

Goldman says the sun will come out tomorrow

Well, it's pretty easy to be optimistic when you're looking at the biggest bonus pool in the history of Wall Street. I hate to join the list of Goldman bashers because it is starting to attract the lunatic fringe, but the irony of Goldman upping their outlook for the markets after heavily investing in the US markets is not lost on me. This would be like me cornering the market in first edition Beanie Babies and then forecasting that the price would rise by year-end.

However, the chorus of "Rally, Rally, Rally" has been growing all week despite what I view as weak operating results from the majority of companies (admittedly a few financial firms have given us the "things are declining at a slower pace" line again). Jim Cramer - the Clown Prince of retail investors - has been getting revved up lately and that's usually good for another 5% run :).

I think the voodoo masters - I mean technicians - continue to rule the day and now that we've surpassed 950 on the S&P there is a good chance we could go higher. However, we've been in this vicinity at least 4 different times in the past 8 months and the market has failed to go higher every time.

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The US dollar has weathered the crisis surprisingly well in my opinion. However, if we take a double dip in 2010 as I expect, the policymakers will have few options - another stimulus plan? lower interest rates again? - to stimulate demand. I think we'll have to watch the prospects for the US dollar in 2010 if the economy remains weak. What does this mean to you? The biggest factor will be the impact on consumer prices if commodity prices soar again when the dollar weakens. $90 oil, $3.50 gas, higher food prices, etc, etc. But you're 401k should be rocking again by that time so don't worry about those little things:)

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