Monday, January 04, 2010

Rally caps....

Here we go again -- frigid temps in China have forced up the price of oil over $81/barrel and that great for Exxon so stocks are soaring again (please ignore the fact that regular gas will cross $3.00 per gallon in NNY in the next 2 weeks, this is of no interest to the rally crowd).

There a couple of stories getting plenty of coverage today so I thought I'd offer my 2 cents.

1) Bernanke's defense of Greenspan's low rates: It's laughable to assume that the low rate environment of the past decade did not contribute to a large degree to the crisis. It was not the sole cause (many, many factors contributed) but low rates were a significant variable in the equation that led to the housing bubble.

2) Krugman's urge for more stimulus: Mr. Krugman is clearly drunk with power at this point. He seen practically every policy he's called for implemented so he's going for the jugular. In his opinion we need another stimulus to prevent a repeat of 1937. I'm on the the other end of this equation. Stimulus measures have stemmed the initial financial panic, but the situation in our country remains bleak. We can not institute any dramatic, long-term changes when things are OK. I'm a rip the band-aid off sort of guy, so I'd support 5-8 years of economic weakness if it prepares us to lead to global recovery for the balance of the century. More stimulative measures right now would keep more people in homes they ultimately can't afford and employ people that are ultimately marginal employees.

3) ZeroHedge's assertion that the US Gov't may have been buying futures...
I'll say that this appears to be nothing more than circumstantial evidence at this point, but it's pretty powerful circumstantial evidence. For much of the rally, I've bemoaned the fact that it hasn't been tradeable. Stocks move up overnight in the futures, open higher and stay higher (see today for example). There is very light volume during the day and participation seems very low. The CEO of Trimtabs, an influential provider of market data said "We cannot identify the source of the new money that pushed stock prices up so far so fast. For the most part, the money did not from the traditional players that provided money in the past." According to Biderman, the money did not come from (a) companies ("which were a huge net seller") (b) retail investor funds, (c) retail investors, (d) foreign investors ..., (e) pension funds or (f) hedge funds."

I still don't believe in the plunge protection team or other conspiracy theories, but I'm going to watch this story b/c even if it only has a 2% shot at being true, this would shake my faith in the markets.

Finally, what in the world is going on in Alabama? Apparently Alabama is the new Madison Avenue for making cheap, funny as he!!, commercials.

Exhibit A: Mexican Restaurant...



Exhibit B: Cullman Liquidation... This guy needs his own reality show. His lines are unbelievably funny (actually the guys that made the commercial are the creative minds behind the ad) --
"These are trailers, they ain't mansions. They come in 2 pieces."
"Some of them have stains. We cover them up."
"So come down and buy a trailer. Or don't."



Cheers!

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