Thursday, February 25, 2010

Markets are getting falafeled

The markets have opened weaker this morning on another round of worries about the Greek situation. If I were Germany, I'd be having concerns right now as well. Every effort to cut spending has been met with massive demonstrations in Greece. I'm not sure if the people of Greece grasp the gravity of the situation. This sounds like the Lehman or AIG CEO's talking on CNBC the day before their collapse that "we'll be fine" -- all is not well in Europe and that should have us all on guard right now.

The market was also caught off-guard by the surprising jump in initial jobless claims. The four-week moving average is back over 470k and is at it's highest level in 3 months. I found it particularly unsettling that the Labor Department went back to the "backlog of claims" well. This is what was to have allegedly sparked the spike in claims in January, but when the backlog disappeared the markets cheered the LARGEST DROP IN WEEKLY CLAIMS, blah, blah... Now apparently the backlog of claims is back this time caused by Northeast snowstorms.

I don't buy those excuses, I sense that companies held onto employees into 2010 in the hopes that things would improve. Since business has not picked up for many firms they are looking to trim more jobs. All of the talk of "recovery" in the jobs market has been mostly tied to benefits expiration (the jobless suddenly disappear when they no longer receive benefits) and stimulative spending not organic economic growth.

I think the markets are also a little concerned with yesterday's SEC ruling to curtail short-selling efforts by instituting a new rule - once a stock falls 10% from the prior close, you can only short a stock at a price above the best bid. So if a $10 stock falls to $9 you can't short the stock at $9 you have to short the stock at $9.01. This is designed to slow rapid declines in stock prices but ultimately it feels like the game is rigged. What if a stock goes up from $10 to $11 shouldn't we have a similar rule in place to limit the stock from shooting to the moon? If we limited purchase to being below the highest sell offer at least it would feel like the market was legitimate. By limiting downside with no upside caps, it feels like the market is a one way bet and that's not healthy for the markets.

Six hours of political posturing on the TV today coupled with miserable weather in the Northeast should make this a fairly slow trading day.

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