Thursday, July 01, 2010

Can we all just go home for the long weekend?

Things are getting pretty testy in the market right now. The market broke 1040 yesterday and a second close below 1040 could really open up the floodgates. The powers that be are trying to bring the market back over 1040 by the close. The next real stopping points for the stock market on a technical basis if it doesn't rally today are much, much lower.

I'll caution that tomorrow's jobs report will largely influence the action and it will be another weird census influence report. Also, note that the rookies will be running the show tomorrow which could add to the volatility (this is one of the little known secrets of Wall Street that every Friday in the summer the person in control of market isn't a seasoned vet but rather some kid that was playing lacrosse at Princeton at this time last year).

The employment situation has been troubling for the past 2 years, but Congress finally turning off the unemployment benefit spigot things might get really ugly in the a hurry.

Sorry for the limited updates, but this market is a trader's dream right now.

Interesting reads from yesterday:

1) It's not much to look at but this building is pretty cool. Tesco - a British version of Target - offers this 500 sq ft, 5 room, DIY building for just $15k.

"With five rooms, a storage loft, a deck terrace and double glazing this is a brilliant addition to our range and could be anything from an office or a gym to a lounging area."

2) Mortgage applications hit lowest level since 1996! Again, we pulled forward demand with the tax credit and right now we're in the post-tax credit vacuum. Refinance applications were up as the 10 yr note continues to plummet.

3) GM's sales were up 10% in June. On the surface this looks good, but remember a year ago we were still in the midst of the recession and GM was in bankruptcy so a 10% increase actually may be viewed as disappointing. I think GM has also increased it's reliance on Fleet sales - I'll follow up when I know more.

4) NYS looking to cook the golden goose for supper - NY May Tax Out-of-State Hedge Fund Managers.

"Recession-hit New York could raise an extra $50 million a year by collecting income taxes from people who work for hedge funds in the state but live elsewhere, according to a legislative plan to raise revenue.

The new plan would tax so-called carried interest.

A spokesman for Democratic Assembly Speaker Sheldon Silver said by telephone on Monday
that it means hedge fund managers would be treated the same way as other commuters.

Congress also has considered taxing carried interest -- profits gleaned by managing assets -- at ordinary income rates -- much to the dismay of hedge fund and private equity titans."

Again, I think carried interest should be taxed as ordinary income but if NYS moves unilaterally on this issue watch commercial property spring up in Greenwich, CT and Short Hills, NJ. These hedge fund and private equity guys don't love the idea of commuting in NYC and if NJ and CT are willing to court them with the promise of lower taxes watch them stay closer to home.

Update: the market has been almost straight up since my original post. I guess no one wants to the leave the rookies on the hook over the long weekend in case the computers go nuts with 2 down days and the S&P under 1040. Remember we only care about flash crashes, flash melt-ups are perfectly fine :)


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