Tuesday, February 01, 2011

Rally On!

Wow, what a difference a weekend makes. On Friday it didn't look like anyone want to touch the equity markets and today the computers are back large and in charge.

Clearly things in Egypt haven't settled down (I'm not sure El Baradei is the answer. He seems to be much more popular outside of Egypt than within its borders. I'd bet on some form of military rule over the next week or so). So what's changed?

Construction data was weak but the ISM manufacturing data was slightly ahead of expectations and that's all the headline reading computers cared about before buying everything in sight. Unfortunately, if they computers could have read the whole report like a human would have done way back in the good old days of 2004 they would have seen that the largest contributor to the ISM number was the huge jump in prices paid which hit a 2 year high. Inflation is hitting the supply chain and that will dramatically impact profitability in coming months but that's not the focus today.

Stats of the day:

"There were 18.4 million vacant homes in the U.S. in Q4 ’10 (11 percent of all housing units vacant all year round)."

"Nearly 20 percent of all homeowners who received permanent mortgage loan modifications through HAMP one year ago have fallen behind on their payments again, according to the latest figures from the Treasury Department."

Oh, and remember there is no inflation, there is no inflation so just grin and bear it when you go shopping next month ---

"Corn spot up 7.76%, wheat up 5.63%, Rice up 10.08%, Hogs up 10.16%, Sugar up 5.64%, Orange Juice up 3.33%, and cotton.... up 17.08%. That's in one month!"

The cost of everything is going up substantially as traders figure out that the real action is in commodities.

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