Tuesday, January 28, 2014

All is good - Bad news is back to driving stocks higher

First a little disclaimer:  I hope everyone knows that much of what I write is dripping with sarcasm.  For example when I said earlier - Stocks fall 3% and everybody panic!! - what I meant is that a 3% decline is normal and healthy for a traditional stock market.  However, in the current setting a 3% decline is suddenly causing emergency central bank meetings around the world and ultimately forced the hands of a few bankers this week.  This is not a natural reaction, but we are not dealing with natural markets.  I'm still in the camp that says 2014 could be a very volatile year. 

Okay, so overall today the news was mixed - a couple of companies did okay on the revenue side, but they cut costs sharply and a few others really disappointed.  My favorite was Apple which had 83% of investors bullish going into earnings last night only to drop $44 which cut $40 billion from its market cap today (so basically it's like they had a company the size of John Deere or Time Warner Cable just cut off from their valuation today).  Again, when everyone is on one side of the ship it usually means the ship is going to capsize :)

However, disastrous numbers on durable goods - really some of the worst numbers we've seen in 2 yrs - suddenly seemed to convince everyone that the Fed taper might be put in neutral.  This is not my opinion, but the threat of the Fed taking away the market's crac...... I mean stimulus, quickly hammered the stock market last week.  The concept that the Fed could keep the party going a little longer boosted stocks throughout the day.

In an effort to stem the tide of emerging market meltdowns Turkey jacked interest rates 4.25% tonight to 12% (good luck getting a mortgage in Turkey tomorrow) and the stock markets around the globe didn't take this as a sign of panic (which it was) but a sign that the Fed will keep supporting global markets. 

The volatility of the markets has been increasing and the lack of short players in this market will make things very interesting.


No comments: