MARKET COMMENT
January 31, 2007
He’s smiling today, so let’s give the man his due. Every asset class had a rally of sorts
today. It’s the end of January and
everything is perfect. Or, is it?
The trouble today was in China where authorities are
suggesting there’s a stock bubble and perhaps they’ll try to cool things down
there. A “cool down” in China markets
can be like a panic in US markets. There’s
a report here
and a snippet of a report here from the Emerging Markets Monitor in London.
For investors this could be a very dangerous and volatile
situation.
Returning to US markets, I sense a lot of nervousness
stemming first from portfolio manager performance anxiety [trying to keep up,
especially at month’s end]; commodity price confusion and volatility [energy
market craziness will probably leave casualties that we’ll be reading about];
gold nearly breaking out of the trading range we and many others have cited [although
the week’s not over] may be tied to energy and currency issues not to mention a
hedge against the Fed, China and a falling dollar; tomorrow’s employment
numbers; and lastly the continuing underperformance of tech relative to other
sectors. That’s a mouthful isn’t it? Maybe I need an editor.
In energy markets, as suggested, there may be some
casualties with leveraged natural gas market players leaning the wrong
way. Losses can wipe-out many--just look
at the Ameranth Hedge Fund disaster. Today the weather bureau suggested that
colder northeastern weather can linger throughout February. That got all the markets going again today
despite neutral to bearish inventory data.
In major markets every sector saw good upside action.
South of the border, more sensitive to commodity prices,
everything except Venezuela
moved higher.
So January ends on a high note. That’s not a surprise given performance
anxiety noted earlier. You must think I’m
worried about China
markets and another round of Asian Contagion a la 1998. Well I am.
As for the Fed they did exactly what was expected and the
markets positive reaction was more surprising.
It must be the kind “tentative” words about the housing situation that
got everybody’s juices flowing. Then
again a falling dollar and rising gold price shouldn’t make investors too
sanguine.
Have a pleasant evening.
Disclaimer: Among
other issues, the ETF Digest maintains positions in: FXI, FDN, QQQQ, GLD, DBP,
PPA, PHO, SPY, MDY, IWM, PZI, ILF, EWZ, EWW, EEM, EWM and INP.