MARKET COMMENT
April 3, 2007
The consensus view was, should the hostage crisis ease, oil prices would drop and stocks would rally.
Doesn’t seem like brilliant logic but that’s
the deal.
The hostage crisis didn’t seem
to have too much of a negative effect on stock markets generally even when
tensions were high.
What could have caused such a blasé attitude?
Money, man…money.
- This
week mutual funds get to reinvest dividends and folks are funding their
retirement accounts before next week.
- The
Fed is pumping more money to the system.
- And,
the M&A deals have been headline grabbing.
The other thing that was supposed to happen and didn’t really
was a sharp drop in gold prices.
Some
gold pundits argue that gold is following a rally in base metals like copper.
That seems like a weak argument but I’m not a
miner.
The dollar rallied some today encouraged by the supposedly
strong pending home sales data.
Overall today stock indexes were around 1% higher and
trading volume increased.
Are there
reasons to be optimistic?
Not many
frankly since real estate despite today’s data was weak, the subprime mess lingers, economic growth is supposed to be
slowing and so are corporate profits.
Bulls argue that there will be a PE expansion, which would have to
happen if earnings are declining but stock prices are rising or even staying
the same.
The bottom line is the tape is
strong and fed by continued liquidity from funds and the “yen carry trades”
which seems back in business.
Let’s look around the horn further.
The above is a fairly representative picture of the variety
of action.
Is there anything to like
fundamentally about stocks?
Not that I
can see.
However, technically the tape action
is dominant and positive.
You can’t
fight that.
Further the amount of money
available for investing and speculation has never been greater.
“Money Money
Money???”
You bet!
The emerging “risk
aversion” argument of just a few weeks ago is rapidly becoming a distant
memory.
Its crazy isn’t it?
Sure, but that’s why we play the game!
Have a pleasant evening.
Disclaimer:
Among
other issues, the ETF Digest maintains long or short positions in: GLD, UDN,
XHB, KBE, IEF, MDY, IGW, XLU, RTM, TTH, EFA, EEM, ILF, EWJ, EWA, EWN, EWO, EWY
and EWC.