MARKET COMMENT
April 4, 2007
“It’s an Easter present to the British people.”
My initial thought is: “Beware of Iranians bearing false
gifts.”
But, surely the families of
these captives are breathing a sigh of relief.
It was good theater while it lasted and the ending didn’t seem to surprise
Mr. Market since he was unfazed by the entire affair.
Nevertheless we’ll be having more drama like
this in the weeks and months ahead.
The investment consensus was that oil prices would fall with
this outcome [and they did “a little”], stocks would rally [and they did yesterday
in anticipation of this outcome] and gold prices would fall [but they rose
inexplicably].
Dallas Fed President Richard Fisher stated today that: “While
the subprime damage is largely contained, I do not
mean that the market will or should refrain from punishing those who neglected
time-proven rules of prudence.
Nor am I
suggesting that the neglect of prudent practice has not bled into other types
of credit--such as the Alt-A market.”
Okay, I think I understand.
No
wait, let me read it again, and again and again…
If you have the translation email it to me please.
He continued, “Housing markets may feel some short-term pain
because 40% of home buyers last year were either subprime
or Alt-A.
The pain will make it less
clear whether housing construction has bottomed and how long the housing
downturn may last.”
Richard Fisher, meet
homebuilder D.R. Horton CEO Don Tomnitz, he of “2007
is going to suck”.
“The economy will grow more slowly because of the housing
market but is strong enough to weather this storm.”
Whew!
“We’re doing our best at the Fed along with other regulators
to tread very carefully in dealing with the subprime
situation.”
I’m going to hurl.
The more positive headline for stocks today was that the
NASDAQ is back to levels of February 26th before the big shakeout.
Will that make everyone happy?
Let’s look around other sectors.
Another chapter with Iran has ended but a new one is
probably being pondered.
It will be
something we just have to live with for a long time.
Economic news is poor and Dallas Fed President Fisher’s
comments weren’t inspiring.
The price of
gasoline won’t encourage consumers.
However, for investors, momentum is the key since all bad news has been readily
eagerly ignored and there’s cash to put to work.
And speaking of cash the supply of stocks has
shrunk and the amount of dollars available for investment has grown.
Earnings season is beginning and we’ll just have to see if
the slowdown in the economy spills over to lower earnings and perhaps warnings.
Have a pleasant holiday weekend.
Disclaimer: Among other issues, The ETF Digest maintains
long or short positions in: DBE, GLD, DBP, UDN, IEF, XHB, KBE, MDY RTM, RYE,
TTH, EFA, EEM, EWO, EWN, EWY, EWJ, EWA and EWC.