The markets seem poised to step further into Bizarro World this morning. Bad news is good—’cause it can’t get worse than that! Still, as one of the links I post to below says, “we have to keep an open mind and respect Mr. Market.” If the market wants to go up, all news is good news. How far might the market go?
On Wednesday, the S&P 500 ETF (SPY: 115.97 -0.5775 -0.50%) bumped its head on overhead resisttance from January — that milestone triggered immediate selling by traders. Today, it is going to try again. If the SPY can close above 87.95, then 94.45 comes into play. And beyond that, 100 — which translates to 1,000 on the S&P 500.
There was plenty of good news in my premium service portfolios yesterday. Here is one for Red-Hot Global Small-Caps subscribers — (EWZ: 71.30 -1.14 -1.57%) …
And here is one for my Red-Hot Commodity ETFs subscribers, (DBB: 21.68 -0.30 -1.36%) …
Now, let’s look at some market news …
For the bears …
Are the Markets Too Complacent About Swine Flu?
The WHO has designated swine flu an “imminent” pandemic, and raised its alert to a level 5 out of a possible 6. The World Bank guesstimates the cost of a severe pandemic at 4.8% of world GDP (yikes!). Yet the US had a very nice day for equity investors yesterday, and the Japanese stockmarket is up handsomely as of this hour. What gives?
XX Sean’s note — I post this because one commentator said I wasn’t taking the Swine Flu seriously enough. It is true that comparisons to SARS don’t quite work — today’s H1N1 outbreak is an influenza virus, which is far more contagious. What I was trying to say is the media tends to overblow every threat, so it’s hard to know when to be scared. And from what I saw over the weekend and on Monday, the media have been hyping more than the “mild pandemic’ posited by Yves at Naked Capitalism. So, if you want to know what you should really be scared about, read this story.
For the bulls …
Why the stock market loves a -6% GDP print
We have to keep an open mind and respect Mr. Market. There is an old adage that a market which does not respond bearishly to bearish news is clearly not a market in a bear phase. As financial economists, we have to keep an open mind and respect the verdict that is being turned in by Mr. Market as he continues to shrug off weak data and embrace whatever sprinkle of good news that can be gleaned from the incoming data releases.
How similar is the current crisis to the Great Depression?
XX Sean’s note — This is a wonkish look that compares the two. The write does point out some differences, but closes with: “Despite the success in containing the damage to date, risks should not be underestimated. The deterioration in financial conditions from balance sheet contraction, asset fire sales, and increased demand for liquid assets has been more rapid than during the Great Depression and at least as strong, if not stronger.”
Recession is Now Tied for Longest Since the Great Depression
The (National Bureau of Economic Research) also keeps a more precise monthly chronology. The postwar record is 16 months, again shared by the 1973-75 and 1981-82 recessions. To match this monthly benchmark, the current downturn would have to have continued into April. Our best single indicator as to whether it did so will be the employment number to be released by the Bureau of Labor Statistics next Friday, May 8. It almost certainly will show that there were further job losses in April. If so, it will further confirm the dismal conclusion: one would have to go back 80 years, to the disaster of 1929-1933, to find a longer recession.
XX Sean’s note — Washington University Professor James Morley on typical recession shapes and why they suggest we might see a strong recovery. HOWEVER — Morley looks at only post-WWII US recessions, so he’s not looking at a financial crisis driven recession or the consequences of simultaneous recessions around the world. Still, I put it out there because there is the chance he’s right.
OTHER NEWS
William Buiter takes a look at the world’s latest “monopoly.”
Exxon net down 58% on lower oil prices
Exxon Mobil Corp. said Thursday first-quarter profit dropped by 58% on lower oil prices and slack energy demand in the face of the global recession.
Exxon (XOM: 67.04 -0.35 -0.52%) saw earnings shrank by more than $5 billion, to $4.55 billion, or 92 cents a share, from $10.89 billion, or $2.02 a share in the year-ago period. Costs also rose. The Irving, Texas oil and gas giant said capital and exploration expenses rose 5% to $5.77 billion.
The markets are about to open. Good luck today.
Related Posts
- The Big Squeeze for Mister Market (10/28/09)
- Is The Market Hungry for Risk? (05/04/09)
- Howe Street Interview and Gold Heads Higher Again (02/05/09)
- Soros: We’re Still in a Bear Market Rally (05/09/08)
- The Hard Facts on Higher Oil Prices (08/31/09)
{ 0 comments… add one now }