Archive for the ‘Uncategorized’ Category
The Hindenburg Omen
Posted by Jody Eisenman | Filed under Uncategorized
With the stock declining the past few days on relatively light volume, there was been a lot of talk lately about a technical indicator known as the Hindenburg Omen. Named after the famous Hindenburg zeppelin disaster in 1937, it is a technical indicator that is said to predict a stock market crash. Basically, this “omen” supposedly happens after a series of indicators related to stocks hitting new highs, others hitting new lows, and a rising 10 week moving average among others. It is said that this is a great indicator of an imminent market collapse. According to the WallStreet Journal, it has indicated every major market decline since 1987. The only problem is, its’only been right about 25% of the time. Why people pay so much attention to this is beyond me, but it’s probably due to a lack of other market news.
As I have stated for some time, I do not see the market making a major move in either direction for awhile. For the year, the Dow and the S and P are down slightly for the year. My own technical analysis shows that we are somewhat oversold here, so I think the next move is probably higher. However, as Summer volume remains light and should continue this way until Labor Day, anything can happen. I, for one, wouldn’t bet my bottom dollar on a crash.
The Fed and the Economy
Posted by Jody Eisenman | Filed under Uncategorized
Yesterday, the Fed issued their latest view of the economy. As expected, their outlook was not encouraging. Among other points, the Fed announced that they would reinvest principal payments from the mortgages they hold on their book into long term treasuries. Although, the Fed really only has the ability to manipulate short term rates via Fed Funds, these anticipated purchases are an attempt to adjust long term rates downward as well. According to a statement from the FOMC (Fed Open Market Committee), “The pace of economic recovery is likely to be more modest in the near term than had been anticipated”. As such, it is unlikely that short term rates will increase any time soon.
This, obviously, is not good news. The DJIA, which had been down almost 150 points prior to the announcement, actually rallied to almost even before closing down 54 points. However, the futures this morning are down dramatically. European markets are down about 1.5-2%, which is the equivalent of roughly 200 Dow points.
Critics of the current administration (who seem to be growing in number every day) site the fact although the government has spent incredible sums in stimulus and bail outs, it has not had a major effect on Main Street America. Many industries are in deep trouble. The housing market continues to struggle under a combination of oversupply and a huge inventory of homes in foreclosure. According to Zillow.com, about 22% of all homeowners are under water, meaning that their homes are worth less than their mortgage. To add fuel to this fire, a Deutsche Bank report last week, this number could hit an incredible 48% before this recession ends. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adBYDzUMt68k
I wouldn’t even hazard a guess as to what mass defaults would do to the housing and financial markets. Stay tuned.
Summer Reading and Job Growth
Posted by Jody Eisenman | Filed under Uncategorized
I just finished Lowensteins’ new book, “The End of Wall Street”, one of several books written about the sub-prime crash and the subsequent financial chaos. I would highly recommend this, as well as his previous book about the demise of LTCM (Long Term Capital Management) titled “When Genius Failed”. Anyone interested in the stories of the demise of Bear Stearns might enjoy “House of Cards” and “Street Fighters”.I read about 2-3 books per week, so if want my opinion, please feel free to call or email.
The markets reacted negatively to Fridays’ job report. US private employers (that is, excluding the government) added fewer workers in July, and June’s numbers were revised downwards as well. The stock market tanked on the news, falling over 100 points, but rallied late in the day to close down just twenty odd points. Still, it would seem to many economists (as well as yours truly) that the economy is not recovering anywhere nearly as quickly as was hoped for. In todays’ Bergen Record, there was a very revealing article about the casino industry in New Jersey. When casino gaming was first legalized in New Jersey, gamblers flocked to the tables in record numbers. It was common for people to stand 2 and 3 deep at the blackjack tables! People did not want to use the rest rooms for fear of losing their seat. As gambling revenues skyrocketed, the tax revenue for New Jersey soared. Today, gaming makes up by far the largest portion of taxable revenue to the state. Unfortunately, the politicians never planned on a recession hurting their business. As such, they never invested much money in Atlantic City. Therefore, unlike Las Vegas, where people can walk the Strip at all hours of the night safely, Atlantic City is very different. A walk along the boardwalk or even a couple of blocks from the casinos will lead you into areas of slums, pawn shops and crime. No the recession has hit, combined with legalized gambling in almost every state, the whole industry is hurting and all of New Jersey is feeling the pain.
Meanwhile, consumer credit continues to shrink, while people are reluctant to spend, let alone take on additional debt. In the meantime, the dollar dropped against the Euro, and fell to a 15 year low against the Yen. However, yields continue to drop, with the 2 year treasury going to another record low. One wonders how long foreign investors will continue to invest in such low yielding treasuries in the face of a weakening dollar.
