The Morning Call
The Market
Technical
While
the Market rebounded yesterday, I was not that impressed with its
strength. The indices (DJIA 14606,
S&P 1559) finished within their short term uptrends (13097-14606,
1521-1595), their intermediate term uptrends (13604-18604, 1446-2040) and their
long term uptrends (4783-17500, 688-1750).
However, they continue to diverge on their all time highs---the Dow
being well above its high (14190) and the S&P failing to date to even
challenge its high (1576).
Volume
was down; breadth recovered a bit. The
VIX fell, closing within its short and intermediate term downtrends.
GLD
(150.28) declined again, finishing very close to the lower boundary of its
short term downtrend. It has negated
that developing support level to which I frequently referred and is now poised
to challenge the lower boundary of its intermediate term trading range
(148.16).
Bottom line: while
stocks lifted off an oversold position yesterday, it looked pretty paltry to me
especially in light of the triple/triple we got (three major central banks easing [again] and the Bank of Japan re-re-doubling
its pledge to flood the Market with yen.
However that may
play to my prejudice, in the end, we are still stuck with the question, is the
Market topping or building a base for a further advance? Until we know that, doing nothing seems to me
to be the prudent strategy.
Sentiment declines again
(short):
Fundamental
Headlines
Only
one economic datapoint yesterday; but it was one that gets a lot of
attention---weekly jobless claims. The
number was not good, though there were some mitigating seasonal factors
impacting the results.
In
any case, no one cared because the central banks were out doing what they do
best---pumping up the volume:
(1)
the ECB and the Bank of England left rates unchanged,
(2)
Mario Draghi stated that Cyprus
was not a template for further bail outs.
That means to me that [a] the eurocrats have deserted the rule of
{bankruptcy} law as quickly as they seemingly adopted it and [b] we are now
back to square one where no one knows what these clowns are going to do in the
next crisis---leaving the risk that they can do something as stupid and
arrogant as their first move in the Cyprus {taxing insured deposits}. Why this didn’t cause great consternation
among the unwashed masses is beyond me; but then much has been beyond me of
late,
However, the
CEO of Italy’s largest bank says uninsured deposits are fair game (medium)
(3)
the real jim dandy development was the Bank of Japan’s
announcement that it would double its monetary base in the next two years. This, of course, will give a whole new
meaning to parabolic money growth. To
give you an idea of the order of magnitude of this deforestation exercise, Japan
is printing money at roughly 70% of the Fed but it is an economy that is only
one third the size of the US . And wouldn’t you know it was favorably
received by most of the ‘smart’ investors.
Well, I
confess, I am not the sharpest tack in the box; but doubling the money supply
in 24 months just doesn’t seem like an idea than will lead to a great ending.
George Soros’ opinion (short):
And from Deutsche bank (medium):
http://www.zerohedge.com/news/2013-04-05/deutsche-bank-central-bank-intervention-we-are-flying-blind
Bottom line: I said in yesterday’s Bottom
line that I wouldn’t read too much into that day’s headlines. I can’t make the same statement today. The reason is that the BOJ kicking in the afterburner
on money printing will only aggravate one of the tail risks about which I am
currently concerned: the after effects of central banks flooding the world with
money. Not to be repetitious, but this
can’t end well.
I
remain quite happy with our cash position.
The
latest from Doug Kass (medium):
Why
bond yield versus earnings yield is a flawed concept (medium):
Investing for Survival
Six
steps to stash your cash overseas (medium):
And
(medium):
The
money-ness of bitcoins (medium):
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