Market Muddle

The stock markets moved up yesterday. So far, it has recovered about 2/3 of its Greek panic losses. For this blogger, I have not been able to visualize a path for much higher prices grounded in reality, not hope. My old target from 2009 was 1200 on the S&P, and perhaps that can be hit. World trade has recovered considerably. Today's FT online: "Global trade in goods has continued to bounce back rapidly from its huge fall a year ago, with an authoritative index recording the fastest monthly increase in December in its 19-year history. Data from the Bureau for Economic Policy Analysis, a Dutch research institute, suggest that little permanent damage has been done to the world trading system by the financial crisis."

More: "Richard Baldwin, professor of international economics at the Graduate Institute in Geneva, said that the rapid recovery suggested that it was largely a fall in demand that had caused trade to contract. 'A large part of the fall was the shock to expectations – the ‘Oh my God’ factor,” he said. “Anything postponable largely got postponed.' "

That was my analysis from early 2009 published here at various times - a Panic caused by the beefers in the fall of 2008 led to the huge economic contraction as everythign was deferred. Here's the link to the full FT article -> http://www.ft.com/cms/s/0/296dedc0-2564-11df-9cdb-00144feab49a.html

By the way, FT is my first read in the morning. Sometimes I read it online the prior evening - many stories are current then as it's ready for the European morning ahead of ours.

Another very interesting article in FT is this one, on similarities - and differences - between quantitative easing in Japan after 2001 and the current Fed adn ECB policies. See -> http://www.ft.com/cms/s/0/af295c08-255d-11df-9cdb-00144feab49a.html

Back to the markets, my thinking is a slow slide down this year until around S&P 1000. Jobs numbers stink. The Fed will cease buying mortgages in March. Obama's stimulus plan was crappy and did not work as the Pelosi-Reid crowd wasted it. State governments have huge pain to go through and must but pay and benefits, particularly for retirees. I expect a wave of taxpayer revolts.

The US will recover from all this eventually and do well. But lots of restructuring must be done and Obama is NOT providing any leadership to a stable future. His plans and efforts want to push the US to a proto-fascist swamp where the US economy is run by the EPA and his bureaucrats control and ration the health care of everyone. That's not a "glide path" to optimism. Hence my moderate bearishness.

BUT that opinion and $1 will get you a cup of Joe in most diners or corner coffee shops. Make the $5 for Starbucks, $2 for Dunkin Donuts.

1-2-3 Fund

My April puts are red. Ugh. My original plan was to buy three slugs to go 300% short. I never got the third slug as the market dropped. Now perhaps I can get it. I'll wait for S&P 1120 to improve my average price enough for the added risk. Well .... that's the rationale I'm using to violate my Green-Red rule. This might not work. Rule violations can bring punishment from the market gods.

Word of the Day

"Dolorous" - adjective [$10]
Dolorous means 1. distressing, painful, doleful, dismal; 2. distressed, sad.
Sentence: US state and local governments face a dolorous future: the bubble of easy tax money from capital gains taxes, high income persons and real estate was squandered and is gone. They locked in a huge cost base in employee pay and benefits, particularly retiree benefits. Now they must cut and the squeals from the public sector hogs will be shrill.