It's all wrong; but it's all right
Steve Cook on Disciplined Investing

Syndication

Have You Seen This?

News

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Have You Seen This?

The Market
    
    Technical

    The indices (DJIA 12086, S&P 1297) again had a good day in the face of generally lousy news.  They remain within their intermediate term up trends ((11664-15088, 1225-1654) and their short term trading ranges (11554-12405, 1247-1345).

    Volume was still quite low; breadth was down.  The VIX busted below the new support level offered by the former upper boundary of a trading range, once again confusing the picture on direction, but opening the way for a further decline (which would be positive for stocks).

    Gold (GLD) penetrated the quadruple top.  If there is any follow through, our Portfolios will likely Add to their holdings.

    Bottom line: stock prices continue strong in spite of a negative barrage of both domestic and international news.  As I noted yesterday, as long as that kind of bid remains under the Market, our strategy is to sit back, enjoy our Portfolios appreciating, but pay very close attention to our Sell Half Discipline and the tight Stops previously set.

   Fundamental
   
     Headlines

    Yesterday was just another verse of same old song--Market up, but the economic news was disappointing [an appalling new housing starts report] and negative developments from every corner of the globe:

(1) while power has been restored to the six damaged Japanese nuclear reactors, ever higher levels of radioactivity are showing up in the food and water supplies, the temperatures in the reactor cores are rising to potentially dangerous levels and there was another explosion in one of the reactors,

This update on Japan (medium):
http://www.zerohedge.com/article/run-rated-fukushina-radiation-release-par-and-some-cases-greater-chernobyl

(2) we continue to bomb Libya, Syrian government forces killed several protestors and a bomb exploded at a Jerusalem bus stop,

(3) the Portuguese parliament rejected the ruling party’s proposed austerity measures, the prime minister resigned shortly thereafter; that country has to roll over $6 billion in debt in the next 30 days and the EU just punted the decision on a bail out fund till June. 
   
Three scenarios for resolution of the EU crisis (long.  Note: the March meeting referenced in scenario one has already occurred and as noted above, they kicked the can down the road):
     http://pragcap.com/3-euro-debt-crisis-scenarios
   

    Bottom line: stocks, at least as defined by the S&P, are slightly overvalued as calculated by our Model.  Nothing in the economic data being reported even remotely suggests that our forecast is understating growth; indeed, if anything rising commodity prices raise the probability of crimped consumer demand and pressure on corporate profit margins that would render our economic forecast and our Valuation Model too optimistic.  On top of that, as summarized above, there are black swans flocking in Japan, Europe and the Middle East--any one of which could potentially negatively impact our Models.

    Yet the Market in its infinite wisdom is suggesting that all of the above is already discounted in current prices.  I can accept that it an extent and at the very least establish positions in stocks that are on our Buy List.  However, in my gut, I don’t believe that stocks can escape the headwinds enumerated above.  So I feel much better about the 20%+ cash position in our Portfolios than I do about the purchases made on Tuesday; and I think that the combination of our gold, foreign ETF, cash positions coupled with our Sell Discipline will serve our Portfolios well for the rest of the year.

    
Economics

   This Week’s Data

    February new home sales plunged 16.9% versus estimates of a 2.1% increase.
    http://www.capitalspectator.com/archives/2011/03/new_home_sales.html#more
    http://www.ritholtz.com/blog/2011/03/comparing-housing-prices-real-vs-nominal-1890-2011/

    February durable goods orders fell 0.9% versus expectations of a 1.2% increase.

    Weekly jobless claims declined 3,000 versus forecasts of a decrease of 2,000.
    http://www.calculatedriskblog.com/2011/03/weekly-initial-unemployment-claims_24.html

   Other

    Another blistering indictment of the Fed and its Wall Street cronies from David Stockman (long):
    http://www.minyanville.com/businessmarkets/articles/federal-reserve-fed-central-banking-wall/3/23/2011/id/33504?page=1

    How big are the losses at Fannie and Freddie? (medium)
    http://www.nakedcapitalism.com/2011/03/fannie-and-freddie-hiding-over-100-billion-of-losses.html

    Global output continues to grow (short):
    http://mjperry.blogspot.com/2011/03/made-on-earth-global-output-and-trade.html

Politics

  Domestic

A letter from ten past chairpersons of the president’s council of economic advisors (medium):
http://www.politico.com/news/stories/0311/51864.html

  International War Against Radical Islam

    More on our Libyan involvement from Tony Blankley (medium)):
    http://townhall.com/columnists/tonyblankley/2011/03/23/let_me_just_be_very_unambiguous_about_this

    Joe Biden and Chris Matthews, in their own words (2 minute video):
    http://michellemalkin.com/2011/03/23/joe-biden-impeach-a-president/








Posted 03-24-2011 8:10 AM by Steve Cook