I worry that I am not being cynical enough
Steve Cook on Disciplined Investing


Have You Seen This?


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Have You Seen This?

The Market

    The indices (DJIA 12491, S&P 1317) finished the day to the upside, still within their intermediate term trading ranges (11863-12919, 1263-1372).  The S&P recovered above its 50 day moving average; though the construction of a right shoulder to the forming head and shoulders continues.

    Volume fell, breadth improved. The VIX traded up fractionally, closing in on the upper boundary of its current trading range.

    GLD was up again and remains well within its intermediate term up trend.

    Bottom line: with stock prices still roughly in the middle of their trading range, there is little to do save those actions that are related to our Price Discipline.  We actually got a couple yesterday and they are detailed below.



    Yesterday was another uneventful day with respect to US economic data--we did get weekly mortgage claims which were disappointing.  But they received little investor attention.  The economic news that did attract notice was better than expected Chinese GDP and Japanese production numbers.  With so much focus on the sloppy US and European economies, investors seemed encouraged that some part of the world could actually generate some positive data.

    Nevertheless, the political class held sway on investor attention:

(1)    Bernanke commanded much of the air time in his appearance before congress.  During those proceedings, he affirmed one of Tuesdays’ headlines; namely that Fed intervention is not over if the economy falters.  This really got investors jiggy.  As you know, I believe that monetary easing will continue in some form or the other whatever the nomenclature.  In its mildest form,  it should limit the downside risk in the Market; if the Fed gets more aggressive, it will likely supply some lift to prices.

(2)    our elected officials are still playing their kabuki/chicken dance.  Obama apparently walked out of negotiations yesterday and the republicans are having as many disagreements among themselves as they have with the dems.  In my opinion, the GOP is on the verge of snatching defeat from the jaws of victory; and unless they wise up, they may be faced with not only an outcome to the debt ceiling that favors the dems but also a very unfavorable result from next year’s elections [and I believe that right now it is more important to position to win the elections versus having your way on the debt ceiling)--neither of which bodes well for fiscal responsibility.



           However, a hat tip to Jeff Sessions:

To put an even finer point on this issue, Moody’s announced that it was putting US government debt [including the GSE’s-Fannie Mae, Freddie Mac, etc] on review for a possible downgrade if a debt ceiling compromise is not enacted.  As I understand their statement, Angel if the US does not make a debt payment on time even if it is remedied in a short period of time {the TARP scenario}, it will still lower the US debt credit rating and Beer it will not raise it back until there is some established process to avoid a similar occurrence in the future.  This accounted for the late in the day sell off.
         For the real pessimists amongst you (medium):

    Bottom line:  the saying goes that you get what you pay for; and right now the US and European electorates are discovering that in spades.  Both political classes are more concerned about their own self serving process than on the greater good for their constituents.  If either the US debt ceiling debate or the EU sovereign debt problem ends well, in my opinion, it will be a miracle.  The big question in my mind right now is, are my assumptions in our Models cynical enough to account for what will be the ultimate outcome of these two dilemmas.  Our Portfolios 25% cash  and 10% gold positions are a good indication of the answer.


   This Week’s Data

    Weekly mortgage applications fell 5.1% while purchase applications dropped 2.6%.

    Weekly jobless claims were down 13,000 versus expectations of a 2,000 increase.

    The June producer price index (PPI) declined 0.4% versus estimates of a decrease of 0.2%; however, ex food and energy, it rose 0.3% versus forecasts of +0.2%.

    June retail sales rose 0.1% versus an anticipated decline of 0.2%; ex autos, the number was unchanged versus expectations of a 0.1% increase.


    Another great piece by Van Hoisington and today’s must read (medium):

    Chart of the day--US public debt:

    Federal budget update (short):

Posted 07-14-2011 8:10 AM by Steve Cook
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