THE KEYLINE WEEKLY REPORT 12-14-09
SIDEWAYS ISN’T SO BAD, YOU KNOW
CURRENT BUY – 100% of portfolio stock allocation $$$
KEYLINE 7-25-09 BUY 50% allocation only (S&P @ 970)
SIGNAL 10-9-09 BUY balance of 50% (S&P @ 1071)
Sometimes you just wonder how long the market can meander sideways. But then, you remember that the rule in charting is that the sideways movement, called a “correction in time,” (especially after a long rally) can be the best world of all. What such a market says is that, yes, the heavy preponderance of buyers has declined, but, the auction market is now at almost a balance between buyers and sellers and the index prices should hold their own until more buyers come to the game.
My wife used to ask me why the market was up or down on a particular day. My answer became so “the same” that she often answered for me. My answer on days where the market was up was “More buyers than sellers,” and on down days “More sellers than buyers.” She used to laugh, but I am sure she got tired of hearing that. I recall she would often say, “No, I mean really!” Sorry honey, but who REALLY knows exactly for sure. Sometimes it is clear, but most of the time it is foggy at best to pick the one best reason. That is why in the daily “Munchin” report I try to give you the 5-7 main reasons the market moved up or down for the day, at least as I see them. Take your pick, as any one of them usually has had at least some noticeable impact during the day.
But, on to the markets. I told you last week that if the bonds held steady, the dollar steady, gold was soft and the S&P above 1,100 on the Friday close this would be the best scenario for the week. We only got the S&P to cooperate. The bonds were decidedly down on much stronger than expected retail sales and consumer confidence. Bonds took the hit, as they say, because the good consumer numbers portend a recovering economy.
That potential recovery means that the Fed may soon be able to raise rates and try to get back to the historical mean of about 5% interest rates. But, the rub is that rising rates means lower profits 80-90% of the time and lower profits means lower stock prices. This last effect is one the Fed would like to avoid, at least for the next 12 months or so. All of this is the main reason I developed and use the Keyline so diligently. It keeps me out in bad selloffs and in on good rallies – like this one.
THE CHARTS
Ok, let’s get to the charts for this week. By the way, I am including two charts this week that I have made a part of the closing data at the end of this weekly Keyline Report, the dollar and copper. The dollar I have shown you several months ago, but I will be now including it on a more regular basis. Copper I am including because of all the commodities, it is the one that is most used by professional traders to gauge the effects of inflation. Yes, there is a commodity index that included almost all the commodities, but copper is the single most sensitive commodity over the years and traders even call this metal “Dr. Copper,” as it is most often the first to signal changes in the inflations winds.
But first, let’s get to the S&P chart.
You can see that we are just “crawling up the chart’s Headline. So far, we have held above it, but just barely, as the market has worked over the last month or so to digest the huge rally that began last March. My target remains the S&P 1220-40 area, at this point, but I am keeping a close watch for any weakness that might signal a shift from the current sideways movement. For now, we are above the Keyline (at 1059) and holding above the 1,100 mark all this week would be a good sign. About 1,080 is still a critical support. Note in the MOMENTUM SECTION of the chart, at the bottom of the chart, that the green line (fast stochastic) has moved back into the 80 area (see red circle), a rather high reading for a good up move to develop. But, I have seen it happen before. Just need to be alert to this high reading for now. Let’s let the chart show us the way here, however.
Now on to the dollar chart.
I am showing the last 10 years here, so you can get a good grasp of the decline this period of time has produced. It is substantial, but the lower dollar has also helped to reduce our import-export balances. But, we need to really cut oil imports to make any more of a dent, it would appear.
The current price remains well below the Keyline (at 79.92) and, you can see by the chart, that the bit of a dollar rally they have talked about the last 10 days is really a very anemic move – so far. The big news here is that the Japanese yen is replacing the dollar as the choice of the “carriage trade” traders. That means that the dollar will be bought for the next month or so, as these traders buy dollars to repay their “carriage trade” loans and move to the yen.
I expect, assuming the shift is relatively smooth, the dollar will continue to gain some in price, but should remain below the Keyline for now. This gain in the dollar will weigh on the stock market, as it means, primarily, that the U.S. will be less competitive in world markets with its goods and services – less profits to the minds of investors. A steady to mildly higher dollar this week would be the best scenario.
And finally, on to the copper chart.
I had this chart in the daily “Munchin’” report this week, but I am including it here again, as I have more extensive comments to make about it. This time I am showing the chart back 10 years. You can see it did the same nosedive that stock market did, as would be expected. But, note that it began to rally as early as January of this year, nearly 60 days ahead of the March low. I suspect that this was one of the major clues to the big investors that that March low was not a harbinger of more lows and may have help set off the rally we are still experiencing.
Note in the MOMENTUM SECTION at the bottom of the chart that the green line (fast stochastic) is quite low and the black line (slow stochastic) is still in the 70 area. This kind of setup is usually a harbinger of higher copper prices. This might also be telling us that the current stock market rally might be ready for more up move. I will be watching this closely.
We remain well above the Keyline (at 2.8808) for now, but like we did in late July to October period, prices are moving sideways pretty much. I am keeping a watch on this one for any weakness that might break the $3.00 level. If that were to occur, we might well see the stock market begin to drop again, also. If that were to occur, the drop would hopefully not be like it was last year. But, for now, the $3.00 level is a critical support. Watch the price updates I give you daily to keep up on this one. Best scenario is to hold steady in price this week.
THE BOTTOM LINE THIS WEEK
Well, that pretty much wraps up this week. I will have the daily update to keep you current on any major developments during the week. But, I will not be giving you a summary this week, as I have in the past, of the major news events influencing the market all week. That I am now doing within each daily update report.
But, here is the way I see the bottom line that would make this week’s scenario a good one. The S&P needs to remain above the 1,100 level, bonds really need to find support in this 117 area, Gold needs to hold steady – but above $1,100 level, oil should hold the $68-72 area and the dollar not break above the 77.50 mark, as the “carriage trade” exits the dollar usage and shifts to the use of the yen.
So, as always, do have a good investing week. And you keep in touch. I do! See you next week.
WEEKLY CHANGES
Closes as of Fri. 12-11-09 WK. CHANGE (cash) KEYLINE# ABV/BLW
DOW INDU. 10,471.50 +83 points 9,848 ABV +623
S&P 1,106.41 +43 points 1,059 ABV +47
NASDAQ 2,190.31 -4.05 points 1,969 ABV +221
30 YR BONDS 117 21/32 -23/32nds 115 24/32 ABV +1 30/32
GOLD $1,132.50 -$37.00 $1,044.40 ABV $88.10
OIL $69.56 -$5.91 $83.21 BLW $13.58
DOLLAR INDEX 76.57 +.63 79.03 BLW 2.46
COPPER $3.1330 +$.0285 $2.8808 ABV +.2522
TOP 10 STOCK SECTORS LAST 6 MONTHS @12-11-09
1. BROADCAST (+70.3%) SAME AS LAST WEEK SAME
2. TOOLS (+65.0%) #7 LAST WEEK UP
3. AUTO (+49.0%) SAME AS LAST WEEK SAME
4. ELECTRICAL (+48.0%) #6 LAST WEEK UP
5. ENGINES (43.4%) #4 LAST WEEK DOWN
6. PRINTING (+42.5%) #2 LAST WEEK DOWN
7. TEXTILE (+41.1%) #10 LAST WEEK UP
8. MINING (+38.6%) #9 LAST WEEK UP
9. PUBLISHING (+36.7%) #5 LAST WEEK DOWN
10. CHEMICAL (+34.4%) NEW TO LIST UP
*The name Super Chart Keyline is a registered Trademark of Max Whitmore.
A couple of thoughts about this article from the New York Times:
It’s true. Anecdotally, I’d have to say that depending on the day, anywhere from 30-50% of the people who I discuss refinancing with are either not able to do it because their income has fallen or because property values have dropped. Now wait, you’re probably thinking, “I thought that the government was allowing people to refinance even if their mortgage was over 100% of the value of their property. They are, but there are a couple of caveats to that:
The loan has to be with either Fannie Mae or Freddie Mac and a substantial portion of the market isn’t with either one of those. If you want to find out whether your loan is with either one of them, check Fannie Mae Loans or check Freddie Mac Loans to find out.
If you have a second mortgage/home equity line of credit on your house and the combined balance of the two loans exceeds 105% of the value of your home (but is less than 125%) then you can still refinance, but the pricing adjustments that Fannie and Freddie charge are so extensive that unless your interest rate is over 6%, it’s probably not worth refinancing.
If you are like a LOT of people in today’s economy, your credit score isn’t quite as high as it used to be. It might be because you’ve had struggles to make some payments on time, it might be because you’ve had some of the credit lines cut on some of your credit cards (thereby lowering your credit scores because you’ve got too much of your available credit tied up), it might be a variety of reasons. But the end result is the same. In order to get the best possible rate, you need to have either:
- A 5% equity position in your house and no second mortgage or
- A first mortgage of no more than 80% of the value of the house and a combined loan to value (including second mortgage) of no more than 90%
- AND a credit score of 740 or higher.
- Ask yourself, if the majority of markets in the country have dropped in excess of 20%, how many people are able to meet those guidelines?
- Part of the reason that this is happening is because Fannie and Freddie are losing not only their shirts but pretty much everything else too. So they have no choice but to tighten up their guidelines. However the question does come up whether they are closing the barn door after the horses have left the county…
- There is a huge economic impact – if we can’t refinance someone’s house, we can’t make their payments cheaper. That means they can’t use that money to either pay off their debts, spend at McDonalds or save for a rainy day.
So what’s the solution? A couple of thoughts:
- We’re in an extremely overleveraged situation right now. When property values were still going up, it wasn’t as big of an issue because liquidation was always an option. If you bought too much house, you could sell it and almost always be “guaranteed” to at least get your initial investment out. Not so much any more.
- Loan modifications don’t seem to be working. Why not? Two main reasons: 1) They are not offering substantial enough savings on a monthly basis for people to stay “on top” financially or 2) The borrower is so "underwater” in their financial situation that it’s not a substantial enough situation where they can see their way out of the problems.
- We need to face the fact that there’s still a substantial amount of bad debt out there. There are a lot of mortgages that are “under water” and there are a lot of people who have loans that they can’t pay.
So what am I proposing? Here’s an idea (I’ll call it the deferred equity proposal):
All homeowners with a mortgage against their home (primary residences only) would receive a 20% principal reduction in their mortgage along with a reduction in their monthly payment.
They would need to sign a second mortgage with their existing mortgage holder for that 20%. The second mortgage would need to be paid upon the sale of their existing home unless the seller buys another home and closes within 2 business days of the closing on the sale of the existing home. The second mortgage would automatically become a prior lien to any other second mortgage that was filed prior to implementation of this policy.
The mortgage is transferable to a new home if the owner decides to sell. So, you have a $40,000 “new second” on your home, you can use that as the downpayment for a new home.
All guidelines for refinancing would acknowledge this 2nd mortgage but it would be viewed as equity and would enable many more people to refinance.
For every year that the owner remains a homeowner (rather than reverting to renting), 4% of the original balance would be forgiven. So, in 5 years, the homeowner who is able to remain a homeowner will have a substantial amount of additional equity. That would provide a strong incentive for people to remain in their homes and keep making payments.
Yes, 20% of the value of the mortgage backed securities would “disappear” but I honestly don’t think that it would make that big of a difference in the value of those securities (and the corresponding value of Fannie, Freddie and FHA). Let’s look at it this way, if 20% of the loan balances goes away but the rest of the portfolio performs better, isn’t that going to actually make them worth more? I’ve heard estimates of mortgage backed securities portfolios selling for 40 to 60 cents on a dollar. If it was performing better, don’t you think it would be worth at least comparable amounts, even if it was 20% smaller?
What does this actually accomplish? A couple of things:
Immediate payment relief for everyone in the country who has a mortgage (well, not immediate because it will take a while to accomplish).
A very strong financial incentive for people to stay as homeowners.
Provide a substantial additional boost to the economy because thousands of additional homeowners would now be able to refinance and generate additional cash flow opportunities that they wouldn’t have had otherwise.
Many people who aren’t able to move now due to a lack of equity would be able to move – thus spurring the housing market.
This is obviously a 30,000 ft view, but tell me. What am I missing? Our government is already pouring billions into Fannie and Freddie and it hasn’t made a difference yet. Wouldn’t something like this actually make a difference? And wouldn’t it put a boost in the economy and make people feel better about owning homes?
Well, what do you think?
Tom Vanderwell
Published: Saturday, 12 Dec 2009 | 5:31 PM ET
By: David Streitfeld
The New York Times
Mortgage rates in the United States have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government.
Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out.
The scarcity of credit not only hurts homeowners but also has broad economic repercussions at a time when consumer spending and employment are showing modest signs of improvement, hinting at a recovery after two years of recession.
Well, we’re less than an hour into the markets today and it’s time to take a look at what’s happening…
- So far, rates are staying quite steady. Not a lot of news going on so far this morning.
- Dubai got a “bandaid bailout” to keep them from totally drowning, but from what I hear, they have approximately $35 Billion in loans that need to be refinanced in the near term with virtually no one wanting to loan them money.
- Exxon/Mobil is buying another energy company with part of your and my hard earned money.
- The President is going to slap the hands of a bunch of Wall Street execs. Does anyone expect that it will really make a difference? Anyone? Speak up if you do…
So, rates are steady for now. As I said earlier, it could be a very volatile week, but I don’t expect any significant changes in the overall direction of the markets.
Stay tuned and keep in touch.
Tom Vanderwell
So, last week was a relatively light one in terms of economic news. This week will be a bit heavier…
- Tuesday – The Housing Market Index, Industrial Production and Capacity Utilization.
- Wednesday – Housing Starts and Architecture Billings Index for CRE (Commercial Real Estate), the Fed’s meeting announcement, CPI (Consumer Price Index)
- Thursday – The Philly Fed Index
So what do they mean and what impact will they have?
First – Anyone who tells you they know is lying.
Secondly, here’s what I think is going to happen..
- All of the reports except the Fed are going to come in lukewarm. Those with positive outlooks on things will be able to find something to be happy about. Those with
realistic pessimistic outlooks on things will find things that they can point to in order to say that things aren’t going well.
- The Fed will issue their report and talk about how good they think the economy is looking. The markets won’t believe them.
- We’re going to end up with a very volatile ride this week, but by the end of the week, there won’t be anything that has a substantial impact on mortgage rates.
Therefore, my prediction for the week is that we’ll see a LOT of interest rate volatility but it will be mainly noise and we won’t see any substantial movement either up or down.
Let’s see at the end of the week whether I was able to predict the market any better than the weather people in Michigan can predict the weather!
Tom Vanderwell
Elizabeth Duke is on the Board of Governors for the Federal Reserve and I think she hit the nail on the head……
Fed’s Duke Outlines New Mortgage Market : HousingWire || financial news for the mortgage market
“Some would argue that most of the really risky behavior is now out of the market,” Duke said. “But, unfortunately, the backlash has restricted a lot of perfectly responsible lending as well. Banks are reluctant to put any but the lowest possible risk loans in their portfolios.”
12-10-09
MUNCHING ON THE NUMBERS
This was “rollover” day for the major futures contracts, meaning that the futures numbers that will apply to most (but not all) futures contracts will be March 2010. Oh my gosh, how can it be 2010!!! It was just 2000! Well, one must adjust to such things. But, believe me when you are over 70, it seems the years don’t fly by anymore, they hit the afterburner!
But, enough of that. It was a better day for the bulls today. They saw the Dow climb another +68 points. If you are a bear, the sweat has to be breaking out on the neck and forehead about now. But, to really claim the resumption of the rally, we need to see the S&P climb over the 1,130-40 level and stay there for 3-4 days. Not yet. So, the bears will fight it out in here for a bit longer. Understand, I am not calling it a victory for the bulls in here, but it is getting tough to be a bear.
Oh, yes. I wanted to pass this along to you, too. A friend of mine in the business sent this along. Go to this web site: http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html. It is a full color graphic showing how the unemployment from 2007 until today has changed for the whole country. It uses a “rolling graphic” to do it and it is astounding how it chronicles the Jan 2007 4.6% level month by month to the 8.8% in October. Of course, the current 10% is higher, but the graphic will surely put things in perspective for you, and quick.
I have also added copper to my closing prices list today (seebelow), as I want to give you a handle on the commodities without going to the more complex indices that are used for the commodity market. Note that this is a Daily chart.
For years, folks have use copper as a great surrogate for the whole commodity complex. Many call it “Dr. Copper.” What the chart I have attached shows is that since the beginning of this year the price of copper has doubled from about $1.50 a lb. to over $3 and is well above the Keyline. That folks is one of the best inflation indicators you will find anywhere. More on copper in the next few Weekly columns.
But, the bottom line for the day to me is that the bulls are still in the driver’s seat, the bears still backseat drivers, but being listened to less and less. Still need S&P 1,145-50 for a few days, but we just might see it if the bulls can hang on like they have so far. How can you not love this business!! It’s the greats show on earth! A new act everyday!
Well, until tomorrow, hope your investing day was a good one. Will be here again tomorrow, Lord willin’ and the creek don’t rise.
NEED SOMETHING TO TALK ABOUT TONIGHT?
SIX MAJOR IMPACTS ON THE MARKET TODAY
1. Trade deficit fell $3.5 billion on higher export lower oil imports. Overall year down $158 B- incredible.
2. Bond yields rise on poor $13 B 30-yr bond auction -markets fear next 12 mo. refunding needs too big.
3. Americans Net Worth rose $2.7 Trillion (T) last quarter (+2%) to $53.4 T (was $65.3 T 2nd 2007).
4. Foreclosures fell 8% from Oct. to Nov. (RealtyTrac), but still 20% higher than 12 months ago.
5. Only weekly #, but new unemploy. claims up by 10,000. Continuing claims fell by 300,000, however.
6. Gold UP, Dollar DOWN, Bonds DOWN, Oil DOWN,
Hard to figure the rise in American net worth, but that is the report. Hummmmm. And the foreclosure news remains disturbing. I’m sure your friends will agree. And #6 says inflation is still a worry. Oh me.
Closes as of Thur 12-10-09 CHANGE (cash index prices)
DOW INDU. 10,405.83 +68.78 points
S&P 1,102.35 +6.40 points
NASDAQ 2,190.86 +7.13
30 YR BONDS 118 14/32 -27/32
GOLD 1,132.50 +$2.00
OIL 70.48 -$.36
COPPER $3.102 -$.0215
Here’s a quick snapshot of what’s going on today……
- Initial unemployment claims were up – that reverses a 5 week trend of improvement.
- The Treasury auction yesterday was sort of like Goldilocks Porridge – not too hot, not cold, just sort of there.
- Overall, there’s a little upward pressure on rates but not significant at the moment.
If you want a quote tailored to your specifics, fill out the form on the right side of the screen and I’ll get you a quote.
I’m switching my recommendation back to locking. We’ve gained back what we lost with the jobs report last Friday. Don’t get greedy…..
Tom Vanderwell
Technorati Tags: Mortgage rates
Posting has been light today – tied up in meetings. But Max has had some time to throw together some thoughts. Enjoy!
Tom
12-9-09
MUNCHING ON THE NUMBERS
Well, another day of battle closes and the winner was .. well, there is still no winner in this test of the market’s supports. But then, no winner, no loser either. For the moment, the rally folks have held their gains and not flinched. Will they prevail in the end? Can’t tell you for sure, but the longer they hold their ground and the longer the bears fail to get the momentum to break the rally gains, the more the S&P 1220-40 target grows brighter. We finished the day about 5 point up on the S&P from yesterday’s close and still about 45 points above the all important Keyline on the Super Chart.
The market overall was a slight favorite to the bull when you note that oil was down, gold up, and bonds eased only a tad. All told, if this were the Battle of the Bulge (I guess only you old timers would remember that one) this is the lull before the final assault, as I see it. It may be a few more days, but the bears, at least for the moment, need to prepare for an all out assault or go to the sidelines while the market climbs to new, higher levels.
Will the bears win out here? Low volume, dollar troubles, and general worries about consumers coming to the rescue are to their favor. But the bulls have held their ground, knocked down oil prices, and had a really unexpected gift in last Friday’s employment report. I don’t know when the current battle will be over, but it is not far off as see it. I like the bull’s situation – 45 points above the Keyline.
Well, cutting this short today, as I have a church meeting to attend and have to leave shortly. But, kept this thought in the back of your mind. We are a basically a people of a sound character and faith. We might get hit now and then, but we do not give up. The rally the last seven months is a combination of a lot of men and women striving to recover – not giving up. Let it be a testament that despite the “formidable headwinds,” we have prevailed so far. Keep at it! Just keep at it!
Until tomorrow, hope your investing day was a good one. Will be here again tomorrow, Lord willin’ and the creek don’t rise.
NEED SOMETHING TO TALK ABOUT TONIGHT?
SIX REASONS THE MARKET WAS FLAT TODAY
1. Obama wants a second stimulus. Oh, me.
2. The U.S. Treasury wants to extend the TARP. Investors are not so certain that is a good idea.
3. Deloitte LP says their Consumer Spending Index (predicts future spending) is at a 5-year high. No joke.
4. Thing s to come? Bond 10-year auction – weak results. Could higher rates be needed next quarter?
5. So you know: Assets per citizen $242,466; Liability per citizen $345,551 (per USDebtclock.org)
6. Tiger Woods favorable rating continues to fall. Really? Hummmmmmmm.
That last one is the one most likely to get a rise out of your family, friends, whatever. But, #4 is the real one to worry about.
Closes as of Wed. 12-9-09 CHANGE (cash index prices)
DOW Indu. 10,337.05 +51.08 points
S&P 1,095.30 +5.30 points
NASDAQ 2,183.73 +10.74
30 YR BONDS 120 5/32 +15/32
GOLD 1,130.50 +$1.00
OIL 70.84 -$1.80
12-8-09
MUNCHING ON THE NUMBERS
It was anything but a normal day today in the stock market. It began in Japan last night, migrated to Asia, then to Europe and finally here. There are a whole basket full of reason (see some of the bigger ones below), but the bottom line is fear. Bernanke called it a “formidable headwind” and that was enough for a lot of investors.
Now despite how Congress is raking Mr. Bernanke over the coals this week, he has done a very credible job keeping the world’s financial system knitted together. Maybe it isn’t to the liking of some the way he has done it, but so far it has worked. He forged ahead in a storm that has never occurred before. He made some mistakes here and there (wouldn’t you) and he admits it. But overall, we are still in one piece, albeit a bit shaky, but one piece.
Some are sure it will all fall apart yet. How do they know? I don’t know how the coming down from the huge flood of money will play out and neither does anyone else. But, I am convinced that if someone has to step us down without going into a deflationary spin that becomes a depression, I can’t think of anyone better equipped to try and get it done.
God forbid a senator or congressman takes on the job. There is no one, I mean no one, in DC that has a clue of what to do. It is totally uncharted waters. It won’t be easy, but Bernanke is my choice to try it.
Well, got that off my shoulders. Now let’s see, oh yes, the market. We are still 30 points above the Super Chat Keyline, a considerable distance, but this is a sharp test of the recent 7 month rally and we need to be very alert this week to see if it winds up just a test, or it becomes a waterfall. Right now, 1080 S&P is an important support number. Bonds rallied a bit as a haven for money today – many, many investors sold stocks bought bonds until the weather either improves or the rains come. We will see.
When I looked at my chart monitor this morning, I knew it would be a tough trading day. It was. I trade futures every day and when we open to a big down or up morning, it is always tough as investors look for supports and resistance. The best I can say for today is that we ended the day just about where we were when the bell opened trading. That is itself is an accomplishment.
Well, not much else today, except gold is correcting in here and I again, like I do so often, tell you to be sure to be buying gold. Your portfolio should be at least 15-20% gold now. Coins are my preference, as they can be sold much easier than the bullion.
So let’s see what tomorrow brings. Love that about this business. It is never the same. Each day is so different from the last. Never a dull moment!
So, until tomorrow, hope your investing day was a good one. Will be here again tomorrow, Lord willin’ and the creek don’t rise.
NEED SOMETHING TO TALK ABOUT TONIGHT?
SEVEN REASONS THE MARKET WAS FLAT TODAY
1. Bernanke’s comments yesterday DID give us the results we see as world markets close.
2. The “carriage trade” continues to cover their past borrowing and the dollar climbs higher.
3. A Senate Committee approved for debate an increase in diesel fuel (+4 gal). We all pay for it.
4. Some corporate earnings continue to dribble in, but no big winners to move the markets.
5. Did you know? Senate asked to raise debt limit again – to $13.6 TRILLION this time. Hummm.
6. Told you so stuff – Copenhagen talks a front. Final Agreement leaked even as talks continue.
Likely the least talked about will be the diesel tax, yet it is the one that will hit us all in the pocket for higher food and goods prices. Go figure. Maybe it will get a rise out of some of your family or friends. Try it as a conversation opener and see. (Or not).
Closes as of Tuesday 12-8-09 CHANGE (cash index prices)
DOW Indu. 10,285.97 -104.14 points
S&P 1,090.50 – 13.20 points
NASDAQ 2,172.99 – 16.62 points
30 YR BONDS 119 22/32 +21/32
GOLD 1,129.50 -$13.90
OIL 72.62 NO CHANGE
Last week, we had the report from Goldman that said that rates will stay where they are until late 2011 or early 2012. Today, we get Morgan Stanley saying that the Fed will raise rates in the later half of next year.
I’m going to continue with what I’ve said before. We are, in my opinion, 12 to 18 months from being in a situation where the Fed needs and is actually able to do anything with interest rates. There is simply too much slack in the system and too many “precarious” situations that anything beyond a token (.25 to .5) would be called for.
But I have to admit, I’ve been saying 12 to 18 months for at least 6 months now and the time frame keeps pushing on the longer it takes until we see signs of pulling out of this mess. I was using the analogy the other day that says that we’ve stepped away from the edge of the cliff but we’ve got about 3 miles of swamp land to trudge through before we come out of it. The longer it takes to tromp through the swamp, the farther out until the Fed starts cranking up rates.
More later,
Tom Vanderwell
Calculated Risk: Morgan Stanley: Fed to Raise Rates in 2nd Half of 2010
In a research note titled: “The Fed Will Exit in 2010″, Morgan Stanley’s Richard Berner and David Greenlaw forecast that the Fed will raise the Fed Funds rate in the 2nd half of 2010 to 1.5%.
They are forecasting GDP to increase 2.8% in both 2010 and 2011, and for unemployment to peak in Q1 2010 at 10.3%, and decline to 9.5% in 2011.
