Here’s something new and way cool: This week’s market commentary made its way into both the Up & Down Wall Street column as well as The Trader column in Barron’s print edition.
(If I were to ignore my own advice about being a middle-aged white guy, I would ask "How whack is that?" but I know better, so I won’t go there . . .)
Bubble 2.0 is the first column, with Randall Forsyth stepping in for Alan Abelson. The excerpt:
"Indeed, with deals seemingly endless in number and boundless in size, the stock market has entered a proverbial melt-up that probably will continue until John and Jane Q. Public get sucked in. With the billions being thrown around by private equity, hedge funds and foreign-government funds, what else would you expect?
On the latter score, the central banks abroad are getting a little restive sitting on trillions of dollars of reserves parked in boring Treasury notes. Japan and China have announced plans to emulate Singapore in investing some of their cache in something other than cash, like stocks, for instance.
This influx of liquidity has produced a seeming paradox — a rapidly accelerating market set against the backdrop of a rapidly decelerating economy, writes Barry L. Ritholtz, chief market strategist of Ritholtz Research & Analytics. "This is now a trading market, where momentum and trend dominate, increasingly detached from the decaying domestic fundamentals."
To attempt to square that circle, investors have been rotating increasingly to the big-cap names that populate the Dow 30 and dominate the Standard & Poor’s 500. While the U.S. economy’s growth slowed to a crawl of 1.3% in the first quarter, S&P earnings so far are posting gains on the order of 7% to 8%, twice the lowered expectations going into earnings season. And much of the those earnings gains are coming from overseas, in part because they’re being translated into depreciated dollars.
As for the economy, proof of the continued slowdown arrived Friday morning in the form of another punk employment report, in which only 88,000 folks were added to nonfarm payrolls in April, the fewest in any month since November 2004. The unemployment rate ticked up by 0.1 percentage point, to 4.5%, which actually understates the weakness. In the household survey, the one used to calculate the jobless rate, some 392,000 folks were estimated to have dropped out of workforce. If you’re not pounding the pavement for a job, you are not counted as unemployed. Had they been, the jobless rate would have been up 0.2 percentage points."
The second piece is the The Trader column, "Even the Bulls Aren’t So Bullish." A quick excerpt of the same:
"But after a long rise, still-confident investors who grow wary of high prices start taking profits in their broader portfolio and funnel those toward blue chips. "The longer the broader averages make little progress in an environment of blue-chip strength, the more likely a top is forming," [Miller Tabak’s chief technical analyst, Philip Roth] says.
To Barry Ritholtz, chief market strategist at Ritholtz Research & Analytics, the juxtaposition of rising stocks and a cooling economy makes this "a trading market, where momentum and trend dominate, increasingly detached from decaying domestic fundamentals." A melt-up to Dow 14,000 would not surprise, Ritholtz says, but that represents a risky "trading, not investing, opportunity."
Whether the rally is slowing — or, as the bulls prefer, consolidating — remains to be seen. For days, the benchmarks have made new highs on dwindling volume and waning leadership. Yet, sentiment is far from excessively bullish. In fact, short interest that is nearly 18% above a three-year average suggests there are skeptics, and money on the sidelines, that might still be converted."
How unbelievable is that? I am honored and humbled and tremendously appreciative of the work getting recognized.
Moved to Yahoo Finance: Bubble 2.0
Even the Bulls Aren’t So Bullish
Barron’s, May 7, 2007
Moved to Yahoo Finance: S&P High Brings Muted Revelry