30 Nisan 2010 Cuma

On CNBC's Kudlow Report Tonight


Tonight at 7pm ET:


ECONOMIC RECOVERY? WHERE WAS OBAMA'S OPTIMISM? IS HE PRIMING COUNTRY FOR MORE SPENDING? WHERE'S THE GOV'T GROWTH STIMULUS?


- Robert Reich, Fmr. Labor Secretary; Author, "Supercapitalism"; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy
- Steve Moore, Sr Economics Writer for the Wall Street Journal Editorial Board; "Return to Prosperity" co-author

GOLDMAN SACHS FEELS THE HEAT

- Tom Curran, Peckar & Abramson Partner

STOCK MARKET…THE BULL’S RUNNING WITH STRONG PROFITS & FREE MONEY FROM THE FED…IS NOW THE TIME TO START LOOKING AT THE PROBLEMS COMING?

- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- Dan Fitzpatrick, StockMarketMentor.com, President & CEO; Senior Contributor, RealMoney.com

GOLD HITS 4-MONTH HIGH…ARE WE HEADING HIGHER FROM HERE?
- Don Luskin, CNBC Contributor/Trend Macro Chief Investment Officer

THE GULF OIL SPILL
CNBC’s Brian Shactman reports.

OIL SPILL SHOULDN'T KILL DRILL, DRILL, DRILL
- Chris Horner, Senior Fellow, Competitive Enterprise Institute

Please join us. The Kudlow Report. 7pm ET. CNBC.

More Mother’s Milk...

Profits, profits, profits.

How many times have you heard me say that profits are the mother’s milk of stocks, business success, and job creation? Well, they remain the story of the day.

S&P earnings look to rise about 45 percent in the first quarter, with earnings estimates pegged at a 9 percent gain in April to lead off the second quarter. Meanwhile, Chevron reported better-than-expected profits this morning, on top of yesterday’s positive results from Conoco, Motorola, and Starwood Hotels. (Stocks are taking a breather this morning, after posting their best rally in two months yesterday.)

Look, profits are the purest and most efficient form of stimulus to the economy. They are vastly greater than oversized government spending and borrowing. Profits improve our future outlook, while borrowing and spending undermine it.

Investors need to remain vigilant of looming tax hikes on investors and successful earners. But right now we’re witnessing some big numbers in retail sales, business investments, ISMs, and the aforementioned profits. All of this is driving stocks higher on the shoulders of a V-shaped recovery in the U.S. and — let me add — Asia.

I prefer Asia to Europe. European countries like entitlements that are bankrupting them. Asia likes entrepreneurs, capital formation, and free-market capitalism. There are even some new free-trade agreements springing up right now, which will spur even more growth.

As for Europe, why in the world should U.S. taxpayers — via IMF bailouts — finance the bankrupt entitlement state of socialist Greece or any other EU country? After all, the IMF is largely funded by American taxpayers. I’m quite sure investors will revolt against the idea of bailing out Greece or the EU’s massive social-welfare failures. This is a key political point with financial and economic overtones.

Happy Friday

Happy Friday, well, probably only for the bears today since the market is down. But this isn't all that surprising. My colleague Helene Meisler at RealMoney.com wrote today that the market has been down in 8 of the last 13 final trading days of the month since the March 2009 bottom. Today the pattern is holding.

Nonetheless, April has been another positive month for the market. If the S&P 500 were to close at current levels (1195), it would be up +2.1% for the month. Not bad.

Goldman Sachs (GS) is weighing on the financial complex after a federal criminal probe has been opened to examine the firm. That's the problem with these SEC lawsuits, they just open to door to more lawsuits which become a distraction for the firm, not to mention the legal costs.

The downdraft in the market is overshadowning a few very positive economic reports that were released this morning. To wit, Q1 GDP came in at 3.2%, basically in-line with estimates, but the consumer spending component of the report (+3.6%) showed its biggest gain since the beginning of 2007.

Also, the Univ. of Mich. consumer confidence report rose to 72.2, up from a preliminary reading of 69.5. And the Chicago Purchasing Managers index rose to 63.8, which marks the highest reading since 2005. These are strong reports that confirm the ongoing economic recovery we are seeing. Despite the positive news, my sense is that there are still many skeptics among us, and that will keep the 'wall of worry' firmly in place.

The dollar is weak today as the euro bounces on optimism that Greece will get some sort of aid. The weaker dollar is supporting commodity prices, with oil up to $85.70, and gold pushing higher to $1180. The gold etf (GLD) has broken out to new highs for the year, and looks like it will test its December highs.

Asian markets were mostly higher overnight; the 10-year yield is lower again to 3.66%; and the VIX is +11.6% higher as fear creeps back in the market, to 20.56, which is still below Tuesday's high of 23.20.

Trading comment: I have been waiting for a pullback, and today I may start by putting just a little bit of money to work. I don't mind nibbling on the way down, and putting some cash to work in stages. I will start with stocks that reported strong earnings but pulled back anyway. Today I am starting to bid on some GMCR.

long GLD, GMCR

TO TRADE OR NOT TO TRADE

I’m going to throw out a few ideas for those of you who aren’t emotionally suited to be investors and have to take the traders path. First off realize that miners are volatile. That means position sizes will necessarily have to be small. As a trader you never want to lose more than 1-2% of your total portfolio on any one trade. So you probably aren’t going to be able to trade more than 20% of your account in any precious metal position. Even the ETF GDX can easily swing 10% in the blink of an eye. If you have a 20% position and it goes against you by 10% you have hit your -2% maximum loss on your portfolio. Also be aware that taking 10 mining positions isn’t really diversifying as the sector tends to move in concert.

What you absolutely can not do is take a 100% position with the intent of trading. Locking in 10% losses in a bull market just isn’t going to be a profitable way to make long term money. If you are going to trade then your main concern, actually your only concern will have to be limiting losses (risk control). Let the profits take care of themselves all you care about as a trader is limiting losses.

Next I want to point out something that is or should be obvious but probably isn’t for most traders. Trading isn’t about getting the direction right. Hell that is easy. No trader has any business trading against the cyclical trend. It just doesn’t make any sense to handicap oneself to that extent. This business is tough enough even with all the odds in your favor. Trading against the trend is like playing poker and having to show your hand to your opponents. Sure you might win a few hands now and then but the odds are really high you are going home to tell your spouse you lost the mortgage.

If you are going to be a short seller in a bull market then you better be digging into the fundamentals of the companies you are shorting. If you are shorting in a bull you had better be selling sick or broken companies. Let’s face it that is the only way you are going to get any kind of advantage and even then the pull of the bull can still mask the disease in many unhealthy companies. The financials are an excellent example. Most of them are for all intents and purposes insolvent but because of accounting changes and free money from the government along with implied protection one would have to be crazy to sell short any bank stock.

There were only 10 new lows on the NYSE yesterday. Trying to short high flyers in a bull market is a fools game and as you can see there aren’t a heck of a lot of potential short candidates in bull markets. So unless you are willing to do the due diligence needed to find cancer patients one really should bypass shorting selling. Wait till the bear returns. That is the time to sell short.

No, trading isn’t about getting the direction right, like I said that one is easy. Trading is about getting the timing right. What a trader wants is to time a swing and then get out. If a trade goes against him it’s not because he’s picked the wrong direction it’s because he mistimed the trade. If the trader is willing to be patient the bull or bear will eventually correct the timing error. When a trader stops out he is admitting his timing was wrong not direction, and he thinks he can exit the trade for a small loss and enter another trade where he hopes his timing will be better.

So if one is going to trade understand what you are doing. You aren’t trying to pick direction you are trying to guess timing. Know that history has shown this is very hard to do on a consistent basis and you certainly don’t want to handicap yourself by trading against the large trend unless you have intimate information about the companies you are trading counter trend.

29 Nisan 2010 Perşembe

The Kudlow Creed

Enjoy...

On CNBC's Kudlow Report Tonight


Tonight at 7pm ET:

IMF OUTRAGE: WHY SHOULD U.S. TAXPAYERS BAILOUT GREECE?

- Rep. Cathy McMorris Rodgers, (R) Washington; House Republican Conference Vice Chair


DENDREON GETS FDA GREENLIGHT
NEW PROSTATE CANCER BREAKTHROUGH


CNBC’s Bertha Coombs reports.

MARKET ALL-STARS

- Ed Yardeni, Yardeni Research President
- Kenneth Heebner, Capital Growth Management Portfolio Manager

FED BATTLE ROYALE

- Mike O'Rourke, BTIG Chief Market Strategist

LET THE TEA PARTYERS SING...

- Bob Tyrell, American Spectator Editor; "After the Hangover: The Conservatives' Road to Recovery" Author

Please join us. The Kudlow Report. 7pm ET. CNBC.

The Fed’s Ultra-Wussy FOMC Statement

Right now investors face a V-shaped-recovery theme at home and the serious debt troubles plaguing Greece, Spain, Portugal, and perhaps other countries in Europe. According to reports, the IMF/EU financial-rescue package is now approaching $800 billion. Will there be contagion? That’s the billion-dollar question.

And will Germany sign off? No one knows for sure. I think it probably will. But what I’m really interested in here is whether there’s going to be strict conditionality attached to this bailout. The socialist Greek government cannot be trusted. It may very well turn around and spend the money.

But let me echo another thought. Distinguished investor Ken Heebner told CNBC on Wednesday that the increasingly strong U.S. recovery is independent of Europe. I totally agree. So stock market investors should keep their eyes on the V-shaped recovery. So far, this includes a 76 percent increase in first-quarter operating earnings for the S&P 500. That is huge.

On top of that, we’ve been witnessing big ramp-ups of retail sales, industrial production, and business investment spending.

Now, I do acknowledge a recent jump in gold prices. While the precious metal shed a few bucks today, it did rise to a year-to-date high of $1,167 yesterday. I believe gold could be a warning signal and currency substitute in a world of excess spending and debt. It also could be saying that global central banks — including our own Federal Reserve — are too weak-kneed in taking back their massive money-printing.

Is gold saying, “A pox on all your houses”? “You’re all Greece now”? Perhaps, especially in light of the Fed’s ultra-wussy FOMC statement this week. It totally ignored booming commodity prices and the V-shaped recovery. The Fed still refuses to offer any sign whatsoever of an exit strategy from its ultra-easy, free-money policy.

What do I want? I want a dose of cowboy monetarism. I want to see the Fed, for once in its lifetime, surprise Wall Street traders by pulling the trigger just a little bit faster. It ought to take a cue from Kansas City Fed head Tom Hoenig. Of course, Mr. Hoening dissented once again. It’s time to cowboy up.

28 Nisan 2010 Çarşamba

On CNBC's Kudlow Report Tonight


Tonight at 7pm ET:


GREEK JUNK CONTAGION?
EURO .. DOLLAR .. IS GOLD THE NEW CURRENCY REPLACEMENT?


- Andy Brenner, Guggenheim Securities, Head of Emerging Markets
- Michael Farr, CNBC Contributor; Farr, Miller & Washington President
- Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor

FINANCIAL REFORM: WHAT'S THE RIGHT MARKET SOLUTION?

- Sen. Mark Warner (D-VA)

WASHINGTON TAX ATTACK/DEBT COMMISSION

- Rep. Paul Ryan, (R) Wisconsin; Budget Cmte Ranking Member President Obama's Fiscal Commission
- Robert Reich, Fmr. Labor Secretary; Author, "Supercapitalism"; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy

FED MATTERS: ISN'T THE EMERGENCY IS OVER?

- Brian Wesbury, First Trust Advisors Chief Economist
- Vince Reinhart, American Enterprise Institute resident scholar; former director of monetary affairs at the FOMC

Please join us. The Kudlow Report. 7pm ET. CNBC.

Fed Stands Pat On Interest Rates

The Federal Reserve said the U.S. economy continues to strengthen, but that the slack left over from the recession is still so large that it expects interest rates to stay near zero for an "extended period."

The Fed also said the labor market is beginning to improve but still-high unemployment is keeping a lid on consumer spending.

After its two-day meeting, the Fed said it was in no rush to tighten policy, sticking to its forecast that economic slack, low inflation and stable inflation expectations should call for record-low rates for "an extended period."

Central bankers said there was no timeframe to "extended period."

Quote of the Day

"Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world."
— Albert Einstein: theoretical physicist

Markets Bounce After Big Selloff

The indexes fell -2% yesterday for the first time in months, and took the S&P below its 20-day moving average. The VIX saw an enormous spike higher, 30%, which shows fear was on the rise. The put/call ratio rose to 0.89, but did not top the 1.0 level I watch for.

This morning the markets are taking a breath, and bouncing from yesterday's lows. There were some more solid earnings reports (BRCM), and a lack of more headlines out of Europe.

Asian markets were lower overnight; the 10-yr yield is bouncing from yesterday's plunge to 375%; and the VIX is giving back -7.7% to 21.03.

Yesterday's Goldman Sachs (GS) fanfare overshadowed that there is an FOMC meeting taking place, and we will get the statement from them later today. I don't think we will see much change in the wording of their statement, but investors will parse the language closely for any nuances.

Trading comment: Yesterday's whack was a pretty good one, but I suspect we haven't seen the lows yet. The S&P 500 has pulled back roughly 3% from its highs so far. That said, there have been many individual stocks that have pulled back more significantly, and those might worth picking at. My strategy is to add to the individual names that I like, that have pulled back recently, and then look to add more exposure by putting more cash to work when I get a sense that the overall market has bottomed as well.


*Note: Past performance is not indicative of future performance. Investing in securities involves risk, including the potential loss of principal invested. Investors should be aware that foreign investing involves special risks including grated economic, political, and currency fluctuation risks, which may be even greater in emerging markets. The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. However, an investor should note that diversification cannot assure a profit or protect against a loss. There is no assurance that these movements or trends can or will be duplicated in the near future.

YOU HAVE TO KNOW WHEN TO HOLD EM


I think it may be time for the miners to start outperforming the stock market again. I know when one looks at that semi parabolic chart of the S&P for the last two months it certainly appears that buying miners has been a poor choice. The reality is that miners have matched the gains in the S&P although they admittedly have been more volatile. Of course that's just par for the course in this sector and one of the things precious metal investors just have to accept.

One of the things I've learned over the years is that this sector has a very sneaky way of boring everyone to tears, then just about the time you get fed up and leave the sector shoots straight up for a couple of weeks. If you are out you miss the move. Then about the time everyone panics back in the sector enters another consolidation.

The only way to avoid missing the move is to just stay in. That means you are going to have periods that try your patience but ultimately the reward is worth the wait.

27 Nisan 2010 Salı

Highlighting The V-Shaped Recovery

With all eyes trained on the financial-regulation bill and the Goldman Sachs hearings, I’d like to keep hope alive by focusing attention on the V-shaped recovery. You may have seen yesterday’s New York Times front-page story: “From the Malls to the Docks, an Economic Recovery Boom Set to Roar.” Of course, I agree. As you know, this has been a key theme of mine in recent months.

Now, it may not last forever. There is a big-government-tax-hike wall standing in front of us next year and beyond. But tea-party politics may tear down that wall in the November midterms. So keep hope alive.

But as far as this year goes, I’m still highlighting the blowout profits and trillions of dollars of capital gains coming from the stock market rally. Profits and capital gains are the purest and most effective economic stimulus of all. Profits are what matter.

Moreover, the stock market may still be undervalued. A new report suggests that S&P companies may earn almost $86 a share in the next year. With today’s S&P index trading just north of 1,200, $86 bucks a share is only 14 times future earnings. And that, at least theoretically, makes stocks the cheapest they’ve been since 1990 (except for the months directly following the Lehman meltdown).

Another key point on the stock market rebound: Did you know that bull markets tend to last about four years on average? They can last as long as five to six years, and they can be as short as a year. But they’re usually about four years. Are we in the early innings of a bull-market run?

And while bank stocks have been clocked recently, I don’t think the proposed financial legislation is going to damage profits to the extent that the banks can’t recover.

To be perfectly honest here, as much as I love to dig into all the money-politics issues -- including the financial-reform bill -- I’m much more interested in these big profits and capital gains. This V-shaped recovery is the most important item on my radar screen. It’s the single-biggest investor issue out there right now. I don’t think the bull market in stocks is over yet.

Again, regarding taxes and regulations, I’ll warn about next year. But frankly, I think the prosperity theme is issue number one.

Goldman Gets Grilled

I have to admit that the reason my morning post is so late today is that I have not been able to take my eyes off of this ridiculous congressional hearing of Goldman Sachs execs. My first problem with it, is that Goldman didn't do anything different than any other investment banking operation across the globe. So when they paid back TARP, we were happy they made money, but no we want to demonize them for it.

Second, these congressmen don't even understand the issues that they are discussing, and proposing to regulate. They don't know the difference between a market maker, which just makes prices for clients to transact, and a financial advisor which has a fiduciary obligation to do what is right for his/her client. Its a joke, and the public expects these folks to come up with sweeping regulation that will protect us in the future. Good luck.

The market had already started off on a negative note after S&P downgraded the credit rating for Portugal. Then came the news that they also downgraded Greece's debt to junk. Good timing on downgrading both in the same day.

The news is hitting the euro, and boosting the dollar. Most commodities are lower, but gold is higher on a flight to safety trade. U.S. bonds are also up big on this flight to safety, with the yield on the 10-yr note plunging to 3.71% as a result.

The negatives above overshadowed some positive economic news in the form of a higher than expected Consumer Confidence number (57.9 vs. 53.5), the best reading since August 2008. Also, the CaseShiller home price index for February rose 0.6% yr/yr, which marks the first increase since 2006. I think the figures for March and April should continue to improve, marking a bottom in the housing market.

There were also more strong earnings reports from Ford (F), MMM, DuPont (DD), and Texas Instruments (TXN), but the stocks are lower as a result of the overall market.

Trading comment: I have cautioned recently that complacency was building. And last week (4/16), I noted the big spike in the VIX that day and said that these spikes were rarely one-day events, and that there was probably more to come in terms of a selloff. The market went on to make new highs in the ensuing week, but today the selloff has resumed. The VIX spiked as much as 20% today, gapping above its 50-day to as high as 21.25.

I think a lot of today's selling is profit taking, as the Nasdaq has been up for 8 straight weeks, a rare event. I have done bits of profit taking along the way, and raised cash. The S&P 500 has just pierced its 20-day average today, and I still think this pullback has more room to run. As such, I am doing little today, and hoping my patience has paid off.

long F


*Note: Past performance is not indicative of future performance. Investing in securities involves risk, including the potential loss of principal invested. Investors should be aware that foreign investing involves special risks including grated economic, political, and currency fluctuation risks, which may be even greater in emerging markets. The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. However, an investor should note that diversification cannot assure a profit or protect against a loss. There is no assurance that these movements or trends can or will be duplicated in the near future.

26 Nisan 2010 Pazartesi

On Tonight's Kudlow Report


CNBC this evening at 7pm ET:

FINANCIAL REFORM SHOWDOWN

- CNBC’S Hampton Pearson reports the latest news and developments..

- Sen. Kay Bailey Hutchison (R-TX; Senate Banking Committee member)

GET DERIVATIVES OUT OF THE BANK? ; BUFFETT; TOO BIG TO FAIL

- Christopher Mayer, Senior Vice Dean; Prof. of Economics and Finance at Columbia Business School Columbia University
- Bill Isaac , Fmr. FDIC Chairman; Chairman of The Secura Group of LECG
- Brian Gardner, Keefe Bruyette & Woods

MARKETS & THE V-SHAPED RECOVERY
STOCKS CHEAPEST SINCE 1990?
CATERPILLAR SOARS…


- Brian Wesbury, First Trust Advisors Chief Economist
- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer
- Stefan Abrams, Bryden-Abrams Investment Management Managing Partner

Please join us. The Kudlow Report. 7pm ET. CNBC.

Monday Morning Musings

The market is adding to Friday's gains this morning in the face of some mixed news.

There were some strong earnings reports from the likes of Whirlpool (WHR) and Catepillar (CAT), but there were also some disappointments such as BlackRock (BLK). BlackRock probably isn't being helped by all of the chatter this morning about financial reform and what it will look like.

I don't want to get off on a rant about govt. regulation, but suffice it to say that it rarely has a beneficial effect ahead of the problems it targets. Does anyone view Sarbanes Oxley as a huge success?

There was also some M&A news this morning, with Hertz (HTZ) agreeing to acquire Dollar Thrifty (DTG) for a mix of cash and stock.

The dollar is higher today, pushing oil prices down a bit to $84.50, but gold is hovering near the unchanged level around $1155.

Asian markets were higher overnight; the 10-year yield is off a touch to 3.80%; and the VIX is +2.9% higher to 17.10.

Trading comment: The market continues to power higher, and breadth has actually been very good. The sentiment indicators are somewhat mixed, with things like the Rydex ratio and the CBOE 10-day put/call reaching bearish levels that have preceded corrections earlier this year. But some of the investor surveys are not showing the same levels of complacency, so I would say sentiment is mixed right now.

I have taken some profits in recent weeks, and still hold more cash than normal. But I also have held on to many of our positions as they continue to perform quite well. My game plan is to look for pullbacks before committing new cash, and to start out slowly in case we do get a correction that has some teeth to it.

long BLK


*Note: Past performance is not indicative of future performance. Investing in securities involves risk, including the potential loss of principal invested. Investors should be aware that foreign investing involves special risks including grated economic, political, and currency fluctuation risks, which may be even greater in emerging markets. The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. However, an investor should note that diversification cannot assure a profit or protect against a loss. There is no assurance that these movements or trends can or will be duplicated in the near future.

25 Nisan 2010 Pazar

THE PROBLEM WITH TRADING

Here is the problem with trading. Most of the time any market will be in consolidation mode. Gold is a good example.


For the last 5 months gold has done nothing but trade back and forth with no defined trend. It's very tough to make money in those conditions.

Now don't get me wrong somewhere someone will have traded this perfectly. They will have stumbled upon the perfect system to catch each little wiggle. Often they will proclaim their superiority loudly for all the world to hear.

Unfortunately there really is no holy grail of investing and the system that happened to work this time will almost always fail during the next period. It's just how the markets work, conditions change. So unless one is lucky enough to guess what will work before each new period in the market what invariably happens is one ends up giving back all of the gains they made when their system breaks down.

The answer of course is to just stay aligned with the secular trend and accept that there are going to be periods when one will just have to sit and watch other people make money. The last five months have been a perfect example as the stock market has gone up while precious metals and miners have gone nowhere.

Know full well that eventually this too will end as gold is in a secular bull market with a long way to go and the general stock market is in a secular bear market with limited upside potential.

So at some point gold and miners will make another big move up and all the waiting will have been worth it. And at some point the stock market will come grinding back down and all those who held on expecting conditions never to change will lose all of their profits.

So one can trade if they must, but do so knowing that the market is going to take away any and every profitable system at some point whether it be a technical system, patterns, cycles, indicators, sentiment, COT or just intuition.

I've watched it happen to countless "traders" over the years. The really good traders survive these periods because they practice excellent risk management. Unfortunately most retail traders when they get on a hot streak believe they have found the secret to the market and risk management goes out the window. That's just about the time the market starts throwing curve balls.

23 Nisan 2010 Cuma

The Washington Tax Attack Marches On

The worst thing I’ve seen recently, by far, is the Senate Budget Committee’s new mark-up to jack the dividend tax from 15 percent all the way up to 40 percent. What in the world are these people thinking?

This is a direct tax attack on capital, jobs, the stock market, and entrepreneurs. It would take effect next year, in 2011, which is not so far from where we are right now in late April 2010.

This tax attack would come on top of a scheduled capital-gains tax hike. And then you’ve got a potential hike of the alternative minimum tax as well as a hike of the inheritance/death tax. And there’s more: In his Cooper Union speech yesterday, President Obama renewed the call for a new bank tax. Remember that one? You thought it was dead? Nope. It’s still alive.

Finally, you’ve got all the chatter about a European-style value-added tax, or VAT.

This is all terrible for economic growth. Whatever happened to the tea-party Contract from America, which calls for constitutional limits on taxing, spending, and ultra-big government?

Washington is not listening.

Incidentally, a new Pew poll reveals that a staggering 80 percent of Americans do not trust Washington. What a shocker. (Read Dan Henninger’s great column in yesterday’s Wall Street Journal on this very important point.) Is anyone really surprised at this poll’s results?

Again, what happened to the tea-party call for limited government, limited spending, and limited taxation? That’s what I want to know.

On Tonight's Kudlow Report

This evening at 7pm ET:

-ARE WE IN A V-SHAPED RECOVERY?
-STOCK MARKET BULL OR BEAR?
-DO WE NEED SOME COWBOY MONETARISM?
-DIVIDEND TAX ATTACK & OTHER WASHINGTON TAX ATTACKS

- David Kelly, JP Morgan Funds Chief Market Strategist
- Jack Ablin, Harris Private Bank Executive VP & Chief Investment Officer
- John Rutledge, Rutledge Capital Chairman; Fmr. Reagan Economic Advisor
- Chip Hanlon, Delta Global Advisors president
- Steve Moore, Senior Economics Writer for the Wall Street Journal Editorial Board; "Return to Prosperity" co-author

IINTELLECTUAL PROPERTY; GREECE, EURO, YUAN, KING DOLLAR
- Bob Hormats, Under Secy of State for Economic, Business, & Agricultural Affairs; fmr. Vice-Chmn Goldman Sachs Internat'l

WILL TEA PARTY CHANGE GOV'T & AMERICA?
- Bill Hennessy, St. Louis Tea Party Founder; "The Conservative Manifesto" Author; Town Hall Forum Contributor

INFLATION THREAT…TAX ATTACK & THE MARKET

- Jimmy Pethokoukis, Reuters Money & Politics Columnist
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager

Please join us. The Kudlow Report. 7pm ET. CNBC.

Goldman's Outlook

This isn't a post about Goldman's SEC troubles. Rather, Goldman released its monthly Market Pulse research piece, and here is a summary of their investment convictions at this juncture:
  • U.S. economy headed for stronger growth in Q2
  • That should be followed by a slowdown in 2H10, followed by a reacceleration in 2011
  • Maintain outlook for disinflation vs. signs of inflationary problems
  • See no reason why FOMC would raise rates in 2010
  • Crude oil should stay in $80-90 range this year, top $100 in 2011
  • 10-yr yield should ease back towards 3.25% by year-end
  • 2010 target for S&P 500 remains 1250
  • Gold should stay under $1165 in 2010, but hit $1350 in 2011
  • Emerging market stocks now slightly expensive relative to developed mkts
  • Small caps look attractive
  • High yield credit appears attractive

In a nutshell, that's what GS is advising to their asset management clients, in terms of how to position portfolios for the near-future.

22 Nisan 2010 Perşembe

Is John Paulson Watching The Kudlow Report?

Billionaire hedge-fund manager John Paulson has received quite a bit of press lately, all arising from his involvement in Goldman Sach’s 2007 Abacus deal which netted him a king’s ransom of $1 billion. Say what you will about the man, Mr. Paulson is a terribly smart investor — one of a small handful who accurately predicted the housing market’s turn with highly successful bets against mortgage securities.

Now, what is less well known about Paulson is that he has turned rather bullish on the U.S. housing market and the overall economy. In a conference call with investors yesterday, Paulson said he was concerned earlier this year about a potential double-dip recession. But he went on to say that he is “not concerned about that at all today. It’s more likely there could be a V-shaped recovery.” Whoa. Mr. Paulson, are you tuning in to The Kudlow Report each night? Of course, I have been discussing — at length — the various and key pieces of evidence that support a clear case for a V-shaped recovery.

Incidentally, Mr. Paulson also remarked that corporate earnings are coming in ahead of expectations, that there’s a vibrant credit market, and that the stock market is stronger. Yes indeed, sir.

Heck, I’ve never seen or owned a synthetic CDO. That’s above my pay grade. But I certainly agree with Paulson’s take on the economy. (Hat tip to my pal and economics professor Mark Perry of the Carpe Diem blog site. He’s been signaling Paulson’s call.)

And now for some worrisome news: While stocks did eke out small gains Wednesday, outside of Morgan Stanley’s 4 percent rise from a big earnings number, all the big banks got clobbered by an average of around 2 percent. The list includes Goldman, Citi, US Bancorp, JPMorgan, BofA, Wells Fargo, and State Street.

Why did the big boys get hit? Financial regulation is going to pass. That ain’t good for banks. First, it may put an end to proprietary trading for these boys. Second, it may squash their lucrative derivatives business. Third, it may take away their too-big-to-fail status.

So be on the lookout for some rocky moments ahead for the big boys on the road to financial reform. While this may be good news for U.S. taxpayers, it’s not necessarily so good for the nation’s biggest banks.

Another point on this bank bill worth noting: Sen. Blanche Lincoln’s derivatives legislation means trading will wind up moving to Chicago, which has much better infrastructure than New York. So, in a sense, you could actually call this a Chicago jobs bill. In the longer term, New York City will be very hurt by this.

Elsewhere, some good news: With 20 percent of the S&P having already reported, roughly 85 percent of the S&P companies have beat expectations. Guess what? If this continues, it will be the best performance since 1993.

On an interesting but somewhat unrelated note, the Treasury and the Fed have unveiled a new $100 bill with a lot of high-tech security embedded in it. Ben Franklin is still on the front, and it’s going into circulation next year. An interesting factoid about the C-note: It’s the highest denomination of all U.S. currency and has huge circulation around the world. Over the past 25 years, global demand has pushed these Benjamins up to $890 billion from $180 billion, with two-thirds circulating outside the United States. As for me, I’m still waiting for the new Ronald Reagan note.

But let me close with this key point regarding the V-shaped recovery: Rising corporate profits equals rising jobs in the future. If businesses are profitable, they will hire. Bank on it. After all, we witnessed such a steep falloff in employment because businesses were so unprofitable.

Again, I’ve never owned a synthetic CDO in my life. But I do entirely agree with John Paulson’s bullish call for a V-shaped economic recovery. I’m delighted to hear he shares my view.

On Tonight's Kudlow Report

This evening at 7pm ET:

PRESIDENT OBAMA ADDRESSES WALL STREET

CNBC chief Washington correspondent John Harwood reports.

NO G.O.P. COMPROMISE?
- Rep. Mike Pence will join us from Washington.

WALL ST. CULPABILITY
How Much Blame Does Wall St. Deserve?

- Nicole Gelinas, Manhattan Institute Senior Fellow
- Roger Lowenstein, author of "The End of Wall Street"

TAX ATTACK: BANK TAX BACK FROM THE DEAD; VAT TAX; BUSH TAX CUTS EXTENSION?; TAXES IN UPCOMING BUDGET

- Matt Miller, The Daily Beast Columnist; Public Radio's "Left, Right and Center" Host
- Jerry Bowyer, CNBC Contributor/Syndicated Columnist

MARKETS & ECONOMY
A V-shaped recovery? Moody's Turns on Greece

- Howard Lutnick, Cantor Fitzgerald Chairman. & CEO
- Peter Navarro, "The Coming China Wars" Author; University Of California - Irvine Business Professor

Please join us. The Kudlow Report. 7pm ET. CNBC.

Old Turkey

I love this story from Reminisces of a stock operator. It is so appropriate as the second phase of the gold and silver bull get underway.

"Most let us call' em customers -- are alike. You find very few who can truthfully say that Wall Street doesn't owe them money. In Fullerton's there were the usual crowd. All grades!Well, there was one old chap who was not like the others. To begin with, he was a much older man.

Another thing was that he never volunteered advice and never bragged of his winnings. He was a great hand for listening very attentively to the others.He did not seem very keen to get tips -- that is, he never asked the talkers what they'd heard or what they knew. But when somebody gave him one he always thanked the tipster very politely. Sometimes he thanked the tipster again -- when the tip turned out O.K. But if it went wrong he never whined, so that nobody could tell whether he followed it or let it slide by.

It was a legend of the office that the old jigger was rich and could swing quite a line. But he wasn't donating much to the firm in the way of commissions; at least not that anyone could see. His name was Partridge, but they nicknamed him Turkey behind his back, because he was so thick-chested and had a habit of strutting about the various rooms, with the point of his chin resting on his breast.

The customers, who were all eager to be shoved and forced into doing things so as to lay the blame for failure on others, used to go to old Partridge and tell him what some friend of a friend of an insider had advised them to do in a certain stock.They would tell him what they had not done with the tip so he would tell them what they ought to do. But whether the tip they had was to buy or to sell, the old chap's answer was always the same. The customer would finish the tale of his perplexity and then ask: "What do you think I ought to do?"Old Turkey would cock his head to one side, contemplate his fellow customer with a fatherly smile, and finally he would say very impressively, "You know, it's a bull market!"

Time and again I heard him say, "Well, this is a bull market,you know!" as though he were giving to you a priceless talisman wrapped up in a million-dollar accident-insurance policy. And of course I did not get his meaning.

One day a fellow named Elmer Harwood rushed into the office, wrote out an order and gave it to the clerk. Then he rushed over to where Mr. Partridge was listening politely to John Fanning's story of the time he overheard Keene give an order to one of his brokers and all that John made was a measly three points on a hundred shares and of course the stock had to go up twenty-four points in three days right after John sold out. It was at least the fourth time that John had told him that tale of woe, but old Turkey was smiling as sympathetically as if it was the first time he heard it. Well, Elmer made for the old man and, without a word of apology to John Fanning, told Turkey, "Mr. Partridge, I have just sold my Climax Motors. My people say the market is entitled to a reaction and that I'll be able to buy it back cheaper. So you'd better do likewise. That is, if you've still got yours."

Elmer looked suspiciously at the man to whom he had given the original tip to buy. The amateur, or gratuitous, tipster always thinks he owns the receiver of his tip body and soul, even before he knows how the tip is going to turn out."Yes, Mr. Harwood, I still have it. Of course!" said Turkey gratefully. It was nice of Elmer to think of the old chap."Well, now is the time to take your profit and get in again on the next dip," said Elmer, as if he had just made out the deposit slip for the old man.

Failing to perceive enthusiastic gratitude in the beneficiary's face Elmer went on: "I have just sold every share I owned!" From his voice and manner you would have conservatively estimated it at ten thousand shares.But Mr. Partridge shook his head regretfully and whined, "No!No! I can't do that!": 'What?" yelled Elmer. "I simply can't!" said Mr. Partridge. He was in great trouble."Didn't I give you the tip to buy it?""You did, Mr. Harwood, and I am very grateful to you.Indeed, I am, sir. But --" "Hold on! Let me talk! And didn't that stock go up seven points in ten days? Didn't it?""It did, and I am much obliged to you, my dear boy. But I couldn't think of selling that stock."

"You couldn't?" asked Elmer, beginning to look doubtful himself. It is a habit with most tip givers to be tip takers."No, I couldn't.""Why not?" And Elmer drew nearer."Why, this is a bull market!" The old fellow said it as though he had given a long and detailed explanation."That's all right," said Elmer, looking angry because of his disappointment. "I know this is a bull market as well as you do. But you'd better slip them that stock of yours and buy it back on the reaction. You might as well reduce the cost to yourself.""My dear boy," said old Partridge, in great distress "my dear boy, if I sold that stock now I'd lose my position; and then where would I be?"

Elmer Harwood threw up his hands, shook his head and walked over to me to get sympathy: "Can you beat it?" he asked me in a stage whisper. "I ask you!"I didn't say anything. So he went on: "I give him a tip on Climax Motors. He buys five hundred shares. He's got seven points' profit and I advise him to get out and buy 'em back on the reaction that's overdue even now. And what does he say when I tell him? He says that if he sells he'll lose his job. What do you know about that?""I beg your pardon, Mr. Harwood; I didn't say I'd lose my job," cut in old Turkey. "I said I'd lose my position. And when you are as old as I am and you've been through as many booms and panics as I have, you'll know that to lose your position is something nobody can afford; not even John D. Rockefeller. I hope the stock reacts and that you will be able to repurchase your line at a substantial concession, sir. But I myself can only trade in accordance with the experience of many years. I paid a high price for it and I don't feel like throwing away a second tuition fee. But I am as much obliged to you as if I had the money in the bank. It's a bull market, you know." And he strutted away, leaving Elmer dazed.

What old Mr. Partridge said did not mean much to me until I began to think about my own numerous failures to make as much money as I ought to when I was so right on the general market.The more I studied the more I realized how wise that old chap was. He had evidently suffered from the same defect in his young days and knew his own human weaknesses. He would not lay himself open to a temptation that experience had taught him was hard to resist and had always proved expensive to him, as it was to me

Greek Deficit Widens, Worries Markets

The market is lower this morning amid renewed concerns about Greece's budget deficit. It's amazing how back and forth the market is over Greece. One day it's no big deal, and Greece will receive aid, and the next day the sky is falling and its woes are troublesome. Today, the concerns is that even though financial aid has been pledged to the country, its bond yields are widening on news that their budget deficit hit 13.6%, worse than the 12.9% expected.

While most stocks in the U.S. are lower, there are some standouts that reported solid earnings and their stocks are higher: Sandisk (SNDK), F5 (FFIV), and Starbucks (SBUX).

There was also a handful of companies that reported solid earnings, but not enough to keep their stocks up, and they are selling off: Pepsi (PEP), eBay, and Qualcomm (QCOM) to name a few.

In economic news, existing home sales were stronger-than-expected for March at 6.8%. Also, core PPI rose 0.1%, in-line with expectations.

The Greece news is weighing on the euro and pushing the dollar higher, which is again hurting commodities. Oil is down -1.5% near $82.40 while gold is down -1.1% near $1136.

Asian markets were lower overnight; the 10-year yield is flat at 3.73%; and the VIX is +5.88% higher to 17.26.

Trading comment: Patience is paying off today as the 2-day bounce in the markets looks to have run its course and we are seeing some pullback. I would peg near-term support in the market at the 20-day moving averages, which equate to 1189 for the S&P 500 and 2450 for the Nasdaq.

The President is going to speak about financial reform in a bit, and I can't see that helping the market. He will likely scold Wall St., imply that the fat-cat bankers got greedy, say we can never let this happen again, and propose some regulation that will likely prove to be overreaching and solving a problem that has passed, like slamming the barn door after the horses are already out. Such is the case with govt. regulation. It is what it is.

The other fact that rarely gets mentioned is that while the banks received aid from TARP, they have mostly paid it back and I don't think the govt. lost any money on the deal. Conversely, govt. sponsored Freddie and Fannie are expected to cost the govt. hundreds of billions of dollars at the taxpayers expense. Maybe govt. should point the finger at themselves and ask why the heck they were allowing Fannie and Freddie to condone such lax lending standards??

long FFIV


*Note: Past performance is not indicative of future performance. Investing in securities involves risk, including the potential loss of principal invested. Investors should be aware that foreign investing involves special risks including grated economic, political, and currency fluctuation risks, which may be even greater in emerging markets. The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. However, an investor should note that diversification cannot assure a profit or protect against a loss. There is no assurance that these movements or trends can or will be duplicated in the near future.

More On Apple's Blowout Earnings

As promised, here is my coverage of Apple's conference call, and my thoughts on the stock, from TheStreet.com article:

Apple (AAPL) reported another stunning quarter. EPS beat estimates by 88 cents, coming in at $3.33, which represents 86% growth vs. a year ago. Revenue also beat consensus by well over $1 billion, coming in at $13.50 billion (up 49%). Gross margins were also very strong, rising to 41.7%, due to a favorable mix of more iPhones sold.

The number of iPhones sold was outstanding. The company sold 8.75 million iPhones (up 131%), which are more units than it sold during the holiday quarter in the fourth quarter. That is pretty amazing. Macs also came in above estimates with 2.94 million units sold (up 33%). And iPods were the strongest they have been in two years, with 10.89 million units sold (down 1%).

Getting back to iPhones, demand was very strong but led by extremely robust international growth. Asia-Pacific was the strongest region, and iPhones are now being sold at 151 carriers in 88 countries. Average selling prices declined a bit, to roughly $600. The new operating system (OS4) is coming this summer and contains 100 new features. With the rumors today of a new form factor coming as well, I expect iPhone demand to remain strong.

Macs had a record in terms of units sold in a second quarter. The company is comfortable with channel inventories and recently updated its Macbook Pro. iPods were also surprisingly strong, led by the iTouches (up 63%). iTunes had its best quarter ever, and the app store now has over 185,000 apps for sale.

In terms of the iPad, management said it was "shocked" by how strong demand was. It wanted to price the product aggressively to capture strong, early market share. Demand was so strong that the company had to delay the international launch, but it expects to be in nine countries in May. And the 3G version in the U.S. will be released April 30. I believe the iPad is going to be a big product segment for Apple and realize that it may weigh on gross margins in the near term.

Guidance was strong, factoring in the normal ultra-conservative practice of lowering EPS expectations. Management guided third-quarter EPS to $2.28-$2.39, the midpoint of which is roughly 12% below current Street estimates, which is normal. Revenue guidance of $13.0 billion to $13.4 billion is above current consensus estimates. Gross margins are forecast to decline near 36%, due in part to the lower margin impact of the iPad, as well as the start of the educational selling season. And the tax rate is expected to rise to 27% (it was 24% this quarter).

Overall, the company once again displayed superb execution and exceeded expectations on just about every front. Demand for its products remains white hot, and in the press release Steve Jobs said, "We have several more extraordinary products in the pipeline for this year."

So the innovations are not over, and neither is the growth for this company. Earnings estimates will continue to climb higher, and I feel compelled to raise my $300 price target I established last year to at least $325 by year-end, which is still a reasonable valuation for this great company.

long AAPL

21 Nisan 2010 Çarşamba

The Case Against Goldman Sachs


I’d like to weigh in on this whole SEC securities-fraud action against Goldman Sachs. The feds have, of course, alleged that Goldman made materially misleading statements and omissions in connection with a synthetic collateralized debt obligation (CDO) that was structured by Goldman and marketed to investors.

This is all very complicated. And I know some very smart people lining up on one side saying the SEC’s fraud action is weak. And I know some equally smart people on the other side saying this is an extremely serious matter that will be followed by numerous other SEC fraud charges against other Wall Street underwriters.

Look, I’m not a lawyer. I don’t know how this lawsuit will eventually play out. But let me make a couple of simple, straightforward, points that may help inform regarding the question of hedge fund manager John Paulson’s involvement in the securities selection for the Abacus CDO, and whether this is a material fact that Goldman should have disclosed to investors.

Here’s a very important timeline of the securities-selection process that was made by ACA management, the portfolio selector. This is from the actual SEC complaint:

ACA/PAULSON PORTFOLIO

January 9, 2007
Goldman sends email to ACA, titled "Paulson Portfolio," containing list of 123 RMBS selected by Paulson for the Abacus 2007-AC1 reference portfolio

January 22, 2007
ACA sends email to Fabrice Tourre & others at Goldman containing list of 86 RMBS, including 55 of the 123 selected by Paulson; 68 were rejected. This is very important. Goldman maintains that ACA was in fact the portfolio selector. ACA rejected 68 of Paulson’s recommendations. They accepted 55.

February 2, 2007
After meetings with Paulson & Tourre, ACA emails Paulson, Tourre & others at Goldman a list of 82 RMBS on which Paulson & ACA concurred, plus 21 others. So at this point, they are in agreement on 82, but they insert 21 others.

February 5, 2007
Paulson sends email to ACA & Tourre deleting 8 of the RMBS recommended by ACA and leaves the rest alone.

February 26, 2007
After further discussion, Paulson & ACA agree on a reference portfolio of 90 RMBS for Abacus 2007-AC1.

Now, what I gather from all of this is that ACA management was most definitely the portfolio selector. There’s no question about it. This is Goldman’s single biggest defense in not mentioning hedge fund manager John Paulson’s name.

However, I’m looking at this and I’m thinking, with all these negotiations, all of this back-and-forth, that it’s quite clear that John Paulson played a pivotal role in the portfolio-selection process. That seems undeniable. So that raises the key question of whether Goldman Sachs’ decision not to disclose Paulson’s involvement was a correct judgment, or whether it was a material omission. It just seems to me that Goldman Sachs should have named Paulson in the offering circular for the CDO. They didn’t. Is it because they didn’t want investors to understand that this was a bear-market, short-the-bond CDO?

Second point: Some highly placed, senior Wall Street sources who have been deeply engaged in structured mortgage-based CDOs tell me that this CDO in question was weak and appeared designed to unravel quickly. They go on to say, in general terms, that this CDO constructed by Goldman Sachs lacked sufficient cash; its covenants were weak; and it afforded less investor protection than usual in order to provide higher yields. This troubles me enormously.

Creating something that’s designed to fail? Well, you know what? If it’s not illegal, it certainly appears unethical. So I must blame Goldman for this. Why sell it to customers if it’s going to fail? Why go there in the first place? What kind of brokerage service is this?

Now, there’s nothing wrong with creating a neutral security that will attract buyers and sellers. That’s called free-market capitalism. And the buyers and sellers do not have to know who the buyers and sellers are. But if, in fact, these Goldman CDOs were designed to fail, then there’s something seriously wrong with this system and it must be changed.

Whether Goldman lied about Paulson’s $200 million equity stake is another difficult issue. If they lied, then it’s a material misrepresentation and the SEC is dead right. But there are different opinions about this.

One final thought: Wouldn’t it be wonderful if Washington could somehow solve these issues without totally demonizing, demoralizing, and even destroying America’s great global banks? We need these banks for full-fledged economic recovery. We also need them for America’s full-fledged leadership in the global financial system and world economy. In other words, can we please figure out a way not to throw out the baby with the bathwater?

This is way too important a time for our recovering economy and financial system. Our future is at stake.

Apple Knocks The Cover Off The Ball

The market is slightly higher in early trading, led by the Nasdaq on the heels of Apple's (AAPL) blowout earnings. The company crushed estimates on just about every metric, from earnings to Macs to iPods and especially iPhones. Apple sold more iPhones in the last quarter than they did during the previous holiday quarter. That was surprising. I covered the conference call for TheStreet.com, and will try to post my comments later.

There was also a handful of other big companies to report solid earnings, pushing most of their stocks higher, including: VMWare (VMW), Morgan Stanley (MS), AT&T, United Tech (UTX), Boeing (BA), and McDonalds (MCD).

The dollar is slightly higher today. That is holding back stocks in the energy and materials sector, even as oil and gold prices inch higher. Oil is trading up near $84.40 and gold is also higher to $1143.

Asian markets were mostly higher overnight, led by China and Japan, while Hong Kong was lower; the 10-year yield is lower again to 3.75%, testing its 50-day support; and the VIX is up a bit to 16.15, after breaking back below the 16 level yesterday.

It's pretty surprising that the Nasdaq is still hovering around the 2500 level. It hit a high of 2517 last Thursday, so it is now less than 1% off its high. Ditto the S&P 500.

Trading comment: I'm happy that some of our positions are doing well today, but I am still a bit surprised that the market continues to hover near its highs. I still think complacency is too high here, and that a pullback is more likely than not. Yesterday, the Rydex ratio that I have shown here before hit a new 1-yr high, indicating that market timers continue to rush into the bullish Rydex funds and out of the bearish tilted funds. That's a yellow flag in my book.

long AAPL, VMW


*Note: Past performance is not indicative of future performance. Investing in securities involves risk, including the potential loss of principal invested. Investors should be aware that foreign investing involves special risks including grated economic, political, and currency fluctuation risks, which may be even greater in emerging markets. The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. However, an investor should note that diversification cannot assure a profit or protect against a loss. There is no assurance that these movements or trends can or will be duplicated in the near future.

20 Nisan 2010 Salı

POTENTIAL RUNAWAY MOVE DEVELOPING

Without going into detail if the market moves to new highs I think the odds are good that we have entered a potential runaway move similar to 06/07.


I can tell you that during one of these moves you can just throw out virtually every tool as they all become pretty much useless.

Sentiment didn't work during this period. Cycles stretched to absurd lengths. The COT failed miserably. Technicals were worthless. Overbought was meaningless.

There are two signs to watch for as a clue to an impending top. Needless to say we don't have either at this point and there's no telling how long this could last if it does indeed turn into a runaway rally. The 06/07 move lasted almost 7 months. This one is already 2 months old.

Virtually all markets have now broken through any and all logical resistance levels. 1200 S&P, 11,000 Dow & 2000 NDX just to name a few.


I don't actually expect the move to continue at the same pace as the last two months but it is showing all the signs of an impending runaway rally.

Needless to say shorting something like this is suicide, although I think by now we've all learned our lesson about shorting this cyclical bull.

On Tonight's Kudlow Report

This evening at 7pm ET:

FINANCIAL REFORM: WHAT'S NEW ON THE FIN-REG/DERIVATIVES/CONSUMER PROTECTION FRONT?

CNBC chief Washington correspondent John Harwood reports.

FIN REG & THE MIDTERMS
- Sen. Jim DeMint (R-SC)

GOLDMAN'S EARNINGS
CNBC’s Michelle Caruso-Cabrera reports.

SHOULD ALL DERIVATIVES BE BANNED?
DID GOLDMAN WRECK IT FOR ALL OF WALL STREET?

- David Goldman, Senior Editor First Things Magazine
- Peter Morici, University of Maryland Robert H. Smith School of Business Professor; U.S. International Trade Commission Fmr. Chief Economist

OBAMA SHIFTING DISCUSSION TO FIN REG...USING GOLDMAN AS A CLUB?

- Camden Fine, President & CEO Independent Community Bankers of America
- Mark Callabria, Director of Financial Regulation Studies at the Cato Institute

BULL/BEAR MARKETS

- James Altucher, Managing Director Formula Capital
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager

Please join us. The Kudlow Report. 7pm ET. CNBC.

Positive Earnings Reports Roll In

The market reversed itself from yesterday's lows to help the S&P finish the session in positive territory. That buying interest has spilled over into today's session, with the major indexes all in positive territory so far.

Earnings reports have generally been positive so far, even thought some stocks that have reported strong earnings have seen their shares selloff on the news. Goldman Sachs (GS) and IBM both topped estimates, but their stocks are lower this morning. Ditto for the likes of Coca-Cola (KO) and JNJ. In the industrials sector, Eaton (ETN) and Illinois Tool (ITW) reported strong earnings and their stocks are actually higher on the reports.

Its really all about earnings right now, although there are other events moving markets. Europe's markets were higher this morning following news that Greece saw strong demand for its 2 billion euro auction of 3-month bills. Asian markets were mixed overnight.

The dollar is higher today, but commodities are rallying anway. Oil is higher near $83, while gold has bounced back above the $1140 level.

The 10-year yield is higher to 3.81%; and the VIX is -5.6% lower to 16.38 after a big negative reversal yesterday.

Trading comment: While the markets are bouncing, I still don't think that the full extent of the pullback was felt in just one trading session (Friday). I have not put cash to work yet, and am patiently watching for stocks that report strong earnings yet selloff anyway as good candidates to add to.

long IBM


*Note: Past performance is not indicative of future performance. Investing in securities involves risk, including the potential loss of principal invested. Investors should be aware that foreign investing involves special risks including grated economic, political, and currency fluctuation risks, which may be even greater in emerging markets. The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. However, an investor should note that diversification cannot assure a profit or protect against a loss. There is no assurance that these movements or trends can or will be duplicated in the near future.

19 Nisan 2010 Pazartesi

Monday Morning Musings

The market is stuggling to stay in positive territory as the overhang from the SEC fraud charges on Goldman Sachs (GS) still linger. At question is whether the SEC widens its probe into other Wall Street firms.

As such, even though Citi (C) reported solid earnings this morning, its stocks is higher (+5.9%) but the rest of the financials are treading water near the unchanged level.

Losses in Asian markets overnight were widespread, led by China which plunged -4.8% on further speculatin that the government will move to further curb speculation in the Chinese property market.

The dollar is higher today, which is weighing on commodities in general. Oil is down another $2 to $81.15, while gold is roughly unchanged near the $1136 level.

The 10-year yield is a touch higher at 3.78%; and the VIX is also higher to 18.55 after its big spike on Friday.

Earnings season heats up again this week, with all eyes on Apple (AAPL) Tuesday afternoon.

Trading comment: I think the correction that I have been expecting started on Friday, in somewhat normal fashion. That is, the market often climbs higher while volatility grinds lower, until some catalyst results in selling en masse. This is what we saw Friday, and most of the time the selloff may take a breather, but then continue in the days and weeks ahead.

There are some out there calling for another 10% correction at this juncture. I don't share this view. Not every correction needs to be of the 10% variety. And considering the correction that just ended in February was roughly 10%, I don't think we see that big of a pullback this close in time. Its anyone's guess, but I'll go out on a limb and say if we pullback in the 3-5% range, that should be another good buying opportunity.

It often comes down to sentiment also. We want to see bearish sentiment rise as the market corrects. What we don't want to see is for investors to remain complacent. But given how quickly investors have turned bearish during previous slides, I think it is likely we will see a repeat performance.

long AAPL


*Note: Past performance is not indicative of future performance. Investing in securities involves risk, including the potential loss of principal invested. Investors should be aware that foreign investing involves special risks including grated economic, political, and currency fluctuation risks, which may be even greater in emerging markets. The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. However, an investor should note that diversification cannot assure a profit or protect against a loss. There is no assurance that these movements or trends can or will be duplicated in the near future.

A-B-OR C

I've been expecting a stock market correction for a few weeks now. It may or may not have begun on Friday. We will need to see some follow through this week before we can say for sure. At some point I expect a big whoosh down. It's how these extreme momentum moves often end.

Gold also appears to be moving into a cycle low. When that big whoosh comes we should know whether gold is still in an A-wave or whether the B-wave has begun. There is even a possibility (although remote) that gold could still be consolidating before another leg up in the C-wave. That scenario is dependant on what the dollar does.

More in the weekend report.

Gold's four wave structure:

16 Nisan 2010 Cuma

America's Constitutionalist Revolt


So much is being written in the mainstream media about who the tea partiers are, but very little is being recorded about what these folks are actually saying.

We know that this is a decentralized grassroots movement, with many different voices hailing from many different towns across the country. But the tea-party message comes together in the “Contract from America,” the product of an online vote orchestrated by Ryan Hecker, a Houston tea-party activist and national coordinator for the Tea Party Patriots.

With nearly 500,000 votes recorded in less than two months, this Contract forms a blueprint of tea-party policy goals and beliefs.

Of the top-ten planks in the Contract, the number-one issue is protect the Constitution. That’s followed by reject cap-and-trade, demand a balanced budget, and enact fundamental tax reform. And then comes number five: Restore fiscal responsibility and constitutionally limited government in Washington.

Note that two of the top-five priorities of the tea partiers mention the Constitution.

Filling out the Contract, the bottom-five planks are end runaway government spending; defund, repeal, and replace government-run health care; pass an all-of-the-above energy policy; stop the pork; and stop the tax hikes.

What’s so significant to me about this tea-party Contract from America is the strong emphasis on constitutional limits and restraints on legislation, spending, taxing, and government control of the economy. Undoubtedly, the emphasis is there because no one trusts Washington.

As I read this Contract, tea partiers are reminding all of us of the need for the Constitution to protect our freedoms. They’re calling for a renewal of constitutional values, including -- first and foremost -- a return to constitutional limits on government. The tea partiers who responded to this poll are demanding a rebirth of the consent of the governed. The government works for us, we don’t work for it.

All this makes me think of President Reagan, who never quite succeeded in gaining a constitutional amendment for a balanced budget, or for limits on spending, or for a two-thirds congressional majority for any new tax hikes. But throughout his presidency, and for many years before, the Gipper argued for constitutional limits on government, especially government spending.

And now this message is being echoed perfectly in the tea-party Contract from America. In effect, it picks up where Reagan left off.

The tea partiers, whom I call free-market populists, desire a return to Reaganism. In particular, their demands for a balanced budget (third plank), for restoring fiscal responsibility (5th plank), for ending massive government spending (6th plank), and for stopping the pork (9th plank) all underscore the populist revolt against runaway government spending, and therefore runaway government power.



There are mentions in the Contract of tax reform and stopping tax hikes. But it is pretty clear to everyone nowadays that the massive run-up in spending of recent years will inevitably result in an equally massive tax-hike movement -- that is, unless the spending is strictly curbed and reduced.



Yet the tea partiers don’t trust Congress to do this, so they want to bring in constitutional restraint.



A recent survey by the Brookings Institution spells out this spend-and-tax problem with great clarity. Under current spending trends, tax-the-rich efforts to bring the deficit to just 3 percent of GDP -- not balance, mind you, but 3 percent deficit -- would require a nearly 80 percent marginal tax rate on the most successful earners. And if taxes are raised across-the-board, the marginal rate would rise to nearly 50 percent for the top earners, with state and local tax burdens bringing it up to 60 percent. Otherwise, a European-style value-added tax (VAT) would become necessary.



The tea partiers know this and they don’t like it one bit. And so, at bottom, they have formed a constitutionalist movement to revolt against big government and big taxes -- and oh, by the way, to stand against big-government control of large chunks of the economy, such as energy and health care.



Harking back to the Founders’ principles of constitutional limits to government is a very powerful message. It’s a message of freedom, especially economic freedom. The tea partiers have delivered an extremely accurate diagnostic of what ails America right now: Government is growing too fast, too much, too expensively, and in too many places -- and in the process it is crowding out our cherished economic freedom.



It’s as though the tea partiers are saying this great country will never fulfill its long-run potential to prosper, create jobs, and lead the world unless constitutional limits to government are restored.



Now, as the tea partiers rally across the country, the big question is only this: Will the political class get it?

MY HOW THE MIGHTY HAVE FALLEN

OUCH!

Stocks Selloff Despite Strong Earnings

The market is moving lower this morning, and picking up downside steam after the SEC charged Goldman Sachs with fraud. The SEC charged GS with fraud involving a French trader and improper disclosure surrounding the structure of a CDO mortgage product, which allegedly resulted in as much as a billion dollars of losses after the subprime collapse.

GS stock is down more than -10% on the news, and this could further damage their reputation. I think the stock could be in the penalty box for some time. It could also weigh on the financials as a whole, as more institutions and transactions come under scrutiny by the SEC's new "Structured Products Unit'.

Last night, both Google (GOOG) and Intuitive Surgical (ISRG) reported strong earnings, beating top and bottom line estimates. But both stocks are being sold off this morning nonetheless. Ditto for Bank of America (BAC) and GE this morning. This was bound to happen at some point, as the relentless rise in stocks already discounted solid earnings reports, so when the news finally came it was time to take profits.

Today is also options expiration day, so my inclination is that the downside pressure in these stocks is being exaggerated as out-of-the-money puts that were sold are now coming into play.

Asian markets were lower overnight; the 10-year yield is down sharply to 3.76%; the dollar is higher, pressuring commodities. Oil is down to $84.50 while gold is down more than $10 near $1148.

Trading comment: The VIX is having a sharp spike higher, rising almost 20% near the 19 level. We have seen this scenario play out before, where the market grinds higher and higher until one day something finally breaks the streak. Past occurrences have proved to be more than just a one-day wonder, so I am not doing any buying today as I think this pullback has more to go.

The S&P 500 has been up for 6 straight weeks, but the streak looks like it will be broken this week. The SPX would have to close above 1194 to keep the streak alive. But the Nasdaq 100 still has a nice cushion, and is likely to log its 7th consecutive weekly gain.

long BAC, GOOG, ISRG; probably selling what little GS we still own

15 Nisan 2010 Perşembe

TAXING AMERICA: After "The Kudlow Report," make sure to stay with CNBC for Larry's Tax Day special at 10:30pm/ET!

On Tonight's Kudlow Report

This evening at 7pm ET:

Washington Mutual Under Fire
CNBC's Hampton Pearson

Taxing America: Tax Day Outrage
CNBC's John Harwood

Financial Regulation and Too Big To Fail
Sen. Chris Dodd (D-CT)

Kudlow 101 More Recovery Vs


The Complexity of the Tax Code
Hiwa Alaghebandian, College of William & Mary Economics Student

Can America Grow Under the Current Tax System?
Rep. Paul Ryan (R-WI)
Rep. Bill Pascrell (D-NJ)

Tea Party Revolt
Dick Armey, Former House Majority Leader
Lou Dobbs, Business & Political Commentator

Please join us. The Kudlow Report. 7pm ET. CNBC.

Happy Tax Day

Happy Tax Day. I expect to hear more than the usual amount of debates in the media this year about who messed up and complicated our tax system is, and how badly it is in need of reform. I totally agree, but I am not that optimistic that we will see meaningful reform anytime in the near future.

Back to the markets, stocks started the session off lower, but have since rallied back into positive territory. There were a handful of strong earnings reports last night and this morning, which has helped bolster bullish sentiment. Companies like UPS, JB Hunt (JBHT) and YUM Brands (YUM) all posted better than expected results, and their stocks are rallying higher. UPS also raised guidance for the year.

In economic news, industrial production for March rose a smaller than expected +0.1%, but the Empire State Manufacturing survey hit a five-month high at 31.9.

Asian markets were higher overnight. China announced that its Q1 GDP grew at the torrid pace of 11.9%. That is some serious growth, but China's market was flat as those results rekindled concern about tighter monetary policy to keep things from overheating.

The dollar is higher today on weakness in the euro again. Oil is bucking the trend, and hovering just below $86, while gold is off a buck or so near $1157.

The 10-year yield is down slightly to 3.84%; and the VIX is up +1.6% to a still low level of 15.85.

Trading comment: My cautiousness of late may seem unwarranted in the face of this relentless bullish stampede in the market, but such is life. That is why we only take partial profits during an uptrend, to let our remaining positions ride in case the market keeps rallying.

That said, the put/call ratio fell yesterday to 0.56, its lowest level in some time. With bullishness and complacency on the rise, I still think there is sufficient risk right now for a correction, so I am trying to sit on my hands and wait to put my cash to work at lower levels.

Google (GOOG) is on tap tonight for earnings. I will be covering the call for TheStreet.com, and will post a copy of my earnings recap here tomorrow.

long GOOG