The markets are continuing to bounce from their oversold levels last week. This morning, stocks are up sharply on news of a bailout package for Greece. The Dow was up 100 points at the open, although it is fading a bit at the moment. We will have to see if month-end buying keeps a bid under stocks into the close.
The big news is obviously the prospect for a German-led bailout package for Greece. Details are thin right now, but the rumors are that it would avoid a total restructuring of Greek debt with more details coming out by the end of June.
Asian markets were up sharply overnight, led by a 2.2% rally in Hong Kong. China snapped an 8-day losing streak with a 1.4% bounce. Even India rose, despite GDP in the country slowing from 8.3% to 7.8%.
In economic news, the Case-Shiller home price index showed prices fell 3.6% in March to a new multi-year low. Consensus expectations were for a 3.4% drop.
Commodities are rallying, aided by the dollar being pushed lower due to the rally in the euro. Oil prices have topped $102.50, and gold prices are slightly higher to $1537.
The 10-year yield is flat near 3.05%, after a prolonged slide since topping out at 3.6% back on April 8th. At 3.05%, the bond market really seems far more preoccupied with a potential slowdown than worry about the end of QE2 and what that might mean for buying demand for Treasuries.
Trading comment: Last week, we said the markets were oversold and we were buying for a trade. Today is day 4 of the oversold rally, and we are taking some chips off the table. We could easily see new beginning of month money come in tomorrow as well, which we would probably trim a little more into. At current levels, the market is still likely to be down a couple of percent for the month of May. June is likely to continue to be choppy, with lots of questions about what the environment will look like post-QE2 (June 30th).
31 Mayıs 2011 Salı
28 Mayıs 2011 Cumartesi
Saving Medicare: Free Market Reforms Are Better than Bureaucratic Rationing
This recent video from my friend Dan Mitchell explains how a "premium-support" plan would solve Medicare's fiscal crisis and improve the overall healthcare system. This voucher-based system also would protect seniors from bureaucratic rationing.
GOLD T-1 PATTERN?
There is quite a bit of speculation lately as to where the impending intermediate cycle decline will take gold down to. Today I'm going to throw my guess into the fire.
Some people expect gold to drop to $1400. Some $1300. Some even doubt that gold will ever go down again. However after watching gold for years and studying its history I think I can safely say that gold never misses an intermediate decline. Next week will be the 18th week of the current intermediate cycle. That means gold is now in the timing band for a bottom. If gold is in the timing band for a bottom a top can't be far off.
In the weekend report I discussed the impending stock market yearly cycle low and three year cycle low in the CRB that are both coming due together this summer. A yearly cycle low in stocks is the second most severe selling event ever seen in the stock market, only exceeded by a four year cycle low, which by the way is due in 2012. The three year cycle low in the CRB is the single most severe selling event for commodities.
By a twist of fate these two major selling events should happen simultaneously this summer. The combination of of these two major cycles bottoming together will almost certainly intensify selling pressure into the stratosphere. In an environment like that fundamentals will go right out the window.
In theory gold put in it's yearly cycle low last January at $1308. Barring something extraordinary I would not expect that low to be violated. However we could very well see something extraordinary.
While the pattern isn't "clean" there is an ongoing T-1 pattern in play on the gold chart that suggests that $1575 probably was the top of the current C-wave and if that is so and the T-1 pattern plays out as expected we should see a test of the the mid-point consolidation during the summer sell off.
That consolidation zone for gold's T-1 pattern comes in at roughly $1225- $1250.
Of course I have no idea if this will play out as we move into the summer but if in July gold touches the $1250 level I think it will be the last great bargain we will get in the secular gold bull market.
Some people expect gold to drop to $1400. Some $1300. Some even doubt that gold will ever go down again. However after watching gold for years and studying its history I think I can safely say that gold never misses an intermediate decline. Next week will be the 18th week of the current intermediate cycle. That means gold is now in the timing band for a bottom. If gold is in the timing band for a bottom a top can't be far off.
In the weekend report I discussed the impending stock market yearly cycle low and three year cycle low in the CRB that are both coming due together this summer. A yearly cycle low in stocks is the second most severe selling event ever seen in the stock market, only exceeded by a four year cycle low, which by the way is due in 2012. The three year cycle low in the CRB is the single most severe selling event for commodities.
By a twist of fate these two major selling events should happen simultaneously this summer. The combination of of these two major cycles bottoming together will almost certainly intensify selling pressure into the stratosphere. In an environment like that fundamentals will go right out the window.
In theory gold put in it's yearly cycle low last January at $1308. Barring something extraordinary I would not expect that low to be violated. However we could very well see something extraordinary.
While the pattern isn't "clean" there is an ongoing T-1 pattern in play on the gold chart that suggests that $1575 probably was the top of the current C-wave and if that is so and the T-1 pattern plays out as expected we should see a test of the the mid-point consolidation during the summer sell off.
That consolidation zone for gold's T-1 pattern comes in at roughly $1225- $1250.
Of course I have no idea if this will play out as we move into the summer but if in July gold touches the $1250 level I think it will be the last great bargain we will get in the secular gold bull market.
27 Mayıs 2011 Cuma
Eric Cantor’s 5% Growth Strategy
House Majority Leader Eric Cantor turned the policy temperature down on austerity this week by rolling out a strong economic-growth agenda. Headlined by a 25 percent top tax rate for individuals and business, the Cantor package includes regulatory relief, free trade, and patent protection for entrepreneurs. It’s job creation and the economy, stupid. Sounds Reaganesque? Well, Eric Cantor has a lot of Reagan blood in him. Back in 1980, while Cantor was still in high school, his father was the Virginia state treasurer of the Ronald Reagan presidential campaign. So the apple never falls far from the tree.
In fact, it looks like Cantor is restoring the supply-side incentive model of economic growth. Forget tax-the-rich class warfare. Throw out wild-eyed government-spending stimulus and dollar-depreciating Fed money-pumping. Make it pay more after tax to work, produce, and invest. Go for a growth spurt, something the economy badly needs. And — my thought — crown such a growth strategy with a stable King Dollar re-linked to gold.
When I interviewed Cantor this week, he made it clear that faster economic growth was crucial to holding down spending, deficits, and debt. As scored by the CBO, every 1 percent of faster growth lowers the budget gap by nearly $3 trillion from lower spending and higher revenues. “Grow the economy,” Cantor said. “It will help us manage-down the deficit and it will help get people back to work.”
This is not to say that spending cuts and structural entitlement reforms aren’t necessary. They are. But it is to argue that lately the GOP has forgotten the growth component that is so essential to spending restraint and deficit reduction.
The GOP should say: In return for substantial federal-spending cuts, we’re gonna more than make it up to you with large tax cuts. You will win. Big government will lose.
I suggested to Cantor that the GOP adopt a 5 percent national growth target, which President John F. Kennedy had when he launched his across-the-board tax cuts in the early 1960s. “That is a fantastic goal,” he told me.
Cantor’s growth plan is very timely as the U.S. economy is once again sputtering. In what is already one of the weakest post-recession recoveries in the postwar era, first-quarter GDP came in at a tepid 1.8 percent. Many economists believe the second quarter will be no better.
And consider this: Between 1947 and 2000, average real economic growth registered 3.4 percent yearly — an excellent prosperity baseline. Yet over the past ten years — amidst boom-bust Fed policy, a collapsing dollar, and soaring gold — the stock market on balance hasn’t moved as the economy has averaged only 1.7 percent annually. Because of the ongoing slump, actual real GDP growth from the early 2000s through the first quarter of 2011 has dropped nearly 17 percent below the long-run historical trend. That translates to a massive output gap of $2.7 trillion.
In order to close that gap in five years the economy would have to grow 7.3 percent annually (roughly Reagan’s two-year recovery rate in 1983-84). To close the gap in ten years, the economy would have to grow near 5.3 percent annually.
Alright, so why not establish a national economic growth target of over 5 percent? That might wipe out the current spirit of economic pessimism and decline.
A 5 percent growth target might give some hope to the roughly 15 million unemployed. Or the 12 to 15 million homeowners who can’t meet their mortgages, are in foreclosure, or have upside-down property values. Or the disappointed investors who haven’t made any real cash in ten years. Or the families who are suffering from rising gas and food prices.
A 5 percent growth target might wipe out the sense that we can’t seem to right the economic ship.
For all these reasons, according to the polls, jobs and the economy are the number one political issue today. Entitlements are going to have to be fixed. But that day of reckoning is nearly 20 years away. Right now folks want work and income to pay the bills.
The brilliance of Mr. Cantor’s effort is his attempt to move the GOP back to the economic-growth high ground. It is our most urgent priority.
WARNING SIGN
The debate lately is whether or not gold still has one more leg up. For the many reasons I went over in last night's report I think it has become too dangerous to continue to play the long side in the precious metals so I don't really care anymore whether gold is going up. The risk is now high that one gets caught in an intermediate decline or worse a possible D-wave.
Here is one more reason. The miners have broken below a prior daily cycle low.
This isn't a perfect signal. Of course nothing in this business works 100% of the time but this particular signal works about 80-90% of the time and those are the kind of odds it usually just isn't worth bucking.
You can see in the above chart that every intermediate decline in gold was preceded by the miners falling below a prior cycle low. That condition is now active in the current market.
As a case in point a violation of a daily cycle low in gold is the main confirmation we look for to confirm that gold has entered an intermediate degree decline.
I've marked the expected timing band for when the next intermediate low should bottom in late June to mid July. You can see that the summer low came last year in late July. The yearly cycle tends to run about 12 months on average so I wouldn't expect this to be over for at least another month to a month and a half. As it stands today gold topped on week 14. That gives it a lot of time to grind lower. As a matter of fact every intermediate decline since this phase of the bull began has dragged gold considerably below the 50 day moving average and fairly close to the 200 DMA. That would suggest gold would at least move back to $1400 if this is just a normal intermediate degree correction.
If this turns into a D-wave then we can expect at least a 38% retracement of the prior C-wave advance. This C-wave began in April of 09 at $860. A 38% retracement of that rally would drag gold back to roughly $1300.
Folks this is what you are risking getting caught in by trying to squeeze the last few pennies out of this sector. Now if gold was doing what I think it should be doing I would be happy to hang on to positions. But it's not! The weak dollar yesterday and today for that matter should be sending gold rocketing higher. So far it's not happening.
Combine this with the warning sign from the miners and I simply don't want to play the game anymore. It's easier to just wait for the intermediate correction or D-wave to run it's course and then get in as close to the bottom as we can for a much safer trade and one we will be able to hold onto for 12 to 15 weeks with little fear of significant draw downs.
Here is one more reason. The miners have broken below a prior daily cycle low.
You can see in the above chart that every intermediate decline in gold was preceded by the miners falling below a prior cycle low. That condition is now active in the current market.
As a case in point a violation of a daily cycle low in gold is the main confirmation we look for to confirm that gold has entered an intermediate degree decline.
I've marked the expected timing band for when the next intermediate low should bottom in late June to mid July. You can see that the summer low came last year in late July. The yearly cycle tends to run about 12 months on average so I wouldn't expect this to be over for at least another month to a month and a half. As it stands today gold topped on week 14. That gives it a lot of time to grind lower. As a matter of fact every intermediate decline since this phase of the bull began has dragged gold considerably below the 50 day moving average and fairly close to the 200 DMA. That would suggest gold would at least move back to $1400 if this is just a normal intermediate degree correction.
If this turns into a D-wave then we can expect at least a 38% retracement of the prior C-wave advance. This C-wave began in April of 09 at $860. A 38% retracement of that rally would drag gold back to roughly $1300.
Folks this is what you are risking getting caught in by trying to squeeze the last few pennies out of this sector. Now if gold was doing what I think it should be doing I would be happy to hang on to positions. But it's not! The weak dollar yesterday and today for that matter should be sending gold rocketing higher. So far it's not happening.
Combine this with the warning sign from the miners and I simply don't want to play the game anymore. It's easier to just wait for the intermediate correction or D-wave to run it's course and then get in as close to the bottom as we can for a much safer trade and one we will be able to hold onto for 12 to 15 weeks with little fear of significant draw downs.
26 Mayıs 2011 Perşembe
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCTHE MARKETS
-Ron Kruszewski, Stifel Nicolaus CEO
-Michael Farr, Farr, Miller & Washington president
-Don Luskin, Trend Macro CIO, "I Am John Galt" author
IS PIMCO'S BILL GROSS WRONG ON TREASURIES?
-John Lonski, chief economist at Moody's Capital Markets
-Carl Riccadonna, senior US economist at Deutsche Bank
KUDLOW TRIBUTE TO CNBC'S MARK HAINES
GOP PRESIDENTIAL POLL SHOCKER
One-on-one with Republican presidential candidate Herman Cain.
WHERE IS THE WASHINGTON GROWTH PLAN?
One-on-one with Congressman Eric Cantor (R-VA)
EINHORN COMES OUT AGAINST MICROSOFT'S STEVE BALLMER
Businessweek's Jon Fine reports.
25 Mayıs 2011 Çarşamba
My Pal, Mark Haines
For years I worked with Mark Haines on Squawk Box, usually Friday mornings as a guest or guest host. We go back a long way. He called me Lawrence of America. The nickname stuck. I loved it. Like every one I was stunned to hear the unspeakably bad news this morning. Nick Dunn called me. I was in a Washington, DC hotel room. A lonely place to get some very bad news.
Mark’s untimely passing hits me close. We are about the same age and of course it gets you to thinking. We had a long history. On Squawk and elsewhere we talked and talked, argued, debated, agreed and disagreed. I preferred it when we agreed, mostly because he was such a formidable opponent when we were on opposite sides.
Mark had a very keen intellect. He had that penetrating lawyer-like skill of cutting right to the chase in dissecting an argument. But you know what? Down though the years I loved it and I loved him.
As a novice learning to become a broadcaster I studied Mark’s formidable skills -- his insightful and penetrating questions -- his ability to hone in and really nail some one. He taught me a lot, and I am still learning.
A bunch of months ago he came by my desk in the newsroom one afternoon to chat. I hadn’t seen him in a while. It must have been around Christmas actually because we were talking about the Washington debate over extending tax cuts and stopping a humongously unnecessary spending bill.
He said “Kudlow, what do you think here?” I said “Mark, buddy, kill the spending, keep the tax cuts.”
And he broke out laughing and said “You know what, I agree with you!” I said “Oh my gosh.” It was a classic Mark Haines moment.
During Squawk Box breaks we’d go off the set to talk about sports, politics, that morning’s show. I learned he was a great family man because that’s what he talked about constatntly. I think Mark Haines had great values. And I think down through all those years he taught me an awful lot about stuff, all kinds of good stuff.
As I flew home today from Washington back to New York, I thought non-stop about my pal, Mark Haines and all the episodes and conversations and our ups and downs as two opinionated guys.
I want to get this blog out because emotionally I need to get it out and say what I’m saying. I don’t think it’s really adequate, but it is what’s rattling around in my head.
Like I said, he was a remarkable man. He passed way too soon. Already I miss him enormously. To his family, my sincerest condolences and my prayers. To Mark, may you rest in peace.
Stocks Beginning To Bounce From Oversold Levels
The markets are higher this morning, after falling for the last 3 days. Energy and materials stocks are the strongest so far, while defensive utilities and consumer staples are lagging.
The dollar is up modestly, but that isn't hurting commodities yet. Oil has risen back above the $100 level, and gold prices are higher near $1526. Silver prices are also moving up.
In economic news, durable goods orders fell more than expected in April, declining 3.6%. Though some of this decline is simply due to the robust 4.4% increase in the previous month.
In corporate news, Ralph Lauren (RL) is down -8% after missing earnings estimates. The retail sector is also lower on the day so far.
Asian markets were mostly lower overnight, and I continue to read troubling reports about China.
The 10-year yield is flat at 3.12%; and the VIX is down another 3% to 17.25.
Trading comment: I want to express my condolences to the family and colleagues of Mark Haines. Although I never met Mark Haines, CNBC has been on in the background of my office for the last 15 years. So I listened to Mark reporting on the markets every morning, and I can't count the number of interviews I've watched him give. He had a strong presence, was always no-nonsense and straight-forward, and wasn't afraid to challenge his guests. I have seen a lot of CNBC personalities come and go over the years, but he will be missed more than most.
The dollar is up modestly, but that isn't hurting commodities yet. Oil has risen back above the $100 level, and gold prices are higher near $1526. Silver prices are also moving up.
In economic news, durable goods orders fell more than expected in April, declining 3.6%. Though some of this decline is simply due to the robust 4.4% increase in the previous month.
In corporate news, Ralph Lauren (RL) is down -8% after missing earnings estimates. The retail sector is also lower on the day so far.
Asian markets were mostly lower overnight, and I continue to read troubling reports about China.
The 10-year yield is flat at 3.12%; and the VIX is down another 3% to 17.25.
Trading comment: I want to express my condolences to the family and colleagues of Mark Haines. Although I never met Mark Haines, CNBC has been on in the background of my office for the last 15 years. So I listened to Mark reporting on the markets every morning, and I can't count the number of interviews I've watched him give. He had a strong presence, was always no-nonsense and straight-forward, and wasn't afraid to challenge his guests. I have seen a lot of CNBC personalities come and go over the years, but he will be missed more than most.
24 Mayıs 2011 Salı
BIG MOVE COMING
Often when we see small moves in the McClellan oscillator it proceeds a large volatile move in stocks. Kind of like a spring compressing.
Since it is now very late in the daily cycle and sentiment has reached exceptionally bearish levels (especially in the Nasdaq) the assumption is that any day now the market is going to rocket higher out of the three week bull flag.
My guess is we will get some news out of Europe that they have successfully kicked the can down the road for a few more months and the market will take off.
Since it is now very late in the daily cycle and sentiment has reached exceptionally bearish levels (especially in the Nasdaq) the assumption is that any day now the market is going to rocket higher out of the three week bull flag.
My guess is we will get some news out of Europe that they have successfully kicked the can down the road for a few more months and the market will take off.
An Interview with Kansas City Fed President Thomas Hoenig
I had the wonderful opportunity yesterday to sit down with Kansas City Fed President Thomas Hoenig. He’s a straight-shooting, hard-money, free market central banker—an unusual combination. Hoenig is also a man of integrity who dissents from the FOMC so clearly in his disagreement with ultra-easy money. Incidentally, he believes that Too-Big-To-Fail and “Bailout Nation” are moving America away from free market capitalism.
Goldman Upgrades Outlook For Oil Prices
The market is up slightly in early trading, but the action is mixed. Energy is getting the biggest bounce following yesterday's selling, as commodity prices rebound.
The dollar is lower today, which is helping boost commodities. Oil prices are up near $99.50, bolstered by a bullish call from Goldman Sachs, who sees Brent Crude prices hitting $120 this year and higher next year. Gold prices are also higher, trading above $1525.
The IPO hype is back in effect today, with Russia's Yandex (YNDX) coming public. Anytime you label something "the Russian Google", you are bound to attract some hype.
Asian markets were slightly higher overnight, a nice reprieve to the recent selling pressure. Europe's markets are also higher this morning.
The 10-year yield is higher to 3.15%; and the VIX is down -4% this morning to 17.53 after a big spike yesterday that took it as high as 20 at the open before fading as the day wore on.
Trading comment: As long as the major indexes are trading below their 50-day moving averages, a more defensive posture is warranted. That strategy has kept me out of a lot of trouble in my career. That doesn't mean you can't pick at your favorite names, with an eye towards lowering your basis, but I don't like to get aggressive until the indexes are back above their key moving averages. Short-term, I am looking for some buying into month-end, but that is just for a trade.
long GOOG
The dollar is lower today, which is helping boost commodities. Oil prices are up near $99.50, bolstered by a bullish call from Goldman Sachs, who sees Brent Crude prices hitting $120 this year and higher next year. Gold prices are also higher, trading above $1525.
The IPO hype is back in effect today, with Russia's Yandex (YNDX) coming public. Anytime you label something "the Russian Google", you are bound to attract some hype.
Asian markets were slightly higher overnight, a nice reprieve to the recent selling pressure. Europe's markets are also higher this morning.
The 10-year yield is higher to 3.15%; and the VIX is down -4% this morning to 17.53 after a big spike yesterday that took it as high as 20 at the open before fading as the day wore on.
Trading comment: As long as the major indexes are trading below their 50-day moving averages, a more defensive posture is warranted. That strategy has kept me out of a lot of trouble in my career. That doesn't mean you can't pick at your favorite names, with an eye towards lowering your basis, but I don't like to get aggressive until the indexes are back above their key moving averages. Short-term, I am looking for some buying into month-end, but that is just for a trade.
long GOOG
23 Mayıs 2011 Pazartesi
Monday Morning Musings
The market is lower again this morning after weakness in overseas markets has been the primary driving factor behind the selling.
There were no economic reports here in the U.S., as investors took their cues from Asia and Europe. Asian markets were lower across the board overnight, led by a 2.9% drop in China. Europe is also lower this morning after Italy had its debt rating downgraded by S&P over the weekend, and Fitch downgraded Greece again.
This has also led to selling in the euro, and a bounce in the dollar. We are actually seeing the old "flight to safety" trade back on, with buying in the dollar, U.S. Treasuries, and gold.
Gold is up to $1511, but that is about the only commodity trading higher today. Oil prices have fallen back to $96.65, and the CRB Index overall is down roughly 1.3%.
Consumer staples stocks are down less than the market so far, but all sectors are in the red. Some food stocks are bucking the weakness, like Panera (PNRA), Chipolte (CMG), and Cheesecake Factory (CAKE).
Last week's IPO darling, LinkedIn (LNKD) is nearly 10% lower today, trading back near $84, which is slightly above the price at which it began trading on the first day it came public.
The 10-year yield is lower to 3.10%; and the volatility index (VIX) is up 6% right now to 18.55.
Trading comment: Bearish sentiment is on the rise. The CBOE put/call ratio averaged more than 1.0 for all of last week; the bull-bear spread in the AAII survey fell to -15%, the lowest level since last August; and the market is getting oversold again after 3 straight down weeks. The rub is that the S&P 500 is only 4% below its high, and we know that a 10% correction could easily occur this summer. My thoughts are just that any correction won't come in a straight line, and I think the bears may be overreaching at the moment. As such, I would wait for another bounce before doing any more selling, a strategy that worked well last week.
There were no economic reports here in the U.S., as investors took their cues from Asia and Europe. Asian markets were lower across the board overnight, led by a 2.9% drop in China. Europe is also lower this morning after Italy had its debt rating downgraded by S&P over the weekend, and Fitch downgraded Greece again.
This has also led to selling in the euro, and a bounce in the dollar. We are actually seeing the old "flight to safety" trade back on, with buying in the dollar, U.S. Treasuries, and gold.
Gold is up to $1511, but that is about the only commodity trading higher today. Oil prices have fallen back to $96.65, and the CRB Index overall is down roughly 1.3%.
Consumer staples stocks are down less than the market so far, but all sectors are in the red. Some food stocks are bucking the weakness, like Panera (PNRA), Chipolte (CMG), and Cheesecake Factory (CAKE).
Last week's IPO darling, LinkedIn (LNKD) is nearly 10% lower today, trading back near $84, which is slightly above the price at which it began trading on the first day it came public.
The 10-year yield is lower to 3.10%; and the volatility index (VIX) is up 6% right now to 18.55.
Trading comment: Bearish sentiment is on the rise. The CBOE put/call ratio averaged more than 1.0 for all of last week; the bull-bear spread in the AAII survey fell to -15%, the lowest level since last August; and the market is getting oversold again after 3 straight down weeks. The rub is that the S&P 500 is only 4% below its high, and we know that a 10% correction could easily occur this summer. My thoughts are just that any correction won't come in a straight line, and I think the bears may be overreaching at the moment. As such, I would wait for another bounce before doing any more selling, a strategy that worked well last week.
20 Mayıs 2011 Cuma
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCTHE MARKETS
- Stephanie Link, Director of Research for The Street.com
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
BOOMING HEALTHCARE INSURANCE STOCKS
- CNBC’s Brian Shactman reports.
IS LLOYD BLANKFEIN BEING INVESTIGATED FOR PERJURY?
- CNBC’s John Carney
- Tom Curran, Partner Peckar & Abramson, P.C.
- William Cohan, "Money and Power: How Goldman Sachs Came To Rule The World" Author
GENE SIMMONS ON U.S. ECONOMY/OBAMA/DEBT & CONGRESS
- NBC’s Jane Wells reports.
MIDDLE EAST IN CRISIS…THE OBAMA/NETANYAHU MEETING
-NBC’s Steve Handelsman reports.
- Jim Glassman, Executive Director; The George W. Bush Institute; U.S. Under Secretary of State (2008-2009)
- Larry Korb, Ctr for American Progress Sr Fellow; Fmr. Asst. Defense Secy during Reagan Admin; Council on Foreign Relations member
IMF IN CRISIS: STRAUSS-KAHN OUT OF JAIL
- CNBC’s Mary Thompson joins us from Rikers Island.
DSK'S PAY PACKAGE UPDATE
- CNBC’s Eamon Javers reports.
WHY DO LEADERS GET CAUGHT UP IN SEX SCANDALS?
- Kellyanne Conway, The Polling Company President & CEO
- Mark Simone, WABC Radio Talk Show Host
- Gloria Allred, Woman's Rights Attorney
One-on-One with Senator Tom Coburn
Yesterday I spoke with the terribly smart, tough, fiscal conservative Sen. Tom Coburn (R-OK) about why he walked out of the "Gang of Six" bipartisan budget talks. In short, what he told me was that the "Gang of Six" budget-cutting package was simply too small. It was not up to the needs of a brewing financial crisis. He highlighted Medicare, but he also called for a pro-growth tax reform package, plus a regulatory rollback to promote economic growth. KUDLOW: All right, so let me ask you the obvious question. Why specifically did you walk out of the Gang of Six bipartisan budget talks in the Senate?
Sen. COBURN: Well, specifically, I didn't think we were making the progress in the areas that we needed to make the progress, and I had a frank conversation with Dick Durbin, and he thought we were at impasse, I agreed that we were in impasse, and his words to me is, `We've been at impasse for a couple of weeks.' And so what I've done is take a sabbatical, and I'm going to produce a document that's going to show you how we can get out of the trouble, and then we'll let everything else be compared to that. My staff and I have the capability of doing that. And we'll just see. And I'm not abandoning it completely, but whatever we come up with has to solve the very real problems. And it can't be light, it's got to recognize that entitlements are a significant portion of our problem, and if you don't really address those, you haven't fixed the problem.
KUDLOW: So let me ask you, you're using the word sabbatical. What would it take to get you back in? Is it an issue of Medicare? Are there other entitlements? Are there tax issues? What would get you to go back into the talks? Because, potentially, that was a very powerful group.
Sen. COBURN: Well, I--first of all, I don't want to debate that through the media, and I'll be talking with those guys intermittently from time to time. What has to happen is we have to have a viable solution to our problems, and if I think that's achievable I'll be the first one back there. But it's not fair to them. Each one of these individuals worked in great faith. But look, realistically we cannot solve our problems unless we generate growth in this country, and the only way we're going to do that is back off on a lot of regulations, create a tax structure that's going to cause investment to happen, and get dynamic returns that actually increase the revenues coming to the federal government. We can't do it all by eliminating large sections and duplicate spending and waste. We can do a large portion of it, but there has to be some revenue component to that, and anybody that says that's not the case, I think they're just wrong and they're not thinking about the long-term health of our country.
KUDLOW: What's the revenue component? I mean, is it tax earmarks or tax expenditures? Would that be accompanied by lower tax rates? Tell me about the revenue part.
Sen. COBURN: Absolutely. You know, the idea would be as you start eliminating a lot of the tax credits that cause people to invest not in the best performance for capital, but in the best tax policy and lower rates, effectively, so that we have a lower rate and a more vibrant economy that people will go out and say, `Hey, this rate's really low, I think I'll put the risk of that because if I make the million bucks on it, the rate's only this.' So changing behavior. But it--with that has to come some regulation reform because one of the things I find all throughout Oklahoma and the places I travel is this government is killing the people's desire to put a risk in terms of capital into new business propositions because the regulations are so heavy and onerous and don't make any sense.
KUDLOW: You're being just a little vague, Senator, which is not like you down through the years.
Sen. COBURN: Well, I...
KUDLOW: Is it--is it Medicare that you want? It had been reported that you were unhappy with the volume of reduction in Medicare spending. Would that get you back in?
Sen. COBURN: Larry, we cannot fix the problems in front of us--let me say it this way. There should not be any confusion on the part of American citizens. Medicare will not be what it is today in five years. It is a physical impossibility for it to be that. We cannot do it. So for us to continue to lie to the American people and say Medicare isn't going to have to change and Social Security isn't going to have to change and Medicaid isn't--that's untruthful. And it delays the time at which we make the critical decisions. So I don't want to negotiate with those guys. It's not fair to them. There's--entitlement spending is the big problem, and we have to address it to a greater extent than they were willing to do it at this time. And if they're not willing to do it, I don't see how we solve the problems.
KUDLOW: I interviewed Nancy Pelosi a few days ago, and she said everything is on the table in these budget talks. Now, she's a House member, obviously, not a senator, but I wanted to ask you is Paul Ryan's Medicare reform plan, his so-called voucher plan, is that on the table?
Sen. COBURN: Well, it should be. The fact is, is, you know, either a means testing or--you know, our problem in health care isn't that we don't have a Medicare program, the problem is health care costs too much, and the reason it costs too much is 1 in $3 that we spend on it doesn't help anybody. And we think we can bureaucratically address that rather than let market forces address that. And so anything that goes away from market forces is going to end up costing health care more, anything that goes towards it's going to cost it less. And that's what Paul--why Paul Ryan's plan is so good. Paul's Ryan plan puts it back in your control and makes sure those that need the most help from the federal government in terms of their health care in their older years are going to get it. And those that need the least are going to get less. And also uses market forces to help allocate those resources and diminish overutilization of the health care dollar.
KUDLOW: So it's been reported that Senator Conrad, who is one of your group, wants to raise the top marginal tax rate significantly. Was that also a deal breaker for you?
Sen. COBURN: No, it was never even brought up in our...
KUDLOW: All right, so let you ask me generally, step back for a minute. You've got these two talks. You've got budget talks and you've got the debt ceiling talks. If we don't get a strong 2012 budget out 10 years, or, alternatively, and/or if we don't get a debt ceiling deal that has serious budget reductions and budget caps and reforms, I just want to ask you, is this country going into a financial crisis? We’re going to be downgraded again by S&P and the other rating agencies? Is all--are we staring a crisis right here in the summer months?
Sen. COBURN: As Erskine Bowles says, this is the most predictable crisis this country's ever faced. As a matter of fact, I think you could make the case right now in a lawsuit against Moody's and S&P for why they haven't already downgraded us, looking at the financial situation. I know that's going to make Geithner go nuts, but the fact is look at the realistic. You have politics being played ahead of the good best interests of the country. I mean, this shouldn't be a Democrat/Republican thing. It--our problems are urgent, they're immediate and they're severe, and lack of action's going to make the difficulty in solving them even greater.
KUDLOW: All right. You were very critical--last one--in your Washington Post op-ed piece. You were very critical of the Senate Democratic leadership. Let me just ask you, in your judgment, are they serious about getting a budget deal and a debt ceiling deal?
Sen. COBURN: Well, I can't answer that. What I know is that they're not serious about having the problem debated on the floor of the US Senate. I mean, when we can't even get a vote to get rid of 3 to $5 billion worth of ethanol subsidies that the people wanting the subsidies don't want--in other words, they've sent us a letter, `Please quit sending us this $5 billion a year,' and we can't even get a vote on that on the Senate floor? Tell me whether they're serious about solving our problem. That's the--actually now, if it were to happen today, it'd be about 4 billion we would save this year. That's 4 billion we wouldn't be borrowing, and that's not even on the floor? And that's a bipartisan bill that we probably have 67, 68 votes for? Tell me, are they more interested in protecting people from having to make tough votes, or are they more interested in what's in the long-term best interests of the country?
KUDLOW: What's your answer to that, Senator?
Sen. COBURN: Well, I think that the lack of action speaks to the answer.
KUDLOW: All right, we're going to leave it there. Senator Tom Coburn of Oklahoma, not exactly out of the budget talks, but not in them, either. Thank you, sir. We appreciate it.
More Problems In Euroland
The market was set to open relatively flat, but the news that Fitch downgraded Greece again led to some concerted selling in the market. Fitch lowered its rating on Greece to B+ from BB+. This also caused spreads to widen on other Euro bonds, and has put pressure on the euro as well.
It's funny that our market seems so tied to the euro, but lately any day that the euro is down, our markets are down also.
With the dollar higher, most commodities are under pressure as well. Gold is bucking the weakness, and trading above $1500 today. But oil prices are down again near $97, and soft commodities (cotton, cocoa, coffee, etc) are are lower on the day.
In corporate news, retailers are weak after Gap and Aeropostale (ARO) both lowered guidance and their stocks are getting hit.
Asian markets were mixed overnight; the 10-year yield is flattish near 3.16%; and the VIX is +8% higher today to 16.75.
Trading comment: Today's weakness is an example of how I said I though we would see renewed selling pressure after an oversold bounce. I continue to think the market will be choppy in the months ahead, with a possible slight downside bias. As such, the only real way to make headway in that environment is to trade around your positions to take advantage of the volatility. Opportunistic trading means adding to your positions on material weakness, and selling into any sizable rallies.
It's funny that our market seems so tied to the euro, but lately any day that the euro is down, our markets are down also.
With the dollar higher, most commodities are under pressure as well. Gold is bucking the weakness, and trading above $1500 today. But oil prices are down again near $97, and soft commodities (cotton, cocoa, coffee, etc) are are lower on the day.
In corporate news, retailers are weak after Gap and Aeropostale (ARO) both lowered guidance and their stocks are getting hit.
Asian markets were mixed overnight; the 10-year yield is flattish near 3.16%; and the VIX is +8% higher today to 16.75.
Trading comment: Today's weakness is an example of how I said I though we would see renewed selling pressure after an oversold bounce. I continue to think the market will be choppy in the months ahead, with a possible slight downside bias. As such, the only real way to make headway in that environment is to trade around your positions to take advantage of the volatility. Opportunistic trading means adding to your positions on material weakness, and selling into any sizable rallies.
19 Mayıs 2011 Perşembe
Fix the IMF
As the IMF gets ready to choose a successor to Dominique Strauss-Kahn, who resigned following his arrest on charges that he sexually assaulted and raped a hotel housekeeper, it would be a good thing to step back for a moment and ask: What should the IMF do?More specifically, can the IMF possibly morph itself into a worldwide force for economic growth instead of Bailout Nation?
Yes, it’s a powerful global economic agency. It’s also one with a very checkered past. Usually opting for austerity policies, such as currency devaluation and tax increases, the IMF has bungled a lot of rescue missions down through the years.
There was Turkey, Mexico, and the Asian Tigers. More recently, there was the Greece bailout plan, which has not succeeded. Neither have the Portugal and Ireland plans. Though the EU’s involvement in these European states has been larger than the IMF’s, the IMF was supposed to be the tough cop for budget cuts that have not materialized. The necessary debt restructuring also hasn’t occurred.
Socialist Strauss-Kahn restored IMF prestige with his political-economic activism. But he didn’t restore prosperity to the southern-tier European countries.
So, to some extent, the IMF has become Bailout Nation Europe. (I note that the U.S. owns about 20 percent of the IMF, and Bailout Nation is very unpopular among the Tea Partiers and independent voters.)
According to news reports, it is widely expected that French finance minster Christine Lagarde will get the IMF’s newly vacated top post, although there’s some talk of Jean-Claude Trichet, the able central banker.
The point is, however, will the IMF ever adopt a true economic-growth model for the basket-case countries it is trying to fix?
For example, why not East-European-style flat-tax reform to go along with the necessary social-welfare entitlement reduction? Greece and Portugal could do as well as Poland and Slovakia. And outside the eurozone, the IMF could seek currency stabilization rather than currency depreciation.
People forget, by the way, that the original IMF created in 1945 was a currency-stability fund. It was set up for the postwar era to help Germany, Japan, and many others keep their currencies lined up with the dollar, which in turn was linked to gold at $35 an ounce. But when the Bretton Woods arrangement collapsed in the early 1970s under Richard Nixon, the IMF was forced to look for a new job. And so it got into the bailout business, with policy prescriptions that frequently made the patient worse, not better.
I remember a great article years ago by David Malpass: “A Radical Idea: The IMF Should Promote Growth.” Today, a whole bunch of us like Lew Lehrman, Steve Forbes, and myself would prefer the IMF work toward a return to a gold-based world currency system.
Like many, I believe successful newly emerging economies like China, India, and Brazil should play a larger role in IMF governance and decision-making. But I think the biggest issue is what will the Fund do with all its resources and influence to promote world economic growth?
There’s news that the highly respected Economic Cycle Research Institute is now predicting a downturn in global industrial growth. Of course, the financial near-bankruptcy of the U.S., without any serious budget-cutting deals, may well contribute to that downturn this summer. So I am less worried about who runs the Fund and more concerned about whether it will be a force for economic growth.
Judging by past decades, I’m not holding my breath.
The late Jude Wanniski used to joke that if you want to find the next breakout of social and political unrest, all you need to do is get hold of the IMF travel schedule. I hope that will change. But I doubt it.
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCLINKEDIN IPO TOPS $100 -- BUBBLE TROUBLE?
- Brett Arends, Wall Street Journal Columnist
- Vikram Mansharamani, Hedge Fund Manager; "BOOMBUSTOLOGY "author"
- Quentin Hardy, Forbes Executive Editor
- CNBC’s Jon Fortt
MARKETS
- Brian Kelly, Capital & Fast Money Contributor President
- Richard Soultanian, NUS Consulting Group President
IMF CHIEF MAKES BAIL
- CNBC’s Mary Thompson reports.
BATTLE ROYALE FOR TOP IMF JOB
- CNBC’s Eamon Javers reports.
BATTLE TO RUN THE IMF -- WHO SHOULD BE THE HEAD?
- David Malpass, Encima Global President, Fmr. Bear Stearns Chief Economist
- Robert Reich, Fmr. Labor Secretary; "Aftershock: The Next Economy and America's Future" author; CNBC Contributor; Univ. of CA., Berkeley, Prof.
GANG OF SIX...AND THEN THERE WERE NONE; WHY IS THE SENATE STALLING ON THE DEBT DEBATE?
- Sen. Tom Coburn, (R) OK joins us.
OBAMA'S MIDEAST SPEECH
- NBC’s Steve Handlesman reports.
IMPACT OF OBAMA'S MIDEAST SPEECH: DID OBAMA TURN HIS BACK ON ISRAEL?
- Dan Senor, Sr. Fellow for Middle East Studies; Council on Foreign Relations
- Col. Jack Jacobs; U.S. Army (Ret.); NBC Military Analyst
LinkedIn, LinkedIn, LinkedIn!
Does anybody care about all the stuff going on in the market today, or is it all about the LinkedIn (LNKD) IPO? CNBC has a special orange box at the top left of their screen monitoring each tick in the price of the stock today.
I was shocked when I awoke this morning to see the IPO trading up to $80, up 75% from its IPO price of $45. But instead of taking a step back, and contemplating if the company is really worth 30x sales right now, investors have continued to pile in, and as of this writing, the stock has topped the $100 mark, up more than 120% from its IPO price. Congrats to all the LNKD employees today.
Now back to our regularly scheduled program. The Philly Fed index was very weak today, coming in at 3.9 for May from 18.5 in April. Talk about a falloff.
Existing home sales were also below expectations, as the housing sector is literally bumping along on life support.
The market had started off the day on high note, but has since pulled back into negative territory. Asian markets were mixed overnight, but Europe was higher this morning.
The dollar is roughly flat, but commodities are pulling back. Oil prices are down to $99, and gold is trading lower near $1486. But agricultural commodities are higher as unfavorable weather and flooding continues to delay planting in the U.S.
The 10-year yield is higher to 3.19%; and the VIX is roughly flat near 16.25.
Trading comment: The market had a nice bounce yesterday from its 50-day support, but volume was rather low. That signals there wasn't much conviction behind the buying. I continue to look for an oversold bounce in the market, of which today is the third day, and then for some continued downside probing.
The put/call ratio hit 1.15 on Tuesday, which is a bit of an extreme. So the selling pressure might have abated for the time being. Also, the AAII survey showed more bears than bulls today. So sentiment is getting in the right place to help the market put in a trading bottom, but I don't think we are there just yet. Be patient.
I was shocked when I awoke this morning to see the IPO trading up to $80, up 75% from its IPO price of $45. But instead of taking a step back, and contemplating if the company is really worth 30x sales right now, investors have continued to pile in, and as of this writing, the stock has topped the $100 mark, up more than 120% from its IPO price. Congrats to all the LNKD employees today.
Now back to our regularly scheduled program. The Philly Fed index was very weak today, coming in at 3.9 for May from 18.5 in April. Talk about a falloff.
Existing home sales were also below expectations, as the housing sector is literally bumping along on life support.
The market had started off the day on high note, but has since pulled back into negative territory. Asian markets were mixed overnight, but Europe was higher this morning.
The dollar is roughly flat, but commodities are pulling back. Oil prices are down to $99, and gold is trading lower near $1486. But agricultural commodities are higher as unfavorable weather and flooding continues to delay planting in the U.S.
The 10-year yield is higher to 3.19%; and the VIX is roughly flat near 16.25.
Trading comment: The market had a nice bounce yesterday from its 50-day support, but volume was rather low. That signals there wasn't much conviction behind the buying. I continue to look for an oversold bounce in the market, of which today is the third day, and then for some continued downside probing.
The put/call ratio hit 1.15 on Tuesday, which is a bit of an extreme. So the selling pressure might have abated for the time being. Also, the AAII survey showed more bears than bulls today. So sentiment is getting in the right place to help the market put in a trading bottom, but I don't think we are there just yet. Be patient.
Portfolio change
A portfolio change has been added to the model portfolio link and the stops for these positions have been added to the stops and trade trigger link.
18 Mayıs 2011 Çarşamba
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCMARKETS: THE BULL CASE VS. THE BEAR
- Lincoln Ellis, Linn Group (CME) Managing Director
- Matt Shapiro, MWS Capital President
- Don Luskin, Trend Macro Chief Investment Officer
FED MINUTES OUT TODAY … WHAT NEXT FOR THE BERNANKE FED?
- Lee Hoskins, Former Cleveland Federal Reserve President
- Dean Baker, Co-director of the Center for Economic and Policy Research (CEPR)
SCHWARZENEGGER BABY BOMBSHELL: INVESTIGATION INTO WHETHER ANY GOVT OR CAMPAIGN RESOURCES USED TO COVERUP
- Stephanie Stanton reports from California.
AROUND THE WORLD...OBAMA’S MIDEAST BLUEPRINT...BRITAIN PULLING OUT OF AFGANISTAN, SHOULDN'T WE?... SANCTIONS ON SYRIA
- Bing West, fmr. Marine; fmr Asst Secy of Defense in Reagan Admin; "No True Glory: A Frontline Account of the Battle for Falluja" Author
- Gen. Barry McCaffrey, NBC Military Analyst; U.S. Army (Ret.); McCaffrey Associates Pres.
IS THE IRS GETTING POLITICAL?
- Phil Kerpen, Americans for Prosperity Vice President of Policy
FIELD OF POSSIBLE GOP PRESIDENTIAL SHRINKS
- CNBC chief Washington correspondent John Harwood reports.
- Larry Sabato, Director, University of Virginia Center for Politics
- Michael Smerconish, WPHT Radio Talk Show Host
An Air of Willingness
This debt ceiling deal is going to be a tough slog. But I want to quote House Republican Majority Leader Eric Cantor, who told me on "The Call" Tuesday, "there's an air of willingness” in the debt talks with Vice President Biden.
And as you know from my interview with House Democratic Leader Nancy Pelosi, she is shifting to the center and told me that everything should be on the table to reduce the federal deficit. Those are her words and she said several times.
She also said that Speaker John Boehner's plan that every dollar increase in the debt ceiling must be accompanied by a dollar reduction in spending is "interesting”. She didn't trash it and that's important.
It's up to the Democrats now to follow through and put some spending and entitlement reforms on the table.
By the way, Ms. Pelosi joins Republicans in favor of pro-growth tax reforms, especially business tax reforms to lower the rates and broaden the base. This is positive.
I have no idea how this whole story is going to turn out. But I am reporting to you that there is some optimistic movement in the right direction by both sides.
We're going to go down to the wire.
But the possibility of lower spending and tax reform is pro-growth and could conceivably be a positive tonic for stocks this summer if a debt deal gets done.
Market Bounces From 50-Day Averages
Yesterday I commented that the major averages had come down to test support at their 50-day averages. So far, that support has held and the indexes are bouncing from those levels. The question is will the bounce last, or is it just an oversold rally?
There were some solid earnings reports that are boosting related stocks today, including the likes of DELL, ADI, and Abercrombie (ANF). One report that looked good but is not helping the stock is Deere (DE).
The big bank stocks are lower on renewed chatter about more stress tests.
The dollar is higher today, but that is not hurting a bounce in commodities. Oil prices are up to $99.67, and gold prices have bounced to $1496.
Asian markets were higher overnight, and Europe is higher this morning. The Bank of England decided to keep its interest rate unchanged at 0.5% and leave its asset purchase plan at 200 billion pounds.
The 10-year yield is up a touch to 3.14%; and the VIX is down -4% to 16.83.
Trading comment: I would expect the market to bounce from oversold levels, which also coincided with the indexes hitting their 50-day averages. We will have to wait to see how volume levels come in, and how leading stocks act. But for now, my guess is it will just be a bounce and then we will have to deal with some more selling afterwards. So I want to be patient here, and maybe even raise a little cash into this bounce with an eye towards putting it back to work at lower levels.
long DE
There were some solid earnings reports that are boosting related stocks today, including the likes of DELL, ADI, and Abercrombie (ANF). One report that looked good but is not helping the stock is Deere (DE).
The big bank stocks are lower on renewed chatter about more stress tests.
The dollar is higher today, but that is not hurting a bounce in commodities. Oil prices are up to $99.67, and gold prices have bounced to $1496.
Asian markets were higher overnight, and Europe is higher this morning. The Bank of England decided to keep its interest rate unchanged at 0.5% and leave its asset purchase plan at 200 billion pounds.
The 10-year yield is up a touch to 3.14%; and the VIX is down -4% to 16.83.
Trading comment: I would expect the market to bounce from oversold levels, which also coincided with the indexes hitting their 50-day averages. We will have to wait to see how volume levels come in, and how leading stocks act. But for now, my guess is it will just be a bounce and then we will have to deal with some more selling afterwards. So I want to be patient here, and maybe even raise a little cash into this bounce with an eye towards putting it back to work at lower levels.
long DE
17 Mayıs 2011 Salı
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCMARKETS
- Todd Schoenberger, Managing Director LandColt Trading
- Mike Ozanian, Forbes Executive Editor
- Keith McCullough, Founder & CEO of Hedgeye Risk Management
IS MOHAMMAD EL-ERIAN RIGHT? IS FINANCIAL REPRESSION COMING TO AMERICA?
- Mark Perry, University of Michigan-Flint economics & finance professor; AEI Visiting Scholar; "Carpe Diem" Blogger
- Matthew Slaughter, Tuck School of Biz, Dartmouth Assoc. Dean ; Natl. Bureau of Economic Research; Council of Economic Advisors Member ('05-'07) - Dartmouth Camera
IMF SCANDAL: KAHN IN THE CAN
-NBC’s Jonathan Dienst reports.
AHMADINEJAD TO HEAD OPEC?
- Helima Croft, Barclays Capital Geopolitical Strategist
- Ken Timmerman, Newsmax.com Contributing Editor
- John Kilduff, CNBC Contributor; Again Capital Founding Partner
WASHINGTON TO WALL STREET…IS PAUL RYAN WILLING TO DEFAULT? AND CAN A DEAL BE MADE TO FIX MEDICARE & SOCIAL SECURITY? WHAT'S THE BEST WAY TO DO IT?
- James Freeman, Wall Street Journal Assistant Editor Editorial Page
- Keith Boykin, Former Clinton White House Aide; Editor of The Daily Voice online news site; CNBC contributor
- Kevin Williamson, National Review Deputy Managing Editor
Markets Struggle To Hold 50-day Averages
The market is under pressure again in early trading, led by a bounce in the dollar and continued weakness in commodities.
The major indexes are now struggling to hold above their respective 50-day moving averages. The S&P 500 needs to close above 1325, while the Nasdaq needs to hold 2771.
In economic news, both housing starts and building permits came in weaker than expected. The housing market continues to bump along a long bottom without making much progress.
In corporate news, HPQ reported solid earnings but issued downside guidance for next quarter which really hit the stock hard. Wal-Mart also reported solid earnings and gave in-line guidance, but it's stock is slightly lower so far as well.
In early trading, materials and industrials stocks are leading on the downside, while defensive consumer staples and utilities are bucking the weakness and showing small gains.
Asian markets were mixed overnight, while Europe is mostly weaker this morning. A bounce in the dollar is weighing on commodities, with oil prices down to $96.50 and gold prices lower to $1482.
The 10-year yield is sliding further to 3.11%. It's funny that with QE2 ending, the fear was that bond yields would rise but the exact opposite is occurring.
The volatility index is up 1.5% to 18.51.
Trading comment: Volume accelerated during yesterday's selloff, making for another distribution day. The market is in a correction now, so it's prudent to space out your buys a little wider, and hold a higher cash cushion to take advantage of further dips. Emerging markets look broken, with the BRIC countries lagging most other parts of the world in relative performance. In the US, leading growth stocks continue to break down, signaling a more cautious stance is warranted. Ideally, this will just be another brief correction like many of the others, but you never know when something deeper is in the cards, so just be careful.
The major indexes are now struggling to hold above their respective 50-day moving averages. The S&P 500 needs to close above 1325, while the Nasdaq needs to hold 2771.
In economic news, both housing starts and building permits came in weaker than expected. The housing market continues to bump along a long bottom without making much progress.
In corporate news, HPQ reported solid earnings but issued downside guidance for next quarter which really hit the stock hard. Wal-Mart also reported solid earnings and gave in-line guidance, but it's stock is slightly lower so far as well.
In early trading, materials and industrials stocks are leading on the downside, while defensive consumer staples and utilities are bucking the weakness and showing small gains.
Asian markets were mixed overnight, while Europe is mostly weaker this morning. A bounce in the dollar is weighing on commodities, with oil prices down to $96.50 and gold prices lower to $1482.
The 10-year yield is sliding further to 3.11%. It's funny that with QE2 ending, the fear was that bond yields would rise but the exact opposite is occurring.
The volatility index is up 1.5% to 18.51.
Trading comment: Volume accelerated during yesterday's selloff, making for another distribution day. The market is in a correction now, so it's prudent to space out your buys a little wider, and hold a higher cash cushion to take advantage of further dips. Emerging markets look broken, with the BRIC countries lagging most other parts of the world in relative performance. In the US, leading growth stocks continue to break down, signaling a more cautious stance is warranted. Ideally, this will just be another brief correction like many of the others, but you never know when something deeper is in the cards, so just be careful.
16 Mayıs 2011 Pazartesi
One-on-One with Nancy Pelosi
Earlier today, I had the pleasure of interviewing Nancy Pelosi, the former Speaker and current House Democratic leader. We’ve had several interviews down through the years. And while we’ve disagreed on a number of topics, I do have enormous personal respect for her. She’s a very strong lady with a subtle sense of humor. Always good copy. And while she still wants to tax oil companies, she did have some interesting thoughts regarding pro-growth tax reform and spending and entitlement cuts. Of course, trust but verify. But I thoroughly enjoyed this interview.Click here to read the full interview.
Monday Morning Musings
The market is slightly week this morning, while newsflow is relatively light to start the week. The big news over the weekend was the head of the IMF getting arrested in NY ahead of a eurozone ministers meeting today. While I would have expected that to weigh on the euro, the euro is higher today against the dollar.
Commodities are flattish, with oil prices slightly lower to $98.85 and gold prices also down a bit near $1494.
Among the sector funds, financials are strongest out of the gate so far while tech is mostly lagging.
Asian markets were lower overnight; the 10-year yield is steady near 3.18%; and the VIX is flat at 17.09.
Trading comment: The S&P 500 is still hovering in that 1335-1340 range that I have watching for support following the late April breakout and subsequent pullback. I expect the market to remain choppy around these levels, but so far the downside has been contained.
Among leadership, if you look at the defensive sectors like consumer staples (XLP) and healthcare (XLV), you can see that they have just experienced a period of significant outperformance. I would expect this bout of relative outperformance to give way to some sector rotation, but it remains to be seen which group with be the beneficiary of said rotation. It could be energy and materials once again, it could be tech, and there is an outside chance that financials catch a bid - but mostly just because sentiment is so negative for the group. Stay tuned.
Commodities are flattish, with oil prices slightly lower to $98.85 and gold prices also down a bit near $1494.
Among the sector funds, financials are strongest out of the gate so far while tech is mostly lagging.
Asian markets were lower overnight; the 10-year yield is steady near 3.18%; and the VIX is flat at 17.09.
Trading comment: The S&P 500 is still hovering in that 1335-1340 range that I have watching for support following the late April breakout and subsequent pullback. I expect the market to remain choppy around these levels, but so far the downside has been contained.
Among leadership, if you look at the defensive sectors like consumer staples (XLP) and healthcare (XLV), you can see that they have just experienced a period of significant outperformance. I would expect this bout of relative outperformance to give way to some sector rotation, but it remains to be seen which group with be the beneficiary of said rotation. It could be energy and materials once again, it could be tech, and there is an outside chance that financials catch a bid - but mostly just because sentiment is so negative for the group. Stay tuned.
15 Mayıs 2011 Pazar
WARNING SIGNS
It is been my belief that stocks and the economy have been locked in a secular bear market since March of 2000. During that period we've had two recessions and two cyclical bear markets. One of those recessions was the worst since the Great Depression and the last bear market in stocks was the second worst in history.
I've said all along that printing money will not cure the problem we've gotten ourselves into. It's never worked in history and it's not going to work this time either. We can't solve a problem of too much debt with more debt. All we will accomplish is to make the problem bigger.
We are now fast approaching the period when the next crisis should arrive.
On average the stock market suffers a major correction about every four years. In a secular bear market that cyclical trough arrives as the economy sinks into recession and a stock market bear bottoms out.
The last four year cycle bottom formed in March of 09. That just happened to be the longest four year cycle in history. I've noted before that long cycles are often followed by a short cycle that compensates for the extended nature or the prior cycle. If that's the case then the next four year cycle low is due sometime in 2012. (My best guess is in the fall.)
As we are still in a secular bear market then the move down into the four year cycle trough should correspond to another economic recession and cyclical bear market for stocks. Bear markets tend to last about a year and a half to two and a half years. If the next four year cycle bottoms in the implied timing band then the current cyclical bull should be topping soon.
As a matter of fact the stock market is already flashing warning signs. Three of the largest and most important sectors in the S&P have not confirmed new highs.
I've noted in the past that this is how major tops and bottoms are often established. Smart money sells into the breakout, or buys the break down in the case of a bottom. The trend then reverses and a major turning point is formed. Both the `02 bottom and the `07 top were put in this way.
The market is now at risk of a similar event as we've experienced a marginal breakout to new highs that is threatening to fail. Don't forget this is happening against a back drop of record earnings.
When a market can't move higher on good news something is wrong. And don't forget bull markets don't top on bad news they top on good.
If the market can recover and move to new highs the cyclical bull will be confirmed, but if the market continues to fade and drops back below the Japan bottom it will constitute a failed intermediate cycle. If both the Dow and the Transports close back below the Japan bottom we would have a Dow Theory sell signal and that would confirm the next leg down in the secular bear has begun.
It would also be a signal that the economy was unable to handle the spiking food and energy costs that were the direct result of Bernanke trying to prop up the financial system with his printing press.
Like I said, printing money has never been the answer. Every empire in history has tried this approach and not one of them has ever succeeded with it. We won't either.
I've said all along that printing money will not cure the problem we've gotten ourselves into. It's never worked in history and it's not going to work this time either. We can't solve a problem of too much debt with more debt. All we will accomplish is to make the problem bigger.
We are now fast approaching the period when the next crisis should arrive.
On average the stock market suffers a major correction about every four years. In a secular bear market that cyclical trough arrives as the economy sinks into recession and a stock market bear bottoms out.
The last four year cycle bottom formed in March of 09. That just happened to be the longest four year cycle in history. I've noted before that long cycles are often followed by a short cycle that compensates for the extended nature or the prior cycle. If that's the case then the next four year cycle low is due sometime in 2012. (My best guess is in the fall.)
As a matter of fact the stock market is already flashing warning signs. Three of the largest and most important sectors in the S&P have not confirmed new highs.
Another warning sign; Despite record earnings the market has only been able to move to marginal new highs and is now in jeopardy of reversing the recent breakout.
I've noted in the past that this is how major tops and bottoms are often established. Smart money sells into the breakout, or buys the break down in the case of a bottom. The trend then reverses and a major turning point is formed. Both the `02 bottom and the `07 top were put in this way.
The market is now at risk of a similar event as we've experienced a marginal breakout to new highs that is threatening to fail. Don't forget this is happening against a back drop of record earnings.
When a market can't move higher on good news something is wrong. And don't forget bull markets don't top on bad news they top on good.
If the market can recover and move to new highs the cyclical bull will be confirmed, but if the market continues to fade and drops back below the Japan bottom it will constitute a failed intermediate cycle. If both the Dow and the Transports close back below the Japan bottom we would have a Dow Theory sell signal and that would confirm the next leg down in the secular bear has begun.
It would also be a signal that the economy was unable to handle the spiking food and energy costs that were the direct result of Bernanke trying to prop up the financial system with his printing press.
Like I said, printing money has never been the answer. Every empire in history has tried this approach and not one of them has ever succeeded with it. We won't either.
13 Mayıs 2011 Cuma
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCMARKETS: BIG CRACKUP COMING?
- Joe Kernen, Squawk Box Host; "Your Teacher Said What?!: Defending Our Kids from the Liberal Assault on Capitalism"
- Dan Fitzpatrick, StockMarketMentor.com, President & CEO
- David Dietze, Point View Financial Services; President and Chief Investment Strategist
INFLATION NATION: IS EL-ERIAN RIGHT? INFLATION IS REAL, NOT TRANSITORY?
- John Rutledge, CNBC Contributor; Fmr. Reagan Economic Advisor
- Peter Cohan, President of Peter Cohan & Associates; Prof of Business Strategy at Babson School of Business; Author of "Capital Rising"
The Great Flood 2011
MISSISSIPPI RIVER FLOOD REACHING CRITICAL WEEKEND
- CNBC’s Brian Sullivan reports from Baton Rouge.
MEDICARE & SOCIAL SECURITY OUTLOOK WORSENS: WHAT SHOULD BE DONE ABOUT IT TO FIX HEALTHCARE & ENTITLEMENTS?
- Matt Miller, Washington Post Online Columnist; Public Radio's "Left, Right and Center" Host
- Betsy McCaughey, Hudson Institute Health Policy Expert; Fmr. NY Lieutenant Governor (1995-1999)
TEACHING THE VALUE OF CAPITALISM: WHY IS AMERICAN CULTURE SO HOSTILE TO FREE MARKETS?
- Joe Kernen, Squawk Box Host; "Your Teacher Said What?!: Defending Our Kids from the Liberal Assault on Capitalism" co-author
- Blake Kernen, "Your Teacher Said What?!: Defending Our Kids from the Liberal Assault on Capitalism" co-author
IS DEBT CEILING REALLY AN URGENT PROBLEM?
- Deroy Murdock, Scripps Howard News Service Syndicated Columnist; Media fellow with Hoover Institution at Stanford University
- Jimmy Pethokoukis, Money & Politics Columnist; Reuters Breakingviews; Reuters Money & Politics Columnist; CNBC Contributor
- Mark Walsh, "Left Jab" Host (Sirius show); Genius Rocket CEO; Fmr. Sr. Vice President at America Online; Fmr. Vertical Net CEO; Fmr. DNC Advisor
Stocks Close Out The Week On A Down Note
My apologies for no posts yesterday and this morning. It was not for lack of effort, but the Blogger site that I use was down.
Stocks finished the week on a down note, with the S&P 500 declining 0.2% for the week.
The volatility in commodities continued this week as well. Oil prices closed at 99.50 for the week, and gold prices were lower at $1493.
Concerns in Europe finally led to a breakdown in the euro, which plunged this week to close at $140.52. (It figures the euro waited to fall until after I made my final payment for my golf trip with my dad to Ireland)
The 10-year yield continues to hover at low levels, currently 3.18%. And the volatility index jumped 6% today to finish at 17.07.
Trading comment: The SPX remains above its 50-day average, and within that 1335-1340 area where I was looking for the recent breakout to find some support. So on the bullish side, those are good indications.
On the bearish side, the action hasn't been very strong. Rallies have come on lighter volume, and the number of new highs has contracted. Also, many leading stocks remain under pressure. AAPL closed below its 50-day this week. And the emerging markets etf (EEM) sold off sharply today, closing below its respective 50-day for the third straight day.
As such, I want to keep some powder dry and see if we get more of a pullback. It's very likely we could bounce first, just to keep investors on their toes, but it still looks like volatility is heating up a bit as we near the summer doldrums.
Have a good weekend, and rest up.
long AAPL
Stocks finished the week on a down note, with the S&P 500 declining 0.2% for the week.
The volatility in commodities continued this week as well. Oil prices closed at 99.50 for the week, and gold prices were lower at $1493.
Concerns in Europe finally led to a breakdown in the euro, which plunged this week to close at $140.52. (It figures the euro waited to fall until after I made my final payment for my golf trip with my dad to Ireland)
The 10-year yield continues to hover at low levels, currently 3.18%. And the volatility index jumped 6% today to finish at 17.07.
Trading comment: The SPX remains above its 50-day average, and within that 1335-1340 area where I was looking for the recent breakout to find some support. So on the bullish side, those are good indications.
On the bearish side, the action hasn't been very strong. Rallies have come on lighter volume, and the number of new highs has contracted. Also, many leading stocks remain under pressure. AAPL closed below its 50-day this week. And the emerging markets etf (EEM) sold off sharply today, closing below its respective 50-day for the third straight day.
As such, I want to keep some powder dry and see if we get more of a pullback. It's very likely we could bounce first, just to keep investors on their toes, but it still looks like volatility is heating up a bit as we near the summer doldrums.
Have a good weekend, and rest up.
long AAPL
12 Mayıs 2011 Perşembe
TRANSITION COMLETE
Despite my bias to see new all time lows in the dollar index, I think the dollar probably put in the three year cycle low last week. Sentiment at the time had reached multi-year lows and as of yesterday the dollar had moved back above the 50 day moving average.
If I'm right then this should usher in the next deflationary period just like the rally out of the `08 three year cycle low signaled a coming recession, the next leg down for stocks in the ongoing secular bear market, and a collapse of the CRB into it's 3 year cycle low.
This should also drive gold down into it's D-wave decline. Yesterday the miners made a lower low and this morning silver made a lower low. It's probably only a matter of time before gold breaks below the $1462 pivot. That would confirm that gold is now in an intermediate decline and this late in the C-wave that would almost certainly turn out to be a D-wave correction.
The good news is that sometime in late June or early July we are going to get the single best buying opportunity we will ever get for the rest of this bull market.
At this point the goal is to preserve capital and get to that major D-wave bottom with plenty of dry powder.
If I'm right then this should usher in the next deflationary period just like the rally out of the `08 three year cycle low signaled a coming recession, the next leg down for stocks in the ongoing secular bear market, and a collapse of the CRB into it's 3 year cycle low.
This should also drive gold down into it's D-wave decline. Yesterday the miners made a lower low and this morning silver made a lower low. It's probably only a matter of time before gold breaks below the $1462 pivot. That would confirm that gold is now in an intermediate decline and this late in the C-wave that would almost certainly turn out to be a D-wave correction.
The good news is that sometime in late June or early July we are going to get the single best buying opportunity we will ever get for the rest of this bull market.
At this point the goal is to preserve capital and get to that major D-wave bottom with plenty of dry powder.
11 Mayıs 2011 Çarşamba
Bernanke’s Quantitative Neutrality
There’s a lot of turmoil in commodity and stock markets. Last week they both got slammed. On Monday and Tuesday they rallied back. And today they got slammed again. The heart of this story is commodities, especially gold, silver, and oil. And the dollar.
And the heart of that story is a significant shift coming in monetary policy. Quantitative easing is going to end next month when quantitative neutrality begins. It’s a significant change by the Fed. And on a de facto basis, it represents a relative tightening.
Traders and investors are fighting like cats and dogs over the meaning of the Fed’s policy. They shouldn’t be. The handwriting is on the wall. And Bernanke’s less-accommodative stance -- what I call quantitative neutrality -- is bullish for the dollar, bearish for commodities, and is leading to a stock market sector rotation of the major groups, away from energy and raw materials and toward more defensive plays like health care, utilities, and consumer staples.
Now, strong profits provide a good backdrop for the change in Fed policy and the rotation shift in the stock market. Profits will cushion whatever stock corrections are out there.
And, let’s face it, with a zero interest-rate target and a negative real fed funds rate, the Fed will still be highly accommodative.
But my point is, going from quantitative easing to quantitative neutrality is a less-accommodative Fed. I think it puts a floor under the dollar and a ceiling over most commodities. And this change from the Fed is the main source of the volatility that we are witnessing.
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCTURMOIL IN THE MARKET
- CNBC’s Brian Shactman reports.
- Lincoln Ellis, Linn Group managing director
- Lee Munson, Portfolio Chief Investment Officer
- Bob Froehlich, The Hartford, Sr. Managing Director
- Michael Farr, Farr, Miller & Washington president
COMMODITY CORRECTION...AGAIN!
- CNBC’s Sharon Epperson reports.
- Jack Bouroudjian, CEO of Index Futures Group
- Richard Ross, Auerbach Grayson Global Technical Strategist
POLITICS OF GAS PRICES
- CNBC’s Eamon Javers reports from Washington.
GALLEON CHIEF RAJ RAJARATNAM CONVICTED ON ALL CHARGES
- CNBC’s Bertha Coombs reports.
- Tom Curran, Peckar & Abramson
- Joe DiGenova, Former U.S. Attorney
SCHUMER WANTS SALES TRANSACTION TAX ON COMPUTERIZED FAST-TRADING
- Jimmy Pethokoukis, Reuters
POSTAL SERVICE REPORTS BILLIONS IN LOSSES
- Jim Miller, Fmr. Reagan OMB Dir; Husch Blackwell Sanders Capital Analysis Group Chairman; US Postal Service Bd. of Govenors Member
WHAT SHOULD BE DONE WITH THE UNDOCUMENTED WORKERS? HOW TO REFORM IMMIGRATION SYSTEM?
- Tamar Jacoby, Immigration Works USA CEO
- J.D. Hayworth, Fmr. Congressman (R) Arizona; Fmr. Candidate for US Senate, Former KFYI Talk Show Host
Stocks Pause After Three Day Run
The market is lower in early trading after putting together a nice three day run. The rub on the recent rally is that volume has been very light. You really want to see the opposite. You want to see markets rally on strong volume and pullback on lighter volume.
There isn't much in the way of market moving economic data this morning, so most of this is just profit taking.
The dollar is up a bit this morning, which could be weighing on commodities. Oil prices have pulled back below $101, and gold prices are also down, near $1506. Silver prices are down sharply as well.
Macy's (M) reported very strong earnings and raised guidance, and its stock is sharply higher today. I think the general public thinks retailers are hurting since consumers are strapped for cash, but many retailers have reported better-than-expected earnings. Although we can't count Disney (DIS) among them, as they reported disappointing earnings and the stock is lower.
Asian markets were mixed overnight, with China reporting another increase in inflation. The 10-year yield is higher to 3.21%; and the VIX is up 2% to 16.33.
Trading comment: Energy and material stocks are seeing the most selling pressure this morning, as are the related commodities (oil, gas, etc). These stocks have been volatile lately, and I think their recent leadership in the market is likely to pause for awhile while other sectors take the lead. I think tech still looks good, and the one sector that could be a wildcard is financials, since sentiment is so bearish there and no one is looking for anything good from financials right now.
There isn't much in the way of market moving economic data this morning, so most of this is just profit taking.
The dollar is up a bit this morning, which could be weighing on commodities. Oil prices have pulled back below $101, and gold prices are also down, near $1506. Silver prices are down sharply as well.
Macy's (M) reported very strong earnings and raised guidance, and its stock is sharply higher today. I think the general public thinks retailers are hurting since consumers are strapped for cash, but many retailers have reported better-than-expected earnings. Although we can't count Disney (DIS) among them, as they reported disappointing earnings and the stock is lower.
Asian markets were mixed overnight, with China reporting another increase in inflation. The 10-year yield is higher to 3.21%; and the VIX is up 2% to 16.33.
Trading comment: Energy and material stocks are seeing the most selling pressure this morning, as are the related commodities (oil, gas, etc). These stocks have been volatile lately, and I think their recent leadership in the market is likely to pause for awhile while other sectors take the lead. I think tech still looks good, and the one sector that could be a wildcard is financials, since sentiment is so bearish there and no one is looking for anything good from financials right now.
10 Mayıs 2011 Salı
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCMARKETS
- Kimberly Foss, Empyrion Wealth Management CEO/Founder
- Keith McCullough, Founder & CEO of Hedgeye Risk Management
- Matt Shapiro, MWS Capital President
DEMS PLOT TO GET $21B FROM BIG OIL … WILL TAXING OIL MEAN LESS OIL & HIGHER PRICES?
- Rep. Javier Becerra (D-CA)
- Rep. Kevin Brady (R-TX)
FLOODS, REFINERIES & GAS PRICES
- John Kilduff, partner at Again Capital reports.
RED CHINA RISING: ARE THEY RIPPING US OFF ON TRADE? ARE THEY ABOUT TO OVERTAKE OUR ECONOMY? DO THEY THREATEN US MILITARILY?
- Peter Navarro, "Seeds of Destruction" Author; "The Coming China Wars" Author; University Of California - Irvine Business Professor
- Gordon Chang, "Nuclear Showdown" Author; "The Coming Collapse of China" Author
- David Goldman, Former Head of Fixed Income Research at Bank of America
NEW DHS ADVISORY & NEW CELL PHONE TERROR ALERT SYSTEM TO LAUNCH IN NYC
- NBC’s Jonathan Dienst reports.
FREE MARKET MATTERS
IS GOVERNMENT STEPPING IN THE WAY OF FREE MARKETS?
- Bernard Whitman, Whitman Insight Strategies; Democratic Pollster & Strategist
- James Freeman, ,Wall Street Journal Editorial Page Asst. Editor
- Sam Seder, Political Commentator; Host, "The Majority Report"
Will Microsoft Make Money From Skype?
The market is higher again in early trading, after Europe breathes a sigh of relief with respect to Greece. Greece completed a successful debt offering, issuing 1.625 billion euros of 26-week bills that drew an average yield of 4.88%.
This helped push European markets higher this morning, which likely aided sentiment here when our markets opened. Asian markets were mixed overnight.
Also in the news is a deal by Microsoft (MSFT) to buy Skype for $8.5 billion in cash. Considering eBay couldn't make any real money with Skype, I highly doubt MSFT will do any better. I love using Skype on my iPad, but I don't think it will move the needle for MSFT. And with a price tag of $8.5 billion, it looks like they significantly overpaid for this asset. Silver Lake Partners bought the company from eBay a few years back for closer to $3.5 billion.
Among the sectors, utilities and financials are leading the action, which is an odd pair. Healthcare is lagging the action so far.
The dollar is flat; gold prices are higher to $1515; and oil prices are up slightly to $103. The CME raised margin requirements in oil futures to help curb speculation. When they did this to silver, it killed the momentum in that commodity. I doubt it will have the same effect on oil, but it might help a bit at the margin (no pun intended).
The 10-year yield is fractionally higher at 3.16%, but has basically been on a one-month slide lower. The volatility index (VIX) is -5% lower today to 16.25.
Trading comment: Color me surprised by the strength in the market this morning. Of course, its still early, so it needs to hold. But overall things look good here. Stocks that sold off after earnings are bouncing back, and energy stocks that were hit last week are rebounding nicely as well. AAPL has been coiling in a consolidating fashion for nearly three weeks now, which makes me think an upside breakout could be in the works.
long AAPL
This helped push European markets higher this morning, which likely aided sentiment here when our markets opened. Asian markets were mixed overnight.
Also in the news is a deal by Microsoft (MSFT) to buy Skype for $8.5 billion in cash. Considering eBay couldn't make any real money with Skype, I highly doubt MSFT will do any better. I love using Skype on my iPad, but I don't think it will move the needle for MSFT. And with a price tag of $8.5 billion, it looks like they significantly overpaid for this asset. Silver Lake Partners bought the company from eBay a few years back for closer to $3.5 billion.
Among the sectors, utilities and financials are leading the action, which is an odd pair. Healthcare is lagging the action so far.
The dollar is flat; gold prices are higher to $1515; and oil prices are up slightly to $103. The CME raised margin requirements in oil futures to help curb speculation. When they did this to silver, it killed the momentum in that commodity. I doubt it will have the same effect on oil, but it might help a bit at the margin (no pun intended).
The 10-year yield is fractionally higher at 3.16%, but has basically been on a one-month slide lower. The volatility index (VIX) is -5% lower today to 16.25.
Trading comment: Color me surprised by the strength in the market this morning. Of course, its still early, so it needs to hold. But overall things look good here. Stocks that sold off after earnings are bouncing back, and energy stocks that were hit last week are rebounding nicely as well. AAPL has been coiling in a consolidating fashion for nearly three weeks now, which makes me think an upside breakout could be in the works.
long AAPL
9 Mayıs 2011 Pazartesi
Boehner Lays Down the Debt-Ceiling Gauntlet
House Republican Speaker John Boehner will give an important policy speech on the debt ceiling tonight at the Economics Club of New York. This is probably the key paragraph (taken from an advanced look at the speech): “So, let me be as clear as I can be. Without significant spending cuts and reforms to reduce our debt, there will be no debt-limit increase. And the cuts should be greater than the accompanying increase in debt authority the president has given. We should be talking about cuts of trillions, not just billions.”In plain English, Mr. Boehner is making this suggestion: Let’s say there’s a $2 trillion debt-limit increase proposed by the administration. In that case, there would have to be $2 trillion-plus in spending cuts in order to get Republican support. This is tough stuff.
By the way, the speaker argues that only tax hikes are off the table in the debt-ceiling discussion. He also insists that any debt deal must “reform the budget process.” However, the speaker does not specify budget-process reform.
That’s where there’s gonna be a big debate between an administration that wants deficit targets and many Republicans who want spending caps as a share of GDP. The former could still allow for tax hikes in the form of eliminating deductions, credits, and other so-called tax expenditures. It would seem that Boehner rules this out, but he does not explicitly say so. A spending cap, however, whether as a share of GDP or as a targeted level of some sort, would rule out any tax increases at all.
The White House believes that eliminating tax expenditures is a spending cut through the tax code. But unless this is accompanied by tax-rate reductions, it’s an anti-growth tax hike.
In terms of the overall budget going beyond the debt ceiling, Boehner talks about pro-growth tax reform and overhauling the code. He even quotes President John F. Kennedy in 1962. Speaking before the Economics Club of New York, JFK talked about the need to lower tax rates in order to generate more revenues to balance the budget.
Kennedy believed in the supply-side incentive model, and Boehner does too. But tax reform will not be part of the debt-ceiling discussion.
Finally, Boehner does state that “allowing America to default would be irresponsible. . . . But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.”
So Speaker Boehner lays down the gauntlet. You want to raise the debt ceiling? Then we need an equal amount of spending cuts to go along with the higher borrowing authority. It looks like a good start. But of course, the Joe Biden talks will go on. We’ll see what happens next.
On CNBC's Kudlow Report Tonight
Please join us at 7pm ET tonight on CNBCMARKETS ... WILD RIDE WITH COMMODITIES ... GOLD, SILVER, OIL AND THE DOLLAR
- Jim Rogers, Rogers Holdings Chairman
- Scott Nations, Nations Shares Chief Investment Officer; Options Action Contributor
- Richard Soultanian, NUS Consulting Group President
DEMS WANT TO OFFSET DEFICITS BY TAXING OIL: WOULDN'T TAXING OIL JUST DRIVE PRICES HIGHER?
- John Hofmeister, Citizens for Affordable Energy Founder & CEO; Fmr. Pres. & CEO of U.S. Operations, Shell Oil
TRANSPORTATION TERROR FEARS
- NBC’s Jonathan Dienst reports.
RED CHINA RISING… U.S./CHINA TALKS…DOES CHINA HAVE UNFAIR TRADING PRACTICES…IS CHINA RIPPING US OFF? WHAT'S THE U.S. GOING TO DO ABOUT IT?
- Zach Karabell, CNBC's Fast Money Contributor; River Twice Research President
- Jonathan Tasini, President Economic Future Group; Fmr. Labor Research Association Executive Director
CEO WAGES UP 11% -- ISN'T IT ABOUT TIME BUSINESS & CEO'S GET REWARDED FOR BEING THE BACKBONE OF THE ECONOMY?
- Howard Dean, Fmr. Vermont Governor & Presidential Candidate; CNBC Contributor
- Jimmy Pethokoukis, Reuters Breakingviews: Money & Politics Columnist; CNBC Contributor
FLOOD REPORT
- NBC’s Jay Gray reports.
BOEHNER SPEAKS AT THE ECONOMIC CLUB OF NY - DISSING THE DEBT CEILING
- Robert Reich, Fmr. Labor Secretary; "Aftershock: The Next Economy and America's Future" author; CNBC Contributor; Univ. of CA., Berkeley Prof.
- Steve Moore, Senior Economics Writer for WSJ Editorial Board
Monday Morning Musings
The market is a touch lower in early trading, after mixed action overnight in Asia but much weaker action this morning in Europe.
Spain fell 1.9% and Greece was down 1.4% after S&P downgraded Greece's debt again amid concerns the country would need more bailout funds.
This also has led to a slide in the euro relative to the dollar. But the bounce in the dollar isn't keeping commodities from bouncing also. Oil prices are up near $99.50, after falling more than 14% last week. Silver prices are up 5% after plummeting 27% last week. And gold is also getting a little bounce to $1505. The action in commodities was so vicious last week that I think at best they are going to be in multi-month trading ranges from here.
There is not a lot of action in the way of corporate earnings this morning. Energy and materials stocks are leading the action so far, while financials are lagging.
The 10-year is still weak near 3.14%; and the VIX is down 2% today to 18.0.
Trading comment: So far the S&P 500 has successfully tested that 1335-1340 support levels. The market is also getting back to oversold levels, but has a little more work to do. I don't get the sense the market is ready to rally yet in any meaningful way, but I still want to be a buyer on weakness as I feel the downside is limited as well.
Spain fell 1.9% and Greece was down 1.4% after S&P downgraded Greece's debt again amid concerns the country would need more bailout funds.
This also has led to a slide in the euro relative to the dollar. But the bounce in the dollar isn't keeping commodities from bouncing also. Oil prices are up near $99.50, after falling more than 14% last week. Silver prices are up 5% after plummeting 27% last week. And gold is also getting a little bounce to $1505. The action in commodities was so vicious last week that I think at best they are going to be in multi-month trading ranges from here.
There is not a lot of action in the way of corporate earnings this morning. Energy and materials stocks are leading the action so far, while financials are lagging.
The 10-year is still weak near 3.14%; and the VIX is down 2% today to 18.0.
Trading comment: So far the S&P 500 has successfully tested that 1335-1340 support levels. The market is also getting back to oversold levels, but has a little more work to do. I don't get the sense the market is ready to rally yet in any meaningful way, but I still want to be a buyer on weakness as I feel the downside is limited as well.
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