Walking a thin line

Social mood and the markets seem to walking a thin line right now. You think that's a coincidence? I don't. With the financial media declaring an end to the recession and the beginning of a new bull market, many on "main st" must be scratching their heads. I say give it the eyeball test...do things really seem better? No, but as we all know, the markets are leading indicators for the economy as a whole. Maybe things are getting better; GDP estimates came in better than expected, manufacturing indexes have shown improvement and the SP even made it's way back to 1,000. I believe we may be approaching a statistical recovery, which ties into a couple of my blogs last week about things "appearing" or "convincing" people things are better. Hopefully George Soros' theory of "reflexivity" will play out and perception will become reality and things will go back to normal. Although, it's true that hope is not a viable investment vehicle, so take it all with a grain of salt. The public doesn't know what to believe anymore. They're not convinced things are getting better with a real unemployment rate somewhere around 18%. The dichotomy between the two implies some volatile times ahead for capital markets in my humble opinion.

A couple of scattered thoughts for the first Monday in August of 2009:

-The equity market was strong today mainly in commodities and energy. Why you ask, well because the dollar index moved to a new low for 2009 pushing up anything priced in dollars.

-Being the first trading day of the month, August monthly inflows helped to put a bid under equities. Keep that in mind.

-HSBC caught some heat for not taking enough risk in the second quarter. They didn't acquire any U.S. investment banks unlike its rival Barclays who bought the bankrupt Lehman Brothers. -Read the market message: At bottoms underperforming managers are criticized for taking too much risk. At tops they're criticized for not taking enough.

-Mark-to-market being discussed again? FASB may want to bring it back. Banks say keep it away we want to value our "assets" at what we "think" they're worth, not what they're currently selling at. Makes sense...ehhhh

-Interesting timing for this to hit news stands considering where the tape stands.

-"Cash for clunkers" seems to be a wild success. I was watching yesterday's PGA event on t.v. and it seemed like every commercial was a cash for clunkers ad. Keep it mind it was the Buick Open, but the ad was a bit redundant.

-Initially we bought (not directly) $1 billion worth of cars, that for the most part have little economic value.

-Friday we decided to go long (buy) another $2 billion because the first attempt was so successful.

-This is a one time purchase and doesn't account for long-term savings. (excluding gas)

-To look at it through both lenses: bull - we're (taxpayers) helping the pent up demand in autos. bear - future sales are being diminished because of the incentive to buy now.

-Staying with the automotive theme, Ford's sales were up 2.3% last month. Thanks taxpayers!

-Still feeling the automotive flow...doing the bull dance. Palladium, which is a main component in catalytic converters, has seen a steady rise in price. Thanks to Ford? I doubt it. Tata Motors of India is releasing a car for first time buyers which is priced at $2,053. India's 18 and under population is larger than the entire U.S. population. Do you smell demand?

-Green Mountain Coffee decided to float another 4 million shares to pay back debt. They mustn't have gotten the note from banks that it's a good idea to sell equity to pay old debts. Something bad may be brewing and it's not the coffee so keep your eyes peeled.

-Insider selling is at a 4.16 to 1 ratio meaning that for every 1 share that is bought 4.16 are sold. The last time the ratio was this high...October of 2007 when U.S. equity markets reached their all time highs.

There you have it. A few randoms to hopefully provoke some thought. As a friend of mine always says, think positive because profitability begins within. Good luck tomorrow!