Bullish Thursday! -- Risk On
Plenty of good news to smile about this morning. Markets are up smartly in the wake of these stories.
Ireland debt woes seemed to be getting resolved
In other, less reported news…
Mortgage applications plunge as rates rise
Fraudclosure is bubbling underneath as more bad news comes out.
The housing market continues in the doldrums and given that this is the consumer’s largest asset, can we really expect a healthy rise in consumption if this asset is acting like an anchor? Credit won’t do the trick either because it is still hard to come by and consumers are already tapped out anyways.
Overall the recovery continues, that’s for sure; and it looks to continue in the near term. However, investors are all but convinced that it’s nowhere but up from here. I remain very cautious given that we still have a massive unemployment problem, housing is in fact double dipping, China (the engine of the global recovery) is experiencing significant problems with inflation, the muni bond market is showing serious weakness, and Europe is one violent coup away from imploding. The economy may be growing, but it is still on very weak footing and any exogenous shock could send it back into recession. Confidence is very fickle at this point. The risks remain quite significant and are not being priced into markets in my view.
The latest sell off due to the CSCO disappointment comes with a new wrinkle. Municipal issues may be an issue in the coming weeks if this fund continues dropping.
