(via Measuring The Financial Sector)
——————————————-
Financial companies as investments look like dead money for another couple of years after looking at these charts.
Gut Feeling
I dunno why, but I feel like we are about to experience a big move in the markets (in 3 weeks max). My hunch is that the dollar is in a retesting phase and that this will be another medium (perhaps major) bottom.
There are way too many risks out there and complacency is just ridiculous.
“$100 oil won’t be enough to derail the recovery” is the main sentiment of investors…
The VIX plunged 10% today despite Saudi Arabia’s stock market free-falling as the Day of Rage comes up. Furthermore, just look at the VIX level now (considering a MAJOR oil producer is in danger of riots and oil delivery disruptions) versus the level it achieved when Greece was going down….this comparison bring the obvious conclusion that investors are not paying attention to the worsening situation in the Middle East.
Bull/Bear Quickie
Bull:
Manufacturing ISM numbers come in strong (Chicago PMI too)…manufacturing continues to carry the US economy on the back of a weaker dollar and increasing global growth. This is translating to expanding hiring plans.
In December, consumers did their part in helping the recovery as their spending and income numbers posted healthy increases. Contrary to bears making the claim that consumers will remain cautious, they continue to surprise.
ADP and ISM employment sub-index shows that job growth is improving. Challenger Job-Cut survey shows that all in all, the firings are completed. Companies are running lean.
Bear
Geopolitics continues to be a headwind as uncertainty on how Egypt will play out (contagion effects?) has oil steadily rising. If oil and other commodities continue climbing, company profits may get squeezed as they find it more difficult to pass rising costs to consumers, or consumers buy less (in the US).
Retail sales numbers are starting to signal weakness in growth. While winter storms are cited as the reason, the real one is because we still have a weak job market and uncertainty on whether job growth will come back. Growth up to this point in the job market has remained quite weak.
Housing remains in a funk.
Perfect Example of a "Moral Hazard Bubble"
(Click on the article above)
Congratulations officials…you’ve succeeded in setting up the most dangerous investment climate ever….BRAVO!!!
This confirms my worse fears that this whole recovery in the markets is based on hope and moral hazard (ie the government will always come to the rescue). Sure the economy has been recovering, but the recovery has been extremely lackluster and is VERY vulnerable to ANY negative shock.
At this point, any time you have some government pondering the idea of withdrawing support, you’ll get this. It’s happening in the Eurozone and it’s happening here.
But guess what…it may continue…because every day the market goes up, more air is being blown into the bubble and the more painful the crash will be. Officials will do everything in their power to keep it going until there’s some sort of political event that pops the whole damn thing.
Who knows when the whole house of cards comes crashing down, but be assured that it will be riduckoulus. It may be worse than 2008.
If the European crisis worsens here are the possible implications from an earnings point of view for the S&P500. Numbers are as of Q1 ‘10 so Q3 numbers should be somewhere in the ballpark. As you can see Europe accounts for roughly 12% assuming an $80.00/yr in earnings (Analysis by Scotia Capital).
