Written by Admin | Jul 29, 2009 4:00:00 AM
Earnings. The flurry of earnings continues in earnest and so far, things have been decent but not outstanding. I have been extremely impressed by corporate America's rapid cost cutting efforts which have boosted bottom lines and will hopefully provide leverage once revenue growth returns.
Residential and Commercial Real Estate. Several data points have come out recently which suggest that the housing market may be stabilizing. In fact, several real estate professionals, including Sam Zell this morning, are suggesting that the bottom has been reached in residential real estate sales and pricing. On the other hand, most folks I talk to continue to be concerned about the commercial real estate market, believing it will continue to get worse from current levels. The debate rages on whether or not the same degree of speculation occurred in the commercial real estate market as the residential market and while I'm doubtful, time will tell.
Commodities. Speaking of speculation, Wall Street was abuzz yesterday over a recent change in views from the CFTC over whether or not the rise in oil prices to $150 a couple of years ago was due to excessive speculation rather than the pure fundamentals. They apparently have access to new data which suggests that speculation played the primary role. Our view of course is that any time you have fund flows going gaga over a particular asset class, you are by definition going to attract speculators who invest, perhaps unknowingly, more on the allure of momentum than the presence of fundamental value.
New Regulation? The debate now rages on whether or not speculation in the commodities markets should be limited to those entities who take or deal in the actual physical deliveries of such goods. The question here is a very difficult one to answer. Speculation in housing has certainly hurt more than just the folks in housing (because of its affect on banks), but it isn't clear to me yet that the energy bubble did the same. Should we protect ourselves from such things or let the players who reap the rewards face their own disasters? For me, we would need to make sure that the banks aren't exposed to such speculation because if they are, then it will affect Main Street bank deposits and given recent history, bailouts would be deemed necessary.
Durable Goods. Durable goods orders, while notoriously volatile, were a little weaker for the month of June, down 2.6% compared to an expectation of a .6% decline. Turning point or simply more noise from a noisy data series?
Major League Pitching. In far more interesting news, White Sox pitching ace Mark Buerhle followed up last week's perfect game by retiring his first seventeen batters in yesterday's game. His astonishing 45 outs in a row set a new record in the MLB, beating the prior record of 41 straight.
Momentum in Stocks, Sports and Life. The role that momentum plays in the stock market and almost every sport has always fascinated me. Nice job Mark Buerhle, I hope you enjoy your recent string of successes. If you really are a great pitcher, I'm sure you'll handle the inevitable slump down the road just fine.