Capitalogix Commentary 10/18/09

Dow 10,000 – Version 2.0.

SNL made a joke that hitting Dow 10K was different this time.  The difference was that 15 million unemployed Americans cheered while they watched CNBC on their couch in their pajamas.

 091019 Letting the Air Out of Hope

The U.S. Equity Indices continue to perform well.  The economy, however, is sending mixed signals.  At this point, some would argue that any positive economic signal is a welcome signal.

Mixed Signals: Two Charts Giving Us Different Views Into a Potential Economic Recovery.

The first chart shows that unemployment is still growing faster than new job growth.  Recent readings show six unemployed people for each potential job opening.  A glance at the chart shows that ratio is usually 2:1 (rather than 6:1).  I'll be watching this indicator, and will take even a small improvement as a positive sign for the economy.

 091019 Number of Unemployed Per Job Opening

Speaking of positive signs of economic recovery, the next chart does show a hopeful turn of events (based on increasing Capacity Utilization).

 091019 Capacity Utilization Up-Turn

Utilization has increased for three straight months, and is up from the record low set in June (the series starts in 1967). Capacity Utilization had decreased in 17 of the previous 18 months.  An increase in capacity utilization is usually an indicator that a recession is over.  Let's hope it keeps up.

When In An Up-Trend, Like This, Don't Fight the Fed.

I was reading "A Dash of Insight" and saw this investment hypothesis: "The government is on a mission.  You may not like the policies, but as an investor, you fight it at your peril."  In other words, don't fight the Fed.

that has been a painful lesson to Bears trying to short the rally.  The
result, a dramatically declining short interest.  Here is a chart from
Bespoke, illustrating that point.

 091019 Short Interest Declining

At a certain point, the lack of sellers
becomes the contrarian indicator that we are near a top.  Again, in
trending markets, too much thinking is dangerous.  Just consider this
another indicator to watch when the up-trend finally breaks.

Business Posts Moving the Markets that I Found Interesting This Week:

  • Impacts of High-Frequency Trading – Manipulation, Distortion or Improvement? (Wharton)
  • Blue Chips Top 10,000 for the First Time in a Year. (WSJ)
  • Loose Monetary Policy: When Will Wall Street's Biggest Gravy Train Slow? (WSJ)
  • Goldman Sachs Sees a "Perfect Storm" for M&A. (StreetInsider)
  • Venture Capital Exits Dallas and Other Places Outside of Silicon Valley. (WSJ)
  • Pessimistic Commentators Remain Anything But Convinced by the Rally. (Economist)
  • Bloomberg Buys BusinessWeek From McGraw-Hill. (StreetInsider)
  • More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

  • Mossberg Gives Windows 7 a Good Review. (WSJ)
  • White House Tells Fox Network News to Take a Hike. (Newser)
  • Patent Auctions Offer Protections to Inventors. (NYTimes)
  • Facebook Has a Happiness Index Drawn From Posts. (NYTimes)
  • Anthropologist: Modern Male Is 'Worst' Man Ever. (Newser)
  • Un-Tapped Potential: Autistic Savant Draws Cities from Memory. (Wiltshire)
  • Cool Chart of Apple's Path To 2 Billion iPhone App Downloads. (BusinessInsider)
  • More Posts with Lighter Ideas and Fun Links.
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