When I left on vacation 4/21 the S&P was at 1159 same as when I returned on May 3. As I start to write this blog it is trading at 1161. I love the quote by Martin Goldberg today on Financial Sense.com "The S&P500 touched 1155 on January 27th, 2004, over 15 mos ago and as of Wednesday night sits at about that same level. In that time, there has been so much analysis, so little movement and so much money floating about looking for a speculative gain." Isn't that the truth. In contrast however, on 4/21 oil was 54.20 vs 48.40 as I write. The dollar was 130,48 against the euro vs 126.32 now. 10yr notes were 4.22 vs 4.13 now. Gold was 434 vs 420 today. So, with all this activity, why haven't equity prices had a net change? A few weeks ago we were fretting over an economic soft patch, that now with the latest releases of retail sales, payrolls, and auto sales common wisdom says is over. GDP will be revised higher. With oil down $6 and 10yr note yields at 7 month lows, earnings pretty good, you would think equities would be higher than three weeks ago. My explanation for why they are not is simply, liquidity is contracting and the ripple effects of the GM and Ford downgrade to junk on the psychology and risk appetite of market participants is casting a pall. It scares the hell out of everybody and they pull back. First Fannie and Freddie, and AIG and now GM and Ford. Credit problems with interest rates this low. What if they move higher? Who else then gets caught. Credit spreads are widening as everyone waits to see if another shoe falls. Time will heal this wound. Everyday no hedge fund fails the market can gather strength.
I do have my reservations over the economic data maybe not being as strong as it appears. If you average March and April together it doesn't look as much has changed. Consumer confidence droped again and the purchaseing managers report was weak. Europe and Japan also continue weak.
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