Market Statistics                   52 week


DowJones +262.80points




  6,547.05 13,058.20                                             
Nasdaq + 75.09 points




  1,268.64 2,549.94
S&P 500 + 20.95 points




  676.53 1,426.63
Crude Oil +$2.13/barrel




  $33.87 $145.29
Gold ($17.10/oz)




  $704.90 $1,001.80
10 Year Tsy +0.394% to


  2.04% 4.32%

















 “The market can stay irrational longer than you can stay solvent,” John Maynard Keynes (attributed).

This aptly describes the current environment where, despite as much negative news as positive, the major stock indexes continued their strong run this past week An improvement in consumer sentiment was a key factor in the previous weeks market rise. After all, if the consumer is more confident and this leads to more spending, then the economy will be pulled out of the recession and any deflationary fears will subside, so goes the theory….Not so fast. Improved confidence, as we suggested last week, does not necessarily translate into spending. In fact this past week we saw monthly same store sales in May for 30 retail chains fall worse than expected. What  is happening here? Quite simply households are being prudent, deferring big ticket purchases, conserving, while recovering from depleted personal net worth (IRA’s/401K’s/home prices)  and/or job loss and/or tightening consumer credit. On the job front, employers in May cut 345,000 jobs , the slowest in eight months. However the unemployment rate rose to 9.4%,the highest in 25 years.

Federal Reserve Chairman Bernanke testifying before the House Budget Committee last week painted a picture of an economy whose decline is slowing , with a recovery expected later this year ,but one which will be gradual. He expressed also the need to address the rising debt levels.

The current environment strikes us as the “fingers crossed” economy where everyone wants the Government to succeed , but where we are in such unchartered territory, no one really knows if it will. Hence the dialogue in the press between those so called experts  predicting inflation and those predicting deflation.





Apart from the raw number gain this week ,an important technical target was reached  in the S&P 500.It closed above it’s 200 day moving average for the first time since December 2007. This moving average is seen as the dividing line between a stock (or index) that is healthy and one that is not .It is regarded as  a good indicator of future  price movements, in  that market gains have largely occurred when the index is above the 200 day moving average.

As we have said before, the markets future progress will now depend on trends of sustained and consistent economic improvement, not a relief things are “less worse” or that there is one piece of positive news followed by one negative. We do not expect this good news trend scenario to unfold in 2009,but rather one with continued mixed signals.



Oil continued to rise with Goldman Sachs predicting $85/barrel by the end of 2009.According to the Canadian Asset Management firm, Gluskin Sheff, a rise of 45 cents per gallon in gasoline prices over the past month is the annualized equivalent of a $60 billion pay cut for American consumers. It is little surprise that the consumer is not rushing out to spend .

Gold declined for the week as the US Dollar strengthened and Gold funds sold off in the light of the steep price rises of late.



The single  most important issue for us this week was the continued rise in  yields in both the 2 and 10 year Treasuries and the apparent reluctance of the Government to  commit to buy more than the announced $300 billion in Bonds in order to dampen any rate increases. Allowing continued higher  interest rate levels at this premature stage in the economic cycle  is likely to choke off any recovery led by consumers and businesses and would be in our view self defeating.


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