Market Statistics                  52 week
            Low High
Dow Jones +198.46 points +2.16% to 9,370.07   6,547.05 13,058.20                                             
Nasdaq +16.13   points +1.01% to 1,619.49   1,268.64 2,549.94
S&P 500 +23.00   points +2.33% to  1,010.48      676.53 1,426.63
Crude Oil +$1.48/barrel +2.13 % to  $70.93   $33.87 $145.29
Gold +$3.60/oz +0.38% to  $957.30   $704.90 $1,001.80
10 Year Tsy +0.10% to 3.852%   2.04% 4.32%












 What  an amazing ride this has been these past weeks! Despite our continued skepticism in our previous blogs about what we see as weak market fundamentals

not justifying the surge in prices ,the markets continue to defy what we thought was a logical analysis of the economy. In our June 5 blog we opened with a quote attributed to John Maynard Keynes which deserves repeating here:

“The market can stay irrational longer than you can stay solvent”.

Like everyone else, we too have read all the prognostications from respected market observers effectively signaling the end of the recession by years end, pointing to all the economic data as justification. We produced a list of issues we have been greatly concerned about and despite the big market moves,none of them have been effectively addressed. At the risk of repetition they are from our July 17 blog:

  • Serious damage to consumer equity which will take time to repair.
  • Unemployment which will continue to rise.
  • Toxic assets on Bank’s balance sheets which have not been effectively addressed.
  • Deterioration in the Commercial mortgage sector.
  • Stress on States with large Budget Deficits.
  • Rising National Budget Deficit due to the Stimulus Package, funding for Afghanistan and Iraq and declining tax revenues tied to the recession.
  • Economic impact of proposed legislation on Health Care and Climate Control .

We’ll keep pointing them out, even as the market continues to rise!



A myriad of positive news propelled the broad based market increases this past week, whether it was the success of the ‘Cash for Clunkers Program’, better than expected factory orders, fewer jobs cuts in July than June, drop in new claims for jobless benefits etc, etc. Goldman Sachs, on top of all the news, declared U.S stocks as having entered a new bull market with the S&P in a range of 1,050-1,100 toward year end. We have no idea how high this new up phase in the markets will go, we do believe that, while it is on the upward part of an apparent ‘V’ shape, there will be a significant retreat below that which would represent even the downward leg of the ‘W’.

We are now still in the “relief rally” and far from any positive growth/earnings news as opposed to “less bad”, we still have the issues bullet pointed above that are going to hit and create a return to reality, perhaps not challenging the  52 week lows ,but nevertheless a significant retracement.



Just as the confidence levels have returned to the stock market, so the move away from risk averse assets such as Treasuries  into commodities has accelerated. Whenever economic optimism grows, so do prices ,particularly of industrial metals such as Copper, Palladium, Platinum and Silver. Gold continued to increase although oil fell of it’s six week highs.



We have talked in the past about the importance of the 10 year Treasury on mortgage rates. The rise in this rate over the past weeks has been because of the brightening economic outlook as well as the increased supply of debt coming to market. It could well test the 4% level soon and have a significant impact on any housing market recovery due to rising mortgage costs.

John Jacobs












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