11/10/10…topsy-turvy

…TB cannot subscribe to bull arguments that the stock market is undervalued…it is ‘priced to perfection’ as a friend used to say. Last Thursday’s 1.37B share day was the highest since October 15th and only the 5th above average day so far this quarter (11/5 was 1.24B shares but market could not capitalize on the prior day’s breakout). Since 8/31 there have been just SEVEN above average days!

 

The good news is that the breakout was on solid volume, the bad news is that it has gone sideways since then...this has been the case for months. Can it be sustained? Not with the mixed economic data, the flawed QE2 policy imposed by the Fed (but what else could Bernanke do to avoid DE-flation…while the rest of the world is becoming concerned with IN-flation as their economies gain traction?), and the lack of hiring, inventory build that showed yesterday, and lack of pay increases.

 

What is more, bond yields are rising (but remember we are in the November auction cycle)…yesterday was a down day…not only for bonds, but Gold which set a record high of $1424.30, then closed down on an outside day that was almost a key reversal. This has been the pattern on days with record highs generally followed by a correction…stocks…while the dollar rallied and is now up significantly (77.54) from the 11/3 low and low cycle close (76.22/76.72). How will it play out? Well, after the November election effect, TB suspects they will pull back.

 

It is hard to imagine how the mix of economic news can be a long-term positive for stocks and thus it is more a reaction to the continuation of gridlock in Washington that is the driving force…albeit under a different party in the house. It is even harder to imagine that we are cheering gridlock even as our infrastructure crumbles…c’est la vie!  

 

. . . - - - . . . . . . - - - . . . (S.O.S.)

 

Readers know that TB is a fan of John Mauldin but this week he blew it by putting an anti-Obamacare article up even with noting that the author is an Executive VP of Wal-Mart who loves to dump their employees health costs on the American people. What was most distressing though was the fact that there were no solutions offered…none! That is the problem…we are told of how expensive the plan is but not about how expensive it is (for both the hospitals and individuals) to do nothing while we exist with the worst health care system of any industrialized country. TB does not think Obamacare is good, but as he wrote Mauldin…can we afford to wait around for another 20 years and had the GOP not been obstructionist and Team Obama overreaching, we might have had helpful and needed reform.

 

Last Wednesday TB was in Seattle, to visit his former friend and colleague who suffered a massive stroke exactly eight months ago. Since then medical expenses have exceeded $600,000! This for a 55 year old who was in excellent health according to a physical just two weeks prior. They have maxed out his health benefits and are now paying $6,000 a month for rehab and $2,000 for COBRA. How many of you can afford this…yet how many of you are fighting healthcare reform? You are being duped!

 

Now look at today’s top Bloomberg headlines and see how we are continuing to be fleeced by Wall Street:

 

*Wall Street Takes $4 billion From Taxpayers as Swaps Roil Public Financing

*Executives Collect $2 Billion Running For-Profit Colleges on Taxpayer Dime

 

The first is the cost to municipalities to cancel interest rate swaps which were misrepresented (and/or bribed) to public officials. The second is those for profit colleges that we see the commercials and laugh at their offerings…become an electrician, etc. Nearly 90% of their revenue comes from student loans, which eventually default at a rate twice as fast as public/private institutions. Meanwhile the highest paid CEO earned 26x what the highest paid college president was paid last year. Who cares? Well, you should because it’s your money!

 

So go buy your stocks and jump on the bandwagon but the day of reckoning is sooner than you think.

 

Have a great day…and remember Veteran’s Day tomorrow…that’s why some of you are off ya know!

 

TB

 

Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries...as he sees it...and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Copyright TBD Capital LLC, November 10, 2010.

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