Wkly Recap & Otlk – 01.14.11

Tower Private Advisors

Prior Posts

Below

  • Whatever I can cram into about an hour of furious typing

Capital Market Recap

Judging by, among other things, the Volatility Index, in the table above, and various measures of investor sentiment, it would seem that the market’s view toward things is:

Implied Volatility is now at a level that has been associated with heightened market risks.  It has, however, also gone a lot lower (the green box in the chart below); i.e. to even higher risk levels.  It’s akin to what someone said at lunch today–and I paraphrase–I know we’ve still got a lot of issues to deal with as a country, but stocks are going up, so you’ve got to own them.    That kind of talk reminds me of 1999.  Here’s a look at the venerable Fear Index, a chart of implied volatility.  We are at the same level seen at the market’s 2007 all-time high–but there’s room for it to go lower.

Top Stories

The top stories this week were centered around earnings releases.  The fourth quarter earnings reporting season began this week with Alcoa’s–the first company in the S & P 500 to report–positive earnings surprise $0.21 v. $0.187.  With only seven of 499 companies reporting earnings, they’re already true to form with a sizeable majority (5/7) beating analysts’ earnings estimates.  Fifty companies will report next week; 127, the following week.

Here are a few headlines I thought were important from this week, generally grouped by subject.

  • Ken Fisher Says U.S. Stocks to Beat Global Markets
  • American Stocks Become Sweetest Spot with Emerging Markets’ Tighter Credit
  • Chrysler Says Global Sales Rose, Breakeven Point Fell
  • Starbucks Signs Accord With Tata Coffee to Enter India

Stories related to Australia and its flooding showed up on several days.

  • Aussie [currency] to Fall as Traders Cut Interest-Rate Bets
  • Queensland Floods May Cost Insurance Companies Record $13 Billion in Claims
  • Australian Inflation Risk Seen in Tomato Price Jump
  • U.S. Coal Miners to Gain on Australian Floods

Others

  • Fed’s Bullard Says Too Soon to Reduce QE on Improved Outlook
  • Duke, DuPont‘s $20 Billion of Deals Signal Appetite for Big M&A

This Week

  • Initial Jobless Claims took a sizeable–and unexpected–8.5% jump.  The downtrend remains intact, but the 4- and 12-week moving averages were violated.
  • Producer Price Index showed subdued inflation at the producer level.  The headline index increased while the so-called core rate was flat and down.
  • Consumer Price Index showed more of the same at both levels.
  • Industrial Production and Capacity Utilization continued their grudging advances, and so as to include at least one picture, I enclose a graph of capacity utilization below. 

  • The current recovery is lagging past post-recession recoveries in so many ways–employment, for example–but I found an area where this one is ahead of others, and it involves no sarcasm or cynicism.  In this recovery, we’ve recouped 50% of the pre-recession peak in Capacity Utilization in a much shorter time, just 45 months compared the average of the last three recessions, 61.7 months.

Next Week

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One Response to “Wkly Recap & Otlk – 01.14.11”

  1. Lloyd Ehmcke says:

    This is as clear as the sand of the seashore! Ha. I’m still unsure which way the wind is blowing, but I know it’s blowing.

    Thanks, Greg.

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