Wednesday, November 10, 2010


Jim Cramer wrote today that 'good news gets drowned out again.'

Or is it that the good news has been more than fully discounted?

Kass is getting longer in YHOO...........

Early Read On GM

I will have more on the General Motors IPO next week, but my early read on the company's prospectus is quite positive.

Trading Desk Tapas

A lot of trading desks are sharing a portion of a Bloomberg story on LCH Clearnet's positions on European debt.

This portion of a Bloomberg story is getting a lot of discussion on trading desks:

"LCH Clearnet Ltd. demanded its clients place a larger deposit when trading Irish government bonds after the yield on the nation's debt soared, and may impose similar measures on other European securities."

The recipe for restoring economic growth is in the hands of our fiscal authorities, not in the hands of our monetary authorities.

I believe, as Dallas Fed President Richard Fisher does, that the Federal Reserve is prescribing the wrong medicine for the ailment from which the U.S. economy is suffering, as the uncertainty regarding income and future demand, not abundant liquidity, are the binding constraints to growth. Our domestic economy needs an intelligent, creative and transformative fiscal response to tame our deficit and grow jobs, not more monetary "cowbell" that disproportionately benefits the richest Americans and that is not likely to trickle down to the majority of the population.

In summary, I continue to argue that QE2 will not deliver the anticipated virtuous and smooth circle of economic growth that the Fed desires and that our domestic economy will stay on a path of uneven, below-historic and (potentially) vulnerable growth. In the fullness of time (perhaps sooner than later), developing commodity price inflation, further pressure on consumer real incomes and accelerated declines in our currency will likely weigh on the trajectory of domestic growth and on corporate profit margins.

Questions I Asked Myself This Morning

Here are some topics that I am mulling over.

1. What would the legendary Technical Analyst Bob Farrell Sr. think about yesterday's market action? Was it the reversal day? Would he argue that, with the lowest five-day put/call ratio since April, we finally have seen a top in complacency/bullishness? Or was Tuesday's market reversal another "pause that refreshes," as Jim Cramer suggests, or even just a "one-day wonder?" Will Tuesday prove to be something more significant that "feeds on itself?"

2. Will the backup in Treasury bond yields (a five-month high in yields/low in price) continue? Did the Fed buy a large portion of the auction? Will yesterday's weak auction foreshadow more poor auctions in the months ahead?

3. Will the CME's hike in required silver margin be matched in other metals and commodities in the days ahead?

4. Should China's Dagong Global Credit Rating Company downgrade of the U.S. be readily dismissed as many suggest?

5. Will a behind-closed-doors deal at next week's G20 meeting involve a reduced QE2 in exchange for an agreement for an appreciation in the yuan or even an agreement on trade/current accounts?

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