Thursday, February 3, 2011


The foundation of corporate profit growth is not as solid as most market participants think.

Why should investors/traders be surprised with the afternoon ramp?

They shouldn't be surprised - after all it was Groundhog Day (literally) yesterday.

Today, we had another trading day and another 10- to 12-handle S&P rally from the lows.

Though fighting Mr. Market on the short side has been dangerous to one's financial health, these positive reversals are getting too pat, from my perch -- and so, too, is the causality/explanation between Bernanke's quantitative easing and the certainty of higher stock prices.

Again, not surprisingly, the predictability of these never ending intraday up moves has broken the spirit of the shorts.

In a Bloomberg interview, Dallas Fed President Richard Fisher is now saying that he cannot see giving his support to further quantitative easing after June 2011.

Active Call Trading in Yahoo!

I am seeing huge activity in the YHOO March 19s and in the April 18s and 20s.

Screwflation for Breakfast

We need food to survive, and food inflation remains a serious threat to the U.S. and to the emerging markets, far more so than energy prices.

Over here, in our country, food represents about 8% of disposable income; over there, it's much more.

The worldwide foundation of a consumer-centric economy remains less sound than most believe.

If food prices continue to soar, the self-sustaining recovery thesis (which is the cornerstone of the bull market thesis) will be in jeopardy.

Run, don't walk, to read Pimco's Bill Gross's 'Devil's Bargain.'

His main points:

* Money has become the economic and political wedge for profound changes in American society.

* Perhaps the most deceptive policy tool to lessen debt loads is the "negative" or exceedingly low real interest rate that central banks impose on savers and debt holders.

* Old-fashioned gilts and Treasury bonds may need to be "exorcised" from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint.

Run, don't walk, to read Knowledge@Wharton's take on the chaos in Egypt: "Uprising in Egypt: Rebirth in an Ancient Land?"

long YHOO

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