Thursday, June 2, 2011


Moody's may cut its rating on U.S. government debt if no progress is made on addressing the debt ceiling.

Price is what you pay; value is what you get.

Earnings momentum will improve as pricing firms up for the insurance sector. The liquidation of banks will cause a natural rotation into insurance as insitutional investors need financial exposure.

GS has been subpoenaed. Big deal - it will amount to absolutely nothing.

The most conspicuous items regarding Wednesday's market action:

* The profound weakness in financials coupled with the developing double dip in housing. The bulls cite that residential real estate has declined to a very small part of GDP, but I argue that a double dip in housing activity and home prices will have a multiplier effect by weighing on consumer confidence, retail spending and investing. Importantly, a weakening housing market would impair profits in the banking industry and in others.

* The obliteration of a week of gains in only three hours of trading is stunning.

Whither QE3?

Until Wednesday, weak economic numbers have been greeted by the notion that more liquidity will be poured into the system -- that a third round off quantitative easing would further inflate animal spirits.

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