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By Tim Melvin
9:47 a.m. EDT
All morning I have been hearing chatter about liquidity and money being forced into the market. Clearly that is what is going on, and I have to confess it concerns me. I ask everyone I talk to these days why they think the stock market will continue to rally. The answer always has to do with liquidity and the nearly mythological cash on the sidelines. Others tell me that the market is forward-looking and is anticipating a recovery.
While the market may anticipate, its anticipated result is frequently wrong, in my experience. While I love what is happening to the price of my book-value beauties, I am really concerned about what happens when a rally is entirely driven by liquidity. There may be some signs of a recovery, but I see just as many if not more signs that we are nowhere near a real economic expansion.
I am staying cautious. I would rather miss part of a rally than overly expose myself to disaster.
2. Nat Gas
By Jim Cramer
10:52 a.m. EDT
If you are like me, you are kind of blown away at the leverage of these nat gas stocks to every 8-cent increment of the futures. Here goes
again, as well as
. Hot group. Perhaps because it is hot? Hurricane season? Exports possible (I see an article in the paper about
going the other way). Very hot.
3. Gold Heavy Despite Europe Limiting Official Sales
By Marc Chandler
10:56 a.m. EDT
The price of gold is off about 1% today, roughly matching the slide before the weekend. What is noteworthy about gold's heavier tone is that last Friday 16 European central banks agreed to limited their gold sales to about 400 metric tonnes a year for the next five years. This is 100 metric tonnes less than the current 5-year agreement that expires next month. There was talk in the market that the quote could have been raised by 100 metric tonnes. The IMF's planned 403 metric tons would appear to be included in these figures, though some had previously anticipated they would be viewed separately.
The bottom line is that there will be less official gold sales in the next five years than there has been in the previous five years. Most commentators expected to gold to rally on the news, but instead it has fallen 3% from last Thursday's high to today's low. The firmer tone for the US dollar and the continued increase in interest rates (which makes the non-yielding asset less attractive), may help explain gold's under-performance.
Gold tested the 50-day moving average, which comes just below $942 today and a break would signal a test on the late July lows and 100-day moving average near $927.50. In terms of foreign currencies, gold looks heavier in yen terms than euro terms.
4. Cheerleading, Goldman
By Robert Marcin
12:16 p.m. EDT
Seems to be a fair amount of cheerleading by the financial press lately. I guess it goes with the rally. There also seems to be a significant amount of spin from the feds as well, as if they want to cajole consumers/business into spending. For example, so much made of the CARS program. It's relatively modest in a $14 trillion economy, and it's temporary. Yet it's a panacea for all things industrial production. I don't get it.
I remember the spending from last year's stimulus and the spike that retailers and domestic consumer sectors realized form that. What happened to investors who piled into that durable/retail mo-mo trade last summer from that temporary plan?
Oh, maybe it's just me. The $54 trillion of debt, the real 20% unemployment rate, and the imminent collapse in the high-end housing market are just figments of my imagination. A normal, healthy, leverage-led recovery is just starting to take hold. Here's to 5% real GDP in 2010!
is acting sloppy lately, as if investors want to take profits. The stock has been something of a tell this entire rally.
5. McDonald's' Sales
By Tim Melvin
1:13 p.m. EDT
Today's report from
highlights why I pay little attention to traditional Wall Street analysts. Nineteen brokerage firms cover the stock, and they underestimated quarterly sales. All of these projections that so many base their decisions on are nothing more than a guess based on projections by a computer model. Apparently they all use the same model with the same assumptions.
Since I am asset-oriented in my approach to the markets, McDonald's is not likely to show up on my buy list. Just by walking outside and looking around, however, it was obvious to me that the company would have stronger sales. They are taking market share from causal diners, especially among cost-conscious families who still want to eat out once in a while. Increasingly, McDonalds and other fast-food chains are the stop of choice.
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This article was written by a staff member of RealMoney.com.