Below is a weekly chart of the past 3 years of the E-mini S&P500 index traded as ES on the Chicago Mercantile Exchange futures market. The red volume bars represent the amount of S&P 500 futures contracts traded each week, where each contract actually represents 50 S&P500 shares. The average volume of the E-mini S&P500 traded each week equates to over $500 billion USD, and it is one of the most actively traded financial instruments in the world, acting as an important gauge of the world's largest economy.
The Commodity Futures Trading Commission (CFTC) each week releases the Commitments of Traders report, which details the held positions of 3 different classes of traders, indicated in the chart below as COT Net Position. There exists the commercial hedgers (gray), the large/institutional speculators (green), and the general public small/retail speculators (magenta).
In 2009, U.S. stock markets were able to rise despite a substantial fund flow headwind. It's hard to see how mere 'liquidity' could have driven the 2009 rally, as some skeptics claim. At least based on ICI data, U.S. equity fund flows were negative for the year.
Rather, the 2009 rally was probably more the result of sellers becoming unwilling to sell at lower price levels. While buying demand was diminishing, selling demand at lower price levels was probably drying up at an even faster rate. Thus prices had to rise in order to clear the market.
The combination of a rising market with negative fund flows is an encouraging sign for the future. Guess what could happen if fund flows significantly reverse and become a positive tailwind.
Note this all comes from U.S. government data itself (from the BEA)...
Most of Q3's downward revised GDP growth was simply one-off auto-output effects created by America's Cash for Clunkers program. Hope you're not forecasting future growth off of this inflated statistic. Just as with earnings, you need to remove the one-off's to see the underlying situation... and sans the huge one-off U.S. Q3 GDP barely grew.
A lot of people have this false notion that the U.S. has suddenly, as a nation, started adding debt like never before. This is because we hear about these giant government debt numbers every day, but rarely hear about the private side of the equation -- which is even larger and is falling.
Thus the point here is to disprove the notion that America is massively adding debt. The government is, but the country as a whole (inclusive of the government binge), isn't. In fact, debt growth is slowing like never before in recent history.
Kenneth Feinburg, the American pay czar, is slashing cash salaries for top employees in companies like Citi, Bank of America, and AIG by 90% on average according to the WSJ. This will make these firms far less appealing to future talent, and one has to imagine that a lot of these top people must be polishing their resumes. A 90% cut means you can make 10x more, in terms of cash salary, somewhere else. (To be fair, note that Mr. Feinbrug is shifting compensation towards other forms such as locked up stock options, thus total compensation isn't technically being cut 90%)
Warren Buffett appears in an interview, asserting that the U.S. economy has indeed passed the brink, and that more importantly the system is not broken. The country's best days are ahead.
It's a healthy reminder that I believe can be extrapolated to Europe as well.
With the recent crisis and claims that capitalism has somehow failed, many forget that a capitalistic system isn't supposed to be always a smooth ride. If we never had any crisis then something would be truly wrong.
Thus when the stock market was slammed during the crisis, many pointed to the fact that stocks had gone nowhere in ten years as a result, rather than whining people should have been hunting for buy opportunities. The world economy, including the U.S. and Europe have come a long way in ten years. If a much larger business is the same price as in 1999, it might be a great deal.
While the year to date global rally surely begs for a technical correction, many international companies with franchises larger than ever, and that are expanding, remain much cheaper to buy out than they have been in the past. Regardless of whatever weakness we might see in the near-term, they'll be around for the better days Mr. Buffett knows are ahead.
It's completely ridiculous that the new American "pay czar" has been able to deny former Bank of America chief Ken Lewis part of his pay package.
The Treasury Department's pay czar pushed outgoing Bank of America Corp. Chief Executive Kenneth D. Lewis into giving back about $1 million he received so far this year and forgoing the rest of his $1.5 million salary for 2009, say people familiar with the matter.
The move makes Mr. Lewis the biggest target so far of Kenneth Feinberg, the Treasury's "special master" for compensation. He also asked that Mr. Lewis pass up any 2009 bonus from the Charlotte, N.C., bank.
Mr. Lewis is still walking away with a lot of money, almost $70m I believe, which shows that this Czar action was merely symbolic. Kenneth Feinberg (the Czar) is now investigating almost 200 highly paid employees who unfortunately happen to fall under his authoritarian control. This sends a horrible message. Essentially, it says that if you are highly ambitious in your career, don't join any bank associated with the U.S. goverment. Join another bank that will pay you as much as you can command.
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