While the news was not particularly surprising, the Federal Reserve's Beige Book said Wednesday that overall economic activity has weakened across all Federal Reserve Districts.Reports from the districts indicated that Vehicle sales showed significant declines in most districts. most districts reported a contraction in activity in the services sector since the last report. All twelve districts reporting weaker manufacturing conditions. Nearly all districts reported weak housing markets, with most districts also reporting weakness in the commercial real estate markets.The Beige Book also indicated a contraction in lending, with many districts reporting reductions in residential, commercial and industrial lending and tightening lending standards.With regard to the labor market, the Fed said that several district reports showed signs of slowing labor demand. Well, every thing does sound familiar..
Earlier in the day, the Institute for Supply Management released a report showing that activity in the service sector contracted by more than economists had expected in November, marking the second consecutive monthly contraction in the sector. The ISM said that its index of activity in the service sector fell to 37.3 (Economists expectation - 42) in November from 44.4 in October, with a reading below 50 indicating a contraction in the sector.
Play: Short the borad market.. in light of last week's rally, this is the right time to short the market.. Buy BGX ( I did buy it today when the market was up 120 points.. and was up 10% after a couple of hours, and then by the end of the day ended flat... well, it would be immensely/preposturously optimistic of me to expect a 30% return on a single day!! :) ).Though the data is overwhelmingly negative, the stock market seems to pay no heed to it. The market acted as if worst of the worst news is priced in. It is interesting to see the market in green in light of the negative data around.
However, Legg Mason's star stock-fund manager Bill Miller said on Wednesday the "bottom has been made" in U.S. equities and that the Federal Reserve should consider purchasing stocks and junk bonds to pull the United States out of the financial crisis. Well, I stil lbelieve that the market will test the earlier lows.. Dow would touch 7500 again.. if not 7000.
The above data supports my view.. in addition, the European CDS benchmark, the iTraxx Crossover index, broke through the 1,000bp barrier for the first time in its four year trading history on Wednesday, meaning it would cost €1m annually to protect €10m of debt issued by mostly junk rated companies over a five year period. translation: more companies are going to go under. CDS spreads spread wider worldwide on Wednesday as low volumes and bearish sentiment drove the cost of both sovereign and corporate default protection to unprecedented highs. transaltion- More countries are in for more trouble..
Should write about this stuff tomw.:
30 year and 10 year treasury yield... and how/why to short treasuries...
Gold, Gold Miner ETF, Dollar strength. Why the dollar would weaken.. .
Feeling damn sleepy tonight.. btw.. Dada!! I am happy for you!!!! :) :)
Song: 'Something in the way' - Nirvana.
Mood: 'I wish the whole world is full of people like CnH (Carthik and Harish or Calvin and Hobbes)'
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