April 23, 2009

What is the end game?

The markets have rallied off their lows significantly as we hit the mid-point of April. With the help of the government, our financial system has, for the time being anyway, averted disaster and may be primed for a recovery in late 2009 or early 2010. Investors need to remind themselves that stocks will bounce before the economy does. But what has all the government intervention wrought on our future?

By monetizing the debt or in Bernanke (helicopter Ben) fashion throwing newly printed money from the sky at the problems, we could very well see a huge inflationary spike in the next 1-3 years. Commodities would certainly benefit from this side effect of a free money policy. Interestingly, gold may not gain as much, as it appears to be over owned by retail investors and has already seen huge price increases. Another result of the Fed's monetary intervention is that T-bonds have no value. You are being paid less than zero (adjusted for any inflation) to hold short term bonds, cd's and money markets. Could this be the next big bubble? Finally, if inflation does explode during the next 1-3 years, stocks may do OK, as companies do have the ability to raise prices and the value of hard assets goes up. As the money supply explodes, inevitably your US dollars buy less and prices go up. This concludes are economic lesson for today.

Diamonds and Dogs

Wednesday, April 15th,
Diamonds
American Express (AXP) wins the diamond for tax day as the credit card lender gained over 11% to finish the session at $20.62. AXP reported that customer delinquencies may be slowing along with loan losses. AXP is up 100% from its lows and still down over 50% from its highs, go figure.

Dogs
The creepy king did it. Burger King (BKC) fell 17% or $4.01 to $18.67 as they reported future revenue losses. Maybe it's just me, but their promotional king scares the crap out of me.

Tuesday, April 14th, 2009

Diamonds
This is the diamond result for bio-tech companies. Dendreon (DNDN) exploded over 132% to close the day at $16.99 after they reported that their prostrate cancer drug was successful in prolonging survival. The $9 move higher caught the attention of Wall Street, as investors, who have waited years, cheered the results of both the treatment and the stock.

Dogs
The Nasdaq, the exchange built by in part by Bernie Madoff, plunged down almost 10% as they continue to lose market share to upstarts like BATS and Direct Edge to name two. NDAQ fell $2.19 to end trading at $20.34. In a case of "where have all the good times gone?" NDAQ had traded as high as $50 as recently as January, 2008.

Monday, April 13th

Diamonds
MGM Mirage (MGM) was on a roll today as the casino operator gained 95 cents to $6.25 as they dodged a bullet with regards to $70 million owed on their CityCenter project in Vegas. The gamblers have bought themselves some time with the house and the shoe is on the other foot.

Dogs
Boeing (BA) lost $2 per share as the largest maker of airlines in the US is cutting production on two-aisle planes as the recession continues to slow business. BA's ETA for the end of trading was $37 per share and down 5%.