Friday, October 30, 2009

Buy this stock market pullback!



This market pullback is most likely due to end-of-month budget adjustments. It has been the pattern for many months. Typically, there is a large debt sale in the last few days of the month to bring down the deficit so as not to show too large a shortfall when it is reported by the Treasury. These selloffs have been excellent buying opportunities and I suspect this will be no different.

What has changed:

The economy is growing again, at a 3.5 percent to 4.0 percent clip, which is decent.

What remains the same:

Employment tax receipts suggest that the job picture has stopped deteriorating, however, it is not improving. This almost guarantees more fiscal and monetary measures to support or encourage job growth and general economic growth.

That is why you must look at this from a bullish perspective.

2 comments:

Brantley said...

What has changed........ not much, but not the light you put it.

What's changed, are you kidding?

The 20+ year build-up is unwinding, and with the usual emotional bounces to be expected, and short lived. I would suggest reading all links if full. Summary below.


http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6448884/Deflation-fears-as-Eurozone-and-US-credit-contracts.html

27 OCT 09 -Data from the European Central Bank shows that the M3 broad money supply has contracted over the last six months, confounding expectations that ultra-low interest rates would soon boost monetary growth. ......The picture is even starker in America where M3 has shrunk at an annual rate of 6.5pc over the last three months, a pace of contraction not seen since the 1930s.

GDP growth........ that stat is now history (IMHO not going to be repeated)based on specific pumping to skew data to paint a picture of false hope by the FED.

http://globaleconomicanalysis.blogspot.com/2009/10/market-cheers-over-ugly-gdp-report.html

Q3 Advance GDP report 29 OCT 09 -A misguided Cash-for-Clunkers added a one-time contribution of 1.66 percentage points to GDP. Auto sales have since collapsed so all the program did is move some demand forward.

More bad news....
Personal income decreased $15.5 billion (0.5 percent), while real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent last quarter. Those are horrible numbers.


http://market-ticker.org/archives/1559-Oh-Boy,-Threats!.html

In the same light this "flood of liquidity", instead of promoting economic growth, went into the stock market as well. This has driven the S&P's P/E to one hundred and forty (as of 9/30/2009), a level never before seen in the history of the stock market, and on a historical valuation basis some seven times expected price/earnings value and more than double the previous high of approximately 60 (just before the Tech Bubble collapsed.)

What I will say is right now the moving averages are going up so the bias is still to the upside but Goldman Sachs and the like always sell into the rally......the retail side always gets caught holding the bag.

googleheim said...

ARE THE 19 BANKS THAT SURROUND THE FED STARVING OFF OTHER BANKS SUCH THAT SOME OF THE NOW 115 FAILED BANKS IN 2009 NEVER GOT ANY OF THE FUNDS SO THAT THESE BIGGER 19 BANKS CAN GOBBLE UP THE ASSETS ??

THEREFORE THE FED IS SECRETLY FAILING BANKS FOR THEIR OWN PROFIT ?