Der USA Bären-Thread

Collins war bislang eher bullisch...

Investing
And the Beat Goes On
By Timothy Collins
Street.com Contributor
3/9/2010 11:08 AM EST


Writing about markets has become difficult as we repeat the same process day after day. Surges continue as if there is no downside at all and no limit to the upside. Rev Shark made a good point yesterday, stating that many justify this run as the market starting to get better. How long will this be a valid argument?

Armageddon is clearly off the table, but this move means that we should be in full growth mode, which includes job growth. [Der Markt nimmt die Volkszählstellen der nächsten Monate vorweg - A.L.] Clearly, I'm the fool for not chasing here. Having some short positions has not been rewarding. In fact, it is nauseating, which is normally the feeling that you get when you are bullish and the selloffs look like they will never end. Of course, just when you upchuck your stocks and move to cash, the market finds its footing and reverses, which is where I think we are right now.

The Russell 2000 pushes higher for its eighteenth day (out of 20), which departs from any logic, even from any economic fundamentals at this point. I've heard the argument that this is merely rotation. Well, if we are rotating from one stock to another, then, in theory, one should be sold so that another can be bought. This buying either is new money coming into the market or existing money that leveraged itself higher. If it is the latter, then any fall could be quicker and farther than one might imagine.

For the time being, I am adjusting some protection on the handful of losing shorts that I have to provide more time. I suppose that the markets could climb forever, especially if the Fed keeps supplying free money that manages to find its way into the markets instead of the hands of wanting borrowers.

Logic and fundamentals dictate certain courses of action, but we have a market where neither logic nor fundamentals apply. Technicals even are becoming hard to use, since pretty much every picture I see paints stocks and indices in overbought territory.

 

P.S. Soll das Ganze eine Art Grillfest für "short Call" werden - so wie der Meltup von Januar bis März 2000? Ich glaube eher, dass bei 1150 im SPX der Deckel drauf bleibt (Doppel-Top). Collins hat vermutlich Recht mit der Annahme, dass hier kein "frisches Geld" in den Markt fließt, sondern bereits investierte Player ihr Leverage (über Margin) erhöhen. Das wäre dann das gut  für eine "gehebelte" Fahnenstange wie vor fast genau 10 Jahren, der ein ebenso gehebelter Absturz folgt.

The worst looks to be over for private-sector unemployment, but it may be just beginning for state and local government workers.

State and local government payrolls typically don’t decline much until a year after the beginning of a recession because budgets are already in place and fairly inflexible.

As a result, payrolls were stable in 2008 and a good part of 2009. But not anymore. Revenue-starved states are taking more drastic steps to balance budgets.

"This is a completely unprecedented crisis," says Ethan Pollack of the Economic Policy Institute. "The budget cuts are going to get more and more severe."

The main trigger will be the winding down of the massive America Recovery and Reinvestment Act, better know as the federal stimulus plan. Tepid to modest economic growth will also hurt.

"A lot of states didn’t go through with the layoffs that were expected because of the stimulus," says Christian Weller, who specializes in economics and public policy for the University of Massachusetts and the Center for American Progress.

The federal government is spending more, not less, so its workers won't be affected by the end of the stimulus program. Still, federal employees represent a relatively small percertage of all government workers, with state and local workers making up the biggest portion.

• Slideshow: America’s 15 Most Recession-Resistant Cities

  State and local payrolls peaked in August 2008. Between then and January 2010, 191,000 jobs have been lost, three-quarters of them at the local level.

  If those numbers seem small, consider that by one estimate, some 256,000 government jobs have been saved by stimulus funding.

  According to a recent survey by the National Association of State Budget Officers 23 states have resorted to layoffs, while 16 states have used furloughs—usually one day a month without pay.

  “Without the Recovery Act, the numbers would be higher,” says Brian Sigritz, the group’s director of fiscal studies.

  States have closed $89.9 billion in budget gaps for 2010, says Sigritz.

  Through fiscal 2010, states will receive $150 billion in funds from the stimulus package. About $70 billion has been spent so far.

  "The Recovery Act is insufficient," says Pollack. Economists generally agree that the funds cover about a third of the state budget gaps.

  Most Medicaid funding expires at the end of 2010, while so-called stabilization funds will pay out at smaller rates through the first half of 2011. Only about $40 billion in such federal transfers is expected in 2011.

  Meanwhile, states are running out of accounting tricks to meet balanced budget laws.

   

  "States are going to worry more about improving their credit quality to sell more debt and raise more money," says Hastings. “And that means cutting spending. What they have been doing is avoiding some of the ugly stuff.”

  Pollack says that there’s a “direct correlation between the loss of public sector jobs and private sector ones, especially in the services area. The jobs that suffer the most are private sector jobs.”

  States, like corporations, have also discovered outsourcing.

  Pollack estimates that about 60-percent of the jobs saved through federal aid to the states has been in the private sector, through spending on such things as road and bridge repair.

  The Center on Budget Studies and Priorities estimates than without federal additional aid, states will implement budget cuts that will cost 900,000 private and public sector jobs in 2011 alone.

  "The impact will be worse," says Elizabeth McNichols, a senior fellow at the center.

  Budgets planning for fiscal year 2011, when states face an estimated $180-billion gap, is now underway. Thirty governors have already proposed budgets, which typically take effect July 1 (The federal budget starts Oct. 1)

  According to the center's March 2010 report, South Carolina's governor has proposed reducing the department of education staff by ten percent; Hawaii is looking at about 1200 job cuts; and Wyoming is considering a 50-percent reduction in aid for local governments. On the local level, the Los Angeles, Calif. United School District says its worst-case budget plan is for 8,000 layoffs, according to a recent report by the National Council of State Legislators . Reduced government spending will cut one way, while higher fees and state and local taxes cur another, taking a bite out of discretionary consumer spending. Sales tax revenue will suffer as a result.

  State budget recoveries tend to lag the end of a recession by a year or two. In the 25 months following the end of the short and shallow 2001 recession, states cut 71,000, according to the Center on Budget Studies and Priorities

  Under the current plan, stimulus funding will be long gone. State budget officers have a name for the moment when it runs out.

  "They call it the cliff," says Sigritz.

Mutual Fund Cash Depletion Highest Since 1991

Year-on-year growth in Chinese exports and imports blew past expectations in February, apparently underlining the momentum powering the world's third-largest economy.

But some economists were wary of reading policy implications into the figures, which they said were difficult to interpret because of the timing of the long Lunar New Year holiday. This fell in February this year and in January in 2009.

"On currency policy, China will not move in the first quarter pending clearer signs on economic growth, as data in the first two months are distorted by the Spring Festival," said Zhu Jianfang, chief macro economist at CITIC Securities in Beijing.

Exports jumped 45.7 percent in February from a year earlier, following a 21.0 percent rise in January, while imports surged 44.7 percent after record growth of 85.5 percent in January, the General Administration of Customs said on Wednesday.

The resulting trade surplus last month was $7.6 billion, compared with $14.2 billion in January.

Economists had expected an $8.0 billion surplus based on a 38.7 percent rise in exports and a 39.7 percent rise in imports from year-earlier levels.

A low base of comparison in 2009, when the global credit crisis was raging and depressing demand, made it especially tough to draw hard-and-fast conclusions from the latest data, said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.

"We should not read too much into the massive increase in the headline year-on-year figures," Lu said.

The government tries to adjust the figures for changes in the number of working days and holidays each month.

On this basis, Lu noted, exports fell from the previous month for the second month in a row -- by 2.2 percent -- suggesting that the recovery in global demand was not as vigorous as imagined.

"I think the sequential figures will cool down expectations of near-term yuan appreciation before trade fully recovers," he said.

But Jun Ma, chief China economist at Deutsche Bank in Hong Kong, said the very strong headline rise in exports cemented his view that exports for all of 2010 could surge 30 percent, dwarfing the government's forecast of an 8 percent rise.

"Obviously, it will translate into stronger pressure for exchange rate reform and it will also add inflationary pressure to the domestic economy, because when exports recover, prices tend to go up. It will reinforce the argument for further policy tightening," Ma said.

The Australian dollar edged up slightly in the wake of the trade data, but overall market reaction was muted.

China has kept the yuan pegged near 6.83 per U.S. dollar since July 2008 to help its exporters weather the global economic downturn, but expectations are mounting that Beijing will let the currency resume its rise later in the year.

Central bank governor Zhou Xiaochuan said on Saturday that the decision to repeg the yuan had been a special response to the international crisis and that China would have to shift from that policy stance sooner or later.

"The country will possibly let the yuan rise in the second quarter, mainly because of strong domestic growth, but also because of heavy global pressure," said Zhu at CITIC Securities.