Don’t Worry, Be Happy

“In your life expect some trouble 
But when you worry
You make it double
Don’t worry, be happy…”

                                              Bobby McFerrin

Higher and higher.  The stock market has gone in only one direction since our last post and that’s been up.

As of yesterday, the Dow Jones Industrial Average had risen for 10 straight days for its best performance since 1996.  The S&P 500, likewise, surged past 1,560 having gained 3.05% in the past month.

Don’t worry, be happy

And, so what if the world is going broke, if that genius Ben Bernanke continues printing money, the Dow could rise from its current 14,500 range all the way up to 18,000 by the end of the year, according to Wharton School Professor Jeremy Siegel.

Don’t worry, be happy

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What Recovery?

Maybe we should be used to high unemployment … but now the bad news on jobs is coupled with queasiness about corporate earnings.

The latest earnings season began with the S&P 500 dropping 1% yesterday.  It has dropped 2.5% over the past four trading days.  The Dow Jones Industrial Average was down 0.8%

Based on estimates compiled by Bloomberg analysts, profits for S&P 500 companies fell 1.8 percent in the second quarter, marking the first decline since 2009.  More troubling, though, is that the drop is likely part of a trend.  What can we expect in the third and fourth quarters? read more

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The S&P 500 Comes Up Short

The S&P 500 fell more than 2% yesterday, recording its worst one-day drop since December.  Was it disappointment with The Fed?  A sudden realization that the market shouldn’t rise when the economy is sinking?  A “fat finger” computer glitch?

There were plenty of reasons for the fall – and collectively they do not bode well for the U.S. economy:

  •  The Philadelphia Fed Survey fell unexpectedly to -16.6 for June, registering its worst reading since August 2011.  New orders, shipments and average work hours were negative this month, suggesting an overall decline in manufacturing business.  The decline was the second in a row, as the reading was -5.8 in May.

The

HSBC China Manufacturing Purchasing Managers’ Index read more

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Bad News Boosts the Market

In the strange world of investment management, bad news is often good news.

That was the case last week, as the S&P 500 gained a hefty 3.7%, more than reversing its 3% loss from the previous week.

The market rose 2.3% on Wednesday alone – its largest single-session percentage gain so far this year – amid signs that the already tepid economic recovery is slowing further.

So why did the market rally?  Because traders speculated that the Federal Reserve will react to the slowing economy with additional stimulus. read more

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Compared To What?

The U.S. dollar is the strongest it’s been in a year-and-a-half.  Is this renewed strength a sign of American economic strength?

In a way – but it’s all relative.  The euro broke to a new low recently, and the dollar and the Japanese yen were both stronger, because of a flight to quality.

Japan, which is still recovering from last year’s earthquake and tsunami, has enormous debt, as does the U.S.  So if the dollar and yen are strengthening, it’s a sign that the euro is in deep, deep trouble. read more

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