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Wednesday, July 29, 2009

Morning Market Report

There's two pieces of breaking news. First, Yahoo and Microsoft have reached a deal for an Internet search partnership.

Microsoft has reached a deal with Yahoo for an Internet search partnership, ending years of back and forth negotiations.

The agreement announced Wednesday gives Microsoft access to the Internet's second-largest search engine audience.

It adds a potentially potent weapon to Microsoft's Internet arsenal as the software maker girds for an online assault against Google.

The partnership was quite as sweeping and expansive as analysts expected, however, an Yahoo's shares are currently trading down about 7% on the news.

Meanwhile, durable good orders were down 2.5%, the most in five months.

New orders for long-lasting U.S. manufactured goods fell more sharply than expected in June, notching their biggest decline in five months as demand for communications and transportation equipment slumped, a government report showed on Wednesday.

The Commerce Department said durable goods orders fell 2.5 percent, the largest drop since

January, after rising by a revised 1.3 percent in May, previously reported as a 1.8 percent surge. This was worse than market expectations for a 0.6 percent decline. Orders had advanced for two straight months.

New orders excluding transportation unexpectedly rose 1.1 percent in June, after climbing by 0.8 percent in May

There was about a $40 billion auction in 2 year Treasury bonds yesterday that was lukewarm. Treasury yields rose to 1.08% before settling at 1.10%. They are trading this morning at 1.10%. The rates on longer term yields are trading better this morning however. The Ten year is at 3.64% and so the yield curve between the two year and ten year is down to 2.54%.

Indices were mixed, marginally, yesterday. The Dow and S&P were down slightly while the NASDAQ was up slightly, .4%. This morning, all three are trading down this morning following the durable goods numbers. All three look like they will start down between a half and a full percentage point.

Meanwhile, in China, investors are worried things are going too well. A very strong Initial Public Offering for China State Construction Engineering Corp sparked worries that the market is headed toward a bubble. The Chinese index, up about 90% year to date, was down about 5% yesterday. The Hang Seng, another Chinese index, was down 2.37%. Not everything was bad yesterday in the Far East. The NIKKEI in Japan was up .26%, however that was the only index that was up. The Straits Time Index in Singapore was down .76%. In Europe, it was the reverse. The Spanish index was down .31% but that was the only index down. The FTSE in London was up .93% and the Dax in Germany was up 1.8%.

Oil is giving a lot back today. It's trading at $65.60 down $1.60 a barrel. The Dollar is mostly better today. It's up .33% against the Euro, .04% against the British Pound, and up .26% against the Japanese Yen.

My Analysis:

There's so much competing data that the market will humble most prognosticators. I still believe that the market will shave 10-15% in the intermediate term, through the end of the Summer, but right now the only thing that appears safe is volatility in the markets.


ddadmin said...

Wow! Finally Microsoft has reached a deal Yahoo for an internet search partnership. Will the newly announced deal between giants Microsoft and Yahoo be a good thing? Got to wait and see. But atleast Microsoft and Yahoo deal is straightforward and not complex at all and ofcourse, the negotiation talks have been going for long. I was just curious to know all the past negotiations between Microsoft and Yahoo so collected all the articles and links (more than 200) related to the current merger and the previous events or negotiations between Microsoft and Yahoo. If you are interested check the link below.

Shalom P. Hamou said...

The article: Ben "Systemic Risk" Bernanke proves that Bernanke knowingly maintained a strict monetary policy long after he knew of the sub prime problem as he knew it would cause of the "Depression".

It shows that he probably engineered it on purpose!

If you want to sleep tonight, Don't Read It!

"In contradiction to the prevalent view of the time, that money and monetary policy played at most a purely passive role in the Depression, Friedman and Schwartz argued that "the [economic] contraction is in fact a tragic testimonial to the importance of monetary forces" (Friedman and Schwartz, 1963, p. 300).

The slowdown in economic activity, together with high interest rates, was in all likelihood the most important source of the stock market crash that followed in October.

In other words, the market crash, rather than being the cause of the Depression, as popular legend has it, was in fact largely the result of an economic slowdown and the inappropriate monetary policies that preceded it.

Of course, the stock market crash only worsened the economic situation, hurting consumer and business confidence and contributing to a still deeper downturn in 1930."

Governor Ben S. Bernanke
Money, Gold, and the Great Depression.
At the H. Parker Willis Lecture in Economic Policy, Washington and Lee University,
Lexington, Virginia.
March 2nd, 2004

You can read also: Preparing for the Crash, The Age of Turbulence Update: 30/07/09., which tries to accomplish Greenspan Mission Impossible:

"That is mission impossible. Indeed, the international financial community has made numerous efforts in recent years to establish such oversight, but none prevented or ameliorated the crisis that began last summer.

Much as we might wish otherwise, policy makers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances.

Financial crises are characterised by discontinuous breaks in market pricing the timing of which by definition must be unanticipated - if people see them coming, then the markets arbitrage them away.


The clear evidence of underpricing of risk did not prod private sector risk management to tighten the reins.

In retrospect, it appears that the most market-savvy managers, although conscious that they were taking extraordinary risks, succumbed to the concern that unless they continued to "get up and dance", as ex-Citigroup CEO Chuck Prince memorably put it, they would irretrievably lose market share.

Instead, they gambled that they could keep adding to their risky positions and still sell them out before the deluge. Most were wrong."

Alan Greenspan
The Age of Turbulence: Adventures in a New World [Economic Order?].

The Age of Turbulence: Plea for a New World Economic Order. explains the nature and causes of economic depressions and proposes a plausible alternative solution.