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Bull/Bear Weekly Recap

Retail Sales reports (ISCS and Redbook) show continued gains in sales.  

March store sales figures came in strong.  This should help corporate profits and thus a bullish equity and economic backdrop.  The consumer is making a return.

Confidence is slowly beginning to creep its way back as the Gallup Poll and ABC consumer confidence reports are beginning to show an uptrend.

Inventories are beginning to rise as businesses look to play catch up to demand. I/S ratio falls to record low, suggesting that further increases in inventories will lead to improved employment and thus more spending power.  The virtuous cycle may be underway.

While spending has improved, confidence remains fragile and increases in consumption may not live up to market expectations.

Weekly Jobless Claim unexpectedly rose 18,000 to 460,000 from  previous revised figure of 442,000.  This indicator still points to job losses or at best minimal job gains. To put this in perspective, todays levels are around the maximum levels for the 1990 and 2002 recessions. 

Greece continues unresolved and is worsening.  Could this be the one off small event that sets in motion a whole new crisis?
We are now seeing oil prices sitting just under $90.  With a 9%+ unemployment rate this seems almost ludicrous (this may be a great time to dollar cost average into shorting commodities).  These are the results of trying to reflate our way out.  Stagflation is soon to become a factor if commodity prices continue to creep higher, which they will if we continue to get stronger reports until consumption begins to falter and margins get squeezed due to high gas/commodity prices.  ISM reports are showing this dynamic is in play. (Note: Commodities in Short Supply sections)

Good Summary of Ricardian Equivalence playing a role in our future growth - (FT)

The political landscape is turning into a pressure cooker.  An important pair of special elections are coming up that could spell trouble for the Democrats.  A negative outcome would most surely stall any momentum the administration had from the passage of the health bill while further sap political will in case a crisis develops again.  The "Moral Hazard Chickens" may come home to roost.  Meanwhile a showdown with China looms and the administration is up against a wall.  Label China a manipulator and protectionism will follow, hold off (give China time and space for them to move) and risk continued political bashing from scared congressmen who might lose their jobs at the mid-term elections.


Given that the market has rallied extensively, could we be in store for a “sell on the news” event when Q1 reporting season comes around? What I’ll be looking at are reactions to the first batch of earnings once they come around.  Also we are beginning to approach the Quarters where analyst expectations begin to diverge from what I believe will happen.  Their’s are high and thus I believe economic reports will once again matter in the near future (0-3 months).  Jobs reports will become very very important.   
"And that’s why you don’t bluff".  0 for 2 on the “bazooka in the pocket” strategy.

This Fits in nicely with my Interest Rate/Treasury Thesis Point - (WSJ)


Disclosure: Short Real Estate, Materials, Emerging Markets