Archive - Aug 2, 2010 - Blog entry

Pension funding relief could provide between $19 billion and $63 billion reduction in required contributions over five years. And the Fed is also taking notice of states' pension woes. This means that the reflation trade will continue well into 2011.

In 1970, the financial industry only accounted for 10% of S&P 500 earnings. By 2003, this percentage had swelled to 31%. Put another way, by the turn of the century the financial industry accounted for nearly $1 out of every $3 in corporate profits. Folks, this is the REAL “New Economy” Greenspan touted in the ‘90s: financial speculation. Greenspan and pals never really believed that technology would increase worker productivity. How could they? None of their policies actually benefitted technology firms or induced entrepreneurialism.

It was a silly rumor. At least I thought it was. Now I am not so sure.

What a rally, the RISK is ON – I got two words: SHORT SQUEEZE! As mentioned in previous June analysis that a close above 10288 on Dow will open room for further rally. There is still a 2% to 5% more room for risk to go up, before stopping for a breath and then to reverse.

It appears to be official. Apple’s iPhone is no longer the fastest growing smart phone in the world’s largest and most important smart phone market – the US! Considering the iPhone is 45% of revenues and nearly 70% of profits, Appolytes, should take notice. The Android Now Cometh!

Is the first collapse in history of a bond market in a non-inflationary environment coming? At some point, the world runs out of buyers. If short interest rates double from the current levels, so does America’s debt service, from the current 11% to 22% of the budget, possibly as early as 2014. (TBT), (TMV).

Markets in a Flash

· Asian equity markets closed higher this morning. The Hang Seng Index was higher by +1.82%, while the Japanese Nikkei 225 was higher by +0.35%.

· European equity markets have retraced Fridays losses and all higher. The FTSE 100 is up by +1.89% at lunchtime in London.

· Commodities are pushing higher at the start of the weak as investor look for more risk. Oil has broken above $79.50. Gold is falling as investors avoid its safety, and it is now below $1180.