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Summarizing The First Half And The Last Scorching Week In Pictures And Charts

Tyler Durden's picture




 

Goldman's David Kostin, who last week was warning about the combustible effects of a hedge and mutual fund space underperforming the general market, has again found his bearings after a week which saw the biggest move in the market in two years, primarily courtesy of an unprecedented and very much delayed shift out of bonds and into any other asset, marking the end of QE2 and substantial uncertainty as to who will buy government issuance in the future. However, the future is a topic for another day. Here is a brief recap of the past: "S&P 500 ended 2Q almost unchanged from the start of April, but has returned 6% YTD. Looking back, Health Care was the major surprise, surging 14% YTD followed by Energy at 11%. Financials was the only sector to post a negative return, falling 3%. Largecaps lagged with S&P 100 returning 5% and Russell 2000 advancing 6%. Looking ahead, macro uncertainty abounds in Europe (sovereign debt), Japan (earthquake recovery), China (inflation pressures), and US (debt ceiling and budget negotiations). However, at the micro level we expect S&P 500 EPS will establish a new high of $96 and lift the index to 1450, a return of 10% in 2H."

Full report:

Weekly Kickstart 7.1

 

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Sat, 07/02/2011 - 12:02 | 1421199 Prepared
Prepared's picture

Yeah, good luck with all of those future goodies....lmao!!

Sat, 07/02/2011 - 12:05 | 1421203 quintago
quintago's picture

YoYo returns: The annual return from moving money back and forth between bonds and equities everytime buyers for each dries up.

Sat, 07/02/2011 - 12:07 | 1421205 max2205
max2205's picture

A bullish article? OMG. short

Sat, 07/02/2011 - 12:13 | 1421216 Rainman
Rainman's picture

Nothing like a big quarter end move to rouse the bullsheet. Time for more channel stuffing....then pray for an Xmas season shopping bonanza. Hope is not a strategy.

Sat, 07/02/2011 - 13:10 | 1421272 Temporalist
Temporalist's picture

"Hope is not a strategy."

No it's just a campaign slogan for the hopless masses.

Sat, 07/02/2011 - 12:32 | 1421232 tequila shot
tequila shot's picture

Time to start Playing

Sat, 07/02/2011 - 12:46 | 1421246 Terra-Firma
Terra-Firma's picture

The stock markets have become an inverse barometer 

of economic events. Bad report market jumps. Good report 

market is flat. I think the folks at the Fed tried to slowly

reduce its influence as the end of qe2 neared; hence

the orderly market decline to the 200 day moving average; just

like before the announcement of qe2. 

 

With that background, i think the markets best rise in

two years is not a bullish sign because it was the Fed

that drove or should i say bought it up out of outright

fear that if the sheeple knew how bad it really was

that their spending retrenchment would accelerate

deflationary forces. Keep in mind that during the first

depression the president confiscated private gold.

in that day and age and even in our day that would

be.seen as an extreme event of government intrusion

into the market and unthinkable until it happened. this.

past week was a sign there is frantic almost panic like

concern about the future. stay tuned for the unthinkable

that is what i think. what do you think the unthinkable

will be? last week's market super pump? return to a war

based economy where we get coupons for oil and paid in fiat ie.,

price and demand control?

 

Their next steps will reach into what was the unthinkable

because that is where they will go once conventional

attempts fail.

Sat, 07/02/2011 - 18:54 | 1421683 JeffB
JeffB's picture

I'm afraid a war or some other major distraction becomes much more likely in catastrophic economic circumstances... terrorist attacks or near misses?

If not, civil unrest could easily become the unthinkable that comes to pass.

 

 

Sat, 07/02/2011 - 13:14 | 1421281 ebworthen
ebworthen's picture

 

I wonder at what point will the banks be recapitalized enough with individual investor savings, pensions, IRA's, and other retirement funds to crash the market again?

 

Sun, 07/03/2011 - 09:11 | 1422397 snowball777
snowball777's picture

Thursday.

Sat, 07/02/2011 - 13:15 | 1421282 fonestar
fonestar's picture

"we expect things to pick up..."

 

second verse, same as the first

Sat, 07/02/2011 - 13:35 | 1421295 JR
JR's picture

Even as the “economy continues to falter, while—at the same time—inflation continues to increase,” even with “a renewed downturn in economic activity,” and even “with income growth failing to keep pace with inflation” while “consumer liquidity problems are worsening,” John Williams in his June 30 Shadow Government Statistics commentary acknowledges: “A formal default on U.S. debt is unlikely.”

Why?  “It would reflect malfeasance at the highest levels. The U.S. government always has avoided and can avoid defaulting on its debt due to the debt ceiling.  The Congress and the President simply act to raise the debt ceiling, although political games often are played right down to the wire.” 

Writes Williams: “One thing to watch for in any deficit-reduction deal is a rumored switch from using the CPI-W in calculating cost-of-living adjustments for Social Security, etc., to using the Chained-CPI-U (C-CPI).  The C-CPI is a fully substitution-based inflation measure, and would complete the process, accelerated in the 1990s by the Boskin Commission, to change the CPI from a measure of the cost-of-living of maintaining a constant-standard-of-living to a substitution-based measure.  In the new measure, if steak prices rise sharply, and people shift to buying hamburger as a result, inflation is reduced accordingly by that switch.

“The BLS may have some logistical problems with such a change.  For example the BLS revises the C-CPI regularly, which it never does with the unadjusted CPI because of use of the CPI in contracts, etc.  Where this type of change would have some distorting impact on the public’s view of the actual inflation rate for purposes of income maintenance or targeted investment returns, it would be better generally for the system if the politicians just admitted that they were cutting Social Security payments and put forth meaningful inflation numbers.”

The point is, with “an intensifying double-dip recession and a rapidly escalating inflation problem,” do Bernanke’s stock market and BLS machinations make any difference? I think people already are looking at inflation as extremely high because of the difference in prices they are paying (why else? Health Care was the major surprise, surging 14% YTD), and no matter what the government says, people can’t take the government’s word when their pocket book shows differently.

It is, IMO, just further evidence, the government is walking into a tunnel without an exit. C-CPI is just an additional excuse for covering up the crisis.

Stealing value from American citizens to enrich the equities markets is bound to come to an end because of the scarcity of values to steal.  For example, the burglary of home values will have a hard time finding enrichment in that these have already been stolen.  And how much more is available to steal from savings and retirement accounts without revolution?

The dilemma is underscored by the problem that both political party leaderships have for taking money from the public to give to the bankers to sustain the image of recovery based on a "healthy” stock market.  The Republicans, playing the fool, say they want to go after “entitlements,” not usually identifying exactly which, and alarming almost every one of their constituents with the threat.  The Democrats, not wanting to be left out with threatening voters, say they want to close tax loop holes and Americans, having stood on this corner before, know that “loop holes” stretch right into their pockets. 

These campaigns for votes are frightening.  The Democrats, trying to appeal to their base, “entitle” those who’ve never paid into "entitlements" with an increasing share of “entitlements,” while the Republicans seem willing to sacrifice their middle class base that was forced to pay into social security entitlements, to benefit their lobbyist class base that wants to game entitlements.

Politicians are going right down to the wire with their posturing, but both parties are getting very little leverage out of their propagandizing – the public already knows the script. It’s like watching a puppet show where all the children know the bad puppet gets hit with the bowling pin just before the curtain falls. Oh, hum.

Sat, 07/02/2011 - 15:19 | 1421422 Missiondweller
Missiondweller's picture

Speaking of health care costs, I just got my new rate for private health care (though Kaiser) the next year: Up 25%. This followed a 26% increase last year forcing me to reduce the level of coverage.

 

Anyone who thought Obamacare would reduce costs while legislating incrases in the service that must be provided is/was smoking crack or drinking Koo-Aid.

Sat, 07/02/2011 - 15:37 | 1421450 trav7777
trav7777's picture

seein the same thing on my end...up at least 50% just in the past couple of years.  When Bamacare is ruled unconstitutional, I'm not betting I'll see a reduction.

Sat, 07/02/2011 - 16:59 | 1421564 grid-b-gone
grid-b-gone's picture

Health care has learned a few new tricks to reduce their risk. It is no coincidence that older workers have continued to experience higher unemployment. Along with higher incomes, companies have also jettisoned health care expense by laying off workers in their mid-40s and older.

Many of the millions laid off have run through COBRA benefits and are paying higher premiums for private insurance, or have dropped coverage.

The application for private coverage is more complete and invasive. Anyone with a potentially expensive condition can easily be denied if any detail in the application is incorrect. So, if you forgot about that ear infection years ago and don't disclose that long-forgotten prescription, your application can be denied. In most cases it won't be, but if you're an overweight, 60 yr. old smoker with a family history of cancer, that antibiotic disclosure oversight is all that is needed to refuse coverage, even if you paid for COBRA and did not have a coverage gap.

For those still employed, beware the HIPPA waiver that you sign during those corporate health fairs that are promoted as a benefit for you. That waiver allows any information to be used in any way and absolves the health insurance company of any responsibility. Health fair data lets the insurance company underwriters more accurately predict future claims exposure, even if no claims for the expected future illness have been filed. The company premiums can be tailered more on an individual level vs charging on the overall history of claims of all employees. Once your employer knows who are the drivers of their health care bill, they are more apt to take steps to contain the cost.

Even if you had proof of discrimination by health history, you've waived your HIPPA rights, and the companies have further insulated themselves with arbitration clauses.

For these same reasons, investors may also see hospitals having a harder time controlling costs as, over time, more uninsured will be admitted in emergency situations.

Sat, 07/02/2011 - 18:03 | 1421639 JR
JR's picture

The media is awash with the claims of our leaders, left and right, to create jobs and get the recovery going again. These are the leaders who have sent America’s jobs to foreign shores, and these are the same leaders who sent the technology and the capital for foreign competitors to erode the miracle that was the American economic engine. 

Example: Republican Governor Arnold Schwarzenegger and his California associates were the boosters behind an American tragedy – the Oakland Bay Bridge now readied for shipment to San Francisco in modules constructed like an erector set in the Communist dictatorship known as the Republic of China.

For the so-called “savings” of $400 million, trade commentator Clyde V. Prestowitz says: “I say the new San Francisco-Oakland Bay Bridge is not only inexpensive, it’s going to cost us a fortune. How apt that this was carried out by the Terminator.  It’s definitely going to terminate a lot of California and American jobs, companies and skills.”

What’s even more significant is that it is a symbol of the sellout of America by her leaders who even in this recessionary crisis are so corrupt that their “job programs and American patriotism” are nothing but a trade for a temporary seat at the internationalists’ table and  short-term stock market gains for their globalist masters.  

Of course, the currency manipulations in China orchestrated with the international bankers entrenched on American soil and China’s numerous advantages due to loose quality and worker exploitation are the obvious reasons for a cheap price quotation. 

Even the reports of Chinese construction project failures were not enough to discourage the greed of America’s compromised “leaders.”

Says Prestowitz: “The Dutch have a saying: Goed Koop is Duur Koop, Cheap is Expensive.”

Have America’s lobbyist-elected leaders become so criminal that they would trade America’s freedom-based wealth advantage for their puny political careers?

Sun, 07/03/2011 - 09:19 | 1422399 snowball777
snowball777's picture

Screw the money and jobs; I don't want to drive on a Chinese piece of shit.

Sun, 07/03/2011 - 10:06 | 1422443 DavidC
DavidC's picture

Whether or not one believes charts, there's what looks like a beautiful head and shoulders forming on the Dow (particularly) and the S&P.

DavidC

Sun, 07/03/2011 - 11:19 | 1422511 Imminent Collapse
Imminent Collapse's picture

When life looks like easy street there is danger at your door.  

Sun, 07/03/2011 - 15:18 | 1422881 MarketWatchTerrorist
MarketWatchTerrorist's picture

How was health care the major surprise?  80 million aging boomers + Obamacare = health care bubble.

 

Health care will be the new bubble, along with student loans, but that one is about to burst as all those kids working at Star Bucks just can't seem to pay back their $80,000 student loan debt.

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