Money Morning Article of the Week
by Keith Fitz-Gerald, Chief Investment Strategist, Money Morning
World markets got a nice tailwind yesterday (Wednesday) on news that the U.S. Federal Reserve is stepping into the fray along with other central banks to boost liquidity and support the global economy.
Of course it's nice to see stocks get a hefty boost, but to be honest I'd rather see them rising on real news.
Not that this isn't a good development in terms of stock values - but come on, guys. When things are so bad that the Fed has to step into global markets and bail out the other bankers in the world who can't wipe their own noses, we have serious problems.
Think about it.
by Trefis Staff
The Week in Review
Below is a summary of the activity on Trefis during the past week that we thought you would find interesting. Trefis is a financial community structured around trends, forecasts and insights related to some of the most popular stocks in the US. It provides the unique feature of allowing the user to model future valuation based upon projected changes in components of each business. It also provides communication capabilities among members, including concensus of member analysis compared to Trefis staff analysis and blogging opportunities for members.
Click on graphic for larger image and go to Trefis for interactive page.
by Guest Author John Hussman Ph.D, Hussman Funds
Let's begin with a few notes on continuing credit strains in Europe and elsewhere.
The Greek 1 year yield shot to 270% last week, with Greek debt of every maturity trading at 35% of face value or less. The prospect of limiting writedowns to 50% is increasingly unlikely, which I suspect will put much greater strain on European bank capital than anyone is willing to admit. As expected, we're beginning to see negotiations pushing for deeper restructuring than 50%. On Friday, Reuters reported:
"Greece is demanding harsh conditions from its creditors as it starts talks with lenders about a proposed bond swap, a key part of Europe's plan to reduce its debt pile and save the euro... The Greeks are demanding that the new bonds' Net Present Value -- a measure of the current worth of their future cash flows -- be cut to 25 percent... a far harsher measure than a number in the high 40s the banks have in mind... It is increasingly likely that Greece will force bondholders who do not voluntarily take part in the bond swap to accept the same terms and conditions, something that is possible because most of the bonds are written under Greek law."
cross post from Searching for Alpha Blog Newsletter, Advisor One
It’s hard to believe that stocks were down over 7% at one point last month. But Wednesday’s coordinated central bank intervention—and on the last day of the month, no less—enabled equities to end the month with only modest losses.
Such attempts to prop up the market can’t go on forever, of course, but they underscore the will of the Western world to avoid a recession at any cost. But it won’t have to, as a December rally is all but assured amidst bullish seasonal factors and the mindset that Europe won’t implode until after the New Year at the earliest.
by John Lounsbury
The decline in the thirty markets followed by Econintersect following the dramatic rise in October lasted four weeks or less and only reached primary bear market status for two indexes, the MERV in Buenos Aires and the ATX in Vienna. Sixteen of the markets achieved secondary bear market levels (commonly called "correction") with declines of 10% but less than 20%. Twelve markets declined less than 10% and are classified as pullbacks. If the dramatic rallies of the past three days are not reversed November 2011 will be noted as a correction month and the fears of a resumed bear market will be gone, or at least delayed. The chart with all the data follows the continuation break.