Big Week Ahead

While this may be old news considering it was reported early Friday, we thought the GDP number is important to mention.  The number was a surprising 1.1% versus expectations of 2.6%, with last quarter’s number coming it at 4.1%.  Of course the interpretation by the silly stock market continues to be that a number like that will keep the Fed contained as it looks at raising interest rates.  The Dow rallied almost 100 points in the face of obviously slowing growth.  Meanwhile the December new home sales jumped 2.9% erasing some of November’s negative 11.3% number.  The consensus was for a further drop of 1.4%.  We probably shouldn’t confuse you with other facts like the prices of houses have dropped steadily while inventory for housing is at a record high.

So far, the economy is making it look like a slow, almost imperceptible, turn but the GDP number seems to indicate a broader contraction than anyone is willing to admit.  With housing turning down, there will be further declines in the GDP.  We always wonder about the inflation expectations as the GDP is always deflated by some inflation figures.  The lower the inflation factor assumed, the higher the GDP number will be.  I wonder…

Well, this week is going to be packed with news and the stock market and the bond market will make the most of it.  The big items are the Fed meeting, not to mention the fact that it is Greenspan’s last one, and the jobs report, both of which have the potential for making markets move.  There are too many others to list separately but we will highlight them as they occur during the week.

Tonight, the futures are not doing too much but that doesn’t mean that Monday won’t bring its own fireworks.  It is the end of the month and the last couple of trading days have been strong up days on significant volume.  We think that means that demand is finally meeting supply but we don’t know that for sure.  There are pockets of strength in the market, not the least of which seems to be the precious metals but we have abandoned that category due to the extreme prices there.  We wait patiently for better ones and we will get back into them when we get a good opportunity.  With so much media attention to the recent upward move in precious metals, we have to say that the end of the move must be here, too.

As you all know the Maestro is finally leaving his post as chairman of the Fed.  He is retiring amidst a sea of admiration that we don’t really think he deserves but the world won’t speak badly of him for now.  We’re not sure if they ever will but, as the True Contrarian says in his Sunday post, “Greenspan has created the illusion of prosperity through the creation of a mountain of debt, both personal and private.”  You can visit his site for more information if you like.

Until tomorrow, be careful and be selling this rally.

Dow Industrials:  10,907.21  +97.74
RYVNX:  17.95
RYAIX:  21.53
TLT:  90.51
BEGBX:  13.19