Tuesday, August 12, 2008

Twins Get Beat By the Yankees in 12

Top Line: The stock market struggled on Tuesday with most indexes ending lower on the day. The market is clearly overbought with the straight up move we've seen over the past ten days. Now, we simply wait for the pull back to get into gear...we expect that to happen very soon.

On Tuesday, the problem was in the financials again as the techs seem to be ignoring the problems in the economy. The Philadelphia Semi-Conductor Index was actually up today (along with our own FSI) in spite of the pounding the banks were taking. JPM announced plans to write down some mortgage assets by $1.5 billion in the third quarter. JPM was down nearly 10% on the back of that news today. And, that news was not received very well by the rest of the financials.

As we are writing this evening, we noticed that Japan's GDP drooped by 2.4% in the second quarter, an indication of recession. Going back to the first quarter, Japan's GDP had risen by a 4% annual rate. Did someone turn out the light? Their stock market is down 2% as we write.

We happened to be at the Twins/Yankees game tonight which took us into the 12th inning and didn't give us time to write a full update. We did receive an email from CM today with two great real estate articles that are at least good reads. Thanks CM.

The first is a general indictment of the viewpoint that subprime could be contained or that it was just subprime causing mortgage problems. The second indicates our position that the residential mortgage problems are far from over. The article points out that many home-owners are now Upside Down.

FSI: 86.90 (an up day for the FSI and not confirming the broader market)

VXO: 23.00 +0.74 (heading up to 50)

SDS: 64.55 +1.27
QID: 39.57 -0.09

Dow Industrials: 11,642.47 -139.88

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