The outlook of the economy, more precisely improving living standard, is optimistic due primarily to advance in technology and science. The financial market and asset price will reflect improvement in the society. This may not be the perception of the majority of the population who may only see stabilization, not improvement in their own living standard, in comparison to the significant jump in wealth of the wealthy elite. As a result, many individual investors feel that the economic growth does not match with the appreciation in equity stock market. Although there is no shortage of fund, individual investors are patient to wait for the market to fall back. Hedge funds are exploiting this perception to create turbulence in the market, equity stocks earlier in the year and commodities recently.
Because of capital liquidity, wealth effect, and corporate earnings, it is likely that equity stock market as well as asset price will recover to uptrend and heading for record high. In the week, although the sudden decline in commodity price is large, there is no panic selling from the mass of investors. There is speculation from day traders and some opportunistic investors take the risk to increase positions. If the market decline further, there will be more buying support from more investors as the price become more attractive. At the present moment, there is no symptom that investors are worrying about the impact of collapse in stock price because of diversified investment and improved personal income. Equity stock market remains a favorite for speculative or growth investment. Commodities is more speculative because of hedge fund manipulation. Other assets, including real estate, see increasing demand from households who are seeking outlet for their wealth.
Investors Ignore Risks in Pursuit of Growth in China
Shares for popular Chinese technology companies like Baidu, the Internet search engine, and Youku, the online video site, have risen triple-digit percentages since their initial public offerings, whetting investors’ appetites for such offerings.
In perhaps the most extreme example of how in fashion the sector is, Facebook, the biggest social network company in the world, has a market value of about $70 billion, based on a share sale currently being contemplated, making it worth more than companies like Boeing.
Needed: A Chart to Lure Bulls
A couple of years ago, as the markets were trying to shake out the cobwebs of the recession and financial crisis, there was a chart in wide circulation that kept a lot of folks out of stocks.
Right now, the market skeptics are leaning on the relative lack of trading volume on rallies and the laggardly action in big financial stocks.
Yet with money free, mid- and small-cap stocks clicking to all-time highs, the takeover and releveraging game gathering steam and investor sentiment refusing to stay excessively ebullient, the downside risk doesn't seem either excessive or imminent.
Stay Calm When the Market’s Chaotic: Gabelli’s Barbara Marcin
If you're feeling like a bull in a market that's suddenly shifted direction (yet again) toward the bears, don't panic.
The market has had three down days, but Barbara Marcin, manager of the Gabelli Blue Chip Value Fund, has some advice for the regular investor. This icon of under-reaction keeps a cool head first and then refers to a list of proven fundamentals.
"Don't fight the Fed," is chief among her admonishments, but she also says there's currently an absence of viable alternatives to stocks. Until rates return to more normalized levels (4%-5%) she argues that total return plays offering both growth and income will win, "especially [those companies] with exposure to global and emerging markets."
Fortune 500 Shows It’s a Great Time to Be a Big Corporation
And judging by the numbers, companies are doing just fine. The nation may be struggling to recover from the Great Recession of 2008-2009, but the corporate sector, which got off its back before the consumer sector, is flat out running. And by and large, this climate is giving corporate bosses exactly what they want.
All in all, while there's plenty to worry about -- inflation, Japan, Europe, deficits -- this is a pretty good time to be a corporation. As recent data from the Commerce Department shows Corporate profits in 2010 came in at $1.625 trillion, up 29 percent from 2009. Fortune 500 CEOs are justifiably proud of the way they've helmed their companies through the storms and are compensating themselves accordingly.
Corporations Rush to Hedge U.S. Dollar
A dollar rally seems wildly implausible in an environment of unprecedented stimulus programs. Of course, the reversal of well-established trends always seems unlikely. If past is prelude, and it generally is, ramping demand for dollar hedging suggests a bottom in the dollar may be at hand. The end of sharp moves always comes when no one expects it. Even if dollar impact is largely not a factor in stock prices, the dollar drop is behind, or at least correlated with, moves higher in gold, crude, silver and nearly any other asset you could buy overseas. Whether we like it or not, most Americans' portfolios are heavily impacted by the dollar.
Is The Market Rigged? Survey Says … ‘Yes!’
Meanwhile, more evidence the stock market is not a level playing field: 47% of respondents in a survey of 400 investors from across the world found one-on-one meetings with companies regularly lead to price sensitive information being divulged, according to the Rotterdam School of Management.
Surveys like this, along with the Rajaratnam trial, the saga over David Sokol's Lubrizoil trades and a overwhelming sense the market is stacked against them helps explain why mom & pop haven't piled back into stocks even after a more-than 2-year bull market.
In Ritholtz's experience what separates the successful professionals from the average individual investor is an information edge, in terms of research and analysis, not privileged information. Most of the rumors whispered around trading floors simply don't hold water, he says. "The best of the fund managers -- they're doing their own channel checks," i.e. legitimate research on industry trends from which they make informed bets about the fate of related companies.
Glencore IPO Shows Unregulated Traders Beating Goldman Sachs
For Goldman Sachs Group Inc. and Morgan Stanley, two of Wall Street’s biggest commodities-trading firms, the year’s largest initial public offering represents a nightmare come true: the rise of unregulated rivals.
“Glencore is unregulated and competes in many of the same businesses,” said William D. Cohan, author of “Money and Power: How Goldman Sachs Came to Rule the World” and a contributing editor to Bloomberg. “It’s based in Switzerland and can do a lot of things that Goldman can’t do anymore.”
Glencore, like rivals such as Hong Kong-based Noble Group Ltd. and Amsterdam-based Trafigura Beheer BV, can take bigger trading risks in the commodities markets, helping to make them more profitable and more appealing as employers for top traders.
Precious Metals Recap: Soros and Margin Hikes Reloaded
Last September, billionaire George Soros made claims that gold was the “ultimate bubble”. In February, Reuters reported that George Soros’ hedge fund actually owned $663 million of SPDR Gold Fund at the end of the year. Today, George Soros made headlines again. The Wall Street Journal reported that Soros Fund Management sold much of its gold and silver investments because there is a less chance of deflation. However, not all billionaire fund managers agree. John Paulson from hedge fund giant Paulson & Co. still holds most of his personal wealth in gold denominated funds managed by Paulson & Co.
Is Soros Right to Get Out of Gold?
Major players, including George Soros, are reportedly pulling back from gold and silver has recorded yet another collapse.
The currency is at two and a half year lows. The Mexican government bought $4 billion worth of bullion between January and March as it looks to reduce its dollar reserves.
Oil prices drop below $100
Oil prices plunged more than 8% Thursday as weak economic data and a strengthening dollar drove crude to its biggest one-day drop since April 2009.
Adding to the selling pressure was a strengthening U.S. dollar. The greenback gained 1.5% against the euro after the European Central Bank president Jean-Claude Trichet left Europe's interest rates alone and said they weren't likely to change in the near term, despite inflationary pressures.
That sent the dollar soaring and a stronger dollar tends to drive down crude prices because oil and other commodities are priced in the U.S. currency.
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