At present level, market valuation is attractive for long term investment. But in short term time frame, market can oscillate in either direction. Thus market makers and day traders find opportunity to drive market in the direction of favor. Market sentiment is bearish and investors have little confidence, especially individual investors who sell at the bottom and stay away from market since the great rally. Nevertheless individual investors have learned to hold tightly existing portfolio despite market turbulence. Market makers and day traders as well as individual speculators have been beating down the market since year peak in February.
Trading volume soars as market falls and attracts speculators with risk capital. Individual investors are afraid to enter market but stay with the core portfolio for long term investment. Market makers accurately timed the peak made significant profit on market drop. At this moment, profit is realized and other market participants are watching on their next move.
Speculators are holding tremendous amount of capital and economy is standing on fragile ground. Market will continue to oscillate. Market participants should be very cautious. Market sentiment turned pessimistic since March and market makers successfully led the herd to sell down the market.
The speculative trading portfolio made a wrong investment decision that market will head up after the Federal Reserve bond buying program ended in June. The decision is based on the guess that the demand for bond will remain strong as there is large pool of capital flowing around in the asset market. It turns out that Treasuries maintain the price after the end of bond buying program. However, it is not expected that market makers use the downgrade of US debt as excuse to set off market selling which is followed by day traders and individual speculators.
Market makers selling is finished and profit taken. Day traders are still speculating further decline. Although selling pressure is limited without market makers but investors confidence is extremely weak. Therefore market drops because of lack of buying desire.
The leading role of market makers in market direction is obvious because of the successful strategy since market peak. It is critical to the next movement. It is uncertain whether market makers will drive market down in the third move after the gradual decline from peak and the steep fall on US debt downgrade. Institutional investors have been liquidating in the last two days. The selling should be temporary as it is not panic selling and market participants are holding the core portfolio. Day traders are following the trend, buying on market makers short covering and selling on institutional investors liquidating. Hedge funds and individual speculators are also participating in the market. Long term investors are still hesitating as confidence remains low.
The majority of stakes in equity stocks are currently in the core portfolio of investors and market participants. Some are in the hands of day traders and individual speculators. Although the trading volume has soared recently, a large portion of stocks that changed hands are among speculators. The percentage of trade in the form of shorted stocks is also increasing.
There is a probability that market may crash like the financial meltdown in 2008. But that scenario is very unlikely as investors are more aware of the intrinsic value of the stocks in the portfolio. On the other hand, investor confidence is weak and prefer to allocate the wealth in relatively safe assets such as money market and precious metal.
At current level, shorting the market is risky for market makers as the room for further decline is limited for large volume trading. The rally driven by market makers short covering indicates that the availability of stocks is limited in the exchange. If market maker set off another round of selling, it would need strong sign of economy deterioration or black swan event to trigger panic selling of investor core portfolio as in 2008 financial meltdown. If institutional investors stop liquidating the portfolio, day traders and individual speculators will stop selling as well. As market clams down, investors will replenish the portfolio incrementally as it will be discovered that the economic condition is not as catastrophic as imagined.
Treasuries Rise Before Home-Price Data; Gross Rues Bet Against U.S. Debt
“Treasuries are expensive,” said Kei Katayama, leader of the foreign fixed-income group in Tokyo at Daiwa SB Investments Ltd., home to Japan’s second-biggest bond fund. “Time will prove that the U.S. economy is not that bad.”
Are Pessimistic Consumers’ Fears of High Inflation Exaggerated?
But this alarmism over inflation on the part of consumers is nothing new, and it may not be warranted. We've given a lot of grief to professional forecasters, who never seem to know when a recession is about to begin or end. But when it comes to projecting inflation, the amateurs don't do very well, either.
People, being human, are prone to emotion. They feel the pain of paying higher prices much more acutely than they notice the pleasure of prices of other things falling or remaining stagnant. And so they tend to accentuate the negative and eliminate the positive when it comes to their assessment of whether life is getting more expensive.
CEOs Earned More Than Companies’ Tax Bills
Twenty-five of the best-paid chief executive officers in the U.S. earned more in salary and other compensation in 2010 than their companies’ federal income tax expenses as disclosed in public filings, according to a report by the Institute for Policy Studies.
The group said its findings underscore the need for an overhaul of the U.S. tax code that would reduce the number of tax strategies available to companies, especially their ability to lower tax payments by parking profits overseas.
The report echoes some elements of a study released in May by Citizens for Tax Justice, a Washington-based nonprofit group backed by labor unions, which said 11 U.S. corporations reported $62 billion in domestic profits while paying a negative 3.6 percent tax rate in 2010.
Investors slash equities in August melt: Reuters poll
Global investors slashed their holdings of equities below 50 percent this month and piled into cash, reflecting what was lining up to be the worst August for world stocks since 1998.
Purple Crayon: How to Handle a Lost Trading Opportunity
A week ago I wrote a column entitled "Sell Today and Go Away". In it I described my reasoning for taking off my trading positions ahead of a vacation I took at the end of last week. For those keeping score at home, the S&P500 is now roughly 5% higher than it was before I made my unforced trading error. Selling off my trading longs (I didn't and don't have any shorts), became what's called a lost opportunity.
In Plague-Filled August, American Consumers Shopped Like Champs
Despite the rising chorus of doomsayers and double-dippers, the third quarter is looking like it will be stronger than the second quarter. Macroeconomic Advisers, which updates its projections in real time, pegs growth in the current quarter at about 2 percent. While that's nothing to write home about, it's twice the rate of second quarter growth. What's more, payroll jobs, which help drive spending, continue to grow at the (anemic) pace of about 25,000 per week. The savings rate remains high, and many signs of stress — credit card delinquencies — continue to trend down. On aggregate, Americans are in a better position today than they were a year ago to do what they like to do: buy stuff.
In the New York area, when markets are in free-fall, the tension is palpable in the streets. In Santa Monica, the most powerful tension detector would fail to register a reading. Many people at the beach literally had turned their backs on the craziness back east. As New Yorkers and beltway types were in full freak-out mode over the S&P downgrade, the locals were generally going about their business — going to work in their Priuses, eating natural foods, and shopping.
Dow 13,600, Here We Come
One of Wall Street's most eminent analysts is forecasting an 18% return for the stock market over the next six months.
Though in retirement, and well past the age when most others have long since given up following the market's daily gyrations, Eisenstadt remains as close a student of the stock market as ever.
Eisenstadt conceded that such a return "sounds too good to be true."
Note carefully, however, that even if this coming month turns out to be a disappointing one for equities, there will remain five more months after September for the market to live up to Eisenstadt's forecast.
Fed Up With Bank Buybacks?
Unfortunately for J.P. Morgan shareholders, the bank spent $4.3 billion in the first seven months of this year buying back its own stock—with Mr. Bernanke's blessing. Yet, thanks to the recent slide in bank stocks, the purchases are already about $600 million in the red.
And while J.P. Morgan's paper loss could prove fleeting, it is also a reminder of the Fed's questionable decision in the spring to allow some banks to resume capital returns even as the central bank was printing money in an attempt to resuscitate the economy.
Still, as the Fed in the future weighs further plans from banks to return capital, it should be more cautious. And investors should remember that banks are supposed to be specialists in lending money, not timing stock markets.
Secrets From a Pawn Star
The business model of the pawn shop dates back over 3,000 years and remains largely unchanged: A customer in need of some cash gets a loan from a merchant, using a personal possession as collateral. The pawn shop holds the property for a predetermined amount of time, charging interest on the loan. If the customer can pay his debt before the deadline, he gets his property back. If not, it's the pawn shop's to resell.
While the basic transaction is much the same as it was in ancient China, the reputation of the pawn shop industry has fluctuated wildly. Pawn shops have often been portrayed and viewed as vaguely threatening stores located in seedy parts of town, where only desperate customers would dare venture to.
Today, the modern pawn industry has become something else entirely. Many of these shops, which also operate like small banks, are publicly traded companies and are becoming cultural phenomena.
Pawn shops are also the last place to go if you're looking for a sucker to overpay for your junk. Harrison's store carries as many as 22,000 different items at any given time, or as he puts it, the shop has "one of everything." After 30 years in the business, he says it's "pretty simple" to spot counterfeits. And if an item is questionable, he calls in an expert to vet the goods. It's a good thing because there are plenty of hard-to-value oddities at any pawn shop, particularly one based in Las Vegas.
Harrison says many of these rarities are more valuable to him as museum-type pieces than retail items. Museums may be the last thing you think of when considering pawn shops, but it's a new day for an old industry.
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