Market & Geithner

Don’t look now, but the market just may be working off its overbought condition by moving sideways.  For the past 9 trading sessions, we are basically flat.  No gain, no loss.  Just a bunch of churning around.  That’s encouraging from the bullish side of things.  Working off its overbought condition means many of the oscillators go down to the bottom without prices of stocks/indices following them.

Investors seem to be reacting favorably on good data and favorably on bad data.  Be careful in here nevertheless.  I still believe the path of least resistance will be to the downside over the short run so I’m keeping my equity exposure pretty low.  But, the longer we go without a substantial sell off, the more bullish I’ll become. 

Technology seems to be the one area this is coming out with some really good results.  Are they enough to carry the market?  I don’t think so but if the market simply moves sideways, owning technology makes sense as those names can continue to run.  Apple, Research in Motion, Amazon, & Google are leading the way.  After the bell, Apple came out with great earnings.  As usual though, they say next quarter may be tough.  Don’t be fooled.  They are simply lowering our expectations so they can surprise us to the upside next quarter.


This morning on Fox Business, I was asked about Geithner and what I thought about all the information coming out of Washington.  One thing I found interesting was his comment that America must live within its means over the next few years.  That would be nice and I personally would love that because that’s the way I run my life.  Unfortunately, this country has lived beyond its means for so long along with most of the world that to get from point A to point B, it’s going to be a lot of pain.  A nation of spenders and borrowers that goes to a nation of savers means less growth not only here but around the world.  Less growth means less profits which means lower stock prices.  That’s a long-term phenomenon though.  We can easily rally to Dow 9000 or possibly 10000 over the next few months only to fall way back down after that. 

This situation of living within our means is basically what the “Great Deleveraging” is all about.  It’s selling assets to pay off debt.  It’s saving more of our paychecks.  It’s not buying as much and when we do, we pay cash.  Strange concepts I know.  But, that’s the new reality.  A world where you have to put a reasonable amount down on a mortgage.  A world where college kids don’t get credit cards with $10,000 limits.  Foreign concepts I know.

Some leverage is good and it definitely adds to growth but too much runs the risk of a global meltdown which is what we’re going through and have been since last fall.  So, Geithner is correct in what he’s saying about living within our means but it’s not a fun process.


1 Response to “Market & Geithner”

  1. 1 Jay April 23, 2009 at 9:53 pm

    Hi Karl,

    Great show and blog as usual. I have a “fundamental” question. The S&P is still extremely overvauled (E/P of 50+, i know tumbling earnings don’t help, but still), there is still $24T in CDS that Geithner says is “complicated,” and the market is flat if not turning over. It seems you are getting a little bullish, what in the charts is making you feel like we are working off the over bought market?


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