Last Things

My tenure as King of the PG ends today, so I want to say a few words before I cede the throne to my successor.

First of all, kudos to The Fly for upgrading IBC and providing us with his high IQ market perspective and stock picks. His patience with the throng of internet leeches attests to his character and unselfishness in sharing information. The fact that he keeps this a free, open forum, without cost to traders with “one comma” accounts, is commendable, despite calls from several to bring back the futures quotes. We are not worthy of such benevolence.

Secondly, I tip my hat to all the contributors to the PG, as well as those who comment on the different threads. You all provide good entertainment value, and sometimes (aka, “once in a blue moon”) worthy insights into the market and individual stocks. Seriously, this is truly a good place to park and glean ideas and observe the outrageously funny (and occasionally gay) banter from the PG and others here.

Also, the current “Tabbers”, Danny, Wood, Rage, Gunners (Tabber Emeritus) and Adam are excellent. You all deserve a pat on the back, the admiration of the PG, and a six pack of Monster. In addition, the current slate of candidates for Gunners slot is quite formidable. It will be a close race. Good luck to all.

Finally, my take on this current market environment:

I look for commodity prices to come down. This nearly seven year bull market in commodities has ridden on the back of the booming global growth and a weak US Dollar. However, considering that commodity prices for the most part have shrugged off the current downgrades in global growth projections, and have ignored the prospects of a stronger dollar, we may be seeing this bubble start to pop.

With the Fed possibly cutting another 25 bps today and then potentially pausing for a period of time, we will most likely see a bounce in the dollar, much to the enjoyment of Ben and Hank.

The crux of the matter seems to be rising food and energy prices which are occurring in the face of weaker payrolls and labor trends. The stock market will have to recognize that this current loss of purchasing power cannot be ignored. Herein lies the risk to the current uptrend this month.

The consumer cyclicals are the greatest risk. They are the most sensitive to changes in purchasing power and the increasing cost of necessities. [[WMT]] has basically put many specialty retailers out of business (or soon to be). This is Capitalism at its finest. However, lest we write-off the consumer cyclicals entirely, they also stand to benefit the most, relative to the rest of the market, from a pause or correction in the past 12 month trend in commodity prices.

Be aware that interest rates are key right now. Many of you do not bother to follow the bond market, apparently because you think that bonds are for asshats and those over 47 1/2. However,  it is important to note that the bond market is beginning to believe that the Fed is starting to catch up with the economic slowdown. If you look at the spread between the 2 yr Treasury and the Fed funds rate, you will see that it is increasing, which means that additional rate cuts are being priced out of the market.

This increase in the spread at the short end of the yield curve is forecasting a potential floor under the US Dollar and a cap on commodity speculation. This development is a key to the direction of the US stock market.

Keep a close watch and a vigilant eye on this.  

And no, I do not know how to trade “The Triangle”.

That is all. Carry on, gentlemen.

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