Monday, July 19, 2010

Restoring Urgency

In an increasing interest rate and dropping unemployment benefit environment, a real world clamor should arise as Americans angle to lock in the maximum benefits afforded under crisis conditions before spigots close for good, or at least for now.

Ingenuity often derives from desperation, and while desperation without hope can do irreparable harm, triply redundant safety nets disincentivize effort and risk entirely.  Likewise, if a comfortable living can be made off of unemployment benefits, there exists no reason to wake up early and beat the streets.

Untenable decisions shall soon be made, perhaps later than hoped, but the backlash against reckless spending by a government living in ways that its citizens have proven dangerous, coupled with mid-term elections mean that nigh looms our Age of Austerity.

This Age lays the foundation for revival.

I'll be watching deposit trends in regional banking as well as keeping some news-flow shorts handy.

The 50 week moving average presently sits at 10213, with the 21 week moving average at 10491, and the lower Bollinger is about 9687.  Values in most names, especially financials, continue to look expensive.  Manage the difference between headline news quoting time frames for "normalized earnings" against mark-to-market accounting and other reporting trickery.  When employment materially improves, expect personal financial retrenchment in earnest, and only then would I believe that credit losses had seen their trough.  For now, companies keep their middle of the pack earners working full throttle/hammer down without raises, in order to "streamline" most effectively.  A few more months of this in a somewhat stable market environment should see turnover beginning to increase, and overpaid workers as indexed by internal corporate ratings should see their departure replaced with cheaper parts.

The bourgeois has shown us that they are back in black and free to spend.  I wouldn't bet against the high end going forward.

I really wish Barrons hadn't come out in favor of Google over the weekend as those goofballs have supplanted Jim "Krammer" Cramer in terms of group-think and fishy timing.  One thing's for certain, both Krammer and Barrons blow medium term trade planning out of the water, and are reliable contrarian indicators after the intermediate retail pop.  For now I hold a starter pack with a covered call against, with high expectations for the Chrome OS to be launched sometime the second half of this year.  If Chrome OS performs anything like their browser expect sleek, speedy performance, built on an instinctive, handy, and customizable frame.  I will not be a first adopter, but expect to get involved with a late first or early second edition.

Have a good week.