Monday Morning Musings

A pretty quiet open on Wall Street, which is welcome news for most people. Given the extreme volatility we witnessed over the last 2 months, I would be happy with any sort of semblance that we are returning to more rational trading.

Asian markets were higher overnight, although Japan was closed for a holiday. The dollar is mixed so far today, nearly flat vs. the Euro and down a bit vs. the Yen. Oil is trading nearly $2 lower to $65.70.

Credit markets continue to show improving conditions. LIBOR rates fell across most terms, and the TED spread is also down 24 basis points more today. Our 10-year yield is a bit lower to 3.93%.

Boeing's machinist union voted in favor of the new contract, which is good news. But Goldman Sachs still put the stock on their Conviction Sell list.

The ISM Manufacturing Index came in at 38.9 (vs. 41 consensus). This is a pretty low number. Anything below 50 represents contraction in the economy.

The volatility index (VIX) is -3.7% lower today to 57.66. The recent uptrend in the VIX is just about broken here, so it will be a good sign if the VIX can continue to work its way to lower levels.

Last, election talk will heat up today and tomorrow. The latest WSJ/NBC poll shows Obama leading by 51% to 43%. Intrade.com also shows Obama as a big favorite. Thus, my guess is that the market is already pricing in an Obama victory. So while that race might not move the market Tuesday night, the race in the House and Senate could. Stay tuned.

Many have asked me what sectors would do well under Obama. The most obvious choice is probably alternative energy. But before I run out and buy these stocks, I want to see confirmation in the market. Let the stocks start to prove themselves first, and then look for who is emerging as leaders. That is the best strategy.

long GS