Tuesday, August 25, 2009

Market Cheers Reappointment of Bernanke

There were several things this morning that helped boost the market today, but I think the reappointment of Bernanke should not be overlooked. While it might not be the sole factor responsible for driving today's rally, I think had he not been reappointed we would have seen the market selloff for sure.

Critics will say that Bernanke was too lax when he first took office, and that as a result he presided over the biggest bubble in the real estate market. That may have some truth to it, although I have to ask where all of these vocal critics were during the fact. I think a lot of them are playing Monday morning quarterback. I would say Greenspan is probably more to blame for the last bubble.

That said, I truly believe that were it not for Bernanke's creative solutions and swift actions once the credit crisis really exploded, we would have been faced with a much deeper economic contraction and drawn-out recession. I think it is important for Bernanke to remain Fed chairman while all of these special programs get worked off, and the Fed slowly removes the stimulus and reduces its balance sheet.

There were some positive earnings reports from retailers this morning (ANN, CHS, BIG), and that is helping push that sector up +3.0% so far, leading the action. Energy stocks are the main laggards today.

The Case-Shiller Home Composite also came in better than expected, even though it showed a -15.4% yr/yr decline (vs. -16.4% consensus). And the Consumer Confidence Index spiked to 54.1 in August from 47.4 in July, another good sign.

Asian markets were mostly lower overnight; the dollar is also lower, which is helping gold, but not oil; the 10-year yield is a bit higher to 3.51%; and the VIX is -3% lower to 24.37.

Trading comment: Yesterday's rally faded into the afternoon, but today's action looks a bit stronger. Internals are better, and the VIX is down today (it was up all day yesterday). I took some profits yesterday on our insurance etf (KIE), which has had a very big run. Today, I am adding a long position to RIMM, which I have been eyeing as an addition to portfolios.

long KIE, RIMM


Post a Comment

<< Home