Behind the Numbers: Month to Date Market Review (Nov.15)

Do as I say, not as I do. Why? What do I mean?

The markets in general and equities in particular were once again supported by talk rather than actual economic actions. Who was talking? What were they saying? Very simply, communication from G-20 ministers last weekend indicated strong support for ongoing fiscal stimulus. That talk drove the equity markets 2% higher on Monday of this week. On the heels of that, during the midweek we experienced Fed-speak once again indicating a strong likelihood of keeping rates at very low levels for an extended period. Markets immediately reacted by once again ratcheting higher.

I have never been fully inspired by talkers versus doers, but these are unique times . . . so let’s collectively navigate the economic landscape. If you have any questions, please do not hesitate to ask.


Economic reports and developments are carrying less and less weight currently. Why? Fed policies are not going to change. That comfort level has solidified the case for those who have sold and continue to sell the U.S. dollar short and use the proceeds to buy risk-based assets, primarily equities. That said, I am compelled to report significant data as I view my mission in helping people navigate the economic landscape, not strictly trade the markets.

Of note this week, the Federal Housing Administration is likely in need of an imminent bailout from Uncle Sam as defaults on FHA-insured loans show no signs of diminishing. This potential bailout has been discounted by FHA officials ad nauseam. They have no credibility.

The University of Michigan Survey of Consumer Confidence plummeted to a level of 66% from 70. Consensus opinion had this survey bouncing back toward 72%. With no legitimate bounce or improvement in the housing or labor markets, I do not know why the survey would improve.

Let’s move along to market performance. The figures I provide are the weekly close and the month-to-date returns on a percentage basis:


$/Yen: 89.65 versus 89.99, -.4%
Euro/Dollar: 1.4916 versus 1.4717, +1.3%
U.S. Dollar Index: 75.24 versus 76.39, -1.5%

Commentary: different week, but same story as the U.S. Dollar Index retreated once again on the heels of the Fed announcement regarding keeping rates low for an extended period. The greenback continues to act as the cheapest source of funding for speculators, investors, and other market participants looking to put cash to work. Although the greenback suffered this week, we do remain in the same range of the last month while equity markets are 5-6% higher.

I continue to reiterate my comment from previous weeks: while I think Washington is not disappointed in a relatively weak dollar, although they should be (”Dollar Devaluation Is a Dangerous Game”), other countries are not overly keen about further dollar weakness. Why? A weak dollar puts those countries in a marginally less competitive position in international trade.

Although Fed officials play up the lack of inflation as a positive and an overriding reason for its easy money policy, they provide no commentary on deflationary pressures at work in large segments of the economy. I firmly believe these deflationary pressures are the Fed’s gravest concerns and they hope the weak dollar creates hints of inflation to offset these deflationary pressures. Can rising asset valuations support underlying economic fundamentals which provide little to no pricing power for many companies?


Oil: $76.41/barrel versus $76.95, -.7%
Gold: $1119.1/oz. versus $1045.7, +7.0%
DJ-UBS Commodity Index: 131.675 versus 131.862, -.14%

Commentary: while oil has declined by approximately 5% over the last few weeks, gold continues to attract interests from market speculators and foreign central banks concerned about the long term prospects for the dollar. Gold is viewed as a safe haven.

We once again experienced a divergence between equities moving sharply higher while commodities ran in place.

The Baltic Dry Index continues to move gradually higher with indications of increased shipping activity, primarily in Asia. That said, it remains within the range going back to this past summer.


DJIA: 10,270 versus 9712, +5.7%
Nasdaq: 2168 versus 2045, +6.0%
S&P 500: 1093 versus 1036, +5.5%
MSCI Emerging Mkt Index: 959 versus 921, +4.1%
DJ Global ex U.S.: 199.97 versus 192.02, +4.1%

Commentary: in short, you’ve ‘got to be in it to win it.’ While I could expound on fundamental issues, I may bore you in the process. This market has not been about fundamentals in a long time. I think we are beginning to enter into a blowoff phase in which investors who have missed the market move to get in while those who are outright short the market are forced to cover. I view the current price action more akin to gambling than anything else.


2yr Treasury: .81% versus .90%, -9 basis points or .09% (rates down, prices up)
10yr Treasury: 3.42% versus 3.40%, +2 basis points or .02% (rates up, prices down)

COY (High Yield ETF): 6.35 versus 6.20, +2.4%
FMY (Mortgage ETF): 17.52 versus 17.90, -2.1%
ITE (Government ETF): 57.85 vs 57.96, -0.2%
NXR (Municipal ETF): 14.35 versus 14.79, -3.0%

Commentary: Treasury bonds overall remain firmly bid with excess cash from the easy money policy promoted by the Fed finding its way into this market segment as well. The yield curve remains steep, indicating expectations that inflation will pick up longer term. Some of the different bond market sectors have been running in place lately, while the municipal sector has been giving ground given issues within municipal finance. Please see my piece, “What Do CA, AZ, FL, IL, MI, NV, NJ, OR, RI, and WI Have in Common?

The deficit is the big, bad bogeyman which nobody wants to discuss . . . BUT it is not going away, it’s not getting better, and will continue to weigh on our markets, economy, currency, and country . . . at some point.

Expect Washington to ‘talk’ more about the deficit and jobs now that they have saved our economy. What? Saved what?

Washington has merely pushed the costs of the economic crisis onto future generations.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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