Everybody Out of the Pool

Were economists and market analysts realistic in thinking July retail sales were truly going to increase by .8%? The actual report came in last Thursday at -.1% and without the benefit of the promotions within the automotive space, the report would have generated an amazingly weak -.6% reading. Missing a piece of economic data of this importance by that magnitude is not only embarrassing but also a statement on the current and future economic landscape.

Against the backdrop of this report the equity markets have sold off approximately 3-4% over the course of the last few trading sessions. when working on a trading desk, we would often say on big down days in either the stock or bond markets, “everybody out of the pool.”

While the markets are down over the last few days, please do not forget, the market has had close to a 15% run since early July. Based on what? Surprisingly strong earnings. Really? The earnings have been much more a function of expense reduction than increased sales. With the American consumer clearly ‘in the pain chamber’ in terms of his economic outlook, sales will continue to lag. If sales lag, how can companies truly generate meaningful earnings? Smoke and mirrors only work for so long.

Within specific market segments, the one sector that has outpaced almost every other is the high yield space within the bond market. An ETF which I reference for market performance is COY. Prior to the recent selloff, this specific fund had risen almost 50% on the year. It has given back approximately 6-7% over the last few days.

Additionally, the bloom seems to be off the commodity index which is off approximately 5% over the last few days.

Add it all up and risks are very high with fundamental values seriously lacking. I believe investors should be very careful allocating money to the market at this level.

Perhaps I should also say, “this entire period is an Adult Swim Only.”

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.

Visit: Sense On Cents

Be the first to comment

Leave a Reply

Your email address will not be published.