Here’s the news of the week – and how we see it here at McAlvany Wealth Management:

S&P 500 Technicals Trump Fundamentals:  The economic data this week was far from stellar.  The trade deficit widened (imports and exports declined), post-census jobs were weak, and retail sales declined a whopping 1.2%.  This didn’t stop the Dow and the S&P from finishing the week on a high note.  Technically, the indexes were due for some upside after the recent selling spree.  But some profiteers may be recognizing that the negative sentiment is lopsided for the moment. So we suspect games — which is par for the course on Wall Street.   Investors have piled into puts on the S&P for insurance against further downside, causing a short-term imbalance.  Perhaps taking notice of this, Goldman bought over 1,000 S&P futures in the early going Thursday (according to CBOT sources), in a possible effort to support the market (for the Fed) or to foment a short-term rally, forcing all those put-hungry people to cover their bets.   This behavior could continue on into the thinly traded summer months, simultaneously moderating gold’s safe haven attraction.  In any case, with the fundamental picture deteriorating as quickly as it is, this dynamic won’t last for long.

Populism – A Little Less Popular?  This was a government mandate not long ago.  After the crisis of 2008, the public cried out for help and the government came to the rescue – or so it seemed.  But now it may be dawning on Americans that government intervention may be the exact thing that is destroying the country.  Democrats,  the once bold group of reformers, are beginning to hide from their constituents.  Perhaps it’s the taxes, the unemployment, the healthcare bill, or the increased regulation — or the fact that government employees get paid more than we do.  We’re not entirely sure where to place the blame; there are so many possibilities to choose from.  We do know this, though, it’s getting harder to earn a buck for most American’s, whether they are employed or not – while gas and food haven’t become meaningfully cheaper since 2008. (We’ve attached a few articles and goodies below just in case you missed them).  We make mention of this shift in political winds, not because it will forestall the painful but necessary adjustments in the economy, but that it may be a step towards gridlock in Washington and an end to intrusive wealth-destructive policies (401K regulation).  One can hope.

Screen shot 2010-06-11 at 6.26.37 PM

Have a great weekend!

David Burgess
VP Investment Management

David McAlvany
President and CEO