Main Street vs. Wall Street Match Continues – March 28, 2013

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

Main Street vs. Wall Street Match Continues…

As the first quarter grinds to a close, stocks managed to finish on a high note, yet again, with absolutely no regard for the spate of bad news now pouring onto the scene. We have our suspicions, first and foremost, that performance “gaming” or “window dressing” is the primary motivator behind Mr. Market’s strong finish Thursday. It’s a widely used practice where managers swap out losing assets in exchange for winners at quarter end. As to the reasons why, we’ll leave that for the reader to imagine.

It makes almost no sense using economic data to prove a point these days, as everything seems to get “revised” (as in the case of 4th quarter GDP figures) favorably in order to help justify the cause in stock-land. Even with the hedonic adjustments, however, it’s proving more difficult to keep negative statistics contained. Of note, US consumer confidence turned south by 8 points leading into March. The outlook on incomes and jobs was the main source of aggravation among those surveyed. US Durable Goods orders and New and Pending Home Sales also came in a bit softer than expected – but this too was ignored by traders who instead went on about the S&P/CaseShiller index, which showed a greater-than-expected increase in US home prices through January.

As we move forward, we suspect the news will continue to slide in a direction displeasing to those of a bullish persuasion. We have mentioned two important points here often: One, that money printing, or QE, is no longer promoting growth as the powers-that-be hoped it would. In fact we may go so far as to say that QE is undermining growth instead. Two, in cases where it’s illegal to “print” (e.g., within the EU), confiscating the assets of individuals not responsible for the financial mess now unfolding will prove to be equally damaging.

Anyway, markets have yet to discount one modicum of disparaging news heard thus far. Arguably, with the Fed providing the wind in its sails, it hasn’t had to – but that doesn’t imply that it won’t. At a minimum it may behoove stock investors to at least hedge their bets in coming months, which could favor relatively undervalued areas. By that, we mean the commodities sector (oil was up 3.7% this week), and in particular the metals in the weeks ahead.

Best regards,

David Burgess
VP Investment Management


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