“All that we see or seem is but a dream within a dream.”—Edgar Allan Poe
NASDAQ has announced plans to reimburse investment firms $40 million to compensate for losses generated on the first day of trading in Facebook (FB). The losses are attributable to computer glitches that slowed down settlement on trades. The settlement will consist of $14 million in cash, the rest in credit for future trading fees.
The chart below, courtesy of Chris Kimble at Chartingsolutions.com, shows the markets are now sitting on long term support while the AAII Bull ratio has fallen to a level which has coincided with market rebounds. In other words, the bounce this week could be the start of another in a long running series of rebounds.
The Economist is noting that major consolidation is occurring amongst fund of hedge funds due to significant underperformance in eight of the past ten years. “Investors are voting with their feet” said the magazine.
The ECB decided to leave rates unchanged at their meeting this week. ECB President Mario Draghi said the economy should recover later this year, but also left open the possibility of a rate cut in July. Can anyone say “whistling past the graveyard?”
The Fed’s Beige Book was released this month, and the analysis of the twelve districts has an optimistic bent. The report focused on healthy expansion in manufacturing, travel, and tourism. The report also cited improvement in the housing market as well has a steady-moderate increase in hiring.
Fitch Ratings is threatening to downgrade the US unless the government addresses its looming financial predicament. “The US does not have a credible fiscal consolidation plan, and if we don’t see one after the election, I would expect a downgrade” said Ed Parker, a managing director at the firm.
In a blow to full disclosure, China’s Administration of Industry and Commerce is refusing to release information to investors on public company asset transfers, financial reports, and shareholder changes.
China made a surprise interest rate cut, the first since 2008, lowering the benchmark 1-year lending rate to 6.31% from 6.56%. Reports have been indicating that the economy there is slowing faster than expected by analysts and inflation is slowing. APAC markets fell last night.
One of the biggest questions that has been raised over the past few years by President Obama relates to income inequality and whether it is good or bad for the economy. This discussion below sheds some light on the argument:
An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama style socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, "OK, we will have an experiment in this class on socialism". All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A.... (substituting grades for dollars - something closer to home and more readily understood by all).
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little..
The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F. As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else. To their great surprise, ALL FAILED and the professor told them that Obamaism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. It could not be any simpler than that.
Kings in five? If so, their overall playoff record would be 16-3, extremely impressive.
Have a great weekend