Observation

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The Feds action yesterday and the subsequent market movements, came as no surprise. I’ve been noting how economic numbers outside the “fudged” monthly employment numbers, have signaled a dramatic slowdown underway. The rally after the news is just another seemingly automatic reaction of the drug addict getting another fix and the belief the junk will keep flowing forever.

It may come as a shock to most, but eventually the stock market does return to being what it was “originally” – A PLACE TO BUY AND SELL PART OWNERSHIPS IN BUSINESSES. And such a place ends up depending on economics, earnings and valuations. Speaking of valuations, 4th quarter earnings estimates are IMHO going to come down hard unless the “tooth-fairy” visits Wall & Broad. The only way equity prices can gain much further is through PE expansion and if anybody can tell me how the “Don’t Worry, Be Happy” crowd on Wall Street can achieve that – I’m all ears!

While I wouldn’t say the U.S Dollar has topped out, I do think its rally has seen the bulk of its gains. The Europeans still want a Euro at parity or lower and much of that is likely to depend on how fast and hard our economic slowdown takes hold.

I do think many commodities have seen their lows now; but oil’s supply versus demand is so overwhelming supply tilted that it shall likely still see the $30s before any meaningful bottom.

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