Fear of Doomsday Abounds

Here are the newsworthy notes of recent days and their implications on a volatile market that continues to face fears of a double dip, trade range bound, and maintain a downward bias:

(1) Housing -- 7 of the last 8 recoveries were either led by a housing recovery or substantially supported by housing. Existing home sales dropped significantly and caused the supply of homes for sale to rise above a 12 month level. Conclusion = this was expected due to the expiration of the tax credit and the continued flow of bank foreclosures; this is a bottoming that will take time - no one thought we were in a housing recovery (or full economic one) yet.

(2) Politics -- calls for the Presidential economic team to resign are political panderings to present day fear and upcoming elections. Imperfect but responsible actions have been taken and recovery will take time (and waiting). Some think a gridlocked Congress after Nov elections will be a boon for the markets... I have to say, I feel like it already gridlocked for the most part. Which I like because it stops Congress from adding to the heap of debt via short term stimulus (which had its point previously but not is unnecessary unless (arguably) very very targeted on specific causes like infrastructure). Conclusion = more of the status quo is good.

(3) Manufacturing -- a weak durable good report confirms the slowdown in manufacturing and also confirms continued growth (no matter how minimal). Possible ALERT is that negative number that came out of the Philly Fed report which indicates actual contraction. Conclusion = expectations of minimal growth remain as manufacturing subsides. One week does not a trend make for the Philly Fed.

(4) M&A Activity -- some thing that the recent M&A activity = market activity and bullish news. There are strategic M&As and robust growth M&As. Strategic M&As like the recent ones are not bullish -- in fact they are about job losses often times. Increased corporate profitability through merging and then cost-cutting as opposed to growth through revenues. Conclusion = M&A is not bullish presently.

(5) Jackson Hole -- this is the wildcard: will the Fed emerge from its meeting this week to announce massive quantitative easing measures or keep the status quo? Conclusion = I believe that further QE measures may prove beneficial but the bang for your buck is significantly less than the measures initially taken in 2008/2009 -- so the debt/liquidity issues may prove more negative than the QE measures prove positive. I'd prefer status quo.