Market Commentary – November 23, 2009

General Market Comment:    November 23, 2009

 While things should be relatively calm this week before Thanksgiving the government data mills will still spew data on Q3 GDP, Personal Income, Personal Spending, Durable Orders etc.  We will also get private sector updates on consumer confidence which of course the pundits will dissect for clues about the upcoming holiday shopping season.  All said, the tenor of the data, given what we already know from our sets of leading indicators should be one of recovery.

 Speaking of recovery, I have included some charts from Mark Perry’s Carpe Diem blog and the Calafia Beach Pundit – Scott Grannis, that not surprisingly speak to more evidence of recovering US and global markets.

 The first chart displays the number of shipping containers being handled in the Port of Los Angeles – the busiest container port in the US.  There is no surprise here – the number is going up and is no where near the highs in recent years past.

ScreenHunter_19 Nov. 23 10.59

The second chart comes from Scott Grannis.  It gives us a view of the trend in global industrial production.  The thing to keep in mind is that these data sets are the quintessential “large numbers”.  They tend to change slope very infrequently.  When they do you can usually expect some durability in the direction of the change – it’s a momentum thing –eh?

 Given the global concert of central bank stimulus and fiscal spending, this upturn should persist for a time frame defined in years.

 ScreenHunter_20 Nov. 23 11.00

Of course if production is going up – so too should the prices of stuff used in production.  Indeed that is exactly what is occurring.  I wish to make a point that the increase in prices is not exclusively about the US Dollar – it is also, and perhaps more so, about a recovery in raw demand.

 ScreenHunter_21 Nov. 23 11.00

 

While one can become confused looking at stock charts or the changing levels of a particular stock index I find it useful to consider the aggregate value of markets.  Sometimes the “macro” numbers are better indicators for some of the “micro” components.  Mr. Grannis provided the following chart of the global equity market capitalization.  Ask any 10 year old what the direction of this chart is and they will innocently and accurately respond- “its going up Daddy” . . . sometimes it is just that simple.

 ScreenHunter_22 Nov. 23 11.00

 

The earnings season just ended illustrated that corporate America adapted well to the financial calamity of the “Great Recession”.  They produced outstanding earnings relative to estimates.  Logically, stock markets around the world have just experienced a price recovery of near historic proportions.  There are plenty of market players still in disbelief of the economic recovery and therefore the earnings recovery and therefore the equity price recovery . . . of well . . . we need pessimists as well as optimists.  The presence of bearish analysts and the earnestness of their arguments are healthy signs of early phases of recovery – not the middle and not the end.  Mind you – corrections of as much as 10% or more will be normal to expect.

 We are in a historically benign time for the market.  It only occasionally drops leading into Thanksgiving.  Remember that November is the best month of the year for the S&P 500 and the 2nd best for the NASDAQ.  December is typically the 2nd best month of the year for the S&P 500.  It is the 3rd best for the NASDAQ.

 

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