What I’m Watching This Week – 20 August 2012

What if something good happened and nobody noticed?

Last week’s started us off with a negative head fake right up until Wednesday when the small and large caps took over and started a new round of peculiar party games.  By Friday, the Russell 2000 had a gain of nearly 2.3%; the NASDAQ came in just under 1.9%, the Dow and S&P 500 squeaking out less than 1%.  Not too bad actually, as the economic data from last week had a generally positive tone.  Globally, 8 of 12 major indexes posted gains with Australia leading the pack while Japan and the Shanghai composite decided to not to participate in the festive atmosphere.

Perhaps some of you noticed lately that the media, particularly CNBC (yes, I’m calling you out) have dived right into the Doom and Gloom, unmitigated fear and conspiracy narrative.  Yeah, funny how the crap I get in “factual emails from unsubstantiated sources” ends up being broadcast by what one would have hoped would be a fair and honest platform for real economic facts and conversation.  If I want to watch and listen to the droning of nonsense and political rubbish, well I can just walk into a restroom and flush the toilet.  At least that way, I know what’s swirling around will soon be where it’s supposed to be, in the sewer, and not broadcast to appeal to the unstudied Neanderthals among us.  CNBC you should know better; when ratings trump knowledge, we all lose. Shame on you.

CNBC withstanding, the data coming in is quite positive.  Building permits are up, inflation data remained pacified, business inventories were lower than forecast and leading economic indicators from the Conference Board remained above zero, and retail sales surged higher.  Yes, there is good news and a fair amount of bad news and we’ll still need more facts to have real confidence going forward however what we don’t need are bogus, pandering partisan stories declaring that the recent gains are the result of governmental adjustments, out of line with anything from the last ten years and in place to only sway to electorate.

Treasury yields rose for the fourth consecutive week: the 5 year crept to .8%, the 10 and 30 year bond yields closed above 1.8% and 2.9% respectively.  The sell-off extended across the bond market, as corporate and municipal bonds were down but within moderate measures.  The pullback in the bond markets should have been anticipated, as bonds have been overbought and it’s thought-provoking to see how anyone could have been flabbergasted.  Commodities continue to move in a sideways direction.   WTI crude oil closed above $95 for the first time since May.  Natural gas continued its retreat, giving back summer gains.   Copper and industrial metals saw irregular trading and the grains sold off on Monday and then advanced again later in the week, with corn back above $8.

The economic calendar is now pretty quiet. Earnings season is basically over.  US Politicians are on vacation (they worked really hard this year-NOT) and European leaders are returning from holiday as well.  A number of very positive trends are occurring right now, with increasing participation from the small caps and the major indexes are closing in on new highs; however there are a number of events on the horizon that have the potential to upset the markets (the Jackson Hole meetings, the European Commission meetings, and German Constitutional Court to name a few).  The markets are holding steady waiting for more information to solidify some conclusive decisions.  I remain optimistic but never foolish.  Keep the current news in perspective.  Politics won’t help the markets, separate that noise from your investments; the fiscal cliff is going to be here after the election like it or not (thanks Congress for a job well done).  There are many good opportunities for the individual investor to gain from.  I remain optimistic.