MARKET COMMENT

October 22, 2009

DRIVE-THRU SOUP KITCHEN 2009

So, what the hell was yesterday about anyway? It lends credence to the idea of heavy liquidations in Galleon’s hedge funds since there don’t appear any other credible ideas—but, I’m open to suggestions.

The rally today was led by earnings from McDonalds, Travelers and 3M. The 2:15 PM Buy Program Express arrived on time to squeeze shorts from yesterday’s closing debacle. The buy programs were stimulated by little follow-though selling from yesterday and the LEI coming in “better than expected”. Ignored in the enthusiasm was a lowering of the previous LEI report.

We finally got big volume today on an up-day with dip buying and earnings optimism. Breadth was quite positive.

Those $1 Happy Meals are just what the doctor ordered for contemporary America, right. Sorry, I just couldn’t resist the image and metaphor.

I did promise in the financial comment a link to Philip Greenspun’s blog (must be a contrived name…if not, my apologies). Herein he describes just how our big banks make money with your money. It’s called fixed-income leverage. And did you happen to see that twice failed (LTCM) John Merriweather was launching a new hedge fund to trade bonds with leverage? You’ll no doubt be ringing him up.

We sheeple have no idea what yesterday’s big sell-off was all about but evidently no one else knows either so the dip buyers entered. It’s definitely a strange environment with valuations sky high as they were back in 1999-2000. But with cash yields this low and plenty of liquidity sloshing about combined with peer performance pressure, it’s a combustible situation.

Again, in after hours trading AMZN and others are doing quite well.

Often, perhaps like you, just before sleeping I ponder what tomorrow will bring in the markets. All I have is the current news and believe to have a pretty good idea as to how things will open the next day. But then I’ll know the news cycle will continue while sleeping and perhaps things will be dramatically changed. They often are.

Let’s see what happens and you can follow our pithy comments on twitter.

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Last 5 posts by David Fry

• MARKET COMMENT October 20, 2009 TAKING A BREAK It was a pretty strange day. - October 20th, 2009
• MARKET COMMENT October 13, 2009 EARNINGS WORRY WARTS I just have a spooky feeling but then I always do. - October 13th, 2009
• MARKET COMMENT October 8, 2009 GETTING SOME ALTITUDE SICKNESS YET? - October 8th, 2009
• MARKET COMMENT October 2, 2009 REALITY BITES BULLS Economic reality is meeting bullish enthusiasm and the results are disappointing and upsetting. - October 2nd, 2009
• MARKET COMMENT October 1, 2009 NOT A PROMISING START When did everything get so predictable? - October 1st, 2009