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After yesterdays big gains and what seems like an endless bull rally off March lows we are still heading higher this morning. Is this market rally unexpected? Nope, not really, considering that over 60% of last month’s float was electronic trading + 30% speculation by the same folks who set up the electronic trading (Thanks Goldman Sachs).
The Q2 GDP advance report illustrated the economy contracted at an annualized rate of -1.0%. Much enhanced from a downwardly revised -6.4% (from -5.5%) in the first quarter. GDP was also better than the expected -1.5% decline. Unfortunately, the main drive of the economy personal consumption expenditures fell at an annualized rate of -1.2%. In addition, government consumption expenditures added 1.12 % points to Q2 GDP and net exports added 1.38 % points to Q2 GDP.
The earnings reports are another fluffer for the economy. Everyone and their grandmothers are beating earnings (from ridiculously low guidance). However, if you do a reality check, revenues are down 30 to 50% for 70% of the companies reporting.
The VIX this morning is a sign of optimism, down again. Somehow, everyone is feeling unrealistic optimism. The Dollar is down again this morning while the DJI is up, so the trend continuous. Across the pond in Europe, unemployment is at a 10 year high.
My advice, get out of the market ASAP! It has climbed much higher than anyone expected in such a short period of time. That alone would not be a good reason to get out, but considering the fact that stock evaluations are at historically high levels, that is! Besides, if this recovery is real, you should put your money in depressed properties which many are cash flow positive.
On a positive note, no report of Goldman Sachs illegal activates today!
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