Market comments for April 8th

Still think the market should be going up and is undervalued? Well this chart below and commentary should give you great pause and concern. This from Chart of the Day:

With first-quarter earnings season set to officially kick-off on Monday when Alcoa reports first-quarter earnings, today's chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today's chart illustrates how earnings declined over 92% from its Q3 2007 peak to Q1 2009 low which brought inflation-adjusted earnings to near Great Depression lows. Since its Q1 2009 low, S&P 500 earnings have surged (up an inflation-adjusted 994%) and currently come in at a level that is greater than what occurred at the peak of the dot-com bubble and not far from its credit bubble peak. It is interesting to note that the original run up in real earnings from Great Depression lows to dot-com highs took over 67 years. The current spike has taken 20 months.

The 10 year Treasuries are now up to almost 3.60% on the day the government shutdown is expected to happen at midnight tonight. Silver has surpassed $40 and ounce and continues to go up.

Market comments for Feb. 4th, 2011

Much has been written of the market rise from the low of 6,400 on the Dow in March 2009 to where we have returned to Dow 12,000. That rise of 5,600 points has taken just about 2 full years. I haven't seen by comparison anything written on the speed of the decline from the Dow 14,000 level down to the 6,400 level, so I thought it might be a good topic this morning.

The Dow was at its 14,000 peak in October 2007 and then dropped to Dow 12,000 within less than 6 months. Then it dropped from the 12,000 level to the 6,400 level in about 9 months. Seems to me, once it started the rate of decline was so much more rapid than the gain by double the speed.

It is my belief that when this market does correct it will have at least the same sharp decline. An article yesterday on Yahoo said that the author believes we are going to have a "Splash Crash", when it happens this time. I agree with him. The last gain of 1,000 points, going from a Dow 11,000 to 12,000 took a little over 2 months. Imagine losing those 1,000 points in a matter of minutes. That's the most likely scenario for the beginning of the decline. It will be a shock when it happens.

Now for some good news. The Unemployment rate for January was reported this morning to drop a very large amount and now stands at 9.0%. However Private sector jobs increased 50,000 vs. 139,000 jobs created in Dec. Last month the unemployment rate was 9.4% so the official counted unemployed number has dropped significantly. This should affect the market very positively as the market actually expected an uptick to 9.5%. Let's see what happens today. You can't get much better news than that for the Obama Administration and those still unemployed. The 10 Year Treasury yield has climbed to 3.60%, which is in the opposite direction to what the Fed has been trying to do with QE2.