2011May2 CEO confidence is high

"The economy depends about as much on economists as the weather does on weather forecasters."~

                                                                     Jean-Paul Kauffmann

 

ECONOMY:

Earnings season is winding down and is largely positive and CEO confidence is high. Housing remains moribund but the market seems to be largely dismissive. A ratings warning on US debt rattled the stock market but bond markets were relatively unmoved. Issues certainly need to be addressed, but they are more likely to affect money flowing into the economy and highly unlikely to result in failure to pay obligations. Meanwhile, the Fed is striving to communicate more effectively-but what are they communicating? Japan's problems in the aftermath of the natural disaster seem to be expanding, while Europe is trying to hold together its coalition. Meanwhile, China is trying to engineer slower, but still solid growth.
 

It's not been an easy offensive period, but the overall bias has been upward.  Even if supply returns and double bottoms are generated, they will come at higher price points and it is likely that the March lows will hold.  If not, the exit point is clear.

So, even though conditions are not "ideal", the overall bias has been upward and absolute gains have been made.
 

Will they continue to climb?  Will the next defensive period come from higher levels so that we can keep some of those gains?  Or, will supply regain control and wipe out all progress?  

Don't know, but we do know that our indictors will be reliable guides and the back and forth action on the charts has provided clear and palatable exit points.

We are operating in an overall bullishly configured market which generally provides support.  After a short defensive period, demand continues to return, with a majority of all of the intermediate-term demand indicators now in a column of X's and the remaining two within 2% of reversing back to X's.  The higher levels on the intermediate-term demand indicators does not mean that equities cannot continue to rise in price; it only suggests that exit points be clear and palatable for any new positions. 

Never easy, but always interesting! 
 
DOLLAR:
 

According to Bloomberg, the creeping devaluation of the dollar may not be over:

 

"The dollar fell to a 16-month low versus the euro on speculation the Federal Reserve will consider further easing measures to support the U.S. economy after its bond-buying program expires in June."

 

Further easing measures, with interest rates already at zero?  Wow!

 

We have no idea if this will really happen, but you might want to rethink things if you are loaded into domestic bonds.  So far, commodity prices have continued to crank up as the dollar has fallen.  Commodities are a reasonable inflation hedge, but most strategically allocated portfolios typically have commodities as an afterthought.  Tactical portfolios (like Global Macro), on the other hand, often have significant commodity exposure when those assets are strong.

 

DEMOGRAPHICS:

Old age is fifteen years older than I am.  ~ Oliver Wendell Holmes

America's population of centenarians - already the largest in the world - has roughly doubled in the past 20 years to around 72,000 and is projected to at least double again by 2020, perhaps even increase seven-fold, according to the Census Bureau.

 

The Census Bureau estimates there were 71,991 centenarians as of Dec. 1, up from 37,306 two decades earlier. While predicting longevity and population growth is difficult, the census' low-end estimate for 2050 is 265,000 centenarians; its highest projection puts the number at 4.2 million.

 

The Social Security Administration says just under 1% of people born in 1910 survived to their 100th birthday. Some have speculated that as many as half of girls born today could live to 100. 

 

When Lynn Peters Adler, a former lawyer who founded and runs the National Centenarian Awareness Project, began to recognize the oldest members of the community, she didn't even know the word "centenarian." Now, some weeks she talks to a dozen people who are 100 and older. And in her 25 years of contact with centenarians, she has culled some similarities among them:

 

- A positive but realistic attitude.

- Spirituality.

- Courage.

- And a remarkable ability to accept the losses that come with age but not be stopped by them.

 

"Centenarians are not quitters," she said.