After a historically bad Thanksgiving week for the S&P 500, the markets turned around with one of the best weeks since Spring of 2009. I’m calling this the Aristotelis “Telly” Savalas market. It starts with Greece and you end up with no hair.
Markets around the world jumped higher after the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve and the Swiss National Bank announced coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity. The central bank actions also bought some time for EU officials to address their problems, giving investors the green light to buy. For the week, Italy, France, and Germany all saw gains in excess of 12%. It may sound hard to believe after such an impressive rally, but the S & P 500 is in neutral territory.
Don’t get me wrong, we surely welcome the positive impact on our client portfolios, but it begs the question, “What spooked these central bankers”? Clearly, the en masse downgrade of financial institutions by Standard and Poor’s didn’t help matters. I suspect that there was the strong possibility of a Lehman-style collapse of a major European financial institution.
One of the biggest movers last week was Copper, +9.6% which I mentioned in our previous Be a Contrarian. Lucky or smart, I’ll take either moniker. The Russell 2000 rose over 10% for the week, with financials leading the way. Aflac (AFL) and Barclays (BCS), among our holdings in the Global Opportunities portfolio, rose over 10% for the week.
I noticed something amusing this week. Emerging markets are now bailing out Europe instead of the other way around. Just a sign of the times, I guess.
Too many of the recent IPOs are doing poorly, like ZipCar (ZIP). Despite beating EPS and issuing guidance in line with analyst expectations, the shares have been dropping hard. Living near the University of Miami, I have seen Zipcars around town. The service is popular among students and tourists. Let’s hope the entrepreneurial spirit remains strong in America. Our work suggests it does.
After your home, a car is the next big purchase decision that many consumers make. Is our economy falling apart? Apparently not. Take a look at Thursday’s US auto sales totals for the month of November. On a seasonally adjusted annualized rate, sales rose to 13.59 million, which is the highest total since the ‘cash for clunkers’ program in the Summer of 2009. Outside of that one month in August 2009, you have to go back to June 2008 to find a higher monthly reading. Strength in auto sales is encouraging for two reasons. First, if consumers have the confidence to make such a big purchase, it is a sign of increased confidence. Second, since most car purchases involve some degree of credit, strong sales totals may indicate that credit is finally loosening up. BMW reported a 15% increase in sales and Mercedes Benz reported an incredible 55% increase so the wealthier cohort isn’t feeling any pain.
The Reserve Bank of Australia and the Bank of Canada meet on Tuesday while the Reserve Bank of New Zealand, the Bank of England and the European Central Bank all meet on Thursday. China releases its major economic data on Friday including consumer and producer prices, industrial production and retail sales. The European calendar is dominated by the EU summit, scheduled for Friday.
Don’t miss John Chapman’s report on Ludwig von Mises on Economic Growth, Denial, and Truth in Europe.
“Who loves ‘ya, baby?”, Telly Savalas as Kojak. Learn about this Columbia University grad.
P.S. “The Dirty Dozen” in one of my favorite movies of all time.
Have a pleasant and productive week.
Key Rates by Bloomberg.com
| CURRENT | 1 MO PRIOR | 3 MO PRIOR | 6 MO PRIOR | 1 YR PRIOR | |
|---|---|---|---|---|---|
| Fed Funds Rate | 0.07 | 0.08 | 0.12 | 0.11 | 0.18 |
| Fed Reserve Target Rate | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 |
| Prime Rate | 3.25 | 3.25 | 3.25 | 3.25 | 3.25 |
| US Unemployment Rate | 8.60 | 9.00 | 9.10 | 9.10 | 9.80 |
| 1-Month Libor | 0.27 | 0.25 | 0.22 | 0.19 | 0.27 |
| 3-Month Libor | 0.53 | 0.43 | 0.33 | 0.25 | 0.30 |
Mortgage* (National Average)
| CURRENT | 1 MO PRIOR | 3 MO PRIOR | 6 MO PRIOR | 1 YR PRIOR | |
|---|---|---|---|---|---|
| 30-Year Fixed | 4.00 | 4.05 | 4.21 | 4.49 | 4.71 |
| 15-Year Fixed | 3.35 | 3.37 | 3.37 | 3.72 | 4.07 |
| 5/1-Year ARM | 2.94 | 3.01 | 2.97 | 3.04 | 3.46 |
| 1-Year ARM | 2.78 | 2.94 | 2.95 | 3.14 | 3.06 |
| 30-Year Fixed Jumbo | 4.66 | 4.75 | 4.79 | 5.03 | 5.38 |
| 15-Year Fixed Jumbo | 3.93 | 4.06 | 4.08 | 4.38 | 4.76 |
| 5/1-Year ARM Jumbo | 3.15 | 3.14 | 3.17 | 3.40 | 3.97 |
Economic Calendar by Econoday.com
![[Report]](http://bloomberg.econoday.com/images/bloomberg-us/byconsensus_butt.gif)
![[djStar]](http://bloomberg.econoday.com/images/bloomberg-us/djstar.gif)
![[Star]](http://bloomberg.econoday.com/images/bloomberg-us/star.gif)
