Posts Tagged ‘cash for clunkers’

Cash for Clunkers FAIL: Factory Production Drops in October

WASHINGTON (AP) — A decline in factory production in October signals that consumers and businesses remain cautious in their spending, with the economic recovery likely to be sluggish.

http://finance.yahoo.com/news/Factory-production-dips-apf-1631895568.html?x=0

What a shocker. Factory production dropped in October thanks to the car manufacturers.

Let’s face it, Cash for Clunkers could only pump up numbers for so long. But who knows, maybe Obama and team will find it “effective” to have another Cash for Clunkers program for every month of 2010. That way, they can keep production and retail sales to whee they want them.

Call me an old fashioned libertarian, but instead of the government subsidizing car and home prices (I didn’t mention the new home buyer tax credit extension, yet) is a waste of money. Instead, the government should let supply and demand take over.

Eventually, prices will be low enough that people will see the value in buying a car or home.

No debt needed.

Yesterdays Shocking Retail Sales Report

The three major US indexes hit fresh 52-week highs on the back of comments Bernanke made yesterday to the Economic Club of New York.

Why the celebration? Shockingly enough, car sales pushed retail sales higher. And this time, there was no cash for clunkers to explain the pickup. We attribute this to pent up demand and better access to credit at the dealerships.

So traders bought. It appears the market was pricing in a slower fourth and first quarter.

Overnight, the dollar strengthened slightly and gold came off its record highs to rest at $1,126 an ounce. Silver and oil both dropped as well.

The weakness worked into today’s market as all three indexes struggled to reach the green.

From this point forward, economic data will matter more than ever. Today, we saw traders looking for an indication that the fourth and first quarter will do better than expected. And so any other economic data that shows this outcome (especially the leading economic indicator report) will likely push the market higher.

I’ve always been suspect about how far this rally could go on government support. And to be fair, we’re likely to keep seeing the economy do a little better than expected due to the massive stimulus Congress passed early last year (We’ll continue to feel the effects of that splurge well into late next year and 2011.).

But there are a few things which would end this rally.

1) The Fed tightening too fast, too soon
2) An end to the dollar carry trade
3) Higher taxes
4) Rising protectionism

If you haven’t bought yet, you probably shouldn’t start. Wait for the market to come back 3-5% and then go ‘balls in’ and buy some strong stocks (I prefer commodity stocks at the moment)