Equities Spend the Week Consolidating

Saturday, March 13, 2010

  • Equities spent the week in a very tight range with the Dow gaining a marginal 58 points. The S&P 500 eked out new highs for the current rally closing the week exactly at previous highs of 1,150. The price action showed strength in equities as stocks hovered below the 2009 highs not encountering significant selling pressure. I keep talking about it but the sell-off into 4th quarter earnings season has been fully recouped as companies surprised investors with better-than-anticipated results and guidance. The path of least resistance looks to be higher.

  • My article, "The Real Reasons Stocks Have Rallied", got published over at SeekingAlpha.com. I gotta get more stuff up on that site, it's really a great site for spreading your content.

  • A 2,200-page report (that I won't read) was released this week accusing Lehman Brothers, among other things, of using an accounting trick called Repo 105 to hide $50 billion in liabilities off its balance sheet in an attempt to show investors each quarter that they were not as highly leveraged as they truly were. Then, they would just buy back the liabilities once the quarter ended. Ernst & Young is being dragged down as well as they were complicit auditors of the company. The company is even being compared to Enron for its accounting "shenanigans". Is anyone surprised? A company doesn't evaporate in a week without an excess of leverage or fraudulent accounting. While Lehman may have been one of the more egregious players of the game, I find it hard to believe that all Wall Street investment banks weren't doing the same sorts of things. Elliot Turner over at T3Live had a good piece about this idea of blaming the individual failing unit rather than seeing it as a symptom, not the cause, of inherent systemic instability.

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