Market Talk

- Big Picture blogger Barry Ritholtz wonders if the crowd can accurately predict a double-dip recession. He reminds there have only been three double-dip recessions during last 150 years and just one (1980-82) in post-war era. “When was the last time the crowd correctly forecast an ordinary recession?” he asks. “Given this track record, why should we believe they can forecast a double dip recession?”

- “The American political class will have to face up to the new reality of a semi-permanent slump for a decade or more that will blight a great number of lives,” Ambrose Evans-Pritchard writes at the Telegraph. “The cyclical recovery that normally makes it possible for most Americans to find a job if they want one is not going to happen this time because the overhang of debt, fiscal tightening, and a liquidity trap have combined to jam the mechanism.”

- Eric Jackson, founder and president of Ironfire Capital, has some advice for Microsoft (MSFT) CEO Steve Ballmer: run the software giant like a bank. “Not a modern basket-case bank with improper capital levels and a stack of bad loans,” writes Jackson, who acknowledges he’s long MSFT. “[Ballmer] should run Microsoft like an old-fashioned bank that expanded conservatively and paid out a fat dividend attracting lots of widows and orphans.”

- Paul Krugman says he’s not surprised that corporations are reluctant to spend, while hoarding tons of cash. “With huge excess capacity, why invest in building even more capacity,” he says. Time to put that cash to good use.

- The debate over whether the economy needs a second stimulus package just won’t go away. Add Goldman Sachs chief economist Jan Hatzius to the growing group of stimulus advocates who believe more help is needed.

- Baltic Dry Index drops for a 29th straight session, its longest losing streak in more than six years, and no one seems to care. This a story that might otherwise make front-page headlines, but “it appears there are some growing concerns about [the index's] usefulness today versus its usefulness say two years ago,” FT Alphaville says. “And it’s all down to shipping supply.”

- Stock market’s recent swoon off the late-April highs shows the market’s “beginning to take a path of fear rather than traversing the path of fundamentals,” writes Doug Kass of Seabreeze Partners. “My baseline expectation is that, despite the hyperbolic dire market warnings and the admittedly poor price action in the markets around the world, the domestic economy is simply decelerating from a V-shaped recovery toward moderate expansion.”

- Netflix trades for more than 40 times this year’s earnings, which prompted Crossing Wall Street blogger Eddy Elfenbein to call it “the absolute worst stock to buy” back in April, when it traded at $87. He didn’t exactly have the best timing, it’s risen since then and today jumped 10% to $118.49. Nevertheless, he’s not changing his tune. “I still think Netflix is wildly overpriced. Only now, it’s even more so.”

- Bearish sentiment this week jumped to the highest level since July 2009, Bespoke Investment Group reports, citing the Investors Intelligence weekly survey of adviser sentiment. Ironic, especially since the S&P 500 rose more than 3% today, its third-biggest gain of the year.

- LeBron’s decision is about 24 hours away. Ochocinco and current NBA player Jared Dudley believe he’s going to the Knicks. Here’s to hoping King James makes the concrete jungle his new home.

US stocks soared into the close, posting their third-biggest gains of the year, as optimism about the upcoming earnings season as well as the rising euro fueled the rally.

DJIA gains 275, or 2.8%, to 10018, crossing the psychologically-significant 10000 level late in the session. S&P 500 rises 32, or 3.1%, to 1060. Once the index crossed 1040, a key level in recent weeks, the gains piled on. Nasdaq Comp jumps 66, or 3.1%, to 2159.

Money-manager State Street projected 2Q profit well above analysts’ forecasts, boosting sentiment as earnings season kicks off next week. Europe’s banking regulator also released details about stress-test results, to be published later this month, which removed some uncertainty and relieved investors.

The rally’s sustainability now becomes the key question. Another day or two like this and all the correction chatter will dwindle. But if the market gives up these gains by the end of the week, look out below.

Dow Jones’ Brenday Conway reports:

Sizeable options trade cross the tape in Madison Square Garden (MSG), with market watchers attributing trades to the LeBron James sweepstakes. The star free agent is expected to announce his plans on Disney’s (DIS) ESPN Thursday night.

As MSG rises 7.5% to $21.79, the action is particularly heavy in near-term $22.50 calls and $20 puts. Among notable trades is a “long strangle” premised on MSG’s shares gyrating in either direction by next Friday, says Interactive Brokers’ Caitlin Duffy. Other call buyers are hoping the stock can set a new 52-week high over the same time frame.

In each case, options watchers see few catalysts except bets tied to the impact on MSG of LeBron joining — or not joining — the New York Knicks.

(Photo: Wikimedia Commons)

So we’re breaking down the rally on today’s Markets Hub, which is interestingly enough heating up just as the weather is here in New York City, and taking a look at commodities and oil and gas in particular, and how the demand picture is playing into all that.

On the News Hub this morning, we discussed Sara Murray’s page one story in the Journal, about the debate over jobless benefits, and whether extending them leads people to stay unemployed. We’ve been here before with this on this blog, but I guess we’re going there again.

Let’s be clear about one thing: there is no concrete proof that jobless benefits lead people to stay unemployed. There are some studies, but it’s mainly a supposition.

But I’ll tell you what I do know: companies are not hiring. The weekly jobless claims numbers say that, and the monthly jobs reports say that. Oh, sure, there are some companies hiring out there. It’s not like the number is zero. But there are not enough jobs being created in America today, not near enough, to even start effectively absorbing all the people who have lost their jobs since the recession started.

This bit about the bennies turning people into lazy sloths sucking from the dole is beside the point. There is a business cycle that has not been restarted by all that money the government threw at the system. That’s the real problem here, not people collecting two years of unemployment benefits; I’m not saying that’s a good thing, it’s clearly not a good way to maintain an economy. The point is, it’s a symptom of something larger, not a problem in and of itself.

“The American political class will have to face up to the new reality of a semi-permanent slump for a decade or more that will blight a great number of lives,” Ambrose Evans-Pritchard writes in the Telegraph. “The cyclical recovery that normally makes it possible for most Americans to find a job if they want one is not going to happen this time because the overhang of debt, fiscal tightening, and a liquidity trap have combined to jam the mechanism.”

Continue reading…

Hey yahoos, get away from the journalism equipment.

Dave Benoit, a reporter here at the wires, yesterday said to me casually, See that new Yahoo column? The Upshot?”

The Upshot? The Upshot!?

True it is. Yahoo has a new feature, The Upshot, which is apparently nothing more than a glorified news aggregator. Some little team of “reporters” and “editors” somewhere surfs the web and reposts other outlets’ stories. You know, so you don’t have to go through the drudgery of reading the news.

“Our goal is to be blunt narrators of the day’s news, to cut through the noise and misinformation and get to the heart of what’s important and why,” editor Andrew Golis wrote in the introductory post.

So let me be a blunt narrator, Andrew.

We write The Upshot.

We write The Upshot.

We write The Upshot.

“The Upshot” is the name of the corporate earnings-focused column John and I have been writing for the Wall Street Journal. We’ve been using that name since January, after sending the name to our corporate offices, who had to make sure nobody else was using it. (The column was initially called “The Wrap,” but we didn’t like that. But that’s another story.) So listen up, you yahoos: “The Upshot” is ours. We got there first. It’s bad enough you’re stealing other people’s news, you don’t also have to steal our name.

Go find another name, you hacks. Call it “News Rehash.” Or maybe “Yahoo’s News Aggregator.” I think “News You Can Get Elsewhere But Which We’ve Put Here In An Attempt To Siphon Off Ad Revenue For Ourselves” is quite catchy.

But “The Upshot” is taken. You will be hearing from our lawyers.

It’s hot in the city, but it’s cool in the trading pits. US stock futures down slightly premarket following weakness overnight in Asian markets and declines currently in European markets. Without much on the docket today to move things, it’s looking like a quiet one – for now.

Still, overall, the rationale hasn’t deviated much, folks — data continue to suggest that the US economic recovery is winded, and the realization of that circumstance continues to deepen.

Nothing notable on the economic data calendar today. Oil up slightly, gold down a little. Euro’s rebounding a bit, recently at $1.26.

S&P futures down 2.40, DJ futures 21. Ten-year flat, yield at 2.93%.