Today's stock market action was uneventful. It started strong, and then after 12:30 pm, stocks fell to end the day nearly at their starting position. In fact, year to date, the S&P 500 is nearly where it began the year.
Doug Kass, general partner of Seabreeze Partners Management, Inc. and commentator for The Edge Column on Street Insight (subscription required), wrote a harsh assessment in his column today. He focused on 1) absence of wealth generators; 2) creative mortgage lending practices have reached their limits; 3) businesses and consumers have locked in lower interest rates (and thus reducing rates will have negligible effect); 4) dearth of savings; 5) a growing schism between the haves and have nots; 6) the consumer is spent-up, not pent-up; and 7) twin deficits (current account and trade) pose structural problems. Doug certainly lays out the problems much more eloquently than I do.
In agreeing with Doug's assessment, I simply cannot find strong positive catalysts on the horizon.
As I have noted numerous times, I am more bullish on commodities. My bullishness is perhaps colored by where I live. I live in Calgary, Alberta, and the province of Alberta is in the midst of an oilsands boom. Fort McMurray, where I used to live, is experiencing too much growth in that it is having difficulty in providing services for its new residents. Edmonton, Alberta's capital, too is growing rapidly. And Calgary, where most of the head offices are located for major oil companies, is growing rapidly as well. Everyone connected to the oil industry is acutely aware of the shortage of resources such as engineers, tradespeople, steel, and everything else that is required for oilsands development. Cost estimates continue to rise and companies continue to pay. The natural thought, of course, is that after every boom is a bust. While a bust might happen—perhaps even certain to happen in time—there is no evidence of one developing yet. I am sure that Alberta's current oilsands boom has colored my outlook in terms of being bullish on commodities.
I suspect that the shortage of oil and gas is symptomatic of many other commodities as well. As Jim Rogers has pointed out, commodities tend to go through long cycles. Although I remain bullish on commodities, I do expect various commodities to be volatile. So while there are bound to be sudden ups and downs, I expect the overall trend to remain upwards.
The above picture is hosted at Flickr. If you click on the picture of the artsy looking lampposts, you will be directed to a larger version at Flickr. The lampposts are in Edmonton between 100 and 101 Streets NW, near MacDonald Drive.
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