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Themis Thoughts 1/25/11 Rahm and Reflexivity

25

January, 2011

I know what you are thinking. ZOMG. How is it that a Daly can have an Emanuel’s job, but an Emanuel can’t have a Daly’s job? (An Illinois Appellate Court yesterday ruled that Emanuel did not qualify as a Chicago resident, and therefore his name could not be on the ballot). But sigh. This is not the reflexivity of which I speak. Besides. You all saw Rahm’s donor list in that Wall Street Journal article over the weekend (Getco, Citadel, Peak 6, etc.); he will be the Mayor rest assured.

The reflexivity of which I speak has to do with circular relationships between cause and effect, and in the economic sense. Consider the relationship between stock fundamentals and stock prices. Stock fundamentals affect stock prices, right? I mean Apple sells a lot of stuff, has great fundamentals and that affects the stock price. But can Apple’s stock price affect the fundamentals? If you believe in equilibrium theory, your answer to that would be a big “no”. Those who believe in equilibrium theory believe that markets move towards equilibrium and efficiency, and that any aberration is short-term noise, and that prices in the long run are affected by fundamentals, which are unaffected by prices.

But if you believe in reflexivity, you believe that markets tend towards disequilibrium, and that prices do in fact influence fundamentals, and that these new fundamentals then change expectations, which then influences prices. George Soros can explain it a lot better than I can. And besides I am dizzy.

Let’s just say that if you are an equilibrium gal you are probably bullish. After all, the market was at 6,600 and it is now at 12,000ish. So that is, umm good. And if you are a reflexivity guy you are moving to a cave in Kentucky with Slim Jims, guns, Marlboro Reds, Blue Moon with orange slice (have to be civilized), and your David Grey playlist. Or maybe Pink Floyd. Yeah. Pink Floyd.

Reflexivity. I am going to reflect on that some more.

 

Where we left off 4:00pm EST:

INDU               11,980.52                                +108.68

SPX                 1,290.84                                  +7.49

CCMP              2,717.55                                  +28.01

Futures now at 7:30am EST:

DJA                             -8

SPA                             -4.20

NDA                            -9.00

Key Data out today:

 

09:00:              Case Shiller Home Prices

10:00:              Consumer Confidence

10:00:              Housing Price Index

10:00:              Richmond Fed

 

Since the prior close, some key stories:

 

-       Oldest son brings home B- in Science on his midterm progress report, but he says the Bernank and POMO can get it to an A soon.

-       UK is surprised their econ numbers missed, despite being snowed in for seven months.

-       IMF raises global growth forecasts – the fund credits the recently enacted tax plan as well as the Fed’s QE2 for boosting the outlook.  Raising ’11 growth from +2.3% to +3%.  The IMF also raised its growth forecasts for the global economy.  The IMF warned that the US fiscal imbalances will have to be addressed that fiscal policies in most countries should be tightened.  FT   FT article here

-       World economic leaders readying to party at Davos. Even Nouriel bought a Vegas shirt.

-       ERIC boosts profit.

-       Alternative fuels don’t help the military (RAND   NYT).

-       Illinois – the state confirmed that the SEC was conducting an inquiry into remarks made by state officials re its underfunded pension fund.  WSJ   http://on.wsj.com/fyi9kx

-       Artradis Hedge Fund to shut down.

-       China’s IPOs have poor debut today – Four of the five stock debuts in China today fell in trading below their initial offering price; Twenty-two of 26 new listings in China this year are trading below their IPO price – Bloomberg 

-       Fed likely to press on with asset purchases despite rising business lending and improved economic numbers.

-       BRIC inflation threatens priciest consumer stocks as food bills increase.

-       Lebanon’s lawmakers back Hezbollah. WTF.

-       DuPont beats (DD).

 

Earnings:

 

Pre-market:  AKS, ASH, BHI, BLK, BTU, CNI, COH, CRS, DD, DGX, EAT, EMC, ERIC, GLW, HOG, JNJ, KEY, KMB, MDP, Misys, MMM, PVTB, RF, SHW, SI, TLAB, TRV, VZ, WAT, WFT, X

 

After the Close: ALTR, BXP, CA, DOX, ELY, GILD, JNPR, MIPS, MOLX, NSC, RFMD, RKT, SYK, TSS, YHOO

 

 

Significant Movers This Morning:

RLI +7.7% (earnings) DPZ +2.5% (SAC Capital 13G) CSX +2% (earnings) EK -6.5% (initial determination that patent is invalid) PKG -5.8% (earnings) VMW -5.4% (earnings) TXN -2.5% (earnings) VLTR -1.8% (earnings) AXP -1.2% (earnings) ZION -0.8% (earnings).

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