The Week that Was---6/4/07
THE MARKET
The market shook off the second Shanghai market drop on Monday but succumbed to the words of Ben Bernanke that suggested there would not be an interest rate cut on Tluesday. By Thursday, that turned to fear of an interest rate increase and the Market went south. The Nasdaq and S&P 500 went down 1.8% and the Dow, down 1.5%---down 3% in the 3 days.
For the week, three down days were sufficient. Friday saw an up market. However, volume was weak so I expect some additional down days this coming week. (If my momentum growth stocks decline 8%, then unceremoniously I will round them up and ship them off to market. I'm willing to give up potential immediate turnaround gain for capital preservation. )
GOOD NEWS
1. The economy is recovering from the 1st quarter slowdown. It is advancing at a "moderate rate." This is showing up as job increases and new orders. The number of new jobless filings decreased.
2. Retail sales in May were higher than those in April.
3. The trade gap narrowed. The falling dollar boosted exports and slowed imports.
4. Cyclone Gonu that hit the Arabian peninsula did not adversely affect oil installations. However, some oil shipments were delayed for three days.
BAD NEWS
1. The decrease in unemployment filings suggests the labor market will remain tight. (If it becomes sufficiently tight, workers will be able to demand higher wages. Also, employers will be less able to find high quality workers which will hurt company profits.)
2. Even though May's retail sales were greater than April's, they are less than they were in May 2006. (Did we know they were that good last May? True, I was working for Alaska World Affairs and spending money.) The decrease in home sales and higher gasoline prices have been hard on retail sales.
GOOD NEWS SEEMS TO LEAD TO BAD NEWS (what's wrong with this picture)
The good news of an improving economy seems to lead to fears of inflation that will be accompanied by an increase in interest rates or at least not a cut in interest rates. (So, do we want the economy to go to pot so interest rates will be cut.)
Until next week---And thanks to the Investors Business Daily for good readable information.
10:35:51 PM 
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