Monday, March 31, 2008

Monday Market Ideas and Views

Breaking China - While the credit crisis has gotten most of the recent financial press, China's Shanghai-A Index (3-year chart above) has been steadily retracing much of its massive bull market gains. A contracting economy in China would have important ramifications for world economies (less demand for raw materials and goods) and commodities.

Quick Look at Rates - We saw more weakness in Treasury bill rates, as flight to safety continues unabated in the wake of recent Fed and central bank interventions. I see where 3-month LIBOR rates are nearly doubling the anemic 1.32% rates for 3-month T-bills. Banks continue to be risk averse in lending to one another, suggesting that added liquidity is not yet adding to confidence among institutions. Meanwhile, 10-year municipal bonds are yielding (on average) 4.05%--a 5.62% effective yield for an investor in a 28% tax bracket--vs. 10-year Treasury yields of 3.42%. Such anomalous rates--where tax-free yields are higher than taxable ones--either offer phenomenal opportunity or a frightening likelihood of municipal defaults in the wake of falling home prices and a weakening economy.

Getting Your News Fix - I try to keep readers posted on major news themes through the Twitter app. But traders need reliable sources for fast-breaking and comprehensive news. Barron's reviews some excellent resources, including the Newsflashr site that I've been using of late.

The Importance of Sleep - Sharp Brains offers an excellent post on the importance of sleep in learning and performance. Lack of sleep--including lack of proper stages of sleep--affects concentration, mood, and reaction time: all important for active traders.

Momentum Ideas That Are Losing Momentum - Abnormal Returns returns with more excellent links, including an ETF that covers the world and four momentum ideas that are getting crowded.

Expensive Puts and Calls - CXO Advisory summarizes fascinating research that suggests that informed investors bid up puts and calls ahead of stock declines and advances. Excellent website worth exploring.

A Look at Markups - Do stocks get marked up at the start of a quarter? Quantifiable Edges looks at the evidence. Another excellent site that offers more than off-the-cuff opinion.