Daily Market Update – Jul 10, 2014 (Close)

This morning no one in Europe seemed to like the fact that a Portuguese bank delayed repayment of some short term debt as a result of some auditing problems at its main shareholder’s investment company. That investment company also happens to be owned by the founding family of the bank, so there’s a tangled web.

A few years ago CNBC was looking for their word of the year and selected my suggestion of “Eurosis,” which came at a time when European banks and national economies were in shambles. But that word proved to not really be prescient as the year went on as some good ECB leadership helped to  ease fears amid the strong suggestion that whatever was necessary would be done to support the banking systems of such nations as Spain and Greece.

This morning it’s hard to know whether the Portuguese bank issue is an isolated one or will simply be the first to come to anyone’s attention. For those who like to draw visual kind of parallels someone, maybe me, is bound to say something like “there’s never just one cockroach,” or something like that, to describe the likely situation.

As it turned out a few minutes before the close, Dennis Gartman used that expression during a CNBC interview, so I felt pretty badly about that.

Whenever you wake up in the morning and see precious metals surging and stocks plunging, you know that there’s a big story somewhere. My first thought wasn’t to think about some banking crisis in Portugal, however. My first thought was centered on the Middle East, but I thought it somewhat odd that when tuning into various TV stations this morning there was really no discussion of the weak futures and no discussion of what was its root cause.

If the lessons from 2010 and 2011 are to be heeded, it’s that problems in the European banking system aren’t necessarily the sort of things that support the ability to start a contagion across the Atlantic Ocean.

Back then our own markets would respond in a sympathetic manner and then relatively quickly shrug its shoulders and wonder why we were bothering to slow down.Back then our own markets were on a decidedly upward trajectory and its momentum wasn’t about to be slowed down by much of anything and certainly not for very long. Now the momentum may not be gone, but it is stalled and the only moves higher of late have been related to assuring words from the Federal Reserve rather than from fundamental factors, such as earnings and revenues.

So this morning will be a little bit of a ride with some relief of not having spent too much opening new positions this week and having had some good luck and fortune in rolling over more than the usual number of positions for the week and h
aving done so unusually early in the week.

I should stress the word “luck.”

Had it not been for this week’s release of the FOMC statement there would have been little reason to consider the early rollovers as there was absolutely no reason to suspect a breaking story such as greeted us this morning.

But with the market seeming to slow down, despite all of the new record highs, a little bit of caution probably has made some sense, but as with most everything that caution has to be in balance with the ability to dip a toe in even when it seems chilly.

Today had the potential to offer some opportunity even if taking advantage of any apparent opportunity could also potentially simply be a case of having faith too early. However, if taking advantage of re-purchasing recently assigned positions at lower prices is the outcome, then being too early isn’t the worst thing in the world and simply relieves the burden of some of the intermediate drop in price had shares been part of a buy and hold strategy.

We’ll see. We’ll see.

 

 

 

 

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