Volatility is back it seems. Four of the five days last week saw prices of the Dow Jones Industrials gain or lose 100 points at some time during the day. Why? Some would argue that it is due to the news from Libya and the oil markets. As we have mentioned a few times already, oil really shouldn’t be an issue because there is plenty of oil. Libya is a lot bloodier affair than either Tunisia or Egypt, but Libya is hardly a big element in the global scheme of things. We think much of the volatility comes from a couple of more mundane sources, greed and fear. Read more

So, what does all this latest wave of unrest mean for the markets? That depends on a lot of things. If your time horizon is a few days to a couple of weeks, it might mean something. If you’re willing to jump out of tech stocks and into oil stocks on the assumption that oil prices will pop and you’re willing to take the chance that oil prices won’t pop, then maybe it matters to you. But, if you have a reasonable time horizon that runs out over years rather than days all this probably doesn’t matter all that much. Read more

Odds and Ends

How about a series of rants on small topics this week, since we have had trouble putting together a really good topic for the week?

Inflation – inflation is coming back, someday, maybe not for a few months, maybe not for a couple of years. But, it will be coming back. This is an old debate that is pertinent again.

If you believe that Milton Friedman had his head screwed on straight, “inflation is always and everywhere a monetary phenomenon” works for you. Read more

To quote Bob Dylan, “there was music in the cafés at night and revolution in the air” (Tangled up in Blue). We’ve seen Tunisia discard its long-time strongman Zine al-Abidine Ben Ali. And all week Egypt has seen street demonstrations and riots on a scale not seen in decades. It seems that the Middle East is seething with revolutionary fervor. But, these revolutions aren’t rooted in Islamism. Rather than the discarded underclass rising up, it is the nascent middle class that is taking to the streets (at least so far in Tunisia and Egypt). The chant is for democracy, not theocracy. These people are demanding a voice and a vote in the future of their country. Read more

Well, Steve Jobs is taking a leave of absence from Apple for health reasons, again. The last time he did this, the whole affair was cloaked in mystery for a couple of months before the company finally admitted that Jobs wasn’t in the office every day running the company. This time, Jobs himself reported that he was going to take another sabbatical to work on his health. The difference tells us a lot about Apple and Jobs. Read more

It is time again to worry about earnings and warnings. This is the beginning of the earnings reporting season for fourth quarter 2010 periods. The beauty of this time of year and the problem is that 2010 doesn’t matter anymore. We are in 2011 already and that means that the forecasts of management for the future take on extra meaning. That is problematic as most managements have a distinct bias toward under-promising so they can later over-deliver on their guesses. This conservatism can be mistaken for a downbeat outlook. Just remember Cisco’s outlook in October that crushed that stock, just because they weren’t forecasting a stronger future than either their suppliers or competitors, good but not good enough. That could be one factor that keeps visiting negative surprises on this market. Read more