Market Commentary for the week of January 9, 2012

No return.
Well, there it is.  Without blinking an eye or twitching a muscle, without doing anything, your ability to budget effectively this year diminished in an instant.  At the stroke of midnight, New Year’s, the cost of water, transportation, pharmaceuticals, tuition, oil and gas, and numerous other related brands increased anywhere from 3-15 percent.

The cause?  Raw material and extraction price increases, expiring legislative codes, patent transfers, and, in some cases, sheer greed.

So how did Wall Street greet the week?  With schizophrenic ardor.  Each day saw a microcosm of what might be the history of 2012.  First excitement, then pensiveness, then regret, remorse, or consternation.

And why not?  Simply turning the page on a calendar doesn’t eclipse or eviscerate underlying problems with top line revenue shortfalls, or bottom line earnings recalibrations.

On that topic, one might disagree that an “earnings” is always a good thing, particularly when profit margins widen through layoffs, technological efficiencies, retirement and benefits package eradication, or balance sheet manipulation.  In fact, I would argue that there comes a point when these machinations are excessive and deleterious to a corporation.  Investment bankers, for example, talk about “good will” as a quantifiable element to a company’s worth.  Well, very little good will exists externally or internally when the people you employ, the community they live in, and their connection to the firm’s mission statement is disaffected by profit-related motives.

There’s such a thing as being too much driven for the bottom-line.

Lonely peak.

As junctures go, the post-holiday euphoria might be short-lived.  Despite a sprinkling of “good” numbers, the headwinds are too great when considering a secular change from bear to bull.  I would be careful about being drawn into a sucker rally.

As I wrote in my current Quarterly, markets today are much more synchronized in their direction.  While we wait, impatiently, for the Eurozone to get its act together, other regional bourses are held hostage.  Growth becomes relative to how the other guy is doing, not absolute in its own right.

Some might argue that the anger of global social unrest is misdirected at the financial markets.  Instead, some say, point your ire at the politicians and monetarists who enact “unfair” legislation.  But let me ask, “Does being irresponsible or greedy emanate from the laws which allow it to exist, or, rather, from a morally deficient code that would flourish no matter what the climate?”  One cannot legislate morality.  You either know right from wrong or you don’t.  The movement of social unrest is directed at those without compassion, without morality, who would transact a deal no matter what the cost, it if means more money.

Once the season of “harmony and peace” passes we are going to be left with a declining stock market, an oscillating employment landscape, a lagging wage base, a condition of secular uncertainty, and a downleg or two of sector degradation, at least, until the probabilities turn back in our favor of bolstering quantitative, social, and fundamental resilience.

On Wall Street, as well as in life, there are “brushstroke problems,” those which can be ameliorated by the stroke of a pen or a single action, and there are “process solutions,” those which require time and procedures to evoke change.  Our problems are not of the “brushstroke” kind.  Be patient.