The Week Ahead
Folks, today is the first day of both the last week of the month and the last week of the 3rd quarter. In addition to the normal end-of-month activity, a great deal of OTC options and listed options activity comes due and goes off on Friday—it’s almost like a second expiration. The action and volatility we see today and for the next few days will be directly related to EOM/EOQ activity, and the way that cash flows will give us a hint of what smart money is doing.
Speaking of smart money, Warren Buffett announced a Berkshire Hathaway share buyback program this morning. I’m not a fan of the man’s politics, but you can’t argue with his track record when it comes to the markets. When companies buy back their own shares, it usually means that’s where they see the greatest value—so when I see a Warren Buffett buying a dip, I take that to mean he sees opportunity.
Something else to pay attention to this week is the fact that we’re seeing the dollar begin to stabilize as equity markets rise. If we continue to see the dollar go up at the same time as the stock market, that, to me, is very bullish. Let’s see if that has any traction. If it does—and that’s a big if—not only will we see capital come back to the U.S., but we’ll see the world start looking for U.S.-dollar-denominated assets. That could easily mean rally of a couple hundred Dow points.
Of course, as Adam Westphalen, chief investment officer of Mosaic Portfolio Strategists, pointed out on the show, we can’t forget about the uncertainty in Europe and that end-of-month/quarter activity. He’s calling this a bounce week, and that overall we’ll be heading lower for the next month or so. Either way, be careful out there. I’m not calling for extreme volatility, but I’m definitely preparing for it.
I’m thrilled to have been asked to be a part of TeaCon 2011, which takes place this weekend at the Renaissance Schaumburg Hotel & Convention Center, just outside of my hometown of Chicago, IL. I’ll be doing a panel called Turmoil or Opportunity? The Economy in 2012 and Beyond, which will be moderated by John Ransom, Townhall Finance editor and good friend of The Jack B. Show. If you’re in the area, stop by to find out what to look for in the year to come and what effect Obama’s economic policies will have in the short and long terms.