2010 Week 2 market

This is an eventful week.  Major market indices started the week down from Fri of Week 1, moved up in the middle of the week and fell back to where it started at close of the week.

Monday was the start of the earnings report season.  Alcoa's below-expectation Q4 result jittered the market. Tech stock was in spotlight in expectation of the Intel result. By Friday, another notable earnings report by JP Morgan and its revenue number didn't help lift the market. During the week, there is Google's high-profile announcement to potentially exit China - that's an interesting piece in that Google made headline again even when admitting its failure and frustration over its business in China! I am inclined to believe that this is a carefully deliberated strategy of exiting China.  At present its China business is insignificant - making less than 1% of its top line and given the painful progress it's making with the time and investment spent on China, i think the US managers have probably eventually came to conclusion that it's not worth throwing more money in any more for the moment.  Well, ebay, Yahoo had the same fate in China... but Google is Google.  "Do no Evil" - it wants the moral high ground and it reinforces its brand.  So the hackers' attack was a good excuse. Has Google ever feared hacker attack? how many attacks are happening every day around the world? After all Baidu - China's dominant search engine, was blacked out for 2 hrs just a few days ago and it hasn't warranted Baidu to point fingers at other people. Anyway, criticism and threat are not the way to resolve problems and it's Google's loss (I don't mean Google overall may lose in business sense. Instead the incident may help its international revenue in near term).  See you in five more years Google.cn!

During the middle of the week discussion on banker's pay and bonus tax re-ignited. Obama was adamant to make back 90 bln out of the 120 bln it lost on TARP funds (the number puzzled me though.  why not just 120bln?).  The tussle will go on.  The root of the problem i think is executive pay and corporate governance. In the past decade US executives paid themselves rich and in contrast companies, big or small, failed. The model clearly failed. I will be eager to see whether the managers are ready to accept changes.

Buried in the earnings numbers are the unemployment claims and retail data which are both slightly worse than expected. EUR and AUD pulled back against dollar and Yen strengthened by end of the week with pull-back of risk appetite.  Oil fell back to 79 dollars a barrel on both stronger USD and inventory data. Overall, it's another week of mood-swinging back.  I think we will go through a few rounds of back and forth by mid of this year with hope of strong recovery lifted and then receded again.  Yet my basic scenario has not changed.  I am keeping long commodities as inflation hedge as Fed will keep interest rate low at extended period and liquidity will remain plentiful so time of pull-back is opportunity to buy.