Friday Market Freak Out

Following an unexpectedly strong GDP report and a consequent 200 point rally in the Dow, the blue chip index took a nosedive on Friday, taking out Thursday's gain plus another 50 points for good measure; which begs the question, are investor's taking profits, or simply unconvinced about the data?

To answer the question, consider the following scenario.

Pretend for a minute that it's Wednesday, the day before GDP is due to be released. You know that the Dow has moved lower by 209 points from Monday's open to Wednesday's close, with the market anticipating the GDP report, and with Goldman Sachs reducing their forecast to 2.7%. Surely a good number on Thursday would wipe out all of the previous days' losses, and convince skeptics that the market's huge rally lies on a solid foundation.

Now consider the following facts:

1)The market did make a huge move post GDP results, but fell 9 points short of making up for the losses clocked over the past 3 days, failing to even penetrate the 10,000 mark.

2)Volume on Thursday's rally was lighter than on Friday's decline. In other words, more bears than bulls.

3)It's been 13 days since the Dow broke, and closed above 10,000. However, the index has only been able to close above that (much hyped) level on 5 of those days; which makes the inability of Thursday's GDP report to provide sufficient catalyst to drive the market back above the mark even more telling.

4)As we mentioned in our presentation ,GDP growth without Cash for Clunkers was only 1.84%.

Putting everything together, it seems that investors have started to really doubt the market's ability to continue its phenomenal run, with the bears back out in force.

-Group 2

The Russian Risk.

As a staunch proponent of non-US investing, I recently received the following video regarding investing in Russia, one of the four BRIC (Brazil Russia India China) countries, and the experience of Hermitage Capital, the most prominent Russia-focused hedge fund in the world. I wish the video, posted below, was a joke. It's not.

Link to Last Post

Here's the link to the study. It links to a PDF file.

http://www.google.com/url?sa=t&source=web&ct=res&cd=1&url=http%3A%2F%2Fwww.stanford.edu%2Fgroup%2Fgreendorm%2Fparticipate%2Fcee124%2FTeslaReading.pdf&ei=FwbJSvCKGpXgNZ21gPMH&rct=j&q=the+case+for+electric+vehicles&usg=AFQjCNH7dlLTVSCnivzMvXchifcY00k2Qw&sig2=2JR668RtYyLh3L7laCQ2lw

Electric Cars: More Efficient Than You Think!

Yesterday a convincing argument against electric cars was made. I'd like to provide a simple counter argument based off of a study performed by Tesla Motors.

First off, the math performed by Professor Salmeen can easily be refuted by the Tesla Motors study. In the Tesla Motors study, electric cars are presented as far more efficient than gasoline cars. While Professor Salmeen's argument centers around mathematic estimates (as implied by his title), Tesla Motors provides concrete data from actual cars.

Also, the environmental benefits of electric cars were overlooked. We know the environmental detriments gasoline cars have on our society. Although it may be currently unclear whether electric cars are more efficient than gasoline cars, the fact remains that the end user can ultimately choose which type of electricity source to use to power their car. Imagine, powering your car with solar or wind energy!

Lastly, increased use of electric cars may change the composition of energy markets, but will energy prices really increase? Electric cars are becoming more efficient with new technologies. People are harnessing unused forms of energy (wind and solar). Taking these concepts into account one could argue that electric cars could lower energy prices in the future.

Although some of my points are based off of Tesla Motors, an electric car company, they present concrete numbers from concrete studies based on actual cars. I'm confident that with the increased popularity in electric cars, we will discover the answer to whether electric or gasoline cars are the way to go.

Electric Cars are NOT the Answer: Why Electricity Makes as Much Sense as Ethanol

First Tesla Motors, then the Chevy Volt. Yes, they're cool...but do they make sense?

The answer? A clear no. Below is an image from Irv Salmeen, a Prof. at the Univ. of Michigan.


And this, of course, does not take into account the (notable) increase in prices due to both global demand for the primary fuels for electricity generation and electricity itself.