Thursday, January 24, 2008

Bottom's Up!

From the stunningly stupid to the overtly optimistic and moronic misguided pundits and plagiarists who make up the financial news media comes word today that the bottom is in.

These calls began with the close of trading on Wednesday and continued here and there through the day on Thursday. Stocks could continue on an unlikely rise for another three weeks and these calls will all be proven wrong in the long run.

Let me be among the first to tell you: the bottom is definitely not in.

Markets have been roiled by a combination of bad news, poor economic reports, weaker corporate earnings, writedowns, bad loans, fear, panic and finally, desperate moves by the Federal Reserve and more sweeping stupidity in the form of free money soon to come from the political class.

All of this points to a world economy splitting apart not only at the seams, but also uncoupling from the moorings of a badly damaged banking and credit system. Fear is rampant, mistrust overflowing, especially among the well-heeled like those gathering in Davos, Switzerland, where the doubtable US Secretary of State, Condoleezza Rice, one of the more serpentine figures in world politics, declared glowingly, "the US economy is resilient, its structure sound, and its long-term economic fundamentals are healthy." Link.

Ms. Rice must think that those in attendance at the World Economic Forum are idiots. Just about everybody outside the United States knows that the US, thanks largely to the policies of her president's (Bush) administration, is a financial house of cards being sold off in parts precipitously to various Arabs, Orientals and other, more stable, companies, countries and individuals. Somebody forgot to give her the memo, apparently.

One has to love comments like this, from an article on a business web site: "This just doesn't feel like a real, full-blown recession to me."

It makes one wonder just what a recession is supposed to feel like. Is there real, physical pain involved in having your assets depreciated right before your eyes?

Take a look at just two serious articles today:
Housing prices to free fall in 2008 - Merrill - This report suggests a 15 percent drop in housing prices in 2008 another 10 percent drop in 2009, with even more depreciation likely in 2010.

Why the Fed can't save us - Here, Senior Editor Allan Sloan correctly points out that the Fed, which has cut rates four times already since September 2007 - from 5.25% to 3.5% - and is expected to cut another 0.5% next week, is running low on rate cut ammo.

That's more like it.

The big news today was another bombshell from the imploding housing sector. In a report released by the National Association of Realtors, the median price of existing homes fell for the entire year of 2007. Since records prior to 1968 do not exist, it is assumed that it was the first time the median price had registered a full-year decline since the Great Depression of the 1930s.

It's notable that reference is being made to the Great Depression, as more and more stories these days are carrying a similar connotation. While some economists are still arguing over whether or not we are in a recession, more adroit minds are pondering the potential of a global depression.

Most of the pieces are in place. The global financial system is about one or two serious events removed from complete failure. As it stands, Citigroup and Merrill Lynch are only still standing due to major cash infusions from sovereign funds from Singapore, China and Kuwait. An actual bank failure could occur at any time, triggering the ultimate catastrophe - the seizing up of the entire world financial system.

On Wall Street, however, where fantasy thumbs its nose at reality, stocks gained for the second straight day, today without as much overt assistance from the PPT, the Fed or any other nefarious agents who might prime the equity pump. No doubt, they were there, keeping the indices above break-even. The job is to restore calm and civility and keep the dastardly sellers and short-players in check... for a time.

Dow 12,378.61 +108.44; NASDAQ 2,360.92 +44.51; S&P 500 1,352.07 +13.47; NYSE Composite 8,942.25 +136.57

That the market will retest the intraday lows of Tuesday and Wednesday is not in question. It's only a matter of time before a bit of news or earnings reports or a piece of economic data once again sets the seller's sails for distant shores.

Today's internals were benign, if not wholly fatuous. Advancing issues raced ahead of decliners, 3861-2541. New lows moderated over new highs, 208-59. Trading was range-bound and, relative to the past few sessions, lighter.

Oil traders got the "all clear" signal and priced higher by $2.42, to close at $89.41. Gold rocketed $23.00 to the upside, to 907.00. Silver improved by 36 cents, ending the day at $16.33 the ounce.

With two consecutive days of gains, a Fed meeting less than a week off and the Super Bowl looming, we are in a significantly soft "bounce" period. The Fed and the PPT will do what they do best, manage the market, and everything should go along swimmingly for a time. Congress and the president are even playing nice, agreeing on a sweeping cash give-away program to boost the economy.

In typical fashion, however, the politicians will not actually deliver checks - ranging from $300 to $1200 - to "the people" until sometime in June, according to most estimates. As Washington goes, that qualifies as "fast.", one supposes. This $100 billion and another $50 billion in business incentives ought to stimulate somebody. By then, surely, we'll need more.

Ah, I almost forgot. The bottom is in. NOT.

NYSE Volume 5,790,062,500
NASDAQ Volume 3,019,970,750

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