Friday, March 28, 2008

The Big Give-Back

After rocketing ahead early in the week, the markets gave back all of the gains and then some. The Dow, which closed Monday at 12,548.64, lost ground four consecutive sessions, finishing 145 points lower for the week.

Dow 12,216.40 -86.06; NASDAQ 2,261.18 -19.65; S&P 500 1,315.22 -10.44; NYSE Composite 8,762.12 -55.05

Volume was on the very low end of the scale, indicative of an end-of-month wait-and-see attitude all around, though Monday's final day of the quarter could prove significant.

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It seems that no matter what moves the Fed makes and how much happy talk the Fox News and CNBC pundits produce, nothing can stop stocks from falling. Just glancing at the charts of the major indices shows that they are still in a holding pattern above recent lows and retests and retreats are inevitable.

Declining issues overwhelmed advancers once again, 4120-2075. Only 39 stocks made new 52-week highs, while 165 made new lows. The string of days with more new lows than new highs stretches back to October 31 of last year, except for two days in December. That's a very long run and the streak is now unlikely to be unbroken until we reach the original falling-off point in August.

Commodities continue to trade very uncertainly, with oil down $1.96 to $105.62, gold off $17.50 to $936.50, and silver down 61 cents to $17.94. Deflation is taking hold in a big way, which is expressly what the Fed sought to avoid with its interest rate cuts and interventions into the credit markets.

Obviously, it's not working.

NYSE Volume 3,610,889,000
NASDAQ Volume 1,739,376,375

Thursday, March 20, 2008

Another Dose of Volatility

In the absence of any more devastating financial news, stocks took the path of least resistance and put on healthy gains on Thursday.

Dow 12,361.32 +261.66; NASDAQ 2,258.11 +48.15; S&P 500 1,329.51 +31.09; NYSE Composite 8,717.56 +168.06

While the unemployment figures delivered this morning prior to the opening bell showed more people applying for benefits, investors chose to overlook that and point to the idea that the Fed is allowing the banks to put up shaky collateral for its Term Securities Lending Facility (TSFL) loans in the form of CMOs (Collateralized Mortgage Obligations).

In other words, the Fed is going to swap good liquid money for toxic, illiquid assets. Those mortgage loans are the same structured vehicles that started the entire mess. Now the Fed is willing to accept these bad investments as collateral.

With any luck, other central banks around the globe will not want to trade with the Fed or hold dollars, since the Fed is wiling to risk its own credit standing and confidence in exchange for bailing out the banks and investment houses which made the ill-advised investments in the first place.

Bernanke's desperate solutions are bound to make matters even worse, albeit further down the road.

As for equities investors, what buyers at these levels must not comprehend is that there is hard resistance at 12,450 on the Dow and the market is very close to attaining that point, meaning that in all likelihood today's gains will have been made in a vacuum and will soon be swept away by more waves of selling.

Advancing issues swamped decliners by a 4406-1895 margin. New lows beat new highs once again, 374-48.

Commodities were in the spotlight once again as recent gains continued to unravel. Oil traded below $100 before closing down just 70 cents at $101.84. The metals were under more severe pressure. Gold fell $25.30 to $920.00, while silver took its second significant tumble in as many days, losing $1.60 to $16.85.

So-called "hot" money is being diverted from the metals into stocks. Fools rush in where angels dare to tread, and there are more than this market's fair share of fools out there.

NYSE Volume 6,158,374,000
NASDAQ Volume 2,652,208,500

Wednesday, March 19, 2008

Now It's Commodities Turn to Dance with Stocks

Following Tuesday's spirited rally, stocks quickly gave up the ghost in a broad retreat which ended up with stocks closing at their lows of the day.

Dow 12,099.66 -293.00; NASDAQ 2,209.96 -58.30; S&P 500 1,298.42 -32.32; NYSE Composite 8,549.50 -276.94

In what has been already a tumultuous week, the bears on the Street seem to have finally exerted themselves on the market while behind the scenes there may have been some serious liquidation of assets which resulted in a major sell-off in gold. Reports were circulating that a number of hedge funds had margin calls to meet, prompting the gold rush, but others pointed to more central bank and government intervention aimed at propping up the US economy.

A key was the a release by Federal Housing Enterprise Oversight to allow Freddie-Mac and Fannie-Mae to relax excess capital requirements, which would free up more than $200 billion into the US housing market. The dollar also broke a string of declines with a strong rally against the Yen and Euro.

It certainly seems the government and the Federal Reserve have taken off the kid gloves and are prepared to fight a downturn in the economy with every weapon at their disposal, and they have plenty with which to inject further liquidity into the general economy.

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Of course, while such actions may be politically expedient for the administration in power, the longer term effects are difficult to gauge.

Like the stock and commodities markets this week, we may be seeing the very early signs of disruptions in an economy being ripped from its economic moorings. Volatility is usually emblematic of uncertainty, and markets certainly won't accept uncertainty for long, but we are a a point of maximum doubt and a crisis of confidence which is only now getting underway.

Declining issues took back the leadership positive over advancers, 4467-1846. New lows buried new highs yet again, 308-69.

The real story was in commodities, especially gold. While oil fell $4.94 to $104.48, gold dropped more than 6%, losing $59.00 to close at $945.30. Silver also was battered, dropping an unprecedented $1.52, to $18.45, a 7.5% loss.

It seems, just a day after the Fed cut rates and two days after Bear Stearns, a major investment bank, was rescued by the Fed, the action is about to get hotter than ever. Just keeping up with the changes to come will be a challenge for the average American, to say nothing of the economic punditry which likely will be wrong more often than right.

Use short stops, try to stay at least 60% in cash and stay tuned. This party's just getting started.

NYSE Volume 5,499,307,000
NASDAQ Volume 2,327,522,250

Tuesday, March 18, 2008

Market Love From Fed, Goldman, Lehman

Investors were treated to an unusually heavy dose of good news today, as two investment banks Goldman Sachs and Lehman Brothers, reported better than expected earnings and the Fed cut the federal funds rate by 3/4s of a percent, to 2.25, the lowest rate since December, 2004.

Wall Street, desperate for short-term gains, rode stocks higher at the open and maintained a buying posture throughout the session. Markets dove shortly after the Fed announcement in apparent dissent that the Fed didn't cut rates a full point, but that was quickly overcome by more buying and some expected short covering, which likely contributed to much of the day's gains.

Dow 12,392.66 +420.41; NASDAQ 2,268.26 +91.25; S&P 500 1,330.74 +54.14; NYSE Composite 8,826.44 +337.06

What the market chose to ignore were a pair of pre-open economic reports which portrayed the economy in a much more sober and realistic vein.

Housing starts in the U.S. slumped in February and building permits fell to the lowest level in more than 16 years. The PPI (Producer Price Index) rose another 0.3% in February, and core PPI - which excludes food and energy - rose an unprecedented 0.5%, signaling that inflationary pressures from rising energy prices have infected the rest of the economic landscape.

Contributing to the rampant inflation is the Fed itself, by its de facto devaluation of the currency through a cumulative 3% cut in the federal funds rate in just the last six months.

What the Fed should have fully understood in gauging their various actions, was that inflation will eventually lead to lower demand, precipitating and aggravating a deflationary cycle that is largely manifested in the housing crash.

Unfortunately, the Fed is a very active political participant, dead set on keeping the economy and the stock markets afloat near term at all costs. Their actions, when viewed in retrospect, will surely be seen to be largely reckless and short-sighted. Long term, they are causing more distortions and damage in markets than acting as a stabilizing force, weakening their own influence.

Because of yesterday's dramatic salvation of Bear Stearns dominating the news, some other key economic reports were largely ignored.

On Monday, the NY Empire State Index fell to -22.2 in March, a record low. Industrial production fell 0.5%, while capacity utilization for February fell 0.6% to 80.9%.

Separate or together, those are not rosy figures.

Tuesday's outsize gains are likely to be short-lived. A significant resistance level exists at Dow 12,450, and the market nearly met that today. Obviously, the nature of the Fed's recent actions speaks to the severity of the credit crisis and it's unlikely that just one large investment bank failure is the end of it.

Lehman Brothers (LEH 44.88, +13.13), Bear Stearns (BSC 6.38, +1.57), Fannie Mae (FNM 28.18, +5.97) and Countrywide (CFC 5.07, +0.97) posted their record one day percentage gains. That's particularly interesting because two of the companies - Bear Stearns and Countrywide - have already lost more than 95% of their value and are both in the midst of takeovers.

As expected, advancing issues soared past decliners, 5289-1084. New lows, however, continued to dominate new highs, 345-62.

While the Fed may be helping out its banking buddies with lower interest rates, don't expect any relief at the gas pump. Oil soared another $3.74 to $109.42 on the NY Merc. Gold rose another $1.70 to $1004.30. Silver continued to pare back recent gains, falling 34 cents to $19.96.

Delta Airlines offered 30,000 buyouts to current employees.

NYSE Volume 5,458,751,000
NASDAQ Volume 2,351,646,250

Monday, March 17, 2008

Bear Stearns Fire Sale; PPT Goes Into Overdrive

US stock markets get stranger and stranger every day. On Monday, the strangeness just went completely off the charts into new areas of weirdness.

Prior to the markets opening on Monday, the Federal Reserve took some specific actions. First, they lent tacit approval to the fire sale of Bear Stearns (BSC) to JP Morgan for $2 per share by announcing that the Fed would guarantee up to $30 billion in Bears' debt. Second, they lowered the discount rate a quarter point (25 basis points) to 3.25%; third, they extended the term of "discount window" lendings from 30 to 90 days, and fourth, they opened the discount window to brokerages and securities dealers.

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This last maneuver was the real cake-taker. The discount window has always been reserved to borrowing by member banks. All others were excluded. By opening the discount window to brokerages, the Fed has now become not just the lender of last resort, but the ultimate bailout arbiter for all the corrupt practitioners in the brokerage business.

With that, the Fed is telling the American public that the health and welfare of Wall Street is more important than the actual value of the currency.

In other words, Americans can kiss their dollars good bye. Already worth less than half of what they were 10 years ago, US greenbacks will soon be worth almost nothing in comparison to other established currencies such as the Euro, Yen, Yuan and Swiss Franc. Anyone close to the Canadian border would be well advised to convert all US treasury notes into Loonies, and soon.

Essentially, the Fed has no plan to save the nation from falling into recession other than to prop up failed Wall Street brokerages. We should all be reminded that the Federal Reserve, the nation's central bank, issues nothing but scrip, or fiat money, backed by nothing more than good will and blind faith.

The Fed has acted as the nation's bank since 1913, before the Great Depression, and since it wasn't summarily discarded during that fiasco, the Fed has been allowed to act illegally as the main minter of money ever since.

The US Constitution, Article 1, Section 8 clearly defines the powers of Congress (not the Federal Reserve): "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"

The dollar fell to historic lows against the Euro and the Yen. Officials from Japan and at major banking interests called the dollar's decline "concerning, dangerous and unwelcome."

Foreign markets were battered well before the US stock exchanges opened, and when the US exchanges did open, they collapsed immediately. The Dow tumbled nearly 200 points within the first ten minutes, marking the last "normal" move of the day.

By 11:00 am the Dow was at the unchanged mark and it crisscrossed the break even line until finally closing positively.

Dow 11,972.25 +21.16; NASDAQ 2,177.01 -35.48; S&P 500 1,276.60 -11.54; NYSE Composite 8,489.38 -146.54

No matter how you slice and dice the news, when the NYSE Composite is down nearly 150 points, there's no way the Dow should be up at all. It's completely ludicrous and suggestive of more manipulation by the Fed and their clandestine agents to prevent what we all know is imminent: a crash.

Volume raged today as declining issues submerged advancers, 4993-1300. New lows swamped new highs, 1183-57. Just about one in five stocks hit a new 52-week low today. But those 30 Dow stocks are still safe bets, right? Sure.

With so much negative news concerning global economics, oil finally began selling off on demand concerns, losing $4.53 to $105.68. The distress only bolstered gold's price, which gained $3.10 to another new record close of $1002.60. Silver, which had been rising at an unprecedented pace, was slowed due to its use in industry, falling 36 cents to $20.30, still a remarkable figure.

After today's flamboyant Dow Jones display by the Wall Street crowd, stocks should be expected to fly tomorrow when the Fed announces yet another cut in the federal funds rate of anywhere from 50 to 100 basis points, which will lower that key rate from 3% to 2.50 or even a flat 2%.

The Fed is trying to borrow its way out of a credit crisis, which is like saving drowning victims by pouring more water upon them. It's a complete and utter mess, and sadly enough, the very same people who created the problems are now being called upon to right it. They can't, they won't and they are living and working on borrowed time and borrowed money. All of this is going to end very, very badly, and sooner rather than later.

NYSE Volume 5,783,798,000
NASDAQ Volume 2,381,058,250

Friday, March 14, 2008

Bear Stearns Blows Up, Stocks Slide

For the past week, the denials had been adamant. Officials at Wall Street brokerage Bear Stearns contended that their business was sound and their liquidity position stable.

On Friday, all of the bluster was gone, replaced by admissions that the company was in the throes of a severe credit squeeze and a bailout plan was devised by JP Morgan and the Federal Reserve.

For its part, the Fed trotted out Chairman Ben Bernanke, who once again warned that home foreclosures were damaging to neighborhoods and to the overall economy. Naturally, what the Chairman failed to delineate was the utter failure of the Fed and the banking community to provide safeguards against defaults all through the explosion in risky mortgage vehicles during the past decade.

Now that the banks themselves have their necks in the guillotine, Bernanke and his friends want reforms. How quaint. How reactive and how completely artless are the supposed "rescues" and "solutions" promoted by the Fed.

Bear Stearns typifies the kind of hubris and delinquency rampant in the banking and finance sector of the economy. Bear Stearns, which traded for as much as 159 per share as recently as May of last year, closed down 26.15 (-45.9%) at 30.85. Surely, the financial services firm is facing dire times ahead.

Essentially, Bear Stearns, like many other major players on the Street, is currently unable to finance their ongoing operations because nobody will loan them any more money. They've mismanaged their business and now the Fed is promising to hold their worthless paper. Sadly, the burden will eventually fall upon every living American. For years we will be plagued with higher taxes, lower living standards and price disruptions in everything from mortgages to loaves of bread.

That will only erode the value of the dollar even further. We are witnessing the evisceration of the US dollar as the de facto reserve currency of the world. Foreign central banks and large financial dealers are increasingly wary of buying our debt or valuing deals in dollar-denominated amounts due to its rapidly-declining value.

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What Bear Stearns, the Fed, the banking community and most of America fails to admit is that years of rampant credit expansion, massive government deficits and a wickedly-lopsided trade imbalance has at last destroyed the value of the currency and shattered confidence worldwide.

The complete failure of the US economic system will have ramifications far and wide throughout the worldwide floating fiat-money system. When the top dog yelps in pain, the smaller dogs whine along in time.

Bear Stearns' condition is nothing new. Bankers, all the way up to the level of the Federal Reserve, haven't managed the wealth of the nation well at all. The most obvious manifestation of their mismanagement is the ever-rising rate of inflation, though stagnation in real wages runs a close second. Wealth, in America, is a fleeting thing. At this very moment, some of the wealthiest individuals in the country are literally losing millions every day.

Bear Stearns marks neither the beginning nor the end of this crisis. We are, by most accounts, still in the early phase of what promises to become a long, drawn-out dramatic collapse.

Dow 11,951.09 -194.65; NASDAQ 2,212.49 -51.12; S&P 500 1,288.14 -27.34; NYSE Composite 8,635.92 -191.24

Stocks followed the lead of Bear Steams in hammering prices lower once again. Tuesday's meteoric rise (over 400 points higher on the Dow), was nearly wiped out by Wednesday and Friday's losses. For the week, the Dow was up less than 60 points, the S&P lost five points, while the NASDAQ finished unchanged, to the penny.

The dollar index continued its relentless decline, off more than 15% since January 2007.

Declining issues hammered advancers on the day, 5064-1213. New lows outnumbered new highs, 527-96. Volume was very high signaling that the selling has not only resumed, but likely will carry on for some time.

Oil backed off an entire 1 cents today, closing at $110.21. Gold finally met the expectations of investors closing at an even $1000 per ounce, up $6.20. Silver also closed at a new record high, $20.66, up 24 cents.

Surely, next week and the months ahead will be difficult ones for investors. There is more and more bad news to come, piled atop an already mountainous heap. Our leaders, both in government and the financial community have failed the US population, and badly.

It is long past time for change. Unfortunately, those in power will not go away quietly.

NYSE Volume 5,344,189,500
NASDAQ Volume 2,574,493,500

Thursday, March 13, 2008

Laugh (or lie) of the Day: End in Sight for Subprime Writedowns

Today's word from Standard & Poors that the "end is in sight" for the massive subprime writedowns taken by major financial institutions, is as ludicrous and bittersweet as news can become.

The ratings agency issued word that the subprime losses had reached the "halfway point" amidst yet another spate of bad news that had markets reeling early in the trading session.

Prior to the opening bell, the Commerce Department reported that retail sales fell by 0.6 percent in February, while analysts had been expecting a gain of 0.1%.

Chiming in, the Labor Department noted that first time applications for unemployment benefits was unchanged, at 353,000. Import prices also registered a gain of 0.2% in February.

With that news in hand, investors quickly sold off stocks, sending the averages to intraday lows, with the Dow down more than 200 points in the first hour of trading.

With the manufacture of positive news the latest weapon in the arsenal of attacks against falling equity prices, the S&P ploy was just what the spin doctors ordered. Stocks eventually turned positive, with the Dow registering a 100-point gain just after 2:00 pm.

Dow 12,145.74 +35.50; NASDAQ 2,263.61 +19.74; S&P 500 1,315.48 +6.71; NYSE Composite 8,827.16 +45.93

Of course, the hot air eventually was mostly blown out, and the session ended with stocks holding onto marginal gains.

Advancing issues managed to beat back decliners, 3706-2535, though new lows stayed ahead of new highs, 497-84.

Over in the commodities pits, the morning's dismal economic news brought out the best, with gold, silver and oil all reaching all-time highs. Oil gained 41 cents to close at $110.33. Gold soared, briefly trading at over $1000 per ounce, before backing down to finish at $993.80, up $13.30. Likewise, silver added 43 cents to end up at $20.42.

What's interesting, sad and funny all at once about the markets is that any small sliver of good news is magnified far beyond its importance, while bad news is simply taken in stride. While the markets continue to wriggle and writhe their way toward some kind of bottom (probably 12-18 months away), the merchants of happiness on CNBC and at the brokerages have consistently under-appreciated the depth of the downturn.

It's not only too bad for them, but for small investors who have neither the expertise nor keen market understanding to make rational decisions regarding their holdings.

Simply put, anybody who hasn't already taken their 10% penalty and the associated tax bite by at least partially emptying their retirement account has missed the boat. The sad news is that most accounts such as these are already down 15-25% from their summer 2007 highs. The even sadder news is that many baby boomer types are still holding on for dear life (and many happy years in their 60s and 70s), though the chances of regaining their former valuations are slim and nil.

Too bad for them too. The age of 70 is still 15 years away for more than 2/3rds of the boomer generation.

NYSE Volume 5,001,790,500
Nasdaq Volume 2,471,754,250

Wednesday, March 12, 2008

Rally Over, Stocks Resume Slide

Following yesterday's massive Fed-induced, short-seller rally, Wall Streeters tried in vain to make it two in a row... and failed.

With healthy gains on the board by 11:00 am (the Dow was up nearly 150 points), stocks sent the remainder of the session losing value. There was no specific news of import to move stocks, simply the general feeling that the economy as a whole is less likely to improve before it deteriorates further.

Dow 12,110.24 -46.57; NASDAQ 2,243.87 -11.89; S&P 500 1,308.77 -11.88; NYSE Composite 8,781.23 -61.45

It's relatively simple to understand where investors are getting the majority of their negative sentiment of late. Oil and gas prices are exploding, as are food prices, while home sales and prices are down and the credit crunch seems far from resolved. Add a falling dollar to the mix, stir gently and viola you have less disposable income for consumers who are tightening their belts, which usually translates into lower corporate profits.

What may be driving Wall Street's declines more than anything, however, is the absolute dearth of leadership from Washington. Investors are concerned about their futures and all they see from D.C. is stagnation and a lack of solutions. America, over the past 7 years of the Bush administration and a strangled congress, has been reduced to a nation of haves and have-nots. The trouble is that the haves cannot survive well without the have-nots having something. The middle class is being shoved down to a survival class with no means of upward mobility. Such a system cannot and will not work in the longer term.

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There's also a feeling that the Fed has become impotent to a large degree and since announcing yet another option to salvage battered banking interests, another rate cut next week may not be forthcoming. The Fed meets on Tuesday, March 18, to discuss the federal funds rate. Analysts had been looking for a 50 to 75 basis point reduction, but since yesterday many have trimmed that outlook to 25 to 50 basis points.

While today's trading range was not great, the breadth of the losses were significant. Declining issues retook the lead over gainers, 3747-2536, and new lows beat new highs, 327-82.

Oil continued to reach new heights, adding $1.17 to close at $109.92. Gold gained $4.70 to $980.70, while silver was up 23 cents to close at an even $20.00.

Naturally, everybody wants to know what's next. Some answers may come as early as tomorrow as February retail sales figures and the most recent unemployment claims hit the street prior to the opening bell.

The news on the retail front is not likely to be cheery, though only a small decline - 0.1% - is expected.

NYSE Volume 4,314,355,000
Nasdaq Volume 2,158,134,250

Monday, March 10, 2008

Bleakness, Misery and Despair

When will it end? When will investors find enough confidence and selected bargains to forge back into the market and begin buying stocks?

From the looks of things, it's going to be a while.

The Dow is off 17.12% from its high of 14164.53 close on October 9, 2007. According to widely-accepted guidelines, we're not even in a bear market. That, supposedly, occurs when an index is down 20%. Seems that the Dow is close enough and the charts ugly enough to call a bear a bear.

Dow 11,740.15 -153.54; NASDAQ 2,169.34 -43.15; S&P 500 1,273.37 -20.00; NYSE Composite 8,534.37 -141.90

Only four of thirty Dow stocks delivered gains on the day: Intel (INTC), IBM (IBM), Microsoft (MSFT) and McDonald's (MCD). Financial stocks took the biggest hits. Citigroup (C) fell nearly 6%, losing another 1.22 to close at 19.69. On a split-adjusted basis, Citigroup has not closed below 20 since 1998.

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The impetus for today's decline was once again the financial sector. Fitch Ratings took negative ratings action on eight US-based banks on mortgage loan exposure. Washington Mutual, Citigroup, Wachovia and Bank of America were among those put under ratings watch or downgraded.

There were also various unfounded rumors concerning financial firms Lehman Brothers (impending layoffs) and Bear Stearns (liquidity problems).

What's becoming more and more apparent every day is that the economy is in severe crisis due largely to the collapse of the banking industry, which underpines the entire system. The largest and most influential banks in America are stressed to the breaking point due to mismanagement and a near-total lack of regulation. As a nation, we are about to be plunged into total economic darkness.

While some economists are worried about the country heading into a recession, more serious heads are wondering how we escape the complete destruction of our financial system.

Wall Street types are guessing whether the Fed will cut rates 50 or 75 basis points at the next FOMC meeting, March 18. It should be pointed out to those who still have faith in the Fed (a number, that, like the stock indices, has taken quite a recent fall), that the 2.25% reduction (from 5 1/4 to 3%) in the federal funds rate since September has done roughly nothing to ease the pressure on stocks, banks, the economy or improve the general condition.

The Fed can ease all the way down to zero if they like, but the inescapable conclusion is not about avoiding recession, it's about survival of the fittest in the face of mounting, inevitable bank failures. Once the banking system completely implodes, the misery will be widespread, bankruptcies will explode and today's 2% foreclosure rate will expand to something more like 10%, if not higher.

The future is very unpretty and I am loathe to be one of the few reporting the truth, but all evidence continues to indicate nothing but bleakness, misery and despair.

Declining issues overwhelmed advancers again, 5104-1228. New lows expanded to 839, while new highs contracted to a mere 52 stocks.

Oil rose $2.70 to an all-time closing high of $107.85 per barrel. Even precious metals investors were taking money off the table. Gold fell $2.40 to $971.80. Silver lost 47 points to $19.79.

NYSE Volume 4,196,839,500
NASDAQ Volume 2,137,205,750

Friday, March 7, 2008

Labor News Gloomy; Stocks Lose Value

The word best fit to describe the current US labor situation is "grim."

Nonfarm payrolls fell by 63,000 in February, the worst monthly decline since March 2003 and well below the expected creation of 25-35,000 jobs. Further, January's payroll decline of 17,000 was revised lower to 22,000.

Meanwhile, the geniuses at the Federal Reserve, those brainy masters of all things economic, have no clue how to stem the rising tide of foreclosures, credit strangulation and runaway inflation. Instead, they're content to "milk" their way out of a serious liquidity and confidence crisis that has only worsened since August of last year. The Fed is increasing the amount of securities it will acquire from banks – via its Term Auction Facility (TAF) – to $100 billion this month vs. the previously announced $60 billion.

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Since December, the Fed has loaned $160 billion to banks via the TAF and the results thus far have been nil, excepting, of course, the fact that certain financial institutions have been precluded from sheer liquidation by borrowing more money.

The Fed's actions can be viewed as somewhat futile considering the depth and scope of the overall economic condition in the US. Americans have saved nothing for 20+ years, the banks went on borrowing and lending - often to individuals and corporate entities that hadn't a shred of good credit standing - and now the defaults are piling upward and onward.

All the Fed is doing is extending the time the banks have until they themselves admit their wrongdoings, take their losses and - for some - close up shop. The short list of major banks on the brink of failure include Wells Fargo, Citibank, Bank of America, JP Morgan Chase, Wachovia and Merrill Lynch. Smaller, regional banks may begin failing sooner as their access to credit markets continues to be impaired. Within 3-6 months, bank failures will be making daily headlines.

Here's a handy list of the 150 largest US banks which will serve as a scorecard later this year.

The early reaction by investors to the labor report ensconced in a shroud of other bad economic news, was, in a word, implausible.

After the expected opening dive, the indices all turned positive by 10:00 am and less than an hour later were sporting healthy gains. The NASDAQ was up a full percentage point and the Dow had tacked on more than 50 points.

Naturally, the artificial euphoria couldn't and didn't last, and by 11:00 am nearly everything was heading lower, the averages continuing their journey of the down slope.

Dow 11,893.69 -146.70; NASDAQ 2,212.49 -8.01; S&P 500 1,293.37 -10.97; NYSE Composite 8,676.24 -89.17

Considering the depth of the labor report, the losses were somewhat contained by the usual late-day upticks, which boosted the Dow more than 100 points off the intraday low. Still, the Dow recorded its lowest close of the year, and the worst since October 12, 2006.

These kinds of comparisons to the past are useful for a little bit of perspective, since life in the USA was a little bit better in 2006. At least gasoline and food prices were lower, the economy was creating new jobs (albeit not good ones, but jobs nonetheless) and home prices were still rising.

Of course, that last caveat is what caused most of the disaster we face today, so the perspective is useful for market trackers, but the conditions are vastly different. Stocks were rising in 2006, as they generally did since the Spring of 2003.

The next support area to be tested on the Dow is a range between 11,635 and 11,670, the near-term intraday low and a top from May 11, 2006, respectively. After that, there's an area of congestion between 10,250 and 10,750, which will likely be where the Dow settles in for the summer of '08.

During that period, we will surely hear plenty of calls for a bottom, though it's unlikely that the bear market will be played out in just 10-12 months. Expect a short term respite during the middle of the year with a resumption along a major decline line following the release of third quarter earnings in October. By that point, comparisons will be easier to make, a change in the presidency and in Congress may offer some relief, and by the end of '08 there may be some reasonably encouraging news. It's unlikely that we'll be out of the woods as a nation and in the stock markets before the first or second quarter of '09 - and that prediction may be overly optimistic.

How soon the economy is righted depends largely on a wide swath of factors, but the most important are the Fed, the fall elections and how quickly America purges both the corrupt practices in the government and on Wall Street and the gargantuan losses incurred by the decrepit banking system.

On the day, declining issues trounced gainers, 3959-2307. New lows widened their edge over new highs, 844-62. Since the number of advancing issues was still somewhat respectable, the obvious direction is lower still. Not until stocks are completely hammered down, when advancing issues only account for 10% of all shares traded will we begin to comprehend how severe the recession (the one we're either already in or about to enter) will be. Until then, investors, economists and analysts remain largely in denial.

Oil backed off 32 cents to close at 105.15. Gold finished down $2.90 at $974.20. Silver gained 3 cents to $20.25. Pre-1965 quarters (90% silver) are now worth roughly $18.00. The smaller, lighter quarters jangling around in your pocket are still worth 25¢, but that value is dropping fast.

It wasn't a good week to own stocks. The Dow, for instance, lost 372 points, but investors can take heart in the knowledge that some weeks ahead will probably be worse.

Peace. Out.

NYSE Volume 4,216,124,500
NASDAQ Volume 2,332,342,000

Thursday, March 6, 2008

Stocks Hit the Skids

It took more than a month, but the major indices dove back to where they were on January 22-23, when the first signs of the economy in crisis really were becoming apparent.

Dow 12,040.39 -214.60; NASDAQ 2,220.50 -52.31; S&P 500 1,304.34 -29.36; NYSE Composite 8,765.41 -197.01

The Dow managed to close above the previous low of 11,971.19, though not by much, and the indication is that the intraday lows - in the 11,500 range - are certain to be tested.

On the S&P it was worse. That index closed below the Jan. 22 low of 1310.50. The NASDAQ, which had already cracked its low of 2292 on February 29, fell to a level not seen in 17 months.

The broad-based NYSE composite has fared the best of all, still, it is only 100 points above its prior closing low.

The declines were caused by the usual, persistent problems: housing, credit, inflation. There was a major mortgage financier default, but that's getting to be old news. The plunge toward total darkness continues.

There was no avoiding the cascade of stocks. Declining issues outnumbered advancers, 5327-976. Obviously, this is a tough market in which to pick winners. New lows surpassed new highs, 644-77.

Artificially high crude closed at another new high of $105.47, up 95 cents. Oil and gas prices are seriously out of control, though the higher the price goes, the more serious becomes the search and deployment of alternative energy supplies.

Gold dropped $14.20 to 974.30 and silver lost 56 cents to $20.23.

In one small smidgen of good news, Wal-Mart boosted its annual dividend. America apparently will keep shopping.

Tomorrow, the government's February employment report is released prior to the market open. It's difficult to envision a condition in which cooler heads will prevail if the labor situation is even better than anticipated, a paltry 35,000 new jobs created, and that's optimistic.

Look out below.

NYSE Volume 4,323,458,500
NASDAQ Volume 2,246,466,500

Wednesday, March 5, 2008

Stocks on Roller Skates

US equities were buffeted around on Wednesday amid another flurry of generally disheartening news, finishing the day with modest gains.

According to the ADP National Employment Report (a privately-run survey of more than 500,000 businesses), private sector employment declined by 23,000 in February, with the majority of the losses occurring in businesses with more than 500 employees.

The report detailed that small businesses with less than 50 employees added 15,000 jobs in February, while those with over 500 employees lost 34,000. The difference was made up by medium-sized businesses which lost 4,000 jobs during the month.

According to Joel Prakken, Chairman of Macroeconomic Advisers, LLC, "employment among small-size businesses, defined as those with fewer than 50 workers, advanced just 15,000 during the month. While this employment growth contrasts with employment declines among medium- and large-size businesses, it is the smallest gain in employment among small-size businesses since November 2002."

An average of 3,960 bankruptcy petitions were filed per day nationally in February, up 18% from January and up 28% from the same period in 2007, according to Automated Access to Court Electronic Records, a bankruptcy data and management company.

At noon, shares of Ambac Financial were halted on reports that a deal to salvage the failing monoline insurer were imminent. An hour later, AP reported: "A group of banks was close to sewing together a rescue plan to keep Ambac from faltering under a weight of bad debt. However, an official announcement might be postponed as to not disrupt the markets, according to a person close to the talks who spoke on the condition of anonymity because the deal wasn't final." [emphasis mine]

So much for that idea. At 1:45, the AP reported that Ambac would issue up to $1 billion in new stock to raise funds to cover losses associated with their subprime mortgage exposure. Stocks tanked immediately on the news, turning all indices from positive to negative in a matter of minutes.

Ambac, which was trading around 11.30 when it was halted at noon, reopened at 9.54 around 1:35 pm.

Stocks wavered around the break-even line until just before 4:00 pm, when a late buying surge boosted all indices at the close.

Dow 12,254.99 +41.19; NASDAQ 2,272.81 +12.53; S&P 500 1,333.70 +6.95; NYSE Composite 8,962.42 +70.97

Advancing issues actually chalked up a win over losers, 3535-2699. New lows prevailed once again over new highs, however, 335-92.

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Meanwhile, the dollar sank to new lows against the Euro.

Oil took another great leap forward, gaining a full $5.00 to close at yet another record high of $104.52. Gold blasted ahead $21.40 to $988.50 (record) and silver set another record at $20.79, gaining 95 cents (5%) on the day.

Wall Street and whomever is pulling the very long strings in the markets seem content to remain in denial about the state of the US economy, inflation and the wisdom of investing in stocks while all the evidence points to a crumbling, systemic failure.

Of course, like everything else the government has its fingers in, the markets are completely corrupted and have lost the confidence of many serious investors. Too bad, because the party in charge used to stand for free, open and trustworthy markets.

Friday's "official" non-farms payroll report from the Labor Dept. is likely to be fudged and massaged to show something positive, as opposed to the "unofficial" private ADP figures released today. Since the experts are only looking for gains of 25-35,000 jobs, anything better than that can be hailed as victory by the malignant financial press and prevent stocks from falling into a black hole.

Remember, keeping the economy on an even keel or at least presenting the case in a positive manner despite the facts is paramount to the designs of the fascist power regime in this election year. A new president will be elected and it must be either Hillary Clinton or John McCain, either of whom will keep the country "safe."

That's the plan and the world is being royally screwed by the process.

NYSE Volume 3,808,456,750
NASDAQ Volume 2,208,738,000

Tuesday, March 4, 2008

Market Dips Disguising Systemic Woes

For the second straight day, US equity markets mostly erased earlier losses and avoided facing the reality everyone owning stocks already knows: we're doomed.

High oil and gas prices continue to fuel unrelenting inflationary pressure which is putting pricing pressure on all manner of finished goods. From flooring to pastries, everything produced requires energy and transportation, and costs are spiraling out of control.

At the root of the dilemma is a stubborn Federal Reserve, which adamantly refuses to hold the line on interest rates in the face of screaming, double-digit inflation, instead focusing on "restoring growth" or "preventing recession" as its main objective.

Speaking before a banking group in Florida today, the Chairman expressed a need for banks to do more to prevent foreclosures. "Reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods and the nation as a whole," he said.

Bernanke went on to provide a solution that would be seemingly unpalatable to bankers in particular, saying, "Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.''

In other words, Bernanke is asking the banks to forgive a portion (principal) of loans made to shaky buyers in the first place. Considering the sheer naivete of making such a remark to an audience of bankers, it's amazing that the chairman wasn't laughed out of the room.

One would imagine the normal response from any banker worth his salt would fall somewhere between "fat chance" and uncontrollable laughter.

On the other side of the ledger are responsible Americans who view such a bailout for delinquent homeowners a reward for bad behavior.

Underscoring the Chairman's remarks is the growing understanding that the housing predicament is not going to resolve itself and that it remains a considerable drain on the economy.

Meanwhile, the dollar continues to sink against other currencies, and especially against the price of oil, which oil ministers say is not their fault, but due more to the shaky US economy. It's a viscous cycle, and the evidence suggests Bernanke - and his henchman at Treasury, Hank Paulson - has no viable solution.

Dow 12,213.80 -45.10; NASDAQ 2,260.28 +1.68; S&P 500 1,326.75 -4.59; NYSE Composite 8,891.45 -78.94

Stocks sank on the news, then miraculously regained 3/4 of their losses by day's end. The continuing cycle of trimming losses late in the session has just about run its course. Not even the most adroit trader can fight the headwinds blowing against US stocks right now. Another significant downturn is currently more certain than ever.

While the headline closing prices may not be startling at all, the internals are eroding at a quickening pace. Declining issues thumped advancers again, 4058-2227. New lows New lows expanded the gap over new highs, 592-79.

Commodity traders took profits, sending oil lower by $2.93 to $99.52. Gold dropped $17.90 to $966.30. Silver shed 34 cents to $19.84.

The Dow, down more than 200 points at 2:00 pm, touched an intraday low of 12,032, its lowest point since January 23, another sign that capitulation is not far removed from the minds of burdened investors.

Those same investors will have plenty of data from which to extract any fragment of hope. ADP Employment, revised 4th quarter productivity numbers, factory orders, ISM Services Index and crude inventories are all on Wednesday's economic calendar. At 2:00 pm, the Fed's Beige Book, with minutes from the February meeting, is released.

And the week isn't even half over!

Hint: Friday prior to market open is the release of the monthly US labor report.

NYSE Volume 4,757,187,000
NASDAQ Volume 2,692,600,500

Monday, March 3, 2008

Begging for Losses

A grizzled, experienced veteran of the trading floor once mentioned never to buy or sell stocks before ten o'clock or after three o'clock.

The reasoning, he explained, "that's when the big money is at work - the brokerages are placing heavy bets and once the momentum gets going, it takes a lot of money to move it in the other direction."

I've heeded this sage advice through many sessions of market-watching, trading and analysis, but the prescience of this wisdom has never been more prevalent than over the past two months, especially on the Dow.

Today was a perfect example of the volatility that often overwhelms inexperienced or fearful traders who are looking for safe entry points. Just before 10:00 am, stocks hit a low of 12,175. Everybody, it seemed was selling.

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By 10:30, however, the Dow was nearly unchanged. It traded in a narrow range, staying just slightly to the downside all day... until just before 3:00. It made the low of the day, at 12,161, a loss of just more than 100 points, right before the clock struck three.

Of course, we all know what happened next. Stocks continued to climb, erasing most of the losses and leaving everyone with the impression that stocks were going down, but not much. No worries, people.

Dow 12,258.90 -7.49; NASDAQ 2,258.60 -12.88; S&P 500 1,331.34 +0.71; NYSE Composite 8,970.39 +7.93

Meanwhile, commodities continued their ceaseless march to record highs. Oil closed up 61 cents to $102.45. Gold was up another $9.20 to $984.20. Silver added 27 cents to $20.18. Just a week ago, silver could be had for $18 and change. Inflation has arrived in a very, very big way.

The internals, of course, tell a slightly different story than the nightly news. Declining issues once again sped ahead of advancers, 3750-2588. New lows carried the day again over new highs, 526-87. That spread continues to grow, indicating further price deterioration for stocks is in the offing.

To get an idea of the flavor in this ridiculous market, consider the running commentary from, at 3:05. "Sellers now outpace buyers by 2-to-1 on the NYSE. Pessimism is broad based." Just to underscore the monstrosity of the market, the NYSE advance-decline line ended with losers ahead by a 6-5 margin. One would suppose that the pessimism, so "broad based" at 3:00, was washed completely away in the final hour of trading.

I reiterate. The US stock markets are rigged, to prevent stocks from falling too much, too fast. The money the Fed continues to supply the banks in terms of overnight, 14-day and clandestine, exotic, never-to-see-the-light-of-day loans over the discount window through auctions and other sinister devices, is going to eventually collapse the entire system.

Please, please, please, examine the chart at the right. It makes no sense in any way, unless you understand that the market is, has been and will be manipulated to avoid showing losses. The it all becomes crystal clear. Might as well not trade before 10:00 or after 3:00, just like the old guy said.

Banks are already unwilling to lend unless your credit record is perfect, so why must they continue to borrow from the Fed? They aren't loaning any out, so they must be... ah, there's the answer, shoring up their own feeble, nearly-penniless balance sheets which are fraught with accounting black holes.

We're sitting on top of a pile of bad checks that have been written by the major money center banks and Wall Street, the Fed and the high reaches of government continue to act like there's nothing going on. Business as usual. Ho-hum.

What an evil, bad joke is being played on the American public - investors or otherwise. While many cannot afford gas for their cars, heat for their homes or food for the hungry mouths of families, the slick Wall Street pitchmen are still touting equities over commodities, and they all know, some day, like it or not, there will be a reckoning, and it won't be a happy occasion. Until then, the phoniest party on the planet carries on.

NYSE Volume 3,933,841,000
NASDAQ Volume 2,128,272,500